IFA Promotions (IFAP) has angered mortgage brokers by claiming IFAs are the only intermediaries that can offer truly independent whole of market financial advice.
The claim is made as part of a research report released by IFAP this morning focusing on the fact that the majority of potential first time buyers are unaware of the financial realities of buying their first home.
Seven out of ten (71%) potential first time buyers say they are either completely unaware of the other financial products they need to consider to accompany a mortgage or would at least need advice.
IFAP also says in practice, 78% of borrowers take out one or more insurance or investment product alongside their mortgage.
It adds that while independent mortgage advisers may offer independent advice on mortgages, they may offer ‘tied’ advice on affiliated products and that only a mortgage IFA can offer truly impartial financial advice across all associated mortgage products that are part of the homebuying process.
Karen Barrett, of IFA Promotion, says: "Buying a home and arranging a mortgage is often a daunting experience, especially for first time buyers, and the fact that so many people do not fully understand the full complexity of associated financial matters comes as little surprise.
“However, for many, it is also the single largest financial commitment they will ever make, and consequently one of the key triggers to consider other financial products. We are therefore warning that people apply caution when seeking expert advice in this area.
“Only mortgage IFAs are obliged to offer the gold standard: whole-of-market independent advice across the full range of financial products"
But James Cotton, a mortgage specialist at L&C has expressed irritation at the remarks, saying: “You can’t discount mortgage brokers just because they don’t have this ‘independent’ tag. There are people that have gone down the tied route but there are a lot that have not. IFAP give the impression that it’s a black and white issue: you’re either one thing or the other.
“It’s pretty misleading because you could call yourself independent but not offer whole of market advice, you could still be working from a restricted panel of lenders,” he adds.
Meanwhile, Andy Pratt, chief operating office at Alexander Hall Mortgages, says IFAP’s comments reveal a lack of understanding about the mortgage market. Pratt says: “We are a truly independent mortgage adviser and so are many others, we are not tied to certain protection products. While there are many mortgage brokers that do offer tied advice there are just as many that are independent.
“And its something we have to be specialists in, we have to understand the market properly and while there are some brokers that work on a tied basis there are also IFAs that work on the same tied basis as part of a network.
“It’s likely the issue of independence is going to come to the fore over the next 18 months and there will be a debate about it. One of the key industry debates over the next year or so will be how to differentiate brokers that are tied and brokers that are independent in the eyes of the public. It’s an industry issue but it's also a marketing issue.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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