A mystery shopping spree by Consumers' Association magazine Which? claims that only three out of 39 advisers surveyed gave acceptable advice. It alleges that brokers and lenders are unclear about their obligations under the mortgage code and the sale of insurance is often pushed heavily even before providing advice on the mortgage.
It claims that 21 advisers could not explain the different ways of repaying a mortgage and 23 failed to disclose properly all the deals available.
London & Country mortgage specialist David Hollingworth says the only way to counter such bad publicity for the industry is to “get on with it and do the job properly”.
He says: “It is pretty straight forward. You need to declare your charges and give good advice. Lenders need to explain their products properly and advisers need to be client-focused and proficient at arranging deals and giving recommendations.”
Which? editor Malcolm Coles says: “Although from November, the mortgage market will be regulated, this does not mean the quality of advice will automatically go up but advisers will be more accountable for the advice that they give.”
Hollingworth agrees that the onset of regulation will not guarantee good advice but says it will at least raise the proficiency of people in the industry and make sure brokers operate consistently.
Coles says: “We think that some of the bad advice is down to poor training or lack of experience. One Lloyds TSB adviser said our researcher was her first real customer.”
But Purely Mortgages chief executive Mark Chilton disagrees. He says: “The staff in bank branches are ordinarily pretty well trained. The problem is that it is entirely a product-driven sales environment rather than a method that provides advice.”
One of the more controversial contentions from Which? is that its researchers believed many mortgage advisers were more interested in selling protection and insurance than in getting their clients the right mortgage.
Hollingworth says: “First and foremost, advisers should be looking to get their clients the best mortgage deal but insurance and protection need to be properly advised on as well.”
Coles says: “Some bad interviews were down to the fact that some advisers concentrated more on selling protection insurance than giving mortgage advice. One mortgage quote from Barclays contained term insurance, critical-illness, cover long-term payment insurance, unemployment, and sickness and accident cover.”
Association of Mortgage Intermediaries policy adviser Ben Stafford says Which? has yet again tarred the entire mortgage industry with the same brush. He says: “As far as I can see, the low level service that Which? observed came mostly from branch offices of banks, building societies and estate agents – not independent brokers. It needs to be pointed out that all these organisations are product-driven rather than independent brokers concentrating on providing advice.”
There were seven “independents” in the sample of 39 organisations but the examples of poor service that Which? has provided are all from big-name lenders.
Which? mystery-shopped Abbey, Barclays, Bradford & Bingley, Connells, Halifax, HSBC, Lloyds TSB, Mann Countrywide, Nationwide, NatWest, Northern Rock, Sequence, Spicerhaart, Team, Your Move and seven independents that it would not name.
Stafford says the FSA has added a requirement for clar-ification of the use of the word “independent” to make it clearer to consumers what they are buying.
Coles says: “While some so-called independent advisers made a big deal out of saying they could search the entire market for mortgages, they were less vocal about being tied to one company for protection insurance.”
He says if consumers need life cover or protection they should not automatically buy it from a lender or mortgage adviser but through an FSA-approved protection specialist IFA.
Chilton is pragmatic about the bad press the industry has been getting. He says: “Which? has a good point. There is a lot of shoddy practice and pressurised selling going on in this industry and while this is the norm the industry will continue to get bad press.”
Chilton, the man who launched Savills, has recently set up Purely Mortgages as a free service to the consumer. He has established a national call centre and put together an initial team of advisers, all of whom are from within financial services but outside the mortgage market in a deliberate move to start fresh with none of the “inherent hard-sell baggage” that he says comes with mortgages.
He says he has carefully picked people who have a cultural fit to learn from scratch how to sell mortgages rather than adopt the hard-sell practices of many mortgage brokers.
Chilton says reports such as the Which? survey are extremely unhelpful to the industry but they should serve as a rallying point for the entire sector to band together.
He says: “We should be promoting the banner of the intermediary because it is only through an independent broker, whether they be big or small, that consumers can get the best mortgage advice. I do not like research like the Which? report putting intermediaries down but we can take advantage of these events and use them to help our own cause.”