While it seems like procuration fees have been around forever, the reality is somewhat different and 20 years really is a lifetime in the evolution of lenders paying brokers for their business.
Before procuration fees, brokers made their living from endowment commission and had no need to expect payment from lenders, or even charge their clients fees.
The recent announcement by Virgin Money, that it would offer brokers discounts on Virgin flights and trains in the same way they do for their other customers, got me thinking about some of the interesting approaches of old in the early days of procuration fees.
One scheme I remember with particular fondness was on offer in the late nineties. Cheltenham & Gloucester offered air miles to brokers for each case completed and, on any case over £25,000 and up to 90% LTV, they would reward brokers with 1,000 air miles.
At the time of its launch, there was a degree of scepticism as some brokers said they’d rather have the cash, but very quickly they became a popular currency and suddenly three cases would get you a flight to New York.
Whether in today’s more enlightened, and perhaps constrained, world it would be made available is another matter, but many brokers saw this as a great positive, an opportunity to travel the world in return for just doing their day job.
Obviously, C&G had some great products and a strong reputation with brokers but, even so, imagine in today’s environment having a deal that would enable the broker to head off to Paris or Amsterdam for the weekend?
I also remember the days of cashback offers and discounted mortgages where the customer could get a percentage of the loan back in cash, or extra incentives for selling payment protection or home insurance. That all feels now as if it is a part of a past era.
Clearly things have moved on a long way since then and today’s procuration fees are much more transparent. They also offer little incentive to a broker to favour one lender over another based on reward.
Although there is clearly upward pressure on fees, today’s brokers are much more informed about which lenders they recommend. As a result, based on what they use, service, support, products and criteria all rank above procuration fees when it comes to selecting a lender.
I wonder if the next 20 years will see as much change?
Gary Salter is head of corporate accounts for Nationwide for Intermediaries
