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What is independence? A DA broker’s view

by: Martin Stewart, director, London Money
  • 23/05/2016
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The independence that comes with operating as a directly authorised broker has many benefits, but what about the costs? Martin Stewart of London Money, explains why the market needs a level playing field.

“I am no bird; and no net ensnares me: I am a free human being with an independent will.”

A sentence that I am confident you won’t find in the FCA Handbook, but hidden away in Charlotte Bronte’s Jane Eyre. It got me thinking.

What is independence? Everyone has an opinion, especially in our industry, and if you asked five compliance consultants that question I daresay you would get six different answers.

The results of the FCA’s recent study on competition in the mortgage market once again raised this question for me. Clients will of course occasionally ask if we are ‘independent’. I stress the word occasionally because in reality the clients don’t really care about our back story, only theirs, but it is still an important issue. My answer to the question if asked is consistent: ‘Technically yes and morally yes’. I go on to explain; technical because as a firm we meet the regulators expectations and requirements and morally in that we don’t work for anybody else.

Lender ‘beauty parades’

Clearly, I can sleep at night from the moral perspective but can I from the technical one? I’ve been trying to get on one particular lender’s panel since 2010 and taken it upon myself to now no longer bother. We recently helped a fellow broker place a case who is ‘independent’ on paper, but not on a large lender’s approved panel whereas we were. Someone told me recently their 200+ network of advisers couldn’t get an agency with a well-known lending brand; and don’t even get me started on the beauty parades carried out by those lenders who didn’t want us in 2008 but now decide that they do.

I used to be an IFA but gave that up post-RDR [Retail Distribution Review] much to my relief and that of my clients. One of the aims of RDR was to remove the product bias and commission inducements that were offered by providers. Yet, every day on the mortgage sourcing systems I see rates that I am excluded from and procuration fees that are higher for some brokers than they are for me and others.

I run my own business because I want to be that ‘free human-being’. This was the main reason why I chose to be directly authorised, a way to avoid the ‘nets’ of someone else’s business model. Why should I be penalised for that choice? Frequently, and it saddens me, but it feels that I am.

Don’t get me wrong, there is a place for networks and I have met some excellent brokers working for them but I just wish we were all singing from the same hymn sheet.

Smoke and mirrors

Martin, where are you going with this? Well, quite simply I want a level playing field please, that is all. One that is fair, transparent and not hidden by smoke and mirrors. A level playing field for DA advisers will mean a level playing field for the consumer.

So we’ve had MMR which addressed affordability and MCD which addressed some regulatory issues but what about the distribution? Is there room for a review of how those mortgage illustrations end up on a client’s dining room table in the first place and what process led to their being recommended?

I don’t think anyone has the appetite for that but perhaps we could all start by at least having a conversation within the industry about working collectively for the greater good. Let me leave you with another quote that may sum it up better than me.

“Best teamwork comes from men who are working independently toward one goal in unison.”

Martin Stewart is a director at Victoria-based mortgage advice firm London Money

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