The FSA urge firms to improve mortgage advice processes

The Financial Services Authority (FSA) has recently reported that only one third of all firms they researched had satisfactory processes in place in order to advise customers.

The FSA assessed 252 firms of various sizes between June and October last year in order to establish a baseline of the process by which advice is delivered in the mortgage industry. They collated their data by means of questionnaires, visits and mystery shoppers.

The general consensus was that all areas of the advisory process could be improved with extra attention being devoted to assessing customers’ needs, record keeping and overall systems and controls.

Commenting on the reports’ findings, 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 result of the FSA’s investigation showed variations based on sizes of firms. They discovered that small firms need to introduce systems and indicate they are in place. On the other hand larger firms normally have suitable processes in place but they did not always meet the FSAs standard for displaying their proper use.

As a result of the investigation, the FSA has produced good and poor practice guides and supplied “key actions” to those firms who were visited.

Of the firms whose failings were declared “significant”, several have been referred to enforcement.

Future projects within the mortgage industry which the FSA are looking into include: mortgage exit administration fees and mortgages in retirement. These come hot on the heels of last year’s publication of its interest-only and non-conforming mortgage work.