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Execution-only changes imply FCA got it wrong with MMR – Morrey

by: Nick Morrey, product technical manager at John Charcol
  • 04/02/2020
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Execution-only changes imply FCA got it wrong with MMR – Morrey
Having been part of the consultation process with the Financial Conduct Authority (FCA) on a few instances in the last six months I was very disappointed to see the regulator pressing on with its execution-only agenda so strongly.


I understand this is an awkward topic to try and resolve in any way as it is pretty much accepted that lenders can, and possibly should, offer execution-only for existing borrowers on product transfers.

If that should be allowed, which it is, then should it not be allowed for purchase and remortgage?

However, those of us in the group expressed concern that many consumers will look for the cheapest deal and not the most suitable.

This could mean an inappropriate increase in two-year fixed rate deals at the expense of longer-term budgeting stability that longer fixed rates offer.

In addition, many consumers may not be aware of potentially more suitable products like offset and without an advice service being sought many consumers will likely miss out.

This is all ignoring the fact that this repealing of the rules implies the FCA got it wrong with the Mortgage Market Review (MMR) that caused the whole industry significant challenges – especially lenders.


Stringent advice checks

Another possible unintended consequence could be the encouragement of industry disruptors.

In recent years there have been many claiming that some big internet companies with deep pockets are looking at offering a truly online mortgage advice and application process.

Execution-only enablement is likely to encourage any such activities and given general consumer acceptance of online offerings compared to traditional channels I am concerned the stringent checks qualified advisers have to go through may not be applied to a computer algorithm.

That is before we get into whether artificial intelligence (AI) can replace experienced advice, which is a whole other topic.


Consumer protection eroded

The problem for consumers with all of the above is that execution-only fails to give much by way of redress.

Should any consumer realise they have chosen the wrong product, for any reason, then their ability to complain and be put in the correct financial position is effectively removed.

I doubt I am the only person to worry that consumer protection is being eroded – but this is normally the biggest financial commitment for many people and that should be considered properly and seriously rather than tapped into a web application with a view to how quickly and cheaply it can be done.

It saddens me to say this in 2020 but should the FCA discover that there is an increase in inappropriate products taken on an execution-only basis then with a heavy heart I would have to say “We told you so – but you didn’t heed.”

I hope I am wrong. I don’t think increasing execution-only abilities is a good thing at all.


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