Guided Advice...

With round two of the FCA’s Mortgage Market Study due to be published sometime before the end of March. Who here feels the regulator may back-track slightly and change their stance in this next and final iteration? Or at the very least, clarify their position on where they are taking the mortgage world. How many of us voiced our views back to the regulator during the consultation period...

Think back to May 2018, the interim report was published and suddenly the regulator (and the industry as a whole) were discussing words relating to ‘Needs’, ‘Tools’ and ‘Cheapest’. Many of which you would generally never associate in this way with the mortgage world. As you all know, cheapest isn't always best.

Did the regulator misunderstand our industry? Maybe just testing out their new FinTech and Transformation arms? Or are they looking to reshape this heavily regulated landscape…

If the final chapter in this market study continues on its theme of; cheapest product is best, upfront eligibility, tools and a possible relaxation of what we now call mortgage advice. I can envisage a very slippery slope ahead, quickly leading to a new generation of mortgages that fall through a “Guided Advice” proposition.

What “Guided Advice” may or may not turn out to be is still difficult to predict. It’s an interesting concept that comes up in my discussions every week, and if I’m honest… far more often than I am comfortable with.

I seem to be reading more and more articles relating to this and a potential relaxing of advice (you need to read between the lines a little and listen to the rumours, but it's worrying to say the least). To give context, I highly recommend reading the following superb articles:

Robert Sinclair - FCA wants to change mortgage advice rules

Robert Hunt - Regulation should not be reworked purely to support automated advisers

With Product Transfers (PTs) on the rise and likely to make up majority of lending over the coming years, will we see an increase in XO or a comeback of non-advised. How about a guided advice model that provides the customer with enough information upfront to support them in making an informed decision. Upfront credit checks, lending eligibility, affordability and expenditure categorisation will all help feed this type of model. It’s not advice as we know it, or as MCOB would view it.

With guided advice, I doubt no single recommendation will be made to the customer and more likely, a selection of products that meet a handful of the customers potential needs may be presented, most likely on-screen via an aggregator or comparison site.

You don’t have to stray too far from the path to see the threats here. Obviously, the regulator would need to flex the rule book to accommodate such a proposition, but…. is this where we could be heading.

If a proposition along the lines of Guided Advice were ever to take off, it could be the pivotal moment the industry shifts. Forget consumer focused market places for a second, If advice became faster, cheaper, more efficient, upfront and more likely to result in the customer doing far more of the work. Would lenders still pay the same proc fee? Would advisers see less business? Would clubs and other distributors be able to leverage this type of model and survive? Would it suddenly become a price driven market and squeeze margins even more? PTs are already driving down the average income per case… what would happen if the advice element was taken away for a big chunk of lending. XO, non-advised or via a guided route.

Question: What do you feel would happen if mortgage advice was relaxed?

One final thing from me and something I feel the regulator needs to think about. If the FCA feels customers do not already have adequate means to identify the best mortgage deal for them, we seriously need to educate everyone in the value and primary purpose of a mortgage broker.

Caveat: These views and thoughts are that of my own, I do not have a working crystal ball so are based purely on my own interpretation of the market and the voices in my head.

Phil Bailey, Sales Director for a leading mortgage FinTech business, general geek and one of those crazy Millennials everyone is so worried about. #MortgageTech #Innovation #FinTech