FSA to ban non-advised sales, retain execution-only opt-out
Regulator claims move to all-advised market will reduce confusion relating to requirement to assess appropriateness of product.
Mortgage brokers will no longer be able to arrange deals for clients on a non-advised basis, under new plans unveiled today (19 December) by the Financial Services Authority.
In its long-awaited follow-up consultation paper on the Mortgage Market Review, CP11-31, the regulator said that it felt the decision to allow non-advised sales to continue would have added confusion to the distribution process, as it conflicts with plans to force intermediaries to assess the appropriateness of products for their clients.
Under plans outlined in the previous MMR consultation paper published last year, CP10-28, the regulator said it would allow non-advised sales to continue but would “enhance sales standards” by adding in the appropriateness test.
However, according to the watchdog there was little support for the proposals, with many respondents to the consultation arguing that the move would simply serve to “blur even further the distinction between the two types of sale”.
The FSA says that it agrees that the plans would have added to, rather than reduced, confusion, and so has proposed that non-advised sales should not be allowed to continue.
Despite this, the regulator also says in the paper that it may continue to be appropriate “in some limited cases” for the option to sell a mortgage product on an execution-only basis to be allowed for certain high net worth or “professional” clients.
This, the FSA said, was in line with its “consistent view” that “consumers should have the freedom of choice and that not every consumer needs advice.”
The paper says: “Taking on a mortgage is one of the biggest financial decisions a consumer makes and the majority opt for help and support through the process. We are also concerned that creating an execution-only sales channel could be exploited as a mechanism to circumvent our rules.
“Feedback supported the idea that an execution-only service would be appropriate for very specific consumers. In the light of this, we are therefore proposing that high net worth and professional consumers should be able to opt-out of receiving advice and purchase on an execution-only basis.”