I suggested the perceived move away from advice by the FCA in the paper could be a ‘mis-read’ from the industry and that, when it listened to further industry feedback, it may accept that any move towards encouraging execution-only business was a retrograde step.
Regardless of whether the tech exists to do this, or not.
Now, however, that doubt no longer exists.
Utterly unfathomable U-turn
The FCA’s consultation on mortgage advice and selling standards gives no reasons to mis-represent the regulator.
Its ambition is clear and it is seeking to change the rules around advice in order to deliver what it sets out in the final report.
No-one can be in any doubt, because it exists in black and white, that the regulator wants to see more execution-only business and it does not care that this could result in consumers getting unsuitable mortgages.
When you write that down, it seems utterly unfathomable.
A regulator, which enshrined the importance of advice in the mortgage market via the Mortgage Market Review (MMR), U-turning in such a deliberate and pre-meditated way.
Cheapest is best myth
And the evidence it presents for such a move?
It believes certain consumers could have got a cheaper mortgage themselves if the execution-only tools existed to allow them to source it.
It has been told that the advice rules do not allow for such tools and it wants to therefore create the environment where this technology exists.
It might say otherwise, but this is all about a perception that ‘cheapest is best’ and it wants to row back on a distribution channel – namely mortgage advice – which it perceives not to be recommending the cheapest mortgage.
This is despite the fact that no-one in the market believes the cheapest is best myth and (lest we forget) its analysis of the market comes from 2015/16 data.
Filled with dread
We are specialists in the high loan-to-value (LTV) mortgage sector, used extensively by first-time buyers, and these are individuals who have never been through the mortgage process before and will have a raft of options available to them.
Is the FCA really suggesting that these new borrowers can find the most suitable product if they are left to get on with it themselves?
The thought of large numbers of potential first-timers trying to secure the first and cheapest deal they see via an execution-only tool fills me with dread.
It surely cannot be right for a regulator to be promoting this distribution avenue for first-timers, can it?
Advisers will have countless examples of clients who came into their office, or called them up, with a clear idea of securing a mortgage which was completely unsuitable for them.
And if we drag everything back to price, and the ease of securing a mortgage via technology, then we are, in my opinion, opening up a huge can of worms.
I am not an adviser. This is not a view based on self-preservation as some may argue against advisers who raise it.
But it is based on common sense and the importance of advice in a marketplace which, not just for first-timers but for all borrowers, is more complex and competitive than it has perhaps ever been.
Encouraging consumers to do it themselves seems utterly bizarre and, for the life of me, I can’t quite get my head around why the regulator would be so intent on this course of action.
Maybe over time, they will be able to explain themselves.
Until then, it will be no surprise to hear many within the mortgage market raging against it.