Dual pricing is not a new concept, but it is certainly one that raised the ire of the intermediary market post-credit crunch.
Looking back to late 2008 when this practice was arguably at its peak, many lenders alienated intermediaries by maximising their mortgage allocation through targeting consumers directly in their high street branch networks.
Understandably, this upset many who stood up and suggested that this fell foul of Treating Customers Fairly principles.
Inevitably, this was a tough time for all concerned in the mortgage market, but especially so for the intermediary channel. Some lenders argued that it was necessary because they had limited money to lend and needed to ensure they were not flooded with applications they could not control.
Other lenders said they needed to keep their branches busy to gain maximum return on their investment.
The alternative view by some in the intermediary market was that lenders used the liquidity crisis as an opportunity to deliberately push brokers out of the door and reap the rewards of any direct business.
In current conditions, while certainly not as bad as in 2008/09, the issue of dual pricing remains a problem as lending conditions remain constrained.
Lenders of all sizes are still feeling the pinch, with many lacking access to sufficient funding to lend at levels the industry has come to expect over previous years.
However, as credit slowly returns, so has the emphasis on the intermediary market, especially by the new entrants, as well as some strong established lenders.
Lending remains nowhere near the levels of old, but thankfully it has stabilised and the CML has revised its 2011 gross lending forecast upwards. If gross lending does reach the predicted £140bn, it will be the first time since the crisis that it hasn’t fallen.
In addition, despite some lenders continuing to undertake some form of dual pricing and HSBC ignoring the intermediary market completely, brokers still account for six out of ten deals.
The threat of high street lending has not gone away, but it has been blunted somewhat by a combination of improved conditions and the intermediary markets capacity to evolve.
However, one of the biggest things still stopping some intermediaries from curbing the threat is themselves by a) ignoring it completely or b) choosing to battle it head on.
Having said this, many intermediary firms have acknowledged the threat and adapted their offerings accordingly.
Some have embraced the concept of incorporating direct deals into their advice process by introducing a fee-charging structure to help combat this threat, while others have boosted their range of services to offer clients a true holistic advice process.
Fees and commission levels continue to be hot and emotive topics, and any lingering dual pricing debate has only worked to exacerbate this.
In April this year, TMA’s Distribution Indicator reported that almost two-thirds of directly authorised intermediaries thought there had been a shift in the reward structure. While procuration fees now play a less prominent role, fees for advice have become more important.
Fee charging is one way to reduce clients going direct to the high street.
Firms should not be afraid to implement a charging structure if they can break down and demonstrate exactly what service they are providing for the fee, even if it is only a minimal one for the mortgage search and transaction.
Charging for good quality professional advice is certainly no crime, but in order to make this transition, intermediaries must change their mindset to overcome any market negativity.
Some have even found it appropriate to help clients with the necessary paperwork and take the case to the high street lender on their behalf. Yet, in doing so they have made sure it is on their terms.
It is also important to be aware of other product ranges and services that clients are likely to be offered by individual high street lenders and have the necessary information on hand to combat these before they can get their hooks into them.
Advising on a high street lending option certainly does not mean the end of the client relationship.
Intermediaries must see the high street lender as a potential lead generator rather than a direct threat to the business.
However, in order to do so, it is essential that any ancillary sales are fully investigated and advised upon. By offering a full range of options, clients are more likely to remain your clients and in turn refer such a valued service to various friends and family.
Another way of helping boost such offerings is by embracing technology.
Increasing numbers of financially savvy consumers are using the internet for sourcing and placing products and services connected to the home buying process and beyond.
As such, a good online proposition across a variety of financial products, with links to referral experts and sourcing tools, can help boost knowledge, expertise and of course sales opportunities.
Combating dual pricing is not always easy but it is a necessary evil, as there is no sign of it ever disappearing completely.
Evolution and flexibility are key components in overcoming these hurdles.
Fortunately, there is support out there via mortgage clubs and networks, helping brokers channel their energies in the right direction, as well as fulfilling the requirements of clients to open up new income streams.
