Don't leave yourself defenceless on Consumer Duty, it's warned
Mortgage brokers will find themselves under greater scrutiny over the next couple of years, according to a compliance expert – and when it comes to Consumer Duty, smaller firms are so far performing better than larger ones. 
Consumer Duty was brought in by the Financial Conduct Authority (FCA) nearly two years ago, to set higher and clearer standards of protection for consumers across financial services, and requiring firms to always put their customers’ needs first. The initiative demands extra attention from mortgage personnel in terms of evidencing that they have fulfilled their obligations.
Simon Dhillon (pictured top right) – a former broker himself – is a senior compliance consultant, who helps financial services firms implement change, streamline processes, and keep across regulatory requirements. Advisers will be more closely watched going forward, he believes.
“The FCA is being fairly relaxed so far,” Dhillon told Mortgage Introducer. “Mortgage intermediaries in the next two years are going to be scrutinised – not only for Consumer Duty, but everything else. From what I've seen, I think the small to medium sized firms have done a very good job, large ones also. If I was to say who's done a better job the most, I'd say the smaller ones, purely because smaller ones, in my opinion, have a lot more to lose. If they're not doing things correctly, they could potentially be shut down, whereas the very, very large firms will have a lot of money to throw at it. So, whether it be a fine of a million or two million, obviously no-one likes to lose that kind of money, but they can afford to do it.”
Read more: Broker urges rethink of JBSP mortgages
The challenge of juggling mortgage business with compliance
Dhillon, who heads up his own business, Dhillon Finance and Consulting, acknowledged the time constraints which mortgage personnel face in complying with regulations.
“I think it's quite a difficult job, having been a broker myself, many years ago,” he said. “There's a lot of work to do. So not only are you dealing with your client, you're dealing with your solicitor, you're dealing with, obviously, the lender, but then it often leaves not enough time for the compliance tasks. Ultimately, if you're not doing things correctly then, you're not going to be able to do the job at all because the FCA could come down on you like a ton of bricks.”
He continued: “I don't think there's any adviser that I've come across that genuinely wants to do the wrong thing. If they don't do the right thing, they know they're going to get in trouble. Whether it be a fine, whether it be from the regulator, whether it be from the firm, whether it be a complaint, there are going to be repercussions. Nobody wants that and everybody wants to do a good job. But is there room for improvement? There always is.”
Protection is an area that sometimes needs greater attention from brokers, in Dhillon’s view.
“It should be a product which comes up within a conversation,” he noted. “Every broker is different and a lot of the ones I've actually come across are pretty good, but I've also seen where it's almost been on a back burner and as soon as the customer or the client says, ‘okay, we're covered, we're not interested,’ that advisor would move on. But what I would like to see from a broker's point of view is for them to say, ‘okay, this is what we do, when you think you want to look at it again, let me know. I can go through some options with you and I can do some research for you’. Just to let that customer know that, ultimately, we can still do it.”
Dhillon suggested that Consumer Duty will become more embedded in terms of culture and habit and behaviour over time, particularly as the intermediary market becomes busier over the next couple of years, which he anticipates. He urged the broker community: “Do not leave yourself in a defenceless position. Documentation is key - if it's not written down it never happened. If you had a conversation with a customer, document it. If you haven't had a conversation with a customer about a certain thing, document it, detail why you haven't had that conversation.” Dhillon summed up: “The Consumer Duty is not just a Consumer Duty, it's our duty, it's your duty. Anybody who's actually working within financial services has their part to play within Consumer Duty.”
