Most mortgage intermediaries would, I’m sure, consider themselves to be professional; I would also expect a majority to be independent. But have you considered how your own definitions fit into the wider definitions of the Financial Services Authority’s (FSA) current investment review, the Retail Distribution Review (RDR); and what actions have you taken in light of it?
If Miss Joanne Smith walked into your office, earning £50,000 per year and looking for a mortgage, most advisers, perhaps with the exception of a few high net worth specialists in London, would bite her hand off to offer her advice. This would be a good client for any broker.
However, under the terms of the RDR, this client could be construed to be the target audience of a ‘primary adviser’. A primary adviser is somewhere down the pecking order, under a ‘general financial adviser’ and merely a spot on the horizon from the dizzying heights of a ‘professional financial planner’.
Potential read-across
As I’ve said before the RDR is a review of the retail investment market. While it doesn’t include mortgage intermediaries, it does have striking potential read-across. The Association of Independent Financial Advisers (AIFA) is spear-heading the RDR response campaign and is publishing a series of issues papers on various aspects of the RDR. Most recently, it has published a paper on adviser segmentation. The paper is available for all on its website and I would urge mortgage brokers to download a copy.
The key issue for mortgage intermediaries is to consider how the RDR could affect them, if it was potentially mapped directly across to the mortgage industry, and then to consider how it could develop to accommodate mortgage advice as we know it. To start with, you need to identify where you would be positioned as it stands. More importantly where would you want to be positioned? While the RDR doesn’t directly affect mortgage intermediaries, the document is peppered with comments such as ‘industry taking a lead’ and the onus could well be on the industry to adapt and develop. In this case it is crucial for advisers to understand the issues.
It might be that as a mortgage adviser you feel that being a primary adviser, notionally with the same qualifications as you have now and targeting people earning £25-50,000 is where you feel comfortable. Primary advisers would also be able to sell a range of ‘simple products’ on a reduced suitability basis to their clients. Great, an easier world for all of us: mortgages with a ‘simple’ range of protection products to support your advice.
But what does ‘simple’ include? I’m assuming it actually includes mortgages, although I’m not actually convinced that mortgages are that ‘simple’. But even if it does, would it include higher-risk products – self certification, buy-to-let, high loan-to-value or non-conforming lending? Or would these not be ‘simple products’ and therefore only be available to those higher up the qualifications stratification?
If so, what would a general financial adviser look like in the mortgage world? Under RDR terms, the suggestion is that advisers would need to have at least the Diploma in Financial Planning (formerly the AFPC). The mortgage market has CeMAP, AdvCeMAP and MAQ/CF6 qualifications. Do any of these really equate to a Diploma in Financial Planning, but for mortgages? If not, how do advisers distinguish their professional status?
Prize title
The other issue to filter into this is who continues to hold the prized title of ‘independent’? According to the RDR, general financial advisers wouldn’t be independent. That is the preserve of the professional financial planner. So, to map across the theory of independence, does that imply we would develop a ‘professional mortgage adviser’ in order to call ourselves independent? If so, how do we develop a qualification structure which gives a mortgage broker equivalent to the ‘chartered financial planner’ status?
A recent poll on the AMI website indicated that 75 per cent of respondents were interested in taking more qualifications, if they became available. This seems to be a very fair response – some advisers would naturally fit in the primary advice model, and others would want to become more qualified and target an alternative market. However, the options for improving qualifications are limited within the direct scope of mortgage advice.
The purpose of AIFA’s paper is to raise awareness and create debate. AMI fully supports this and hopes that mortgage brokers also get involved – after all, the lines between sectors of the advice community are very blurred. This gives mortgage brokers a real head-start on the discussion so please get involved – it is your industry.
