Choosing a Mortgage Network

Choosing a Mortgage Network

Think about what’s right for your mortgage business

Before anyone picks up a glossy brochure or trawls the Internet looking at what’s on offer, you need to stop and think about your own business. What do you want from the network, the future and most importantly what is right for you. Often advisers make a mistake of joining a network or organisation because someone else said it’s good. Being “good” and being “right” are two completely different things, a pair of wellington boots are good, but not if you’re going swimming.

Moving or selecting a network can be a difficult task compounded by each network telling you their proposition is the best without giving real consideration to your business. Isolate your needs; consider these answers as your true drivers.  After which, consider your preferences, what you would “like” to have and make a clear distinction between “must haves” and “like to haves”’. For the would be Appointed Representative there is no bespoke offering in the market place, inevitably there will be some compromise to a greater or lesser degree. So be prepared to make a compromise on some of your preferences but try and stick to your main drivers.

How to make the right decision when choosing a network

Financial stability – This is covered in our article How do we rate networks  but before signing on the dotted line as an independent mortgage adviser it’s vital to make sure you feel confident with a networks finances. Last published network accounts can be obtained from Companies House. Be aware that this information could be 18 months old, so look at previous accounts for obvious trends.  Further business referencing tools are available, these aren’t geared towards the financial services industry and are more expensive but can still be useful. Does the network have a parent company or controlling influence? If so check out their accounts and consider their appetite to remain a supporter of the network. Remember financial security is not just about size, how much turnover or profit the company has or even how much they have in the bank. Consider the overall model including charging, running costs and number of staff, is it sustainable?  Use the search facility on industry press sites such as Mortgage Strategy for any past problems the network may have had.

Service Standards – This is massive, a much bigger issue than I would have assumed when Which Network started, some eight years and 1,000+ clients ago.  In fact next to the financial stability of a network in terms of importance, we now know that this is the main reason AR’s leave their current network or DA’s who are using a compliance organisation leave their current trading partners and look for something better.  Having the right product range and getting commissions paid on time are obvious examples of this, but not having problems or queries dealt with, not having calls returned, and Business Development Managers or Compliance departments that just don’t seem to care are also high up on the list of brokers of complaints.  Feedback from mortgage brokers has proven time and time again that poor quality service and feeling undervalued have a very real negative effect both on the satisfaction you get from running your business and the levels of business you write.

Financial network charging structure – Transparency is key, can you see what you are being charged easily. Consider what you get in return, is it value for money, and more importantly does the structure have longevity. If it doesn’t then you could be in for a nasty shock when charges increase or even worse the network ceases to be after it runs into financial difficulty. Confirm what is included with the charges, software, mortgage brokers Professional Indemnity Insurance, FCA fees, compliance fees and look out for networks that have excessive penalty charges for re-checking failed cases.

Compliance regime – Compliance is both integral and important in financial services. However you may be confident in your own abilities and would like to be given a degree of flexibility conversely you may want to stay on the designated tracks without deviation. Networks’ interpretation of the FCA guidelines differs greatly and if you make the wrong selection it could prove a very uncomfortable ride but make the right choice and you can trade being confident that you are comfortably within the FCA’s regulated framework.

Commission rates and procuration fees – Surprisingly many advisers overlook this and concentrate on the percentage retention charged by the network. For example, if you are charged 10% retention by one network but a life commission is only paid at 160% API whereas elsewhere another network would take 15% but is paying 210% commission for the same policy, then the net effect is that on a policy with premiums of £1000pa you would be almost £350 better off with the second network just on this one policy. This is an example of one kind of calculation we use at Which Network in our research.  In financial terms what matters at the end of the day is the bottom line, how much actually arrives in your bank account per transaction when all of the costs have been taken off.

Mortgage adviser support services – Marketing support, web presence or even increasing your permissions. Mortgage lead generation should always be approached with care as it is rarely as good as advertised and is often supplied by a third party that could be used independently of the network. Do you need active field support or just have the ability to call upon support when it is required? Other ancillary services may be important to you such as a route to refer investment business or equity release. Would you like to increase the number of advisers or have access to training facilities to help develop existing advisers?

Other network proposition considerations – must be given to the business submission process, back office and sourcing systems. Professional Indemnity Insurance, what is covered and what is your excess liability should the worse happen? Check the networks contracts particularly exit clauses, if you need move on, you do not want a clause making it prohibitive for you to do so.

The character of the network is often apparent by the way it operates and the people who run it, this can cascade down to the advisers. As a result some advisers may decide that networks aren’t right for them and want to consider becoming directly authorised or even a registered individual with another firm. Still do your homework and with the latter be certain of client ownership.

If you are unhappy in your current network, isolate why. Be aware of the warning signs, one of the first signs of instability in a network are delayed commission payments. If delays with payments are increasing along with excuses for the problem then that’s probably a good indication that it’s time to leave while you are in control of the situation.

With all of the factors above to consider , you are probably by now realising that doing your own research is both time consuming and difficult in terms of getting accurate information. Even where you have a colleague who is apparently happy with the network they use remember that their business is not the same as your business and you will almost certainly have different priorities.

In business terms network choice is a major decision, so don’t take it lightly.  Which Network Ltd are the UK’s premier independent mortgage network consultants, and we not only ask the mortgage networks all the relevant questions, but we also have sufficient knowledge and industry experience to know when the answers they give have the ring of truth, or are just marketing spin. Remember, we work for you and nobody else!