The FSA has hinted the mortgage advice market could be in line for an "RDR-style" review in the near future.
Speaking at the Mortgage Masters Conference today, FSA director of the small firms division, Stephen Bland, says the “jury is still out” on whether the mortgage arena needs a more thorough investigation.
It follows recent regulator reviews which highlighted that, while many mortgage firms are treating their customers fairly, some are still operating “in a way which is currently unacceptable”.
In addition, Bland also highlights the grey areas between investments, mortgages and protection and how the RDR – which is mainly investment-focused – could affect the other industries.
Currently, adviser firms are in the process of responding to the FSA’s discussion paper on the Retail Distribution Review (RDR), with the deadline for responses only a month away.
Bland was speaking at the conference to point out where the FSA sees the RDR possibly affecting – “reading-across” to - the mortgage market.
He says: “To my mind the jury is still out on whether there are aspects of the mortgage market that require an RDR-style review at some stage.
“What I do know is that, while many firms are treating their customers fairly, too many firms are currently operating in a way which is unacceptable – and risk bringing the industry into disrepute and damaging consumer confidence in it.”
Bland says key aspects of the RDR – such as Customer Agreed Remuneration (CAR) - could have huge implications for the 6,406 adviser firms that deal with mortgages.
He says feedback already received on the review suggests the industry wants a “convergence” of approaches for investments, mortgages and protection.
“If a broker is operating on the basis of CAR for its investment services and has agreed this with the customer, does the broker then want to have to explain a different remuneration system for mortgage services to the same customer? He asks.
“I ask this question – to which I don't yet know the answer – because even in the absence of regulatory intervention, some mortgage market practices may – for sensible commercial reasons – converge with future possible practices in the investment market.”
Bland also fired a warning shot to those adviser firms with a mortgage focus deemed to be not heeding the outcomes of the RDR.
“[The] RDR aims to achieve an investment market which gives consumers better outcomes in terms of the advice they receive and services available to them, with standards of professionalism that inspire confidence and clarity about the services being provided and what the customer is paying for.
“If we achieve this, and yet the mortgage market doesn't operate with these outcomes in mind, then the mortgage market could – relatively speaking – be seen as offering an easier ride for those individuals and firms not wishing to meet the professional and other standards involved.
“Or the mortgage market could be seen as a less attractive option than the investment market for individuals and firms who do wish to meet those standards.
“And both those effects could in principle lead to an absolute decline in the quality of advice and other services that the mortgage market offers its customers.
“So the mortgage market might need to up its game just to stay in the same relative position to the investment market.
“What is clear is at this stage we are not saying the review (RDR) should automatically read across to mortgages. But we do have an open mind about where the review goes.”
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