FSA - the Blame Game - What if they remove commission payments for mortgage advice?

Mrs_Bumble

I am wondering how people feel about the article last week in relation to the FSA looking at the possibility of aboloshing commission/procuration fee's being paid to mortgage brokers.

I am a mortgage broker and operate my own small company, for me the thing I enjoy most is working with clients and helping them, customer service is of the very highest importance and the people that come to me I care about (sorry that sounds a bit gushy!) But I genuinely enjoy helping people and so for me this latest move by the FSA is a very worrying one because if it happens it will mean that to stay in business every broker/IFA will have to charge a fee, which will potentially mean that more clients go direct to the lender where for the most part they will be offered a non-advised sale and be subjected to every cross sale approach.

Be interested to hear your views?

Dan_1976

I think it will mean that the crap brokers while be pushed out as people will not pay for poor advice and the good brokers will stay and be paid for advice!

However I think brokers using this article to sell them selves may increase!

koexelek

Mrs_Bumble wrote: »

for me this latest move by the FSA is a very worrying one because if it happens it will mean that to stay in business every broker/IFA will have to charge a fee, which will potentially mean that more clients go direct to the lender where for the most part they will be offered a non-advised sale and be subjected to every cross sale approach.

Be interested to hear your views?

It concerns me too.

It will be difficult to justify charging a client a fee in the current climate, as dual pricing means that the products they can get direct from lenders are often better than we can offer at the moment anyway.

I work the same way as you. Always give the best advice to my clients ( with no hidden agenda), am a whole of market broker and don't charge a fee.

The sad fact is though, that the FSA want the likes of you and I crushed.

You and I know that borrowers who go direct to the lender are not going to get advice and will be blackmailed into takling expensively cross sold products, but the person in the streets will just look at it that they are saving themselves a fee by going to them instead of us.

Mrs_Bumble

Agreed, it makes me very sad! Just wish there was a voice out there that could echo the warning bell and make people sit up and query. Will be too late before anyone realises.

Dan_1976

I am afraid this was always going to happen. It gets rid of a load of hassle and pressure for the FSA and saves the lenders money. They dont want to lend as much and would rather keep staff in branches and call centres working.

The client wil suffer as it always is, the toothless FSA and the greedy lenders will win.

Then again, dispite my cheeky first post, I do believe that a good broker will be able to charge for a fee, but some clients just will not pay and will go direct.

koexelek

Dan_1976 wrote: »

I am afraid this was always going to happen. It gets rid of a load of hassle and pressure for the FSA and saves the lenders money. They dont want to lend as much and would rather keep staff in branches and call centres working.

The client wil suffer as it always is, the toothless FSA and the greedy lenders will win.

Then again, dispite my cheeky first post, I do believe that a good broker will be able to charge for a fee, but some clients just will not pay and will go direct.

If a case is a bit difficult, I think the client will see value in paying a broker a fee to set it up, but if it is dead straightforward, what is the point ?

The only way a broker can really fight back is on the cross sales.

If a client of mind is going direct to a lender, I tell them to accept every protection policy the lender tries to sell them ( failure to do so, could result in the mortgage being declined... I used to work for a lender, so I know this to be true )... BUT when they have the mortage offer, come back to me and I'll be able to do the protection much cheaper.

The bottom line, is that the FSA do not want the average working person to have independent financial advice. They want them dealing with the banks on an execution only, non advised basis.

dunstonh

Personally, I think its daft unless the lenders improve the terms of the mortgage. Typically, deals through brokers have been better (ignoring current issues with some that are trying to reduce their distribution). Plus, the banks pay bonuses etc to their own staff for selling their own mortgages. So, if they dont have to pay the broker a commission but can still pay their own staff yet offer the same terms then that is wrong.

If the deals from the banks were factory gate priced (as will be the case for all investment class business from 2012) then I think that is fine.

TEDDYRUKSPIN

Actually I believe the FSA have got this right. To be honest, and from above, the amount of companies paying out commission has reduced alot. People actually believe advisors get paid alot of commission but the opposite is true.

Another reason for the FSA decision is simple. I as an advisor can not see how people who provide a commission based advice can actually be whole of market?

By allowing an one off fee approach, the client will be truly obtaining a true service.

Concerns of people going directly will not be an issue. As for Bumble comments of obtaining a 'NON ADVISED' service, this is getting scrapped anyway. No banks or buildings societies will be able to provide a non-advice approach. The FSA in the last 2 years have clamped down on this due to surprisingly, many companies having an astounishing 60% percentage ratio as non advised sales. Why? To save paper work.

Anyway, this will not be a concern but will be the future.

FSA is actually ready to clamp down on sites like moneysupermarket etc who are providing non-advice services in assurance as well. The only problem is that they have yet to implement this but the year 2012-2013 is ringing to mind.

TEDDYRUKSPIN

dunstonh wrote: »

Personally, I think its daft unless the lenders improve the terms of the mortgage. Typically, deals through brokers have been better (ignoring current issues with some that are trying to reduce their distribution). Plus, the banks pay bonuses etc to their own staff for selling their own mortgages. So, if they dont have to pay the broker a commission but can still pay their own staff yet offer the same terms then that is wrong.

If the deals from the banks were factory gate priced (as will be the case for all investment class business from 2012) then I think that is fine.

I understand what you mean, put a new tier system will soon be in place by each bank/building society. Unfortunately many of these financial institutions are tied or multi-tied.

I do believe the FSA will try this anyway. In the business for so long, they try this on and off. They will test it, and disagree, and pull it. 10 years later they will bring it back again.

This is the future. The internet has actually taking alot of the business and companies know this. Too many internet sites have resulted in non-advice sales.

Off the mark. Fee paying service will be the future. Too many companies have been physically shafted. How applications have you carried out which have failed and you don't get paid? This year alone, this has happened alot.

That is why woolwich etc are charging a non-refundable administration charge.

One way to get around the FSA problem, is for all IFA's still to have both services but charge an administration fee.

Mrs_Bumble

Interesting comments, thanks.

I hope you are right Teddyrukspin, that the lenders are going to move back to an advised sale. I worked for a lender that went from advised to non advised and so I am fairly cyncical.

Incidently I did work purely on a commission only, with the option to pay a fee, whole of market advice for mortgages, because as you point out the amount of commission paid has been cut then I have now moved to a set fee offset by any commission received.

I personally just feel that as an industry we have a pretty bad reputation, admittedly there are some out there that have behaved in a shocking fashion and like Dan says above I think it will be better for the industry when they have all gone, I just wonder how the profile and respect of the industry can be improved in the public eye when the likes of CML and FSA seem to think that we are the scurge of the system when hey those lenders are there!

I guess we will see?

Dan_1976

If I was to start again now as a broker a: I would slap myself around the face or b: work on a fee basis, I do not see a future for fee free, or at least with the amount of fee free brokers out there.