After the past two weeks looking at the merits or otherwise of joining a life company or an IFA network, I now turn to the arguments for and against joining a mortgage network as an appointed representative for mortgage and insurance sales.
Mortgage networks are very much the new kids on the block in terms of regulatory experience although many have been in the mortgage market for a long time. For a list of the mortgage networks, refer to this column in Mortgage Strategy March 22.
As with the IFA networks featured last week the interests of mortgage networks and their ARs are totally aligned. The mortgage network has everything to gain from negotiating higher commissions, promoting industry and product training for its ARs and offering guidance on marketing, lead generation etc.
Many of the mortgage networks have a mortgage placement team that can help brokers to identify the most suitable mortgages for their clients.
The more professional networks will be organising induction courses for ARs and arranging for training and competence schemes to ensure that their ARs have the ability and confidence to sell all types of mortgages, including lifetime mortgages, as well as related insurance products.
The mortgage networks will, almost without exception, avoid the investment market like the plague.
The recent demise of the InterLink Premier Network, an IFA network, offers a salutary lesson in that the size of its PI insurance premium – which reflects the underwriters' concerns over mis-selling and compensation handouts – was reported to be £1m. This caused the firm to be put into administration.
The new mortgage networks can at least start off with a clean sheet and learn from the lessons of the investment market.
As to the arguments against becoming an AR of a mortgage network, these largely centre around the fear of the unknown. Questions arise in brokers' minds: How will the networks cope with FSA regulation and all the compliance issues? Do they have a compliance team in place with documented procedures and processes?
Along with the life companies and IFA networks, many mortgage networks have a limited range of lenders on their panels, some with fewer than 20. What happens if you want to go off-panel?
By definition the off-panel lender does not have a procuration fee arrangement with your network so the question arises – will the lender accept your business and if so, how will the procuration fee be paid? And will you even be allowed to go off-panel in the first place?
Some networks will argue that their panels' mortgage products are representative of the market as a whole. This is absolute rubbish.
The concept of a representative panel may work reasonably well in the investment market but for a fastmoving market such as mortgages where the products change day by day, it is an absurd assertion With a limited choice of lenders, you can almost guarantee that the best five-year fix, the best discount and the best cashback mortgage will be available from a lender that is not on the panel.
With a few notable exceptions, the new mortgage networks have little or no experience of insurance products. The quick-win solution is to set up deals with third-party suppliers such as Paymentshield (payment protection insurance), Select & Protect (household insurance) and Lifequote (term assurance).
But how are insurance payments received by the ARs – through the network or direct from these third-party suppliers? Be warned that the scramble to put together a onestop proposition for ARs covering both mortgages and insurance could leave serious shortcomings in the resulting offering, such as single product providers for insurance products that leave little or no choice for clients.
Quite often, disparate quotation systems like Paymentshield's Inertia or Select & Protect's Sprite are simply loaded onto the same CD along with a free mortgage sourcing package with little or no interface between the systems.
Client details have to be re-keyed and there is a different look and feel to the systems which can hardly be described as user-friendly from the brokers' perspective. And to repeat the question I have asked for the past two weeks – how do they intend to produce a combined KFI for mortgage and insurance sales?
For most networks, to be able to produce integrated illustrations or consolidated payments of proc fees and insurance commissions to the ARs is simply pie in the sky.
But some networks have achieved these goals – you just have to identify which ones they are.
Pros and cons of joining a mortgage network
100% focus on intermediaries
Long-term experience in mortgages
No involvement with investments
Lack of regulatory experience
Hurdle of becoming authorised
Limited mortgage panel
Lack of insurance experience
Limited insurance panel