How many debt advice companies are there now? It seems that every day, I am reading about a new start up aiming its services at the intermediary market. Although I don’t have any figures, it seems that before long there will be one for every intermediary in the country!
Of course, there is no problem having as many as the market can stand, the important question is whether they are all doing the same job? Knowing that there are so many choices of ‘new best friends’ to help intermediaries is fine as far as it goes but how are intermediaries supposed to differentiate between all the competing siren calls from the increasing numbers of providers to find a proper match? The trick is how to find one partner who will be a genuine helpmate and not only provide a new line of income opportunity but will ensure that the client has the best advice and therefore enhance the intermediary’s own treating customers fairly regime.
The right choice
There are plenty of providers who do a good job but what does the intermediary look for and what questions should he ask? Picking the wrong horse by introducing clients to the wrong advice could well mean leaving himself open to censure though his compliance regime or even retrospectively by a disgruntled client who discovers he might have gone down a more suitable route.
Currently, there are no written standards that any debt advice firms have to adhere to over what type of advice they offer, whether it is a ‘whole of market' scenario with more than one potential avenue to explore, or whether the intermediary having introduced the case is still responsible for the advice. Potentially, it is a minefield and in a young market like this, unless there are some signposts or minimum standards adopted then there is no doubt in my mind that not only will some intermediaries find themselves in trouble but more importantly clients will be seriously disadvantaged.
Code of conduct
TCF Debt Solutions is working on a code of conduct which we will be publishing on our website and which we hope will act as a catalyst to ensure that no matter which debt advice company an intermediary might go to, he or she can be assured of receiving a level of service on which he can rely with confidence.
Naturally some providers are going to be uncomfortable with a code of conduct because their offerings are weak, either because they do not offer a full range of services or in some cases plainly of more value to them in fees than value for the customer. However, at a time when so many people need help with debt and its consequences, it is vital that intermediaries are seen to be on the side of the angels.
Move forward
By putting in place some simple statements of intent that describe the extent of the services offered and the standards that their customers can expect, the industry can move forward in a way that complements existing compliance understanding in relation to treating customers fairly, while at the same time looking to mirror future compliance needs by working closely with a future regulator.
In no particular order these are the kind of areas which need to be addressed:
Choice
There are many different types of debt help. DMPs (Debt Management Plans), IVAs (Individual Voluntary Arrangements), Bankruptcy and for company debt, there are debt restructuring and CVAs (Commercial Voluntary Arrangements). All of these are relevant to clients and depends totally on their individual circumstances. What is important is to see that all clients are given the best chance of getting out of their debt prison by ensuring that the plan they are recommended actually meets their particular requirements. It is vitally important for the purposes of clarity and fairness that clients are aware at the outset of whether they are being offered a range of options or just one. Unfortunately too many companies offer only one solution, which might very well not be suitable to a particular client.
Fees
In our view, the charging of upfront fees is not right, particularly when the client can find he is paying out even when his situation might be beyond help. For this very reason, providers who insist on upfront payment should be upfront over their fee charges before the client is too far engaged. The full fee structure needs to be explained at the beginning and fees. Clients and their advisers can then see and compare costs and those companies which are charging excessive fees will be shown up. Some companies are charging in excess of four months payments for Debt Management Plans (DMPs). With a proper written tariff, it will become much clearer for client and adviser and lead to greater trust and acceptance.
Advice
Who is giving the advice? The adviser needs to have written confirmation that he is only introducing his client and is not responsible for the advice given. Alternatively, if the adviser is more involved in terms of fact finding and document completion, he needs to be made aware that as far as a regulator is concerned he might be considered to be giving the advice.
Checking the status of the advice is vital for future compliance requirements and firms should make the situation clear to introducers. Too many firms say they offer a referral service when in fact the introducer is still liable for the advice given. Either the intermediary is a ‘real’ introducer to a firm which is taking full responsibility for the advice or he is working with the firm he chooses and is part of the advice process. Either way, it should be made very clear. The implications for the intermediary through future action by a regulator or legal action by a client where the introducing intermediary is not a ‘real’ introducer, might make many reconsider the type of debt solutions company they should be dealing with.
Cross selling
As in any niche, where brokers are introducing clients to a third party, there is a danger that the ‘ownership’ of the client can begin to blur. Debt solutions companies should be making every effort to partition clients introduced by intermediaries from their own direct to customer clients. The opportunities for ‘accidents’ to happen reflect badly on the industry. While any savvy intermediary will insist on a proper no cross selling agreement, the providers should be communicating this upfront. Intermediaries and their clients deserve to be protected. Some debt companies are known to sell ancillary insurance products without permission. For a fledgling industry relying on intermediary business this is cynical in the extreme.
The opportunity to create a confident, transparent and proactive industry made up of companies which have chosen to embrace a set of publicly broadcast principles is, in my opinion, a goal worth campaigning for. Too often, the financial services industry has waited for legislation to be thrust upon it. By taking the time to set out some ground rules and principles which are in tune with the needs of the customer, debt solutions providers can be seen to be at the forefront of customer care rather than resistant to change.
The watchword is transparency and I believe the time is right for like minded debt solutions providers to come together now and engage with each other to set out some guiding principles which can become the building blocks to a future regulated industry which we have had a real hand in shaping.
