Expert discusses how intermediaries have performed amid the new regulation
Six in 10 brokers want to have more information about Consumer Duty from financial providers to help them with make changes, according to Hodge.
Consumer Duty is meant to deliver significant changes to the way consumers are treated, providing them with products of a fairer value and resulting in better customer outcomes.
So, how has Consumer Duty impacted the market and how have intermediaries felt the changes?
How has Consumer Duty impacted the market?
Nick Baxter (pictured), non-executive director at Rockstead, said financial institutions have allocated eye watering sums to Consumer Duty projects, with huge teams working to hit deadlines.
“It is worth highlighting the steps they have taken as their processes will help inform mortgage intermediaries’ own gap analyses,” he said.
Their main effort, Baxter said, has been defining target markets for each of their products, then outlining customer needs for each target market, listing product features for each product, cross-referencing features against needs for product types, identifying mismatches where needs are not met by product features, reviewing product pricing and designing ongoing review and monitoring processes.
“Yes, it is a long list, and here is the rub, a typical mortgage intermediary business structure is one that would be described as an SME business and just does not have the resources to run a project in this way,” he said.
Unsurprisingly, Baxter said, over half of all mortgage intermediaries have said they want more information from lenders to help them implement Consumer Duty.
The good news, Baxter added, is that lenders have already taken great strides to help intermediaries.
“A cursory look at some lender intermediary-only webpages show that there is a commonality in the approach to providing fair value statements for individual products,” he said.
These, he added, are substantial documents that identify product characteristics and benefits, target market and distribution strategies, consumer need analysis and an assessment of fair value.
“They help intermediaries ensure that the products they sell meet the needs and characteristics of their individual customers,” Baxter said.
How can intermediaries get projects over the line under Consumer Duty?
So, looking to what intermediaries can do to get their projects over the line, Baxter said, irrespective of the state of an intermediary’s progress, a good step would be to go back to the original ‘FCA Dear CEO’ letter titled “Implementing the Consumer Duty in mortgage intermediaries”, issued March, 3, 2023.
Intermediaries, he said, need to design services that meet the needs, characteristics and objectives of specified target markets. Offering products that provide fair value with a reasonable relationship between the price consumers pay and the benefits they receive, Baxter said, is also key.
“Moreover, communication with consumers in a way that enables them to make effective, timely and informed decisions, and supporting consumers’ needs throughout the life of the product or service they provide is required,” he added.
There is no doubt, Baxter said, that consumers are already benefitting from the fair value work undertaken by lenders.
As an example, he said that there have been significant changes to many early redemption charges (ERCs).
“Any improvement in the areas mentioned above will have a positive impact on customers’ journeys, which will result in a more meaningful relationship between intermediaries and consumers, and that sounds like a ‘win/win’,” Baxter said.
How have you seen Consumer Duty impact the housing market since its implementation? Let us know in the comment section below.
