why you should REALLY support brokers

NeilQuinn

Kez100 wrote: »

is there anything stopping you doing the above - working only on a fee basis?

Yes, Kez.........the general public. In the main, people don't want to pay fees. Most are quite happy to get good advice & for us to receive the commission, whether it be £100 or £1000.

It's a bit of a crazy world, ours. You can spend 12 hours on a case & receive £100. The next week you'll spend one hour on a case and receive £1000. The week after you'll spend 12 hours on a case and receive absolutely nothing because somebody hasn't been truthful, been gazumped or a housing chain has broken down. All circumstances beyond our control but it happens.

I can't think of many other professions be it a plumber, lawyer whatever who'll do hours of work & not get paid at the end of it.

homer_j_3

Does a direct deal automatically mean its a bad deal? In my opinion, it does not.

Are we as brokers saying that people should pay indirectly through potentially more expensive products to receive the choice? I think the current system does imply that.

Will putting a leaflet together with the IDD, actually impact on anything when you get clients going into branches to see the adviser and coming out credit checked and agreed by the end of it. Will many people actually read a document that fully when they don't even read the IDD in the first place?

If we have to read it out to them, you will only get the sales aspect put on these documents like - "yes we do not provide advice but our products are cheaper direct than through a middleman" Customers will not pick out the fact that they are losing advice, they will just pick out that advice is more expensive.

The industry needs to work together, not against each other. I do not believe that we need more tools to spin things. We need to alter the regulations to allow us to access the direct deals and that will not happen as the FSA have clearly stated this.

Sorry if I being perceived as being negative towards your viewpoints MM but we have had dual pricing for many years. OK its becoming a bigger part of our lives. The issue has been magnified with decrease in volumes of business because of economic reasons.

The industry is going through its toughest time in the last 10 years. Lobbying the FSA will not increase the amount of money there is to lend nor will it increase consumer confidence in the housing market nor will it reverse the last 12 months of decline.

What we need to be doing is speaking to the FSA and banks about how we can work together and promote choice but ensure that income isnt lost to the banks or brokers. The government need to be involved to help those who cannot afford advice and maybe look to put advisers into places like CAB who are salaried and want to do the job to help people rather than earn shed loads of money.

Kez100

Neil - All of that though is your business model. It's what you signed up for when choosing to become self employed in this field. The reason HMRC let people have self employed status does often hinge on risk - and that covers all the things above you mention.

If you wanted to be paid per hour and have 'less' risk(not no risk) of not being paid then you should have become a plumber or lawyer. If you wanted no risk you should have become employed in a different field.

Being self employed is tough.

MM and the others on dual-advice. I do see exactly where you are coming from in saying banks are not tied to giving advice of the quality you perceive you do. I do know many professions that battle with the unqualified but, at least they are small men and not likely to literally trample on you overnight when the fight for work begins. That is - from what I gather from reading your links - has happened in recent months. It does seem wrong to a member of the general public that people do not know that brokers offer impartial advice when the big boys are not under the same regime.

On the other hand, I think the profession has grown up around the boom time and some dodgy practices - which are just hitting many - are putting the whole industry into disrepute (including many banks). I'm not sure words and advertising will do much good - the public are rightly quite cynical at the moment! We need positive action and I can see why you think banks and brokers should have rules that are, at least, in line. Selling ones own products is one thing but having rules that say you can ignore best advice in selling them is something completely different.

Through all of this though, I cannot see how it will help you in the downturn in terms of income. If the bully boy banks want a bigger slice of the pie (seems to me they were treating you all as subcontractors when there was too much work for them to do) then I just cannot see how you will win through.

MortgageMamma

homer_j wrote: »

Does a direct deal automatically mean its a bad deal? In my opinion, it does not.

Are we as brokers saying that people should pay indirectly through potentially more expensive products to receive the choice? I think the current system does imply that.

No, I don't believe thats whats being said. I believe that the lenders should offer brokers an equally competitive product to what they offer direct in their branches, and still pay us to advise, market, administer etc

Will putting a leaflet together with the IDD, actually impact on anything when you get clients going into branches to see the adviser and coming out credit checked and agreed by the end of it. Will many people actually read a document that fully when they don't even read the IDD in the first place?

This isn't just about dual pricing. its a wider issue. Consumers need to be informed of the advice channels available to them and the advantages and disadvantages of each channel. This is for the consumers benefit as well as the advice industrys. Its a plea for clarity as currently the system is unfair to consumers. The leaflet I am talking about should be a mandatory document, and, there are differing views on this but I personally feel a consideration period should be given before any formal advice could be given. There are various benefits of a consideration period to the consumer. 1, it prevents them making rash decisions and being victim to clever sales tactics. 2, it breaks the advice process down into digestable chunks so they understand whats happening and are not blinded by science or subject to lengthy meetings where their concentration can drop. It will stop those advisers who factfind, "advise" and sign up all in one meeting from doing so. The advantages to advisers themselves is that the meetings are structured to allow a consideration period whereby they can truly focus on the clients needs and think carefully about the advice they give BEFORE they give it.

If we have to read it out to them, you will only get the sales aspect put on these documents like - "yes we do not provide advice but our products are cheaper direct than through a middleman" Customers will not pick out the fact that they are losing advice, they will just pick out that advice is more expensive.

No, we are regulated as are the lenders. We present an IDD in a client friendly manner, this should be something that has a uniform approach. The client should be given the leaflet to take away during the consideration period. The format of the leaflet should be adapted in different languages and ways to help people with differing needs i.e. blind people - braille could be offered or a talking book.

The industry needs to work together, not against each other. I do not believe that we need more tools to spin things. We need to alter the regulations to allow us to access the direct deals and that will not happen as the FSA have clearly stated this.

Never say never. The Financial Services Authority need to be campaigned against and pressure put on them to see that they are not acting in the true interests of the consumers at present. If they are what they say they and enough people, both the general public and intermediaries alike get behind the campaign then eventually they will sit up and listen. Letters to MP's always help in these situations.

Sorry if I being perceived as being negative towards your viewpoints MM but we have had dual pricing for many years. OK its becoming a bigger part of our lives. The issue has been magnified with decrease in volumes of business because of economic reasons.

I don't perceive your comments as negative, I just dont think you have considered what I am saying to the degree I would like. This isnt an easy concept to get across - some restructuring would be required within the industry, particularly from lenders, but its a far better way to deal with things that wiping the slate clean and starting again industry wise. Some of the regulation we have is good, some very impractical - the FSA should build on the regulation we currently have and fine tune it to perfection, not restructure an entire industry to the detriment of the consumer.

The industry is going through its toughest time in the last 10 years. Lobbying the FSA will not increase the amount of money there is to lend nor will it increase consumer confidence in the housing market nor will it reverse the last 12 months of decline.

Nobody is trying to correct economic conditions here. To me, the current economic conditions present an opportunity to improve things for the consumers, and to make things fairer and more consistent for both consumers and intermediaries. I agree with conrad about the naturual cull of brokers, who knows who will survive and who will go, but this is an ideal time to implement changes to benefit all.

What we need to be doing is speaking to the FSA and banks about how we can work together and promote choice but ensure that income isnt lost to the banks. The government need to be involved to help those who cannot afford advice and maybe look to put advisers into places like CAB who are salaried and want to do the job to help people rather than earn shed loads of money.

Why should the Government use taxpayers money to provide financial advice to the needy when if the right systems were in place they could get it for free anyway? Intermediary associations and indeed individual intermediaries ARE talking to the FSA and "trying" to talk to the banks (who have conveinently closed their ears on the issue" to try and establish talks for a way forward. There are organisations joining forces to become one united front - things are being done, but the apathy from some brokers to accept their fate is absolutely appalling.

So this is it, its crunch time. Results won't happen overnight but there is power in numbers and it would be great if other intermediaries and the general public could support brokers to campaign for fairer legislation, definitions and financial structures.

HelpWhereIcan

Unfortunately, as bad as dual pricing is for customers, the FSA is correct that it cannot force lenders to stop dual pricing under competition laws or its own rules.

Unless the alledged cartel can be proven to exist, that is how things will remain until an element of liquidity returns to the market.

Whether the FSA should have the powers to prevent this is another matter. Even if they get them we (as brokers) have to remember that the last 5 years have been heavily weighted in favour of brokers with broker only exclusives and many direct only lenders unable to compete most of the time with deals available through brokers. An end to dual pricing means an end to broker exclusives as well.

The market has changed and we have to look at this as an opportunity to increase the professional image of the industry. Not, in my opinion, by just telling people about the value we add and helping to ensure that customers make the right mortgage choice (thank you Lisa/MM), but by being seen to do so.

The RDR is on its way. Increased professionalism is on its way. Increased qualifications are on their way. Maybe not this year, next or even in 3 years time... but on their way. Anyone looking for a long term career in this industry needs to accept this reality.

Now is the time for brokers to seize the initiative back from lenders. Go professional. Work on a fee only basis.

Send your customers to HSBC if they offer the best 'product' - we offer the best advice and deserve to be paid for it. Warn them about the prospect of being subjected to a hard sell on uncompetitive and possibly unsuitable cover (life cover for single no dependants as has been mentioned).

That customer will come back to you for advice on those other areas.. if you can show that your advice on the mortgage is professional. They will reccomend you to others who may not be suited to a mainstream mortgage etc etc.

Fighting for the conditions of last year is, I fear, merely yelling at the tsunami hoping to force it back.

I have been working for a customer this week moving home on this basis. She is significantly better off on an HSBC deal than the nearest deal I could get commission on. I calculated that, by paying me a £150 research & reccomendation fee, she has saved £800 over 3 years compared to the best deal a broker who would only look at deals paying commission would reccomend.

She has been more than happy to pay for the reassurance that the deal is right and that her circumstances won't restrict her options in the way she thought.

I arranged a KFI for her as well as the application form and she will be passing me the offer to give a once over when she receives it.

I have my fee, a happy customer and an intact reputation.

homer_j_3

Sorry MM. I disagree but thats life, it would be boring if we agreed all the time.

You and I know each other pretty well and we both know that we are in this for the consumer and not ourselves. Just because we have a difference in opinion to how we solve the issue shouldn't detract from this point.

I believe that commercial entities, whether they are 1 man bands to 10000 man bands, we have a right to conduct business how we want to providing its within the law. The banks are doing this.

Your answer does not work for the way I see things and clearly mine does not for the way you see things.

I believe dual pricing is as lawful and fair as charging different arrangement fees for a product.

I do not believe its fair that regulated advisers are restricted from getting verified KFIs for these products. We have a choice too then. Recommend products which pay nothing or ones that do. Its upto the broker then to choose their business model as the lender has chosen theirs.

The number of people getting mortgages will still be the same, we may see branch staff lose their jobs and brokers lose theirs too as the number of staff in the industry exceed what is required to service it.

HWIC - I concur with your post fully.

NeilQuinn

Kez100 wrote: »

Neil - All of that though is your business model. It's what you signed up for when choosing to become self employed in this field. The reason HMRC let people have self employed status does often hinge on risk - and that covers all the things above you mention.

If you wanted to be paid per hour and have 'less' risk(not no risk) of not being paid then you should have become a plumber or lawyer. If you wanted no risk you should have become employed in a different field.

Absolutely, Kez. I wasn't actually complaining about it...just pointing it out to a few people who seem to delight in other's misfortune (I know you weren't one of them).

Maybe I didn't answer your original post correctly, when you asked about us charging fees. Different brokers work in different ways & have completely different types of client bank. The majority of my clients go back many years & I also have a lot of friends as clients. I don't feel comfortable suddenly charging them a fee when I haven't previously. I don't think my clients would be comfortable paying one either.

MortgageMamma

I feel the way we have to work NOW to survive is to charge fees but to be honest I absolutely hate doing that. My suggestions are MY VISION of the future and a way that I feel that everyone would win. The customer, the intermediary and the lender. Of course there will always be a market for fee charges but I really do resent being pushed down a fee charging route on the claims that commission bias "could" occur. I'm sorry but we are so heavily regulated that we couldnt possibly be commission biased - our lender spreads are continuously assessed for a start, so I think commission bias is being made out to be a much bigger problem that what it really is.

silvercar

NeilQuinn wrote:

It's a bit of a crazy world, ours. You can spend 12 hours on a case & receive £100. The next week you'll spend one hour on a case and receive £1000. The week after you'll spend 12 hours on a case and receive absolutely nothing because somebody hasn't been truthful, been gazumped or a housing chain has broken down. All circumstances beyond our control but it happens.

Exactly like estate agents!

Who are also suffering for the same reason you are suffering, people aren't buying houses.

Whichever way you look at it the major reason why brokers are facing a downturn is that people aren't buying houses.

You could start a similar thread from an estate agents point of view (which I'm not BTW):

"I'm honest, treat people fairly act in the interest of my customers....
Life is hard at the moment because people are running scared in the credit crunch and/or can't get mortgages and/or deposits.....
So please visit your local, decent, honest estate agent and buy a house as I need to feed my kids, pay my mortgage......"

HelpWhereIcan

MortgageMamma wrote: »

I feel the way we have to work NOW to survive is to charge fees but to be honest I absolutely hate doing that. My suggestions are MY VISION of the future and a way that I feel that everyone would win. The customer, the intermediary and the lender. Of course there will always be a market for fee charges but I really do resent being pushed down a fee charging route on the claims that commission bias "could" occur. I'm sorry but we are so heavily regulated that we couldnt possibly be commission biased - our lender spreads are continuously assessed for a start, so I think commission bias is being made out to be a much bigger problem that what it really is.

If commission is to be allowed I agree that it has to be standardised to protect the image of the industry.

I do however believe that commission should be rebated in all cases where a fee is charged and that is where I agree with the FSA/RDR and all the other bogie men.

Customer Agreed Remuneration/Factory Gate pricing are on their way and we have nothing to fear from it.

On another tack, if a lender does not want to allow me to assist the customer with their application, that is their choice. As long as I give the advice to the customer any administrative task I carry out is an additional service. One that has to be paid for.

My accountant charges for doing the company accounts, filing them with companies house and submitting mine and the company's tax returns. I pay a fixed fee, but it is all broken down somewhere in a (relatively) transparent way.

If I decided that I wanted to let him do the accounts, but I would submit the returns etc my fee would drop. The fact that he does it better, quicker and with less hassle than I ever could means that it is worth it to me to let him do it and pay him for it.

If the revenue decided to prevent accountants submitting returns for their clients, the accountant would not be able to charge a fee for submitting them, but could still charge for preparing them and would be able to spend the time previously dedictated to submitting returns on another part of their business. Either way, their admin cost could go down reducing the need for accounts personnel meaning they could cut that cost.

Given the same set of circumstances, I can help a customer get a mortgage offer for a particular product quicker, easier and cheaper than they could get for themselves ... that's the value I add for them. If the lender will not allow me to get involved, fine. The customer just pays for what I have done - the advice.