Boy, has the Sub prime market had a lot of attention recently. Many have concluded that the stock market falls of last week are directly linked to some cavalier lending in the US market while over here many lenders have withdrawn from this sector. In addition the FSA has been increasing its attention on the Sub-prime market; only last week two more brokers were fined because of mortgage advice failings while another was censored.
In essence the issues on both sides of the market are linked to poor advice and loan underwriting and an overwhelming belief that the good days would go on regardless. I would have thought that the lessons of the early nineties would have scuppered such optimistic delusions. Selling the wrong mortgage product to the wrong people, without the proper checks such as affordability can only have one long term result .
AT8 have long held the opinion that technology can help advisers “know your client” and in doing so avoid the problems we are witnessing today. This goes beyond moving the current sales processes to an electronic form (although this in itself is a big step forward) but looks at changing the sales process itself.
For example AT8 have been working with a new company Verifi ( www.verifi-solutions.co.uk ) who look at bringing forward the client assessment and credit checking in the sales process so the adviser can recommend the right products at the start of the process. I was pleased to see in the latest FSA research they state, as an example of good practice “A firm obtains credit references on all occasions to assess the credit status of applicants” . To achieve this though needs a clear and simple systematic approach and I believe Verifi have cracked this. In addition the Verifi approach includes calculators to ensure checks such as affordability can be easily done and consolidation of debt is not inappropriate.
The subprime and Self certification markets are important parts of the UK financial services industry and it is important that they continue to thrive and grow. However there is a real danger of a backlash as a response to the current industry happenings. To avoid this it is essential that the industry takes best practice sales approaches onboard and does so quickly.
