The functionality to be able to manually adjust timescales to ensure a consistent comparison has been present in Xplan Mortgage and Trigold for a number of years and is being used by the majority of Iress clients.
In January the FCA’s Policy Statement PS20/1 concerning changes to rules governing mortgage advice and selling standards, was published, due to come into force at the end of July. It came about as a result of the FCA’s Mortgages Market Study (MMS) which identified three potential harms to consumers resulting from the mortgage advice and selling standards brought in by the 2014 Mortgage Market Review (MMR):
● the rules and guidance may be a barrier to developing tools that help consumers choose a mortgage
● consumers looking to buy an execution-only mortgage are diverted to advice; execution-only sales channels are not always easy to use
● many consumers are overpaying for their mortgages even when they get advice
While the above aims are admirable and clearly in the best interests of consumers and the rest of the industry, they have caused some confusion, particularly in how the rules addressing the third point are implemented. The FCA has changed their perimeter guidance around this and are now “requiring advisers to explain why they have not recommended a cheaper mortgage where other products meet the customer’s needs and circumstances.”
It stands to reason that many would see this as a directive to ensure that all systems used to price compare mortgages within an individual firm are identical.
However, a closer inspection highlights the issue that comparisons are not that simple. The FCA defines “cheapest” as the lowest total amount payable in respect of the relevant period.
“Total amount payable” is then defined as the aggregated monthly payments together with any product or arrangement fee that is being paid by the customer up front (rather than added to the sum advanced).
“Relevant period” is defined as either the discounted or introductory period or the full term of the contract.
Clearly, the FCA wants to make sure that advisors are not comparing apples with oranges. The issue here is that some systems are not able to make like-for-like comparisons, owing to the fact that it is not possible to adjust the timescales over which mortgage products are compared. This means that the “relevant period” is not consistent and comparisons are being made between, for example, a 5 year fixed term, a 2 year fixed term product and one with no introductory offer. The functionality to be able to manually adjust timescales to ensure a consistent comparison has been present in Xplan Mortgage and Trigold for a number of years and is being used by the majority of Iress clients.
Further, some in the industry have said that in order to comply with these regulations, they are consolidating all advisor systems onto one to ensure a consistency of quotation procedure across all advisors. This seems like a drastic change and one that may not be entirely necessary given the relatively straightforward solution present in Xplan Mortgage and Trigold.
Iress believes that the best way to ensure consistent prices in quotes is to have a consistent process. Ensure all advisors know what that process is and that records are kept. Finally, if in doubt, talk to the FCA.
While new regulations can be complicated, they needn’t warrant a wholesale change in business operations. If you’d like more information on how we can help, we’ve put together some helpful videos.