In explanation, the issue is not just about asking customers for a fee to arrange their mortgage. It’s about brokers’ ability to demonstrate they can research the whole of market in depth – not just on the headline rate (which mostly is what web-based price comparison sites do). Only then can brokers prove to customers that they offer the very best service possible. The idea of charging fees also involves customer choice between paying a fee for advice on direct products or possibly no fee (or a reduced fee) for advice on intermediary products that pay a lender proc fee. But, to make a true comparison between the best intermediary and the best direct product, brokers must a have a statistically robust comparison tool – whether they build one themselves or invest in a proprietary analysis programme.
In addition, evidence from our own customer base shows that a sizeable proportion of customers that opt to take the direct-to-lender deal are happy to pay a fee because the analysis shows them the saving that they are making by doing so. Should there be very little saving, or indeed if the intermediary product is cheaper, then the justification works both ways and the broker can recommend the Intermediary product as the cheapest option.
In some cases (especially at lower LTVs) by adding a fee to the direct product and thereby creating their own procuration fee, the intermediary product can also be shown to be better value.
We have also found that in cases where the customer cannot afford to pay a fee then they are happy to take the intermediary product in the full awareness of what other products they could potentially have chosen, were they to have paid a fee.
When a direct product is being sold the broker can then go on to manage the application process without the need for the customer to go to the lender. Finally, as all brokers know, retaining the customer is the best position from which to sell additional appropriate products such as the related insurance. Many are saying that by demonstrating savings on their chosen mortgage product to the customer they create the opportunity for their customers to use part of that saving to safeguard their future. In this way, being able to source direct to lender products lessens the chances of the customer walking away.
I realise that many brokers want to stay in their comfort zone and they desperately wish for a return to the good old days of generous proc fees from lenders. Unfortunately, those conditions are unlikely to return in the near future and only those who can change with the market and adapt to new methods of doing business are going to succeed in the long run. We are dedicated to helping brokers to find the most appropriate way to thrive given the circumstances we now find ourselves in. The fact remains that people have never needed a broker more than they do now and those that can find the approach that works best will have strong, sustainable, profitable businesses.
Perhaps it is time for brokers to consider how to avoid being in a situation where the lender dictates what they can or can’t earn.
