Financial Conduct Authority  

FCA finds two out of five mortgage advice files unclear

FCA finds two out of five mortgage advice files unclear

The Financial Conduct Authority found nearly 40 per cent of the mortgage advice files it has reviewed were so unclear it couldn’t tell if the advice given was suitable or not.

The regulator’s senior associate Gordon Findlay highlighted the figures from an earlier FCA review at the Legal & General Mortgage Club Live conference today (13 October).

He said: “In our thematic work almost 40 per cent of the files we checked were unclear in that we couldn’t tell whether the advice was suitable or unsuitable.

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“That could be a shame because the conversation may have taken place but it wasn’t documented.

“That file is given to internal and external file checkers who don’t know the client. It might come to us and we don’t know the client. It may go to the ombudsman.”

The thematic review found there were issues of clarity with 38 per cent of the files the FCA looked at.

Mr Findlay stressed the importance of advisers using clear communication and engaging the client to “bring them onboard”.

Simon Webster, managing director of Kent-based Facts & Figures Chartered Financial Planners, said: “I wish I was surprised so many files are unclear but I am not.

“Regrettably, after north of 30 years in this business there are relatively few advisers that have the necessary skills to both talk to clients and write up decent reports.

“There is a strong case that more advisers should be working with paraplanners who have different skills.”

Mr Findlay also said that ageing populations could lead to mortgage brokers having to take a client’s pension into account.

He said: “We have heard a lot about people living longer but they are not necessarily going to take a guaranteed income.

“For mortgage advisers, being right up to date with how clients are enjoying their retirement and the funds behind that is going to become part of the puzzle as well.”

Addressing some of the work the FCA will be doing in the coming months, Mr Findlay told advisers gathered at Legal & General Mortgage Club's conference in London that advisers will have to comply with the senior managers’ regime from 2018.

He said: “The reassurance I can give you, for all those that have got a small firm, is that we are not going to ask you to produce the same thing to the same extent that we ask NatWest or Barclays to do.”

Touching on the FCA’s upcoming mortgage market study, he said the regulator would be looking at areas including the borrower’s ability to shop around, the wider intermediary market and commercial arrangements across the sector, such as between brokers and lenders or builders and estate agents.

Earlier this month the FCA's executive director for strategy and competition Christopher Woolard said commercial arrangements could be good for managing commercial or regulatory risk but may be detrimental to the overall good-functioning of the market, or to the interests of consumers.