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Always read the small print when joining a mortgage network – Bawa

by: Ahmed Bawa, chief executive of Rosemount Financial Solutions (IFA)
  • 22/04/2024
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Always read the small print when joining a mortgage network – Bawa
The early stages of any relationship are often filled with excitement, and we rarely stop to think about what might happen if things go wrong. The same can be true for brokers when joining a new mortgage network. 

At first, a mortgage network might roll out the red carpet and make various promises. So, naturally, brokers often aren’t thinking about what will happen if they decide to leave one day or if the relationship sours. 

However, it’s important for brokers to think not just about the present, but also about the worst-case scenario if they find they need to leave the network one day. They should also think carefully about what the network they are considering joining can do to help with a smooth transition. 

All too often, the conditions and restrictions placed on brokers if they want to leave a network can act as a barrier to them joining a new one, and problems only come to light when brokers look to move. 


A mortgage network’s terms and conditions 

This might be because brokers just skimmed over the small print or didn’t fully absorb what the conditions of the contract fully meant for their business – or what they would mean if there came a day when they wanted to move. 

Even if advisers were aware of the terms and conditions, when all seems well, brokers might like to think optimistically and believe they will never leave – much like a celebrity marriage without a prenup.

One area of frustration we see for brokers looking to move across to our network is what will happen to their commission payments once they make the switch. If an appointed representative (AR) resigns, it’s common for some networks to withhold brokers’ commission payments for a period of time – sometimes up to six months. While this might be to protect against clawbacks, it can make life very difficult for brokers.


How mortgage networks can assist brokers 

There are a number of things a new network can do to help, though.

The first thing a network can do is novate on-risk policies and indemnified commission across, so we take the liability. 

Where there are loaded premiums, however, brokers need to be particularly cautious about the terms of their initial contract. There may be some networks who agree to novate the liability, but if there are clawbacks, the broker repays even the network’s share. 

We can, however, guarantee the old network that, if anything does come off the books, we will make sure that we pay the network first. Sometimes that works out well, and they are happy with that, as they don’t have to chase brokers. 

The other thing we can do is help the broker with cash flow – this can often be the most important thing for an adviser when moving networks. Like a bank account, we can provide cash flow similar to an overdraft facility – which is very much a bespoke deal.

There are other considerations for brokers as well, such as what their contract states about their professional indemnity (PI) insurance and what happens, for example, if any future complaints are made against the adviser or whether there is a requirement for run-off cover. 

Whether it’s making the switch from directly authorised (DA) to AR or from one network to a rival, concerns over contract issues shouldn’t stop advisers moving networks if they are unhappy.


One size doesn’t fit all 

We see mortgage brokers switch networks for various reasons. They may be looking for a network that can help them expand into new products or financial planning, or they may need greater compliance support. Alternatively, they might be looking to grow their business by better utilising technology or by improving their marketing strategies. 

Or they might be thinking further ahead to when they retire and looking for a network that can help them with succession planning. 

What we often also see is brokers moving from larger networks to smaller ones for a more personal service and a higher level of support. They might be looking for a better sense of belonging or to have a network that they feel better understands their goals and aspirations.

As with all separation processes, it can be rocky or smooth, but a new network can help with this. If brokers do want to leave their network, they shouldn’t let fears over existing contracts stop them from breaking free. 

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