An execution-only route is still permissible by the FCA as long as it is a ‘non-interactive’ sales process, the customer has rejected the advice given and has elected to proceed with a product of their own choice, and the customer is high net worth – that is, have earned at least £100,000 or has held net assets to the value of more than £250,000 throughout the financial year – is a mortgage professional, or the loan is solely for business purposes.
Firms must always obtain the customer’s consent prior to proceeding on an execution-only basis and are required to notify them of the potential consequences of not taking advice. The promotion or encouragement of customers by firms to reject advice and proceed on an execution-only basis is not allowed.
How execution-only works
According to the Association of Mortgage Intermediaries (AMI) execution-only sales, including variations to existing contracts, are restricted to cases where there is no spoken or other interactive dialogue between the firm and the customer in the course of the sale. During this time the customer has to have rejected advice, identified the product which they wish to purchase and elected to proceed with the execution-only sale.
If the customer is a high net worth individual, a professional customer, or the loan is solely for a business purpose, then some interaction between the firm and the customer may occur during the sale. In any of these cases, the customer must have chosen to go ahead with an execution-only sale and have already identified the product that they wish to purchase.
David Hollingworth, associate director at London & Country Mortgages, says, “The natural environment for execution-only looks to be set online, where borrowers could, in theory, transact their mortgage from product selection through to making an application and beyond.”
The changes in MMR have made mortgage applications more complicated than ever, furthering the need for many borrowers to seek the opinion of an adviser.
“However, our experience of online transactions has always been that clients do, at some point, want to clarify something about their product choice. As a result, we’ve decided not to offer execution-only and concentrate on our core advice offering, which after all is what the vast majority of our clients want,” Mr Hollingworth continued.
The AMI states that an execution-only sale can be conducted through the internet as long as there is no interactive dialogue. However, as soon as this process begins to steer the customer away from one product and towards another, then advice requirements apply. Text messaging, instant messaging, email and communication on social media sites are all considered to be interactive dialogue.
