Critics have suggested Which?’s excursion into the world of mortgage advice could undermine the brand’s position as a consumer advocacy group. But the firm says its remuneration structure, which does not pay commission, ensures its advice is impartial.
So are salaries the best way to ensure impartial advice? Or is there an even better ideal remuneration policy for mortgage advisers?
For this week’s Marketwatch, our commentators are:
Which? Mortgage Advisers managing director Mike Lawton, who says paying advisers salaries rather than commission ensures independence
Stonebridge Group managing director Richard Adams, who argues commission can encourage advisers to look at products they might otherwise ignore
Edinburgh Mortgage Advice director Mark Dyason, who suggests a bonus can be a useful tool for embedding new practices and messages
Mike Lawton, managing director of Which? Mortgage Advisers
Which? has been giving independent advice and campaigning to defend consumer rights for more than 50 years, so when we decided to launch our own mortgage advisory business we were mindful of respecting this ethos and bringing our trusted values to a new area.
Central to this was the decision to pay our advisers a salary rather than a commission, so our customers could have confidence we were acting completely independently and with their best interests at the heart of everything we did.
We do charge an administration fee to borrowers that wish to proceed with a mortgage application after their initial consultation. But unlike other brokerages, all the profits we make are invested straight back into the campaigning work we do on behalf of consumers.
Despite the fact our advisers are salaried rather than being paid commission, this doesn’t mean that we don’t set ourselves internal volume targets. But rather than being driven by commission, our advisers are motivated by helping as many consumers as possible.
We conduct regular customer satisfaction surveys to ensure we are doing the best by each and every customer we deal with and the feedback we receive helps shape and inform our processes.
Richard Adams, managing director, Stonebridge Group
Remuneration models not only have to suit regulatory standards but they have to meet the needs of an array of stakeholders including the provider, the network or club, the firm themselves and the client.
We are, quite rightly, in an age of total transparency. Clients have to know upfront how their adviser is going to get paid and make a decision about whether they are comfortable with this or not.
To my mind, impartiality is non-negotiable. However this does not mean that commission, for example, is not an appropriate way to pay advisers. Typically our network advisers are self-employed with a flat commission split across all products and I believe the payment of commission actually encourages the industry to advise on products that clients would otherwise not be aware they need.
Bonuses too are often derided. However they can be used in a constructive way, for example, with employed staff in order to encourage a balance of sales across products in a compliant manner.
Sales volumes should not be the sole benchmark on how an adviser is rewarded. However, to look at ‘best practice’ metrics as well seems to be slightly off-kilter. After all, a strong sales process and good compliance back-up should ensure best practice anyway.
Mark Dyason, director, Edinburgh Mortgage Advice
The ideal remuneration model balances the rewards for high performance with a culture of high standards continuously proven by checks and measures.
At Edinburgh Mortgage Advice we work on a revenue share basis, with the higher earners being those that contribute the most. However this is set against clear and reported standards.
The most obvious benefit from bonus schemes is the ability to share the success being delivered with those that are delivering it. But care is needed to make sure behaviours designed to deliver bonus success do not come at the cost of other aspects of the role.
Bonuses can be used to help embed new practices, heighten awareness of new products and reinforce company messages. However, bonuses are only one tool among many others, such as telling someone they do a good job.
I don’t believe that best practice itself should be rewarded. It is the basic entry level of what we as brokers look to deliver to every customer, on every meeting. If someone can’t buy into that, then perhaps they are in the wrong role.
If we tightened the remuneration policy it could change the type of people attracted to the role. For that reason alone, I am very happy with where we sit and the team I have.
