Using multiple brokers to obtain the best mortgage

AndrewSmith

kenshaz wrote:

Loyalty to an institution can be expensive,for example high street banks, the big five current account customers,always shop around.Comparison is the yardstick.

I agree. When you take this situation and apply it to mortages you have described exactly why a mortgage broker is so important.

Pleasant exchanges a coffee and small talk would not fool me,charges and results would be my guide.

Nobody would expect anyone to be 'fooled' by such things. The days of the 'Pru' man popping in for a cuppa and a chat are long gone. People lead far to busy lives for such idleness and demand relevant information and appropriate contact.

How can personal recommendation be a consideration,we are not talking about a bathroom suite,when workmanship is a concern .The final analogy is how much it costs,and that can best be done by comparison

Ah but we are talking about the provision of a service whereby how your case is handled by the broker and how efficient he/she has been. Therefore personal recommendation is absolutely relevant. At the end of the day I receive (and have done for some years now) the majority of my business via personal recommendation so I guess it must be a consideration. Also if you check these forums to see the number of people who recommend certain brokers you will see demonstrated that personal recomendation is a big consideration.

If you were to receive good service from, for example, a solicitor you would refer that person on to other people to whom you think he could be of benefit. You would most likely want them to reduce their fees to come in line with cheaper solicitors if they were wildly more expensive.

Compare that same scenario to a mortgage broker. If you look at fees free brokers then what the 'advice' costs will not play a part as the broker will be paid a set percentage by the lender on legal completion. This is set by the lender and is not subject to negotiation and will be the same whichever broker is used. The most important thing is that you do not pay it in any way shape or form.

How much it costs? I agree that this is vitally important to compare the monthly costs, lender fees and interest rates but must be alongside the suitability of the product for your circumstances. Again, you have perfectly described one reason for using a broker.

Comparisons? Again that is one of the key roles of a broker, not only to provide comparisons of the interest rates but to also carry out a 'true cost' comparison which takes into account all the fees payable and possible penalties/charges for leaving your current lender. Don't forget that the broker uses Industry exclusive sourcing software that will show every product available, not just those that the lender wants you as a consumer to see. In fact a broker will most likely have access to products that the lender branches will not be able to offer you.

The most important thing though is that you must feel comfortable using the broker you select, if that means approaching more than one then there is nothing wrong with that. I always ask the client if they are approaching more than one source so that we all know where we stand.

Personally I do business with approximately 8 out of every 10 people I have contact with so do not have an issue over retention.

Some good points though Kenshaz well worth further debate and discussion.

TangentMan

AndrewSmith wrote:

True, but remember that a broker is offering the advice from the perspective of many lenders and works on behalf of the client, the large high street lender can only offer advice based on their own product range and underwriting criteria and works on behalf of the bank. Also the broker is then taking on full responsibility for the suitability of the advice given and, as such, the client is protected by the brokers PII.

Actually the broker is working on behalf of themselves, as is the advisor it is the manner of their doing business that is to the beneift of the customer. No one is begrudging people making money, but i think it is somewhat rose tinted to paint a picture of a charitable broker and a dictatorial lender! This isn't meant as an insult on brokers, both brokers and bank advisors are attempting to give the best advice within their sphere of product availability. Yes, a small local broker carries the indemnity "for life" but if they didn't like that they can work for a larger broker, and see less of the individual rewards.

None of the above is an issue for "should customers use more than one broker". Why should i care that a one man mortgage broker has more exposure than a broker who works for a large national firm or an employee of a bank that only sells its own products? In theory i am indemnified either way. In fact there are more one man brokers that have gone to ground than there are large lenders or national brokers that have disappeared in the last 10 years.

The harsh fact of business is that consumers will always work the system to their beneift. If this means that consumers find a way of getting something for nothing out of brokers, this is just the cost of doing business, just as brokers will find a way of doing the same to lenders and so on.

kenshaz

TangentMan wrote:

[HTML]The harsh fact of business is that consumers will always work the system to their beneift. If this means that consumers find a way of getting something for nothing out of brokers, this is just the cost of doing business, just as brokers will find a way of doing the same to lenders and so on.

[/HTML]
That is the way of the world,a free market,companies have marketing departments to manipulate the consumers ,we are just getting together to fight back. :money:

Joe_Bloggs

There may be a virtuous circle in which a broker can give the best advice and the client take it and benefit from it. The Client will tell others and the work for the broker will increase due to their initial performance.
My concern for small brokers is that their clients do not have a clue about finance, or how to take onboard financial advice. A glossy advert from a major advertiser is a hard act to compete with.

It is up to this site to make a difference in peoples perceptions of financial matters, in my view. Those that take part benefit by just taling part and seeing things from the other side.
I appreciate the candid views of all contributors to this thought provoking discussion.
J_B.

AndrewSmith

TangentMan wrote:

Actually the broker is working on behalf of themselves, as is the advisor it is the manner of their doing business that is to the beneift of the customer. No one is begrudging people making money, but i think it is somewhat rose tinted to paint a picture of a charitable broker and a dictatorial lender! This isn't meant as an insult on brokers, both brokers and bank advisors are attempting to give the best advice within their sphere of product availability. Yes, a small local broker carries the indemnity "for life" but if they didn't like that they can work for a larger broker, and see less of the individual rewards.

None of the above is an issue for "should customers use more than one broker". Why should i care that a one man mortgage broker has more exposure than a broker who works for a large national firm or an employee of a bank that only sells its own products? In theory i am indemnified either way. In fact there are more one man brokers that have gone to ground than there are large lenders or national brokers that have disappeared in the last 10 years.

The harsh fact of business is that consumers will always work the system to their beneift. If this means that consumers find a way of getting something for nothing out of brokers, this is just the cost of doing business, just as brokers will find a way of doing the same to lenders and so on.

Having worked in mortgage on both sides of this argument for well over a decade I have to disagree with this.

The broker works on behalf of the client when looking to place a mortgage. A bank adviser can only offer their own products so is working on behalf of the bank. It is the very basic principle of how it works.

If the broker is charging a fee regardless of the success of the case then yes I would somewhat agree that the broker may not be quite so client focussed as he is paid regardless of whether the case is successful or not. Pretty much like the bank adviser who will receive his salary every month.

The majority of brokers work on commission thus receive nothing unless the case is sucessful and goes to legal completion. It is therefore in the interests of the broker to find the 'best' possible deal for that client or else the clinet will go elsewhere and the broker receives nothing. Again, with the bank adviser if this happens he still gets his salary (especially as the commission driven emphasis within bank based mortgages is not as tough as it was 5 years ago).

Consider this then, if the broker is working on behalf of himself, is that then true of other professionals providing a service? A solicitor for example? Who is he working on behalf of in your eyes? The client or himself?

The issue with this particular debate is that two things that are completely different are being compared, which is not possible to do. A whole market broker, and a tied bank mortgage adviser.

I do accept and somewhat agree with a lot of what you say regarding it all being 'fair game' etc but do not agree, especially with the tight regulatory system within which we now operate, that a broker works on behalf of himself.

If the broker makes a recommendation that he cannot justify as being the most suitable or best for the client then this will be picked up by his compliance monitoring or audit.

I also agree that there are some sole trading mortgage brokers that do not succeed in business however they tend to be people new to the industry. Personally I have never been busier with business levels increasing month on month, hence my expanding my business.

AndrewSmith

TangentMan wrote:

None of the above is an issue for "should customers use more than one broker".

But then neither is a lot of the information on this thread directly related to the original topic, I am merely responding to points raised.

Why should i care that a one man mortgage broker has more exposure than a broker who works for a large national firm or an employee of a bank that only sells its own products?

Unless you are actively searching for a mortgage then I would not expect it to be of any concern to you. But as this is a mortgages and endowments forum then it is perfectly relevant to the thread.

In theory i am indemnified either way.

Yes you are to a degree. However the more often scenario with someone going direct to a lender is that they have carried out prior research and are simply asking that lender to offer no advice but process the applicaton. In this scenario you are not indemnified as the case would fall into the catagory of 'non advice'.

In fact there are more one man brokers that have gone to ground than there are large lenders or national brokers that have disappeared in the last 10 years

Quite possibly however what you do not take into account is the very high staff turnover of these national brokerages and banks. I have seen this first hand and the exact numbers are quite shocking in some cases.

I have come across a few advisers that have left one of the Brokerages sometimes mentioned these forums. They all tell a similar story of a sales target driven environment, quibbles over being paid commissions and high staff turnover. Bancassurance also has similar staff retention problems (if not the highly pressured sales environment). This is largely due to broker introduced business being very profitable for the lenders, thus it is actively encouraged more and more. Quite a few bank mortgage advisers move on to become Whole Market brokers, using the bank as a training ground and somewhere to learn about the mortgage market.

AndrewSmith

Joe_Bloggs wrote:

My concern for small brokers is that their clients do not have a clue about finance, or how to take onboard financial advice. A glossy advert from a major advertiser is a hard act to compete with.
J_B.

Which, in reply to Kenshaz, is exactly why personal recommendation is so important to both client and broker, hence the emphasis has to be on good client service to be rewarded with such referrals.

dunstonh

Actually the broker is working on behalf of themselves, as is the advisor it is the manner of their doing business that is to the beneift of the customer.

A tied adviser works for the employer. An indepedent/whole of market adviser works for the client. Its been that way for years.

TangentMan

Andrewsmith :-

You are confusing (or at least confusimg me!) best advice with why people do work. People are mortgage brokers as a profession, as a job and i am sure do it to the best of their abilities. But they are few and far between that do it for charity, to make the world of borrowing a better place. Whilst i take the principle on board (of working for the clients interest) i can't consider it as the altruism i read in your post as that simply doesn't work in a fee free world (because otherwise they would be charitiies).

Fundamentally brokers are attempting to get the procuration fee for the completion (or perhaps some cross sales) - nothing wrong with that. And the way that their business model works is that if they do the "right thing" they will get good repeat business etc. there are many advantages to going to a broker. There are advantages to going to more than one. Which is the challenge fee free brokers have to face.

My example of a lender's advisor was the idea of wasting someone time. In my original post i gave the example of someone asking about mortgages, not products. Therefore they would be discussing how fixed rates work, or discounts, but not necessarily any particular product. If they then walked to a broker armed with their newly gained knowledge, would we care about the wasted morning of the bank advisor? Agreed they ahve a basic salary, agreed they have a limited product range. But, fundamentally, they made less money out of that morning than if they had sold the customer a product.

Should we care if a broker (one man band or otherwise) wastes time with a client? Well morally its up too you, but since the broker offered a free service and a time waster took advantage of it, c'est la vie. The customer might still think the broker is a jolly good egg and come back in two years time, or recommended a friend. It isn't all dead time.

The real challange facing brokers is that they can't easily negotiate their proc fee updwards to take into account the costs of doing business (i.e. people who may waste their time). To be honest i can't see a fee free solution other than to accept that its just the way of the world and put it down to customer relations?

By the way, when i say a one person outfit has more exposure i mean that they are personally more individually liable than someone who works for a large organisation. However the rewards are commensurate with that exposure, and if the one man brokers don't like the balance they can take steps to address that.

Joe_Bloggs

There was an article linked by some FSA bod who claimed to be unhappy with the remuneration structure offered to advisors. Things would take ten years to fix etc. Some may consider fees offered by lenders to advisers a 'bung'. If they all do it then it is OK, I presume.
These fees have to be paid from somewhere because that is how money works. I do not mind paying for expert advice if it saves me money in the long run. Other people have short term agendas and it is what it costs them now that is their major consideration. I am all for transparancy in financial dealings. You should get what you pay for.
J_B.