The question many advisers ask themselves – who owns the customer?
The client gets advice to take out a mortgage typically a 2-year fixed rate in the current market but then 18 months later a letter pops through the letter box offering a cracking retention product.
Yes the adviser can help the recipient to complete the paperwork and look at the protection needs for the client but where does the adviser sit in terms of their advice – is there going to be a challenge from the client as to why they weren’t offered a longer term fixed rate in the first place?
The Mortgage Market Review puts advice at the heart of the model both in terms of affordability and future income but does this conflict against the current retention model.
How can a lender offer a retention product without understanding how the client’s circumstances may have changed?
The fact that the client has had a great payment record over the past 18 months is no indication of another 2 years of meeting affordability requirements.
You could argue that the lender has got the risk of the mortgage whether the client falls onto standard variable rate or not but this contradicts the fact that a client has had advice with the intention of getting more advice in 2 year’s time.
So should advisers be highlighting to clients that their advice is only valid for 18 months and if they choose to take advantage of a retention product then the liability for suitability moves to the client or lender if there is a change in the amount borrowed.
For most advisers the customer is still a customer and I’m sure the majority will see helping the client in the retention process as part of their service but does product retention without advice go against the spirit of the MMR.
There is no reason why a customer, who sought out advice initially, doesn’t need advice again that is unless they have sat and passed CeMap in the past 2 years.
As an industry we are too proactive in tempting clients to make decisions based on price and an assumption nothing has changed in their lives.
So the question on retention letters should not be whether the client wants to save themselves a few pounds by avoiding falling onto an SVR, it should be do they need a financial review.
If the answer is no then a retention product could be right but it should carry the appropriate risk warnings. If it’s a yes then the adviser who has the full picture of the client’s circumstances should be the first port of call.
The mortgage market review promotes advice, expertise, constant review and assessment of affordability over more than just the short term. How retention fits into this ethos has yet to be seen.
