Bob's Blog

FCA must answer why it is promoting execution-only

25 Feb 2020

Despite attempts by the Financial Conduct Authority (FCA) to the contrary, there will be a lot written about its Policy Statement on ‘Mortgage advice and selling standards’ over the coming days and weeks. And on that very point, if you want to be considered a transparent organisation and one open to scrutiny, then perhaps don’t release highly important documents late on the last Friday of the month, when the UK is leaving the EU? Just a thought.

However, back to the contents of the statement...

In reading it, I couldn’t help but keep asking the

same question, over and over: Why?

Unanswered questions

Why have we got to this stage? Why has the regulator pursued the encouragement of execution-only with such apparent zeal? Why have the views, particularly of the intermediary community, been ignored? 

Why would you take the market down a path that is likely to create greater consumer harm when you are supposedly trying to dial this down? 

Why didn’t you consider the alternatives? Why, if you were so concerned about consumers not getting the cheapest products, did you not introduce measures which insisted on all channels presenting that information to consumers? 

Why don’t you recognise the benefits that the Mortgage Market Review (MMR) has delivered and build upon them, rather than trying to break them down?

Split opinions

I could go on. What I also recognise is that we will have different opinions on this – the bigger banks and some lenders, aggregators and price comparison websites may be enthused by the opportunity this presents them. Advisers, not so much. 

And I don’t have an axe to grind here. In fact, I have a personal investment in a business which, if we wished to, could go down the execution-only route and leverage these changes, perhaps you might say, even exploit them. But we won’t because we recognise the overall inherent value in consumers receiving advice and the benefits that brings them and the wider financial services space.

So, what is the regulator’s answer to the ‘why’ question? Can they answer this? Do they have a plan for the future they could share with us? Does the intermediary community not deserve this?

Off the top of my head there are perhaps two answers that we might get. Firstly, it might come back and say it’s trying to totally eradicate instances of poor advice. That, I’m afraid, is impossible. 

A degree of poor advice is a feature of the market – whether that’s box-ticking clients through a retention option or taking a lazy approach. It’s a very small number doing this, but you cannot get rid of that entirely, and you certainly shouldn’t try to do this via a strategy which beats up every single adviser that is doing a quality job.

Secondly, it might have looked at the data and come to the conclusion that there is a tranche of the market, a cohort of borrowers, who are never going to take advice of any kind.

Cost as a driving factor 

In moving in the direction it has, perhaps it’s hoping that by promoting execution-only at least it gets these borrowers to a point where they are getting the cheapest deal. Because we’re aware of the store it puts in consumers to have the cheapest mortgage – even if it can’t quite define ‘cheapest’ in a satisfactory manner. 

And yet if that is its focus, why has it not insisted that purveyors of execution-only have to tell their customers when they are applying for a mortgage that isn’t the cheapest? That there are cheaper options available to them? There is no such requirement for execution-only.

I’m clearly putting words in the regulator’s mouth here but it’s

important that it speaks for itself and justifies its decisions.

Indeed, answering this would give us greater confidence in our regulator and a fairer understanding that allows us, as businesses, to think strategically from a more solid base, not forgetting the chance to plan and invest appropriately. Those who think this is merely the next evolutionary step in the mortgage distribution market, and we should simply put up with it, are well off kilter here. 

It’s far more serious than that and the least we should all be getting from the regulator is an answer to a very simple question: Why?

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