There is still too much confusion over what constitutes independent status for brokers in a post MCD world.
Nuala Wheeldon isquality and risk director at Fluent Money
There is still too much confusion over what constitutes independent status for brokers in a post MCD world.
There is a real danger that brokers will end up ignoring alternative funding sources if they are not able to refer clients to outside specialist distributors where appropriate for the client. Due to certain interpretations of the regulator’s rules, independent status can only be maintained if the broker provides the actual advice on the product he or she is recommending. If brokers are not comfortable in unfamiliar areas, such as second charge borrowing, they will most likely return to simply advising on a remortgage, which is not what the regulator wanted.
We would argue that one of the unintended consequences will be a situation where any broker who refers a client to a third party specialist distributor or packager, be it for first or second charge, bridging or other regulated product cannot call themselves independent in terms of whole of market advice.
Surely, giving advice must also embrace the concept that as a broker you consider yourself as a master in certain aspects of the market, but draw on external expertise in areas which are secondary to your main business focus. That should not mean that the advice being provided by a third party is any less valid or in some way, diminishes the introducing broker’s independent status.
Equally, do DA’s as well as networks, their compliance departments and their PI insurers really expect their AR’s to offer a full palette of services, when they do not have the experience of the market, particularly in second charge where the process is still very different from what they are used to in first charge?
We feel there is a need for the FCA to clarify the situation not only in its execution but also the reasoning behind it. Independent advice should mean that a broker is able to demonstrate to a client he or she has access to products from a wide range of providers and is able to provide sound reasoning for recommendation. The fact that the choice of product might be made by a third party, who is also responsible for that advice, should not invalidate the independent status of the introducing broker.
Brokers who feel unable or uncertain of providing advice on alternative sources of funding because it is not their core competence, could seriously undermine the regulator’s wish to see greater choice being offered to clients.
