‘It’s time to end the second charge fee roulette’ – Master Private Finance

We, as advisers, packagers, solicitors, surveyors, lenders and brokers all need to be paid for the service we provide in getting a client from A to B. However, in an ever-changing and fast-evolving industry with automation and technology advancements: is the client paying too much and will consumer duty force us to revisit our cost versus service?

Take second charge mortgages as an example. In 2007, brokers were operating a heavily manual process. Advisers ran their own Land Registry title deed and credit searches. Brokers had manual processes to manage consideration periods (we’re showing our age here), couriers, postal packs, postage and even paper files. With lender portals, automation, and desktop valuations, why haven’t clients seen savings passed on to them by the UK’s major providers?

‘Days of 10 per cent fees are over’

Consumer Duty will change the face of our industry forever and you only need to ask a room of brokers when the go-live date is, to recognise, we aren’t ready. But you need to be.

Master Private Finance began with Consumer Duty and its obligations known in advance – we had to identify a cost-based approach with the client central to the exercise, not an introducing broker. For those in this industry a long time, what the broker once earnt was a major USP in driving new introducers into your arms. Not anymore.

Following extensive research into industry charges, structures and differences between the main mortgage market and our own; we recognised a minimum cost per case to ensure we process fairly, transparently and customer-centrically.

To ensure second charge mortgages are selected as “best advice”, they need to be “best priced” rather than seen as an opportunity for brokerages who have monopolised the comparison websites, to fill their coffers.

The days of 10 per cent fees are over. For our market to be accepted as a valid choice and assimilated as an acceptable lending option, it’s time to close the fee-charging gap and end the era of excessive fees.

Regulated advisers are requested by the regulator to confirm they have assessed a second charge versus a remortgage when capital raising.

The fee-roulette between the UK’s largest and best-known second charge providers and ourselves, shows a stark difference in fees.

Do they do it better than anyone else to justify the fee? Are business overheads so high we can justify charging a client borrowing £50,000 as much as £5,000?

If we haven’t paid for consent or a valuation, are we really able to accept charging £3,000 to someone seeking help to consolidate £30,000 of unsecured credit?

Can a brokerage heavily focussed on technology or “AI” really also justify eight per cent fees?

Client fee should be ‘fair and reasonable’

At Master Private Finance, we are proud to say we charge now and always have charged three per cent of the loan amount.

We believe a client should only pay what is fair and reasonable whilst the introducing broker still receives a true 50 per cent net of cost. Clients should not face barriers to financial solutions, including that of excessive fees.

As an industry, it’s time to move on from the days of old, when brokers were unregulated, and fees could be as high as 15 per cent. More than ever we will struggle to justify we are fair, reasonable and honest.