By Frank Eve, managing director of Frank Eve Consulting
The FSA’s Mortgage Market Review will change the mortgage market but mortgage intermediaries do have a chance to affect what happens if they choose to get involved in the debate.
Yet how many of us have the time or inclination to wade through the mountain of information contained in the various MMR documents issued by the FSA? Also reading is one thing but understanding the implications of how the market may change is another.
Let’s take an example in the FSA’s Distribution and Disclosure paper CP 10/28 specifically the section on Advised and Non Advised sales.
The FSA has suggested that mortgage borrowers don’t appreciate the distinction between advised and information-only sales and tend to assume they have been given advice anyway.
Therefore the proposed regulation changes would see the end of mortgages on an execution only basis with all consumers receiving some type of "advice". This advice will fall into two categories "Advised" or "Non-advised" however the difference between them appears to be negligible particularly from the borrowers perspective.
"Advised" sales would be undertaken by intermediaries who offer borrowers products from a range of lenders. "Non-advised" sales would be offered directly from lenders that provide only their own products to choose from. All other aspects of the advice, the appropriateness and affordability requirements will be the same and so will the qualifications needed by the advisers. Therefore the only distinction between advised and non-advised sales in future would be whether the adviser is offering a range of products from different lenders or the products of just one lender
This may seem on the face of it to be in the interests of the mortgage intermediary as lenders will need to invest in more training for their staff to bring them up to the required standard and upgrade call centres to offer the advice required. Lenders will also need to meet all the regulatory responsibilities that you as a mortgage intermediary have, even though they will only be offering their own products.
One line of thinking suggests that as a result of this new regulation, lenders may feel the investment required to bring their own distribution up to the required new standard is prohibitive and may choose to run down their own operations and use the intermediary channel exclusively. Good news for intermediaries!
However, the alternative view is that the branch networks will continue to be an integral distribution channel for the major banks.
Therefore many of the larger Banks may choose to invest heavily in their own infrastructure including their call centres to reduce regulatory risks and then focus on developing their own customer base.
This strategy may not have room for the intermediary market and we may have more lenders like HSBC without any intermediary distribution.
As a result, we could have a number of major lenders offering products that are unavailable to intermediaries and this could lead to intermediaries only being able to provide ‘restricted’ advice. Is this what the intermediary market wants? If you want to get involved in the debate go to www.tcfinfo.co.uk
