INDUSTRY UPDATE – 5
product, yet had identified that 30% of customers could have found a cheaper equivalent mortgage deal. The stand-out reason for this was clarity, particularly clarity of certain eligibility criteria, with maximum LTI and minimum credit score as the two biggest offenders. What I find encouraging is – against the backdrop of these findings - those consumers using intermediaries were much less prone to taking a mortgage product that was costlier than it should be, with “only around 20%” missing out on “significant savings”. It is recognition of the vital part advisers play in ensuring that UK consumers find the most suitable mortgage for them. And given the increasing proportion of mortgages sold through advisers, the study did not propose to intervene any further. Implementation of Intelligent Office (iO) I’m pleased to report that the project is currently on track, working towards a launch in Q4 of this year. We’re keeping you updated via our weekly Intelligent Office (iO) communications and our dedicated iO extranet area. If you turn to page 10, you can read more about the benefits that the system will offer for advisers. In terms of the regulatory environment however, technology is a very effective way of reducing the strain and helping ensure compliance, especially in light of the FCA’s ongoing suitability review work.
for FOS or legal cases, and our PI cover provides the same comprehensive cover for all sectors. Mortgages Market Study As I write, the FCA has published its consultation on mortgage advice and selling standards, which includes proposals to change its mortgage advice rules to make it easier to offer execution-only options to borrowers and to equalise treatment of advised and execution-only sales. It will also require mortgage advisers to keep a record of why they did not recommend a cheaper mortgage, if the product recommended was not the cheapest policy that met the customer’s needs and circumstances. These proposals are one part of a package of remedies from the Mortgages Market Study. In March, the regulator also stated it was concerned consumers were being “unnecessarily channelled” into advice and said its rules on advice could have been a barrier to the development of tools that help consumers choose and buy a mortgage. Based on the fact that the original study found that the mortgage market is working well for most customers, these developments are concerning – if it ain’t broke, don’t fix it comes to mind! We will therefore be keeping a close eye on how this progresses and as ever, represent your best interests via our board position within AMI and other channels. Looking back to the Mortgages Market Study (MMS) final report itself, in the last issue of Connected I focused on the two key areas that could drive change within the industry - a proposed digital comparison tool to help select the ‘right’ adviser and the desire to support ‘mortgage prisoners’ in switching to a better rate. Another topic under the FCA’s microscope is related to concerns about ‘making it easier for consumers to choose the right mortgage’. It cited the prominence a mortgage has, making up 80% of total UK household liabilities, and thus the importance in selecting the best value
area is not going to diminish and this is a positive move by the PFS in the wake of the British Steel scandal to better enable the public to understand what to expect from regulated advice. The gold standard is linked to an adviser code, based on nine principles underpinning good practice in pension transfer advice and firms need to have PI insurance that meets Financial Conduct Authority (FCA) threshold conditions. Although we can’t apply for this on your behalf, we can support your application, particularly around potential amendments to your IDD and client agreement. The required qualifications for advice on transfers of pensions with safeguarded benefits are changing in January 2020 and for this reason, applications can only be made by Tenet members who hold a relevant Level 6 qualification (G60, AF3, AF7). We want to maintain our own register of advisers who sign up to the Gold Standard to ensure we support your ongoing compliance with this and therefore, please contact our Compliance Helpdesk in the first instance to inform us of your intention to apply and we will guide you through the process. Once approved by the PFS, we can then provide you with the required amendments to your initial disclosure documents. Increased FOS compensation limit From 1st April, the Financial Ombudsman Service compensation limit increased from £150,000 to £350,000 for complaints about actions by firms on or after that date. There has been a lot of concern within the market about what the effect on advice firms and professional indemnity insurers will be, with the FCA estimating that PI insurance premiums could go up by 140 per cent and may force 1,000 ‘higher-risk’ advisers to leave the market. The worst-case scenario modelled by insurers sees premium hikes of between 200 and 500 per cent! We are pleased to report that there is no change to our own captive PII policy however in relation to this, as we don’t set a single claim limit, so cover will be the same
Steve Jones Adviser Relationship Director
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