Staying out of the glare

Angela Faherty

December 1, 2007

The Financial Services Authority (FSA) has recently penalised three firms found failing to meet its requirements during the non-conforming investigations published in July.

All three had inadequate mortgage sales and advice procedures which exposed their customers to the risk of receiving unsuitable advice.

The investigations by the FSA found a number of worrying failings. Two of the firms didn’t correct record-keeping failings identified during a 2005 FSA visit and they were also deemed not to have gathered adequate customer information to access affordability or support the mortgage recommendations made.

One of the firms was reported not to have trained its staff adequately, failed to monitor or review its client files properly and gave customers inconsistent information about the key features of the product.

Other findings highlighted that another firm couldn’t demonstrate why recommendations were made and it failed to explain the details or risks of recommended mortgages to clients.

Appropriate systems

So what does this have to do with the secured loans sector I hear you cry? Well, let me point to the comment made by the FSA’s director of enforcement, Margaret Cole, who said:

“Firms who do not comply with FSA standards taint the entire mortgage industry, which is totally unacceptable. Any firms who place their customers at risk of receiving unsuitable advice through inadequate business processes can expect strong action from the FSA. Firms must ensure they have appropriate systems to protect their customers.”

Forget the FSA action for a moment, the key here is having appropriate systems in place to protect clients. For a sector historically as tainted as ours then surely it is imperative to offer the highest standards of service and quality of advice in order to move away from the old perception of the market.

On the back of this announcement, I believe it is timely to highlight what brokers working in, or looking towards, the secured loans sector should be doing in order for it to continue moving in the right direction.


The FSA’s ‘Treating Customers Fairly’ (TCF) initiative has been around for some time now and while people may not necessarily like it, there is no doubt that it is here to stay.

She said: “The pace of progress needs to increase. What we have seen mainly has been in the back offices but there is further to go with customers and ensuring evidence is suitable.

“There is room for improvement on both sides and we are detailing various outcomes, but it is important that there are no hidden surprises for consumers. For brokers, we have found some good practise and some not so good.”

I believe that a big part of TCF is ensuring that all staff are adequately trained and it is this investment of both time and resource in such extensive training that results in the heightening of advice standards.

We are currently operating in somewhat turbulent conditions, the market is becoming increasingly competitive and the only way to survive and prosper is to sustain this quality of advice which ensures that service standards are optimised.

The backbone of any company that is serious about their compliance process has to be the implementation of a robust sales process. Giving all those involved in the customer experience a clear structure to follow means that, as a firm, you are ensuring that these customers are being treated fairly across the board.


It is important that brokers keep an objective view of the advice that they give on cases. One way of doing this is by ensuring that any specific recommendations are recorded in a clear and concise way so that any outsider – not just the FSA – viewing the files would easily be able to see how and why you arrived at the end deal.

Strong record-keeping systems are a fundamental element of any broker’s procedures and a comprehensive audit trail showing how a conclusion was arrived at, regarding any recommendation, is an absolute must.

Any company that takes compliance seriously should be reviewing their client files on a regular basis to ensure that advisers have been following the agreed compliance procedures. Good compliant firms are also likely to be gathering feedback from their clients to ensure that their treatment was fair and open. This feedback can prove invaluable in improving the customer experience.

Finally, clients should be made to feel that they are fully involved in the advice process. Ensuring this happens means firms have greater client retention potential and referrals rather that a simple one-hit customer.

These points may all seem common sense, but it never fails to surprise me how often these principles are not implemented. As we see the growing amount of FSA action being taken in the market, it’s prudent to ensure that the regulator’s glare doesn’t fall on you.

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