It is hard to think of an industry that has gone through the same turmoil as financial services and each week there seems to be another issue about to turn the industry upside down.
Mortgages are certainly one of the hot topics right now as everyone jockeys for position ahead of regulation in October. What pedigree do IFA networks need to compete and offer the right solutions for mortgage brokers?
Contrary to suggestions made by certain commentators, some IFA networks, such as Sesame, have been active in the mortgage market over many years, offering services under their block MCCB registrations and taking full mortgage code responsibility. Sesame, for example, has a mortgage service that introduced in excess of £9bn of applications to lenders last year.
With a mortgage track record already established, one aspect that particularly favours IFA networks is the new regulated environment we will be operating in. Experience and expertise in dealing with FSA regulation is a significant advantage and IFA networks can provide brokers and advisers with a range of compliance support services to guide them through this minefield.
IFA networks are already authorised by the FSA and only need to extend their permissions to include mortgages and general insurance. This process is much easier than having to obtain FSA authorisation for the first time, which is what the new mortgage principals have to do.
But regardless of whether your prospective principal or support provider is an IFA or mortgage network, how can you ensure they are the right fit with your business? By asking the following questions, you will be able to assess the true value of what is on offer:
Does the organisation have the financial strength and backing to support my business in the long term?
What experience does the organisation have working with FSA regulation?
Has it been regulated at all before?
Does the scale of the organisation mean that it will be able to secure the best deals for my clients and me?
What technology support will it be able to offer to help keep down my costs?
Will it offer me a broad range of good quality support but leave me to make the right decisions for my business?
PI insurance is also an important consideration but here again the market is evolving, with some schemes offering lower premiums and excesses to mortgage advisers to reflect business that is typically lower risk.
If you choose to join a network, how do you know if you will be restricted to where you can place your mortgage business in the future? The answer will depend on the terms and conditions of the network in question and you need to carefully check what is on offer. For example, some networks such as Sesame offer either a whole of market or a panel option.
The former enables you to choose mortgage products from the whole of the market and is very important to some advisers, such as those who wish to provide an holistic financial planning service to clients. However, comparing whole of market against a panel offering is not as black and white as may first appear. This is because some panel propositions have evolved to offer access to a wide range of lenders and still enable you to be classed as an independent mortgage adviser following M-Day. This is possible by operating through a panel of lenders that collectively are representative of the whole of market. The advantage of this new approach is that it enables you to offer independent mortgage advice while also benefiting from the higher procuration fees and enhanced service that panels typically provide. It may even be possible to go off panel in certain circumstances, for example, if a client requests a specific lender which is not on the panel.
The level of procuration fees for whole of market and panel offerings will vary widely so it is crucial you compare fees before making a decision. Some networks may purport to offer low charges but mask this by retaining a portion of the procuration fee by the lender.
Network charges are important and you will need to understand the impact both of procuration fees payable and the charges made to your business. Considering your options ahead of general insurance regulation next January is just as important and you should expect the same flexibility to suit your business.
Many IFA networks have a long history of operating in the mortgage market and can offer the flexible solutions that mortgage brokers and advisers are looking for. Make sure you do your homework and ask the right questions to ensure you make the right decision for you and your business.
Andy Young is product manager, mortgages,at Sesame