The FSA reviewed 252 firms of differing sizes through mystery shopping, visits and questionnaires between June and October last year to establish a baseline of the process by which advice is delivered in the mortgage industry. Scope for improvement was found in all aspects of the advice process. Some of the poorer areas identified were the assessment of customer needs, including affordability; training and competence; overall systems and controls; and record keeping.
Clive Briault, managing director of retail markets at the FSA, said: "We found significant failings in the advice giving processes in a number of mortgage firms. Poor processes increase the risk of unsuitable advice being given. It is essential that firms have robust processes in place, so that they treat their customers fairly and provide suitable advice. It is crucial that customer needs are assessed properly. Customers should consider what they can afford both now and in the future, taking into account any likely changes to their circumstances."
The FSA found examples of good practice in all sizes and types of firm, but findings differed depending on the size of the firm. The results showed that small firms need to implement systems and be able to show they use them. Whilst larger firms generally have robust processes in place, they could not always demonstrate that they are using them. The FSA has produced good and poor practice guides as well as providing key actions to the firms that were visited. However, the failings were significant in a number of firms and it has referred several to enforcement.
This project is one of a series from the FSA looking at the mortgage industry. Work into mortgage exit administration fees and mortgages in retirement is due later on in the year and follows the publication of its interest-only and non-conforming mortgage work at the end of last year.
