Advisers have expressed consternation at commission disclosure demands under the incoming European Mortgage Credit Directive, which the Financial Conduct Authority has said will require an industry solution comprising of standardised information from networks and others.
Speaking at the Financial Services Expo in Manchester, the Financial Conduct Authority’s technical mortgage specialist Keith Hale outlined the new position on commission disclosure for advisory firms when the new rules are implemented from 21 March 2016.
It appears that advisers will have to disclose all potential commission levels they could have received on all relevant products, not just the commission payable on the product applied for.
He said: “You will have to tell the customer that they can ask you about the levels of commission you could have received. Advisers will have to list all the lenders’ commission levels of all the loans [they] could have accessed on a piece of paper.”
Mr Hale acknowledged that an industry solution will be needed and suggested that networks, mortgage clubs and sourcing systems might wish to provide a standard form of the information to allow ease of use for advisers.
Martin Reynolds, chief executive of SimplyBiz Mortgages, was a speaker at the conference and told FTAdviser that there was certainly surprise amongst delegates as to the extent to which advisers have to make clients aware of what other commission rates are.
“As with all these things, the devil is in he detail. Do you have to show the whole of market, just your panel, include secured loans?”
Adviser attendees questioned how they would be able to collate such information and the potential length of document required, which might need to list the commission levels of every single lender in the marketplace.
Mr Reynolds said there were also questions from the audience about the level of record-keeping required by the new rules and how advisers would document that a customer had not requested the commission disclosure information.
He added that, from his perspective, it would be best to show clients the documentation and get them to sign it.
“The document is an ancillary one to the initial disclosure and you only have to give it out if the consumer asks for it,” said Mr Hale.
“However you have to tell the consumer that they can ask for it; every intermediary will need to provide a mortgage-specific disclosure document. There is however no obligation to provide documentary evidence that the consumer did not ask for the document.”
Mr Reynolds added that while the presentation certainly raised some questions from advisers, it provided clear guidance on the new rules and gave a good idea of what the FCA will look for post-implementation.
Mr Hale also appeared to question the benefits it would bring to the industry.
“As far as the FCA is concerned it adds little of consumer benefit... We are not going to be prescriptive and tell you exactly what you to need to do.”
peter.walker@ft.com
