This week I take a look at the point-of-sale systems on offer from the networks.
With POS there are really two separate considerations; what you should be looking for in a system, and what is being offered by the networks. The latter question is easily answered – it varies from one network to another.
Home Loan Partnership offers Encore free of charge; Network Data provides mortgageLink free; others offer Trigold and/or Mortgage Brain free, while the rest allow ARs to use any system they like provided they pay for it. These latter networks obviously haven't got a clue as to how they will monitor their ARs. Possibly they don't intend to do so.
This lax attitude might appeal to cowboy brokers but respectable ones would be well advised to steer clear. Sooner or later these networks and their cowboy members will be kicked out of town by the FSA sheriff.
The POS system is commonly referred to as a sourcing system but it is evolving from a simple search, select and print tool into a more sophisticated system encompassing case management and electronic trading. It will become ARs' most valuable tool, enabling them to find suitable mortgage and insurance products for clients, maximise sales potential, operate in a compliant manner, use electronic communications and manage work schedules. It must also be capable of producing all the FSA-prescribed documentation to be handed out to clients.
The KFI should include the insurance premiums so ideally the system should provide a truly integrated KFI covering both mortgage payments and insurance premiums.
The only system on the market that currently meets this requirement is mortgageLink. All others are essentially bundles of systems cobbled together with rudimentary interfaces enabling the exchange of client data between them.
Most networks recommend the Trigold system which comes on a CD together with the Inertia system from Paymentshield, The Source, or the Sprite system from Select & Protect – or even all three insurance quotation systems.
A user will have to navigate between systems, each with its own look and feel and each at a different stage of development with regard to electronic trading. Questions include – are the links between the systems sufficiently robust to produce an integrated KFI? And do they produce a suitability letter that covers both mortgage and insurance sales?
Though not required under the FSA rules, you have the option of producing a suitability or 'reasons why' letter for the mortgage sale. In contrast, the 'demands and needs' statement for the insurance products is mandatory. All networks are likely to insist that their ARs hand over a suitability letter to their clients and retain a copy for their own files.
Another important issue is disclosure of fees. The FSA rules are clear on this matter. In a nutshell, the KFI must show the fee paid by the network to the broker, the name of thenetwork and the amount of the procuration fee it retains.
To quote one of the sample KFIs issued by the FSA: “Flounder (the lender) will pay Dogfish Brokers £300 and Catfish Network £50 in cash if you take out this mortgage”.
If your system does notproduce the correct figures or name the interested parties you will not be operating in a compliant manner. This, of course, presents the sourcing companies with a formidable challenge.
Each mortgage product on the system must hold the gross procuration fee paid by the lender to the network as well as the amount the network pays to its AR broker.
For Trigold this is a real mountain to climb with its stated 12,000 mortgage products and the 50 or so white-labelled versions it produces for corporate clients, all of whom will have their own proc fee arrangements with the lenders.
Compare this with Network Data which is in the position of being both a network and owning its own mortgageLink sourcing system. Life is easier in that this system will contain only one set of procuration fees – those that apply to Network Data.
10 key features of a network
(Dates subjects covered on this page in brackets.)
Mortgages – product range and procuration fees (May 24)
The lender panel and product range should be large enough to ensure that you are able to select the best products for your clients.
Insurance – product range and commissions (May 31)
You should have access to a good range of products from well-known names.
Point-of-sale quotation system (June 7)
Essential in order to search over whole of market, to provide best advice and to produce FSA-prescribed documents.
Network membership fees (June 14)
What do you get for your money?
Network size, financial standing and culture (June 21)
Track record, stability, and strength through size.
Service standards (June 28)
Fast and efficient processing of all administrative issues including any mortgage packaging and the prompt payment of fees owing to you.
Compliance monitoring (July 5)
Conducted in an efficient manner which causes minimum disruption to your business.
Professional indemnity insurance (July 12)
Mandatory under the FSA rules, but who pays?
Training and competence (July 19)
Are you provided with training and help with exams?
Exit strategy (July 26)
If you decide to leave your principal firm the break-up should be as painless as possible.