We’ve read a number of comments recently which can be effectively paraphrased as “thank goodness for PTs”, and speaking to a major distributor recently, they are now running at over a third of all their business being PTs.
For advisers, it’s an obvious point to make but the impact on income can be sizeable, especially when (as we know) only one lender, Lloyds Banking Group, pays a full proc fee for PT business, and only two others pay more than half.
Which is why our sector should continue to press for greater parity of proc fee payment in this area, and to continually question why a lender community which doesn’t want the liability of advice, isn’t willing to pay the same amount for a PT as it does for a remortgage.
The work required for a PT
We had a recent client contact us who had taken a direct deal with their existing lender last time they remortgaged, and were adamant they were not going to do this ever again.
Even if the PTs on offer to them now turned out to be the most suitable product for them, they wanted the full reassurance and protections that come with advice, and – somewhat ironically – so do lenders.
It seems an obvious point to make but we’ve seen in recent years that lenders don’t want to deal with the public when it comes to their mortgages. Of course, they have in-branch ‘mortgage advisers’ but fundamentally they don’t want the responsibilities that come with giving ‘advice’ even if it is just on their own products.
Conversely, we do want to deal with the public, we do want to provide them with the advice they require, and afford them the protections they get, make sure they have access to the entire market, and know that if we do recommend the PT, then it is going to be the most suitable for them, not just the result of a tick-box exercise.
Paying for the effort
So, given this, why aren’t we seeing more lenders following Lloyd’s PT proc fee lead? In the world of Consumer Duty, where positive outcomes and fair value are the be all and end all, why don’t lenders facilitate a system whereby they recognise the same work is involved and pay accordingly?
This is often a point that is pooh-poohed by many. You can’t possibly be carrying out the same amount of work on a PT as a remortgage, they argue. But, that’s exactly what we are doing in order to get to the point where we can recommend the PT.
How can we be certain the PT is right if we don’t understand the client’s needs and circumstances, how they might have changed since the last time they mortgaged, for example? We have to go through the full process in order to get there.
If there is any time saving in this for the adviser, it is marginal, and it is certainly not taking us half the time of a remortgage, which means we should only get paid half the proc fee.
The lenders offering small numbers of PT options do not do any of this work, do not review, do not take into account the equity in a property might have grown, the balance will have fallen, the financial situation will have developed, etc.
Borrower suitability
Plus, under Consumer Duty of course, there is an ongoing commitment required to the mortgage customer – annual reviews and the like. Will lenders carry this out? Will they even want to or have the capacity to do so? Again it all adds to the point around lenders not wanting, or increasingly being able to, deal with mortgage customers.
And the other point to make here is that it seems very difficult to argue a client has picked a direct PT product which is ‘execution only’, when the lender has only offered them a limited number of product options and told them to pick the one they want.
If you have narrowed down the number of products you offer, that in itself is pushing an existing borrower in a certain direction.
Overall therefore, we’re not in full Bob “Give us your effing money” Geldof mode, but we are certainly asking for lenders to look at the fairness of their current PT payment model, to accept they would much rather intermediaries be the ones carrying out this advice process, and to move towards parity in order to recognise the benefits for borrowers (and they themselves) that such a move would bring.
