Is the FCA's execution-only approach a roll-back of MMR?

The publication this month of its Consultation Paper, ‘Consultation on mortgage advice and selling standards’, could have been its opportunity to do just that but instead, not only has the regulator not done this, it appears to have ratcheted up its somewhat extreme views in this area and, when it comes to its promotion of execution-only, we think we are looking at a serious cancelling out of the changes that were introduced by the MMR.

At the moment, there have been two major takeaways from the CP. Firstly, that advisers are apparently now being told to tell clients why they have not recommended the cheapest deal to them. The fact this has even been mentioned shows a serious lack of understanding around how advisers work – we have to provide such evidence already and explain why we recommended the product we did, including why it’s not the cheapest deal. That’s been in the rules since ‘Mortgage Day’ and to suggest we’ve not been doing this for well over a decade is somewhat bizarre.

Secondly, we have the regulator’s approach to execution-only business and the apparent contradictions inherent in it. On the one hand, the regulator purports to be agnostic in terms of the methods by which consumers secure a mortgage, and yet here we have an approach which is pushing execution-only, suggesting large numbers of consumers don’t need advice, whilst at the same time, admitting that such an approach will mean more consumers are at risk of getting an unsuitable mortgage.

This is quite absurd, and as mentioned, totally cancels out the MMR changes. Pre-MMR, the market outlined where execution-only had a place, and the FCA at the time chose to disregard this and made advice mandatory. Now, just a few years later, when all stakeholders have made huge changes to accommodate MMR, where many many consumers seek and receive advice, the FCA are backtracking for no apparent reason.

This, at a time, when we might rightfully argue that the need for advice – and the protections it affords consumers – has never been greater. When the mortgage world is far more complicated than it has perhaps ever been. When people’s situation is going to change potentially many times in the lead-up to, and beyond, them taking out a mortgage.

For example, how many consumers would choose (on their own, without any advice) an offset mortgage? Even when this might be the best solution for them – we would suggest a miniscule amount. Likewise, consumers tend to default to the ‘cheapest’ option – which crazily appears to have become the FCA’s default preference – but what about clients for whom the long-term security of a five-year fix is the best option? Left to their own execution-only devices, how many would choose this product?

Covering all of this is the data that has been used by the FCA, which harks back to 2015/16 – both pre-Brexit and pre-remortgage/product transfer boom. How (and why) is our regulator introducing such huge systematic changes based on out-of-date information? It is, quite frankly, bonkers and to our mind the regulator is setting itself up for a whole new mis-selling scandal.