Our concern with the recent Financial Conduct Authority (FCA) interim report of the Mortgages Market Study is that it makes a lot of assumptions about what consumers want – but is not clear that these are supported by informed consumer research.
Some of the suggested changes to the advice regime could lead to some borrowers taking decisions and going down paths that ultimately prevent them from identifying the most suitable mortgage.
Following extensive consultation, the Mortgage Market Review (MMR) ushered in an enhanced advice regime that was centred on finding the most suitable deal for borrowers.
Lest we forget, this has only been in place for four years, and was introduced during a period of historically low interest rates and a relatively subdued market.
The effects are still working through the system, and the precise benefits to consumers have yet to be fully analysed. So it feels premature to be considering making further changes now.
Risk that consumers who need advice may avoid it
The interim report suggests that some consumers might prefer to avoid the “cost and inconvenience” of advice – and would benefit from having more choice in terms of how much advice they need, or even whether they need to receive advice in the first place.
Clearly there will be some consumers who are able and prepared to do a lot of their own research in terms of identifying a suitable product – but not all consumers will have the same capability.
And not all will appreciate how much there is to find out and consider, which is precisely where an experienced adviser comes in.
The main risk, in relaxing the existing advice rules, is that consumers who really need advice might be tempted to avoid it, and end up buying products on the basis of incomplete information, or without having fully considered all the options and implications.
If the MMR concluded that it was sensible for the majority of sales to be advised – what has changed so much over the past four years?
The current emphasis on advice helps to ensure that products are suitable and that lenders lend responsibly.
Unless there is a compelling case for further change, we believe the FCA should refrain from further tinkering with the advice rules – and let the advisers judge what will best serve consumers’ needs.