Periodically, the debate begins again, perhaps fuelled by a different part of the consumer lobby, or the regulator, which feels inclined to question its validity as a payment method for intermediaries, with the accusation that it somehow denigrates the integrity of the advice provided for advisers to accept such a payment method.
That debate has reappeared, this time in the guise of the FCA’s own mortgage market competition study and, in particular, the Association of Mortgage Intermediaries’ (AMI) response to it.
The trade body publicly derided any attempts to ban procuration fee payments in favour of consumer charging and suggested it would hit the most vulnerable consumers who might not be in a position to pay for their mortgage advice.
While I’m supportive of the position, I’m also mindful that the debate around fee-charging for mortgage advice might have moved on, particularly when we talk about customers not being prepared to pay for advice.
Increasingly, we’re seeing advisers charging an advice fee and, as long as the firm can provide a compelling case for why that fee is charged, customers are prepared to accept it.
Of course, with the payment of procuration fees as well, this will (to a great extent) supplement and offset the fee that is charged, so that the client secures all the benefits of a quality advice proposition for a much-reduced fee.
If firms are able to articulate all the positives of their offering then, in my view, charging a fee is often perfectly acceptable to the client.
All in the mind
This of course is the major challenge for advisers in structuring their fee-charging because if the fee is simply presented as a fait accompli, then it’s not going to go down as well as a firm which, at the start, highlights the value that consumers get from their advice, the savings that are made, the protections they are afforded, the work involved, and the customer care that is delivered.
Having done this, advisers develop a much more comfortable position for fee-charging to fit in. Indeed, the worries about losing business because clients won’t accept a fee tend to be more in the mind of the adviser rather than the client themselves.
Add in the element of the procuration fee and, as mentioned, the impact this has on decreasing the fee and I think advisers can present a very strong position to their clients.
Any criticism around the potential for a skewing of advice from procuration fees, to my mind, do not hold water anyway but charging an advice fee makes these accusations even more redundant.
Bring in business diversification into areas such as protection, life insurance, general insurance, conveyancing, or specialist areas and this type of adviser model can work and provide a successful business not just for the larger firms, but the whole host of SMEs that work within our industry.
Perhaps now is the time for advisers who have been wary of a combined advice/procuration fee model, to grasp the nettle, develop their proposition, articulate it and re-engage with a customer base that might be much more willing to pay a fee for a service that warrants it.