In this day and age, and given the significant campaigns that have been fought recently, the word ‘misselling’ has a particularly powerful draw.
I was therefore rather perturbed to hear that some are claiming the provision of limited company buy-to-let mortgage advice as a potential ‘misselling’ scandal, the evidence purportedly being that limited company products tend to cost more and some advisers are perceived to be ‘pushing clients’ into limited company options.
There’s no need to go over the potential benefits that come with purchasing or housing properties within a limited company structure in light of, in particular, the changes to mortgage interest tax relief – as they will be widely known.
However, we are in danger of damaging the sector and advice profession by suggesting clients could have a potential ‘misselling’ claim against their adviser if they were recommended a limited company product, rather than an individual landlord one.
The fact is that advisers should only be involved in the advice decision and the choice of the client to choose a limited company structure or not should have been made before this, ideally with the help of their tax adviser/accountant.
We have said many times that advisers should not be drawn into providing tax advice and given that some are suggesting advisers are making this decision for clients, then it’s even more imperative to document that this wasn’t the case and that it’s mortgage, rather than tax, advice that’s being provided.
For what it’s worth, I’m not aware of any advisers pushing clients down the limited company route, and there is no evidence that products are being ‘mis-sold’ on this basis. Indeed, I would expect advisers to point out that limited company products can be more expensive, however (as mentioned) the client is the one who wants to purchase/remortgage/transfer their property through that vehicle, not the adviser choosing it for them.
If you are not making this clear to clients, then you certainly need to start doing so. Make sure they have made that decision before you provide the advice and they are under no illusions about what you are there to do. The recommendation follows their choice of vehicle or otherwise – don’t let the tail wag the dog on this one.
Bob Young is chief executive Officer of Fleet Mortgages