Some purchases in life involve no advice from the salesperson. Buying a car, employing a builder, purchasing a computer or software. None of these advisers or consultants who sell the products has to legally advise you of the pros and cons and recommend a way forward. In the world of mortgages, all advisers have to give advice legally.
Buyer beware, doesn't apply in mortgage sales but it sure does in buying a car or a computer.
Since 2014 all mortgages have to be advised somehow, and customers steered to accept this advice. They can refuse of course, and go their own way, but there are massive hurdles to do this, and the vast majority of advisers pull away at this point.
That’s all changing, and this shift has been augmented by the FCA.
The new rules allow customers to make their own path and decision to buy a mortgage in whatever style they want. Whether advisers or mortgage brokers will embrace this newfound power is doubtful, after all, they have to make a living and giving advice is all they know and provides a good stream of income in advice fees, procuration and commission payments.
The FCA's new advice rules will also apply to online platforms, apps, websites that allow people to explore their options and buy the right mortgage to suit them and not face any people procuring advice. Many people want to make their own decisions preferring to figure it all out themselves.
The other avenue the FCA saw was to help those who want to switch mortgage products who have come to the end of their deal, to remortgage like for like, mortgage prisoners rescuing seems to be the vogue.
Here are the details:
- Automated mortgage platforms can now provide filtering and search capabilities to narrow down the choice of mortgages for customers. This is not deemed as advice and help customers wanting to do it themselves.
- Firms can now interact with customers in any way they want before advice is given. This will allow the customer to talk to people and have their questions answered before they start making decisions. I can see chat boxes, video conversations with online mortgage firms.
- Firms can now make changes to online execution-only apps to make it easier for customers to narrow down their choices and options, chat to people for help and then make their own decision execution-only style.
- Whether the traditional face to face broker market will be affected in the short term, no one knows. Especially if they are dealing with complex mortgage cases or for customers who value advice in their largest purchase, they’ll ever make.
- The real changes will be online Artificial Intelligent (AI) based approaches and the various startups kicking off their mortgage broking models. Allowing execution-only will merely assist these business models to give the customers want they want. Simple, cheap and autonomous routes to securing their mortgage utilising intelligent software and little or no human interaction.
Not for everyone, granted, but ideal for a growing number of people.
Brokers beware, particularly those of the traditional face to face advice brigade. Make sure you offer something tangible and valuable to your service offering, that complements and maybe enhances the advice. Ensure the customer’s value what you do, if not, they’ll go direct and do it themselves. Believe me; the younger generation will.