The FCA’s new Consumer Duty: What this means for brokers

The Financial Conduct Authority’s (FCA) new Consumer Duty is a watershed moment for small firms implementing new standards of client service. It will set higher and clearer consumer protection standards across financial services and require firms to act to deliver good customer outcomes. Now, almost halfway to the implementation deadline of July 2023, brokers, conveyancers, estate agents and other parties involved in the home buying process should be planning to deliver these outcomes for customers.

Within the ‘Consumer Principle’ that requires firms in the consumer finance sector to act in good faith, avoid foreseeable harm and enable support for customers to pursue their financial objectives, the challenging nature of the property market is the first and most obvious concern. With volatile house prices, inflation, rising cost of living and other macroeconomic headwinds creating hurdles for brokers and their customers, the need for transparency and trust has never been more apparent.

While the property market’s narrative for 2023 is largely focused on stabilising house prices and some mortgage lenders reducing rates and offering more services, the market appears to be settling just in time for the integration of the FCA’s consumer principle. Brokers who have long been a valuable part of a homebuyer or home movers’ journey will feel more empowered to engage customers with a breadth of helpful products and services.

The Association of Mortgage Intermediaries (AMI) has been dutifully involved in the introduction of this guidance into the UK market. AMI has been vocal about its support for the FCA’s regulation while acknowledging the implications on the sector for broker firms and lender trade bodies attempting to understand their refined roles and responsibilities. AMI continues to provide clarity around implementation timelines, board champions, and definitions of products while offering helpful resources and guidelines to mortgage brokers[1].

As an integral part of the home buying process, brokers must work with lenders to provide accurate and transparent information about their customer base and target audiences. It would be advantageous for brokers to ‘map’ a homebuyer’s journey, identifying the stages at which various outcomes can occur and how brokers can mediate, support, or advise accordingly. This will help brokers with their consumer understanding or ability to provide the right information at the right time for homebuyers that are confused or stressed about the process. Brokers will also focus on demonstrating how their proc fees, paid by the lender, offer value for homebuyers, highlighting their role as a partner and advocate for the client when reviewing complex documents and paperwork, overseeing transactions, or guiding clients through a re-mortgage process.

Importantly, brokers will review their entire product and service pipeline to find where processes can be streamlined. Identifying these ‘friction points’ not only benefits a broker’s business but a homebuyer’s journey as well, for example by reducing wait times, simplifying paperwork or easing the lender engagement process.

Overall, there is no doubt that the implementation of the Consumer Duty guidance will further establish brokers as integral players in the property industry and enable them to support clients better as they navigate the complexities of the market. Despite the challenging property landscape in which they operate, brokers have and will always be advocates of clients hoping for a stress-free home moving experience.

[1] FCA Issues Consumer Duty Update for Firms | Association of Mortgage Intermediaries (AMI) (a-m-i.org.uk)