View more on these topics

Commissions are fair earnings

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


TMW reprices BTL and self-cert range

The Mortgage Works has reviewed its buy-to-let and self-cert product ranges.While fixed rates have been increased, tracker rates have been reduced and new products added to the range, to widen the choice available for borrowers. The specialist lender is introducing six new products to its buy-to-let range at a maximum LTV of 75% – these […]

Help clients to hold on to their homes

The growing number of companies that offer to buy peoples’ homes while allowing them to continue living in them has turned the spotlight onto a twilight world often overlooked by mainstream commentators.

Debt Advice Portal offers brokers fees for IVA clients

Debt Advice Portal, a new debt solutions provider, has launched offering brokers the chance to refer clients on for specialist advice while retaining them on their books for future business. Brokers will receive a fee if an Individual Voluntary Arrangement is taken out, but the Debt Advice Portal will ensure that they retain an ongoing […]

SPPL launches packaging guide

Southern Pacific Personal Loans has launched a packaging guide.The guide takes packagers through each part of the application process ensuring applications are submitted ready to proceed to completion.The SPPL packaging guide includes income assessment, credit search and identification, loan documentation and valuation and mortgage information.Sharron Jones, training manager at SPPL, says: “Packagers are our lifeblood […]


Guide: day-to-day tasks ​— can your system manage?

This guide from Johnson Fleming will take you through the required communication and also give ideas for additional actions that will ensure your auto-enrolment project is a success. As well as highlighting what is required from a system to ensure it is up to the tasks, an overview of the following is also provided: data validation; data categorisation; employee communication; opt-in process; opt-out process; produce contribution schedule; contribution reconciliation process; upload of member data to pension provider; upload contribution to pension provider; manage salary sacrifice process; enrolment process; re-enrolment process; and management of increased employee queries.


News and expert analysis straight to your inbox

Sign up