The lack of movement could suggest brokers get it right first time or that there is not enough difference between providers to prompt change, or there are too many barriers to jump.
We asked this week’s Markewatch panel if there is enough innovation and competition among clubs and networks and if it’s easy enough to change membership.
The mortgage industry has already seen a large amount of change and some commentators feel the market is ripe for further disruption.
However, it is an industry that is proven to be geared up to gradual evolution over time rather than respond to risky, big bang explosions of change.
Over the past 15 years, mortgage networks responsible for their appointed representatives (AR), and clubs looking after their directly authorised (DA) brokers have all embraced a plethora of regulatory demands.
They are all now well placed to handle further general changes as tight management of compliance, systems and controls are very much part of day to day business.
It is perhaps in the area of technology that most change will be forced on the industry by the sheer expectations of customers who demand things to be done with vast speed and efficiency across all sectors of the property buying process.
In the main, such DA clubs and networks work well for their members because they know they have to delight them with superb products and services or else that intermediary will go elsewhere.
That said, it is very hard for appointed representatives to easily leave their network due to the tight contracts in place and especially as many networks withhold commissions for several years after the AR has left.
This can be very punitive and so the AR is naturally often put off leaving, making competition in that arena somewhat questionable.
For mortgage clubs the world is much different as DA brokers are not generally under contract and can use as many clubs as they wish and therefore much more competition exists between clubs, which have to think of imaginative ways to win and retain customers.
Innovation is a positive thing.
Sometimes disrupting a market is what is needed to refresh a group of companies and organisations which have, maybe for too long, had things ‘their own way’.
Or, you may have the alternative viewpoint of the status quo being perfectly acceptable – with the feeling that ‘if it ain’t broke, don’t try to fix it’.
Either way, it does seem to me that the network and mortgage club models are ripe for change.
There are some really positive examples of where being part of a network or mortgage club has helped people grow their business, with support and training, plus negotiations with lenders and providers.
But if you keep your finger on the pulse of this industry, you’ll hear some of the more negative stories.
For example, if a broker firm is a member of a network, why do some networks seem to freeze commission pipelines if a broker firm gives notice to leave them?
Why are there long notice periods in the first place? Yes, it’s a commercial arrangement between the broker firm and the network – but the network doesn’t employ the broker firm, it’s the other way around.
Does the mortgage industry need the equivalent of a Bosman ruling? Answers on a postcard.
Sometimes it’s easier to stick with what you know – perhaps this is why broker firms don’t try and move from one network or mortgage club to another on a regular basis.
An innovative, disruptive new network or mortgage club could however buck the trend and give broker firms flexibility – who’s first?
There is always a need for innovation and change, otherwise we all simply stand still and the service provided to AR firms, or indeed in the DA space, becomes ‘samey’ and the status quo prevails.
From our perspective, technology has a massive role to play here.
Regardless of what type of advisory firm you are – you will need to embrace the fact that services like robo-advice are here to stay and an increasing number of clients will want to use it.
This is why we effectively got on the front foot with our virtual adviser service, which allows clients to tap into the service, and jump off at any point in order to deal with a human adviser.
In terms of competition, it’s fair to say there could also be more.
New mortgage or protection networks do not come along very often, which perhaps tells you all you need to know about how difficult it is a) to set one up, and b) to make it unique and viable.
Clearly, being different helps.
Offering product sectors, such as equity release, that a large number of networks still shy away from, also sets you apart, especially when you consider the growth in the later life lending market.
Not loading premiums on protection products and being totally transparent about procuration fees also singles you out in this sector.
It can be difficult to choose a network, but the good thing is not every proposition is the same.
Comparing networks however is tricky and this market is crying out for a proper comparison tool to cover all principals and which genuinely places the AR with the right network.
We suspect we’ll be waiting some time for this though.