Payment of Independent mortgage adviser

LearnerMan1

Recently I have decided to stop paying for life insurance for my mortgage, as firstly I have no partner and secondly no children, thirdly it is too expensive at £30 per year.. If I was to die the house could be sold and pay my siblings some cash. However last year when I set up my mortgage through an independent adviser I got a mortgage picked and then they wanted me to get insurance I felt it was forced on me quite a lot and they tried to put the fear into me regarding not having it. I subsequently got insurance but now as I want to cancel. I have let both the insurance company and my adviser know.

The mortgage adviser now has said that I must pay for their services. I want to ask. Is this the case? I thought that they were getting commission on the mortgage not the insurance?
This is some of the the email they sent to me:

"However, as discussed at our initial meeting, I did not charge you a fee for my time and advice on the basis I would get paid commission for arranging your protection products. The cancellation of your policy means I have to repay commission. As your case was complicated (you had several appointments and two different applications as you changed your purchase property!), unfortunately I will need to charge you a fee for my services. I hope you understand I would prefer not to do this, but I need to get paid for my time and professional services"

"I will wait for the reclaim statement and then forward you an invoice at this stage (I will only be charging you a fee for one mortgage application, not two as was the case)."

I have replied to ask for copies of what I signed but I thought it was for commission on the mortgage. I have requested these at this stage.

Thanks

[Deleted User]

You should have been given an Initial Disclosure Document.  What does it say on that document about fees and refunds and claiming future fees if you cancel?   Sounds overly complicated to me and if it wasnt stated clearly that a fee would be payable and you agreed to this then I dont see how a fee can be charged.   
Did you sign anything to say you would pay a fee that was then waived? Or did fee not come up at all? 

Also the life insurance as single with no dependents is always a contentious issue.   Doesnt sound like you were given clear advice and information but make sure you check the disclosure documents to see what you agreed to

K_S

@LearnerMan1 I have advised on protection for my mortgage clients for many years now. I get a procuration fee from the mortgage lender and a commission from the insurance provider. I can choose to be paid a lumpsum commission (indemnity basis) and if a client cancels the policy within x years, that commission gets clawed back (either a stepped percentage or all of it). Or I can choose to be paid on a monthly basis (non-indemnity) so I get the commission in small parts when the client pays the premium.

The broker can't just decide to charge you a fee if you go on to cancel. It has to be included in the disclosure document that he should have sent and the T&Cs should not be unreasonable. None of the three firms that I have worked for would charge in the scenario outlined, a small percentage of customers cancelling policies and the associated clawbacks is a cost of business and it happens. Good protection advisors sell appropriate policies at affordable premiums which the clients find value in keeping. Less ethical ones pressure sell high-premium policies which the client either struggles to keep up or doesn't find any value in once they've got the mortgage.

What looks like has happened here is that he used the urgency of a mortgage to force a sale and push life insurance on to someone whose circumstances didn't warrant it, you've realised that and now cancelled it.

In your place I would consider paying only if the disclosure documents sent to you -

- clearly describe a fee being payable under the above scenario

- clearly describe how that fee will be calculated

MWT

LearnerMan1 said:

This is some of the the email they sent to me:

"However, as discussed at our initial meeting, I did not charge you a fee for my time and advice on the basis I would get paid commission for arranging your protection products. ..."

I don't think I would be letting them think an invoice would be well received unless the conversation and the disclosures were along the lines of 'my fee structure is as follows, but I will waive my fees if you take, and keep active, insurance products through me...'

I'm very careful to be extremely clear on how any 'advice' I take is being funded as it avoids exactly this sort of thing after the event.

LearnerMan1

Hi so an update on this situation is the mortgage adviser sent me an invoice for a admin fee of £295 for  "Administration fee. 295.00 Advice and two separate mortgage applications. Extension to expired mortgage offer". One year on from starting my mortgage on the day I mention I wish to cancel my insurance. On the copy of the terms of business contract I signed it says an admin fee is optional for the adviser if he chooses to charge it.  So I guess he has me on that, although morally its not nice. I sent him back a reply saying I would pay it but I don't want any further dealings. He then replied and says he changed his mind as he values me as a client and has decided to waiver the fee. I wonder what would have happened if I had said at the start I didn't want the insurance to begin with? 

K_S

LearnerMan1 said:

Hi so an update on this situation is the mortgage adviser sent me an invoice for a admin fee of £295 for  "Administration fee. 295.00 Advice and two separate mortgage applications. Extension to expired mortgage offer". One year on from starting my mortgage on the day I mention I wish to cancel my insurance. On the copy of the terms of business contract I signed it says an admin fee is optional for the adviser if he chooses to charge it.  So I guess he has me on that, although morally its not nice. I sent him back a reply saying I would pay it but I don't want any further dealings. He then replied and says he changed his mind as he values me as a client and has decided to waiver the fee. I wonder what would have happened if I had said at the start I didn't want the insurance to begin with? 

@learnerman1 Well, that's certainly odd, maybe he saw this thread!   Or, more likely he realised that he would be in trouble if you formally complained before/after paying the fee.

Afaik, something to the effect of "an admin fee is optional for the adviser if he chooses to charge it" in the terms of business doesn't by itself justify an admin fee now. You would have to word it clearly enough to indicate what a fee is contingent upon.

As an example this is my ToB which also indicates that a fee may be charged but clearly outlines in what circumstances and at what point.

------------------------------------------

The Costs of our Service

Mortgages
We may charge a fee of up to £XXX, for advising and submitting your mortgage application. This fee is payable upon the mortgage application being submitted to the lender. The fee is non-refundable but can be used on another application. We will always advice on the fee being charged (if any) before we proceed with an application.
We will receive and retain any commission paid by the lender when your mortgage completes. This amount will be confirmed by the lender in their disclosure document.

Non-Investment Protection and General Insurance Contracts
We do not charge a fee as we will receive commission from the provider/insurer after your policy has started.

-----------------------------------------

Carl2510

I sold my house in October and my MA adviced me not to cancel my life issuance? Am I being played so they don’t have to pay back a fee? I have currently bought a new build due to be completed next year?

MWT

Carl2510 said:

I sold my house in October and my MA adviced me not to cancel my life issuance? Am I being played so they don’t have to pay back a fee? I have currently bought a new build due to be completed next year?

Would any unbiased advisor suggest you needed life insurance?

Plenty of reasons why you might still value having the insurance even without a house, but your MA is skating on thin ice if there is no rational reason to have the cover and they are benefiting from its continuance...

LearnerMan1

Carl2510 said:

I sold my house in October and my MA adviced me not to cancel my life issuance? Am I being played so they don’t have to pay back a fee? I have currently bought a new build due to be completed next year?

If you don't have a partner that needs support or dependents to leave a house too in the advent of your death. Do you think its necessary to have life insurance? Its entirely up to you.  Is your MA getting a cut out of your insurance payments? You should check this. I think be the sound of the advise given to me here. If you got the insurance through them when you got the mortgage I'd say they are getting a cut out of the premium.

ACG

It sounds like your broker waived their fee in lieu of getting commission for the protection policy. But that should have been explained to you. If a protection policy is cancelled within the first 4 years, the commission is to be repaid in part... general rule of thumb is to multiple the premiums by 20. £30 a month premium, would have meant £600 to the broker. 

If you cancelled it after 12 months, he would have had a clawback of around (probably slightly over) £450, meaning he received commission from the lender and also £150 from the insurance policy.

The way you have explained it sounds complicated but I suspect that is just because it has not been explained to you in a straight forward way. 

dunstonh

The mortgage adviser now has said that I must pay for their services. I want to ask. Is this the case? I thought that they were getting commission on the mortgage not the insurance?

The rules changed on this some years back due to the Consumer regulations Act 2015.    Some do not appear to have realised.  However, its not a black and white case and depends on the process.
1 - using the commission to offset a specific fee is allowed.
2 - using the commission to offset a non-specific fee is not allowed (breaches CRA 2015).  

You personally have no liability for any clawback under the CRA 2015 unless you agreed for a commission to offset a fee.   The fee has to be specified as an amount on your fee agreement.   It cannot just say you are liable for any clawback.  Prior to CRA 2015 it was not considered an unfair term to have it unspecified.

Recently I have decided to stop paying for life insurance for my mortgage, as firstly I have no partner and secondly no children,

If you were sold life assurance with no critical illness cover then this would likely be considered a missale.  If there is critical illness cover then it wouldn't be as the cost of including life cover with CIC is often pennies and considered sensible to include it as you may not need it now but may later due to the length of time a typical policy is in force for.

 On the copy of the terms of business contract I signed it says an admin fee is optional for the adviser if he chooses to charge it.  So I guess he has me on that, although morally its not nice. I sent him back a reply saying I would pay it but I don't want any further dealings. He then replied and says he changed his mind as he values me as a client and has decided to waiver the fee. I wonder what would have happened if I had said at the start I didn't want the insurance to begin with? 

Obviously, we dont have the whole agreement but that wording would not be compliant with the CRA2015.  Yes, the adviser has the right to make a charge but they must specify the monetary amount at the outset.  They cannot make it up down the road and try to apply it retrospectively.