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FCA: Networks have more work to do than DAs

Sarah Davidson

July 14, 2015

When asked whether the regulator had found a difference in quality between the advice given by ARs and DAs during its review of firms following the Mortgage Market Review Philip Salter, acting director of retail lending at the FCA, admitted networks had “the most work to do to strengthen governance”.

He said: “The quality of advice in the mortgage market was mixed and we identified weaknesses across all types of firms providing advice.

“Based on the firms we assessed, larger retail intermediary networks have most work to do to strengthen governance and oversight arrangements to identify, manage and mitigate the risks of poor customer outcomes.”

Salter said the regulator found that appointed representatives of many large retail intermediary networks were delivering advice with “little or no structure”.

He added: “This, coupled with limited oversight and controls in many of these networks, resulted in variable and inconsistent quality of advice and a higher propensity for unclear or unsuitable recommendations.

“Other firms placed heavy reliance on completion of point-of-sale application systems. We found this limited advisers’ options to adapt delivery to meet individual customers’ needs.

“Both of these approaches had unintended consequences which impacted on the customer experience or the suitability of recommendations provided.”

Pat Bunton, chairman of the Association of Mortgage Intermediaries, said while the review identified that all types of firms including lenders, DAs and ARs “could do better” to provide consistently quality advice, Salter’s admission provided further evidence that lenders should not discriminate against DAs by paying lower procuration fees for allegedly poorer quality submissions.

Bunton said: “The whole AR and DA argument has been in the spotlight in recent times with firms like Legal & General altering their strategy in favour of DAs.

“The FCA’s thematic work also highlighted their concerns about the rigour of advice quality and controls in the network and AR space in particular.

“Taken together the assertion by some that ARs offer greater quality, simply doesn’t add up and the real issue here is that there will be good and bad ARs and good and bad DAs.

“In a world where ARs and DAs are doing the same basic job it is difficult to see why one should be favoured over the other commercially.

“After all quality is quality, irrespective of the distribution channel that originated it, so to discriminate against one channel purely because of regulatory status seems flawed.”


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