What do you expect from a mortgage broker?

kenshaz

What about companies that charge an hourly rate ,evaluated on time spent to recover costs,not a percentage,does that work out more expensive and would it discourage clients from choosing that route and is it common practice?It would be like a plumber starting work without a quote .
There would be no way of knowing your final bill in advance,would that type of practice push all towards commission?

Would it be possible for a company to say that they usually charge for example .5% fee,how would they evaluate usually,what would that mean ?Could it be lower or higher who decides and would you know that in advance?

Would it be possible for a broker to be truly whole of market no club,network or packager,a member of non and access to all.Does the beast exist?

Do brokers tell clients that they are in a network?and that another club might have a better deal.

UK007BullDog

As I have the intention to start my own brokerage next year I will be forced to charge a fee for my services. I have overheads that need covering (insurances, rent, utilities, software & hardware, telephone & fax, internet, furniture, continued education, staff, etc...).

When I was working as a broker some mortgages were quite small or so straight forward that the commission was less than £200. That does not pay the bills. Thinking of the amount of time spent to service this mortgage the company would be out of pocket. Some very small mortgages we would not even bother with and send the customers back to their lender due to the cost for us. No one likes to work for nothing. So I would not even contemplate lenders who do not pay a commission if I were fees free. Why should I send them business if I don't get paid? However if the client pays me a fee I would include those naturally.

I cannot understand how we are supposed to bend over backwards and give everything for free and in other professions it would not even come to mind to ask for a free service (legal or medical for instance). A local broker to where I live asks for £75 before they will even let the person sit in front of them, as they are sick and tired of advising people and then to never see them again as they are going direct. The £75 will be refunded once the mortgage has gone through.

So I would be charging a fee with the option if the commission is higher than my fee that the excess will be returned to the client. I have not yet thought it through though in detail.

As for the insurances I definitely do not agree with the onces where the premiums are added to the loan. Some people are strapped to buy so offering to add the fee to the loan is OK as long as the pros and cons are well explained and understood by customer.

As for the broker only deals, they are good but most brokers have the same deals only called differently depending on their network.

Either I go DA to be truly WOM or with a network with a huge panel which would let me also go off panel if that product would be the best for the customer.

My brokerage will be a service shop where I expect to be paid for my excellent services, as they do not stop with just submitting the mortgage but the chasing of surveyor, solicitor, lender etc.

UK007BullDog

I would definately not go down the hourly route. That is a very murky and grey area. Fixed prices only for me.

MortgageMamma

kenshaz wrote: »

What about companies that charge an hourly rate ,evaluated on time spent to recover costs,not a percentage,does that work out more expensive and would it discourage clients from choosing that route and is it common practice?It would be like a plumber starting work without a quote .

Yes correct, most companies who charge an hourly rate or simply offer the option of an hourly rate and a commission rebate often charge £100+ per hour. They may give an estimate how many hours a case will take but not a definite figures (or at least I have never known this). From my experience the average case can take anything from 10-20 hours, dependant upon complexity. This can sometimes be more for those brokers who travel to see clients.

There would be no way of knowing your final bill in advance,would that type of practice push all towards commission?

I think so yes, unless the firm say is x per hour but will never be more than x in total

Would it be possible for a company to say that they usually charge for example .5% fee,how would they evaluate usually,what would that mean ?Could it be lower or higher who decides and would you know that in advance?

If a firm classes itself as independent it will advise a customer on all fee options before work commences. I think who decides on what the fee will be is dependent upon the individual adviser. larger firms with employed advisers will specify their fees and the adviser won't have an option, whereas a one man band or brokerage with self employed advisers, the advisers themselves usually have the option to set fee's as they see fit

Would it be possible for a broker to be truly whole of market no club,network or packager,a member of non and access to all.Does the beast exist?

Sort of, this is called directly authorised. Directly authorised means you can join any mortgage club you like and have access to their deals, but you will not have access to network only exclusives. An example of this is how I used to work. When I was directly authorised prior to starting my company I used to have access to the same product through different mortgage clubs - lets say in this instance

Abbey 5 year fixed 5.99% 499 fee

I could go direct to Abbey for this and get 0.35%

I could go through premier mortgage services and get 0.42% but give PMS 5%

I could choose to go through Legal and general and get a 0.36% net

None of this will make any difference to a client, as they still get the same product, but being directly authorised gives the broker the option to earn more than they would going direct to a provider and some mortgage clubs pay more than others.

However, as a DA broker I would not have access to a network exclusive which a mortgage network has negotiated with a lender, for example, the imaginary product above may be available through a network (lets say Sesame for example) with no valuation. This would be much better for the client and a DA broker could not get it.

A broker who is an appointed rep of a network may not access other networks exclusives. A DA broker can use any mortgage club and will have access to things that an AR would not be able to get, but cannot access a network brokers exclusives.

There are lots of different mortgage networks and lots of different mortgage club so this is swings and roundabouts. However I have to say, with the exception of business support and compliance support I think being directly authorised gives the mortgage broker the best level of market access.


Do brokers tell clients that they are in a network?and that another club might have a better deal.

I cant speak for all brokers but I tell my clients that I am a member of a network, we have x amount of lenders on our panel, but we can in effect go off that panel and recommend any lender. I do make them aware of exclusives and the fact there are occassionally certain products I do not have access to.

I told you this industry was a complex beast didnt I?

Mr_helpful

The network verses DA thing has of course been forced on us by the FSA. Prior to the FSA taking over I was a lot more independent than I am now. It is very dificult for a small firm to be directly authorised as there are now so many regulations to comply with. I dont think there is any sales process that is so heavily regulated. Its probably less complicated to sell the A Bomb to the Iranians.
The problem with Fees is that they alter the structure of the deal. If I were to sell someone say a 2 yr exclusive fix and charge a typical 1% would the client still be in the most economical position? We make a lot of fuss about our exclusive deals but in reality they are often only slightly better that the customer can get by going direct and when a fee is put in the customer is now worse off.
We must remember that the customer is No 1 and if we do not benefit the customer they will not come back which may explain people going on about advertising budgets as they have the constant need to find new custom.
To answer the Op the broker should add value not cost. i point out the extra range of products, The ability to go to any lender in the land. Time saving, Form filling, help and advice etc

MortgageMamma

Mr_helpful wrote: »

The network verses DA thing has of course been forced on us by the FSA. Prior to the FSA taking over I was a lot more independent than I am now. It is very dificult for a small firm to be directly authorised as there are now so many regulations to comply with. I dont think there is any sales process that is so heavily regulated. Its probably less complicated to sell the A Bomb to the Iranians.
The problem with Fees is that they alter the structure of the deal. If I were to sell someone say a 2 yr exclusive fix and charge a typical 1% would the client still be in the most economical position? We make a lot of fuss about our exclusive deals but in reality they are often only slightly better that the customer can get by going direct and when a fee is put in the customer is now worse off.
We must remember that the customer is No 1 and if we do not benefit the customer they will not come back which may explain people going on about advertising budgets as they have the constant need to find new custom.
To answer the Op the broker should add value not cost. i point out the extra range of products, The ability to go to any lender in the land. Time saving, Form filling, help and advice etc

So what level of advice is fairest to the consumer combined with which method of adviser remuneration? Do you think an adviser who tries to cover absolutely everything on the market without a fee is doing more than is required and is not a viable business entity? How would a mortgage network react if they found out you were advising clients to go direct but not charging a fee? (perhaps I will test my network on this one)

AndyWallace

MortgageMamma wrote: »

So what level of advice is fairest to the consumer combined with which method of adviser remuneration?

Anybody taking out a mortgage doesn't work for nothing so why should we? Whether you ask for extra payment to cover non paying / dealing lenders is up to you but you shouldn't ever undersell yourself.

As a fees free broker I never included such lenders but was open and honest enough to state my case.

But also lets not forget that most standard applications don't need the service of a broker.

Andy.

Mr_helpful

MortgageMamma wrote: »

So what level of advice is fairest to the consumer combined with which method of adviser remuneration?

Fees free advised as this gives no disadvantage to customer
Do you think an adviser who tries to cover absolutely everything on the market without a fee is doing more than is required and is not a viable business entity?

No Most of the work is done by a cheap software program. The difference between searching a network panel and everything on trigold is just a few seconds. It must be viable as I have been Self Employed for over 10 yrs.

How would a mortgage network react if they found out you were advising clients to go direct but not charging a fee? (perhaps I will test my network on this one)

I have very rarely advised a client to go direct. Only when a direct product suited that I could not get or match. I could not care what the network thinks as it is good for the customer to see you treating him honestly and fairly. The last time I sent a client direct was when he could get a special Nat West product for existing customers that I couldnt obtain. We have done 2 mortgages for him since.

MortgageMamma

I must admit the instances where it would be better for the client to go direct are few and far between, and the clients DO often come back and give you more business generally

A broker friend of mine who is a sesame AR stayed with us this weekend and we had this discussion.

It was his opinion that searching off panel and recommending the best you can get from whats available to you is the max a fee's free broker should do, otherwise it would get too complex and be too time consuming. He's been a broker for 19 years and I value his opinion but I am not sure I agree

The results on this poll are very interesting - there is ahigher proportion of people prepared to pay an upfront fee and have it rebated if a commission paying lender is selected than what I anticipated

AndrewSmith

MortgageMamma wrote: »

The results on this poll are very interesting - there is ahigher proportion of people prepared to pay an upfront fee and have it rebated if a commission paying lender is selected than what I anticipated

On paper more people like this idea but I would sugest the results would be different in the marketplace.