Good brokers have always had their customers' best interest at heart, but how do mortgage brokers find the line between mortgage advice and financial advice?
An IFA will have a clear remit to annually review their customers' circumstances, attitude to risk and adjust their financial portfolio in line with those factors and market conditions.
But how is a mortgage broker expected to act in a similar way when they provide a service but have very little control over the mortgage products?
Historically this has been the role of the lender, but with consumer duty coming into play, this is shifting.
The key to all of this is knowing your customer and understanding what they need.
The Financial Conduct Authority has been clear about the role of the mortgage intermediary and in its recent letter stated that mortgage intermediaries may be able to help by encouraging customers to contact their lenders for support if they start to experience difficulties repaying loans and by helping customers understand what types of debt help or money guidance are available.
This provides some clarity around the expected role of the mortgage adviser.
This has been standard practice for card and loan providers for a long time. These providers are able to purchase monthly data sets from credit reference agencies to help them spot customers who are financially vulnerable or trending in that direction.
This type of data is currently unavailable to mortgage brokers and this creates a conundrum in terms of operationally servicing customers in the way that consumer duty demands.
A typical mortgage broker has a back book of around 250 customers. If a broker wanted to act like an IFA and do a one hour annual review with each of their customers, they would need to set aside 31 days of their year just to conduct the meetings and probably a further 31 days for prep time and follow ups. Clearly that is not realistic.
Therefore, we need to look at the data that brokers have at their disposal if they are going to be able to monitor their customers' circumstances effectively.
The data used by lenders works through reciprocal data sharing of customer performance.
There needs to be a coming together between brokers and lenders to facilitate a more open approach to sharing information.
Mortgage brokers cannot contribute to that data, therefore they cannot access it without the explicit permission of the lenders.
That is one gap that can be bridged under consumer duty.
Then there is the cost of purchasing data, systems required to consume it and analysts or similar to turn the data into meaningful action points that benefits customers.
