Earlier today the Financial Conduct Authority published the findings from its review into the quality of mortgage advice, here we dig a bit deeper into the various papers to unearth more of what you need to know.
1) The key statistics
The work appears to have been mostly qualitative in nature, although some statistics were garnered.
Crucially, 59 per cent of mystery shops and files reviewed resulted in suitable mortgage recommendations to customers – with only 3 per cent of cases assessed as demonstrably unsuitable.
However, many firms failed to take reasonable steps to obtain sufficient relevant information about customers’ needs and circumstances before making recommendations, resulting in 38 per cent of cases where the regulator was unable to determine whether the mortgage recommended was suitable.
Shoppers did not receive advice in 19 per cent of mystery shops, despite the shopper believing they had received a recommendation.
The ESRO research found that in the case of lenders, consumers do not consider themselves to have received ‘advice’, rather ‘support’ to make the application.
This was due mainly to their lack of expectation surrounding advice from the lender and the fact that many consumers switch off during what they perceive to be the ‘legalese’ components of discussions.
Consumers also perceive follow up communications as designed to protect the lender rather than support them, reinforcing their belief that lenders cannot provide specific product recommendations.
2) What advisers could do better
The quality of advice in the mortgage market was mixed, according to the FCA, with some firms delivering advice with little or no structure, meaning advisers failed to ensure they had sufficient understanding of customers’ needs and circumstances on which to base recommendations.
Other firms placed heavy reliance on completion of point-of-sale application systems, allowing little flexibility for advisers to apply judgement or adapt delivery to meet individual customers’ needs.
“Both approaches resulted in unintended consequences which impacted on the customer experience or the suitability of recommendations provided,” the regulator added.
Firms had adopted contrasting approaches to dealing with initial customer enquiries, with some having strict controls on the boundaries between providing advice or information – in some cases making it difficult for customers to obtain mortgage information without advice – while others were more receptive to the information needs of customers, although advisers were often unclear as to whether or not they were providing advice.
Some lenders adopted a cautious approach to providing information to mitigate risks of unqualified staff providing regulated advice.
In some cases this prevented customers from accessing information about products unless they spoke to an adviser or accessed information online.
Mystery shoppers said they thought they had received advice and a recommendation, but reviews indicated advisers had only provided information.
In other cases advisers made specific product recommendations without first establishing the customer’s needs and circumstances, in breach of FCA rules.
3) ‘A time consuming process’
The research showed that consumers found the mortgage application process to be time consuming and unnecessarily convoluted.
Many who went direct to lender had to wait for an appointment, while others who had used alternative methods also mentioned the delay in getting to speak to an adviser, with these ranging between a week to three or four.