WARNING Unregulated Advice

by Readers Question

9:21 AM, 1st April 2015
About 4 years ago

WARNING Unregulated Advice

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WARNING Unregulated Advice

There has been a great response to my last post ”effect of pension release on the BTL market” so I thought I’d post the following both as a WARNING and for discussion. WARNING Unregulated Advice

Currently the Buy To Let financial advice market is entirely unregulated. This means that so called advisors can undertake mortgage broking activities without any come back. The FCA have decided that BTL constitutes a commercial transaction. Unlike regulated mortgages (residential) where you can sue the advisor to the grave and beyond, and where they are required to have, Qualifications, Professional Indemnity Insurance and cover from the Financial Services compensation Scheme, you can do nothing if your investment in BTL goes bad.

Up until now you could argue that as being acceptable since the number of BTL mortgages taken out have been relatively small and the people taking them have been mainly small business people or investors.

That is now changing…. the Grey Haired investors with money for deposits from their pensions are starting to flood the market in BTL (thanks to television programmes telling them how easy it is to make money), these are the same ”poor old grannies who are happy to take money when its good but then decide to play the ”Woe Me” card when it doesn’t go their way.

This WILL be a ticking time bomb…. I can see the headlines from solicitors now ”pensioners loose millions in the BTL markets and advisors (sharks) are to blame for advice etc.

The SHARKS are circling…… I have already started to receive marketing literature from unregulated firms which if i didn’t know better I would probably take further.

My view is easy and simply, as of tomorrow, take BTL mortgages under the FCA control and only allow them to be sold by regulated mortgage advisors.

Problem Solved !!

Richard



Comments

Mark Alexander

9:25 AM, 1st April 2015
About 4 years ago

Oh dear, oh dear!

Don't vote for more Nanny State politics folks, it's impossible to regulate for stupidity.

Regulating BTL mortgages will not stop pensioners investing into unregulated land deals, buying property for investment without mortgages, buying time-share, investing into Crowd Funded residential investment etc. etc. etc.

So NO! Richard's proposal will not solve the problem of peoples stupidity, just accept that common sense isn't actually that common.

Regulation comes with cost too!
.

Mark Alexander

9:40 AM, 1st April 2015
About 4 years ago

PS - there is only one form of regulation that I would advocate for the PRS and that would be akin to a driving licence for both landlords and agents.

A "provisional licence" would enable people to own and rent property via a fully qualified and bonded agent agent only. To obtain such a provisional the landlord would have to attend a one day "passportable" Landlord Accreditation Course, like those run by LLAS, NLA, MLAS etc.

A full licence would be as above plus ongoing CPD and would allow landlords to self manage.

A commercial licence would be similar to an HGV or a PSV. This would the the one for agents wishing to act for landlords with a provisional licence. Rules would include exam based training, membership of a redress scheme, client money protection and professional indemnity insurance.

Operating without a licence should be a criminal offence. Further offences could then be considered akin to driving offences, i.e. points, bans and fines depending on the severity of offences, e.g. three points for failing to protect a deposit, 6 points for not having a gas certificate, automatic disqualification for X months/years for serious offences.
.

Richard Williams

9:58 AM, 1st April 2015
About 4 years ago

Ok I can agree somewhat with what Mark is saying in the first part of his response, however the regulation is already in place for the sale of mortgages. This is not new regulation it is simply providing the same level of protection to the public which they receive for their residential mortgage. Or do we advocate removing regulation for residential mortgages as well ?
With regards to unregulated land deals etc I agree that is a case of buyer beware as these as investments . But if you are "borrowing money" that is entirely different.
On the second part, I agree entirely with Mark but that is a different subject and not related to "borrowing advice"

Mark Alexander

11:15 AM, 1st April 2015
About 4 years ago

Reply to the comment left by "Richard Williams" at "01/04/2015 - 09:58":

Hi Richard

Following the MMR I think regulating the sale of residential mortgages is a high cost pointless exercise and should have been addressed in the deregulation bill, as should the sale of insurance.
.

Neil Patterson

11:24 AM, 1st April 2015
About 4 years ago

My question is how does a qualified and regulated mortgage adviser know what a good property investment is and what are the criteria?

Mark Alexander

11:33 AM, 1st April 2015
About 4 years ago

Reply to the comment left by "Neil Patterson" at "01/04/2015 - 11:24":

Awesome question Neil 🙂
.

Howard Reuben CeMap CeRER

12:20 PM, 1st April 2015
About 4 years ago

Reply to the comment left by "Neil Patterson" at "01/04/2015 - 11:24":

Excellent question and one that further asks the question "should I work with a mortgage salesman who dabbles in BTL, or a professional BTL mortgage adviser who is ALSO a property investor / landlord too?"

I would also add that IRRESPECTIVE of whether the FCA requires Advisers to be regulated, I am delighted to say that the vast majority of lenders (including high street banks, specialist lenders and the new 'challenger banks') have set out their stalls under this new regime and they have said that they will only provide agencies to Advisers who are FCA authorised in the first place anyway.

The old CCL is going and is being replaced by an FCA authorisation for ALL Advisers.

Those (currently unregulated) that pass the new FCA authorisation approval process will be regulated - again, irrespective of whether the product is a regulated product.

This is yet a further move towards 'professionalism' across the Adviser community, and one day maybe all Advisers will also be property investors, FCA authorised, NACFB members, and provide assurance to all that there is recourse under PI and the FSCS too (if applicable).

Howard
http://www.property118.com/member/?id=314 (authorised, regulated, NACFB Full Member, property investor and award winning BTL Broker!) 🙂

Mark Alexander

12:31 PM, 1st April 2015
About 4 years ago

Reply to the comment left by "Howard Reuben" at "01/04/2015 - 12:20":

Excellent reply Howard, but which of those attributes is most important though?

For me, it's the fact that you're an experienced landlord and an NACFB member. The FCA doesn't care two hoots about that though, but those who want advice on BTL definitely SHOULD. A piece of paper confirming that an adviser passed exams is no substitute for real life experience and strong connections IMHO.
.

Andre Gysler

20:20 PM, 1st April 2015
About 4 years ago

Sorry guys, but in many respects the FCA are a bunch of muppets who, in many areas, have completely missed the point of their existence.

An example would be that affordability should be of primary concern, with proof of sustained expenditure at that level being counted as evidence of ability to meet repayments rather than black and white criteria for fear of being accused of irresponsible lending.

The above is an example of how lenders are prevented from lending without the FCA size 9s wading in.

Mark Alexander

21:12 PM, 1st April 2015
About 4 years ago

Reply to the comment left by "Andre Gysler" at "01/04/2015 - 20:20":

I agree Andre, and we mustn't forget that we had regulators prior to the Northern Rock collapse too.

I've been thinking about Howard's list of attributes and putting them into the order of what I think is most important. Where do you think his FCA qualifications come in that list? If you said at the bottom you came to the same conclusion as I did.

Going back to the point of regulation, how can anybody other than a whole of market broker actually have the label of being an adviser? Surely a person who is tied to one company is just a salesman, a rep at best!
.

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