STAGE 4 RECOMMENDATION AND NEXT STEPS. High level summary

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1 High level summary

2 Key outcomes of this stage The client understands: - the implications of our recommendation regarding particular mortgage features, both now, in the future and with interest rate movements - the costs associated with the mortgage and the impact of adding any of these to the mortgage - the next steps and timescales including any administration needed e.g. underwriting and valuation - how and who they should contact for help or support throughout the solution lifecycle - the ongoing service they can expect from their adviser You as the adviser have produced a Mortgage Suitability Report to confirm the following: - The final recommendation, the risks, and how it meets the needs and circumstances of the customer - Affordability has been evidenced - Why any suitable alternative products were discounted - The possible disadvantages of the recommendation - Confirmation that protection has been discussed Summary of key learning points Recommendation and Next Steps : - There are agenda templates to help your client s understanding of the process - Checking understanding is vital at each stage - The Authority to Proceed document helps capture their consent - Check that the client has received the appropriate factsheet to help their understanding - Stating other solutions that you considered but dismissed enhances credibility - Explaining areas that may not go as planned helps manage expectations and protect your fee and credibility - The KFI and Mortgage Suitability Report are key aides to client understanding - Agreeing the style and frequency of your on- going relationship is vital

3 Detailed advice process Method: Face to Face Phone Must be completed but could be done at a different stage Manual suitability template not Trigold template Agree meeting date Send Meeting Pack in advance Follow appointment agenda 4.3 Agree next steps Discuss recs with and actions (& Complete Create Mortgage Client UTP? Complete AIP Send to Client review date if application Suitability Report 1.3 applicable) YES Client Agrees to Meeting Method: Post KFI Agenda Complete UTP Process Provider websites Upload ATP

4 Advice standards and guidance We will cover in this section: Presentation meeting agenda (2nd Meeting) Key Facts Illustration (KFI) Record keeping for interest-only mortgages When should I give the client a KFI? Source and accuracy of the KFI Disclosure of procuration and other fees Costs and Charges Next Steps Ongoing Service Presentation meeting agenda (2nd Meeting) The client needs to fully understand your recommendation, how it fits with their needs and objectives and be aware of the benefits and risks. Your presentation must be factually correct and not misleading. You must present your recommendation and articulate your solution in plain language to ensure the client is fully aware of proposal, the benefits and associated risks. You must produce an agenda for the content of the presentation meeting with the client at outset. We have formatted two which you can use, including a short version. You must explain to what extent the solution meets their needs, any shortfalls that remain and when and/or how these should be addressed. You must have appropriate research and knowledge to deal with any challenges or clarification required by client You must not present solutions for any areas of advice for which you are not authorised. You must follow a meeting framework that should cover the following: Reconfirming your objectives Of today s meeting Any changes since we spoke? your objectives, budget, circumstances Your solution Checking perceived wants versus needs What we based our research on Other options that we decided not included Checking understanding Impact of rate changes and your budget Term of loan, any initial periods, and tie-ins Ensuring you understand all associated fees and costs Authority to proceed Completing the application documents Clarifying the fees Cancellation rights

5 What we can expect from each other? The mortgage journey from here (for us and you) Managing expectations about things that might not go to plan The style and frequency on our ongoing service Testimonials There is no specific order in which the above that must be adhered to, however all of the above steps should be completed. If you are conducting the meeting over the telephone, rather than face to face, you must talk through key facts illustrations highlighting the interest rate, term and monthly repayments etc., link to the client s needs and circumstances. You can obtain high level agreement to proceed during this call; however, you must send all the relevant documentation to the client so the client has the opportunity to review the documentation before any application has been submitted Key Facts Illustration (KFI) When you recommend, or provide personalised information about, a specific mortgage product, for a client who is eligible to apply for that mortgage, you must provide a KFI. The purpose of the KFI is to make sure that, before your client applies for a mortgage, they are given information which makes clear: the features of the mortgage; the price they will have to pay for the mortgage, to help assess whether it is affordable; and any linked deposits or borrowing (offsets etc), and any tied products. The FCA requires the KFI to follow a prescribed content and format, so that it s easier for clients to shop around by comparing different products and lenders. If a client reads the KFI, he/she should be equipped with all the information he needs about a particular mortgage product, before making a decision about whether to purchase. You must explain the content of the KFI, this means going through the main points raised in each section. In addition, the client must understand the importance of reading and understanding the KFI to your client. Record keeping for interest-only mortgages For regulated mortgage contracts you must provide the KFI on a repayment (i.e. capital and interest) basis. If you are recommending an interest-only quote, a Repayment KFI must be produced also required so that the client can see the differences and you can evidence that this option was discussed. You must record clearly the client s plans for repaying the debt at the end of the term and this is confirmed in the Mortgage Suitability Report. You must always issue two KFIs for the mortgage product you have chosen the extra KFI should be on a repayment basis in order to illustrate the difference in costs (monthly repayments and total amount of interest over the term). You need to upload a copy of the repayment KFI into Officeweb to demonstrate you have given this to the client. It is unlikely that a lender will accept an application for an interest only mortgage on the grounds of affordability there will be cases where it may be reasonable, but you need to document everything. Your Mortgage Suitability Report to the client must include full details on how the client intends to repay the interest only loan at the end of the term. Full risk warnings must be included in the letter confirming that the client understands the risk associated with this type of mortgage.

6 When should I give the client a KFI? You must give your client a KFI: when recommending a specific contract, at the time of the recommendation or when providing written information specific to the amount the client wants to borrow on a particular mortgage (i.e. whenever you provide a mortgage quote) or if you have provided the relevant advice or information by telephone, you must send a KFI within 5 business days of the call. You must issue a KFI without unnecessary delay, if the client requests the information. In addition, you must always give your client a KFI before any application form is completed because you cannot submit an application to a lender without the client having a KFI first. Source and accuracy of the KFI At Intrinsic, we require you to get the KFI from either the lender or Trigold. The KFI must be accurate within 1 or 1% of the total cost of the loan over the anticipated term. The responsibility for accuracy lies with the regulated entity which produces it. So, if you use a lender-generated KFI, it is the lender who is responsible. If you use Trigold, you are responsible for the accuracy of the KFI, however, Trigold have developed a method of identifying verified KFIs so their accuracy can be relied upon. Disclosure of procuration and other fees If you charge your client a fee for advice, or for arranging the mortgage, you must insert this in Section 8 of the KFI (under other fees ). Section 13 of the KFI, Using a mortgage intermediary, must include the following: A clear statement of the amount paid by the mortgage lender to Intrinsic, or to any third parties. The name of the mortgage lender who will make the payment, the name of the mortgage intermediary and the names of any third parties who will be paid. If the total sum paid by the lender is 250 or less, you don t need to disclose the exact sum on the KFI, unless the client asks for the figure. Instead, you can state that the amount of the payment is no more than 250. If the lender makes no payment at all, you can state this on the KFI. A copy of the KFI must be kept indefinitely, as part of the record of the advice or information provided and Workbench caters for this. The KFI should be dated before the date of the application. Costs and Charges There are a number of different costs and charges associated with taking out mortgage. Some charges are payable at outset, some on surrender of the loan. Most lenders offer the facility to add some of these costs to the loan, others offer benefits such as free legal advice, free valuation etc. The costs and charges must be discussed with the client and their preferences and affordability taken into account when sourcing an appropriate product from the final shortlist of suitable products. The final KFI must replay any costs and charges associated with the loan and how these are to be paid.

7 You must explain clearly to the client what fees have been added to the loan and the impact of these fees on their monthly payment, the size of their loan, the interest on the fees for the term of the mortgage and the impact of any rate rises. Your results from sourcing system should be sorted in an appropriate way, i.e., cheapest first by rate, monthly payment or Total to Pay. Your source results should also list the filters used to obtain the results. If you use Trigold, best practise would be as follows: Term This should match the deal period that you are sourcing or the period that the client intends to keep the mortgage (if different). Then select: Calculate Early Repayment Charge No Include Remaining Loan Balance No Client Conveyancing Costs No Arrangement / Booking Fees Yes. (If these are not included you should confirm why as they can make a significant difference to the overall costs over short term deals.) Other Fees Yes - unless you have agreed at this point not to Next Steps You must explain the remaining steps of the mortgage process and any actions that the client needs to take. This will include explaining timescales and actions required by the client or you or, any administration needed e.g. underwriting or valuation. Ongoing Service You must agree with your client what ongoing service they require from you. This can be a meeting to review the mortgage when the current deal comes to an end, yearly reviews, or more regular reviews, e.g. a client with a portfolio of Buy To Let properties, or a first time buyer that wants hand holding if and when rates change. The client can also choose to have no further contact.

8 Case checking criteria Outcome The client will have received the appropriate supporting documentation How to evidence the outcome Produce a Mortgage suitability report to confirm the final recommendation, the risks, and how it meets the needs and wants of the customer: Why any suitable products were discounted Confirmation that protection has been discussed The adviser has explained and the customer understands the implications of our recommendation regarding particular mortgage features, both now, and in the future and with interest rate movements The adviser has explained and the customer understands the costs associated with the mortgage and the impact of adding any of these to the mortgage The adviser has explained and the customer understands the next steps and timescales including any administration needed e.g. underwriting, valuation The adviser has explained and the customer understands the expiry date of any rates Vulnerable clients have been provided with the appropriate opportunity and assistance to understand the recommendation The Mortgage suitability report should include descriptions of how the product links to agreed needs and what benefit this offers. Signed Authority to Proceed uploaded along with all other relevant documentation e.g. KFI, Mortgage suitability letter Guide to our Mortgage and protection services brochure issued. Fact sheet issued. The file demonstrates discussions that were had and the mortgage suitability letter explains how the product is suitable and meets the clients needs and objectives KFI on file Fact sheet issued Mortgage suitability report discusses the impact of adding the fee s to the loan Guide to Mortgages issued. Fact sheet issued

9 Case checking criteria How to record the presentation appointment Best practise only: Upload the presentation appointment document used (Framework) Attach any relevant documents