why you should REALLY support brokers

homer_j_3

Thats the question I have no answer for really.

The evolution will mean the strongest will survive and the weakest will not. Strongest does not mean best and weakest mean worse either.

A lot of variables can determine where we go from here. Whatever happens, there is now less cake to be had and the same number of people to feed.

HelpWhereIcan

I think it is both cyclical and an evolution of the market.

By that I mean that the argument made by lenders that this is temporary has some merit. No one can argue with the fact that everyone will be lending less this year and their priority will be to keep their own staff busy first.

I also believe that lenders have concerns over quality of business coming from certain intermediaries and will be looking to cull numbers and move the market away from the 2 year churn that has dominated for the last 10 years.

My thoughts on this were confirmed by a conversation I had with my BDM from a certain blue logo'd lender. He came to give me his new mobile as they have culled some brokers from their panel based partly on volume but also on quality. Those not producing the volume, type of business & quality they wanted were having field based BDM services withdrawn and some had lost their agency.

The only way to get an agency now is via a major network (you all know who the lender is) and my BDM was tellingly quiet when I suggested that we may be returning to the days of lenders being selective about who they take business from.

I also believe the evolution will see the end to upfront commissions over the long term and the introduction of Customer Agreed Remuneration, Factory Gate Pricing and trail commissions based on outstanding loan amount/offset balances etc (as they have in Australia and IF tried once and are trying again).

Will be good for some brokers, bad for others. Those working as part of the major networks, National Firms or other KEy Partners will be the only ones with full access and commission agreements (trail or upfront), they will be likely to be charging a fee for their advice and have customers who have mortgages for the longer term due to features such as offset rather than just pure rate.

Pure rate churn will always be there, but it is expensive for lenders and customers alike, forces brokers into an unstable business model and will be part of the market lenders will wish to end.

BrokeRage

Graeme7777 wrote: »

Hi,

Am I correct to surmise from what has been said on this thread that the future for giving financial advice (at least regarding mortgages/loans) is bleak as the lenders are seeking to reduce their costs by cutting intermediaries out of the distribution channel?

If so, is this just a cyclical event or does it represent a structural change in the way financial products are distributed in the UK?

Thank you for sticking with this thread, Graeme. It is not to do with reducing costs (proc fees merely pay for processing and market share). It has to do with supply and demand and with lenders trying to pay for cheap deals with cross-sales of ancillary products, for which they receive commission.

You should move away from the concept that lenders are saving themselves the commission that they pay to brokers with dual pricing as this is a minimal factor. A 100k mortgage typically pays the broker £300-£400, but a comprehensive suite of protection products can pay three or four times that amount, sometimes more. It has nothing to do with "Procuration fees". It is about flogging commission-bearing protection products and property insurance to captive clients without the regulatory burden of providing advice.

Lenders do not want their products scrutinised externally. It may be that financially-aware consumers feel that they are informed enough to counter this pressure, but even I have felt that my application is at risk if I don't protect my mortgage/loan with their cover. It is insideous and intimidating to consumers and requires action by a regulator who understands the vulnerability of the applicant.

ixwood

BrokeRage wrote: »

..
It has nothing to do with "Procuration fees". It is about flogging commission-bearing protection products and property insurance to captive clients without the regulatory burden of providing advice.
..

And that's your job!!

How dare they.

druss

I agree there is less money around to lend but when the lenders are starting to employ more mortgage sales people in branches to cope with the increased demand for direct mortgages it starts to smack of abusing their power in the industry.

Graeme7777

BrokeRage wrote: »

It is about flogging commission-bearing protection products and property insurance to captive clients without the regulatory burden of providing advice.

I read an interesting article in the press today in which it appears that the Competition Commission has recently weighed in heavily against PPI. The market isn't competitive and the many people who buy such products often have very little chance of making a successful claim against the policy.

druss

Graeme7777 wrote: »

BrokeRage wrote: »

It is about flogging commission-bearing protection products and property insurance to captive clients without the regulatory burden of providing advice.

I read an interesting article in the press today in which it appears that the Competition Commission has recently weighed in heavily against PPI. The market isn't competitive and the many people who buy such products often have very little chance of making a successful claim against the policy.

Yup the lenders make a fortune from it which is why they push it so hard on loans and credit cards, they also get loads of complaints that people are unable to claim, some add the insurance to a loan so when customers repay the loan early they still end up paying for the insurance in full.

BrokeRage

ixwood wrote: »

And that's your job!!

How dare they.

:rotfl:
That made me smile, Ixwood. There is, of course, truth in that comment as well, but:

1) I always make clients aware that they are under no pressure to buy insurance from me.

2) I provide advice and accept ongoing liability for it.

3) I have a fair number of insurers to use, so can find the right products for clients.

Most lenders aren't providing any of the above.

MortgageMamma

I read somewhere (can't remember exactly where) that only 20% of people who take PPI are able to successfully claim on it. Sohow much are the insurers making out of those 80% who cannot? Its more like a bet than an insurance cover with stats like that.

Regards

Mrs Grumpy

dunstonh

MortgageMamma wrote: »

I read somewhere (can't remember exactly where) that only 20% of people who take PPI are able to successfully claim on it. Sohow much are the insurers making out of those 80% who cannot? Its more like a bet than an insurance cover with stats like that.

Regards

Mrs Grumpy

I seem to recall the claims stats for PPI were 86% rejected in 2006.

This is one of the reasons why I find Martins article highlighting PPI best buys strange yet he is critical of CI which has a successful claims rate typically of 85% plus.