There are tough issues coming up for the small mortgage broker and it doesn't look good for the consumer – or for anyone who values a competitive market.
The concern is that small brokers (as defined by the relatively small volume of mortgage protection business they will be producing) will be a less appealing proposition to the insurance companies dealing with them for mortgage-related insurances.
Andrew Cowell, head of sales at The Source, asks how many providers have key account managers as well as business development managers within their intermediary divisions. “In the insurance arena, it seems letters have already been sent to brokers whose premiums have not reached the required levels, cancelling their agencies,” he says.
For the providers, Steve Muir, marketing manager at Axa, presents one case. “As far as non-regulated mortgage brokers are concerned, some of them are quite small and therefore wouldn't get a berth in a direct sense as a tied agent, and most of these people will be joining networks or bigger groups of IFAs or other regulated companies. We are looking to expand the IFA market. If mortgage brokers are going to be large enough and want to tie with us we will take them on in that way.”
Muir makes the point that for small firms who might find it difficult to comply with the new regulatory regime, a merger with a larger entity may prove to be the most sensible route.
But as an industry should we not be looking at quality as much as, if not more than, quantity? The implication is that smaller brokers present a greater risk than the ones bringing in more business. This is clearly an inadequate, blanket approach. The point of regulation, if we have any respect or faith in it at all, is that the wheat gets separated from the chaff and the latter gets blown out of the market, not that the big wheat gets away with everything regardless and the small wheat gets tossed away with the bad.
Networks are the ones we should be looking at to set an example for the right attitude towards large and small mortgage brokers. Networks have plenty at stake in terms of the risks of taking on smaller brokers and the better ones are not turning away these smaller practitioners.
“The small broker has an important role to play in the market,” says Payam Azadi, head of marketing and corporate relations at Mortgage Times Group.
“Small brokers provide a special service to many consumers and play a role in driving competition in the mortgage market.”
Your protection related questions
Q: What will be your attitude towards low-volume business brokers after regulation?
Stephen Smith is director of housing marketing at Legal & General
There are many successful small brokers, particularly those who have taken advantage of technology to streamline their business and drive up productivity. As a product provider, Legal & General will continue to support productive firms of any size who can use our e-commerce solutions, online term assurance and/or our Launchpad system to submit their business.
Scott Fynn is senior marketing manager at Select & Protect
Every provider will act differently although they might answer this question in the same way. S&P has first-class technology which means we can handle low volumes of business quite economically, so small brokers need not fear a lack of support. Nothing should change as far as smaller agents are concerned.
Roger Edwards is product director at Bright Grey
I don't believe that the way small brokers are treated by providers will change after regulation.
Peter Hamilton is head of protection marketing at Friends Provident
We're pleased to work with a wide range of brokers though we're obviously keen to attract high volumes of protection business. Our Friends Mortgage World proposition includes tiered procuration fee payments that recognise the benefits to us of the differing levels of protection business brought in by our distribution partners.
Sue Wilkinson is interim head of life and health propositions at Abbey for Intermediaries
Regardless of size, Abbey for Intermediaries will support all brokers that are authorised to sell protection, although it is worth remembering that we are likely to see more brokers joining forces to deal with regulation.
Rob Fletcher is director of partnership business at Norwich Union
We are happy to accept business from any regulated individual. We sold our mortgage club to Bankhall because we thought they could better provide those sorts of facilities but we deal with a number of distributor groups and networks that provide access to our products and services. For a producer writing only small levels of mortgage-related protection business, I would expect the way forward to be through some form of network service provider such Paymentshield, Bankhall, Sesame or mortgageforce.
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