A fair price for a fair job – who can argue with that? So why do we hear cries of “unethical” whenever the thorny issue of commission earnings reaches the agenda? While the Financial Services Authority’s Retail Distribution Review looks, in part, to shape the future for adviser income, we currently find ourselves contending with an increasing number of ‘consumer champions’ castigating advisers for any sort of commission earnings.
While we await the outcome of the RDR how can we combat the impact of the verbal swipes from these consumer champions?
I would suggest a review of the process for introducing remuneration for your services, in particular the way you use the initial disclosure document within the advice process. While you are compelled to explain the fee-based route to clients as an independent adviser there is also another word that I recommend you use when covering Section 4 of your IDD ‘What you will have to pay us for our services’. The word is integrity.
You provide your client with a professional service, similar to that of an accountant or solicitor. After all, the majority of clients won’t baulk at having to pay these professionals so why should it be different for mortgage professionals? How many of your clients are aware of your qualifications and training programme/career history on your journey to become a mortgage adviser? Market yourself as a professional. Your clients are utilising your experience and knowledge of the mortgage market to ultimately recommend a product which best suits their bespoke needs.
Of course there will always be those with a ‘tick box mentality’ and they will find themselves best served listening to Vivaldi while waiting on the end of a telephone line to speak to an individual based in an outpost far, far away. Ensure your clients feel good about the service they are about to receive. You will guide them through the whole of the mortgage process, you will deal with any glitches/ issues and review their needs regularly, ensuring contact throughout the life of their mortgage. Would your clients receive a similar service elsewhere? They must be made aware of the quality of the service you provide. The ultimate message is you do a good job and will charge a fair price for that job.
My second suggestion follows a route you probably already use, in that once you have explained the ‘independent’ fee route option, you also explain there are other payment options available such as commission only or a mixture of commission and fee. The key is to explain the options: fee, commission or mixture of fee and commission as one – your expected earnings on a case by case basis – 0.5% of the loan amount for a straightforward case, 2% for an adverse case and so on.
We have to appreciate that even to the informed outsider commission is often viewed in a bad light, leaving the perception that all mortgage brokers are unscrupulous. It is down to the industry to educate our clients in order to change that perception.
Neal Smith is director of mortgages at Lansdown Place