Last week I said that one of my new year resolutions would be to value my time more highly. I pledged to charge my clients a fair fee for the work I do for them – fair for them but also fair for me.
Then something I read made me even more determined to put this resolution into practice. Paragon Group has done some research that confirms mortgage brokers are getting record proc fees.
Apparently 95% of advisers now receive some sort of fee from lenders, with the average payment being 428 for each client. Indeed, in almost 30% of cases advisers are receiving more than 500 per case.
The immediate thought that sprang to my mind was that even at 500 per case these fees are too low. I accept that proc fees have risen over the past year but how any adviser can be making a profit solely on mortgage applications is beyond me.
I don’t know how much time it takes you to do a mortgage but consider the process – probably two client visits, a couple of hours’ research and preparation time between meetings, another couple of hours to process the application, time spent writing reports and file notes and then many phone calls to lenders, clients, solicitors and agents to bring the deal to offer and then completion.
Then there’s the administrative staff time spent inputting data, typing and chasing up outstanding information which adds several more hours (and my administrator’s a quick typist). This brings the total to more than 15 hours so the lender is basically paying you and your firm just under 30 per hour, based on the average fee. And I haven’t even factored in postage, phone and other costs which you incur on its behalf.
This means that to make mortgage work viable financially advisers must charge fees or write associated business such as life cover. Have you ever considered how much more profitable life cover or investment business is to you on an hourly basis than mortgage work?
I reckon you’ll easily be earning 100 per hour for this sort of business – even on more tricky cases – because it is much less time-consuming. Once a proposal is in, there’s little else to do.
And of course the average proc fee figure quoted is simply that – average. It will be distorted by regional house price variations and case type. For example, a buy-to-let or complex adverse case will earn more for an adviser. Therefore many cases must pay advisers well below the magic figure of 428.
So my message to lenders is this – stop trying to persuade advisers that your proc fees are generous and stop making out to clients that advisers are overpaid for their efforts. Get real. For example, start asking us to log time spent on cases and pay us a sensible hourly rate.
In short, start paying us something approaching a fair sum for our time, effort and expertise. Isn’t it about time lenders valued my time in the same way I’ve promised I will ask my clients to?