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FCA should focus on encouraging digital advice, not making execution-only easier – Blackwell

by: Lynda Blackwell, consultant at Thistle Dhu and non-executive director of Molo
  • 17/07/2019
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FCA should focus on encouraging digital advice, not making execution-only easier – Blackwell
Last month I warned that the regulator’s recent proposal to bring back a widely available execution-only mortgage sales channel runs the risk that lenders and brokers will circumvent the Mortgage Market Review's (MMR) more rigorous advised sales standards. 


Execution-only costs less to deliver, it removes the knotty problem of compliance and lowers the potential cost of complaints. 

Settling for too little for too long

My view remains that a significant number of lenders and brokers are likely to take the execution-only route if the Financial Conduct Authority (FCA) rules that they can. It is highly likely that, as the industry warned the regulator back in 2012, it will be gamed and consumers are the ones who will lose out as a result. 

I was therefore interested, though not surprised, to see UK Finance claim this week that the Mortgages Market Study recommendations would not drive execution-only but would result in borrowers getting ‘the right advice for them’. 

I completely disagree. 

Borrowers in the UK mortgage market have been settling for far too little for far too long, driven by the vested interests of those few players who dominate the market. It is time for a change and a proper appreciation of what other players in the market offer.


Brokers becoming lenders

I was encouraged to see Habito announce it was launching a range of buy-to-let mortgages. This follows Molo’s launch six month’s ago into the buy-to-let sector, offering landlords fully digital mortgages. It’s fast and painless. Everything happens online from application to credit and affordability checks, security checks, valuations, product recommendations, approvals – the works. 

The attraction is obvious: with a very low-key launch and next to no advertising, Molo has already attracted more than £250m of applications through its system. 

This is clearly just the start. The next logical step is a launch into residential mortgages, which Molo plans for next year, on a fully advised basis; not just jumping on the execution-only bandwagon but providing customers with the help, support and protection they get today and should continue to expect in future.


Varying advice standards

I have witnessed first-hand the varying standards of regulated advice available in the market. With a digital approach, the good standards are hardwired into the process. It doesn’t have an off day, it does not cut corners, it isn’t influenced by third parties and outside influences; it basically provides quality advice and a good customer outcome consistently every time.

This is something the regulator should be actively encouraging. 

As I’ve said before, the regulator would be far better focusing on and supporting the industry to develop technology that will deliver a fully regulated, compliant, speedy and efficient online advice process for all customers.

We’re at a pivotal moment in the mortgage market today and we have a choice to make. 

Do we keep regulation that ensures a good outcome for all customers and invest in making digital advice technology more widely available to provide a fast and efficient service.  

Or do we change the rules and allow firms to spend their money on systems that provide a poorer outcome for consumers that will take years to manifest? 

I know which side I am on.


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