Using multiple brokers to obtain the best mortgage

AndrewSmith

TangentMan wrote:

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).

Yes agreed that a broker works for themselves and a bank adviser works for the bank but that goes without saying. What you actually said was the the broker works on behalf of themself which is incorrect. The broker works on behalf of the client. The bank adviser works both for and on behalf of their employer, the bank.

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.

I agree with you totally and that is again the reason why, in response to Kenshaz, recommendation is a consideration.

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.

True, and this does work more often in reverse however you usually find these days that a large number of people will research the different types of mortgage on the internet, for example, before they speak to an adviser/broker. However it is part of the usual initial interview to go through the different types of mortgage etc along with explaining polarisation, market access etc.

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.

Again, I agree that it is the risk faced with offering a 'fee free' service however personally don't usually fall foul of this.

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?

Proc fees are set by the lender and are totally non-negotiable. Any broker setting up a fees free service must take account for the 'window shopping' fraternity as must anyone offering free consultations such as solicitors etc. It is something that the broker should have accounted for in their business planning. We all do things for nothing though. Take this site for example. We give guideance without expectation of anything in return. Yes we may be approached on rare occasions for further help but that is the exception as opposed to the rule.

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

True, but if a bank adviser is proven to have given incorrect advice then he will be personally liable.

Take the example of an ex-collegue of mine from a few years ago. He worked for a large corperate firm. Between him and the client they submitted an application for a self cert mortgage with an inflated income figure on it. Basically they were caught and are both serving the remained of a 10 year prison sentence for fraud. The company for which he worked could only offer limited protection, as they would for most forms of mis-sale or bad advice. It is ultimately the adviser who takes responsibility for their actions.

AndrewSmith

Joe_Bloggs wrote:

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.

Which is why on all Key Features Documents the amount of commission payable to the broker must be declared in section 13.

All commission of fees payable must be declared to the client before the business is concluded.

Joe_Bloggs

A description of what to expect in a key fact document can be found here.
They appear straight forward in their format and terminology used. It does say in the FSA advice that the keyfacts document may be 'updated' when it comes to a mortgage offer. Quoting, "Use the original to compare the two keyfacts documents".
J_B.

HelpWhereIcan

Good to see that this thread is now heading down a constructive route and that it may be offering members something of interest into the 'industry perspective'.


I feel Andrew has done a great job fielding points. Just to have twopenneth worth on some points raised.

TangentMan wrote:

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 reason I would urge people to consider is one that Andrew has touched on a little.

As a small one man band, I have no targets (other than my son's xmas present list!! :eek: ) and have made the conscious decision to build a client base that I will service regularly.

When I worked for a large firm, it was a very target led environment more reliant on numbers than relationships. This meant that the clients I did a mortgage for will (more than likely) not be contacted at the end of their deals. My current clients are all diarised for future contact and should hopefully have less work to do in the future, all the time knowing my personal mobile number and that (for as long as my firm exists) they will never get 'Oh Michael left 3 months ago, can I help' - having to restart relationship building again. This is an illustration of the potentially better levels of service that a small firm may give.

The other thing to consider is that a lot of the larger firms tend to be restricted to a panel of lenders and/or a single insurer which could have an effect of the the 'cost' of the mortgage deal that they reccomend. Of course, there are many small firms with the same restrictions; but the more small firms that go under, the more customers will be exposed to the large firms with restricted mortgage/life panels and multi tie investments.

After all, one poster mentioned the power of glossy advertising. If a large number of small brokers go under cos of people using them for free advice, those same people will be more exposed to sharp marketing practices in the future.

TangentMan wrote:

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.

Agreed. Competition is a great thing and noone argues with shopping around. Just be conscious of using the small broker to then go and use L&C. Why assume that all small brokers will charge a fee? If they offer a good service and cost you no more than using L&C, is the personal touch and ongoing relationship not worth using them?

kenshaz

TangentMan has highlighted some important points and deserves some Thanks,but unfortunately he has not received due credit ,because they are not shared by the clique,he is not incorrect ,just opposing which is healthy and necessary for a debate.

kenshaz

Mortgage brokers are a necessity for some,in the same way that people require a travel agent to book a package holiday.But like package holidays, a decline will begin, as consumers become more conversant and software wizards more expert.The result will be less commission paid and reduced interest rates.

Please do not react in a hostile manner to my comments ,they are observations ,and a progression as the consumer becomes more sophisticated.

The need for brokers will remain,but only for the few.The point that I am attempting to make is,yes like the man from Pru,knocking on your door,the time will go ,but the need will remain for those who require the personal contact and the less able. The customer base of a broker,does it consist of the uninformed , the less able or those who like waiter service?

I make an analogy ,the need for changing a washer on a tap by a plumber will always remain,but the majority are capable without assistance

TangentMan

Helpwhereican.
I am not saying there is no value in brokers, in fact i have said quite the opposite and all the points you make in their favour i support (although i do believe whole of market is misleading, the FSA approves of the term so i can't blame brokers for that).
I don't begrudge broker's proc fees and i do think they provide value above and beyond lenders tied advisors. Everything you describe is a benefit of a small customer focussed operation (in fact in any industry).

But, lets be totally and utterly realistic here. Your son's xmas present list is a sales target! Those people who work for larger companies have christmas lists too. Whilst you don't need to chase numbers to translate through someone else's matrices into a diluted bonus. You do have your lifestyle to support.

So, if we are going to peddal the "they are small one man bands and if you waste their time you are taking the food straight out of poor sickly Bob Cratchet's mouth. Is that what you want? Is it?" type argument we need to also say "they are lowly paid advisors in a bank who have aggressive targets and remuneration and working practices less in their control than that of a self employed person, if you waste their time you are starving bob cratchet etc etc".

In other words lets take the emotion out of the debate. 1 employee or 1 thousand. Should consumers go to more than one place for free advice?

I say yes. The reason being that as someone else posted, this behaviour should be built into the business plan and if it isn't then there is a flaw in the plan - because consumers are going to do it.

There are fees on credit cards because people take advantage of the free credit and pay their balances off. People add fees to loans on mortgage applications so they can stop the application and not lose money.

Back in the day i used to order my food at McDonald's, pay for it, receive it and then ask for ketchup - they used to charge 10p for it and i found by doing it that way they would never bother to ring a seperate 10p transaction through the til and i got it for nothing.

payless

kenshaz wrote:

TangentMan has highlighted some important points and deserves some Thanks,but unfortunately he has not received due credit ,because they are not shared by the clique,he is not incorrect ,just opposing which is healthy and necessary for a debate.

strangely , on this thread ( well certainly last few pages) I think he's the only one I have "thanked"

Joe_Bloggs

Thoughts of thanks were deserved. I have restrained my thanks in all areas because of the perception that my thanks would be taken the wrong way. For example, a scycophantic tribute in an unfamiliar territory made by an explorer.
J_B.

AndrewSmith

TangentMan wrote:

I say yes. The reason being that as someone else posted, this behaviour should be built into the business plan and if it isn't then there is a flaw in the plan - because consumers are going to do it.

It was I who stated this and I stand by it. When one evaluates one's business plan at the end of the year consideration has to made for time spent on cases that will not proceed. Luckily I do not suffer much from this however I always factor it in when writing my new business plan each year.

I agree Tangentman that regardless of what we all say on here it is the public who will dictate by their actions. There will always be a number of people who want advice from more than one source. That is their perogative and is neither right nor wrong.

There are fees on credit cards because people take advantage of the free credit and pay their balances off. People add fees to loans on mortgage applications so they can stop the application and not lose money.

Proof that these things are only OK until everyone finds out about it. Examples:

Credit Cards. Now that everyone is stoozing cards many companies introduced handeling fees to compensate this making some 0% deals not that attractive after all.

Mortgages: Lenders started losing out by people taking short term rates then switching to new lenders afterwards hence the introduction of 'closing fees or deed release fees' to try and deter it.

Brokers: Who knows, maybe we should all just fall in line with everyone else in the service industry and charge by the hour. It will be dictated by the industry itself. Consider though that more and more lenders are opening their doors to Broker Exclusive deals as they are very profitable for the lender.