‘Giving ARs carte blanche creates potential for complaints and claims’ – Marketwatch
However, some networks impose restrictions on the deals firms can complete so being an appointed representative (AR) may end up limiting options as well as open some.
So this week, Mortgage Solutions asked: Are networks right to restrict the deals ARs can do?
Paul Shearman, proposition director at Openwork
Ultimately, networks stand behind the advice that their appointed representatives provide. They therefore need to understand and have confidence in the product or service proposition that their advisers offer to clients.
At Openwork we undertake a comprehensive due diligence process of all providers before they are brought into the proposition.
This will include an assessment of a raft of factors including financial stability, product range, service performance, regulatory controls, complaints processes and so on.
The results of the due diligence are formally reviewed by our Proposition Steering Group before appointment and key elements of the relationship will be included in a legal contract.
The product offer and provider performance are then reviewed on a regular basis to determine that the product is being provided to the intended target market and that the overall offering is performing in the intended way.
Failure to deliver this can mean that products or providers are withdrawn from the range available to our advisers.
As a network we also provide clear guidance to our advisers from a sales process perspective, detailing what solutions are appropriate to different types of client scenario.
We believe that this approach is essential to ensure we are delivering the very best propositions and outcomes to our clients. Rather than being restrictive, our advisers value the comfort that a network safety net provides.
Offering complete carte blanche for advisers creates the potential for future complaints and claims if things go wrong.
James McGregor, director of Mesa Financial Consultants
Speaking as a firm which came from a network to go directly authorised, the restriction on deals we could do was something we did not agree with.
However, the way a firm approaches this and feels about it will purely be down to the skillset of the appointed representatives themselves and what their understanding of overall risk is like.
A lot of the larger corporates need this protection in place as they are not too close to the front end and client facing.
This means it is extremely hard for them to monitor the risk across certain clients, so the appointed representative restricting deals is a way of protecting the business.
I can completely understand why they do this, but in the same breath I do not agree with them dictating how companies run their business and this is why we went directly authorised.
Andy Wilson, director of Andy Wilson Financial Services
I have had almost nine years’ experience with the same network, and only once have I needed to apply to go ‘off panel’ for a mortgage.
The network has a large and diverse panel of lenders, and it is nearly always straightforward to source the mortgage I am looking for.
The network advises that I can claim to be a ‘whole of market’ mortgage adviser, because the panel is made up of a large cross section which is representative of the whole market. It does not mean I have access to every lender – in practice no one does.
However, the panel is sufficiently large and diverse enough to always have a source to go to. Also, it is frequently updated and new lenders are added.
I can understand networks creating such a panel. They can perform due diligence on a selection of lenders instead of trying to monitor every single one, and their payment services sections can deal with commission payments more easily from a limited number.
Added to this is the availability of ‘off panel’ requests, where if a strong business case can be made for using a lender who is not currently on the panel, this will be considered fairly, and permission usually given.
In my experience, clients like their mortgages to be with lenders they have heard of, and who they understand to be regular and solid lenders. The current news often refers to mortgage prisoners, and no one wants to think their lender might end up like Northern Rock.
They want lenders who are here for the duration, and who they may be able to have a long relationship with, and lesser known lenders can be a turn off.
Stonebridge facilitates £7.7bn of mortgage lending
Mortgage application case numbers received by the network rose by five per cent on the previous year and by value they increased six per cent.
Strong protection volumes for the network generated £16.5m of life commissions, up by 10 per cent on 2018, it added.
General insurance business completed in 2019 increased by 13 per cent on 2018.
In the analysis of its mortgage business, Stonebridge revealed that purchasers made up 49 per cent of its overall mortgage submissions – this had fallen slightly from 50 per cent in 2018 and 55 per cent in 2017.
The other 51 per cent of its business was made up of remortgage or product transfer business. Some 20 per cent of its remortgage business was for product transfers.
Stonebridge also said that its buy-to-let business had remained steady during 2019, holding firm at 17 per cent of its overall business submissions, the same figure as 2018.
Of this buy-to-let business, purchases had increased to 24 per cent, up from 15 per cent in 2018, and 76 per cent was for remortgaging.
The network said its growth was slightly ahead of forecast reflecting its continuing progress in driving up income per adviser, with this figure outstripping adviser growth.
Stonebridge revealed a 7.5 per cent growth in adviser numbers over the course of 2019, with the network having 644 individual advisers in 320 appointed representative (AR) partner firms at the end of the year.
Positive year ahead
The network announced plans to upgrade its Revolution software system with features such as dashboard reporting, additional equity release capability, and the introduction of automated fee agreements, file checking and compliance remedies. The system developments will be completed by the end of 2021.
Jo Carrasco, (pictured) business partnerships director at Stonebridge, said: “Over the course of 2019 we outperformed the previous 12-month period, saw adviser and firm numbers increase, added new lenders and providers to panel, plus developed our unique Revolution system in a number of areas.
“There is no hint of us resting on our laurels as we have ambitious plans for the future and want to keep developing the Stonebridge proposition, helping our existing members grow their teams, and bring on board new AR firms that will grow and thrive within the network.”
She added: “Last year ended on a high with record mortgage completions and January applications continued in the same vein. We are highly positive about the year ahead and further into the future.”
Stonebridge mortgage business up 17 per cent in September
The network added nine new partner firms in the month boosting the overall number of ARs by 24, including seven who joined with Ideal Mortgage Advisers.
The firm said it arranged £7bn of mortgages a year, with applications rising by 17 per cent in September against the same month in 2018.
Stonebridge also expanded its own team hiring business development manager Lee Williams and appointing Chika Osondu as business analyst at Revolution, the group’s trading platform.
Claire Chambers was promoted to the newly-created role of compliance and operations manager overseeing AR firms, the business standards department and 40 staff members.
Career development culture
“Our year-on-year growth in mortgage applications and completions is particularly pleasing at a time when political and economic uncertainty mean many potential clients are opting for wait-and-see,” said Rob Clifford, chief executive at Stonebridge (pictured).
“Demand for advice remains very strong and we support our firms to ensure access to opportunities in mortgages, protection and general insurance.
“We’re confident that our model, with new appointments to the team and a focus on adding quality advisers and firms to the network, can work for any ambitious advisory practice.
“We’ve talked to many potential new recruits during ‘expo season’ over the last couple of months and will continue to do so in the months ahead,” Clifford said.
The network outlined a continued focus for 2019 and into 2020 on increasing its number of member firms and supporting existing members to recruit new advisers.
Clifford said: “I’m particularly pleased to promote Claire after five years in quality and audit,” adding “career development is key driver of our culture.”
Transparency and independent monitoring of networks required to improve competition – JLM
Up until now, as pretty much everyone will know, this has been a process fraught with frustration and delay, so it’s positive to see that market get its act in order.
But, what of the mortgage market? And what of our networks? As an appointed representative (AR) firm, how easy is it to switch?
Well, even we might accept that this can’t be simply done with a text message, but we’re also certain this could be made a whole lot easier for AR firms.
All cloak and dagger
At present changing networks involves a lot of pain and the prospect of losing all income for six or so months.
That being the starting point, it is perhaps no wonder firms tend to stay put longer than they would like, and that network principals have every incentive to make things as difficult as possible for them, which seems incredibly anti-competitive.
Of course, what makes the possibility of switching even more difficult is the ‘secret society’ way in which some networks operate.
It’s like the prohibition speak easy joints of 1920s America, or the hellfire clubs of 18th Century Britain, in that everything is all cloak and dagger.
You don’t know what you don’t know, and it’s unlikely you’ll get any transparency on key areas to allow you to make an informed decision about whether you should be joining one network over another.
More transparency needed
In this world, everything is hidden under a commercial cloak, so we have networks quoting a nominal fee, say 10 per cent, but then also charging monthly fees for the Financial Ombudsman Service (FOS), Financial Conduct Authority (FCA), professional indemnity (PI) and the like.
At the same time, we have double-dipping – under-reporting gross commissions and then deducting the network fee off the net commissions and procuration fees.
In an age where information is king, and ever more information is available to help all of us make the decisions we need to – indeed in our market where Freedom of Information and subject access reports can be requested and viewed – it seems odd that networks are not required to be much more transparent about the way they operate.
How else can AR firms make a choice without being able to compare apples with apples?
How do advisers compare?
It seems such a small request, and absolutely necessary in order to make a switch, but why are networks not providing a full lender panel list on their websites?
Why aren’t they confirming what business they can and can’t transact?
Why don’t they say who they refer to and what is paid away? Why don’t they outline the fee scale for each business type?
Why aren’t they outlining whether they pay gross lender proc fees or gross life commissions received, whether they deduct from this and by how much?
And why won’t they confirm whether they load premiums and by how much, because this is not just important for the firm but the client as well?
There has been a lot of talk about an FCA-endorsed broker comparison website but why not start with a rating system for networks, based on speed of payments, fairness, compliance, ease of joining and leaving, and so on.
The network-comparison business that exists is a glorified recruitment agency for a very small number of networks, so it would need to be independently run and monitored to give confidence to firms.
One for the Association of Mortgage Intermediaries (AMI) perhaps?
And then we’re back to the ease of switching, or rather the lack of ease.
Why can’t the network market have ‘seven-day switching’ where a currently authorised Competent Adviser Status adviser is moved from network A to network B with all their pipeline and fees following them, and the new network automatically receiving pipeline payments?
At the risk of being branded evangelists, we pride ourselves on always disclosing gross received fees, of complete network fee transparency, of never loading life premiums and of being fully whole of market in its truest sense.
We would welcome a level playing field and some proper competition, and I’m sure AR firms would certainly feel the same way.
Networks have ‘slightly bizarre’ compliance worries about equity release – Wilson
Demand for later life lending can only go one way but we have some issues to overcome, not least the segmented nature of later life lending advice.
This includes the disconnect between equity release, retirement interest-only (RIO) and mainstream mortgages suitable for older people.
Then there is the ability of those customers to find the right advice and get the right product.
And can advisers make their mark in this sector and secure the support they need to succeed.
The last point is obviously important, especially when we still work within an environment where, for example, some networks are still not comfortable with their advisers conducting equity release business.
This tends to be due to compliance department unease about advisers being active in this part of the market and perhaps a regulatory headache or potential complaints which it simply does not want to deal with.
This is short-sighted, especially when you consider the growth potential of the later life lending sector.
Bizarre compliance worries
The compliance worries equity release especially creates for networks seem slightly bizarre. Somewhat ironically, there is an acceptance that their member firms can work within the mainstream field – which includes RIOs and mortgages which come with a higher maximum age level – but equity release is out of bounds.
Even though, as we all know, to truly be able to ensure later life clients are recommended the right product for their circumstances, equity release has to be part of the advice process.
In a way there is a bigger chance of complaints coming further down the line from a decision which stops appointed representative (AR) advisers and firms being active in the equity release market.
By doing so you are completely neglecting a relevant and potentially suitable product choice for these customers.
What will they do in the future should they feel they came out of the advice process with completely the wrong product?
Principals with foresight required
There is no shortage of support to help advisers and firms make the full transition into later life advice.
We are working with networks to build bespoke training, support, and technology in this area and providing it for the whole array of products and services later life clients need – not just equity release and other lending.
To that end, the opportunity becomes even greater, but it will need principals with foresight to help their firms into such areas.
At the moment, for some, the door is locked.
By the time it is opened by them, those who have stolen a march will have established services and brands, while others will be picking over the scraps.
This is not a demand that will fall anytime soon – all firms, regardless of their regulatory status, should be given the opportunity to make their mark.
Primis and PTFS integrate under one brand
LSL acquired PTFS in January 2018 and the firms have undergone significant alignment throughout the last year, including integrating sales, operational and proposition functions under a single executive team.
Toni Smith, chief operating officer at Primis (pictured), said that the unification was extremely exciting.
She said: “Now a year since the acquisition of PTFS, the past twelve months have been filled with record milestones and successes.
“We are hugely excited about our plans for the network and we are confident Primis will flourish further under a single brand.
“A fantastic start to the year, the announcement was extremely well received at our annual event and we look forward to what we can achieve in 2019 as one united powerhouse.”
‘If networks looked after members they wouldn’t want to leave’ – Star Letter 11/05/2018
This week the accolade goes to Martin Wilson for his response to the post: Leaving a network should be more straightforward – Hunt.
He said: “Bob Hunt has got this absolutely right. Agents should be given easy access to different ways of being authorised.
“Many networks impose all sorts of unfair hurdles, which in effect is a restriction to trade and choice. If networks looked after their members they wouldn’t want to leave.
“Restrictions we have seen include, run off professional indemnity cover, annual regulatory fees, withholding general insurance renewal income and freezing commissions. All of these are completely unnecessary and legitimately debatable.
“It’s about time the Financial Conduct Authority (FCA) created a level and fair playing field allowing advisers to move easily without restraint.”
Leaving a network should be more straightforward – Hunt
For those advisers completely new to the business, there can often seem like a lot of benefits to taking the line of least regulatory resistance and opting to shelter under a network’s umbrella.
This works completely fine for a large number of firms and there’s no doubting, particularly for those start-up advisers looking to build a clientbank, that it can smooth the path for many who want to get up and running as quickly as possible.
In any situation however it’s important to review your options – for ARs this may be carrying out due diligence on other network options available, or it may eventually mean making a decision to move from AR status to DA.
Whatever the choice, it is important to reappraise the options on offer regularly. There can be plenty of comfort in staying put where you are, but ultimately it might not be the right home for you or your business, and there may certainly be both financial and business advantages to looking elsewhere.
Hoops to jump through
The move from network to network should be more straight forward – I say ‘should’ because I have heard countless tales of the hoops firms have needed to jump through in order to change.
It sometimes seems like it’s the business practice that time forgot, and while I appreciate networks have to cover the risk involved, at times those obstacles can seem beyond onerous.
Making the move from AR to DA could be viewed as a whole different level up in terms of business change, but in our experience it need not be painful at all.
In a certain respect, you can be at the whim of the regulator in terms of changing your authorisation, but let’s just say that the FCA is far better at its processing now.
It reported a fall in authorisation times for firms, down from 12.7 weeks in Q2 2017/18 to 11.2 weeks in Q3 2017/18.
Indeed, the regulator has specific targets to achieve, namely 100% authorisations within six months of an application being completed, or 12 months from the time it receives an incomplete one – although I doubt anyone sets out to submit an incomplete application.
Grass not always greener
The fact is that slow regulatory authorisation times should not be an excuse when choosing not to go DA.
Within three months the transition can be complete, and with the support of distributors like ourselves, this should be a painless task that gets you to where you want to be far quicker.
It’s not always the case that the grass is greener on the DA street, and for some established AR firms perhaps the comfy pair of slippers should remain in place.
However, if you’re established and feel you’ve potentially outgrown the network environment, there should be nothing holding you back, and the encouragement and tangible support you need to make that change is ready and available to you.
It’s up to you to grab it.
Mortgage club sector ripe for disruption – Adviser Alliance
“I just read a book about Stockholm Syndrome, it started off badly but by the end I really liked it”.
I think sometimes the broking community itself can suffer from the malady that suggests long term captives can begin to trust and empathise with those responsible for their internment.
We have some very dominant voices in the mortgage sector who have been dining out on the same story for 20 years. There are bountiful myths which have, over time, become legend and are now so ingrained that many think they will find them in the Magna Carta.
It is easy to see therefore why change can be difficult to achieve if we are all chained to a radiator believing those that feed us are our friends.
As Bob Dylan rightly observes, the times they are a changing and where there have been some huge improvements and innovation in certain aspects of the mortgage industry there has also been a lack of progress in others.
One of the areas ripe for disruption is the mortgage club sector – virtually unchallenged as a model since 1998.
I am totally supportive of the work undertaken by the clubs. In the early years they brought together a disparate army of brokers to aggregate them and make the distribution of mortgages that much easier for lenders. That certainly aided both ends of the food chain and helped make the sector what it is.
But it is a different beast today from the one of 20 years ago. And where we have seen huge progress in the professionalism of brokers, innovation from lenders and empathy from regulators, many advisers question why it can cost them £10,000 per annum to access their own income.
The Adviser Alliance would like to see more power over advisers’ income to be handed to the broker themselves. That is hardly a radical thought and we are not talking about insignificant sums of money here. The broker influences 80% of a £250bn industry. They should be the ones dictating the terms, and certainly not the ones being dictated to.
Seeing as mortgage advisers are the forefront of the advice process, it only seems logical to have them at the forefront of other things as well.
Our preference is to move toward a subscription based model where brokers simply elect to pay for services they need.
Just want access to your money? £50pcm please. Want access to a helpline and other ancillary support services? That will be £100pcm. Want the all singing all dancing package which comes with a pen, a brolly and a fortnightly cuddle? All yours for £200pcm.
Populism is proving very popular these days so let’s have some in our industry.
If Brexit means Brexit, then why can’t procuration fee mean procuration fee? You absorbed the costs of client acquisition, processing, counselling and a lifetime of liability so is it really too much to ask to be paid fairly?
This becomes more relevant when you see the cost of being in business rising exponentially at a time when many procuration fees remain rooted at pre-2007 levels. There is a pay rise sat right in front of us all and it’s one that won’t cost the lender, client or regulator anything.
Ditch the radiator you’re chained to, trust me – you are more influential than you think.
DA vs AR: The DA dark side may be lighter than you think – London Money
I can’t imagine there have been too many mortgage articles that have started with a quote about existentialism but there is a first time for everything.
“Man is condemned to be free” – so said Jean Paul Sarte.
The essence of the message here is that the onus of responsibility remains with the individual, it is they that are in control of the decisions that shape their life and it is the result of those decisions that then define you as a human being.
Still awake at the back? I went directly authorised (DA) six years ago mainly because I had spent the previous 20 years watching people getting it wrong and making decisions about my future which, on the whole, turned out to be flawed. I vowed never to let that happen again.
I have read a number of articles recently about networks in which they extol the virtues of network membership.
I am the first to admit that there are many positives about this type of model and I know some fine mortgage brokers that work within them. A mortgage broker who has ridden the peaks and troughs of the past 10 years will be a good broker today regardless of how they are authorised.
But I also hear plenty of myths in the industry about what it is like being DA. That the regulator will want to close you down, that the cost is prohibitive and that the industry as a whole doesn’t want DA brokers as they are feral and we don’t wash.
Regulator is not a risk
Hmm. Well I can tell you now for a fact that none of those are true.
Regulation is the price we all pay for being in business but the cost is surprisingly cheap and certainly cheaper than employing a large number of people to tell you otherwise.
Worried about the Senior Mangers regime? Don’t be. I spoke to the FCA directly and the answer was the majority of firms will see little or no difference in what they do. Trust me, it is not the regulator that is the risk to your business.
So ask yourself this: while you may be self-employed are you really in control of your own destiny?
As my good friend Thucydides once said: “The secret to happiness is freedom… and the secret to freedom is courage”.
So please, don’t be scared about taking the leap to the dark side, it may be brighter than you think.