Why do people use mortgage brokers?

[Deleted User]

baileysbattlebus

My daughter and her partner on the recommendation of her partner's parents used a financial advisor for their first mortgage. He is a financial advisor rather than a mortgage broker, her partner's parents had used him for years and so had lots of their friends and their children. So they went with him, rather than look themselves. Or let us help them look for products. They weren't a special case - they were employed in stable jobs, where her partners parents had been self employed all of their lives.

He got them a mortgage with the Nationwide (bog standard as advertised on their website) plus arranged all of their insurance products for them.

I had a look through their paperwork after the event and he had earned over £3k for the policies he had arranged plus he had charged them a fee.

I told them to change their insurance products to much cheaper products, contents, building insurance, life insurance, illness cover. Which at the end of the first year they did, cancelling everything he had set up. They found their new products on the internet with large reputable companies and the Nationwide themselves provided them with very reasonable building & contents insurance.

For instance they were paying twice as much as we were for life insurance cover, they are mid 20's, we are mid 50's. Now if that wasn't arranged for his financial benefit, then I'll eat my hat.

Their building & contents insurance was also a lot more than ours - we have a 5 bed house theirs is a 2 bed.

He didn't explain to them how much commission he would be earning from them etc. Although it was itemised on the documents he sent them - which they never read themselves - but I did.

I'm not knocking financial advisors, as I know one who takes his fee out of the commission, and if the commision is less than the fee then you pay the difference, if it is more than the fee then you get the difference, Or if you want you can pay the fee and you get the commisson, the choice is yours - which is much fairer than the way the guy who "helped" my daughter and her partner worked, although the guy I know charges higher fees.

Would I use a financial advisor or mortgage broker - yes I would if I had an unusual property to find a mortgage for, or if I wasn't "standard" in terms of job or employment status.

dunstonh

For instance they were paying twice as much as we were for life insurance cover, they are mid 20's, we are mid 50's. Now if that wasn't arranged for his financial benefit, then I'll eat my hat.

A difference of that size is not like for like. If they had used a tied agent then its possible but an IFA is usually only a few more pounds if done on commission basis and actually usually cheaper than internet if done on fee basis. The minute you say half and an IFA is involved, you know the cover is not the same.

Now if that wasn't arranged for his financial benefit, then I'll eat my hat

He has commited fraud then. Complain about it.

I'm not knocking financial advisors, as I know one who takes his fee out of the commission, and if the commision is less than the fee then you pay the difference, if it is more than the fee then you get the difference, Or if you want you can pay the fee and you get the commisson, the choice is yours - which is much fairer than the way the guy who "helped" my daughter and her partner worked, although the guy I know charges higher fees.

Its the way many IFAs work. From 2012 it will be compulsary for IFAs to work that way. Tied agents will still be able to run on commission though. Although most IFAs dont do mortgages any more. They use mortgage advisers.

Personally, I think long term, the mortgage route is heading the way of home insurance and car insurance; online.

However, a recent article did highlight research that 74% of first time buyers used mortgage brokers. So, there is still room for some to survive. Just as you still see some insurance brokers surviving as the internet likes to cherry pick. If you dont fall in that niche, the internet can spit you out and thats where the brokers can do their stuff.

As mentioned on the duplicate thread that is running in the mortgage section, the Times article is highly flawed as they didnt use any indpendent mortgage advisers yet were looking for independent advice. They used commision only firms, whole of market firms (that state they will only use commission paying deals) and limited panel firms in their research. You cannot expect an independent level of service if you dont use an independent company.

macaque_2

olly300 wrote: »

Wrong forum.

I agreed with your comment and reposted this on the 'mortgages and endowments' forum.

Mortgage advisors denounced the article and lined up to throw tomatoes at me (fair enough). The thread has been deleted from the forum altogether (not shifted). That concerns me. Are mortgage advisors behind this?

chucky

macaque wrote: »

I agreed with your comment and reposted this on the 'mortgages and endowments' forum.

Mortgage advisors denounced the article and lined up to throw tomatoes at me (fair enough). The thread has been deleted from the forum altogether (not shifted). That concerns me. Are mortgage advisors behind this?

did you not tell them that you preferred bananas?

ps. you're the 2nd best conspiracy theorist that i know

Conrad

I used to have regular heated discussions with other MA's where I argued we should not be peddling insurance and that people are more than capable of chosing thier own or consulting a dedicated IFA specialist.

There is a clear connection between 'fee free' brokers and insurance sales.

I revel in specialist complex cases, be it residential or commercial. I run my own high street business and although I don't enjoy anything like the status of a Doctor, I do have real demand for my expertise and love the fact no one tells me what to do.

I'd sooner be a low status mortgage broker with my own shop, than say a high status fund manager wage slave that can be made redundant at the stroke of a pen - almost as if they were adding no value and serve no purpose in life.

Straight forward people have no need of mortgage brokers.

Ian_Griffiths_Halifax

Conrad wrote: »

Straight forward people have no need of mortgage brokers.

The majority of your post makes sense Conrad, but this bit troubles me.

Somebody could have a straight forward case, but may need help and advice because they don't know what they are doing. After a couple of time of using a Mortgage Broker they may then have the experience, time and confidence to do it them selves.

chucky

i always use a broker, always one of two - i'm self employed and trust them to point me to the best deal that suits my needs. i also do my own research as a peice of mind to make sure that i'm happy with what i'm getting.

they're always open with commissions and even tell me what they earn back from the lenders. they've even done work for me free as they were getting a good commission for a couple of transactions.

Conrad

Ian_Griffiths_Halifax wrote: »

The majority of your post makes sense Conrad, but this bit troubles me.

Somebody could have a straight forward case, but may need help and advice because they don't know what they are doing. After a couple of time of using a Mortgage Broker they may then have the experience, time and confidence to do it them selves.

Ah, but that pre-supposes the broker is in a position to give sound advice.
Whilst your good self would clearly be in such a position, there are truck loads of grunts that have merely been on a few weeks training, and more likely to read the Sun than the Times, and these 'sales people', often straight out of college are definitely not qualified to give such advice.

We wouldn't for example expect to find a chef that had done nothing more than say 2 months training, in posession of a Michelin Star.
We wouldn't allow our loved ones to go under the knife where the 'Surgeon' had merely attended a weeks training!

Ian, like me you must attent the odd seminar where these shiny booted, Sun reading, chain smoking types are present.

lostinrates

Conrad wrote: »

Ah, but that pre-supposes the broker is in a position to give sound advice.
Whilst your good self would clearly be in such a position, there are truck loads of grunts that have merely been on a few weeks training, and more likely to read the Sun than the Times, and these 'sales people', often straight out of college are definitely not qualified to give such advice.

We wouldn't for example expect to find a chef that had done nothing more than say 2 months training, in posession of a Michelin Star.
We wouldn't allow our loved ones to go under the knife where the 'Surgeon' had merely attended a weeks training!

Ian, like me you must attent the odd seminar where these shiny booted, Sun reading, chain smoking types are present.

May I ask then what you recommend people look for in a broker?