Nay

Jeremy Duncombe, director of intermediary distribution, Accord Mortgages

Brokers are resilient. The industry is constantly evolving to meet the changing needs of homeowners, and the perceived ‘promotion’ of execution-only following the recent FCA review is simply another hurdle to overcome.

In today’s society, the ability to self-serve is so accepted it’s easy to see why execution-only mortgages could appear appealing. Consumer choice is imperative, but for it to be a real ‘choice’ the customer has to be clear what it is they are deciding between.

Speaking with an adviser clearly constitutes ‘advice’, but a price comparison website with automatic question prompts does not. The boundaries are blurring, and this is where as an industry we need to respond and clearly demonstrate the value of advice.

For the right customer, execution-only can be the right outcome, but the customer’s decision should be based on suitability, not price. Therefore, offering lower rates for non-advised cases compared to an advised mortgage could drive the wrong outcome, with a customer selecting a product based purely on the cheapest rates, instead of whether it’s the best product for their current and future circumstances.

Committing to the wrong mortgage can be expensive. If you need to exit early, there will be fees. While speaking to an adviser will not stop any unexpected events, by asking the right questions a broker will encourage the applicant to fully consider what they need from a mortgage over the full length of its term and the implications of any changes to their personal situation.

While I accept that the delivery of advice is changing – telephone meetings or video calls can be more convenient and just as effective – the value of advice itself remains the same, and having been guided through the process, the customer will enter a deal with the knowledge and confidence a decision of this magnitude deserves.

I don’t think brokers should see execution-only as a threat, more as an opportunity to explain the value of advice – and the risks of getting it wrong. As an industry, we have a duty of care to protect those entering into a financial contract and so we need to work together to ensure people are fully aware of their options, know what advice is – and what it isn’t – and can consequently make the right decision for them.

Yay

Bob Hunt, chief executive, Paradigm Mortgage Services

The threat of execution-only clearly isn’t to the mortgage market as a whole – it will continue to function, people will get mortgages and, in that sense, life and mortgage finance will go on.

I should also say that I am the first to understand that the market has to evolve. Technology has been, and will continue to be, utilised within the mortgage market – but is the encouragement of execution-only evolution? I don’t see it.

Moreover, is the greater use of execution-only a threat to the advice profession? Well, again, I think we all know how resilient advisers are. Intermediary firms are strong enough to withstand this. They can segment their customers, they are valued by their clients because they want to do a good job for them, and there is growing demand for advice in more complex times with more complex client needs.

It must therefore be the consumer that is at most threat from this, and we might rightly question why the regulator is leading in this direction.

After all, it’s the consumer who won’t receive advice; instead, they will get suggested product choices, which they certainly shouldn’t be construing as advice. It’s the consumer who won’t have their suitability checked and who won’t have any ombudsman or compensation scheme protections. It’s the consumer who won’t get a heads-up when they’ve chosen a product that is unsuitable for them or when there’s a cheaper product available, which might seem rather odd for a regulator to allow when they’ve been talking about the importance of price and costs for the best part of three years.

I’ve talked before about wanting to know the reasoning behind this strategy. I think having a greater understanding of this would be helpful for the entire mortgage market – and, in a way, I think the FCA owes us all an explanation.

There are many positive aspects to the mortgage market today but this isn’t one of them. My view is that having opened this particular gate, it will be very difficult to close it, if the outcomes are not as the FCA has envisaged. I hope I’m wrong but fear that ultimately it will be the very people that the FCA is trying to protect – consumers – who will come out the worst from this.