In recent history, the regulatory landscape for financial services has changed significantly, with the FCA introducing a number of initiatives such as Treating Customers Fairly (TCF), the Mortgage Market Review (MMR), and most recently Consumer Duty.

These policies are all designed to protect consumers. For example, one of Consumer Duty's key objectives is for companies to ‘act to deliver good outcomes for clients'. In Smart Money People's latest Mortgage Lender Benchmark, a bi-annual review of the mortgage market, we asked brokers whether they feel these regulatory changes have improved the mortgage industry.

Brokers understand the need for regulatory changes

The top line answers paint a promising picture. 52.3% of brokers either agreed or strongly agreed that recent policies such as MMR and Consumer Duty had improved the mortgage industry. On the flip side, 14.1% said they disagreed or strongly disagreed, and just over a third (33.6%) weren't sure.

Whilst the latter figure suggests ongoing ambiguity for some, the fact that over half are happy with the impact of the changes shows that the FCA's efforts haven't been in vein. It also demonstrates that overwhelmingly, brokers want to do the right thing by their clients, and recognise that stricter regulation has been necessary to tighten up the industry. The introduction of these policies will have undoubtably resulted in more work for brokers to demonstrate ongoing compliance, but the responses show they're still mindful of the bigger picture.

So everything is just fine?

We also asked brokers whether they found any specific aspects of regulatory compliance in the mortgage industry concerning or confusing. The overwhelming response (79.9%) was ‘no, everything is fine thank you'. At face value, this could be taken as extremely positive. If the vast majority of mortgage brokers have no concerns and totally understand the regulatory landscape and what it means for them, the FCA can rightly congratulate themselves on a job well done! But given that just over a third of brokers couldn't say whether the various new regulations had actually improved the industry – suggesting a degree of misunderstanding, for some brokers it may be a case of ‘not knowing what they don't know'. Obviously, if this leads to any non-compliance, the excuse of not being aware of the rules will cut no ice with the FCA.

And of those who did raise concerns, the key theme that came out was confusion around the latest FCA initiative – Consumer Duty. Not only around the rules themselves and how they should be applied, but also the value the new regulation actually brings to the industry. One respondent said it was ‘hardly any different to TCF, just packaged up differently'. Others felt that all the new regulation has achieved is adding more work for the broker and another layer of compliance. However, more encouragingly for the FCA, some of the responses that highlighted Consumer Duty as an area of concern did concede that they understood why it had been introduced.

Some frustrations still remain

Of those who raised other concerns, there were a wide range of responses citing various frustrations with the impact of regulatory changes and compliance in general. Some felt there was too much red tape – that everything feels like a tick box exercise and complying with the various regulations is far too time consuming. One respondent even went as far as saying ‘the mortgage is over regulated and results in worse customer outcomes'. This is exactly the opposite of what the regulatory changes are trying to achieve. Others said that while they understand the need for client protection, the clients themselves should take some responsibility during transactions. Finally, some brokers raised concerns around a lack of clarity, with FCA vagueness and ambiguous rules mentioned on more than one occasion. This supports the argument around a potential lack of understanding in some areas.

Summary

Overall, the Mortgage Lender Benchmark's findings are encouraging, with the vast majority of brokers saying regulatory changes have improved the industry. Despite this, there still appears to be a degree of ambiguity for some.

It's clear that like previous FCA initiatives, Consumer Duty is here to stay. So brokers will need to ensure they can evidence good outcomes when called upon. Working with the right partners can certainly help. At Smart Money People, we offer advisers the tools to ask clients key questions about their experience, focusing on the most important aspects of Consumer Duty, with the ability to benchmark against historical financial services market data.

By Jess Rushton, Head of Business Development at Smart Money People