Every day the BBC sends me an email entitled “Things you need to know today” which is mostly filled with things I neither need to know, nor do I particularly enjoy reading. For the most part they tell me that Brexit will/won’t go ahead, Theresa May will be going soon and that Donald Trump has done something mad or insulted someone or lied about something.

Anyway, I’m going to do my own take on the BBC “Things you need to know email”, but hopefully, you will agree with me that these really are things you need to know and you won’t be left thinking this is completely irrelevant.

Annual Testing

In a little over a month, you will receive your invitation to complete your annual competence testing. This is designed to afford you the opportunity to demonstrate your knowledge and experience in a practical way by testing your understanding of products and procedures.

The tests are not meant to be particularly scary, nor are they meant to take hours out of your working week; they do, however, afford us the opportunity to carry out part of our regulatory responsibility, namely to assess your fitness and propriety.

The test will cover, products that you are authorised to advise upon, the advice process, financial crime and regulation. The pass rate will be 70%.

As usual, we will give you plenty of time to complete the test, but if you are struggling, please liaise with your Compliance Manager.

Mortgages Market Study & Consultation Paper 19/17

Ok, so it’s not a very snappy title, but you can’t have missed the fallout from these two papers from our regulator.

There is an awful lot of information contained in these papers, so I will do my best to keep this brief and relevant.

Three ‘harms’ have been identified by the FCA, they are:

• The quality of research tools available to consumers are poor, thus researching and purchasing a mortgage is viewed as being difficult;
• Consumers are being forced to obtain advice when Execution only would be more appropriate;
• Customers are paying too much for their mortgage, even when they have received advice.

These three harms as identified in the Mortgages Market Study have led to a consultation paper being written regarding “Mortgage advice and selling standards”. In this paper the regulator talks of a number of solutions which allows them to fulfil their stated operational objectives, which are:

1. Protect consumers;
2. Ensure market integrity;
3. Promote effective competition.

These solutions involve increasing the amount of execution only business, making direct to consumer systems easier to use and improving advice standards through better quality research tools.

Needless to say, we have an awful lot that we wish to say to the FCA on this paper and I would encourage you to also take a look at the paper and form your own opinions.

What I will say is that the consultation paper leaves the door open for some significant changes to our industry that could have serious impact on each of our businesses, so this is not one to be ignored.

Without wishing to prove you too much or to colour your judgement, let me share a couple of excerpts from the paper regarding the costs predicted.

Page 27 of the consultation paper states that the FCA’s proposals “…could result in movement away from traditional intermediaries and the use of traditional advice.”

Additionally, they acknowledge that their proposed changes “…would impose costs on traditional intermediaries in the form of lower levels of sales.” They further state that “…those providers innovating would gain these new sales.”

To interpret what has been written, it looks very much like the regulator understands that their proposals would result in increased growth of the direct to consumer channel, but could have a negative impact on the amount of advice given; this, of course, brings its own problem, namely, that customers end up adopting a DIY approach with varying measures of success.

It is therefore imperative that the quality of your advice and service be at such a high level your customers would never dream of going elsewhere to buy their mortgage, because they perceive the true value of a mortgage adviser.

Complaints

Last week the Financial Ombudsman Service released their annual review document. The report identified that there has been an increased number of complaints in 2018/19 and, although PPI still accounted for the majority of complaints, mortgage complaints have also started to rise, 13% to be precise. Additionally, there were significant rises in the number of complaints relating to insurance products, including buildings insurance and private medical insurance.

The Financial Ombudsman Service also reports that there have been increases in the percentage of complaints that have been upheld.

Interestingly, our own complaints statistics show that mortgage complaints to the network have remained static, but protection and general insurance complaints are on the increase.

As the number of PPI complaints received will drop off after August this year, it is reasonable to expect that complaints management companies will start looking for other areas to complain about. Watch out for complaints abut products not sold (duty of care), rebroked protection complaints and, of course, advice quality in general.

So, is there any guidance I can give to help you? Well, interestingly, when reviewing our own complaints data, we have established that around half of the complaints we have received since the network was formed could have been avoided if only the advice process had been followed.

Some examples of our findings:

• Full documentation not received by adviser prior to making application;
• Mortgage DIP’s being completed without prior consent of customer;
• Insurance policies being started without customer permission;
• Replacement questionnaires not being completed correctly.

The only protection the network can have against complaints, is the completion of a robust customer file using The Key. The Key contains a detailed audit trail which we use to investigate complaints; this audit trail is time dated and has system identifiers included as well.

We also recommend the use of robust and detailed notes; it is amazing what can be forgotten (or remembered) about a case when there are no notes to remind/evidence.

Once you add notes to The Key, they cannot be deleted. These notes can then, potentially, be used to defend complaints and would be acceptable evidence to use for cases that go to Financial Ombudsman Service.

New Additions to the Team

In May we were pleased to announce the arrival of Leena Mistry to our Compliance Management team; Leena has a great deal of experience both with the network and in lending as well and is sure to be a great support to our firms.

I am also pleased to announce that we will be adding another Compliance Manager, Tracy Auchterlonie, to our team in June and she will work alongside, Angie, Greig, Leena, Nick and Robin in supporting your businesses. Tracy has a wealth of industry experience and will be an excellent addition for us.

So there you have it, one update, but a few things to consider – I hope it wasn’t as irrelevant as my daily BBC news email!

By the way, if anyone wants to press me on my opinions regarding the mortgage advice standards consultation paper, I will be at the National Training Event, taking questions, on 6th June. Send your questions to I’ll events@therightmotgage.co.uk and I’ll endeavour to answer them on the day.

I look forward to seeing you all there.