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Transparency and independent monitoring of networks required to improve competition – JLM

by: Sebastian Murphy is head of mortgage finance and Rory Joseph is director at JLM Mortgage Services
  • 24/07/2019
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Transparency and independent monitoring of networks required to improve competition – JLM
The mobile phone industry is advertising its Text to Switch service, which is designed to make it easier for customers to switch network and keep their existing phone numbers.


Up until now, as pretty much everyone will know, this has been a process fraught with frustration and delay, so it’s positive to see that market get its act in order.

But, what of the mortgage market? And what of our networks? As an appointed representative (AR) firm, how easy is it to switch?

Well, even we might accept that this can’t be simply done with a text message, but we’re also certain this could be made a whole lot easier for AR firms.


All cloak and dagger

At present changing networks involves a lot of pain and the prospect of losing all income for six or so months.

That being the starting point, it is perhaps no wonder firms tend to stay put longer than they would like, and that network principals have every incentive to make things as difficult as possible for them, which seems incredibly anti-competitive.

Of course, what makes the possibility of switching even more difficult is the ‘secret society’ way in which some networks operate.

It’s like the prohibition speak easy joints of 1920s America, or the hellfire clubs of 18th Century Britain, in that everything is all cloak and dagger.

You don’t know what you don’t know, and it’s unlikely you’ll get any transparency on key areas to allow you to make an informed decision about whether you should be joining one network over another.


More transparency needed

In this world, everything is hidden under a commercial cloak, so we have networks quoting a nominal fee, say 10 per cent, but then also charging monthly fees for the Financial Ombudsman Service (FOS), Financial Conduct Authority (FCA), professional indemnity (PI) and the like.

At the same time, we have double-dipping – under-reporting gross commissions and then deducting the network fee off the net commissions and procuration fees.

In an age where information is king, and ever more information is available to help all of us make the decisions we need to – indeed in our market where Freedom of Information and subject access reports can be requested and viewed – it seems odd that networks are not required to be much more transparent about the way they operate.

How else can AR firms make a choice without being able to compare apples with apples?


How do advisers compare?

It seems such a small request, and absolutely necessary in order to make a switch, but why are networks not providing a full lender panel list on their websites?

Why aren’t they confirming what business they can and can’t transact?

Why don’t they say who they refer to and what is paid away? Why don’t they outline the fee scale for each business type?

Why aren’t they outlining whether they pay gross lender proc fees or gross life commissions received, whether they deduct from this and by how much?

And why won’t they confirm whether they load premiums and by how much, because this is not just important for the firm but the client as well?

There has been a lot of talk about an FCA-endorsed broker comparison website but why not start with a rating system for networks, based on speed of payments, fairness, compliance, ease of joining and leaving, and so on.

The network-comparison business that exists is a glorified recruitment agency for a very small number of networks, so it would need to be independently run and monitored to give confidence to firms.

One for the Association of Mortgage Intermediaries (AMI) perhaps?


Seven-day switching

And then we’re back to the ease of switching, or rather the lack of ease.

Why can’t the network market have ‘seven-day switching’ where a currently authorised Competent Adviser Status adviser is moved from network A to network B with all their pipeline and fees following them, and the new network automatically receiving pipeline payments?

At the risk of being branded evangelists, we pride ourselves on always disclosing gross received fees, of complete network fee transparency, of never loading life premiums and of being fully whole of market in its truest sense.

We would welcome a level playing field and some proper competition, and I’m sure AR firms would certainly feel the same way.



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