During the investigation, the regulatory body reviewed 252 firms of various sizes through mystery shoppers, visits and questionnaires between June and October 2006, in a bid to establish a baseline of the process by which advice is delivered in the mortgage industry.
Scope for improvement was identified in all aspects of the advice process. The worst areas were named as the assessment of customer needs, including affordability, training and competence, overall systems and controls, and record keeping.
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, commented Clive Briault, managing director of retail markets at the FSA. 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 FSA has produced good and poor practice guides, as well as providing key actions to the firms that were visited. However, the failings were significant in a number of firms and so the regulator has referred several to enforcement.
