The inaugural Woolwich Intermediary Forum was held in the Barclays building in Canary Wharf hosted by Mark Parsons, managing director of Woolwich mortgages. The 20 participants covered a wide range of the intermediary market with the network, packager, mortgage club and broker sectors all strongly represented in the discussion.
The forum was chaired by John Cowan who has over 40 years experience in financial services, specifically in the intermediary sector. As a former board member and adviser to a number of financial institutions he was well placed to chair such an event.
Broker commission
Commission and procuration fees are always a contentious issue, but there was a general opinion in the room that although procuration fees are important, different types of business mean different things – for some, cash and cash flow is king, for others it is just part of the business mix. This issue means there are different types of ways that different parties want to be remunerated, the key for lenders is to be able to accommodate a range of requirements.
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Mark Graves, managing director at Linear Mortgage Network, called for lenders to recognise the different business models in the marketplace and be more flexible to tailoring their propositions accordingly.
Many of the mortgage brokers involved offer a choice of fee or no fee based models to their clients and opinion was that they do not think the mortgage market will go the same way as the IFA market where fee based models are now dominating. They insisted that their clients want choice and only if the mortgage market changes from a more commoditised type of product into something more sophisticated could fees be fully justified.
Client ownership
In terms of sharing the rewards of looking after the customer, the view from the group was that they would be happy to look at this but are not interested in the income/margin made from lenders on banking products. Those who use insurance products have their own deals in place rather than using a lender’s insurance.
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There were differing perceptions in the room regarding who actually owns the client, the general consensus being that brokers believe they own the client and the majority of other parties claimed shared ownership of the client. The group discussed the merits of trail commission but agreed that no structure that could work across the whole of market, and cited it would need to be individual deals for individual circumstances.
One broker regarded best advice as being able to offer strong longer term deals for their client and asked for more competitive long-term rates, specifically in the five to 10-year range, with 10-year deals being particularly attractive if they had a five-year get out clause included.
Sally Laker, managing director of Mortgage Intelligence, also thought there was demand in the market for long-term fixed rate deals and highlighted the prospect of a lender putting together a 20-year fixed product with certain clauses written in. She added that it would only be a truly viable product if there are clauses inserted so the product can be reviewed every three years even if it is only via a small window of a few weeks. This will aid ‘Treating Customers Fairly’ procedures and brokers could be offered a procuration fee if clients stay on the deal – providing they have sufficient proof this is still the best deal available, of course.
Retention
There was a general acknowledgement that there is a demand for strong, well structured longer-term products but it is important that the client’s status and deals were reviewed every two to three years in order to maintain best advice. This stimulated the topic of retention.
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This area caused great conjecture within the room. The intermediary contingent of the group expressed their concerns over the market’s fixation with two-year fixed rates but it was suggested it appears to be driven by more customer demand and media bias rather than the broker market itself. Many brokers around the room felt they have the best retention models in place because revisiting and rebroking a client helps their income and helps the client. A big ‘fear’ is not the customer staying with the lender but being rebroked away by another mortgage intermediary and therefore future business and earnings being taken away.
The theory of retention fees was considered a good one provided the mortgage intermediary continued to advise across the whole of market and not just sit with the lender because it was now providing a fee for doing so.
There was a little suspicion about lenders trying to take the customer away from the broker but there was an emphasis that the customer was the intermediary’s customer if they had sold the mortgage. However it was not thought that lender retention schemes are going to kill the remortgage market.
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The important thing to remember is that different clients want different things. Retaining a client to the same lender when their deal is over means the same amount of work for the broker doing the factfind, just less work in terms of lender paperwork.
The human touch
The human touch was highlighted as being as important as ever but technology has its place in forging efficiency and speed of process. Tom Cleary, director at Mortgage Find, pointed to reducing front-end time processes as being critical when lenders looked to increase intermediary propositions. He suggested that offline/online solutions were key elements to any offering, going on to say that if front-end processing was right then ultimately service will take care of itself. In the not too distant future he saw electronic identification as the norm with any paper-based applications soon becoming a thing of the past.
All of the mortgage brokers around the room wanted a lender who is straightforward to deal with and has well-conceived, easy to understand products, criteria as well as simple and fast processing. The major problems occur is when the system or process is not intuitive.
It is quite a simplistic view, but is very apt in providing and maintaining strong levels of business.
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In response to this, Cowan agreed that that there was a need for an online hygiene factor but posed the question that when speeding up the processing does this inhibit or nullify the advising procedure? Is there too much emphasis placed on speed?
Cleary noted that speed was intrinsic to the purchase market but less so in other elements of the mortgage market.
Ian Fitzgerald, area development manager for the Thinc Group, expressed that there had to be a fundamental difference between processing and the advice procedure and maintaining the balance is of utmost importance.
Thriving market
It was thought that the industry will continue to thrive if brokers keep pace with technological developments and lenders realise what support brokers need in terms of these innovations. Listening and working together will ensure that all parties involved in the process will provide more opportunities to keep and expand their share of the market without being in danger of losing business to increasingly technologically savvy competitors.
Technology for technology sake has no place in the market. Understanding systems and processes is imperative for it to work efficiently.
You can’t look at technology without looking at the internet and it was interesting to hear views regarding how the internet was affecting the mortgage market. The resounding voice was that while the internet is a fantastic research tool, for business transactions of such high values people still need to have human intervention and recognise the value and reassurance of face-to-face advice.
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This navigated us back to one of the first points highlighted in the discussion – that brokers continue to remain vital in the advice process but only if they maintain the quality of advice, and that word again, give value to their clients through their knowledge and expertise. While it is the lender’s job to innovate through products, online propositions and service levels in order to provide the broker with the necessary tools to maintain the process, communication is key in today’s world and through forums such as this voices do get heard, and while we may not always like what we hear it, as a lender it is our duty to listen to such important distribution channels.
This was a useful forum and gives food for thought for Parsons, David Finlay, Woolwich intermediary business director, and Fiona Kitchin, Woolwich senior intermediary marketing manager, to look at acting on what has been heard in order to move forward.
