UK regulator to investigate ‘misaligned incentives’ in broker market

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UK regulator to investigate ‘misaligned incentives’ in broker market

James Mitchell 3 minute read

The Financial Conduct Authority (FCA) has launched a market study into competition in the mortgage sector and the relationships between banks and brokers.

Announced this week, the market study will explore two questions:

• At each stage of the consumer journey, do the available tools (including advice) help mortgage consumers make effective decisions?

• Do commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers?

The FCA will also review whether there are opportunities for better technological solutions to problems we identify, including greater use of digital channels to deliver information or advice.


The FCA announced the study and its focus in May, having gathered feedback on competition in the mortgage sector. During the study, the FCA will be engaging with a wide range of market participants about their experiences. In a terms of reference document published today, the FCA provides further detail on the scope and procedures of the market study.

The FCA aims to publish an interim report in summer 2017 with a final report expected in early 2018.

As a mortgage is likely to be the biggest financial commitment most people make in their lifetime, we’re keen to ensure that competition in the mortgage sector is healthy and working to the benefit of consumers, FCA executive director of strategy and competition Christopher Woolard said. 

The news comes as ASIC prepares to hand the federal government the findings of its own review into broker remuneration and consumer outcomes. 

At the FBAA 2016 National Industry Conference last month, ASIC's group senior manager, credit, Chris Green said determining the effect of current commission structures on consumer outcomes had been a tough job.

“It’s been quite an extensive process. Our main objective in the year we've been undertaking this [has been] to get a nice clear picture of what is happening in the industry, so we've collected information about the broking channel but also the proprietary channel from the lenders, so there is comparing and contrasting where that needs to happen.”

Mr Green said that the information requested through the lenders and “other people in the chain” was “very extensive” and that the commission had “tried to make that match up as best [it] could to information that was being collected for other purposes as well, so it wasn’t too much of an impost on industry”.

[Related: ASIC: Commission review an 'impost to industry']

UK regulator to investigate ‘misaligned incentives’ in broker market
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James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.


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