Is 2014 the year of outsourcing? Demonstrating compliance in a post-MMR market

SPECIAL FEATURE: Chris Thompson, CEO of Vertex Financial Services

Amy Loddington
17th January 2014
Is 2014 the year of outsourcing? Demonstrating compliance in a post-MMR market

In 2014, lenders will be under greater pressure to ensure and prove that the appropriate mortgage advice has been given to clients, they comply with treating customers fairly principles and the necessary qualifications are in place. Just how are they going to do this effectively on an ongoing and continuously updated basis?

In many cases, outsourced skills will be necessary to ensure companies can offer a fully compliant advisory service. In others, technology will be needed so that companies can themselves streamline processes and demonstrate compliance in a simple and effective way.

Here Chris Thompson, CEO at Vertex Financial Services, discusses the challenges faced by lenders as they move into the post-MMR market and how these can be overcome through technology and forward planning.

There are a number of challenges that lenders can expect to experience as MMR takes hold in April 2014. Firstly, the regulator will be looking to lenders to demonstrate that they are complying with new requirements. This has potential to increase the administrative burden on service providers, restricting their ability to focus on delivering effective customer service and so impacting the customer experience. We anticipate that many will look to technology to ease this process.

Loan origination and administration systems will play a key role in improving the customer journey. Such platforms can be highly automated to drive efficiencies and regulatory adherence across all types of business including prime, near-prime, sub-prime, buy-to-let and lifetime mortgages.

In order to meet quality assurance checks and be accountable to the FCA, it is important that each customer case is traceable throughout the advice process and clear record keeping is therefore paramount. While some customers have the choice between execution-only or advised channels at the loan origination stage, others will take the advised route. Technology can allow a lender to see whether the customer has previously accessed one of these services, which can bring useful insight to a business. For example, if a lender can see that advice is frequently rejected by customers, it may wish to put a further focus on skill development within the organisation to ensure that as many cases as possible are converted into advised sales.

An important aspect of any loan origination system is the ability to generate suitability reports reflecting the customer’s individual mortgage needs. Systems exist that allow this report to be highly personalised to ensure the best advice is being given. Efficiencies can also be made at the quality review stage of the process as reports are flagged for third party approval based on each adviser’s competency record.

A second challenge faced by lenders is the requirement for greater training and staff development. As the non-advised sales channel is replaced by an execution-only process, every lender will need to ensure its customer-facing employees hold the relevant mortgage qualifications, so training will continue to be an important requirement for 2014. For those lenders who are yet to put training programmes in place, outsourcing business support is a simple and quick solution.

Lenders now operate in a market where the customer voice is louder than ever. The popularity of social media has placed a renewed emphasis on the customer experience and if a brand is to succeed, it needs to uphold its online reputation. The third challenge of 2014 is therefore to simplify and improve the customer experience.

Those who choose to seek mortgage advice will be looking for a time-efficient service. This is particularly true of those who have a lot of industry knowledge, and who are confident about which products they want, but who are unwilling to go execution-only because of the legal rights they would therefore waive. In these cases an effective system that can guide both the adviser and the customer through the loan origination process will help advisers to gather sufficient information in a timely and well structured manner.

Under the MMR, the consumer will benefit from transparent and well informed mortgage advice and those lenders that have plans in place to offer this will reap the benefits throughout the year. The above challenges point towards 2014 being the year of the outsourced service provider as more lenders rely on technology solutions and business process support to deal with the changing regulatory landscape.

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