Clients accept solicitor fees as ‘necessary cost’ but not brokers’ – Star Letter 25/06/2021
This week in a Marketwatch piece, HD Consultants owner Howard Reuben, Rose Capital’s managing director Richard Campo and Darryl Dhoffer, mortgage and protection consultant at The Mortgage Expert debated whether broker fees should be on a par with solicitors fees.
They suggested that due to a higher volume of business and heightened property prices there should be a restructuring of procuration fees, commission, and broker fees to better reflect the increased workload.
Paul Smulovitch said: “The difference here is the perception. Most clients accept a solicitor is a necessary cost and will pay accordingly, however, regarding brokers some clients are aware they can do without or use effective robo-advice so it is being sensible and justifying the charge.”
He added: “However, as most conveyancers charge circa £1,000 for work, as a broker fee this is not unreasonable at all.”
Adam Hosker said: “[It is] your business. Charge what you think works best for your business. If you think broker fees should match solicitors and be based on case complexity, then do it.”
‘The last thing my clients need are seven or 10-year fixed rates’ – Star Letter 18/06/2021
This week, JLM Mortgage Services director Rory Jospeh and head of mortgage finance Sebastian Murphy proposed introducing seven or 10-year fixes into the market to cater for higher loan to value (LTV) borrowers.
They also criticised the market’s moved to launch sub-one percent rates, arguing that they could be the “equivalent of a chocolate teapot”.
John Azopardi said: “The last thing my clients need are seven or 10-year fixed rates. The last person who successfully planned seven years ahead was Joseph wearing a technicoloured dream coat in Egypt.”
He continued: “The reason that these products [seven and 10-year fixed rates] are rarely taken up is that they are over-priced and inflexible. Clients often pay more than on a five-year rate, coupled with the inflexibility of a long early repayment charge (ERC).
“If penalties dropped off or reduced drastically after five years then maybe – and if the rate was slightly over the five-year rate then possibly – but until then I would suspect that very little business is transacted at seven and 10 years.
He added: “More to the point, if the lenders are buying in more lending at sub 60 per cent to improve market share and to ensure that they can do more high loan to income lending above 85 per cent I am all in favour of their stance. That’s a win-win for all my clients and we get the added bonus of news space when we are competing with Euro 2020 and the Delta variant.”
A robust file will protect brokers from the growing ‘sue culture’ – Star Letter 21/05/2021
The first comment was in response to the story: Broker wins case against charge of mis-selling interest-only mortgage
Andy Wilson said: “As always, a robust file will help to protect against losing claims such as these, which are likely to become more and more common whilst we live in a ‘sue culture’.
“It is not enough to give your clients sound advice, you need to be able to prove you gave them sound advice.”
He added: “Converting an interest-only mortgage to a capital and interest loan in the future is an acceptable repayment strategy, as long as the effects and risks of such a strategy are carefully explained to the client upfront, and in writing. There would also need to be evidence on file of how this change would become affordable, preferably with some stress-testing calculations in place too in case interest rates rise in the meantime.
“It would not be an acceptable strategy however, if there was no likelihood of meaningful changes to the borrowers income in the future to be able to afford to convert in this way.”
“We also know all too well that borrowers conveniently forget they needed to put in place a plan to repay the debt at the end of the term. They can also conveniently suffer total amnesia when asked to recount conversations that may or may not have taken place with their adviser, especially when someone is given a whiff of possible compensation, so documented evidence on file and saved forever is key,” he added.
Wilson said: “As an example, my supervising network sensibly keeps electronic files for 80 years, and this is solely to be able to defend complaints.”
Long live the BDM!
Last week’s Star Letter comment, which questioned the need for business development managers (BDMs), also garnered responses.
Simon Wilkinson kicked off the support for BDMs, saying: “A good experienced BDM is a lifeline for brokers and their value should not be in question.
“The idea of different lender BDMs sharing a WhatsApp group is excellent and a useful way of getting cases placed and co-operation between BDMs is a useful resource for brokers.”
Danielle Panteli weighed in, adding: “BDMs are so valuable. I’d say I speak to at least one of our BDMs once a week.
“Some I’ve known through my almost 20 years doing the job and are more like friends. A BDM’s guidance, help, advice quite often decides if a case goes through or not. I’ve had more situations than I can count where a case has been declined and a BDM has managed to turn it around.
“I, for one, love our BDMs and love seeing them in the office for a coffee and catching up. It’s also hugely valuable for new staff to learn the lenders USPs and during the last year we’ve relied heavily on our BDMs support with various changes in criteria especially for the self-employed. Long live the BDM.”
Arron Bardoe said: “How can any broker demonstrate they are maintaining their awareness of lenders’ criteria and getting their clients the best deals without speaking to their BDMs?
“While the quality varies in what support a BDM can provide, they make all the difference in my business.”
Tiffany C saw things from both sides, saying: “Not all BDMs from each lender are as co-operative or truly adding any value compared to others.
“I know some BDMs who go the extra mile for me and my cases which makes a huge difference than if I didn’t have that relationship in the first place. There are certainly some BDMs who are just there and not adding any extra value than if I called the broker helpdesk or looked it up on their website.”
Brokers don’t need a BDM to sell to them to use a lender – Star Letter 14/05/2021
This week’s first comment was a response to the article: Without BDMs, it is difficult to make ‘out-of-policy’ cases fit – Marketwatch
Andrew Ducksbury said: “Before regulation, business development managers (BDMs) were the lender’s sales force.
“They had targets, appointment targets and were pushed onto the broker community by lenders – since regulation you don’t need BDMs.
Ducksbury added: “If, as a broker, you are any good, you don’t need to be sold to in order to use a lender. You use the lender because for they are the best available for the customer you’re dealing with.
“I’ve not allowed BDMs to make appointments with me at my office for years.”
Benefits of advice
Robert Drury responded to the article: Product transfers: Benefit to the customer or the lender?
He said: “We contact all our clients three to four months before the maturity of their current deal, and while some clients do go direct to the lender due to the ease of the process nowadays, many also come back to talk to us.
“The loan to value (LTV) is only one area for discussion – do clients want to borrow more? Borrow less? Decrease the term?”
Drury added: “Even if my advice is to stay with the existing lender, our clients really appreciate that time spent discussing their biggest financial commitment.
“Two hours every two to five years seems to be time well spent with our clients and many of them allow me to make the product transfer for them, on their behalf, as we cement our relationship with the client for the next time they look to review their mortgage.”
‘Brokers will choose between similarly priced lenders based on the BDM’ – Star Letter 07/05/2021
The first comments came in response to the article: Lenders that cull BDMs do so at their peril – JLM
Nick Morrey said: “The skill set of a business development manager (BDM) is actually not inconsiderable and their use to brokers for both pre-submission vetting and troubleshooter is invaluable.
“I know some brokers will choose between two similarly priced lenders based on the BDM service that they may need.”
He added: “I am in support of the above article on behalf of brokers everywhere. Lenders have had both a tough and bumper year so to then make culls in their support divisions would be both unfair on individuals who have likely worked very hard from home, often deepening relationships with brokers who didn’t engage pre-pandemic, and harmful to future profits.
“In time, face-to-face visits will return, good BDMs will be at a premium so don’t let go of yours just for a teeny positive blip in profits to mask other failings. ‘They do so at their peril,’ indeed – and don’t say you weren’t warned.”
An anonymous poster was in agreement, saying: “I concur. At least 50 per cent of the web chat interactions I’ve had have been less than worthless because they wasted my time.
“Whereas being able to speak to my BDM I was on occasion able to persuade them to go outside criteria to place a case for an exceptional client.”
Balance lender loss with ERC
The next comment was to the story: Legal & General trials equity release fixed early repayment charges
Andy Wilson said: “The charging of early repayment charges (ERCs) is to reflect that potential loss to the lender of the client paying the loan back early.
“However, I have long maintained that if some lenders can use fixed ERCs for lifetime mortgages that will charge a maximum of 10 per cent of the loan amount, there is no clear reason why lenders charging gilt based penalties can justify up to 20 to 25 per cent of the loan as a penalty charge.”
Wilson added: “Surely the loss to the lender of early repayment cannot be so different? The fixed charged penalty lenders would suffer massive losses if the real loss was up to 25 per cent of the loan.”
High gilt-based ERCs
He said: “I attended a recent workshop on gilt-based ERCs along with many other brokers.
“None of the three lenders using gilt calculations for their ERCs could offer any solid justification for such high gilt-based maximum penalties, while fixed ERCs as low as five per cent of the loan for five years followed by just three per cent for the next three years are available elsewhere.”
“There are two huge criticisms of lifetime mortgages on social media – the potentially huge increase in rolled-up debts due to high rates of interest in the past, and ERCs for those trying to get out of the past high-rate deals now,” he added.
Wilson said: “The sooner we can start to show the ERC amounts reasonably mitigate some loss to the lender for early repayment, the better.”
If government pays for cladding, lenders will agree to mortgages – Star Letter 30/04/2021
This week’s comment was in response to the article: Cladding loan scheme should be abolished and paid for by industry and state, say MPs
Arron Bardoe said: “In what other world would the victim be expected to pay remediation?
“Where they are still trading, the developers should be fixing these problems or using their professional indemnity cover; and in turn they can sue the providers of the cladding if they remain in business.”
He added: “If the government does decide to alleviate owners of the costs, it may help lenders to agree their mortgages, as they currently factor in the cost of any future works when considering applications.”
AR fees will result in more costs and red tape for rule-abiding firms – Star Letter 23/04/2021
The first comment was to the story: FCA announces £10m fee for networks to tackle AR oversight failures
Paul Smulovitch said: “For the average appointed representative who represents no risk and follows rules diligently, this is just more cost and likely to be even more red tape when time is already precious.”
Facing ‘keyboard warriors’
The second comment came from Andy Wilson, under the article: Banter and bullying or community and kindness: five brokers open up about life on social media
Wilson said: “I post quite heavily on LinkedIn, and occasionally on my own Facebook business page, but Twitter has for me fallen a bit by the wayside.
“However, there are a lot of companies advertising for equity release on Facebook, and many of them are lead generation companies for equity release products.”
He added: “Almost inevitably, there will be anything up to 100 or more posts which are knee-jerk reactions from people who clearly do not understand the modern products, with flexible features and benefits.
“’Don’t do it’ and ‘it’s a con’ they cry. So, I challenge them. ‘Why do you feel like that?’ or ‘what makes you say that?’.”
Wilson said: “Those who bother to reply, and who aren’t simply keyboard warriors posting for a jolly, do state their arguments about it, but they are nearly always related to old non-regulated products with high exit charges, and bear no relation to the lifetime mortgages of today.
“I try to educate and explain, but it is an uphill struggle with some. Some are violently opposed.”
He added: “One poster was so incensed by the fact that I, as an adviser, had dared to challenge the seemingly popular view that all those involved with equity release should be hung, drawn and quartered, and even went so far as to post personal attacks on me, including a statement that he grouped me in with child molesters and paedophiles.
“My wife was horrified, but I simply reported the posts to Facebook and within 20 minutes they had deleted his posts and issued a warning.”
Wilson concluded: “Social media can be an offensive place. You just need to keep everything very polite and professional, and eventually some will realise you may actually be worth talking to after all.”
‘Welcoming back self-employed borrowers will not be as smooth as we like’ – Star Letter 16/04/2021
This week’s comment was in response to the story: Changing tax year means lenders can no longer put off self-employed borrowers – JLM.
Sox said: “It will surely be sensible for all lenders to still request the last three business bank statements, and I will certainly still be asking my clients for them.
“I’ve heard recently of a case that declined because the client took out a government grant as advised by his accountant; despite the fact his business was doing okay for the last three months.”
Sox added: “The reasoning behind this was when you apply for the grant, you have to declare that you are still suffering financial difficulties – which he technically was not.
“You shouldn’t ‘have your cake and eat it’ but hundreds of people and businesses have over this period. I’m not sure the welcoming back of the self-employed with open arms will be quite as smooth as we would like.”
Hawaiian shirts and flip flops would be welcome in broker offices – Star Letter 01/04/2021
This week we’d like to thank our readers for joining in with a little April Fools’ humour to put a few smiles on our faces.
The first comments came in response to the story: High street lenders to allow beachwear in offices and when meeting brokers, with advisers reacting to the almost unbelievable news.
Sox said: “Clearly the ‘coconut six’ are exactly that – nuts!
“I don’t want to see any professional at work in swimwear, thank you very much. Ladies can wear many blouses and dresses that are cool yet smart.
“Men can certainly ditch the ties, but a smart short sleeve shirt would still offer comfort and look smart. Even go Hawaiian if you wish, but I do not think t-shirts, jogging bottoms and swimwear are appropriate work attire if you are visible. Call me old fashioned.”
Paul Smulovitch was a fan of the objective, saying: “Personally, I’d love a more relaxed approach.
“Someone being suited and booted isn’t the reason we do business, it’s the help they offer. Bring on the flip flops, albeit there are some I may not be too keen on seeing in beachwear.”
Others saw through the Mortgage Solutions team prank, including Danielle Panteli who commented: “Happy 1st April. Very good,” and James Carter who said: “Ha ha – you do know what the date is? ‘Rolf Lopia’.”
Working from home leading to ‘incompetent’ services
On a more serious note, the story ‘Lenders need to get staff back in the office’ to improve service – Marketwatch, also got some attention.
Clinton Green said: “Having spent sixty minutes on the phone several times trying to reach lenders, I could not agree more.
“Working from home saves money on offices, but you do try and avoid using lenders that are offering such an incompetent service.”
Regulators should stress test based on loss of income due to illness – Star Letter 26/03/2021
The first this week came from Trying to be a Retired IFA under the article: Quarter of homeowners miss mortgage payments due to ill health – MetLife
They said: “This is why the regulators should look at stress testing income from accident and illness, not just from a rising interest rate. Where advisers talk of the total costs of the mortgage, including mortgage payments and all insurances, the success in clients understanding the need to protect themselves and doing so goes up. I’ve seen this work.
“Clients need to be educated yes, but so do some advisers who sell a mortgage and then try to upsell when clients are already thinking about the existing costs.”
They added: “Include it in the conversation, explain why and quote an all in figure within their total budget. Also, advisers revisiting those who couldn’t afford everything at outset is another way to ensure the client is aware and protected for things we all know can happen.”
Mortgage guarantee not solving affordability problems
Robert Craig reacted to the article: Let’s not expect miracles from government’s mortgage guarantee scheme – Ganatra
Craig said: “This [scheme] does nothing to solve the real problem that even those of us with a £20,000 to £30,000 deposit still can’t afford to buy a house in the south of England because property prices are too high compared to income.”
He added: “I have literally just spent the last three weeks looking for somewhere to buy, and out of the nearly 130 potential properties I have looked at and seriously considered online, only three of them are affordable and even then, only with shared ownership.
“Not because I don’t have enough deposit or monthly income to service a mortgage, but because I can’t get a mortgage for more than five times my salary, and even with a £20,000 to £30,000 deposit, house prices put that number out of reach.”