Kate Davies: FCA Policy Statement may impact number of consumers choosing execution-only

Jessica Nangle

February 4, 2020

kate davies imla

Kate Davies, executive director at the Intermediary Mortgage Lenders Association (IMLA) believes the recent FCA’s recent Policy Statement may impact the number of consumers choosing execution-only.

The FCA dismissed concerns from intermediaries that consumers could effectively ‘steal advice’ as it changes the rules around execution-only.

The regulator has been consulting the market on planned changes including how firms can market execution-only channels and adopt different pricing between channels.

This led to some intermediaries expressing concerns that some consumers might ‘steal’ advice.

For example, they would speak to an adviser to get a recommendation only to then buy the product execution-only, avoiding any advice fee.

Others also warned that changes could skew the market towards online intermediaries with small panels.

However the watchdog dismissed these concerns in its latest policy paper.

Kate Davies said: “The outcome of the Mortgage Market Review led many in the industry to conclude that the FCA’s preferred outcome was for the vast majority of sales to be advised.

“We now understand that the FCA’s position with regard to sales channels is neutral, and the amended rules published in PS 20/01 are therefore likely to create some re-balancing of the current split between advised and non-advised sales, including non-advised execution-only.

“Lenders have found it difficult to go down the execution-only route, given the ambiguity surrounding what may or may not trigger a requirement to give advice.

“The Policy Statement and amended rules address these concerns and this may also impact the number of consumers choosing the execution-only option.

“Cost may also play a part, if products sold via execution-only channels are priced more keenly than those sold with advice.

“However, identifying the ‘cheapest’ deals may not always be straightforward and – as we have said in the past – cheapest doesn’t always equate to ‘best’ or more suitable for the customer in the circumstances.

“In our response to the earlier consultation (CP 19/17), we noted that whilst non-advised and execution-only sales may be entirely appropriate for some consumers, there will be many – particularly first-time buyers – who need professional advice in order to help them to ask the relevant questions about their circumstances and ensure they buy the right products.

“Some consumers, particularly those with straightforward financial and personal circumstances, may be well-placed to make their own decisions about suitable mortgage products unaided.

“However, there will continue to be many who need and will appreciate the professional and independent advice which mortgage advisers can offer.”

Policy Statement PS20/1 can be read in full here.

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