Keychain.co.uk

Navigating Consumer Duty: Evidencing Appropriateness and Customer Understanding as a Mortgage Advisor

The Financial Conduct Authority (FCA) introduced the Consumer Duty at the end of July 2023, marking a profound shift in expectations for financial firms, including mortgage intermediaries.
Described by some analysts as the most significant change in UK financial services regulation since the establishment of the FCA in 2013, this new directive focuses on four outcome areas: products and services, price and value, consumer understanding, and consumer support.
Mortgage advisors are now tasked with closely monitoring, substantiating, and supporting the outcomes experienced by their clients under this regulatory framework.
consumer duty
Evidencing the Appropriateness of Products & Services
One fundamental aspect of the Consumer Duty revolves around ensuring that all products and services provided to consumers are tailored to their specific needs, characteristics, and objectives. Mortgage advisors traditionally invest significant effort into identifying the most suitable products for their clients. However, the introduction of the Consumer Duty necessitates a deeper level of documentation regarding why a particular product was chosen for a specific customer.
The appropriateness of a selected product often hinges on the information uncovered during the fact-finding process. For instance, certain customers may not meet the criteria for certain mortgage products, and it becomes crucial for mortgage advisors to meticulously evidence the research and considerations that led to their recommendations, for example through evidence of research documentation provided by sourcing systems.
In some cases, consumer preferences can also play a significant role in the choice of a mortgage product. For instance, two clients with identical financial profiles may differ in their preferences regarding mortgage payment variability. This might result in a 2-year fixed deal being more appropriate for one client, with a 5-year fixed deal more appropriate for the other.
Facilitating a collaborative fact-finding process, wherein clients can actively view and edit their details and preferences, enhances the availability of evidence that supports the appropriateness of product recommendations. Conversely, a less interactive fact-finding process, such as one conducted over the phone and later transcribed by the broker, with clients having no visibility, may provide weaker evidence.
A collaborative and digital fact-finding process can positively impact other facets of the Consumer Duty, particularly in evidencing consumer understanding.
Utilising Digital Signatures as Evidence of Understanding
An effective way to evidence compliance with the Consumer Duty is to have clients sign key documents, such as suitability letters and fact-finding records, confirming that they have reviewed, understood, and validated the information contained within these critical documents.
Nevertheless, the traditional method of requesting clients to print, sign, and return physical documents can be inconvenient and may even lead to delays, potentially hindering consumer outcomes—contrary to the intended purpose of the Consumer Duty.
In response to these challenges, an increasingly popular solution adopted by mortgage brokers is the use of digital signatures or e-signatures. These streamlined and hassle-free methods enable clients to acknowledge receipt and understanding of documents from anywhere, promoting efficiency and client convenience.
Collaborative fact finds and digital signatures are just a couple of the ways that mortgage and protection advisors can improve their client processes, check out this article for other top tips.
About Keychain
Keychain is an all-encompassing client portal tailored for mortgage and protection advisers. It enhances client and adviser interactions by offering digital fact-finding, secure document sharing, e-signatures, and automated reminders. Book a demo of the platform here.
  • About us
  • Pricing
  • FAQs
  • Contact us
  • Blog
    • Keychain is the registered trademark of IJSR 7 Ltd, company number: 13687896.