Execution-only and the need for lenders to show more commitment to advice

Reading the recent reports that came out of the FSE London exhibition, it appears this type of discussion raised its head at the event during a panel debate which contained representatives from OneSavings Bank, Nationwide, Lloyds Banking Group, HSBC and Accord.

For a start, each member of the panel was asked about the level of execution-only business they carried out and it would seem answers ranged from ‘none at all’ to ‘a small amount’ mainly focused on product transfers.

However, as AMI’s Robert Sinclair pointed out, if these lenders are only conducting very small amounts of execution-only, then who accounts for the large amounts of such business that are being written right across the lending community? It’s a pertinent question.

The other point to raise is the apparent contradiction between offering fulsome support for intermediaries, highlighting the importance of the advice process for borrowers, and yet at the same time, being quite willing to write to existing customers well in advance of the end of their term, with product choices not available to the original intermediary, and encouraging those same borrowers to use first-class online/tech systems to execute that business without any advice at all.

Something doesn’t add up here and it appears the audience at FSE London weren’t quite willing to let the lenders on panel have their proverbial cake and eat it when it comes to such matters.

And quite right too. Can you really talk about the massive ‘missed opportunity’ for brokers in ‘allowing’ their clients to go execution-only, when you as a lender have a process and system which encourages them to do this? Our view is that lenders can’t take a ‘woe is me’ stance on this and yet are quite happy to write execution-only business which they know full well strips that borrower of all the protections they get by using an adviser.

Now, let’s be clear here, a number of lenders – when writing to the borrower towards the end of their term – point out that advisers exist, and perhaps they might wish to take these product options to their adviser to review and check against the rest of the market.

But how many point out to a borrower that your circumstances may well have changed since you first took out this mortgage and we do not know how that might impact your situation, and your wants and needs? Indeed, the product choices we offer you now are based on your circumstances not having changed, so are they really right for you now?

And how many currently include the name and contact details of the original adviser in that letter, giving more encouragement to them to revisit advice? How many actually take a stand and say, ‘You came via an adviser and we believe advice is absolutely necessary, and so we won’t allow you to carry out an execution-only deal’?

We’re prepared to be schooled by lenders on how they approach this but, judging by the responses from lenders at FSE London, we’re doubtful many have such an approach. Indeed, one lender representative said their system would not be up to including the name and contact details of the original introducer adviser in a letter. Really? We know that lenders have tended to prioritise their direct-to-consumer tech far more than their intermediary systems, but given this is two fields in a database, are they really saying they can’t merge that into a letter? If so, that’s quite staggering.

So, while we might all welcome the commitment to intermediaries many lenders are showing, perhaps more needs to be done in this area. We’re not denying that advisers need to do their bit to ensure that existing clients come back to them and don’t end up being enticed by the wrong deal via execution-only, but lenders also need to marry up their vocal support for our sector, with some practical help. Otherwise it’s simply lip service and the whole industry might well prepare itself for some significant complaints in the future from borrowers who got the wrong deal with no hint of advice.