There is a famous tale of a telegraph exchange between the great Irish playwright George Bernard Shaw and the leading actress of the time, Cornelia Otis Skinner, following the opening night of Shaw’s play Candida.Shaw telegraphed “Excellent! Greatest!” and Skinner replied “Thanks, but undeserving of such praise” to which Shaw replied “I meant the play”, with Skinner retorting “So did I.” I mention this because there is a danger that operators of the mortgage network model could be in a similar situation as Shaw was of being too self-regarding. A network might believe that it has everything in place to enable its appointed reps to operate effectively, but does it? For that reason, it is worth reminding ourselves of what kind of person the appointed representative is and why they have decided to throw their lot in with a network in the first place. Of primary importance is the fact that most are professionals who have an in-depth knowledge of their chosen field and who enjoy the interaction that this brings with both the public and the provider. What they do not enjoy is being constrained by red tape but they recognise it is a reality which must be dealt with. They want the freedom to concentrate on what they do best, that is, providing professional advice and arranging the most suitable mortgages for borrowers. Networks loan their expertise, at a price, to the broker and, in return, the broker has the freedom to concentrate on growing their business, knowing that much of the demands brought about by regulation are being taken care of. The key to making this work is the support that the network provides to the AR – the more support, the greater freedom that the intermediary has to service clients, network or simply relax without fearing the encroaching FSA shadow of compliance that otherwise could eventually eclipse their business. The ongoing compliance support from their chosen network should therefore be comprehensive and ongoing to mitigate against any exposure to regulatory risk. But the benefits of joining a network are, or should be, wider than this. What any broker should expect to receive from their network principal essentially boils down to two things – first, a comprehensive range of “hard” benefits which help build a successful business and second, “soft” factors which help create a community, foster a climate of trust and mutual benefit and build a spirit of camaraderie. Aside from the obvious factors of financial strength, which are essential and the key factor in today’s market, and compliance, including full training and support to enable members to build and maintain their knowledge, these should include leading-edge IT support, which is crucial to the smooth running of an AR’s business. The principal should offer a reliable IT system which helps the broker to run their business efficiently and cost-effectively within the network framework. It should provide: t Management inform-ation to help the broker run their company in a proper mannert Up-to-date commission statements for their sales team, information relating to their client records including past and current business, and diary information.
- The best new products and exclusivesAround the time that FSA regulation was launched, we conducted some research. Mortgage brokers who favoured AR status considered the quality of their principal’s IT system to be the most important consideration after financial cost-benefit. In fact, 82 per cent of brokers surveyed said that well designed and reliable technology was the second most important consideration when choosing a Principal. Brokers also said that they intended to test the IT systems of shortlisted Principals before making a commitment. I am tempted to conduct the research again, one year on. I wonder just how good the technology offered by some networks has proved to be, especially given the importance that brokers placed on IT at that time. As we are already seeing 80-90 per cent of mortgage transactions through the bigger lenders conducted online and some lenders actively discouraging paper applications, this is a key issue. The soft factors are key differentials in the service offered by a network.
- A relationship that is transparent and honest with mutual trust between the broker and their network principal and a structure that encourages camaraderie. We are all people and work far better when we enjoy what we are doing.
- One the most obvious areas where there should have been noticeable improvements is training. Training in the new sales processes and T&C procedures should be provided as well as an IT system which gives an audit trail and ensures the correct processes are followed.
- Mortgage advisers with a quality network should reasonably expect regular visits from a business development manager and a T&C supervisor. The FSA places an obligation on principals to ensure they have appropriately trained staff who operate within a wider T&C framework. There are variances with the spans of control in all the networks and some are as much as one T&C supervisor to 120 brokers. If you are in such a network, you may want to qualify exactly what support you will receive and when. You are certainly entitled to ask your network what the spans of control are, and you can check by asking for the total number of T & C supervisors and divide that into the total number of ARs.
- Professional indemnity insurance that does not have ridiculous excess, which means it will never have to pay out, should be provided. Unbelievably, some networks are providing their ARs with cover that has 10,000 excess for individual claims – I do not know how those people sleep.
- Intermediaries should also take a close look at their network’s mortgage support desk, lender panel and exclusive mortgage products and compare and contrast what they are getting with the propositions of other networks.
- It is important for an intermediary to look at what other networks are offering as they may have their own version of a sourcing system that does not show all the products available. A tied adviser may not realise what they are missing in terms of exclusive products.
- It is also time for brokers to assess what clout their network really has with lenders in terms of being able to negotiate exclusives.