The Financial Conduct Authority has published a Frequently Asked Questions document in a bid to clear up advice-related confusion ahead of the incoming Mortgage Market Review on 26 April.
The document, published on the FCA's website, was drawn from questions brokers raised at a series of FCA workshops.
Some highlights from the FAQs (and link to the full document below):
Advice
Q1: What happens if changes need to be made after the application (e.g. underwriting amendments)?
"It will depend on the nature of the change and whether it has an impact on the advice given. For example if the customer was advised to have a 25-year term but when the case is underwritten the decision is that they can only have a 20-year term, this may not meet the customer's particular needs and circumstances and a further discussion will be needed to establish this.
"It will be up to the firm to decide how to manage this. The underwriter may refer it back to the adviser for the adviser to discuss the change with the customer."
Q2: If I do not offer an execution-only sales channel and the customer does not want to go with the product I have recommended, or wants to change one part of it, can I proceed with the sale and get them to sign a suitability letter with the disclaimer stating that the change is their choice?
"No. Where a customer has rejected your advice (in whole or part) and you have made a commercial decision to not undertake execution-only business then you do not have to proceed with the sale.
You can amend your advice, as long as the new product still meets their needs and circumstances. You are responsible for the whole recommendation, so getting them to sign a disclaimer will not absolve you of any responsibility (MCOB 4.7A.4G)."
Execution-only
Q3: Do intermediaries have to set out the levels of execution-only business they expect to write?
"Yes. A firm which intends to transact execution-only sales must have in place a policy which sets out the amount of business it reasonably expects to transact by way of execution-only sales and the steps it will take if the volumes of business exceed the expected levels (MCOB 4.8A.17 R)."Q3:
Q4: Can I tell customers how long an execution-only sale takes compared to an advised sale?
"If you choose to state this, you need to take care not to discourage the customer from receiving advice by going down the execution-only route."
Disclosure
Q5: Do I have to give any form of special disclosure for higher risk products?
"There are some extra disclosure requirements for firms offering either Sale and Rent Back or equity release."
Q6: What is the FCA's view of labels such as ‘independent' or ‘whole of market' when describing the service provided?"
"Under the MMR reforms we do not require you to use labels such as ‘independent' and ‘whole of market.' But intermediaries must explain to their customers any limitations to their service. For example ‘I only offer mortgages from a number/panel of lenders. I can provide you with a list of these.
"We give further examples in PS12/16."
For more questions and answers on disclosure under MMR visit the FCA's website.
Santander for Intermediaries and Kensington began to issue details on transitional arrangements for MMR this morning, including calls for early case submissions.
