Of course, this hasn’t always been an anti-adviser approach – there have been various points when we held an advantage but there are times when lenders’ dual pricing did not put us in a positive position.
At present, on the whole, dual pricing doesn’t seem to exist in any meaningful way. We suspect that has much to do with lenders getting the vast majority of their business through the intermediary channel and (we hope) an acceptance that independent advice is a good thing and places customers in a better position than the alternative.
However, there will always be breaches of this ‘agreement’ and we currently have one of the top lenders offering better mortgage rates to those borrowers who execute through its digital-only channel.
The price differential is not huge, but it is there and fundamentally we believe this presents some serious issues, not least for the borrower themselves who are essentially waiving away their advice rights by choosing to execute with the lender via this channel.
Hard to ignore
Not that the borrower is likely to be aware of this. However, the fact this lender is actively offering a price/cost incentive to give up those rights based on a slightly cheaper deal should not go unnoticed or uncommented by our profession.
We fully understand that in the world of lending, there will always be outliers and approaches that are different but fundamentally you expect there to be a level of transparency. With Consumer Duty approaching, you also expect there to be a focus on putting the customer in a position of protection.
This approach certainly doesn’t do that.
Of course, at the heart of this, you worry about what sort of product/price/term the borrower will be accepting via this channel without advice. We saw a spate of borrowers in the immediate aftermath of the mini Budget feeling the need to go it alone, acting quickly without advice, choosing products wholly inappropriate for them and ultimately likely to cost them considerably more.
There are other examples of course – the first-time buyers, or indeed any borrower, who might see the cheaper rates and cheaper costs available for a five-year fix right now, but soon realise they have no flexibility should their plans, needs and circumstances change in a shorter timescale.
As advisers will know only too well, first timers often work in a much shorter time horizon, where a five-year, slightly cheaper fix, is simply not going to work for them.
Fewer protections
However, what seems truly odd here is that a lender who is likely to get the vast majority of its business through the intermediary channel seems so comfortable in a borrower executing digitally, not getting any advice, losing access to the Financial Ombudsman (FOS) and Financial Services Compensation Scheme (FSCS), and ultimately putting their own mortgage life in their own hands, just for the sake of a slightly cheaper rate.
As mentioned, in the world of Consumer Duty, allowing a customer to waive their advice rights and protections seems really odd, and we wonder whether the Financial Conduct Authority (FCA) might want to review what is happening here.
Also, why not spend the money that’s being used in developing these channels on improving the systems that advisers have to use?
After all, these lenders are happy to take the business, to not have the risk of providing advice themselves, to have a cheaper source of distribution, etc. Why not focus money and resources on developing these relationships and the way business is placed via advisers, rather than adopt a policy which effectively disadvantages those who take advice?
At the very least, make the prospective customer think about going down this route, fully aware of what they are giving up and where they can find advice, and what benefits this might deliver.
Far better than thrusting a cheaper rate under their noses and expecting them to make their own decision based on less than full information.
