You are here: Home - Your Community - Marketwatch -

Are networks letting down their ARs? Marketwatch

by: Mortgage Solutions
  • 23/07/2015
  • 0
In the Financial Conduct Authority’s (FCA) MMR thematic review, Appointed Representatives (AR) of many large networks were criticised for giving advice which had little or no structure.

Specifically, they were criticised for assuming needs and circumstances or missing them. The quality of advice depended on the person giving it and the approach they decided to adopt. The regulator said limited monitoring and controls had been allowing this to happen. Directly Authorised (DA) firms, responsible for their own adviser monitoring, were not singled in out during the review.

This week we asked our panel of distribution experts if networks were failing their ARs by not carrying out checks on the quality and suitability of their members’ advice.

David Carrington, sales and marketing director, Personal Touch Financial Services, believes there are some networks who operate on a ‘light touch compliance’ basis and discusses how processes can be made more robust.

Martin Reynolds, chief executive of SimplyBiz Mortgages, says the industry needs to focus on the FCA’s comment of ‘little or no flexibility’ in advice rather than a who-did-what argument.

Gemma Harle, managing director of Tenet Lime, thinks one of the key ways clubs and networks can support their members with the quality of their advice is to observe the good practice of others.

 

David CarringtonDavid Carrington is sales and marketing director at Personal Touch Financial Services

 

It is without doubt a network’s responsibility to robustly check and challenge advice quality and suitability and any that don’t, and the report indicates they are in the majority, are badly letting down their members. We have deliberately reduced membership numbers to focus on delivering good customer outcomes and I suspect some of those networks, who have recruited firms on the back of a light touch compliance message, read the thematic review with a mixture of nervousness and panic.

Whilst the review doesn’t comment specifically on DA firms, they do need to have the same robust challenge processes in place. As a network that has invested heavily in the quality of advice our experience is that many firms who have moved to DA have done so to avoid compliance oversight rather than embrace it.

Preventing inconsistency of advice and promoting good customer outcomes is at the heart of how a network and indeed any advice business should operate and there are a range of mitigants that can be considered. As an example, last year we replaced a myriad of different inert fact finds with a universal electronic version that allows the adviser to flex the process depending on customer needs – whilst following a clear advice process that focuses on establishing their circumstances before diving in too early with advice.

The FCA stresses the need to ensure the advice process is built around the customer and networks (and DA firms) need to demonstrate they understand how the customer felt about the advice process, such as through an electronic feedback service. If you are not asking customers their views about their experience with an adviser you have no idea whether the systems and controls in place are actually working.

Martin ReynoldsMartin Reynolds is chief executive of SimplyBiz Mortgages

 

It would be very easy to use this piece to extol the virtues of DA vs AR and create a party political broadcast on behalf of the DA Party. However, I think we need to look at the words used by the FCA in the report and understand how all intermediaries can review their processes to ensure they are not falling into the same trap.

The key words that the FCA used were “little or no flexibility” and this is the conundrum that we all have to address. How do all networks and compliance providers provide a robust, compliant sales process that protects their members but also allows them the flexibility to provide advice on an individual basis for each of their clients.

We have to be mindful that we do not create a tick box mentality. This would be compliant but would provide regimented advice. I do feel that the DA market may find this a little easier to implement as each individual firm can take the process from their compliance provider and then have the flexibility to adapt it within certain tolerance levels. Being directly responsible to the FCA can help crystallise thinking but it also allows a freedom to document changes to processes that are to the customer’s benefit.

Finally, we should also take the report in its whole and the FCA stated only 3% were classed as ‘unsuitable’ which is 3% too much but still a small number. It also felt that there was no evidence of systemic consumer detriment. To me this seemed like a B+ on our report card. We can always do better and we must strive to do this. The challenges now are to review and change where appropriate plus engage with the FCA to gain better clarity on their thoughts.

 

Gemma HarleGemma Harle is managing director of TenetLime

The FCA’s thematic review of MMR essentially recognises the diversity of ARs and therefore the complexity involved in supervising such a wide range of different business models.

As we know, ARs can range from firms with 100-plus staff to sole traders and this is mirrored in the Directly Authorised market. It is a fact of life that there are good and bad examples in both.

As an established network, we will of course pay detailed attention to the findings and will adapt our model in any areas we deem necessary in the light of this report.
As standard practice we constantly review the supervision of our members and provide them with all the necessary tools to explain everything as comprehensively as possible to their customers. Advisers all undertake an initial induction when they join the network and oversight and development then continues on a remote and face-to-face basis.

Importantly, Tenet has the ability to invest in resources to ensure we have the appropriate insight and focus on end customers – ensuring the best possible journey and outcome for them.

Within a commitment to understand and monitor the support and development of advisers there should always be a willingness to observe and adopt the good practice of others, be they AR or DA. In such a fast-paced regulatory environment, effective supervision is necessarily an evolutionary process and new insight and learnings are welcomed.

It is important that we look at these findings in context. The FCA found just 3% of cases where advice was classed to be unsuitable and as AMI chief executive Robert Sinclair pointed out we do not know what sector these cases were in. We should always strive for better quality but this is not indicative of a widespread issue with mortgage networks in my view.

The FCA’s review can be read in full on the lender’s website.

 

There are 1 Comment(s)

You may also be interested in