April 2020
By Steven Howard , Head of Mortgage and Lending Intermediaries Compliance Services at The SimplyBiz Group
Whilst we are clearly not in such a parlous state of emergency as the world was in 1939, it is vital that we take time to recognise and appreciate the current and unprecedented challenges that we all face from the Coronavirus (COVID-19) pandemic and it seems an appropriate time to consider how the broker community can help itself to “Keep Calm and Carry On” over the forthcoming days, weeks and months when we expect major disruptions to normal face-to-face communications to be in place.
Whilst you may have undertaken face-to-face advice , there is no actual requirement for this method of delivery, and as far as the regulator is concerned, the rules are broken down into ‘advised’ and ‘execution only’ sales, neither of which makes any reference to the method of delivery (although execution only typically is transacted without any personal interaction). So, with no one permitted to have direct personal contact due to the pandemic, how can brokers adapt from their traditional face-to-face method of delivery?
In reality, there is nothing different in the process other than the obvious, but regulated firms will still need to consider the following:
Disclosure – Documents such as the Client Agreements and Privacy Notices can be emailed to the client. Where fees are charged these can be acknowledged and consented to, by the client, in a return email and therefore a record kept.
Know Your Client – This key difference in the delivery could be achieved either by a video link or a conversation on the phone. There is always a reluctance to send documents for the client to complete in isolation, as it is difficult to capture soft facts and sense check that the client understands the full purpose and need for full disclosure. However, this could be sent to the client for completion and returned prior to a follow up video or phone call.
Client Verification – Liaise with the lender to understand their stance on the acceptance of electronic verification. Requesting original documents is fraught with danger and asking the client to submit certified copies can be problematic. Electronic verification can be the perfect and simple solution to this matter. You will find details on the FIBA member website of SmartSearch, this being one example of a provider of such a service. Please note if you use a different solution you should carry out your own due diligence on the provider of that service.
Suitability Report – The content of the report will be the same as if the advice was delivered face-to-face. There is no requirement for a report to be signed by the client(s) but if this is your practice, this can be requested by postal or email return.
Submission – Requests for supporting documentation will likely be made in the same way, although potentially delays could arise when documents and signatures are travelling back and forth in the post. Due consideration to the timeline of completion should be notified to the client(s) in advance of the services being provided in order to ensure that service standards meet expectations.
It is important to consider the various data protection implications of homeworking during a pandemic and the Information Commissioners Office (ICO) who regulate this have been at pains to emphasise that data protection should not be a barrier to increasing or different types of homeworking. During a pandemic, staff may work from home more frequently than usual and they can use their own devices or communication equipment – data protection law does not prevent that. You will however need to ensure that the same kinds and levels of security measures you would normally utilise within the office are also in place for the homeworker.
As you may have heard recently, the FCA announced on 17 March in the face of the coronavirus pandemic, it has been forced to postpone its guidance on vulnerable clients as it sheds all "non-critical" work in an attempt to allow firms in the financial services sector to focus on "supporting their customers during this difficult period". Despite Chancellor Rishi Sunak’s confirmation that anyone struggling as a result of the coronavirus outbreak will be able to take a three-month mortgage repayment holiday, it is very probable that some of your clients will be affected financially by Covid-19 and may find themselves in a vulnerable mortgage re-payment position. It will therefore be vital that all firms (despite the postponement of this thematic work by the FCA) continue to be vigilant when spotting and dealing with vulnerability and to continue to “do the right thing” at all times.
Finally, we would suggest that any engagements with clients regarding payment holidays make clear the fact that they should do everything possible to continue making repayments; if they can afford to pay, they should.
If the current situation puts pressure on a client’s affordability, our current understanding is the vast majority of lenders will treat each case on its own merits and your client should be proactive about contacting the lender as early as possible before difficulty arises. It is also imperative that clarity is sought on whether individual credit scores will be impacted by any payment holiday arrangement so that an “informed decision” can be made by the client(s).
So whilst I started with Keep Calm and Carry On as a reference point, there is without doubt much to consider in what is a particularly strange period in our history, I believe that there are restrictions that can be overcome and in the true spirit of this island nation shown in times of trouble, I also believe that there is opportunity to be grasped by brokers through a new low interest rate and the potential for discussion with your clients around many matters – and my guess is protection could be high on the list of many.