I do this article on a monthly basis to give a market analysis of my sector of the mortgage market – secured loans. As everyone is well aware by now, this has probably been the most buoyant sector of the industry based on the new entrants, from a lending and also a packaging point of view. If you pick up the trade magazines and look at the upcoming Mortgage Business Expo, this will be confirmed immediately by the amount of adverts and the number of ‘master brokers’ who are exhibiting next month in Manchester.
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This is actually worrying me, rather than being thankful that all the hard work that myself and various other companies have done over the last three years convincing everyone involved in remortgages that there is a place for our products. Why is it worrying me? I’ll tell you.
Commission questions
Up until a couple of months ago, all the articles and advertising that was done by master brokers was of an educational type, ensuring that everyone was learning about the products within the secured lending market and when and where was the best time to use them. Everyone had two things at the front of their agenda – getting the best deal for the client and getting the introducer to understand about the products.
But now, it’s like the battle of the supermarkets – who is going to give the most off their goods? Only in this case, it is which person is going to pay the most commission?
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I have been in this business for 24 years, and I know that when you are paying the amount of commission that is being advertised it is a recipe for disaster and is a really short-term solution to try and win over introducers on a monetary basis. This is not restricted to brokers, as the recent example of one of the main lenders in our market who has recently pulled out ‘temporarily’ from the broker market. It doesn’t take an economics graduate to work out that they are doing this because broker business is not profitable for them.
An ongoing process
What really should be happening is an ongoing educational process for these potential introducers into what our market is all about and when our products should be used. It should not be ‘give us your business and we will pay you the maximum commission’, because if you are doing that, then you will not be spending enough on the infrastructure of your business to provide a correct ‘Treating Customers Fairly’ or compliance department that now goes hand-in-hand with secured loans.
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Bear in mind that the massive growth that secured loans has gone through in the last two years, according to a recent survey by the Association of Finance Brokers (AFB), which found that almost half of the firms they surveyed gave advice on secured loans while only one in 10 were members of the regulatory and compliance body FISA. If that is the case, I really hope that the master brokers who are offering ‘excess’ commission are also offering ‘excess’ advice and training on the products as well. Clearly, from the result of the AFB survey, the people who are giving advice to the public are not receiving support in the right manner.
If you are an IFA or mortgage intermediary looking to get into this market then please take some time to look around at your options as you maybe getting a better deal on commission but are you getting a better deal on support, knowledge and education in a quickly changing market where best advice and TCF are just as important as in the mortgage market?
