Mortgages and product transfers
Written on 10/08/2018
Product transfer

IFAC still often receive a lot of queries around the methodology of dealing with Mortgage Product transfers:

This has been , and remains a topical issue, and product transfers are still becoming increasingly attractive, as the borrower just moves from one product to another without changing mortgage provider.  Indeed, many providers / lenders pay procuration fees for this work if conducted by a broker. 

For the product transfer, the FCA stated at an FCA Round table in February 2018, that they would expect to see a “full advice process”, however, a lot depends on the client situation, ie, whether they are:
  1. Your existing clients.
  2. Whether they have just come to you and asked you to facilitate the transaction, and are not known to you. 
For Situation (1).
  • Best Practice would be either a new fact find, or update the existing as appropriate, or as a minimum, confirm no changes, and obtain a signature. There may be other areas of business that you need to “review” such as protection needs?
  • From here it depends whether the client simply wants to take out a product transfer to avoid hassle, in which case, you can research existing lender products, and then issue a short Suitability report explaining what you have done and why. This should include the fact that that you have, on this occasion not offered a full advice process, but simply facilitated a product transfer, at the client request, and that there could “potentially”, have been better products available. 
  • Alternatively, if the client needs full advice to determine whether a product transfer is best, then you conduct a full process / research etc.
For (2)
  • Offer full advice, complete a basic fact find, and then restrict research to existing lender, document why, and issue a report accordingly.
Some networks offer their advisers a “disclaimer” for their clients to sign, which again you can adopt depending on circumstances, and an example is available.
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