Thankfully, there has been a growing amount of interest and analysis of the FCA’s most recent Consultation Paper – CP25/11 – and it’s somewhat odd conclusions and proposals about advice, or the lack of it, going forward.
I’ve covered it myself but recent data, out of the FCA itself, has made me once again revisit the CP and question whether it’s the same organisation promoting the same offerings.
There’s an uncomfortable contradiction running through the latest pronouncements from the FCA.
On the one hand, it recently told us that one in four people in the UK have low financial resilience, barely a step away from financial fragility.
On the other, it’s consulting on proposals that would open the door to far greater numbers of execution-only mortgage business.
You couldn’t make it up!
Strip away the jargon, and what we’re really being told is: people are struggling, so let’s make it easier for them to take life-altering financial decisions without professional help. You couldn’t make it up!
As you will I hope know, CP25/11 suggests removing the requirement for mortgage firms to offer advice when there’s ‘interactive dialogue’ with customers.
If that change goes ahead, borrowers could find themselves engaging with lenders, being given personalised information, but no actual advice, unless they specifically request it.
At the same time, firms would be required to clearly state they will not be assessing suitability, and that consumers are on their own. Welcome back to execution-only, just with a few more legal warnings tagged on.
THE BIG ISSUE
The problem with all this is not just theoretical. It’s practical, and it’s foreseeable.
The FCA wants advisers to assess clients holistically under Consumer Duty. It wants advisers to consider the whole picture, such as vulnerabilities, needs, goals, and to signpost where necessary.
In effect, it wants advisers to become financial lifeguards, spotting risks before they become disasters. And yet, it’s now floating proposals that make it easier for consumers to sidestep advice altogether.
It’s something of a paradox.
That’s not just inconsistent, it’s something of a paradox and seemingly a world away from all the Consumer Duty noise we have heard in recent years.
The industry’s response has already highlighted the problem. Some have pointed out that advisers are likely to be caught in the crossfire when things go wrong.
HELP NEEDED
If a consumer chooses an execution-only route and it later turns out to have been a poor decision, the temptation will always be to question why someone didn’t step in to help.
Even more worryingly, the proposals would remove the requirement for a full affordability assessment in some situations, such as when a borrower wants to reduce their mortgage term.
On paper, that might seem like a consumer-empowering change. But what if the borrower’s financial circumstances change six months later?
What if that reduced term leads to unaffordable payments or triggers a crisis? Would the consumer remember that they chose to go it alone, or would they question and wonder why no one stepped in?
FLAWED LOGIC
The rationale offered by the FCA is that many consumers ‘don’t want or need advice’, and they find advice channels too rigid, particularly in the digital space.
But that logic ignores the very reasons the post-MMR advice rules were put in place.
Back then, a significant chunk of the market was based on scripted, non-advised sales that often led to poor outcomes. Advice isn’t just a service, it is a safeguard.
The truth is that some consumers think they don’t need advice, until they do.
TOO LITTLE TOO LATE
And by then it’s often too late. What’s more, execution-only isn’t just about consumer choice, it’s also about liability avoidance.
It moves the responsibility for the outcome from the firm to the customer. That may tick a box, but it doesn’t tick the Consumer Duty one.
Meanwhile, the FCA’s own past research has shown that consumers who used advisers post-MMR typically saved money compared to those who went direct.
Advisers also help all types of lenders access more customers, driving competition and choice.
And yet here we are, considering reforms that could dilute that value and make it easier for mortgage decisions to happen without professional support.
UNDER PRESSURE
All this comes at a time when consumer finances are under more strain than they have been in over a decade.
Inflation has dented household budgets, mortgage rates remain volatile, and arrears are edging up.
If ever there were a moment to reinforce the value of advice, this would be it. And yet, the FCA appears to be opening the door to more self-navigation in a market where the stakes couldn’t be higher.
Perhaps worst of all, these proposals risk damaging the trust that advisers have worked hard to build with their clients.
CONSUMER FIRST
The advice sector has proven itself, time and again, to be a consumer-first profession, one that steps up when borrowers need clarity, reassurance, and guidance.
There’s a reason why 97% of all new mortgages since 2015 have come with advice and it’s not because people didn’t want it.
Rolling back the default position on advice sends the wrong signal, to both the industry and the public.
The FCA has to choose a side.
So what do we want?
A world where advice is the norm and poor outcomes are the exception, or a world where the regulator gives consumers the rope and waits to see if they hang themselves with it?
You can’t preach Consumer Duty on Monday and promote execution-only on Tuesday.
The FCA has to choose a side. For the sake of the public, and the long-term credibility of our market, let’s hope it chooses wisely.
