Negotiating Equity Release - can you haggle for commission share?

deehell

Has anyone got experience of negotiating with an equity release advisor - given the level of various fees that they charge, to say nothing of the commission they earn from the provider? I am trying to help relatively elderly (late 70s, one is terminally ill with possibly a few years of life left) parents consider equity release - they have a property worth at least £360k (in London) and are looking for around £30-£40k. They are using an advisor that is a member of the Equity Release Council that gets best ratings on trustpilot... and the paperwork is reasonably comprehensive (although I've not yet found a declaration of commission earned)...

I found the provider site suggesting the average commission earned by this company was £3400.

I would have thought that commission, given all the fees charged, must be negotiable? I discovered that the company had revenues of £17m and made profit of over £1m (not huge but still pretty substantial)... and this enquiry came direct from my father rather than through a third party IFA, who would have earned £1700 for the recommendation!

Or am I too optimistic that these sums are negotiable...?

Thanks in advance

Let_Us_See

Yes, it is possible to request a split in the adviser's procuration fee (the fee received by adviser from lender for processing the application on their behalf), but this fee for borrowing £40,000 is likely to be around £850.00 and not the £1,700 quoted. So not a great deal for the adviser to split with client. Perhaps £1,700 covers both lender's procuration fee and adviser's fee?

Typical charges are valuation/survey fee, lender's arrangement fee (usually deducted from loan on completion), adviser fee and solicitor's fee. A little pointless quoting the company's average commission as this has no reflection on your own requirements. I do not know how far the application has progressed, but on early contact an Initial Disclosure Document (IDD) should have been issued which will confirm adviser's charges, which will be repeated, together with the amount of lender's procuration fee, within the Key Facts Illustration (KFI). The KFI confirms all the details and fees of any scheme proposed by adviser - although it is possible the application has not yet reached this stage.

If you can confirm how far the application has progressed then I maybe able to provide more accurate information and advice.

amnblog

The advisers also pick up all the risk for the advice.

£3,400 sounds a lot put out of context but the trading figure you note identify there is £200 profit in this case (on which corporation tax has to be paid).

Do you have a problem with a company making some profit?

deehell

Hi

Thanks both for the thoughts. My father hadn't sent me the Key Facts Illustration which he now has...

Application fee of £139
Arrangement fee of £550 to the provider
No valuation fee
Rate of 5.69%
Mortgage intermediary fee of £1030 (although that doesn't tie in to the overall key facts statement of 1.65% with minimum of £865)
Provider pays proc fee of £1450 (based on initial sum borrowed of £30k, total loan potential just under £90k)

So adviser/firm earns 1450 + 1030 + 139 = nearly £2600 = 8.7% of the total initial loan advanced. Plus an unspecified marketing contribution from the solicitors on the panel.

I have no problem with a firm making a profit or charging for a reasonable service, and my father has no complaints about the service provided...

But I do think that amount is unreasonable for the amount of time spent and advice given... Can I part negotiate please?

TrickyDicky101

deehell wrote: »

Mortgage intermediary fee of £1030 (although that doesn't tie in to the overall key facts statement of 1.65% with minimum of £865)

This in particular looks like the minimum plus 20% VAT.

Given the risks involved in provision of advice for this kind of transaction the fees don't look excessive to me.

What do your parents need the money for (is there anything specific)? Have you any brothers or sisters that could club together and provide funding to your parents instead (I would presume you have already considered this though)?

Let_Us_See

deehell I believe you have room to negotiate and I would ask them to cover the £550 lender's arrangement fee. The proc fee at £1450 is high for borrowing £30,000 and I imagine the scheme has a reserve fund that also attracts commisssion. There are good advisers that will charge a lower fee.

The information (fee charged etc) provided by adviser MUST be the same as confirmed in the KFI.

Post again or PM me if you need any specific advice.

deehell

Just to update this, I finally managed to speak to the adviser.

Of the fees I quoted above, the £1030 was the £139 plus the £865 "minimum" . There were legal fees of "no more than £600 max" including the outrageous fee of £114 for introducing my father to them (even though the legal panel also paid him commission). I managed to negotiate that the minimum down to £500, saving £395 and got them to refund the £114. Thus, the fees of £1030 + £600 + £550 = £2180 were reduced by £509 or just under 25%. My father was otherwise happy with the adviser and so I said that as long as he was happy with the loan terms (there were no other fees payable should he draw down more), the firm is reputable and if my father got the key facts illustration revised in writing to reflect what I discussed, then I felt it was more acceptable.

Both my father and his partner are relatively elderly and they preferred the equity release route as freeing up some capital in a London house, which has appreciated substantially since they bought it, without having to borrow from relatives or me.

Grateful to those that posted thoughts and advice. I might have been able to negotiate more or find another lower cost adviser but I wanted my father to feel he was making the decision - as indeed he was.