'Sub-Prime' fees made me feel icky.

Spamreported

mini mike - one mortgage a month on average, i know advisers who are shelling 30 of these a month generating 200k a year

Kez100

Well, I hope they have used the earnings - after tax - to bolster their savings for a lean period.

Spamreported

they network so their leads come from estate agents and accountants and a 2000 strong client bank. thats where reactive advisers make do and proactive strive.

dekh

minimike2 wrote: »

Non adverse a lot less.

Maybe half the time?

I dont know many brokers that charge a fee on non-adverse cases though

Thanks again for the info. If I do a bit of rounding to help my math I'll take 16 hours for an adverse and 8 for a non adverse. Does that sound reasonable? Mind you based on a possible 30 a month that doesn't seem even close to possible.

I can get a representative sample of proc-fees and broker fees from genuine recent adverse and non-adverse cases. I think I'll make sure I find out what the Halifax give. A lot of lenders are actively pricing their products uncompetitively to deter borrowers, another way would be to stop proc-fees I suppose.

I think the differences in rules governing solicitors and brokers are very interesting.

For instance if a solicitor gets a referral fee over £20 from recommending a service to a client the client has to be offered the referral fee. If the solicitor receives the referral fee as part of the natural course of the transaction - for instance in conveyancing they may recommend or take out a particular insurance or search package - then every penny has to be passed to the client. BTW a lot of solicitors still ignore this rule, so if you find your solicitor got a referral as part of your conveyancing, demand it - it's yours

If those rules were applied to brokers they'd have to pass every penny of the proc fees to the client, and every penny of kick back they get from recommending an intermediary or solicitor or insurance etc...

I guess, a possible natural result would be that they would charge more for their services but then there would be less temptation to recommend a product based on receiving proc fees. I would hope it would be much more transparent though.

minimike2

I would say those times are a true average reflection. If a broker is doing 30 cases a month then they WILL employ an administrator. It would be physically impossible to carry that case load on thier own. Hell I did 5 this week and that was more than enough to fill my time and thats with an administrator too!

Lenders do not pay the same proc fees to everyone. Different networks get different deals, largely dictated by thier business levels.

I think the question in response to the final part of your thread is....if brokers were not getting commission, why would they bother doing the job? The answer is either a. they wouldnt and people would have to source thier own mortgages and possibly lose thousands in the long run, or be sucked in by banks sales people, or b. Broker fees would be upfront, non-refundable, and £2k+ every time.

This may not be true of London where prices are high, but for where I am an average mortgae proc pays less than £400, so by the time expenses and tax are taken from it, there is actually very little profit left, if any. I often receive procs for less than what the costs of the case have been. This is obviously just in relation to the mortgage itself.


There is talk of this being the future, but its certainly not one that would work for clients in my opinion.

Its an interesting topic for discussion and I think the industry has created this unease - the fallout of the 80s and early 90s is distrust of the public and people are always wary that what they are being recommended is driven by profit instead of need.

But there are two clear drivers. This is the main one. The second is the "why should someone make £x out of me" - this is a totally different subject. At the end of the day brokers do the job they do because they earn a decent living out of it - but they should always have the clients interests first and be totally transparent. This is why you will always see me saying on here that as long as the client is fully informed and happy with the proceedings, then what is wrong with brokers making a good living?

I dont know if its where I live, but 9/10 times when I advise clients what commission is payable they stop me half way and tell me they arent bothered and dont really want to know. I still tell them as I have a duty to and I have never had a complaint about the commissions payable.

You can tell from all of my posts in this thread how transparent I am and I would hope that my fellow brokers do not look upon me as "giving away trade secrets" and the like, but I guess I am of a new breed that believes the only way to get trust back into this industry is to share this information so people can make thier own choices....else in ten years time as an entity the broker might no longer exist.

dekh

minimike2 wrote: »

I think the question in response to the final part of your thread is....if brokers were not getting commission, why would they bother doing the job? The answer is either a. they wouldnt and people would have to source thier own mortgages and possibly lose thousands in the long run, or be sucked in by banks sales people, or b. Broker fees would be upfront, non-refundable, and £2k+ every time.

My take on this would be, the commisions would stop being paid by the: lenders, insurers, intermediaries and they wouldn't even say "thank you very much" and the money would just increase their profits.

The borrower would lose out.

However if a broker did charge 2K+ in fees and passed on commissions, lenders etc, would still pay, they might try to reduce proc fees etc, but a good broker would be factoring that into the best deal for their client. Everything would be much more transparent and feel much better to the borrower, and they should end up no worse off for the deal but hopefully, less than scrupulous brokers would have temptiation removed.

I don't see why the whole 2K should be non refundable though, this immediately strikes me as sharp practice. I would however say that, if for instance 25% of the work had been done, then 25% of the fees should be payable if it was the borrower who killed the deal.

This is, of course, all pipe dreams. I don't see brokers wanting to move to a transparent model of business.

One nasty anecdote, a quote from a sub-prime broker "We target stupid people."

They charge (IIRC) £2500 in fees which are tagged on to the mortgage, on top of their proc/referral fees. I believe they didn't want this shown on the completion statement.

Thankfully my client sent all the case files back and won't work with them.

The brokers are still in business.

minimike2 wrote: »

You can tell from all of my posts in this thread how transparent I am

This is much appreciated, especialy as I'm trying to understand the whole conveyancing process.


How do you come to £2K+ would you be willing to give a typical example of what fees, referral fees, proc fees got to make up this £2K+ at the moment?

minimike2

£2k is just an example of what a broker might decide to charge should there be no commission income. The reason for the likelyhood of it being non-refundable is because all that would happen is people would see a broker to find out the best deal, then go and apply direct to avoid the fee. Brokers would go out of business. This happens to an extent now, but not massively so.

I think prices would be dictated by business levels. Its impossible to say what demand there would be on a broker in this scenario without proper testing / market reserch etc. If say on average I were to sign 4 clients a week, I would perhaps charge £500. If I was signing one a week, then £2k......pricing would very between brokers based on what they want to earn and the service that they offer, but like I say it would be impossible to say without the proper research, what demand there would be.

Some brokers currently work to this model, but the way that things are perceived in the market and by the public, people avoid them. What does everyone on this site say...."Seek a WOM Fee Free Broker".....

Now lets compare the scenarios

A. Joe Public goes to see a fee free WOM broker. Broker arranges mortgage and life cover and earns, say £2000 commission. JP gets best mortgage deal availavle, and pays £60 a month for life insurance and doesnt pay a fee.

Total Outlay £0. Total in life premiums over 5 years (average time a policy stays on risk for) £3600. Total paid £3600.00

B. Joe Public sees a Fee charging WOM broker. Broker charges £1000 (for example). JP gets the same mortgage, but as there is no commission the life insurance costs £35 a month. Upfront fee £1000 life premiums £2100. Total £3100. £500 less. Broker earns less as the client is paying less.

Personally, I would be happy with scenario B. Ive used the figures based on actual sample figures from my own business, so they are not just made up.

Reason I would be happy with B even though I earn less? - If they mess me about and dont go ahead, I still earn my money. They would be less likely to mess me about!! Plus it would remove the chance of getting hit with "clawback" from the insurance providers if the policies get cancelled.

So fees-fee isnt nececarily the best way to go. Of course, you could argue that clients would like to see scenario A, then arrange thier own insurance. In reality, it may work for a minority, but realisitcally consumers would not do this. The flip side of B is also that service from Brokers in general would slip, as they are under no incentive to get the work done quickly as they would be paid up front (other than those that care about referal business and thier reputation).

Its a really interesting discussion and one im glad that we got onto! I think in the near to medium future though, there isnt likely to be much change, if any, in the way things are done.

dekh

Thanks for the figures. I wouldn't expect any member of the public to be happy caughing up 2K before starting.

Like you say, all just theorising. It would take a change in the rules governing MAs/IFAs similar to the rulings governing solicitors which states that basically they can't take commissions.

There also appears to be a discussion going on in the Law Society (SRA) with regard to solicitors paying referrals. I for one would be happy to see this practice banned. Brokers would have to pick Solicitors based on price/quality not size of referral fee - and all those intermediary conveyancing sites that have sneaked into the market would disappear, hopefully.

minimike2

Who knows what the future holds! Only time will tell.