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The product used to be the exclusive, now with restricted distribution it’s the lender – JLM

by: Rory Joseph, director and Sebastian Murphy, head of mortgage finance at JLM Mortgage Services
  • 13/04/2018
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The product used to be the exclusive, now with restricted distribution it’s the lender – JLM
Lenders were traditionally open to all advisers either directly or through packagers, with quality or volume earning coveted ‘exclusives’.


Yet in recent years there has been a shift towards lenders offering limited distribution through chosen firms.

Where once the product or criteria was exclusive, now the lender itself has become the exclusive.

For example, how many lenders new to market have entertained launches to only a few of L&G Mortgage Club’s panel of firms?

The Post Office and Harrods Bank previously, HSBC, Tesco Bank, M&S Bank, Secure Trust, Redwood Bank, the list goes on.

As an adviser, this means something of a return to days where the strength of a relationship with a lender was paramount.

Given this, we believe networks and mortgage clubs should be evolving their propositions to ensure more advisers can access a true whole of market, and not just the FCA ‘representative’ definition.

We also believe client outcome is the priority and we feel it is unfair for a client to not receive the same breadth of advice, regardless of the firm they choose to use.

Otherwise this is a disadvantage to everyone involved. Would you and your clients not agree?


Changing market

It is important to understand why the market has evolved in this way.

Regulators place increasing pressure on lenders to ensure a high quality of business and to fully understand their loan-books, including how their products are distributed.

In-depth due-diligence assessments, followed by regular reviews, are becoming the new normal for registering with a new lender.

Indeed, we might say lenders are being regulator-esque in terms of the information they require from advisers to satisfy themselves about who they’re dealing with.

Then there is the control factor.

Many new lenders need to heavily control the volume of applications and lending.

Fully opening and accepting too much, too early, has been catastrophic for some lenders and everyone has learnt from their mistakes.

Limited distribution is frankly, easier for a lender, as they can control their business volumes, which in turn ensures service is maintained.

They can also closely manage a relationship with mid-to-larger firms, with centralised operations managing large numbers of advisers and data readily available, to ensure quality is maintained.

These factors mean the increasing responsibilities on lenders’ senior management are addressed.

It all sounds great, unless you’re an adviser who does not have access, or a customer of that adviser.


Threat to sole advisers and small firms

Larger lenders now perceive big as beautiful and only wish to deal with larger networks or firms, this presents something of a headache for smaller firms that is unlikely to go away.

Our concern ultimately is that the customer could potentially suffer, and steps need to be taken to clearly explain to them the breadth of lenders available to their chosen adviser.

It’s an interesting conundrum and one which we all need to address sooner rather than later.

For sole advisers or small firms, perhaps now is the time to consider joining a larger organisation if you don’t want to see your market access eroded further, rather than disadvantaging both your clients and yourself.

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