IFA vs 'Whole of Market'

ncfcstar

Hi guys,

I have within the last week been looking at properties, I'm a FTB, we are looking to complete in July/August (if all goes to plan!). I visited a 'whole of market' adviser (someone I know) on Monday and was happy with what they could offer in regards to our budget etc.

In the opinion of people who have been through this process, or deal with mortgages frequently, should I visit an IFA as well? I appreciate that they will charge for my time but could they offer us better deals? Obviously I want to get the best value for money possible, but with knowledge of the markets is it likely to be a huge difference between what is on offer from an IFA vs a 'whole of market' service?

Thanks in advance!

ACG

It depends on what they charge, the deal they can find and the deal you have been shown already.

It also depends entirely on your circumstances as to whats available.

Its kind of a gamble really, you might pay that money and end up with nothing better then you have already, you minght end up with something better but by the time you pay their fee its broadly the same, or they might find you something thats better than what a WoM advisor can get you.

I know that doesnt really help, but if it was a straight answer everyone would just go to the one which is financially better for them.

ncfcstar

ACG wrote: »

Its kind of a gamble really, you might pay that money and end up with nothing better then you have already, you minght end up with something better but by the time you pay their fee its broadly the same, or they might find you something thats better than what a WoM advisor can get you.

I know that doesnt really help, but if it was a straight answer everyone would just go to the one which is financially better for them.

Yes I thought that may be the case. I guess I just don't want to be in a position where I could have been paying x amount less per month. But like you say, that is down to me to decide whether I 'gamble' on that or not.

dunstonh

An IFA is a financial planner and typically mostly deals with investment backed contracts. A minority may still do mortgages but most dont (if they do it, they do it with the mortgage adviser hat on. Not IFA). However, most IFAs will employ mortgage advisers. The days of jack of all trades, master of none are coming to an end. You cannot be proficient in all areas nowadays.

I appreciate that they will charge for my time but could they offer us better deals?

If you employ a mortgage adviser on independent basis rather than whole of market basis then they will typically include the true whole of market. This means including the non-commission paying deals. Whilst you will pay a fee for the advice, if a commission paying deal is recommended then the commission is rebated to you. Depending on the size of your mortgage, this could actually be greater than the fee. For the average person, it is probably cost neutral in that respect.

Many whole of market mortgage advisers will offer the independent option if you ask them. The public on the whole, don't get the independent vs whole of market mortgage advice thing. Even Martin doesnt no this site. So, you find many prefer the commission route and many mortgage advisers go with what the consumer wants. Some people cannot understand how paying a fee can be cheaper than a commission paid by the provider.

kingstreet

Following-on from what dunston was saying, here's a comparison I put together last June. The rates are out of date, but the broad reasoning still holds good;-

In some cases, using an independent broker may be preferable to a whole market adviser.

Whole market advisers may only select from lenders and products which pay them a commission, while an independent mortgage broker may agree a fee with you and pay to you any commission he receives. If a direct to lender product is better for you, the independent will tell you if that is better as you are paying a fee for the advice.

Here's an example;-

you see a whole market broker looking for a 25 year repayment £150k mortgage on a £200k purchase. You want the best five year fix, regardless of fees. You agree the broker will take commission on any arranged mortgage.

He finds you an Accord Mortgages product at 4.44% fixed until 31/08/2016 at £828.65 per month. The broker will receive commission of £487.50.

You then see an independent broker who agrees to charge you a fee of £299 and to pay you any commission he receives on any arranged mortgage. He also looks at direct to lender deals and explains that in this case, you may get the best deal, but no commission rebate.

He finds you the Accord option, but as you have a fee agreement, he tells you the commission rebate would be £487.50, leaving you £188 better off.

The best overall deal is Yorkshire Building Society's 3.99% fix until 30/09/2016. The monthly payment is £790.93. This is a direct to lender product, so no commission rebate. You've paid a £299 fee, but in doing so, the monthly cost of your mortgage has fallen by £37.72 against the Accord option, saving you £2,263 over the five year fixed term.

I'm sure someone will point out that you can save £299 by finding the best direct deals yourself and that is true. If you have the time and inclination to do that, why bother with a broker at all?

Most brokers have different fee options to suit each individual client. It's worth a discussion to see which would suit you best as an individual.