View more on these topics

Little sympathy for the banks

The preparation for the retail distribution review is most certainly already beginning. I have recently been called several times by IFA networks asking whether I want to join them to shelter under their umbrella. Such consolidation is made necessary by capital adequacy requirements that are part of the RDR.

The banks and insurance companies are also having their own reaction. The idea of factory-gate pricing has been with us for a while. It came at the outset of stakeholder pensions and the pension providers advertising low annual management charges unless the advisers were greedy enough to want to be paid, when the AMC would be 1 per cent. That was fair enough because the AMC was to be used to pay the provider and the adviser.

Most recently, however, the banks have introduced a similar idea with mortgage rates and arrangement fees. Mortgage rates have been put up, using the excuse of the credit crunch. Arrangement fees have increased dramatically over the last couple of years to amazingly high levels.

It is difficult to see how the banks can justify fees of up to 3 per cent of the loan. At the same time, they seem to be positioning themselves to stop paying procurement fees to introducers.

The banks are perfectly within their rights to choose the rates that they make available to their own clients and to intermediaries but their stance in this is making it very difficult for mortgage brokers. When the mortgage sourcing system highlights several direct rates being far better value than the best introduced rate, the lenders are forcing brokers into the position of needing to charge fees or higher fees than they were previously, otherwise brokers will run the risk of future claims if it were proved that they did not advise the most beneficial rates to clients.

The banks have been historically opportunistic both with lending and savings rates by not passing on the full benefits of rate shifts, as they are with their sales procedures, which are going to need to change under the RDR proposals. They will not be able to be tied or multi-tied while still calling their employees advisers.

Another cause for concern for the banks will be the effect of the case against them by the Office of Fair Trading relating to bank charges. It is difficult to see how they can realistically believe that their appeal will change the original verdict.

I actually thought that they could have worked with the original verdict because the judge said he did not feel that the level of charges was unfair. All he did was to confirm that the OFT had the right to challenge the charges in the future.

This will cost them a lot of money and also probably change the way they cost their accounts in the future. I cannot think that there will be much sympathy for them.

Tony Catt

The IFA Centre, Hove,

East Sussex

Recommended

Friends appoints global manager

Peter Drummond has joined Friends Provident International as international strategic business development and global account manager. He has over 15 years experience in the insurance industry, most recently at Muscat Life Assurance in Oman.

Openwork picks Hornbuckle Mitchell

Openwork has appointed self-directed pension specialist Hornbuckle Mitchell to provide self-invested personal pension services for its investors.

Towergate buys M2 Financial

Towergate Financial has bought Nottingham-based M2 Financial. Mark Howard will remain as managing director, with M2 becoming Towergate’s East Midlands regional business.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com