"Brokers who work with introducers also have to be mindful that there are some circumstances where the introducer needs to have permission just to introduce."
We are often approached by brokers who believe they are regulated by the FCA because they have a Consumer Credit permission with them but do not always realise that this means they are not regulated to do residential mortgages. The biggest misconception however is around buy-to-let mortgages.
Only consumer buy-to-let, covering accidental landlords, is actually regulated by the FCA, and you need separate permission for this. Business buy-to-let is not regulated by the FCA at all!
The Consumer Credit permission for mortgage advisers is required if they would like to provide commercial mortgage advice to individuals, but if the loan is to a limited company then this again falls outside of the FCA regulation.
This effectively means that someone without a mortgage qualification, or without having obtained FCA regulation, can actually provide mortgage advice to the unknowing consumer. The risk of this is that if something goes wrong, the consumer cannot turn to the regulator in support of their complaint, although they could still seek recourse via the courts.
However, many lenders in the buy-to-let market place have chosen to deal only with brokers that are regulated by the FCA, even though they are not required by the regulations to insist on this. This has meant that the standards of buy-to-let advice is normally of a similar quality to that a consumer can expect from a residential mortgage adviser.
Commercial lenders are starting to follow the same principles and some (but not all) buy-to-let bridge lenders insist on the same. This is important, otherwise it could mean a consumer, borrowing a substantial sum of money, is relying on advice from a broker who has not evidenced their knowledge or ability in the market place.
Recognising this shortcoming in the market place, networks of advisers like Connect, are improving standards through training. Connect recently launched an Academy to provide a standard of training and a level of support that non-regulated brokers or those looking to return to the market can attend and prove their worthiness to provide advice in these areas not covered by the FCA. Only those advisers who demonstrate the required level of skill can join Connect and come under its FCA regulation.
Brokers who work with introducers also have to be mindful that there are some circumstances where the introducer needs to have permission just to introduce. For example, an introducer needs to be regulated by the FCA to introduce clients with insurance needs, and the introducer also needs to have Consumer Credit permissions from the FCA to introduce clients who are looking for a commercial mortgage that is to be arranged in their personal name.
It is important that brokers check this before working with an introducer so as not themselves to fall foul of the regulations by accepting these introductions. We have seen circumstances where clients have paid substantial sums to non-regulated introducers. If the deal has gone wrong, we have seen the adviser who took the introduction having to deal with unsatisfied clients who have lost money to a now absence introducer.
