David Hunter, Senior Manager at Rockstead, comments on the regulator’s recent findings and what firms need to do to comply with the Consumer Duty.
Recently the FCA published the results of its multi-firm work on later life mortgage advertising and advice, which can be summarised as “action is needed to ensure good outcomes for later life borrowers.”
Coupled with the release of an FCA policy statement which introduces a gateway for firms approving financial promotions, this points to the need for all later life lenders to review their compliance processes.
While it may be true that there is nothing in the FCA announcement that was not predictable, that isn’t the point. It is worrying that it has had to repeat its message despite clear and long-standing rules and that it also had to immediately intervene to remove or amend almost 400 financial promotions.
Sadly, the regulator found many examples of firms’ poor consideration of individual circumstances (including income and expenditure), dismissing discussions around alternatives, inappropriately incentivising sales, inaccurate and misleading promotions, the highlighting of product benefits without balancing descriptions of risks and inappropriately steering outcomes in favour of lifetime mortgage products. The later life lending sector has faced similar criticisms since the first home income plans appeared in the 1980s and all subsequent variations of the original products, so we ask the question – will firms accept the Consumer Duty challenge?
It is telling that firms included in the FCA review have had to amend their sales and advice processes as a result of it, giving credence to the fact that there was something wrong in the first place. It is also clear that most firms changed how they incentivise advisers. Providers that were not directly involved in the review must pay attention and learn from this.
Consumer Duty raises the stakes on these issues as the three cross-cutting rules add wider responsibilities onto firms to protect consumers. Firms simply must embrace the objectives of Consumer Duty if they want to avoid additional regulatory costs, fines, adverse public criticism and ‘ambulance chasing’ claims management companies.
Rockstead, founded in 2008, focuses on helping firms improve their governance, risk and compliance and are specifically encouraging firms to review their processes to ensure adherence to the new regime.
Our Consumer Duty reviews can ensure that firms have properly implemented the necessary changes which will provide a high degree of confidence to senior management that the new consumer principle is being adhered to.
Our risk assessment work, tailored to each specific client, ensures high levels of client satisfaction as well as providing evidence of independent oversight.
Get in touch to learn how our expertise in the later life lending market can help your firm via [email protected] or 01494 429333.
- The views of contributors are not necessarily shared by the Council.
