Brokers are faced with fewer lenders, fewer products and tougher underwriting. Earnings are under threat from many quarters, with reductions to procuration fees a real danger.
I believe it is time to get back to basics. When I started in this industry, brokers really were brokers. They worked to negotiate the best terms on each deal. A proper fee was charged for professional advice and a full financial review was done as standard.
Brokers are needed more than ever in this environment. We are best placed to get minute-by-minute information on rate withdrawals and new products. We can reserve many of these products for our clients so they do not miss out. The sheer scale of these changes means much hard work but it is in these conditions that brokers rise to the fore. Any broker worth their salt not charging a decent fee in these conditions is doing themselves and the rest of the market a disservice.
I would add that life cover, protection and general insurance are not dirty words. In my old days at Charcol, we were targeted to bring in 40 per cent of our business from financial planning. Ensuring a client is well protected is an important compliance requirement and many brokers have lost the art of “disturbance” techniques so vital to ensure clients do not find themselves with issues at an important time.
The relationship between lenders and brokers is even more important in these tough times and I agree that brokers must understand what lenders are going through and offer support rather than being too quick to just slag off lenders. Where I differ from some other luminaries’ opinions is the theory that lenders can control distribution better by offering direct through branches.
Tightly managed independent brokers can work with lenders here as they can market direct to clients, cutting down on lenders’ marketing expenses and filtering through the exact parameters required. For example, a smaller tranche of £10m on a remortgage basis between 50 to 75 per cent loan to value at a bespoke rate is easily achieved and managed.
Lenders will miss the benefits of brokers if they cut proc fees too much. Just as lenders will remember which brokers supported them in the hard times, brokers have a long memory.
Change is inevitable. Are we prepared to change and adapt to the new environment we find ourselves in? Survival may depend on it.
Andrew Montlake is a partner at Cobalt Capital