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Consumer Duty is bringing the fragmented mortgage market closer – Wilson

by: Stuart Wilson, chairman of Air Club
  • 13/11/2023
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Consumer Duty is bringing the fragmented mortgage market closer – Wilson
For many years we in the later life lending sector have talked about a move away from silos when it comes to offering and delivering advice to an older customer demographic.

We’ve suggested that, for many reasons – including regulatory, lender and provider options and greater product choice – simply offering one type of later life lending, often just lifetime mortgages, is not the route to delivering a positive customer outcome. Not least of course because there are other options available which, unless fully explored, may be ignored when they could be the most suitable for the client.  

So, again in our space, the introduction of retirement interest-only (RIO) mortgages or more lenders offering mainstream mortgage products to those in older age and retirement, shifted the goalposts for those advisers who are only working within the lifetime mortgage silo. To such a point that, as mentioned, it doesn’t seem tenable to be just a specialist in that space anymore.  

Now, of course, we have the Consumer Duty which effectively dots the i’s and crosses the t’s around regulatory requirements for a holistic approach to delivering advice to the clients, not just for the lending product itself, but also in areas such as protection and insurance.  

It also brings in areas to consider, which have been a main focus within the later life sector such as identifying vulnerability, resilience, capability, and transplants them into the mainstream mortgage system.  


Bringing it all together 

And it’s at this point that you can see why there is likely to be a ‘merging of the streams’ between later life lending and mainstream advisers. Just as we have been talking about in the former, there now needs to be a wider consideration of borrower needs and requirements, against the backdrop of greater product choice, within the latter. 

Hence, much as it’s not possible for later life advisers to only consider lifetime mortgages, mainstream advisers must consider the other options outside their silo for those clients who are of an older demographic. A ‘normal’ mortgage might not be the only appropriate product choice for an older borrower, particularly when you have RIO and lifetime mortgage options available. 

You can therefore see the potential for a ‘quid pro quo’ type arrangement between traditionally mainstream mortgage advice firms and those businesses that have traditionally serviced the later life lending market, but whose technology, tools, assessments, sourcing, CRM, with potentially a few tweaks, could be the perfect products or services to ensure mainstream advisory firms are getting it right in this post-Consumer Duty world. 


Broadening capabilities 

At Air, we’ve already had some very interesting conversations with, what we might call, broader advice firms who recognise the need for potential support with, for example, vulnerability assessment tools, affordability assessment, a triage tool that takes all that fact find information and offers product choice, plus in other technological areas such as API functionality. 

To that end, we’ve also been working with other software, CRM and sourcing providers to look at the ways we can integrate the tools and options we have already developed, and to utilise them for a more mainstream audience. The good news here is that there is no need to reinvent anything, or to start from scratch; the fundamentals are sound and already meet requirements, they just need to be ‘bespoked’ for each one. 

Overall, you will have seen already a number of larger operators – particularly in the network space – looking at how they can utilise all of these elements to ensure their adviser base has everything they need to be able to deliver not just what the regulator wants, but also what customers require in today’s marketplace.  

They need to be confident that all their many needs and circumstances are being considered in the round, and that the adviser has the tools and technology available to be able to look at all options, not just those they have been simply historically predisposed to offering.  

These are big changes for many firms to accommodate, but they are absolutely the right ones and the good news is that there is a raft of businesses like Air who have the tools, systems and services to make such decisions much easier to make and take.  

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