Well, this move comes in response to growing concerns over consumer protection and the need for financial firms to prioritise the interests of their customers.
Therefore, Consumer Duty is there to set out a framework for firms to meet higher standards of care and service for their customers and now it is up to all of us to take this on board to actually make it happen.
It is very easy for firms to pay lip service to this, put some work together and publish this to justify what they currently do. However, in reality if this is to really work every firm needs to look at what they do in minute detail and be bold enough to instigate change, ensuring they put their customers at the centre of their business operations.
This will take time and cost money, but surely this is exactly what should have been happening in the first place?
The work that needs to be done
In our industry, it will be the lenders and manufacturers who will, in my opinion, be the people with the most work to do, but this does not exonerate advisers and adviser firms at all.
I believe that any lender brave enough to look at all aspects of their business, with the above end goals in mind, will not only create a pathway for others to follow, but will also have a fantastic proposition that will see them excel in years to come.
For example, we still have a huge gap that exists between conventional mortgages and lifetime mortgages for a large proportion of clients who cannot pass stress tests on retirement interest-only (RIO) and other later life mortgages.
They cannot get a more conventional mortgage and, at the same time, cannot get enough loan to value (LTV) through a lifetime mortgage.
This just isn’t right, so hopefully, lenders are looking to address this situation.
Where the LTV market has contracted, we now also have an increasing number of people at the highest end of LTVs who simply cannot be helped by lifetime mortgages. This means clients have no option but to sell and uproot from where they have based their lives, usually for many, many years and again – this cannot be right for putting clients’ needs front and centre.
Differential pricing
There are also instances in our market where lenders offer different interest rates to different brokers and while this does not feel right in any free market, it should certainly be looked upon unfavourably under Consumer Duty.
The client should be able to get the same product at the same interest rate from any broker that they choose.
Some lenders pride themselves on their service standards from initial contact to completion of a loan, which is fantastic and sits well with advisers who will then bear this in mind with future recommendations.
I now believe that it is essential for all lenders to do this. This will take time and investment but is necessary for the industry to move forward.
What needs to change
Where I personally would like to see a huge improvement with both lenders and advice companies is the post-sale journey. Very often the adviser has no clue that their client has applied for a drawdown, had a change in circumstances, or even been bereaved – simply because the lender will not pass on this information.
Surely it is beneficial to everyone that the adviser is informed so that they can have a meaningful conversation and satisfy themselves that the client is not vulnerable, party to being scammed or are simply aware of all of their options at that time.
These are the times that advice is needed and very often the adviser is the last to know. Recently we had word from a lender who had been trying to contact a client with no luck for almost a year, and it took five minutes for the adviser to speak with the client.
This does not mean that the adviser gets let off either, most advice firms in my opinion will need to strengthen their post-sales touch points with their clients and make sure that these touch points are both meaningful and ongoing. How else will an adviser know if their client is making truly informed decisions as things happen in their life.
Ultimately this may well lead to a change in how advisers are paid and if this helps to put the client at the heart of the situation, then I am all for this.
