Speaking on a podcast, Edward Payne, director of Clifton Mortgages, said that the sector “need to really start to think about foreseeable harm” as it was the “key thing when it comes to Consumer Duty”.
He explained that, since 2008, “affordability has been the watchword”, which has meant ensuring that the customer has sufficient income to cover the mortgage.
However, this is not necessarily the case when it comes to a lifetime mortgage, as customers can choose whether to pay the interest, and if they chose that route, then questions around income can cease.
“It was perfectly acceptable to sit back and say, [if a customer said they didn’t want to pay the interest on a lifetime mortgage], in that case I don’t need to see proof of income, bank statement or pension. They don’t want to pay it, so we don’t need it. That’s madness.
“We have to sometimes step back and say have we shown the client alternative products, and clearly that has been driven by innovation within the lending sector with people prepared to offer standard mortgages to older clients, the advent of retirement interest-only [RIO], etc.,” he said.
Payne said that if a later life client comes to see him he will always check the income, even if they say they want a lifetime mortgage and don’t want to pay the interest or roll it up, and show an alternative for an interest service product if they’re able to afford it.
“That’s the sort of additional work that we need to be doing here, not just taking the client’s word for all that then drives the agenda, we need to be showing them all of the options and drive on the agenda ourselves,” he said.
Michael Craig, managing director for Brilliant Solutions, said that in its broker firm for every equity-release case he would expect to see two options: an equity-release option and a RIO option if it is available.
“You have to give the customer choice; the customer is coming to a mortgage broker, because they need support, they need to understand what they’re getting themselves into, and that’s what Consumer Duty comes down to.
“If it [Consumer Duty] hasn’t changed your business, you haven’t taken it seriously. It’s as simple as that,” he said.
Holistic advice is key
Craig said that the “one underlining message” that the Financial Conduct Authority (FCA) gives is to give “holistic advice and make sure that you’re looking at every option for that customer”.
“That’s what, from our perspective, and it is our opinion, that’s what the regulator wants, they want that holistic advice. If you can’t give that holistic advice because you’re not a specialist on that side of it, then find someone that gives you that advice.
“You can have a conversation, and you can understand what that customer needs, and if you can’t fulfil what that customer needs… find someone that can and have that in-depth conversation,” he added.
Payne added that customer contact and regular reviews with clients was also important, but said that it can be “easier said than done” as brokers do “not have many free hours in the day”.
“Fitting in the time to go back to those clients is difficult, but it can be as simple as automated comms: ‘It has been a year since you did this’ and if you have any questions I’m here if you need to speak to me,” he said.
Payne said that support in the market was improving for ongoing customer contact, pointing to Livemore’s trailing commission model, which offers ongoing procuration fee for continued contact throughout the term of the mortgage.
“We’re not paying lip service to this, we should be actually going back and speaking to our clients, and then from a relatively light-touch approach if they have a change in circumstances or they need to speak to you, that prompts them to actually do it,” he added.
Watch the 20:06 video talking about the later life lending sector and regulation with Family Building Society. Hosted by Mortgage Solutions’ deputy editor Anna Sagar, with speakers including Darren Deacon, head of intermediary sales at Family Building Society, Edward Payne, director of Clifton Mortgages, and Michael Craig, managing director at Brilliant Solutions.
This is the latest video in the series. Watch the previous videos here and here.
