The warning was sounded by the executive chairman of Sesame Bankhall Group (SBG) John Cowan (pictured), at the network’s annual conference, attended by over 200 brokers in Birmingham.
In an interview with Mary Nightingale, presenter for the ITV Evening News, Cowan was asked what lay ahead for the mortgage advice market.
He said mortgage brokers should look to the experience of the Retail Distribution Review (RDR) and its impact on wealth advice, for an indication of what was to come.
“A wealth adviser who wants to invest £50,000 for their client, has a responsibility to take the client through understanding [the] volatility [of the transaction], and explain they may risk losing money if they invest, along with carrying out due diligence on the platform,” said Cowan.
“In the mortgage world, a client can walk into the adviser’s office and get £200,000 of debt and walk back out the door again. There is no obligation for the adviser to discuss the personal risk, the ‘what if you’re made redundant’ question or discuss with the client the risk of getting a critical illness or death – it’s optional.
“If we read the signs from the regulator it is going to take more interest in the mortgage space,” he added.
Cowan believes the Financial Conduct Authority will put more pressure on advisers to discuss with their clients the risks of taking out a mortgage, over the next two to three years.
He added that the arrival of RDR had polarised the adviser community into wealth advisers and the mortgage community with one regulatory authority sitting over the two camps. The notion that one would be able to conduct business differently to the other ‘was not going to wash’, he said.
Mortgage advice with no obligation to discuss the risks of taking on the debt, ‘was not a sustainable proposition’ he added.
Speaking to Mortgage Solutions after the conference, Cowan said the arrival of overseas fintech firms would allow consumers to carry out many transactions themselves.
“Right at the centre of this we have the death of advice,” he said. “People will be able to do their own research and go direct to the provider. We don’t know who is going to win this battle but we want to help advisers work with this technology and move from being transaction fixers searching for products to becoming planners offering longer-term advice.”