Thomas Brett, our Head of Mortgage and Lending sat on the Consumer Duty panel at this year’s Mortgage and business Expo North. So, what did we learn about how consumer duty will change marketing in mortgage, protection, and equity release?
It was fantastic to be included on the consumer duty panel at the MBE this year, incredibly well hosted by Robert Barnard of Pepper Money, and to be alongside industry experts in Martin Reynolds of SimplyBiz, Tony Hall from Saffron Building Society and Gurpreet Chahal from Accord Mortgages.
The discussion inspired lively debate and goes to show the ability of the market as a whole to get together and work on improving propositions for better outcomes for customers. Below are the questions asked and my answers on how consumer duty will continue to change marketing for mortgage in the UK.
How prepared do you think the mortgage industry is for this? Lenders, Distributors, and brokers.
The headline is that nearly half of mortgage brokers feel ‘somewhat prepared’ and that around a quarter feel they are ready for the new rules. What’s worrying is the FCA’s note that some are avoiding the subject and hoping it will go away, of course, we all know it won’t.
Personally, I think the vast majority are really working on their preparation for the July deadline, but as always, the proof is in the pudding. Typically, the smaller firms/lenders etc have the agility to work towards a new way of doing things. It’s the big ships that take a long time to change direction.
If we had our time again when this regulation was announced, is there anything we as an industry would and should have done differently given what we know now?
Yes, probably. When we look at consumer duty, we need to remember that the customer journey needs to be fair, compliant, and in their interest from the first point of contact, regardless of a good outcome.
I think perhaps sludge design would be something we could all do without, and Consumer Duty will help facilitate the removal of these practices.
Landing pages promising an instant quote on what you can borrow, or how much cover you can receive, then not receiving a quote but a thank you page saying someone will be in touch could be argued against, as a sludge heavy customer journey.
The 3 cross cutting rules set the overarching expectations that apply across all areas of firm conduct. Act in good faith, enable & support retails customers, avoid causing foreseeable harm. When you speak to some people in the industry, they will say “I/we already do that and so it’s ok, we have no action” – what would you say to those firms and individuals.
I’d say that’s great news! Then I would ask, where do your enquiries come from? If there is any form of digital marketing or lead generation either internal or external. Then that’s where the real discussion starts.
If you’re buying leads in, you need to know what journey those potential customers have been on, as when consumer duty goes live, you could be held jointly liable for any advertising, landing pages etc, that are used in that journey.
Consumer duty doesn’t start when the customer first speaks with you, it starts when the customer sees an advert, or an advertorial, or a landing page. Regardless of a good outcome, or a great product, these journeys need to be fair, compliant and in the consumer’s interest.
There is so much work under way across the industry to ensure all the policies, processes, and procedures along with all the right measures are in place to evidence the 4 key outcomes. Products and Service, Price & Value, Consumer Understanding and finally Consumer Support.
From what you are seeing and indeed probably involved in, what are the most significant changes we can expect to see and how will that impact the advice process and day to day workload of a broker and their interactions with their customers.
I think product silos and their removal will be a big change in the year(s) ahead. We’re already seeing the regulator taking a keen look at this area.
For example: Equity Release brokers only focussing on lifetime mortgages when there are RIOs, standard mortgaging options, loans etc.
The FCA are really keen on advisers/brokerages looking at every possible product available for a customer and saying that we only deal with this product or that product is no longer good enough.
Advisers will need to be an ‘expert’ on every type of mortgage/borrowing option available to customers. This will inevitably lead to a heavier workload.
So, it’s all about evidencing good customer outcomes and so how does this look different to the work done in relation to treating customer fairly (TCF) and what poor customer outcomes in relation to mortgages do you feel the focus on consumer duty may help prevent?
I think foreseeable harm is the key here. Every step of the customer journey needs to be checked to make sure it’s in the customer’s interest. Not just the advice process itself, but the marketing, the customer journey, the steps towards advice, and then post advice care.
And testing is vital. This is and will be an ongoing process. Testing every section of that journey will be very important. To make sure the advertising is hitting the correct demographics, the customers understand the products available, and their ability to make an informed decision is not hindered.