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Keep in contact to keep clients

My mailbag has turned up some bizarre oddities which contrast the mortgage business with other areas of financial services so I thought I would share some of this with you this week.

Despite not having a Volkswagen, I insure several of my family’s cars with Volkswagen Insurance. Another car, a Renault, is more logically insured with Renault Insurance. All done because they offered the best deal at the time.

Volkswagen Insurance is a brokered offering through Equity Group whereas Renault is another RBS spin-off from Direct Line. So, as a broker who believes in choice, I was delighted a couple of weeks ago to be told that, from renewal, Renault Insurance would be transferring to Equity so I can, in theory, be certain that, as a brokered offering, I will get the best deal at renewal.

But I have now got a letter for each car with Volkswagen, saying they are transferring to Zurich. Apart from the disappointment that they are going monoline, they also asked for negative consent to the data transfer.

Taking this approach into our world of mortgages with relationships between introducers, intermediaries and lenders demanding a more rigorous approach, it makes me wonder why our market is so tightly controlled in this area. Many distribution routes blithely ignore these restrictions so perhaps there is another ticking bomb in this area.

I also got a base rate change notification from my lender and this set me thinking now that some lenders are paying brokers on retention. Two factors have emerged before the debate about duty of care from the broker’s perspective. First, despite lenders paying us for retention, they are competing with us by a combination of mail and, in some cases, what would be perceived as cold-calling if a broker did it.

Clearly, they would prefer us not to be involved as it adds to their costs, so it is vital, even if the retention offering is best advice for brokers, to be highly proactive on their own retention activity to ensure they retain the retention proc fee and the customer. If you have not maintained contact with your customer, you will run the risk of not being a preferred option to the lender. You must have a regular contact strategy which accelerates towards the expiry of rate.

The picture is more complex with differential pricing. Why is it that, within HBOS, you can use new business products for existing customers with Halifax but only specific retention products that are less competitive with BM Solutions? It means the vast majority of BM customers are better off switching. Paying us to retain the business would, in these cases, put our duty of care to the customer in question.

This was emphasised two years ago when Michael Bolton led a massive hit into the prime sector with the first high-fee, low-price trackers. These particularly appealed to customers with bigger loans for whom the retention products are the least attractive.

Until last week, their best option was often to remortgage to the Bank of Scotland’s similar deal – which perhaps explains its withdrawal. Internal churning and at what a cost. But, moving back to where we started, would it not have been simpler to transfer the entire BM book on these products to Bank of Scotland? It just goes to show that we can learn some smart moves from other sectors. Oh, and I will be saying no thanks to Zurich.

Mark Chilton is chief executive at Purely Mortgages

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