Cover
Size definitely isn’t everything
by Gary Watts, Which Network
The second quarter of 2012 has been nothing if not eventful. Big rises and falls within mortgage networks seem to be the order of the day; however the huge news is the
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It is not just the network heads who take this view. Ordinary brokers working hard to earn their crust are beginning to take notice. Gavin Perrett, director at Sussex-based broker Liddle Perrett, says choosing a network based on high proc fees is naive. “A network can promise the earth but if they don’t have the financial muscle to sustain high commissions in the long term then it is irrelevant,” he says. “Key factors are the financial strength of the network along with their inter-connected relationships with businesses that feed into the pot.” And Colin Payne, associate director of London-based broker Chapelgate Associates, says increasingly it has to be about more than the proc fee. “Whilst higher proc fees are naturally tempting it wouldn’t sway me in isolation and of a growing concern is lenders’ thoughts on linking proc fees to the quality of cases,” he says. “I’d be looking at a network that offers support in training/ coaching, has an excellent rapport with lenders and whose compliance may be considered on the stricter side. As an Openwork AR I have already seen our proc fees reduced by Abbey for Intermediaries despite the quality of our cases being very good. This is clearly
Networks may be beginning to wake
It’s not just because we’re one of the most financially strong networks and directly authorised service providers...
www.mortgageintroducer.com MORTGAGE INTRODUCER OCTOBER 2012 31
collapse of Honister, an investment and pensions network which seemed to be prospering until it recently closed its doors after failing to secure Professional Indemnity cover for its ARs. This followed on from a £6m claim against Burns Anderson one of its subsidiary networks which effectively meant that ongoing, the network was unable to secure PI cover at an affordable price. Although certainly nothing good
disappointing given as an individual firm we have no control over other firms’ quality of business so it makes it even more important to understand the quality controls the network has in terms of compliance and training.” Sinclair is of the view that a lot of advisers left without a home after Mortgage Times collapsed in 2009 went to Honister Capital and that the experience should be a lesson for those considering a move. “It’s always nice to have a bit more money but sometimes it’s better to stand back and think about the longer term implications of moving to a network offering better proc fees,” he suggests. “If all you’re doing is moving to another firm that isn’t sustainable maybe you should think twice. Honister is another salutary reminder of this – a lot of advisers went there from Mortgage Times. They’ve therefore gone through a second phase of losing income. They maybe went there because it offered better commercials than other networks – but that’s not always the best place to be. It might be a false economy.”
has come out of this situation it has at least illustrated a couple of points which we are forever pressing. Namely, size is definitely not everything when it comes to the financial stability of a network, just ask any ex-appointed representative from Honister, Home of Choice, Mortgage Times or Network Data - all large networks with a good track record, but fatally huge loans and debts which eventually proved too much for them.
up to the fact they can’t survive without rethinking their income. Brokers have not reacted particularly well to last month’s hike in fees by Personal Touch Financial Services – its first for three years. While PTFS IFAs already pay a fee, from 1 November 2012 all ARs will pay a £265 monthly fee for the firm plus an additional £102 fee for each individual mortgage, protection, equity release and PMI broker. Sesame has also raised its charges this year. But there are those – notably those who run profitable networks – who have a different view from brokers who see PTFS’s move as yet another assault on their own income.
“Why would any other network come
to a different conclusion?” questions Duncan Crocker at L&G Network. “Every business has the right to make a profit but gone are the days when I think advisers can clamour for more, more, more. That way lies the road to ruin when brokers run to switch networks for every penny of extra commission. I think the sad fact is they’ve got used to networks giving them too much of the cake.” Crocker isn’t alone. “It’s getting to a point where networks have not been
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