Financial Conduct Authority  

Advisers accuse FCA of u-turn on mortgage advice

The FCA's review also flagged that fears over breaching protocol had led to a stifling of innovation in the industry and intermediaries felt they could be seen as giving regulated advice if they gave generic information that led to a mortgage contract.

Mr Shave said the struggle to fuel innovation, such as around robo-advice, had lead to the regulator’s change of opinion.

He said: "I think the FCA are bringing this forward because of new technology. Companies are trying out new systems and want consumers to get instant answers.

"I don’t think the FCA can get their head around where that falls in regulation — they can’t pigeon hole it."

Following 2014’s MMR, it was unclear to many intermediaries and lenders where the line between information and advice lay and whether robo-advice would count as advice in regulatory terms.

Ms Leyland said she believed this to be the cause of the apparent polarisation in the industry, where the majority of direct lenders offered exclusively a non-advised route and the intermediary channels offered advice-only.

She added: "Although face-to-face advice will always be preferable, there are some clients that would benefit from a simpler mortgage transaction. But the worry is identifying where the consumer would benefit from advice. The system would need foolproof robust questioning with options for human intervention."

Chief executive of the Association of Mortgages Intermediaries, Robert Sinclair, agreed help from the FCA to better explain the boundaries of their rules would assist firms in not labelling all interactions as 'advice'.

He said: "Should the FCA go further and loosen the boundaries to make execution-only more simple and encourage innovation, there would need to be greater clarity and balanced warnings of the loss of protections for the consumer."

An FCA spokesperson said the regulator was willing to allow the market, be it brokers, intermediaries or lenders direct, to refer customers in a way which allows them to exercise their choice.

The spokesperson added: "We remain vigilant about advice and the need for advice but that should not be at the expense of innovation for consumers who have the ability and the knowledge to execute themselves or be advised by a broker.

"If our rules are pushing people into unnecessary advice or acting as a barrier to innovation that is something we need to think about."

The FCA's consultation on potential changes to mortgage regulation is expected to be published in the final quarter of this year.