This week the accolade goes to Arron Bardoe for his response to the post: Brokers say regulator is right to question mortgage club fees.
He said: “I agree the market needs reform. Prior to the electronic age in which we now live, clubs would market rate changes, literature and administer payments. The internet, email and BACS have now removed these issues.
“Many clubs still offer help with placing cases, but, as most lenders will not pay brokers directly, why should all brokers pay for a service they may not use?
“The exclusives can be helpful, but often we see the same ‘exlcusive’ with every club, which causes additional issues on Trigold when the same product is shown multiple times.
“The advocate of clubs above mentions it is a small fee, but it is around 9% of a broker’s mortgage revenue, which I would not consider small.
“A broker earning say £100,000 in proc fees each year will be paying £9,000 in fees, which would equate to say a part-time administrator. Across larger brokerages, this would fund full-time support and paraplanners.
“For most brokerages of 1-25 advisers, there is little choice other than to use a club as lenders will either not pay directly or they significantly reduce the proc fee.
“Indeed, for many, the clubs take 9% and only serve to delay payment of a proc fee; I know some pay the same day, but not all and even so, it still means we get paid a day later.
“Accordingly, the FCA is right to question the value of clubs and I suggest it is time for them to make their case to justify 9% of brokerage revenue.
“In addition, I suggest lenders should also explain why they will not pay the same gross fee directly as they pay through clubs.
“These clubs do not undertake any compliance or quality checking and, for most brokers, it is simply a case of selecting a club from the drop down menu.
“Lastly, I would suggest most brokers review what service they are receiving from their club in support 9% of their income. Even a broker earning just £20,000 in proc fees is paying £1,800 pa.”