I’m not sure if remuneration, remuneration, remuneration would have been as big a hit for ABBA or the phrase ‘show me the remuneration package’ would have helped cement Jerry Maguire as one of the most quoted films. But those musings should not take anything away from the importance of the word.
As we all know money makes the world go round and without it we would all be out of business pretty quickly. How we make money and are recompensed for the time and efforts involved is an age old battle between employee and employer not to mention client and service/product provider. Of course, an important part of any remuneration package for intermediaries are proc fees, but this wasn’t always so.
Taking a short, brief trip back in time some 25 or so years ago. In addition to mortgage requirements the ‘better’ the adviser the wider the range of products and services they offered. As such it was standard to charge a fairly considerable fee for this all-encompassing advice process.
Then, as the intermediary lending arena evolved, a proc fee heavy culture emerged and with hefty commission levels being paid by lenders this resulted in fee-charging structures being far less prevalent as intermediaries could survive and prosper purely on some substantial commission related payments. As the intermediary market continued to grow so did the number capitalising on these now considerable commission levels.
Combine this with the UK’s growing appetite for homeownership, not to mention huge numbers of providers willing to lend across a variety of borrowing scenarios, and it’s little wonder the majority of intermediaries focussed on proc fee led bulk mortgage business, rather than a wider advice process.
Bang. We were then hit with the credit crunch and it’s fair to say intermediaries had to take a step back in time as lending restrictions dictated a reliance on other sources of income beyond pure mortgage business. Now endeth the history lesson.
Let’s focus on today’s marketplace government initiatives, improvements in lending conditions, increased competition and general economic recovery have all certainly helped create more mortgage business for intermediary firms. It’s inevitable Help to Buy (one of these days I will endeavour to complete an article without referring to it) will continue to drive even greater lending volumes.
But the question is – will this encourage a significant number of mortgage brokers to go back to the ‘good old days’ and turn their back on all-important ancillary products? For everyone’s sake let’s hope not.
And what about proc fees? There is currently the hot debate surrounding quality linked proc fees and if AR/DA fees should differ. And the big question of what good quality business actually looks like. All highly emotive subjects that need dissecting in far greater detail than I can go into here.
It’s obvious that we, as an industry, need to find some kind of balance between where the market has come from, where it is now and it’s short to medium term potential in terms of types of business/advice offered and remuneration. All whilst correctly interpreting and applying the lessons learned in the feast and famines of times gone by.
Intermediary firms will naturally have different goals, objectives and ambitions. But one thing each should bear in mind when trying to reach this balance must be the end client. And when chasing this business the importance of packaging each case correctly remains highly relevant whether proc fees received are quality linked or not.
The fact is intermediary firms will write more business in the next 12 months however they are remunerated. But for everyone’s sake let’s just hope the quality of advice and professionalism within the intermediary marketplace which has improved so much in recent times doesn’t suffer as a result.
