There is increasing pressure on distributors from all angles of the mortgage market but unsurprisingly most of this pressure stems directly from lenders. Maintaining strong relationships are the key to any business and making sure these relations work for both sides can invariable result in success and longevity. However, this sometimes means walking a bit of a tightrope and as a result of such a volatile market a sudden change of climate can easily throw one party, or even both, off balance.
Networks can often find themselves somewhere between a rock and a hard place. They are increasingly looking for ways in which to service their ARs’ needs in order to keep them happy and remain under their umbrella. Of course this is not made easy in the current environment which is dominated by lending restrictions and funding issues. This was further illustrated by recent figures from the Bank of England reporting that the level of mortgage approvals for house purchase in January has remained static at 31,000. So, with this in mind, it is little wonder networks are looking to alternative sources of income.
Conflict
While it is clear that distributors are exploring other areas of the market such as debt solutions, secured loans and insolvency services, to name but a few, none seem to have caused lenders to raise their eyebrows as much as when looking towards affiliations with claims management firms. There have even been a few rumblings recently in the pages of the trade press that networks are being urged to steer clear of claims management firms by various un-named lenders.
Coming from lending background it is easy to see the lender viewpoint. It would be easy for a lender to make a knee jerk reaction as, on one hand, brokers/networks are providing mortgage products while receiving proc fees and then, on the other hand, working with certain claims management firms to challenge the very same lenders. This could certainly leave a bad taste in the mouths of some. However, as with most things in life this issue is not as cut-and-dried as might first appear. It is important to clarify that not all claims management companies are the same. There are different types of firms out there dealing with other types of agreements.
Lenders should not tar all claims management firms with the same brush and to instruct networks not to deal with claims management firms across the board without knowing the types of claims being made, we believe, is unjust. There are simple ways to undertake research on the types of claims being made by individual companies and this should be done with the same stringency as should be done before entering into any affiliate agreement.
Be careful
The Association of Mortgage Intermediaries (AMI) has issued guidance to its members regarding claims management firms. It urged them to be careful and to make an informed decision before working as an introducer with a claims company, as the cost to their reputation could be far greater than the reward of referral fees. This is a message that we also echo.
As with entering into any business arrangement the act of due diligence is vital to securing the reputation of all individual firms as ultimately they, along with their clients, will be the ones losing out. There are currently many claims management companies enticing intermediaries with promises of large referral fees but it is imperative to put reputations and track records under scrutiny in order to secure good service on behalf of their clients.
Claims management firms must be regulated by the Ministry of Justice. Any solicitor used must be regulated by the Solicitors Regulatory Authority and it is vital that they should possess the specialist knowledge required and that firms have high level barristers at their disposal. A proven track record and reputation are also crucial combined with a strong, experienced management team and staff.
There is increasing appetite for diversity in the market and we are certainly experiencing a strong level of interest. But, the important point remains that claims management firms are not all the same and networks, brokers and lenders should all be aware of this. A select few could actually open up new income streams without a tidal wave of lender opposition but a select few others could also just open the tidal gate to flood of problems. Fortunately the decision is yours.
