Hamptons International Mortgages managing director Kevin Duffy has hit out at mortgage brokers, claiming that most are mediocre and overpaid and only remain in their jobs because the buoyant housing market has increased broker demand and there is a shortage of new talent entering the industry. This attack comes shortly after the FSA found only one-third of mortgage firms had robust processes in place to provide customers with suitable advice.
But advisers have denied the claims, saying that, while there may be a few cowboys in the job, the vast majority of brokers work hard to give their clients the best deals.
Duffy says: “Many mortgage advisers are what I would call journeymen, operating in a comfort zone simply because the skills shortage is so emphatically in their favour.”
But AMI associate director Rob Griffiths says clients would take their business elsewhere if brokers gave inferior advice.
He says: “The quality of the advice is everything. This market mainly works on referrals and if a mediocre service is being provided, most people would vote with their feet so it is up to the broker.”
Purely Mortgages chief executive Mark Chilton agrees that the shortage of new blood may be allowing some advisers to rest on their laurels.
Chilton believes more companies should raise broker standards by recruiting and training advisers themselves.
He says: “The big companies are very cash-oriented and it is cheaper to pinch someone already in the industry than train them up. Apart from us and London & Country, no one is out there actively recruiting and training new entrants so that means these people are in high demand.”
Chase de Vere Mortgage Management director Nick Gardner says companies have had to recruit more advisers to cope with demand as the mortgage industry has expanded. He adds that the more brokers a company recruits the harder it is to maintain standards but says it is their responsibility to make sure advisers are up to scratch.
According to Duffy, salary inflation is rampant to the extent that distinctly average advisers are getting £50,000 basic salary.
He says: “This might be more palatable but for the fact that the actual sales management of some of these people leaves even more to be desired. Too many are yesterday’s failed salespeople and are quite simply box-tickers.”
But Griffiths believes a firm will pay what it thinks an individual is worth and no more.
He says: “Of the guys who are advising and making a good living, the vast majority are providing quality advice to their clients. Who are we to say what a firm pays their advisers.”
Industry players predict 2007 will be a tougher year for mortgages.
Duffy says rising rates, foaming property values and the impact of lender retention strategies may scale the market size back to under £300bn. He says most of today’s advisers have never had to perform in a downturning market and believes they will struggle.
Chilton says: “It is all very well in a bull market but when you are struggling, it is bad. It has been a very strong market for a long time which does allow advisers who are less than the best to survive who might not in a more difficult environment.”
Griffiths says many brokers have moved into the market in the last few years while the market has been booming, but many more have been in the business for over a decade and therefore have experienced a bear market.
He says: “Many intermediaries have seen a downturn in the market and it is in that situation where the job of a mortgage adviser becomes even more important because people are in need of more qualified advice.”
The FSA found last month that only one-third of mortgage adviser firms have robust processes in place to provide customers with suitable advice. The regulator said it found “significant failings in the advice giving processes in a number of firms”.
Gardner says: “Some small operations who are struggling to get by would do almost anything to get a deal done and it is that end of the market who think they can get away undetected by the FSA. We had a routine visit from the FSA recently and they were delighted. It would probably be the same with other big brokers because we cannot afford not to comply.”
London & Country mortgage specialist James Cotton says: “Regulation certainly puts a strain on smaller firms but it is a regulation world we are in now and the FSA are not going to accept excuses. There are networks and services that smaller brokers can use to allow them to give good advice as well as be compliant.”
Griffiths says: “We are not suggesting every firm is at the standard we would like but the vast majority are trying hard to keep up with compliance.”