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MS Leader: Proc fee cuts could backfire

The decision by two of the market’s biggest lenders to cut proc fees for directly authorised advisers last week has unsurprisingly had an unsettling effect on many brokers.

Both Nationwide and Lloyds Banking Group were quick to state that it was a tidying-up exercise more than anything else, but that’s cold comfort to brokers who will see their income dip.

Other lenders would be well advised to think long and hard about any structural changes. A large number of brokers – well over 50% at Mortgage Strategy’s last count – charge fees and are not wholly reliant on proc fees. But there remains a dedicated core who provide free advice and are remunerated by a proc fee.

So the question all lenders have to weigh up is whether cuts to proc fees are worth the disastrous effect this would have on the livelihoods of thousands of brokers.

As Ben Thompson, managing director of Legal & General Mortgage Club, points out on page 6, if lenders want to hit the ground running when the recovery finally arrives, they need to ensure there are people around to distribute their mortgages.

Most lenders admit that brokers are a scaleable distribution force that is far more flexible than their own direct sales forces. And despite what the Financial Services Consumer Panel insisted last week in its response to the Mortgage Market Review, consumers do appreciate the value of advice. They like having somebody who takes into account their best interests, rather than a provider’s bottom line.

Clearly the Financial Services Authority, with its proposal to ban non-advised sales, also sees its value. So the reality is that major changes to proc fees would not just result in a decline in brokers’ fortunes, but lenders themselves.



Take it all with a pinch of salt

Isn’t it about time we stopped paying attention to all these various economic and market datasets — or at least started to give them the far smaller level of attention they deserve?

My Worst Deal, BBC1, available on iPlayer

You know a programme entitled My Worst Deal about loan sharks, repossessions and bust lender Northern Rock is going to contain some disturbing tales. And so it does – laying bare a lending industry focussed on trickery and subtle deceits to make money. The show, part of a series on BBC 1, reveals there are […]


Proc fee cuts show lenders seek quality

Nationwide and certain Lloyds Banking Group brands are the latest lenders to cut proc fees to directly authorised firms, seemingly suggesting providers prefer to deal with networks and their appointed representatives.

Europe: banking on a recovery

Neptune video: Europe — banking on a recovery

Arguing that the eurozone crisis is over, watch Rob Burnett, head of European equities at Neptune, discuss the sectors that he’s investing in to harness the recovery. 

In the video, Burnett addresses the following: 

• The primary drivers of the eurozone’s economic recovery
• The turnaround in individual countries’ current accounts
• Sectors best positioned to harness the recovery, without offering undue exposure to risk


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