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Why push an execution-only policy when FCA’s own research shows value of advice? – Philips

by: John Phillips, national operations director of Just Mortgages
  • 18/05/2020
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Why push an execution-only policy when FCA’s own research shows value of advice? – Philips
Back in March, the day before the Budget if you can remember as far back as that, the Financial Conduct Authority (FCA) published an intriguing piece of research exploring why so many borrowers do not remortgage when their initial discounted rate expires.


With new borrowing now in limbo as a result of Covid-19, remortgaging clearly assumes a new importance for brokers, so when I saw the Mortgage Solutions analysis of the research a couple of weeks back, I decided to have another look.

In what was no doubt a shock finding in Stratford, the FCA report concluded that borrowers were far more likely to remortgage if they use a broker to take out their initial mortgage.

They are also far more likely to switch lender when remortgaging if they also use a broker for their remortgage.

You could have knocked me down with the proverbial feather when I read that.

Who would have thought that getting advice from a qualified professional, who takes trouble to find out all about someone’s individual circumstances, and who goes out of their way to explain all their options and get them the best deal, would also make clients more likely to get a better deal?

There is a big lesson here for brokers, too.


Stating the obvious

You’d have hoped this would also fall into the “bleedin’ obvious” category for most but, as Mortgage Solutions reported, the FCA data shows that brokers are losing 60 per cent of their clients to direct channels, so it is worth restating.

The lesson is that it really pays to stay in touch with clients and make a special point of contacting them as their rate approaches expiry.

Otherwise, there is a good chance they will either slip onto the reversion rate or remortgage direct with their existing lender, cutting the broker out of the process.

They most likely will not get as good a deal – but knowing that does not do the broker any more good than it does the client.


Policy does not match research

But if the FCA’s own research is showing them that advice adds real value, why is policy – in the shape of the mortgage market rules published at the end of January – increasingly pushing borrowers down the execution-only route?

The same research indicates that the benefits of remortgaging can be worth thousands of pounds a year, significantly exceeding any cost associated with the process.

There is the prospect of real consumer detriment from the FCA’s stance – at a time when many need to reduce outgoings more than ever.

Brokers need to get active on their client base to stop that happening.


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