Proposed Mortgage Broker Code of Conduct

kenshaz

EdInvestor wrote:

I'm inclined to think a sticky will be adequate in the long run - however some initial publicity for the existence of the code may be useful.

Ed although you did go for the link in the signature on your original suggestion,has the debate swayed you?I also note that you have provided links to the draft code in your above post is that confirmation of intent.
Martin has a link in his signature (He is the Boss) to article links,perhaps brokers could have links to Martin's articles in their signature in addition to the code link.

I am saying that tongue in cheek because I know that it would never happen ,but it would help the poster to get a balanced view on their mortgage options.

EdInvestor

Hi kenshaz,

My comment was really a response to Martin's comment about the possible difficulty in policing signature links.Of course he could always issue a warning that anyone found abusing a code of conduct signature link would be immediately PPRd.

IMHO signature links (as in my example) would be useful to raise awareness of the policy on these issues.This would not only help posters seeking guidance but also new arrivals from the industry, who may break the rules if they don't know they exist, as payless has testified.

MortgageMamma

I think signature links would be immensely helpful to forum users and other advisers alike.

I just want to ask you all though to stop and think about trust for a minute.I feel that some individuals on this thread feel they cannot trust anybody. Distrust breeds distrust and bad feelings. It is not a constructive/productive state of mind.

I don't think we can cover every potential issue in consumer protection with either a code of conduct or a signature link or whatever. The only real way to minimise risks to users of the forums, is self policing, which has been something thats gone on for some time now - the forums would you be a free advertisement for those that chose to spam/tout/induce if it was not for long term regular posters reporting abuses. I thought that the code of conduct is meant to be complimentary to the self policing not a replacement of it?

Anyway I feel good progress is being made in how to deal with what we can see on the open forums, but what about what we are not able to see?

One thing I would like to see added to a signature is UNSOLICITED PM'S ARE AGAINST SITE RULES - PLEASE REPORT ALL UNSOLICITED PM'S VIA THIS LINK

EdInvestor

It may just be worth mentioning that there don't seem to be many Board and Forum guides posting regularly around the relevant forums at the moment, otherwise it would probably be better if their signatures had the links ( though they might get lost amid the other links they usually have).

jem16

whambamboo wrote:

I
I'm not sure if you have said this because you didn't actually read my post, and imagine that I was attacking you, or if you believe that "slimy advisers" don't exist, and mis-selling doesn't happen. Do you really think that all advisers are wonderful and criticising the bad ones should be banned on this forum, and is somehow a personal slight to you? I'm not sure that that was the purpose of this site, as a PR service for IFAs.

I was involved in that thread too and although you probably did not mean your reply to be a personal slight, I can see why it may have been taken as that, especially as you went on to add.

Just as the person going to his local bank for investment advice is paying a hidden fee to the bank for their products, so too is the investor getting 'free' advice from an IFA.

Ultimately this is why people don't trust the financial services industry, as there are far too many people involved in it who are receiving commission payments (which the client cannot opt out of in many cases, even if directly investing or paying a professional fee), which create an immediate conflict of interest between client and adviser.

and

Quote:

Originally Posted by jem16
Personally I would rather pay an adviser trail commission rather than an upfront payment. At least that way the adviser would be working with my interests at heart as he gets 0.5% of my fund - the more he makes for me, the more he gets.

If an upfront payment is made, there is no incentive for ongoing servicing as he's already got his money.

I'm not sure. It doesn't represent a fair means of payment.

If I go to an IFA to get advice on how to invest £100k in a pension now, in 40 years time, I will have paid £20,000 (at today's money) in commission to him.

This is plainly absurd. The fund managers are already being paid to manage the money, and servicing should be paid for as needed.

I'm not going to pay a dentist every month even if I don't need a checkup (yes I know you can get dental plans, but these insure against more costly treatments), so why should I do that to IFA? And the dentist doesn't get variable monthly payments depending on what sort of filling he puts in, even if the cheapest one is the best.

By the way, I'm not getting at you - just pointing out how your views could be read.

I think the main problem on this site is that although it is a MSE forum, it has also grown into a great forum for helping out people in lots of ways, not just in ways associated with "money saving". There are many advisers, brokers etc who are freely giving their help and opinions. Unfortunately, at times, there seems a lot of negativity towards charges of any sort and therefore by implication, those charging.

MortgageMamma

Hi Jem16

Useful point thanks. Its my feeling that it should in fact be remembered by those thinking of taking advice from a mortgage broker or IFA that advisers don't work for nothing, just as they do not work for nothing, and with the nature of financial advice of any sort a financial adviser or mortgage broker carries with them the responsiblity of that advice for life, therefore should be paid for it. Some people feel like advisers earn to much - perhaps some do - but mostly it is in line with their expertise and liabilities.

whambamboo

jem16 wrote:

I was involved in that thread too and although you probably did not mean your reply to be a personal slight, I can see why it may have been taken as that, especially as you went on to add.

Just as the person going to his local bank for investment advice is paying a hidden fee to the bank for their products, so too is the investor getting 'free' advice from an IFA.

Ultimately this is why people don't trust the financial services industry, as there are far too many people involved in it who are receiving commission payments (which the client cannot opt out of in many cases, even if directly investing or paying a professional fee), which create an immediate conflict of interest between client and adviser.

But people *don't* trust the financial services industry. This is not an insult, it is a statement of fact, and it is intended as a CONSTRUCTIVE comment.

I was trying to persuade one of my friends to invest but he just doesn't trust banks and is mortgage-free and has all of his money in premium bonds. He did previously get compensation for endowment misselling.

People like him simply do not trust finance any more, as he thinks those involved are just out to enrich themself, and is distrustful of commission payments, where he himself works for a more transparent hourly rate.

and

Personally I would rather pay an adviser trail commission rather than an upfront payment. At least that way the adviser would be working with my interests at heart as he gets 0.5% of my fund - the more he makes for me, the more he gets.

If an upfront payment is made, there is no incentive for ongoing servicing as he's already got his money.

I'm not sure. It doesn't represent a fair means of payment.

If I go to an IFA to get advice on how to invest £100k in a pension now, in 40 years time, I will have paid £20,000 (at today's money) in commission to him.

This is plainly absurd. The fund managers are already being paid to manage the money, and servicing should be paid for as needed.

I'm not going to pay a dentist every month even if I don't need a checkup (yes I know you can get dental plans, but these insure against more costly treatments), so why should I do that to IFA? And the dentist doesn't get variable monthly payments depending on what sort of filling he puts in, even if the cheapest one is the best.

By the way, I'm not getting at you - just pointing out how your views could be read.

I think the main problem on this site is that although it is a MSE forum, it has also grown into a great forum for helping out people in lots of ways, not just in ways associated with "money saving". There are many advisers, brokers etc who are freely giving their help and opinions. Unfortunately, at times, there seems a lot of negativity towards charges of any sort and therefore by implication, those charging.

I'm not sure why you are saying this. I clearly said people should "pay a professional fee for a professional service", and that "the advisor needs to get paid for the work he has done", but that "he will get his money either from trail commission or by upfront payment. It makes no difference either way."

If you don't think that debate should not be allowed on charging models and transparency on this site, even when that debate is very clearly expressed in general terms, and quite clearly not in reference to any particular adviser's charges, then I think you've rather missed the point of the site.

Consumers need to know how they are being charged. Because of course it's being paid for. So why call it free advice, when such a thing is impossible?

I have not noticed Martin telling people to buy a TV for £800 on interest-free credit rather than buying one for £600 up the road without finance.

If I were to point out the hidden costs of PPI here, and describe those companies selling inappropriate and unsuitable PPI at excessive prices as "slimey", would it then be reasonable for a low-cost PPI provider to come on and abuse me and insult me/?

I will make no apologies whatsoever for saying that charging should be transparent and only paid according to the service actually provided. In particular, trail commission is an unfair means of charging, because it is paid regardless of whether service is provided or not, and it places the consumer at the mercy of the adviser, who might be diligent or might not. In addition, it isn't designed to empower the consumer, as even though he is paying it, it is never charged to him directly. Saying that a 40 year 0.5% trail commission is an effective 16.67% (1 - 1/1+(40*0.005)) upfront charge is fact.

Why shouldn't consumers be able to choose whether they pay for a service or not? It's simply not designed to benefit the consumer. He is not being told that he is being charged. There's nothing to stop the adviser inviting the consumer to have a regular review of his funds, charged at cost. But why should he pay for it if he doesn't want it?

whambamboo

MortgageMamma wrote:

Hi Jem16

Useful point thanks. Its my feeling that it should in fact be remembered by those thinking of taking advice from a mortgage broker or IFA that advisers don't work for nothing, just as they do not work for nothing, and with the nature of financial advice of any sort a financial adviser or mortgage broker carries with them the responsiblity of that advice for life, therefore should be paid for it.

I agree entirely :-)

But the consumer is told that they do.

It is not his fault that things are done this way. But when he is faced with all this marketing telling him he can get 'free' advice, is it any wonder that attitudes as to its cost are formed accordingly?

The adviser *is* paid for the work, and that payment does come from the consumer, but the industry is setup so that this payment does not go from the consumer to adviser, but rather from consumer to investment company back to the adviser.

So that's why people think advisers should work for free, but don't think the same of lawyers, builders, or anything else.

EdInvestor

MortgageMamma wrote:

Anyway I feel good progress is being made in how to deal with what we can see on the open forums, but what about what we are not able to see?

One thing I would like to see added to a signature is UNSOLICITED PM'S ARE AGAINST SITE RULES - PLEASE REPORT ALL UNSOLICITED PM'S VIA THIS LINK

I agree this is a fundamental point. Especially given that it's obviously a concern of the brokers posting, should policy on touting perhaps be moved up the top of the Code of Conduct?

Should it be one of the first things that any newbie poster - whether borrower or broker - actually sees?

MortgageMamma

whambamboo wrote:

But people *don't* trust the financial services industry. This is not an insult, it is a statement of fact, and it is intended as a CONSTRUCTIVE comment.

I was trying to persuade one of my friends to invest but he just doesn't trust banks and is mortgage-free and has all of his money in premium bonds. He did previously get compensation for endowment misselling.

People like him simply do not trust finance any more, as he thinks those involved are just out to enrich themself, and is distrustful of commission payments, where he himself works for a more transparent hourly rate.



I'm not sure why you are saying this. I clearly said people should "pay a professional fee for a professional service", and that "the advisor needs to get paid for the work he has done", but that "he will get his money either from trail commission or by upfront payment. It makes no difference either way."

If you don't think that debate should not be allowed on charging models and transparency on this site, even when that debate is very clearly expressed in general terms, and quite clearly not in reference to any particular adviser's charges, then I think you've rather missed the point of the site.

Consumers need to know how they are being charged. Because of course it's being paid for. So why call it free advice, when such a thing is impossible?

I have not noticed Martin telling people to buy a TV for £800 on interest-free credit rather than buying one for £600 up the road without finance.

If I were to point out the hidden costs of PPI here, and describe those companies selling inappropriate and unsuitable PPI at excessive prices as "slimey", would it then be reasonable for a low-cost PPI provider to come on and abuse me and insult me/?

I will make no apologies whatsoever for saying that charging should be transparent and only paid according to the service actually provided. In particular, trail commission is an unfair means of charging, because it is paid regardless of whether service is provided or not, and it places the consumer at the mercy of the adviser, who might be diligent or might not. In addition, it isn't designed to empower the consumer, as even though he is paying it, it is never charged to him directly. Saying that a 40 year 0.5% trail commission is an effective 16.67% (1 - 1/1+(40*0.005)) upfront charge is fact.

Why shouldn't consumers be able to choose whether they pay for a service or not? It's simply not designed to benefit the consumer. He is not being told that he is being charged. There's nothing to stop the adviser inviting the consumer to have a regular review of his funds, charged at cost. But why should he pay for it if he doesn't want it?

I agree with you, in an ideal world the industry would be purely fee based, (which would indeed stop people thinking advisers will do what earns them the most) however this would stop people on lower incomes from seeking professional advice, and push more people into going to the banks and other lending/investment institutions direct - catch 22 situation. However, disclosure of fee's and commission is now mandatory so thankfully people can make their own judgement. Anyway, wont waffle on, as this only has tiny relevance to the thread, but I respect your opinion.