What do you look for in a broker?

homer_j_3

EdInvestor wrote:

Groan. This sounds like what typically happens when people retire.They toddle along to the advisor who reminds them about the 25% tax-free cash they can get from their pension fund.

Then s/he sells them

a) A cheap(ish) annuity for the money still in the fund

and

b)A massively expensive (7% upfront commission and huge internal annual charges :eek: ) investment bond for the 25%.



Surely it must be possibly to devise a system where the interest of the "advisor" is aligned with the client, not the provider?

Otherwise we are just talking salesmen, regardless of whether a broker is independent, tied, whole of market, whatever, and the FSA's blurring of the boundaries is correct, because otherwise consumers are just being misled.

All I meant by that quote was that if somebody needed some ancilliary products that would benefit the customer and protect them against death, critical illness, income protection and ASU then they are pretty easy to arrange and the commissions paid on them could minimise the loss for MM to actually do the work on the mortgages she has to do for free due to no proc fee.

I know with investments, and I was actually joking to an old FA from the pru about the regurgitation of money. Pay out from policies, were applied to other policies etc and repeat commissions were the life blood of some!

This is slightly different I think but fully understand where you are coming from

silvercar

If you have a marketing tag that says you ALWAYS get the best deal for the customer, say this means that X% of your business doesn't generate a procurement fee. But if it generates an extra Y% of business from people who might not otherwise come to you, it still works. So overall you increase your volume of work but a small percentage doesn't give a commission.
Presumably, in your business model, you allow for the fact that some mortgages won't happen just because people change circumstances and don't move house.

MortgageMamma

homer_j wrote:

All I meant by that quote was that if somebody needed some ancilliary products that would benefit the customer and protect them against death, critical illness, income protection and ASU then they are pretty easy to arrange and the commissions paid on them could minimise the loss for MM to actually do the work on the mortgages she has to do for free due to no proc fee.

Just to add - when I started this thread I wasn't focusing on my specific business model/situation - I was just posing the generic question, wondering how people - the public and fellow brokers feel about it - and how they see best to address the situation

kenshaz

MortgageMamma wrote:

Just to add - when I started this thread I wasn't focusing on my specific business model/situation - I was just posing the generic question, wondering how people - the public and fellow brokers feel about it - and how they see best to address the situation

But you didn't start this thread,you came in a few posts later

jamesd

kenshaz, while technically I'm the person who created this as a new thread, it was her question that started it. I just chose to repost her question here and answer it because it looked interesting enough to merit the extra attention.

kenshaz

jamesd,you come over to me as a very fair minded person,your posts and responses are intelligent,and thought provoking.

Ian_W

A really interesting and thought provoking thread. I wouldn't disagree with kenshaz description of jamesd posts overall but I think the analogy with doctors and lawyers in post #1 is misconceived for several reasons.

Firstly, Doctors and lawyers get paid in a different way, imagine how different it might be if the drug companies paid doctors rather than the NHS or the patient? And what lawyer is going to give any but the most basic advice without ensuring, as a first priority, that their fees are paid?

Second, and perhaps more important, the regulator [the consumers champion?:eek: ] allows a wildly misleading description which "whole of market" most certainly is - as it doesn't mean THE whole of THE market - only that to which the broker has access, in some cases in a very limited form. So a whole of market broker can quite legitimately ignore the fact that Britannia or Direct Line are offering a better deal for a particular client and remain well within their regulatory framework.

But whilst the public [and I think MSEers in particular] resist fees then I think truely impartial advice from brokers is a pipedream. Some, like MortgageMamma, might aspire it but the majority, like the rest of us, need income from the lender to earn a living. Bottom line is they do it to run their business and feed their families and we, the consumer, should appreciate that we need to do our own research to make sure we get the very best deal.

Travel Agents have been, I think, hit quite hard by the internet and I would be worrying if I was a broker whether a similar scenario is looming. If you're not a FTBer, financially inexperienced, self-employed, pushing the edge of lending criteria, or in debt and you are prepared to do your own research, get together the documentation and fill the forms in - do Brokers add value? Any thoughts?

homer_j_3

Yes I think brokers do add value but many may think that I am being biased by this thought. Maybe I am?

It is only because I am a broker and see the mess people get themselves into or some of the questions that I get asked that I realise how even those who think they are financially savvy do not get everything right.

It may not be because of lack of knowledge, it may not be because of lack of aptitude but it could be because someone only deals with their mortgage every 2/3 years. In fact I think I read the other week that people on average review their mortgage every 7.5 years. As a broker we do this day in day out, we see many different things that allow us to take into many different variables and considerations that wont be considered by many.

I think that to put it in an analogy, its like me going to London in my car and trying to find a certain street. I probably would get there eventually with an a-z and a bit of map reading or asking people on the way but it would be so much quicker for me to get the train and to get a cabbie who would know the quickest and shortest route. Clearly I could do it myself if I applied myself but maybe using somebody with the knowledge would be just as easy.

The only bit I cant really fit the analogy is that with a fees free broker, there isnt any extra cost in using a broker!

Ian_W

homer_j wrote:

The only bit I cant really fit the analogy is that with a fees free broker, there isnt any extra cost in using a broker!

Ah, but there's the rub, homer. Whilst "whole of market" doesn't actually mean the whole of the market - there might be ... if a non-fee paying lender has a deal that better suits a particular client, using a WOM broker who legitimately doesn't disclose this, might well cost them!

Oh, and didn't travel agents use the same argument? Our services don't cost the holidaymaker anything?

kenshaz

Some people need a broker ,like some people need a travel agent,but as software wizards become available that are as searching and comprehensive as those used by brokers,the distinction will lessen.I agree repetition and experience assists ,but that can be built in.

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Yes,brokers do add value ,and I have no bias,they carry more clout with lenders.But I also realise that they build up networks with solicitors and estate agents,receiving a thank-you drink,and receive procuration fees from lenders and a fee from the client,all this is ultimately paid for by the borrower. It all adds up.