The endless debate about client ownership has been raging for months, with no sign of abating. With brokers, packagers and lenders all referring to borrowers as ‘their client’, the issue is unlikely to be solved to all parties’ satisfaction, in the near future at least.
Consumer interest
A recent report from the Association of Finance Brokers (AFB) claimed that 88 per cent of respondents believed that the customer was the client of the broker, event after the mortgage had been introduced. As a result of this, the AFB stated that brokers needed to ensure that the relationship was in the best interest of consumers.
AFB director, Robert Sinclair, said he believed an agreement should be set out between the broker and lender. “The issue of who owns the customer is at the heart of many regulatory revisions and Ombudsman decisions. Brokers should take care to ensure they understand these issues fully as they go wider than regulatory requirements and are based in law.
“Roles, responsibilities and limitations should be set out in the agency agreement between brokers and lenders. We would encourage all brokers to ensure that they read such documents carefully and do not agree to conditions that have a potential negative impact on relationships with their clients.
“We encourage all brokers and lenders to agree a period where the lender cannot ‘market’ the client, for, say, 12 months, to allow the broker to forge a relationship. The broker must accept responsibility to develop that relationship via face-to-face meetings, telephone calls and other communications.”
Unique selling point
This week, the issue of client ownership was raised once again, as an online platform was launched for second charge applications. Seconds2seconds.com is a system for secured loan applications that works on two levels for the broker. Firstly, it makes the application process straightforward, and secondly, it allows the broker to retain the relationship with the applicant from the initial stage through to completion.
This is a unique selling point according to director, Zac Mace, who claims that this is the real difference between its system and other offerings. Mace describes the system as a quick and simple process for secured loan applications that ensures client ownership.
He explains: “The real difference here is client ownership; this will allow brokers to maintain a direct relationship with their clients, which is the whole point of the system. This is a long way forward from the master broker as with this, the broker deals directly with the applicant from their perspective as the sourcing and application is done in the same location.
“The intention was to bring in people who had some antipathy towards the secured loan market as it is designed to be easy to use and puts the broker in control.”
Client authority
So as brokers seek to keep their contacts to themselves, the debate continues on who the client actually considers to be their authority. After all, they initially contact an intermediary to seek advice on getting a mortgage, so at that point the broker ‘owns’ the client. Once the application is made, this relationship remains until the customer moves into the property and the mortgage payments begin.
It is at this stage that the customer becomes the client of the lender in some perceptions, as they have a mortgage with a lender and when the statements arrive, the header gives the name of the company with mortgage account details for the borrower.
Robert Ridge, managing director of the Help Group, claims that if the broker has found the client, then the ownership is with that broker. Ridge says: “Brokers will often have paid out a significant amount of money either through a lead generator or through other marketing methods in order to attract that client and the broker’s ability to attract future clients to place with the lender often depends upon the ability to retain and earn money from their existing clients.”
Broker property
In regards to lenders, Ridge says that as so many companies rely on introduced business then they deserve to let the client remain the ‘property’ of the broker.
He explains: “Most brokers will give a high level of service which is likely to take into account all of the client’s long-term objectives and circumstances, which may include remortgaging the client a couple of years down the line to reduce their outgoings. It is unlikely a lender will know all of these circumstances and they obviously cannot look at the whole market to find the best deal for the customers.
“If a lender churns the client itself it is undercutting its supply chain, taking away the intermediary’s lifeline and often making the master broker look bad, especially if there is a ‘no cross-selling’ agreement in place.
“Lenders cross-selling and not remunerating the broker appropriately is hypothetically the same as brokers churning clients every six months from one lender to the next, as would theoretically be possible after the Consumer Credit Act changes next April, as this would significantly affect the lender’s ability to earn money from a client.”
Remuneration
Ridge claims that in the world of the intermediary, it is them that receives the commission until the client physically writes to the provider to say otherwise. He says that it would be nice to see the same happen in the mortgage and loan industry and if the lender does cross-sell, the broker should get remunerated appropriately, in the same way that a master broker remunerates the introducing broker if they sell on any further products.
This is a debate that will continue, as many people will argue back and forth as to who the client ‘belongs’ to. At the end of the day, as long as customers are treated fairly and receive the best advice from the broker and lender, at least the client should be happy.
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