View more on these topics

Will Tesco and the Post Office reconsider using brokers under MMR?

Brokers say intermediaries could benefit from Tesco and the Post Office’s new execution-only propositions if the FSA pushes ahead with its ban on non-advised mortgages under the mortgage market review.

Earlier this month, Tesco launched a range of two, three and five-year fixed-rate mortgages and two-year trackers up to a maximum loan to value of 80 per cent. The products are available in stores and over the phone.

The Post Office, which previously offered mortgages over the phone and online, followed with the launch of its range of two, three and five- year fixed-rate products at 75 per cent LTV, available in selected branches.

Both propositions offer a direct-only, non-advised service.

Post Office head of mortgages Mike Cook says sales staff, or “mortgage specialists”, are not trained advisers and can only offer information on the Post Office’s current range.

He says: “We call them specialists on the basis that they are experienced mortgage people but they will not be giving advice. What they will do is what we call an assisted sale. They will do a smaller fact-find where they ask the customer some personal details on their preferences, they will present the products on screen and the customer will make an informed decision on what suits them. Because it is quite a simple range, advice could be seen as overkill and it is not something we have ever been asked to give.”

The MMR estimates around 30 per cent of sales in the mortgage market are made on an execution-only basis.

In the third and final consultation paper on the MMR proposals, published in December, the FSA says: “A large proportion of these non-advised sales are to borrowers with higher-risk characteristics. For example, in 2007, 58 per cent of credit-impaired borrowers received no advice from branch-based sellers. We believe this is not delivering adequate consumer protection.”

The FSA proposes non-advised sales should be banned where there is “spoken or other interactive dialogue” between a customer and a lender. High-net-worth individuals would be exempt under the proposals and borrowers would be permitted to proceed with an execution-only sale if they reject the advice offered.

The final rules are expected in the autumn.

Both Tesco and the Post Office says they would move to an advised model if the MMR implements the ban.

A Tesco spokesman says: “As a responsible lender, we are closely monitoring the progress of the mortgage market review and will comply with any future regulatory requirements.”

Cook says: “If the rules change as a consequence of the MMR, we would have to go into an advice model but we would prefer not to.”

Precise Mortgages managing director Alan Cleary says he is surprised the FSA authorised Tesco and the Post Office to launch execution-only services ahead of the MMR.

He says: “I thought that, as per the MMR, execution-only sales were going to be a very small sub-10 per cent slug of the market. This move contradicts that so unless these guys know something we do not, it is quite an odd decision.”

The Association of Mortgage Intermediaries chief executive Robert Sinclair says if the ban is put in place, it could bring new opportunities for brokers.

He says: “While non-advised sales are within the current FSA mortgage conduct rules, if the MMR is enacted as it is currently proposed, then those models will have to change and they will have to move to an advised model.

“There would be a few commercial options available to execution-only firms. They could train their existing staff, hire new staff with the relevant qualifications or contract the business out. There may be broking firms that are prepared to work in partnership with them to deliver advice. The other option available is to sell their products through intermediaries.”

London and Country associate director of communications David Hollingworth says: “If the ban is enforced, the balance between direct and intermediary lending could shift back towards brokers. There would be a cost that comes with providing advice for firms that are not already doing so. It could force them to rethink their strategy and consider selling through intermediaries.”

John Charcol senior technical director Ray Boulger says there is a strong possibility that Tesco may sell its products through intermediaries in the future.

He says: “Tesco did not rule out using brokers forever. The door is very clearly open to use brokers in due course and I think that is what will happen within a couple of years. If Tesco has an appetite to conduct a serious volume of business, it will either have to massively increase its staff, perhaps have actual advisers in some of its branches, or use intermediaries. I think it could be using intermediaries by the end of next year.”

Recommended

Peter Vicary-Smith MM blog
12

Which?: Ridiculous to suggest axing free banking will stop misselling

Over recent weeks we have heard too many senior bankers and regulators saying that if the banks charge a monthly fee for current accounts this will prevent the misselling scandals of the past. This suggestion is completely ridiculous and a damning indictment of the current culture of the banking industry.  Consumers should not be forced to pay […]

Out of context

“I am more into Gypsy weddings myself.” Syndaxi managing director Robert Reid’s Wednesday nights are not what they used to be. “I am presently on a boat feeling not very clever and a bit ill.” Hargreaves Lansdown pension investment manager Laith Khalaf struggles at Cowes Week. “You cannot leave a message but thank you for […]

Scottish Life links with Nest for auto-enrolment offering

Scottish Life has linked with Nest for its automatic enrolment pension offering. The tie-up will allow employers to use a Scottish Life pension scheme or Nest, or a combination of the two, to meet their auto-enrolment duties. Nest managing director of scheme development Helen Dean says: “Employers have told us that they intend to use […]

Harriet Quiney MM blog
4

Legal view: FSA must stop treating PI as a cash cow

Historically, the FSA has seemed to regard professional indemnity insurance as a cash cow which exists to compensate misselling claims. While the tide may be turning slowly, the FSA’s 2010 Insurance Sector Digest exhorting insurers to focus on profitable underwriting, this digest was not PII focused and recent developments surrounding Arch cru suggest that the […]

Guide front cover - thumbnail

Guide: how to… audit your auto-enrolment scheme compliance

As the Pensions Regulator starts to bare its teeth and the changes mentioned in the Budget and Queen’s Speech start to come into force, it is essential that you understand your scheme and the processes you need to undertake to ensure it remains compliant. Our second re-enrolment guide looks at how to audit the key areas of your auto-enrolment scheme.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com