U4: T9 - THE ROLE OF THE MORTGAGE ADVISOR Flashcards
What are the 4 stages of the advice process?
1) Factfind
2) Research
3) Present
4) Implement
What 2 key things should the advisors fact find uncover?
1) How much the potential borrower can afford each month
2) Type of mortgage
An ESIS must be provided for all:
A) MCD regulated mortgages
B) regulated mortgages
A) MCD regulated mortgages
New mortgages taken out post 21Mar2016
A KFI must be provided for all:
A) MCD regulated mortgages
B) regulated mortgages
B) regulated mortgages
Old regulated mortgages taken out pre 21Mar2016
Define Ethics?
Conscious decisions taken by individuals and groups based on moral values; distinguishing right from wrong and choosing to do what we believe to be right.
In terms of ethical advice, what 4 things does the advisor need to establish?
- Attitude to risk
- Customer needs
- Customer circumstances
- Customer’s objective s
Which 7 FCA principles for business are relevant for fair treatment of customers?
Principle 1: A firm must conduct its business with integrity.
Principle 2: A firm must conduct its business with due skill, care and diligence.
Principle 3: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management.
Principle 6: A firm must pay due regard to the interest of its customers, and treat them fairly.
Principle 7: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way that is clear, fair and not misleading.
Principle 8: A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
Principle 9: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.
In relation to the six fair treatment of customers outcomes.
Here are some hints:
a) Consumers should be confident of what?
b) Products and services marketed and sold in the retail market must be designed to do what?
c) Before, during and after the point of sale, consumers must be provided with what?
d) Where consumers receive advice, what criteria must be met?
e) How must products perform? What can consumers expect of the associated service?
f) What must firms ensure once a sale has been completed?
a) Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.
b) Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
c) Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
d) Where consumers receive advice, the advice is suitable and takes account of their circumstances.
e) Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
f) Consumers do not face unreasonable post‐sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.
What will be the three elements of Consumer Duty?
1) A Consumer Principle – setting out the overall standards of behaviour expected from firms.
2) ‘Cross‐cutting Rules’ – clarifying the Consumer Principle’s overarching expectations of firm conduct and its practical application.
3) Four outcomes – rules and guidance to provide detailed expectations relating to four specific outcomes for the firm–customer relationship. The four outcomes are:
— Communications equip consumers to make effective, timely and properly informed decisions about financial products and services.
— Products and services are specifically designed to meet the needs of consumers, and sold to those whose needs they meet.
— Customer service meets the needs of consumers, enabling them to realise the benefits of products and services and act in their interests without undue hindrance.
— The price of products and services represents fair value for consumers.
State the six outcomes for the fair treatment of customers?
Outcome 1. Fair Treatment. …
Outcome 2. Products designed to meet needs. …
Outcome 3. Clear information. …
Outcome 4. Suitable advice. …
Outcome 5. Products perform to expectations. …
Outcome 6. No unreasonable post sale barriers.
The primary requirement of the advice process is that:
a) the product recommended should be the best fit to the customer’s needs from the range available.
b) the amount of time the adviser invests in the customer should be reflected in the commission earned.
c) the customer should be sold the product they ask for.
d) the recommendation should be suitable for the customer’s needs.
d) the recommendation should be suitable for the customer’s needs.
If a mortgage adviser asks a customer about the age at which they expect to retire, this is most likely to be so that the adviser can:
a) ascertain whether the type of property the customer is interested in buying is suitable for them.
b) recommend an appropriate term for the mortgage.
c) ensure that the customer can afford the repayments from their pension income.
d) establish whether the customer is good at long‐term planning.
b) recommend an appropriate term for the mortgage.
The adviser is most likely to ask about retirement plans to help them suggest an appropriate term for the mortgage, since many lenders are reluctant to agree to borrowing that will not be repaid before the customer retires.
Why might an adviser want to know about a customer’s future career plans or expectations of promotion, as well as their current situation?
Information about future expectations of earnings might influence the type of product that the adviser would recommend (for example, a low‐start mortgage might be suitable for a trainee in a job with a recognised career path and expectation of a higher salary on qualification).
What are the four key pieces of information that an adviser needs from their customer in order to provide a recommendation that meets the customer’s needs?
The adviser needs to know the:
customer’s needs
circumstance
objectives
and attitude to risk.
In what section of the FCA Handbook are the rules relating to fair treatment of customers set out?
There are no rules relating to fair treatment of customers. However, guidance is provided in the regulatory guide The Responsibilities of Providers and Distributors for the Fair Treatment of Customers (RPPD) and in the ‘six outcomes’ for consumers.