Just as brokers are making their final decisions about which network to join after wading through piles of marketing material, a new issue has surfaced that could influence the route they take.
It emerged at the end of last month that networks are divided over whether they want their members to avoid calling themselves independent as they are worried about losing a vital source of income – their slice of the broker's proc fee.
For a broker to call themselves independent after Mortgage Day, one of the Financial Services Authority's requirements is that clients be offered a fee-based option.
This means the broker will have to rebate their proc fee to the borrower. The worrying point for networks that take a share of this fee is that they too will have to give it up.
Some networks, including Genesis Approved Network, say they only became aware of this in the past few weeks. Genesis is now advising its members not to call themselves independent and believes other networks will follow suit. Some, like Complete Mortgage & Loan Services, have already said they will.
But as usual not all networks are in agreement with at least Mortgage Intelligence, Freedom and Bankhall saying it is up to their members whether they want to call themselves independent or not.
And there is speculation that by moving their members away from independence, some networks have a hidden agenda of becoming multi-ties in light of de-polarisation which is now impacting the IFA sector.
“Independence has helped make mortgage brokers successful, but if appointed representatives are being advised to drop the tag and choose from a predetermined panel of lenders, it seems to be a move towards multi-ties,” says one source.
So it is vital that brokers checkout their chosen network's attitude to independence and decide how important this label is to them.
Some networks argue independence does not mean much to the general public and, while it is an emotional thing for brokers, it will have little impact on business.
But many others argue that the promise of impartial, untied advice can be a big draw for borrowers.
“I can't see any advantage in telling members they can't call themselves independent,” says Freedom group compliance director Stephen Atkins. “We prefer to give them that option. On the other hand, we'll not force them to offer a fee alternative.”
Another option brokers could consider is to join a network that does not take a share of the broker's proc fee – like Enable or Optoma – to avoid having to consider dropping their independent tag.
And the Association of Mortgage Intermediaries says this whole issue is a commercial decision for networks, not a regulatory one.
“It's a question of networks being aware and establishing a rule for appointed representatives as to whether they should use the term independent. But it's something that will come onto our radar and then we'll sound out opinion,” says policy officer Ben Stafford Time is running out fast so rather than deliberating further over which network to join, brokers should make their minds up now. But they must be clear on whether they value their independence.
Q: How long does it take to become an AR?
Richard Griffiths is managing director of Network Data
If you get your application in to your chosen network this week, you can be reasonably confident you will be registered as an AR firm by October 31 and able to continue writing business. Every week you delay you increase the risk of being out of business at the end of October. Why take the risk?
Stephen Atkins is group compliance director at Freedom Finance
I am getting reports that it takes around eight weeks for the process to be completed, and then the FSA has to be informed. Delays are occurring because of the employment and financial histories required. A potential AR should make every effort to assist with their own application preparation or they run the risk of not being authorised by their chosen network by Mortgage Day.
Shaun Godfrey is sales director at Bankhall
There are a few givens when it comes to AR status. These are application, references, checking the assets and liabilities, obtaining FSA approval of each RI (which is a lengthy process), induction course, examinations and business stationery sign-off. Not to mention the familiarisation of the new AR and RIs to the business procedures. I estimate the average time to be about four to six weeks at the earliest. Any quicker and I would be concerned about the shortcuts taken.
Sally Laker is managing director of Mortgage Intellingence
Nobody should think that becoming an AR is a quick process. It is necessary for principals to carry out proper referencing and also ensure advisers are competent to give mortgage advice. The main delay in becoming an AR revolves around getting references from previous employers. This can take up to eight weeks. We cannot complete the authorisation process until we have received these references. If everything is satisfactory, we can then put you through our induction process.
Rischard Verdin is sales and markting director at Enable
That depends on the speed with which references can be obtained. Our referencing process is well organised so we would expect to complete that aspect of taking on new ARs relatively. It would be sensible to allow four to six weeks, though it is possible we could complete the process faster. Where referencing delays are caused by a third party, the process could take longer.
Richard Coulson is director of Zurich Mortgage Network
We carry out full regulatory vetting. Each business is treated individually, based on their requirements, so the time taken to become an AR varies. We have a full induction programme so that the application process is managed to a mutually agreed start date.
Martin Cae is managing director of Home Loan Partnership
Fitness and propriety checks can take around six weeks. Then you will have to undergo induction training which typically involves three days on a residential course after a certain amount of distance learning. Networks will have scheduled induction courses on fixed dates at selected venues so you may find you've left it too late to trade as an AR from October 31 if you haven't applied by now.