At the time, the regulator said consumers were “being channelled unnecessarily into advice” and suggested the potential harm caused by execution-only did “not appear to be large”, thus encouraging lenders to capitalise on this particular route.
Being seven months since this statement, Mortgage Solutions is asking: Have you noticed a change in the behaviour and your relationship with lenders since the FCA made execution-only more attractive?
Lenders have been contacting my clients earlier, up to six months before the end date of the fixed rates. It used to be only three months.
I feel it’s behind my back because we gave them the business then they write to the client and make it so much easier just to tick a box and get that rate, but as a broker, I have to justify why staying with that same lender is suitable advice.
But the clients want the easy option and ask why should I provide this paperwork when the lender can do it for me over the phone.
I’m finding we’re going back to the bad old days of the credit crunch when there was a two-tier system where the lenders would offer deals that brokers could not have.
Some of the broker-friendly lenders are telling the clients to speak to us but fewer lenders are pushing towards the adviser route. We have a diary system to contact clients and we’ve had to change it from three to six months because sometimes they’ve already done the business.
I would say we’re losing at least 25 per cent of that business.
The business development managers (BDMs) we see are supportive and we’re being told it’s out of their hands. It’s the bank’s decision to do that. They appreciate brokers and the BDM is looking after us and trying to get targets, but they’re disadvantaged.
The bank itself is sending these letters; BDMs are in our corner, but their hands are tied. They’re getting frustrated.
Removing barriers and going into a transaction on an execution-only basis should be perfectly satisfactory. In practice, however, it’s not and I don’t think it’s how we should promote the mortgage market.
I have a client who has five buy-to-lets, and he’s favoured five-year fixed rates as he had no requirements to change or sell. Five or so years ago I arranged one of his buy-to-lets with an intermediary-only lender.
His product ends at the end of December and I contacted him this week because I’ve got his details, I know his situation hasn’t changed so we can have a look around – including with the existing lender.
He emailed me back to say they had contacted him, and he had tied in again to a five-year fix.
Lenders say they will approach customers around 90 days before deal expiry. That’s way too early for me to get involved in a transaction, but they can switch him. They haven’t poached him because he’s an existing client but I am struggling to find another way to say it.
When I see a lender actively working against me, I feel a bit sad because it means the clock is ticking for people like me.
On the customer-facing websites, it says what you can do if your product is about to end but does not mention intermediaries.
A lot of lenders will switch before the end of a term with no early repayment charges, so there are methods they can use in a sly way to eliminate the need for advice. It’s difficult to manage.
To be honest we haven’t seen any difference our side at all.
Perhaps it is the end of the market we deal in, in that we deal with more affluent clients and they completely understand the value of advice. There is no denying they are more than capable of arranging the loan themselves and leading the process.
However, any intelligent person knows how little they know in the grand scheme of things. I tend to find an inverse curve in the smartest people I know understand how little they know, and the dumbest tend to know it all. So, when it comes to execution-only that could never be truer.
Why on earth would you not get advice on one of the largest financial transactions you are likely to make?
If anything, lenders are making it more attractive to go via lenders.
While the increase in applications and online technology makes it easier to transact directly with a bank, and are being heavily promoted in the media, most sensible people would at least do a sense check before going down that path.
That is our experience and I could well be wrong. However, it looks like we have a job for a little while yet.