Mortgages and product transfers
IFAC still often receive a lot of queries around the methodology of dealing with Mortgage Product transfers:
This has been , and remains a topical issue, and product transfers are still becoming increasingly attractive, as the borrower just moves from one product to another without changing mortgage provider. Indeed, many providers / lenders pay procuration fees for this work if conducted by a broker.
For the product transfer, the FCA stated at an FCA Round table in February 2018, that they would expect to see a “full advice process”, however, a lot depends on the client situation, ie, whether they are:
For Situation (1).
- Your existing clients.
- Whether they have just come to you and asked you to facilitate the transaction, and are not known to you.
- Best Practice would be either a new fact find, or update the existing as appropriate, or as a minimum, confirm no changes, and obtain a signature. There may be other areas of business that you need to “review” such as protection needs?
- From here it depends whether the client simply wants to take out a product transfer to avoid hassle, in which case, you can research existing lender products, and then issue a short Suitability report explaining what you have done and why. This should include the fact that that you have, on this occasion not offered a full advice process, but simply facilitated a product transfer, at the client request, and that there could “potentially”, have been better products available.
- Alternatively, if the client needs full advice to determine whether a product transfer is best, then you conduct a full process / research etc.
Some networks offer their advisers a “disclaimer” for their clients to sign, which again you can adopt depending on circumstances, and an example is available. https://ifac.eu/download/get_file.php?download_id=TzRjNkNLS2xFZVU4eWxuTExRUWpvUT09
- Offer full advice, complete a basic fact find, and then restrict research to existing lender, document why, and issue a report accordingly.