The battle of the networks stepped up a gear last week when Mortgage Intelligence announced that it is offering brokers the chance to join its network free of membership fees until October 31 2004.
MI managing director Sally Laker says the decision was taken for two reasons. Firstly, the financial costs for prospective ARs before Mortgage Day are substantial and could be acting as a deterrent, and secondly, by opening its doors now the firm stands a better chance of managing demand later on.
Mortgage Next quickly followed suit by waiving all monthly fees up to M Day for any intermediary who submits a successful application for appointed representative status – largely for the same reasons.
Networkone is a pioneer of free membership.
“This is a bold step by Mortgage Intelligence and Mortgage Next,” says networkone managing director Terry Markham. “It's a decision that should help a lot of other fee-charging networks see the error of their ways. MI says fee charging will be suspended until October 31. I'm betting it won't reintroduce tariffs but that it won't confirm this until later.”
Markham believes charging upfront membership fees is not in the best interests of members and has championed the cause of 'maximum benefit, minimum risk' mortgage networks.
“I have always believed that potential ARs would not be willing to subscribe to a service that expected them to pay out upfront fees. Now Mortgage Intelligence has changed tack I expect most of the other networks to do likewise.”
Indeed, it would seem something will have to give soon to encourage prospective ARs to move as many networks are simply not getting in the numbers. One network, which shall remain nameless, boasts a major mortgage industry name as its principal backer but last week had signed up less than 25 members. It has publicly declared it expects to have over 1,000 by October.
Then there's the case of the former packaging company that has recently launched a network proposition but again only has a handful of members.
Another organisation that is a household name in the industry has been struggling to persuade advisers to subscribe to its proposition and currently has less than 30 ARs on its books. It hopes to have in excess of 1,000 by Mortgage Day.
So, is there going to be a lastminute stampede by prospective ARs?
“More than likely,” says one industry insider. “It's not just one or two potential networks that are suffering – it's pretty much all of them – even me. There must be some jittery directors out there. After all, business models have been constructed based on the number of advisers networks can attract.
“The problem is that prospective ARs know only too well how valuable an asset they are to the networks and many are delaying their decisions as they know something has to give and that more incentives will be offered to encourage membership.”
If that's true, in the final months before MDay there's going to be a lot more jockeying for position and things will start to get messy. Very messy indeed.
Do all networks take a percentage of my income?
Chris French is managing directror of The Mortgage Marketing Center
Most networks will take some of your income either by a percentage of the sum earned or by fixed fees. Fixed fees are good if you do lots of business whereas percentage deductions tie your payments to your earnings so if you don't earn you don't pay. Providing compliance and PI is an overhead that does not come free.
Richard Griffiths is managing director at Network Data
Not all, but for many networks their charges to ARs are expressed as a percentage of income – typically 10% but varying between 5% and 15%. Check if the percentage applies to insurance commissions as well as normal proc fees. Remember there may be other charges in addition to the percentage charge, such as a charge for PI insurance.
John Lee is head of sales at Genesis Home Loan
Ultimately yes, but networks present their charges in different ways. These may be quoted as turnover charges, membership charges and fees per application. Alternatively charges may be collected by the network paying lower proc fees. The only way of comparing network costs is to look at your business profile and compare the net amounts the different networks would pay you after all charges and bearing in mind their procuration fee scales. The lowest charges will not necessarily equate to the highest net retained income for you.
Dave Dodworth is compliance manager at Professional Mortgage Partnerships
Not all. Some are based on monthly fees while others are based on overrides. Brokers must weigh their options depending on their business levels. Often percentages are better than fixed fees.
Ian McIver is managing director of the Whitechurch Mortgage Network
This is the norm although some networks may charge a flat fee dependent upon turnover. It could be dangerous to look solely at end-of-process costs. You should also look at the front end income – and in particular procuration fees. Some networks will not pass on the full fee.
Andy Young is head of mortgage services at Sesame
All networks will have to derive an income but charges will be applied in different ways such as a fixed monthly fee or percentage of turnover. Some networks also derive income by retaining a proportion of procuration fees and passing on lower fees to advisers.
Chris May is director at Mortgage Times
All networks have their own charging structure. Most are taking a percentage of income. Few are taking a flat fee which is a lot more transparent and does not penalise volume producers.
Martin CAve is managing director of Home Loan Management
It makes good business sense to minimise your fixed costs so avoid networks that charge flat fees irrespective of business volumes. Giving up a percentage of your commissions is a simple and equitable way of paying for services.