Hiten Ganatra, managing director of Visionary Finance, spoke to Mortgage Solutions about how his firm had implemented its plan for the Duty.
He said the rising costs had created an unintentional perfect storm for rules because more emphasis was placed on how different choices could impact people’s finances.
Ganatra explained: “A £50 a month saving could make the difference between [people] keeping their head above water or drowning. That’s how tight it’s become for some households.
“In terms of its roll out, Consumer Duty couldn’t be timed any better.”
“It’s got a lot of brokers thinking about how to make sure that they are doing right by their customer. It’s put it at the top of the news agenda and put a deadline in place,” he added.
The client’s point of view
Ganatra said the mindset of Consumer Duty was already embedded into his firm’s practices and the Treating Customers Fairly (TCF) rule prompted Visionary Finance to put themselves in their clients’ position.
He added: “If you adopt that process of saying, if I was a customer, I would be wanted to be treated in an XYZ way then the implementation of Consumer Duty won’t be too tough.”
Firms which operate with a short-term view of simply getting deals away without thinking about the consequences will “have a greater battle have in terms of complying and conforming,” Ganatra added.
Ganatra said it took “ongoing tweaks” to put the plan into place and the work started in October 2022.
The firm has also provided CPD training on vulnerability and high risk lending to its advisers, and revised its suitability reports.
Ganatra said the firm was now in a good position.
Visionary Finance will also enlist an external compliance firm to look at its plan to make sure it has an objective opinion.
“It’s good to lean on the external support that’s out there,” Ganatra said.
Ganatra said the biggest challenge he had was “articulating the importance” of Consumer Duty to his employees, because as a business owner he was “thinking with a certain type of hat” compared to the advisers who were focused on handling cases.
“It’s not that any member of the team has any ill intentions, it’s just the fact that it’s not their priority. Their priority is getting the right mortgage and getting the case over the line.
“Then you have to explain that these are the principles of getting to that solution.”
Adviser stubbornness
Ganatra expected most firms to take the Consumer Duty seriously but said there may be stubbornness from people who had been in the sector a long time or saw it as a TCF rebrand.
He also said brokers may not feel like they needed to be told how to do business, especially if they had worked long enough to see multiple regulatory changes come through.
However, he said brushing up on market knowledge was always important as major events like the Global Financial Crisis had caused a notable shift in how people in the sector worked, so it was necessary to be aware of changes.
Ganatra added: “That’s where it tends to go wrong for firms. The fact that they’re not hungry for knowledge. They’re hungry to make sure that the bottom line works.
“You’ll get your successes, but when you are chasing that bottom line, you lose sight of what’s right and what’s wrong because you’ve not got the updated knowledge and therefore it has impact on the outcomes.”
Transparent, fair fees
He said Visionary Finance’s transition had not been too onerous, but the biggest change was to its fee structure.
Up until this year, the firm did not charge clients an application fee but said because of the due diligence needed during onboarding, there was now a £350 charge for new customers. For existing clients with large property portfolios conducting a lot of business, the firm does not charge a fee.
Ganatra said that was the main differentiator between Consumer Duty and TCF because firms need to justify their fees as there is no prescribed format.
He added: “Previously, you could look at one customer and say ‘I could charge him that amount because he’s got the money to buy a bigger house’.
“But you must make sure your fee charging structure is correct and fair.”
Ganatra also suggested that daily running costs of a business, such as office space, could be used to justify fees as it would help cover those costs.
He said the increased workload caused by the current changing rate environment and regular re-broking of cases could be a justification for charging a fee, especially while proc fees had largely stayed the same.
Ganatra added: “Our workload for each case has almost doubled.
“With how volatile the market is, we tend to find that buyers may get cold feet as well. You’ve done all the work, got through to offer, but you don’t get any reward. Because of how soft the market is, some brokers may want to maintain their income and charge for this business.”
He predicted that some fee-free brokerages may have to introduce fees while others may have to consider removing charges.
Ganatra also said firms needed to be more descriptive and make tweaks as to who they considered to be vulnerable and why.
Lean on market support
Ganatra said it was useful to speak to other brokers about how they were approaching Consumer Duty.
“By speaking to others, by talking about experiences, your challenges… you can learn, and you can help educate others about the problems and challenges that you’ve had as well.
“You’ve got to use the network. The power of that network to effectively grow, become better together and improve the sector collectively,” he added.
To firms who are still unsure how to approach the regulation, Ganatra said they should “leverage on the expertise” available for support such as compliance firms and other companies undergoing the same task.
“Chances are a lot of firms will have these measures in place. It’s just that they will need to polish them off and maybe introduce one or two extra measures, think about the impact of fee charging and how that can be standardised.
“Use the resources and educate yourself on what you need to do.”
