As part of their Live and Local programme, the FCA has been running a series of Positive Compliance workshops to guide mortgage advisers on how best to deal with the advice process.
Although much of the feedback will come as no surprise, the following summary should be useful.
There has been a lot of positive feedback on these workshops, and other events in the Live and Local programme. They are undoubtedly extremely worthwhile. There are still workshops available throughout various parts of the UK up until March 2017, which can be accessed by clicking here and following the registration process.
The main objectives of the workshop were:
- Consider the current mortgage market landscape;
- Understand the findings of thematic review TR15/9: Embedding MMR – Advice and Distribution;
- Consider the balance of regulatory and customer requirements;
- Enable firms to consider their own processes against what the FCA have seen in practice;
- Refresh knowledge on other relevant areas.
MMR thematic methodology and findings
- Published July 2015;
- Mixture of mystery shopping, file reviews and firm visits;
- Cross section of firm types;
- Based on independent consumer research;
- Outcome of reviews …
59% Suitable, 38% Unclear and 3% Unsuitable;
- Evidence that advice is being delivered at extreme ends of the spectrum, for example a 2-hour rigid process where the client was “switching off” versus a 10-minute process which seemed rushed.
- Files should be clear enough such that any adviser could pick up the file of another adviser and be able to carry it through the sales process to the conclusion of the sale;
- The first thing the FCA looks at when conducting a file check is the fact find. From this document, the advice should more or less speak for itself and come as no surprise, with the SR being merely a confirmation of the KYC information gathered at the fact finding stage;
- A main area of concern was the process itself (or lack of one) – firms, particularly larger ones, should have a documented process to drive consistency between advisers;
- Disclosure – firms should try and make this more engaging for the client by simplifying the language. A good tip is to have a third party to read through the document in order to minimise jargon – this could be deemed a good example of TCF. Firms should also position the document more positively with client, for example, “I’m going to do this…. that’s important because…”. Firms should even use it as an opportunity to “blow their own trumpet”;
- Fact find/KYC information – general lack of client objectives/drivers and taking into consideration the clients’ knowledge and experience e.g. 1st time buyer versus serial mover. Lack of soft facts, the example given here was that a fact find will generally always have the NI number, but rarely will it have the reason for moving house;
- Suitability Reports – the three main requirements are demands/needs, why suitable and risks. Reports should not be seen as a “tail covering” exercise. Write it for the client, not for the FCA or FOS.
Other relevant areas
MI – should be Seen, Challenged, Analysed, Actioned, Recorded;
File checking: what the FCA look for (not exhaustive)
- Mortgage repayment method;
- Product features;
- Evidence of debts (for debt consolidation cases);
- Was a Suitability Report issued?
- Affordability and how this is documented.