Consumer Duty is a hot topic across the mortgage industry, with the July 2023 implementation deadline having passed. In our latest Mortgage Lender Benchmark, we asked brokers how they’re feeling about the new regulation.
While most mortgage brokers told us they were prepared for Consumer Duty, almost a third said they were unsure or not ready. This will be of concern to the FCA given the implementation date for Consumer Duty has passed. It remains to be seen whether this uncertainty extends itself to other areas of financial services.
One of the challenges voiced by brokers has been around the explanation of Consumer Duty’s expectations. A common theme in their feedback was the amount of information shared by the regulator and others on what advisers need to do, with many brokers suggesting that they needed more information about what meeting the legislation actually looks like.
Brokers told us they wanted more examples of any changes they need to make to meet the regulator’s expectations. Others suggested that guides, templates and training sessions would have been helpful to prepare for the incoming legislation.
Clearly, the majority of brokers want to get this right. However, some are unsure of precisely how Consumer Duty applies to their business, and specific assistance on meeting the requirements, rather than being left to interpret what one broker referred to as “a blanket regulation across the financial sector”.
“Consumer Duty isn’t my problem”
One notable aspect of the feedback from brokers came from those who didn’t believe they needed any further support.
On the positive side, some argued the information provided had been sufficient, and so they felt their business was now correctly positioned to meet the regulator’s expectations.
But others seemed to dismiss the need to engage, stating that someone else was dealing with it on their behalf, such as compliance team or a network. In other words, they said it wasn’t their area or simply not applicable.
It’s true that many adviser firms will have tasked some staff with leading the Consumer Duty preparations. But the reality is that the new legislation applies to everyone involved throughout the company. So it’s vitally important that it’s embedded from the top down, rather than sidelined as something for others to handle.
Viewing Consumer Duty as someone else’s problem, or a matter simply for dedicated leads, could lead to some issues among brokerages in the months and years ahead.
Brokers deliver good outcomes
There’s a very good reason that so many borrowers opt to obtain their mortgages through intermediaries, and why lenders value their broker channels. Brokers deliver an excellent experience to all types of borrowers, from the service to the product recommendation.
But despite the good practices in place, almost two-thirds of brokers either told us that they felt the Consumer Duty legislation would impact their day-to-day processes, or were unsure.
This is further evidence of the general uncertainty some brokers feel about the new legislation and what it means to them. The fact that so many brokers either wanted more specific guidance of how Consumer Duty applies to their business, or were happy to leave it to others to negotiate, speaks to the general lack of clarity still present.
It’s clear that everyone will need to be able to provide evidence for how they deliver the best outcomes for their clients. Arriving at the right answer will not be enough - brokers will need to demonstrate how and why they got there.
Working with the right partners can help brokers do just that. At Smart Money People, we offer advisers the tools to ask clients key questions about their experience, focusing on the most important aspects of Consumer Duty, with the ability to benchmark against historical financial services market data.
Following our Mortgage Lender Benchmark's findings, only time will tell how prepared brokers, and indeed all industries, truly are for Consumer Duty. But acting now to provide evidence of the good outcomes they deliver will stand them in good stead for meeting the regulator’s expectations.