Many other financial services sectors have either embraced openness and complete transparency to customers or had it forced upon them by a regulator. While our own regulations have evolved with arguable effectiveness, we are still plagued by many issues which ultimately serve firms and not consumers.
How else might we explain dual-pricing in these post-MMR, supposedly TCF-focused times? To the extent it is not just rearing its head again but is actively pursued by self-styled ‘intermediary-focused’ lenders. This is not an attempt to resurrect the divisive witch hunts of a few years ago, and we are not keen to single out any one lender, but to the make the point it sadly still exists let us look at a real example from last month.
Our client, a current account holder with this lender, approached us for advice on a long-term fixed rate. This lender had a competitive 2.39% 10-year fixed rate available, with the usual decreasing Early Repayment Charges. All was well until our client discovered the lender would offer the product to them at 2.34% and reduce all repayment charges. Just for applying directly.
This was not a product transfer, or an existing mortgage customer of the lender, the direct product was not listed on (our) sourcing platform and even the lender’s own BDM was not aware of the direct products. In the normal course of events we would not have been able to even process an application for that product for our client, even though he wanted us to.
Now to the conflict. We wholeheartedly agree with the commercial aspects of customer acquisition and retention for us and lenders – the arguments of packaging, quality and risk aside, if lenders have to pay procuration fees they need to maintain profit margins elsewhere. Simple economics. Yet can we really say there are fair outcomes for customers in all of this – sadly ‘fair’ to the regulator and our industry rarely means equal.
As intermediaries we are equally guilty of a similar type of dual-pricing in loading life insurance premiums, or adding additional broker fees onto lender fees on second charges or bridging loans. A cynical person would see these as hidden charges.
Again, in a supposedly TCF-heavy regulatory regime why do we allow some advisers, firms or networks to ‘load’ customers’ insurance premiums by as much as 20% compared to the usual premiums available through less-predatory intermediaries. For a consumer then, it becomes a lottery of who they turn to for advice and yet we as intermediaries we bemoan consumers shopping around or worse, not seeking ‘professional’ advice at all. I wonder can we blame them?
Then there is the allowed practice of stating commission on insurance illustrations on that convenient second page. A clear break after the body of the illustration, lack of pagination and how many of those commission-disclosing pages are voluntarily shown to consumers.
We saw the rise of a claims culture from endowment and PPI mis-selling. Advised interest-only residential mortgages is rapidly becoming contentious and I fear we, as an industry of both lenders and intermediaries, are sowing the seeds of yet more potential mis-selling scandals.
Like many people I now think of the casual acceptance self-certification mortgages for the employed, or lending to extreme adverse from SPML, with surprise. How were these practises allowed? Surely, consumers and future entrants to our industry will one day think the same of these issues?
We have a moral and ethical position against these practises. Now is the time for us all to take a positive step to be better - clearer, completely transparent and truly customer-focused. Otherwise I have no doubt the FCA will intervene and again expand the rules we collectively work to, bulldozing the playing field RDR style.
In a time when technology and culture should allow us to engage with customers in so many exciting ways, I cannot help but wonder if we are creating an environment of resurgent greed. Ultimately everyone votes with their feet and an increasingly competitive marketplace will highlight this quicker than ever before. As an industry let’s all work together to help ourselves.
