Speaking at the Westminster Business Forum policy conference, ‘Next steps for mortgage markets in England’, Sebastian Murphy, group director of JLM mortgage network, said that when Consumer Duty was introduced, it was welcomed because it provided a “clear, regulatory framework to raise standards, prevent foreseeable harm and improve consumer understanding”.
He said this was “not a revolution” for advisers as these standards had been held for years, “but it felt good to know that we were aligned with the regulator”.
Risk of weakening consumer protections
He said this was why the Mortgage Rule Review (MRR) “came as a surprise” and some proposals did not seem to align with Consumer Duty and seemed to be at risk of “undermining” it.
Murphy said advising was more than just choosing the right rate for a client, as it included educating clients to make the right decision, understanding vulnerabilities and future plans.
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He said consumer satisfaction levels with advice had remained “consistently high” and the growth of advised sales was an example of “the British public voting with their feet”.
Murphy said: “They want advice, they value advice, and they need advice”, adding that for some people, interacting with a mortgage adviser would be the only touchpoint with a financial adviser at any point in their lives.
“To weaken advice is not simply to weaken the market, it’s to weaken the financial resilience and education of families across the UK,” he said.
Murphy referred to 49% of working adults in the UK having a reading age of 11 years or under and issues around over-indebtedness, and said with more execution-only sales, people would be “left to navigate complex products without challenge, guidance or protection, so do we really want this?”
He said this would leave consumers exposed and paying the price for their decisions.
Murphy said advice was “not optional” but “essential” as often, some consumers became financially vulnerable because the environment around them – such as the economy – had changed and not their personal circumstances.
Profits over advice
He suggested that some of the proposals in the MRR were motivated by enabling high street lenders to lower acquisition costs and boost profits.
“The danger is clear. A government eager to back anything that claims to boost GDP has been tempted to listen to some of these lenders, and the poor regulator faces pressure to change unnecessarily,” Murphy said.
He said Consumer Duty was a “bold step forward” that should be praised, but some of the reforms proposed “risk taking us backwards”.
“Our industry has proven that advice works.
“Advice is not a cost to be cut, it’s a safeguard at the very heart of a fair and functioning mortgage market,” added Murphy.
Addressing regulators, Murphy said: “Hold firm, stay true to the principles of Consumer Duty, do not be swayed by arguments dressed up about consumer choice when in truth they are about profits.
“If we really want to get more people on the housing ladder, the government should be mandating advice for first-time buyers and improving financial education much earlier on.”
