In April 2014, the Financial Conduct Authority’s (FCA) Mortgage Market Review (MMR) will come into force, and will result in all mortgage sales interactions with potential and current customers being classed as ‘advised’.
There are several requirements attached to this, not least the fact that staff must be suitably qualified and follow a strict evidential process detailing a customer’s financial circumstances before recommending a mortgage.
The MMR to-do list is a daunting one to look at, and lenders will need to start ticking off their tasks as quickly as possible if they are to avoid the FCA bottleneck when it comes to applying for the relevant advice permission.
Among the biggest tasks on the hands of lenders include training existing staff to the required level – and putting in time and money to keep them at this – as well as redesigning and upgrading IT support and quality assurance systems.
Throw in the need for a programme management team to manage this significant overhaul, all while preventing executives from being distracted from focusing on the core of the business, and it is easy to see how the MMR can quickly cause a headache.
Lenders don’t have many options:
• Understand, design and implement all the people, process and technology changes themselves (and/or pay for others to do it to them)
• Give up dealing with their own customers and hand the sales of their products over to intermediaries
• Draw upon the resources of an outsourcer to manage and implement the changes and continue to deal directly with their own customers in their own unique way
What are the biggest benefits of outsourcing?
The April 2014 regulation demands a hefty portion of time, money and resources from lenders, and outsourcing the mortgage sales process reduces the compliance burden inherent in business-critical process change.
In addition, getting their houses in order for next April might seem a long way off, but lenders should not underestimate this task.
By outsourcing to a third-party that can offer an MMR-compliant solution, lenders can enjoy peace of mind that they will make the FCA deadline – and with plenty of time to spare. This time can be used to maintain high levels of customer service, a growing differentiator in the busy mortgage market.
In addition, lenders can cross off several tasks in one swoop; fully-qualified staff will be on hand to deal with customers, there will be no need for system or process overhauls and implementation costs will be reined in.
So, what do lenders think?
Incorporating all of the new MMR requirements and being ready on time to meet the deadline in April 2014 with confidence is a big issue for lenders.
HML recently created a Mortgage Origination group on LinkedIn and asked lenders how much of a headache the MMR is proving to be. Of the votes cast so far, ‘Being distracted from daily operations’ and ‘The time and money it takes to comply’ are the biggest concerns for individuals and lenders – especially the latter.
Of course, outsourcing the mortgage origination process eases these two issues; however, the only alternatives to taking on the extra responsibilities of advised sales are non-advised web-based applications or delivery through intermediaries. Competing on a web channel means having the lowest headline rate – low margin products for mass consumption with all the funding and profitability risks they carry.
Catches, clauses and big product fees, which are often seen as ways to restore profitability – along with cross selling add-ons – could result in customer disenchantment and carry the potential to damage a good brand.
While intermediaries and the web are important channels for lenders, they also need a direct channel – one where they talk to their customers, deliver the value of their own customer experience and understand at first hand their customers’ real needs and deliver products to meet them. The issue has been how to do this cost effectively, reliably and compliantly; this is where outsourcing can help.
