Regulation – Good and Bad practices when advising

We regularly assist Mortgage Brokers with improving their advice process, so thought that we would produce a general guide to assist firms and Advisers on what should be taken into consideration to improve files.  This article also incorporates key actions that the Financial Conduct Authority have previously reported along with good and bad practices which we thought were useful.

Assessment of Customer Needs

Check the processes you use to assess affordability.  Whilst affordability falls on the Lender, the FCA rules still require Advisers to only recommend a policy that is suitable and meets the Lenders criteria.  Part of this is ensuring it is affordable.  Where the loan extends into retirement ensure you check the customer’s affordability within that period and that they have a plan on how they will continue to meet their mortgage repayments.  Also, ensure sufficient customer information is gathered before making a recommendation, so that you can evidence ‘know your customer’.

Examples of Good Practice

  • Advisers should recommend the cheapest mortgage product available that meets the customer’s circumstances unless there is a valid reason not to.  As part of the sales process if you are not recommending the cheapest product then you should say why they have been discounted.  Please note – this is an FCA rule, therefore ensure you record this fully in your file/Suitability Letter.
  • Highlight key features that are relevant to the customer and use a mortgage calculator to compare the costs over the longer term to ensure you recommend the most suitable product available to them.
  • Keep detailed notes on the client file of all communications with the customer and Lender, including vital information in case of a complaint.

Examples of Bad Practice

  • No account of other regular expenses is recorded, therefore providing a false picture of the customer’s circumstances and affordability.
  • No income and expenditure assessment being carried out prior to recommendation, with reliance being placed on the customer stating they could afford the payments.
  • Using Industry average figures sourced from internet websites to determine the customer’s affordability without checking that this represented an accurate figure for the individual customer in question.
  • Interest-only mortgage being recommended based purely on affordability despite sufficient budget being available for a capital and interest mortgage.


Research is an important part of the Advice Process.  Therefore, you should ensure that you carry out adequate research to support why a particular lender/product was recommended.  This should then be held on file to support your recommendation.  We often review files that don’t contain any research.  As such, we can’t assess whether the lender/product recommended was the most suitable.  In cases where the research isn’t available, it could be difficult to explain why a particular Lender/product was recommended, and others discounted, if a complaint arose.

Communication with Customers

Communication includes the conversations you have over the phone, zoom, email or if safe to do so, face to face.  It is these conversations that need to be recorded so that the file gives a true reflection of the customers circumstances and then the advice being given.  Customers are not all the same, so make sure the factfind/file reflects who they are.  Soft facts are great for this as it provides a story of what their current situation is and then support what you have recommended and why.

Examples of Good Practice

  • We have produced a number of template Disclosure Documents in different designs.  One of our templates uses large circles to explain key areas that are visually more easy on the eye and draws the customers attention to the sections with importance.
  • The Disclosure Document accurately reflects the level of service you are providing.
  • We have seen some customers use a fact sheet describing the meaning of jargon in plain language, that they leave with the customer.
  • The factfind includes soft facts explaining the customers current circumstances.
  • The Suitability Letter clearly confirms why the Adviser has recommended the product, lender, term, rate.

Examples of Bad Practice

  • Suitability letters have standard paragraphs that haven’t been removed, so it contradicts other statements being made.
  • Fees being added to the mortgage and the impact in the long term on the interest charged hasn’t been discussed.  If they can afford the fee then it maybe more suitable for them to pay it, so ensure you challenge the customer rather than just adding because they wanted to.
  • Debts are consolidated without receiving all the facts and added because the customer wanted to consolidate or not understanding the implications of securing previously unsecured debts to their property.
  • We often hear the term ‘the customer wanted XYZ’ within Suitability Letters/Statement of Demands and Needs.  The role of an Adviser is to get to know the customer so that they can give advice and not just take orders.  Whilst the customer has an opinion the Adviser should establish what their needs are and then make a recommendation that is suitable.  This might end up being exactly what the customer wanted, however it demonstrates that the Adviser has still reviewed the customers circumstances and is making a recommendation based off those facts. Therefore, when writing letters avoid terms such as ‘you wanted’, ‘you chose’ and replace with ‘I have recommended XX because..’.

It is essential that firms have robust processes in place to ensure customers are being treated fairly and suitable advice is given.  The above are only a few tips that we commonly come across, which we hope you find useful and don’t forget to add this to your CPD

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