Advisers must “avoid causing foreseeable harm to retail customers”. That’s one of the key rules, set out in the Financial Conduct Authority’s (FCA’s) new Consumer Duty. Gordon Reid looks at what that means for you as a mortgage adviser and the advice you offer during the current cost-of-living crisis.
The first implication of the FCA’s new rule, is that if something is “foreseeable” you must take it into consideration – and its potential impact on your customers.
Not knowing that something was going to happen is no longer a valid reason for not considering it.
You might argue that this makes it even more challenging to get the advice right for your customers. But remember, mortgages are a long-term commitment and must therefore remain affordable for many years to come, not just now.
Financial and mortgage advice
The new Consumer Duty also emphasises the value of holistic financial advice.
But as a mortgage adviser, you may not be authorised to advise on all of the products that your customer needs. However, you do need to be able to identify those needs and alert your customers to them.
There’s a view that your responsibilities go even further. Is it enough that you highlight a potential need? Or do you need to provide information about where your customers can get the advice they require to meet this need?
Mortgage advice and the cost-of-living crisis
Of course, the cost-of-living crisis makes things even more challenging. Significant increases in virtually every area of expenditure mean that you need to fully understand a customer’s financial capacity and capability, before making your recommendation.
Previously you may have asked quite generic questions about how they could afford an increase in interest rates. Now, you might have to be more specific and ask about more than what will happen if there are increases in the mortgage rate.
All of this means that the need to understand a wider range of options, solutions, risks and implications, has never been greater for a mortgage professional.
Professional development
Expanding your skillset is absolutely key to tackling all of this and will determine whether you survive or indeed thrive in this challenging environment.
For example, you could choose to broaden and deepen your understanding of your customers financial needs by undertaking a qualification in financial advice, such as the Diploma for Financial Advisers (DipFA).
Completing DipFA would of course give you the option to pursue a career in financial advice.
However, it would also benefit you and your customers if you opt to continue specialising as a mortgage adviser. In particular, it will help you identify wider financial needs and potential solutions.
Expanding your mortgage skillset
You might also develop your mortgage skills and knowledge, as demand for later-life lending continues to rise.
In the current climate, many of your older customers may be looking to reduce their outgoings, by consolidating debt. Or, they may want help out family members with a deposit for a new home. They could be looking to make home improvements or go on a holiday of a lifetime. You need to be able to steer them towards the right option or know when to refer them to someone with a different specialism.
The Certificate in Regulated Equity Release (CeRER) will enable you to advise on a broader range of mortgage products and improve your knowledge of later life lending options.
Finally, if you want to develop your understanding of the financial impacts of both global and personal changes for mortgage customers, you should consider studying for your CeMAP Diploma.
This will help you assess the risks your mortgage customers face so that you can more easily and confidently tailor your advice to suit their needs – both short and long term!
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