A poll run by Mortgage Solutions found 68% of respondents thought the FCA’s Competition In the Mortgage Market study was right to be looking into the relationship as it has been left unchallenged for too long.
The FCA said it wanted to identify if there was any potential conflict of interest between the two parties, which could hinder consumers and the variety of choices available to them.
The study will also look into whether established agreements are causing a barrier for new lenders to enter the market.
Some 32% said the FCA need not worry about the arrangements as they were fair and transparent.
Julian Harris, CEO of Julian Harris the independent financial and mortgage adviser network, welcomed the move by the FCA and said existing best advice panels rarely offered consumers good advice because the partnerships were made for the financial benefit of the panels themselves.
“If a firm is putting itself forward as an independent advisory firm but has panels in place then that goes against it being independent. The advice should be tailored to the individual and should consider all products available from the whole marketplace, not just the ones that can afford to be on the panel.”
Harris said he was aware of arrangements made in the past between providers and networks where networks would sell their spots on the panel to the highest bidder. This meant smaller providers would not be suggested to clients even if they were better suited to the client’s requirements.
Martin Sims, development director of Homeloan Partnership (HLP), agreed the FCA should go ahead with the study but said it shouldn’t take precedent over existing issues the FCA currently is focused on.
“The FCA should definitely look into this as long as it is balanced with the issues it is already involved in investigating.
“The relationships between distributors and providers are as important as the way we treat the clients directly, the FCA just needs to make sure there is proportionate activity and time spent on it,” said Sims.
However, Robert Sinclair, CEO of the Association of Mortgage Intermediaries (AMI), does not think there is a need for the FCA to be looking into the matter.
“It is right that the FCA looks at any aspect of the market where commercial arrangements have the potential to impact consumer choice. Do I think current commercial practices impact consumer choice? I don’t think they do,” said Sinclair.
Reaction towards the FCA’s proposed market study has been mixed, and met with apprehension, but all agree the study is important to help the market remain a fair and balanced place for consumers.
“It is far too broad to say what could happen. The important thing is that the FCA will release its report and that will define the call for evidence and from that we will have clarity on what it expects from the industry. But until then speculating is very risky,” said Sinclair.
The FCA is set to release its terms of reference before the end of this year, which will identify the key areas it will focus on.