The regulator hopes such a tool would make it easier for borrowers to assess the strengths of different brokers, after finding that a consumer’s choice of intermediary typically makes a difference to the eventual cost of their mortgage.
So we asked this week’s Marketwatch panel if a broker comparison tool is a good idea.
A broker comparison tool could be useful in a number of areas.
The first is around the terminology brokers use to describe the scope of what they offer their customers.
I do not believe terms such as whole of market have clearly defined the scope of the advice on offer.
For example it wasn’t that long ago when you could get away with calling yourself whole of market despite having access to five or so lenders who happened to represent the whole of market.
A tool that provides transparency around the extent of a firm’s market access would be valuable for borrowers ahead of engaging an adviser to act on their behalf.
A second benefit is the tool could compare brokerages in terms of fees, the adviser qualifications – do they hold the CeMAP Diploma, for example, and the number of lenders that brokerage actually uses.
If you are a fee free broker but work from a small panel and transacted with fewer than 10 lenders in the previous 12 months, a customer may feel it worth paying a fee to a broker who transacted with 30 lenders in the same 12-month period.
The tool could also include the comparison of services like electronic fact finding, the offer of a no obligation face to face meeting, holistic protection advice alongside the mortgage, and direct access to the adviser throughout the process.
This way consumers know what to expect from their broker, and it will hopefully encourage more competition within the intermediary sector to upskill and engage with as many products and providers as possible.
First up, a question: how many advisers believe they or their firm gives a poor-quality service?
I’m suspecting that there’s no one out there who believes this to be the case.
I read the recent comments from some brokers who attended the Mortgage Solutions’ broker Supper Club and they appeared all in favour of such a comparison tool.
They all, no doubt, believe themselves to be high-quality advisers providing a high-quality service.
With such belief surely they would rank highly on such a tool?
Well, not necessarily.
Indeed, without knowing how firms are going to be judged and on what basis, I’m surprised there is a groundswell of support for such an idea.
I’m all for consumers having more information to make their choice, but, at present, there are far too many questions about how firms will be judged, compared and placed.
How would you feel if your firm was on the last page of results?
The balance on this one is tricky. Any comparison has to be understandable to consumers but can’t be so dumbed down that it becomes meaningless.
How will the FCA define and judge the quality of the firm? On its fee level, on its access to lenders, on the consistence of its business, on its profitability, on the reviews of former/existing clients?
Perhaps. But all can be manipulated and we could be in danger of a Google situation where the larger firms work their way to the top of the list and the smaller firms – of which there are many – might find themselves completely overlooked when it comes to putting their services in the consumer shop window.
This might seem like a simple idea but it is teeming with problems, complications and could result in some very disgruntled firms.
The devil will be in the detail but I suspect it could bring about a hellish situation for many advisory practices.
I welcome the news that the FCA is planning to work with intermediaries to help consumers compare brokers.
Transparency in the industry is vital. It will be interesting to see exactly how these comparisons will be made, in the interests of fairness.
If things do shape up as hoped, we could see consumers better understand the connection or financial relationship between an introducer and adviser, prior to transacting.
They might also understand the way intermediaries fit in with the market.
This should be a good thing for all concerned.
The areas that the FCA suggest using to compare intermediaries, include how many lenders or the range of lenders, a particular intermediary uses.
In this regard there would need to be acknowledgment of any specialist area the intermediary works in and obviously the clients’ circumstances, which may mean they are limited to a certain choice of lender.
However, more clarity on panels used, fees charged and areas of knowledge should only help the client when choosing an advisor, if properly explained and compared.
Complaints is another area comparison metric mentioned by the FCA that you’d expect to be in the public interest.
Overall, to make this type of comparison tool for consumers a success, borrowers will need to be able to understand the context of the comparison and ensure that like for like is compared.
I believe this may be difficult, given the different types of advisers, introducers and structures in the market today.
But having a tool that helps consumers to choose an intermediary can only be a good thing.
Being able to compare fees, areas of expertise, markets and products covered, concentration of business transacted and number of complaints on one comparison tool can certainly assist consumers to make the right choice for their individual needs and circumstances.