Over the next three weeks I will be looking at the values a network will need to survive and prosper over the longer term.
Hopefully this will help brokers decide on which network to join before the October 31 deadline which is now looming over everything in the landscape ahead.
The values I have in mind are choice, control, and continuity and this week I look at choice of mortgages and insurance products available on the network panel.
Not surprisingly, your clients expect you to find the best mortgages for them. Most are aware of the plethora of mortgages available on the market and one of the main reasons for using the services of a broker is to guide them through this potential minefield.
When deciding on your network it is important to look at the number of lenders on panel which means you will have no difficulty placing mortgages with these lenders, subject to criteria, and the procuration fee will be paid through the network.
A recent survey showed that 75% of brokers regard the size of the mortgage panel as being a major factor in their choice of network and that 80% of brokers want over 50 lenders on a panel, with 10% happy with 41-50 and the remaining 10% content with 31-40.
To my knowledge only six networks have more than 50 lenders on their panels with only two, Sesame and Network Data, having procuration fee arrangements in place with over 80 lenders and hence offering a genuine whole of market approach to mortgage research. The other 20 or so lenders not on these two panels are the small building societies, most of which lend only within their localities and their combined annual lending wouldn't match that of the Blackpool branch of the Halifax on a wet Monday afternoon in November.
Generally you can access all lenders on the sourcing system provided by your network but what happens if you want to go off-panel and place a mortgage with a lender not on the network panel?
By definition there is no proc fee arrangement in place and you will need to check with your network if you are able to place the mortgage off-panel, if the lender will accept the application, and if you will receive a procuration fee.
With all this uncertainty it is hardly surprising that the largest possible lender panel is high on the list of priorities of brokers when choosing a network.
On the subject of proc fees, be aware that the scale publicised by the networks may be subject to a deduction for those that charge a percentage of income such as Genesis, Mortgage Intelligence and Pink, or for those that charge a flat fee per transaction such as Enable.
On the insurance side your clients may equally expect you to offer a choice of product providers for those insurance products normally sold with mortgages.
The bad news is that many networks have a limited panel of insurers with some only having single product providers for household and payment protection insurance.
There are networks, however, that offer wide insurance panels and these are not difficult to find by doing a small amount of exploratory work.
It's so easy to set up a separate company for investment business At Network Data, we receive a constant stream of enquiries from the IFA member firms of Sesame and the like asking how they can continue to place mortgage and insurance business with us.
One option is to leave Sesame and join Network Data but if you want to continue with investment business this is not viable as we, like all other mortgage networks, are not regulated for that market.
The other option is to set up a separate business which can be just a trading name if you are a partnership or must be a limited company if you are a sole trader. Judging from the MCCB profile of mortgage brokers, over 40% of firms are in fact sole traders so it is not surprising that the limited company option is attracting a great deal of attention.
As a practical example of how to go about it, I registered a new limited company, Network Surveyors Ltd, on the evening of Monday, September 13 by spending 20 minutes on the internet and paying £24.99 plus VAT by credit card.
To check on the availability of the name Network Surveyors, go to www.companieshouse.co.uk. From the 'tools to help you' box on the homepage select 'Find information on a company'. Click 'go' and then click on 'webcheck' on the next page. You will now see a prompt to enter a name of a company. Enter your preferred name. If it does not exist the box will display the next name in an alphabetically sorted list and you can scroll through 30 names.
Having established that the name does not exist (which means it is available for registration) go to www.companiesmadesimple.com which I found from a Google search on 'company formation agents'. Click on 'name check” from the menu on the homepage, enter your preferred company name on the next page and click 'continue'.
You will receive a congratulations message, confirming the availability of the name and you then click on the 'register company' button. On the next page I chose the 'bronze' option costing £24.99 and you then go through the normal booking routine of entering the billing name and address, credit card details and so on. That's it.
You will receive an immediate automatic email from the company formation agents, Westbury Chartered Accountants, with a standard set of Memorandum of Association and Articles of Association saying the company has £1,000 of authorised share capital, being 1,000 shares of £1 nominal value of which £1 is paid up and registered with Westco Directors.
The next morning I received a .pdf file from Westbury, this being the Certification of Incorporation showing the company to have been registered at Companies House, number 523016, on September 14. Also attached were instructions on how to appoint director(s) and a secretary and transfer the first share, all online.
They really do make it easy for you to start up a bone fide limited company these days. By Wednesday morning the company was listed on the Companies House website. It's almost worth the money just for the sense of achievement.
So what will Network Surveyors Ltd be doing? All will be revealed in due course.