why you should REALLY support brokers

MortgageMamma

Trollfever wrote: »

Dear MM,

Thank you for taking the trouble to contact us about your concerns. Based here in Canary Wharf we have little contact with what is actually happening on the UK High Street. Sadly we only found out about problems with Northern Rock when we saw the queues outside their branches on TV.

In this instance I have passed your concerns to my father Gordon, and he should be phoning you personally over the weekend.

Happy trading.

Yours sincerely,

Hector.

Absolutely hillarious!:rotfl:

BrokeRage

Quote:
Originally Posted by BrokeRage
HWIC mentioned charging a fee for mortgage research and then getting the protection business. The RDR will remove commission from there as well, so that business model is a dead duck.

Actually not what I said, and not what I meant either.


Quote:
Originally Posted by HelpWhereIcan
Now is the time for brokers to seize the initiative back from lenders. Go professional. Work on a fee only basis.

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

I am advocating the fee based approach to ensure that we get paid for the work we do. The fee paid covers the work done - no more dealing with tyre kickers or giving advice for a case to fall through and receive nothing on it.

If commission is removed from Protection Business then a fee will need to be charged for advice and/or administration on that as well.

The RDR does not call for all commission to be removed

http://www.ifaonline.co.uk/public/sh...ml?page=791553

http://www.citywire.co.uk/adviser/-/...aspx?ID=302958

but looks to push Customer Agreed Remuneration and promote trail 'commissions' or fees to pay for ongoing advice/servicing which is only fair."

My apologies, HWIC, I was in a rush when I posted and mixed up your response with another.

You are wrong though about RDR. It is trying to remove up-front commissions and replace them with up-front fees. Even the links that you provided effectively say this. You don't even have to read between the lines to see that....they have been forced away from that goal by reality, for now, but protection commissions will cease within a year.

I have learnt from bitter experience that few insurers honour agreements in the long-term and, as a species, have become increasingly untrustworthy over the last 25 years, so I may like the concept of trail commissions, but I would not trust providers to maintain payments.

Unfortunately, I no longer believe a word that is said by our regulators. They talk with forked tongue and, sadly, I knew that this would happen the moment they uttered the words "Light touch regulation".

Finally, somebody earlier mentioned that providers can charge what they like in what form they like (Hector Sants' "Commercial decision). Why do people say this? They are regulated organisations and should not, therefore be free to do what they will. I have "Commercial decisions" to make, but the regulator doesn't allow me to make them unless they obey the rules. The whole thing is nonsense.

MortgageMamma

Somebody said earlier. HWIC I think that if we move to a fee based model, which we must at present (but I hope not on a permanent basis) that we will end up only advising clients who can afford to pay us.

That is just so wrong. as I said earlier those that can't afford to pay for advice are those that need it the most.

I know there are a lot of people pushing for a purely fee based model, or fees with commission rebated but this model will not work for people in trouble.

If the FSA ordered lenders to standardise the commissions they pay, and pay the commission on the drip the the consumers that need advice would get the advice. brokers would still be remunerated and it would eliminate commission bias and illegal inflation of self certification income. Why is it that the FSA insist on attacking the advice providers, it is the lending institutions that should be taken to task and forced to make changes.

Graeme7777

Hi,

This is a very interesting discussion even though I'm not part of the industry.

Although I railed against commission-only compensation arrangements elsewhere in this thread, it has also occurred to me that we consumers are no longer used to paying (directly) for financial advice. For example, it seems to be received wisdom on this website that one should only deal with fees-free mortgage brokers. If a broker is to eat he or she has to rely on commissions from lenders. But we don't like that arrangement either.

Unless you can get consumers to attach a value on your service I would suggest that it may be difficult to proceed without relying on commissions.

MortgageMamma

I can see what you are saying Graeme but a lot of reasons the consumers don't use brokers is because they dont know brokers exist, or do know but don't know the value of what we do, or may know both but be so convinced of the stereotype that has been painted of brokers by the press and the odd bad apple that they daren't use us.

I myself didnt know what a mortgage broker was and did until I was about 22, and I only learned as I worked in an IFA office.

The thing is some brokers are so full of their own self importance regarding their job that they forget some people genuinely do not know we exist, and what we can do, let alone the benefits of using a broker.

Thats why websites like this, and some aspects of Martins articles are helpful to the public and making them aware of whats on offer.

But why should Martin Lewis have to champion consumer education and distributing the benefits of using a broker to the public? this is something that the Financial Suicide Authority should be doing, hence my letter to them that I published earlier in the thread.

BrokeRage

Kez100 wrote: »

Out of nosiness (and that is all it is - please ignore my post if you want) what drop in work have you seen? If you take an average month early last year, say, and May 2008?

Happy to answer that, Kes100 and it is good that you are taking an interest.

May 2003 was 1.875 million, May 2004 1.5m, May 2005 2.8m, May 2006 2.4m, May last year 1.7m and this month was just over 1 million. My self-set aim is 2 million a month in submitted mortgage borrowing, so I am only 50% this month, which is unsustainable for any length of time.

Before anyone does the sums and claims I am earning £8,000 a month, I have a secretary to pay, office costs and a split to business partners. Furthermore, not all cases go through to completion.

BrokeRage

There is a massive difference between someone paying a fee for assistance investing a fortune in funds, or planning a pension, compared with first-time buyers or distressed borrowers under threat of repossession.

Graeme7777

I've got no evidence beyond the anecdotal to back up this assertion but my own experience chatting to friends and acquaintances suggests that people are well aware of mortgage brokers but don't have much faith in them. I think that as consumers many of us have been burned - often more than once - by intermediaries in the financial services and real estate industries.

I would go as far as to say that using such intermediaries is often viewed as a necessary evil when buying financial products or property. So if people can avoid dealing with brokers and agents - for example, with DIY real estate packs or choosing a mortgage from a best-buy list on a website - they may be inclined to do so. And this disintermediation is only getting easier.

My own suggestion, for what it's worth, is that brokers need to offer clear and desirable value to the borrower. These days we have far less need of someone to compare offerings in the market for us or to complete an application form. When sitting opposite a broker who can't calculate an accurate monthly repayment using a calculator it's easy to wonder what he adds to the transaction other than another layer of costs.

As a consumer I think that mortgage brokers - though perhaps not as many as in the past - have an important role to play but you may need to work harder to convince both us and the lenders.

That said, I have little doubt that yourself and the other regular advisors who post on this site will continue and thrive. You guys clearly know what you're talking about and are eager to help. As a borrower I can't ask for more than that.

MortgageMamma

Thanks for your opinions Graeme its nice that you are being completely honest but not in a defamatory and insulting way as some MSE users can often be. You are quite right of course, some "Brokers" have made a pigs ear of the industry and damaged the reputation of those of us who really are dedicated to the job and reallly do know what we are doing.

This is why I think standardising mortgage commission and paying it on a monthly basis rather than an upfront lumpsum would be a good thing. It would rid the industry of the quick buck wide boys and only the long term dedicated advisers will be left and eventually the good quality advisers will raise the profile of the industry. The industry needs advisers that will always put their clients needs before their own, and I'm sure there are some advisers like that, in fact I know a number of them - ethics is the key.

BUT I have mentioned this "paying on a monthly basis" to many of my adviser friends and they all recoil in absolute shock and horror. The reason for this is, as mortgage brokers we really do not earn a fortune, especially when you put our earnings in line with hours worked, huge paperwork requirements, continous professional development and the lifetime liability for the advice we give. for those of us who do not charge fees and who do the job PROPERLY (paperwork watertight et al) it is extremely difficult to gross more than say £60k and then you have to take running costs out of that.

I want to try and make the industry a fairer place for everybody and raise the profile of mortgage advisers. I just wish I could get some support behind me but the apathy really is appalling. I see and here brokers every single day moaning about how bad things are but hardly any are prepared to challenge the situation and invest their time and resources in securing their own future.

Graeme7777

You're very welcome MM. Good luck with your campaign!