Celebrate might be a strong word but, for what it’s worth, we certainly think Consumer Duty represents a positive for the advisory community, even if – at the same time – we believe the Financial Conduct Authority (FCA) could be doing more to acknowledge the benefits of advice rather than somehow trying to toe the line which seems to ‘value’ non-advised routes equally despite the greater risk and the lack of protections for consumers. 

However we digress. We actually wrote about that in this very publication here a couple of months ago if you’d care to read. 

But, back to Consumer Duty and as mentioned, we think – even in these early days – that it does present opportunities, especially given the focus on broadening the array of products and services firms can offer to consumers. Some of these, such as protection, general insurance (GI), conveyancing and the like, are so closely linked to the mortgage they are no-brainers, but there are clearly other client wants and needs that can also be serviced, if not directly, then certainly through referrals. 

Advisers, we think, have embraced this, have looked at their propositions and have tweaked, or indeed, re-engineered them to meet the rules and to continue to deliver those positive consumer outcomes. 

It is, however, interesting – a year on – that one of the big perceived mortgage benefits of Consumer Duty appears not to have translated into reality yet.  

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Waiting for a mortgage revolution 

When the duty was announced – and its focus on providing borrowers with positive outcomes for their unique requirements/situation, etc – we were told this would be a gateway for much more bespoke product options from lenders for our clients.  

Which seems somewhat odd because those bespoke options – particularly from the larger lenders who after all cover approximately 80% or so of our market – seem to be still conspicuous by their absence. Why might that be? 

Well, the common response from lenders tends to be that it is incredibly difficult to offer these bespoke arrangements, due to their technology/IT issues; often, their legacy systems are cited as holding them back, and hence we continue to see a homogenised product offering that borrowers have to fit into, rather than products fit for borrowers. 

At the time of Consumer Duty, there was a conversation being had about bespoke products tailored to different borrowers, in different regions, for example. Consumer Duty being able to help deliver individual interest-only pricing, or include multiple borrower factors depending on where they live, what the valuation was, or higher loan-to-value buy-to-let again based on property type/region/value/rentals, not forgetting highly specific options for the over 55s, or first-time buyers, or on houses compared to flats. 

What about products which are specifically priced on the energy performance certificate (EPC) of a property and the specific energy/carbon emission nature of that home, rather than again a somewhat basic ‘green’ mortgage option which is limited in scope by nature of it having to be a catch-all. 

 

Not enough of a niche  

Now, we’re not for one minute saying these products – or variations of them – aren’t currently available at all. We do have some mutuals or specialists which are moving much more closely to a bespoke offering in different niches, but at the same time, their reach is clearly not going to be anywhere near as wide as the bigger, mainstream lending ‘giants’. 

And from them? Well, nothing really at all.  

Certainly no product tailored to an individual borrower rather than the biggest pool possible. Again, we hear all too often the ‘super tanker’ excuse – that it’s difficult to pivot in this bespoke direction because of the size of their operation, their tech, which means they have to offer a traditional product range because the system is unable to handle anything else. 

Well, quite frankly, is that really good enough? Would advisers – who are meeting their side of the Consumer Duty holistic advice bargain – be allowed to blame their tech or their systems if they weren’t?  

Especially, given that the Duty was at least 12-24 months in the making before it was even launched – surely, that is enough time to deliver on what was highlighted as a major gap in the mortgage product space? 

Apparently not. So, as we reach that one-year anniversary it will be interesting to see how the regulator reviews duty compliance, how it determines whether any progress has been made by the major lenders to tailor their offering much more individually to borrowers rather than continuing to lump them all into a limited number of pre-determined pots. 

 As mentioned, advisers are required to look at the needs of the individual and advise accordingly; it would be nice if a number of the big lenders could entertain product options for individual borrowers which did exactly the same.