Second charge: don't leave your client between a rock and a hard place

Now, on first glance, to the layman you might think this was a strong result, coming so soon after the introduction of the Mortgage Credit Directive. But, in my opinion, you have to delve much deeper, firstly, into the actual question brokers were asked in the survey, secondly, what are the other two out of 10 brokers doing, and thirdly, what is the mindset behind the answers they provided?

Firstly, in these sorts of surveys, it’s important to know what the actual question was, and what the respondent perceives it to be. In this situation, I’m unsure of the nature of the question and what level of detail it went into. This is important, because in talking about two out of 10 brokers not ‘offering’ second-charge advice we have to determine whether they are merely meeting their regulatory responsibilities and mentioning the existence of seconds, whether the reason they are not giving advice is because they are referring to a master broker who will, or if there is a blatant disregard for what is expected of them post-MCD.

This latter point, whereby brokers are not even mentioning the existence of second-charge mortgages is perhaps the most worrying, if true. As Ray Boulger points out in the very same news piece, if two out of 10 advisers are not including second charges within their advice process at all, then they are not complying with the rules and could well consider themselves in the FCA’s regulatory cross-hairs.

You have to wonder however, if advisers really are opting out, then why? What they may be saying to clients, although again I can’t clarify this, is something akin to: “I have restricted the scope of my service to providing advice on first-charge mortgages, but I need to tell you that a further advance, a second charge or unsecured loan may be a suitable alternative to a remortgage. However, I don’t offer the latter three, I just offer remortgages. Now, let’s talk about your remortgage.”

Now, while this may seem particularly unsatisfactory from a client point of view and certainly isn’t anywhere near the provision of a holistic client advice service, there is no breaking of the rules here because the adviser is telling the client that other options do exist, they just don’t offer them. In this situation, they don’t even need to refer to other advisers who might offer these other products – such as a master broker. Essentially, for any client with this adviser it’s a remortgage or nothing.

So, if we have such a situation, where advisers are choosing to mention seconds but not engage with them any further than this, then our next question again, has to be why would they make that choice? This essentially leaves the client between a rock and a hard place, where the remortgage option is the only one available and there is no chance of a referral or introduction to an adviser/master broker who could provide an alternative option? Worse still, what if their client goes off to a price comparison site and self-serves? I’m sure that advisers in this position will know that, should they wish to, they can introduce the client to a master broker like ourselves who will cover the whole advice process and provide them with an introducer’s fee.

I’m not here to say that in every case, a second-charge mortgage will be right because that simply wouldn’t be true. But, for some it will be, and even if the adviser is concerned about their own expertise, is worried about the product ranges available, the rates and fees, or has never engaged with seconds before, we can help overcome these concerns. If they want to provide the advice themselves, they can utilise our services for generating accurate quotes and packaging the case, so again the client gets the right deal and the adviser offers that much-valued holistic advice service.

To my mind, given these scenarios, there really is no excuse for advisers who aren’t engaging with seconds, and utilising the services of a master broker in order to get that best possible outcome for their client. They will demand it, why not deliver it?