Like a pendulum, so the balance of power swings between lenders and intermediaries. Before the credit crunch intermediaries were calling the shots, but as the market contracted, power transferred back to the lenders.
Today, with market growing again, we are seeing the power pendulum swinging back towards intermediaries. Lenders and intermediaries must ensure that this state of flux and accompanying tension does not jeopardise effective competition in the interests of consumers.
In her presentation, at the October 2013 Financial Services Expo, FCA director of mortgages and consumer lending Linda Woodall confirmed that one of the regulator’s key focus areas is to become more outcome-focused. ”It is more about looking at the end result for the consumer,” she said.
Now, with over 50 per cent of mortgage business channelled through intermediaries, it is imperative that the industry streamlines the outsourcing process to minimise the risk of poor outcomes for the customer.
Close collaboration between lenders and intermediaries is necessary to deliver a seamless process where clients benefit from consistent support during their customer journeys.
However, the present position looks increasingly unsettled. There have been many reported instances which would seem to indicate growing disquiet between lenders and intermediaries, such as:
– Claims of inadequate procuration fees to reflect growing demands under regulation
– Unfair procuration fee differentials applied by lenders to directly authorised intermediaries in favour of appointed representative firms
– Quality procuration fees and lack of procuration fee transparency
– Case underwriting delays and inconsistencies, poorly communicated
– Panel restrictions and strike off without redress/appeal
– Poor quality intermediary case submissions
– Time wasting decision in-principle applications
– Client ownership tensions
– Fraud issues
Behind such perceived tensions, an enthusiastic regulator could have concerns regarding competition, conduct or control, especially as outsourcing control is an area earmarked for special attention by FCA in 2014.
Intermediary needs may differ from the needs of their clients, but well supported intermediaries deliver satisfied end customers.
Many managers within lenders already think of – and treat – their intermediaries as customers.
Enlightened yes, but not a universal view, as many colleagues would prefer to cut out the middle-man.
Although not a practical solution at this time, if ever. Even the regulator recognises the embedded nature of intermediary mortgage distribution and has commented on the enduring role of the intermediary.
As the majority of customers become increasingly reliant on intermediaries to source their mortgages it has never been more important for the mortgage industry to deliver increased efficiency and professionalism.
Now is an ideal time for lenders and intermediaries to consider adopting a customer centred Mortgage Outsourcing Protocol as an accord within which to collaborate.
Protocol outcomes could look like this:
Mortgage Outsourcing Protocol – Outcomes
- Mortgage intermediaries and lenders collaborate to identify and mitigate outsourcing risks and to ensure optimal outcomes for mortgage customers; a key element of their distributor relationship
- Lenders’ products and services are communicated well enough for intermediaries to easily match suitable products to appropriate clients
- Mortgage intermediaries are regularly updated after the sale process
- Mortgage intermediaries are provided with clear systems, sets of procedures and training in order to progress lenders’ applications
- Application processes and timings are as intermediaries have been told to expect, advance notice is given of service issues; intermediaries are informed of service issues
- Individual lenders’ lending policy is applied consistently to each intermediary
- Lenders have an agreed understanding with distributors covering ‘cross selling’
- Mortgage lenders’ procuration fees reflect fair value for intermediaries’ input and responsibilities; intermediary fee scales are clear and transparent
- Mortgage lenders are seen to acknowledge the importance, value and ongoing nature of the intermediary’s role in the customer journey
- Mortgage intermediaries are committed to delivering well packaged, high quality applications, while concentrating on minimising bad debt and fraud
Unlike the Treating Customers Fairly assessment programme, now morphed into the Firm Systematic Framework supervision, there would be no direct FCA support to embed such an initiative.
Implementation and control would require an independently led body, supported by the industry and its trade associations.
Such a scheme would be in the interest of all such stakeholders to boost public confidence, improve standards and ultimately enrich customer outcomes.