Frustration with mortgage clubs stems from fees and cost of additional services
The mortgage club debate has raised its head once more, with some brokers expressing dissatisfaction at the manner in which they operate.
Proc fees and the relevance of extra services such as compliance were of particular focus.
Mortgage Strategy quizzed a host of industry voices from both sides of the fence to find out what exactly people are thinking, with the aim of catching a glimpse of the future of mortgage clubs.
Dan White runs mortgage consultancy White Financial Services and says: “I think mortgage clubs have a place in the industry – I just don’t agree with how they are currently set up.”
He points to the fact that some brokers do not use many of the services clubs offer, including compliance support, educational events and exclusive rates. “These should be at an additional monthly cost as an optional service,” he adds.
Martin Stewart set up DA mortgage club The Adviser Alliance last year. He argues that the wider industry needs to evolve its current model because of changes in the way brokers do their jobs. “Most [brokers] undertake their own compliance functions and marketing initiatives, so really they only use clubs because there is no other way to access their income. That sounds crazy when you write it down,” he says.
Despite this argument, one fact that kept cropping up was that accessing income is key for many small brokers, as well as having the opportunity to access the whole market when forging relationships with every lender can be trying.
John Charcol senior mortgage technical manager Ray Boulger throws another advantage into the mix: “New lenders have to carefully manage the speed at which they offer their products. A lot choose to enter the market through mortgage clubs. Brokers get access to these products quicker than they would otherwise.”
He adds that with, for example, changes in the later-life lending market occurring so quickly, brokers should not be so quick to dismiss regulatory help.
Legal & General Mortgage Club director Kevin Roberts is keen to describe what additional services his club offers, citing how it can influence the market to the benefit of brokers and their clients. He also mentions that his support services team handled almost 100,000 calls in 2017.
“We’ve supported brokers on fees too, championing the payment of proc fees on product transfers and ensuring they are paid early or on completion,” he adds.
And payment is a sensitive topic for many.
“The reality is that the broker should receive 100 per cent of the procurement fee from a lender for placing a case and packaging for them. It isn’t fair for a third party to take a cut of a broker’s income without any opt-in or opt-out option available,” says White.
“The broker has all the risk of advice and all the expense of client acquisition… we believe [a subscription model] is where the industry needs to start moving toward,” adds Stewart.
As for what the future holds for clubs, some believe that change is on the cards. “It is certainly true to say that mortgage clubs need to adapt to market changes – but this statement is true of any player in the mortgage industry, which is undergoing a real period of innovation,” says The Mortgage Alliance development director Lisa Martin.
The march of technology and the disruption it can bring is also brought up. “Rather than burying our heads in the sand, we should embrace the opportunities that technology brings, and clubs can play a leading role here,” comments Roberts.
However, The Finance Roome founder and financial adviser Ellen Roome is entirely satisfied with how things currently stand in a broader sense.
“Having moved away from the comfort of being an AR under the umbrella of network provider, to going DA,” she says, “I do not see that the ongoing and continuing help and support that a mortgage club offers will change in the near, or distant, future.”
Similarly, Martin summarises her position by pointing out that without clubs, many DA firms would not have had access to as many deals, higher income or more service. Nonetheless, Stewart says that the effect of clubs on a lot of DA firms could be “best described as benign”.
He concludes by saying that he has been suggesting for some time that clubs and brokers partake in a roundtable event to address concerns, “but none have yet taken up that offer”.