The FCA’s recent Mortgage Market Discussion Paper (DP25/2) has got the industry talking about ‘enhanced advice’ – an idea that certain customers, such as those with high LTV mortgages, might need a more comprehensive advice process beyond what is required to be provided right now.

The regulator’s rationale is that these customers could face greater risks, and therefore benefit from a deeper, more structured conversation.

Whatever your views on whether this is truly required, it does raise an interesting question: if the FCA does go down this route, should protection advice be a mandatory discussion with those clients who are deemed to require an ‘enhanced’ service?

For what it’s worth, my belief is that high LTV lending, for example, when assessed properly for affordability and suitability, shouldn’t require any sort of enhanced element. But that might not be the FCA’s view.

For me, advisers already have a duty to give a thorough, tailored recommendation to every client – that’s core to what they do. So, for some of the potential areas that the FCA highlight as potentially needing enhanced advice, such as high LTV mortgages or interest-only mortgages, then I don’t quite understand the rationale.

VULNERABILITY

However, for clients deemed vulnerable, you can see the rationale, although of course it will depend on what the requirements of delivering enhanced advice might be.

But if the FCA is intent on introducing this, then perhaps there’s an opportunity here. If certain customers are going to be singled out as needing a more in-depth advice process, would it make sense to ensure that protection is part of the conversation every single time?

Think about the profile of many high LTV borrowers. They’re often first-time buyers who have stretched to pull together their deposit, used most of their savings, and now face the full reality of monthly mortgage payments. If their income were to stop suddenly because of accident, sickness, or unemployment, they might have very little buffer before arrears become a real possibility. That’s a foreseeable harm, and one advisers can help address. Indeed, large numbers already do.

Many advisers already make protection discussions standard in these scenarios, but not everyone does. Sometimes the focus is purely on the mortgage. Sometimes advisers assume the client won’t be interested or able to afford it. The result? Missed opportunities – for the client to safeguard their home, and for the adviser to create an additional income stream from protection business.

So, if the FCA is going to define certain borrowers as needing enhanced advice, could this be a moment to build protection into that process as a given? Not to force a sale, but to ensure the risks are discussed, the options explained, and the outcome recorded.

Even if the client decides not to proceed, the adviser has fulfilled their duty and helped the client make an informed decision. Again, I’m fully aware that many advisers already do this as a matter of course.

ENHANCED ADVICE

The same question applies to other groups the FCA might bring into the ‘enhanced advice’ bracket – for example, as mentioned, customers they consider vulnerable because of health, insecure employment, or low financial resilience. In each case, the potential for income loss and repayment difficulty is there, and protection could be a critical part of keeping the mortgage sustainable.

I’m conscious there’s a balance here. I wouldn’t want to see enhanced advice become a long checklist that slows the process down or adds cost without improving outcomes. But if it’s going to happen, we should think carefully about what goes into it and we should certainly think about whether protection be a core, even mandatory, element for those customers who are more likely to need it.

There’s no arguing with the fact that having a clear conversation regarding how a customer is going to continue paying a mortgage should their life change is absolutely necessary. The next question with enhanced advice is whether it can continue to be up to their adviser to cover this off, or it becomes a non-negotiable.

Patrick Bamford is head of international business development at Qualis Credit Risk, part of AmTrust International