Why mandatory advice for first-time buyers is a consumer protection issue, not an adviser issue

Back in September and October last year, after the Financial Conduct Authority (FCA) confirmed the removal of the mortgage advice interaction trigger, a number of industry commentators – including yours truly – quite rightly started asking whether this was the right call. Was this the thin end of the wedge? After all, this was effectively directing existing borrowers away from advice. If you were a first-time buyer who had gone execution-only at the start of the mortgage journey, there is now a very good chance that you may never secure advice. In our current world – indeed, in any world – that feels like a huge risk and totally at odds with the delivery of positive consumer outcomes.

From this, it is not surprising that calls began to grow for mandatory mortgage advice for first-time buyers.

A debate/cause that has not been grasped
At the time, I felt this was a debate that had real potential to grow momentum, because the more you looked at the regulatory direction of travel, the more difficult it became to ignore one very simple question: are we really comfortable with first-time buyers taking execution-only mortgage journeys?

That question has not gone away. In fact, I would argue it has become even more important. Over recent months at Paradigm, we have spoken to lenders, advisers, networks, trade bodies and providers about this issue, and there is clearly a growing recognition that first-time buyers are uniquely exposed to poor outcomes if they attempt to navigate the mortgage process without structured, regulated advice.

That is why Paradigm has now published a discussion paper on mandatory mortgage advice for first-time buyers, and it’s why we are asking the industry to support the debate publicly.

To be clear, this is not an attack on lenders, banks, technology, or digital journeys, because all those things absolutely have a role to play within a modern mortgage market. Nor is this about manufacturing work for advisers.

This is about positive consumer outcomes – the central tenet of Consumer Duty, we should point out – and whether the current framework genuinely delivers these for first-timers, who are often making the single biggest financial commitment of their lives.

First-time buyers are not typical consumers
One of the key points within our paper is that first-time buyers are fundamentally different from many other borrowers. They are usually dealing with long-term financial commitments for the first time, often under significant emotional pressure, while trying to interpret huge amounts of information from lenders, websites, social media, family members and friends, all while attempting to secure a property in what can still be a highly competitive market.

At the same time, many are stretching affordability, dealing with higher loan-to-value (LTV) borrowing, navigating changing interest rate expectations and trying to understand complex product structures they have never encountered before. And all within an economic and wider global environment that would confuse even the most informed individual. That combination has the potential to create a very obvious risk of foreseeable harm.

Under Consumer Duty, firms are supposed to identify and mitigate foreseeable harm, particularly where such potential vulnerabilities exist. The difficulty I have is reconciling that expectation with a market that appears increasingly comfortable allowing first-time buyers to self-diagnose whether they need advice in the first place.

Execution-only does not just impact the mortgage
One of the biggest concerns for me is that this debate is often framed far too narrowly around mortgage product selection. Of course, choosing the right mortgage matters enormously, but advice for first-time buyers should never simply be about product sourcing.

The reality is that the home buying process is often the first moment in a consumer’s life where they seriously engage with broader financial planning issues, particularly protection, but also many others. An adviser is, to my mind, absolutely crucial to first-timers moving down the right path at the outset.

Take protection as a key example. The FCA’s own Pure Protection Market Study highlighted significant protection gaps across the UK population and acknowledged that many consumers simply do not have these conversations unless there is a structured advice process in place.

That matters because if a first-time buyer goes execution-only, there is a real risk that wider needs and vulnerabilities are simply never explored properly. What happens if illness impacts income? What happens if one applicant dies? What happens if affordability changes dramatically in the future? What support structures are actually in place? These are not side conversations. They are fundamental parts of responsible borrowing and protecting the client through the rest of their lives.

This should not be viewed as radical
Some will inevitably argue that mandatory advice represents overreach or unnecessary regulation, but I do not see it that way at all. In fact, many parts of the market already recognise the risks involved because there are lenders today who insist borrowers receive advice before accessing certain high-LTV products.

We have also seen the FCA introduce mandatory advice requirements elsewhere in financial services where the stakes are high and the risk of consumer detriment is significant, particularly within the pension transfer market.

The principle itself is, therefore, already well-established. What we are proposing is not the removal of consumer choice. It is the introduction of a minimum safeguard for a consumer group that is potentially much more vulnerable to poor outcomes.

This debate now needs wider support
One thing I have learned over many years in this industry is that meaningful regulatory change rarely happens unless there is broad and visible industry support behind it. That is why we have launched the paper publicly, why we are asking stakeholders to sign the pledge, and why we want this conversation to move beyond closed-door discussions.

We already have support from across different parts of the market, and I suspect there are many more individuals and firms who quietly agree with the principle involved here.

The question now is whether the industry is prepared to say publicly that first-time buyers deserve a consistent minimum standard of regulated advice when making one of the most important financial decisions of their lives. Personally, I believe they do.