November 2022 Roadshows – Register Now!
Hi everyone and welcome to this weeks protection update.
Now I’m actually recording this on Tuesday which is a couple of days before the NTE.
I’ve called this week’s protection update “Its your duty, do the right thing” – and that is/was the title of my panel discussion on the main stage at the NTE.
I can’t comment on how that went because I’m recording this before it happened, but let’s explore some of the themes… “It’s your duty”… what does that infer?
I’m referring to Consumer Duty.
On 27th July this year, we received the final rules and guidance from the FCA which came in the form of a policy statement which is 161 pages long. (attached to this weeks update)
It covers lots of different things around treatment of consumers across different areas of financial services.
Many different businesses from across financial services fed into the initial consultation and you can find a full list of them within the policy statement.
By 31st October (that’s in 3 weeks’ time); firms must agree their implementation plans.
The Right Mortgage and Protection Network have been working on our implementation plan through a series of committees over the past few weeks and we will be in a position to share this with you soon and explain what it looks like and what it means for you and your business.
Obviously, I’m talking about protection in this update so I’m going to keep my focus on that.
We know that one of the biggest opportunities to talk to a customer about protection is when we arrange a mortgage.
And that’s because when we arrange a mortgage; that’s probably going to be one of the biggest debt liabilities the customer is ever going to have – and they will have it for a long time.
If you’re a mortgage adviser, you don’t need me to tell you that sometimes, it can be a paper chase and with a fast-moving market, it can be a full-time job to keep on top of all the mortgages you are arranging for your clients. The events of last week were a bit more unprecedented, but that does illustrate the challenges you face.
But we know that when we arrange a residential mortgage, there is always a risk statement which appears on the illustration and then on the mortgage offer.
It says “Your home is at risk if you do not keep up repayments on your mortgage, or other loans secured against it”.
What does that mean?
Your home is at risk… ‘At risk’ means you could lose it. Could be repossessed.
How could you lose your home?
“If you do not keep up repayments on your mortgage” …
So how could that happen? How could you find yourself in a position where you can’t pay your mortgage?
There are different things and whilst your client might not have thought deeply about any of them before; if you ask them an open question “Tell me, how could you find yourself in a position where you can’t pay your mortgage?” – is that a fair question? Could they reasonably answer it?
I think so, but they might need a moment to ponder it.
No, people don’t like to sit there thinking about bad things happening, but it’s an important question that the regulator wants the client to consider.
If you think about the current principles of good regulation, principle 6 talks about ‘Customers Interests’ – it says “A Firm must pay due regard to the interests of its customers and treat them fairly”.
What does “paying due regard to the interests of its customers”?
Could you interpret this as helping them get to a place where the risk of the customer losing the home is mitigated? You could argue that?
Principle 7 talks about communication with clients and says “a firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.
I mention both of those principles 6 and 7 together because the Consumer Duty policy statement now contains a new principle 12 which says “Principle 12 imposes a higher and more exacting standard of conduct than principles 6 and 7”.
Let’s see what Principle 12 says…
“A firm must act to deliver good outcomes for retail customers”.
What is a good outcome for a retail customer and what is a bad outcome?
Could it be that a bad outcome is losing the home? A good outcome is not losing the home?
It also says a firm must act… that means do something, be proactive, have it on the agenda…
It’s going to be interesting to see what the industry does both from a provider and distributors point of view, but the general opinion that I am hearing is that we’re not going to be able to simply ‘walk past’ obvious protection needs.
We understand that sometimes, you’re run off your feet and having the time to talk to clients about protection isn’t always possible; but what should we do if that’s the case?
Could we have a process where; if you can’t do it, someone else does?
We’ve got a referral mechanism built in here at the Right Mortgage & Protection Network so get in touch if you want to know more.
And with all of this, I think the sentiment of doing a better job for our customers will, yes, give a better outcome for customers, but also, be more lucrative for you and your business.
A good friend of mine who was a big protection advocate always used to say “give them the opportunity to tell you they don’t want it”.
“Give them” – your clients.
“the opportunity” – that means the opportunity, once they understand what it is you are talking to them about. The risks they face, how do they feel and what they want to do about it.
“to tell you they don’t want it” – if that’s the case, we document it and we move on to our next customer.
I don’t really think an awful lot has changed here when you look back to Treating Customers Fairly, the Retail Distribution Review and now this Consumer Duty.
But as I mentioned earlier; the FCA are raising the bar of the standard.
Firms (that’s us and it’s you), must act (that means having something in the process) to deliver good outcomes for customers.
There is a nice symmetry between arranging mortgages and protection.
My job is to find you the most suitable mortgage to help you buy your home…
But also…
To make sure, if the worst happens, you don’t lose your home.
We will be on the roadshows in November and Ben Allen and Aidan McCarthy have a slot where they are going to talk about some of this and what we are doing as a network to implement Consumer Duty so please book your space now.
There are a combination of different sessions including round tables and that means we do have a ceiling on how many people we can have at the event, so I’ve added the registration links to this week’s protection update.
Plus, before we get to the roadshows in November; we have our Protection Portfolios Webinars. These are going to be really good sessions about how we can make the most of the budget the client can afford to spend with diversity of opinions from our guest speakers. Again, I’ve added the registration links to this week’s protection update.
So that’s it from me for another week.
Next week, I will be away on annual leave so I do have a very special guest speaker presenting my protection update. In fact, there will be 2 people speaking and they have an exciting and important announcement to make, so watch this space!
See you soon!
