Range in second charge broker fees is due to ‘varying complexity’ – Drake

The more we invest financially, the higher our expectations for quality and performance. We desire not only value for our money but also a sense of fairness.

When expectations are not met, it’s only natural to feel frustrated, seeking resolution or a refund.

This also applies with broker fees and is our opportunity to showcase the specialised and dedicated hard work we invest to help our customers achieve their objectives.

If not, we miss out on valuable opportunities: customers won’t return to us, they certainly won’t refer us to others, and the introducing brokers are less likely to work with us again.

Unless working for free, solicitors typically either retrospectively charge hourly, a percentage of the compensation in a no win/no fee scenario, or a fixed fee.

With either, you know where you stand. This same approach applies in the second charge industry: some charge a fixed monetary amount, others a fixed percentage, and some on the expected workload.

Second charge loans have varying work levels

The challenge is with varying complexity, so here’s a typical scenario us second charge packagers have. Yesterday, we completed two second charge loans, both for £100,000.

The first was with Pepper Money. We received the application less than a month ago, and all the necessary checks, paperwork, and funds were swiftly processed. Our costs for this transaction were at a base level.

The second loan was with Together Money. We received the application three months ago, and it involved extensive work to address a historic land registry restriction and navigate a complex divorce situation with two separate solicitors involved.

The property had a valuation cost of £1,200, which we covered as the customer couldn’t afford it. Consent from Metro Bank was required for Together to register their charge, and we had to conduct a full cost assessment of 12 debts resulting from consolidation.

The amount of work required to package the Together loan was significantly greater than the one with Pepper. And at the time of advising either customer, we were far, far less able to determine the extent of time for our Together customer.

Key to ‘clearly demonstrate’ fair value

Due to the varying range of complexity for the majority of our customers, assessing this cost is challenging to say the least.

So, we either stick to a flat fee regardless of complexity or discuss the issues that need resolution with the client, and charge for each one accordingly. There are valid arguments for both approaches, but as principals of our firm, it’s up to us to clearly demonstrate that fair value has been provided for all.

I don’t believe the FCA will come in and tell us how much we should charge our customers, they are not a price regulator. They want to us adhere to their rules and guidance.

When assessing how well we achieve this, I hope they understand and appreciate the diverse nature of our customers, and that the AMI continues its excellent work to work closely with them.