There has been some debate recently about whether brokers should be nervous about the need to hand control of the client over to a master broker. I personally do not know why they should.
It is all change in the second charge world, as you may expect. The Mortgage Credit Directive comes into force on the 21 March, where secured loans will need to be advised on in the same way as first charge mortgages. Brokers will now need the required permissions to be able to advise on second charges as well as firsts. Alternatively they need to refer them through to a master broker.
The most important thing is that second charges, now more than ever need to be a considered as a real viable alternative to a remortgage. It is no longer enough to just offer a client a remortgage as a matter of course, at the very least a broker needs to make the client aware that there may be other options available to them.
Of course the recent changes have brought with them a raft of new processes and procedures and for those that did not have them in place already this will have brought about wholesale internal change. This includes carrying out a thorough fact-find, taking the client through the full advice process and making a recommendation that best suits the customer’s needs – exactly the same as an adviser does today on first charge.
Although the new rules don’t come in until March 21, we at Brightstar switched to the new regime on the 15 February, along with the majority of master brokers and second charge lenders. When we switched we adopted the new regime entirely and did not continue to write CCA business as we felt it was better for our brokers and clients to run a single system. If you are ready to do so, why not?
This makes sense for a number of reasons. Firstly, it gives everybody time to embed a new way of working. It also lets this become ‘business as usual’ as we build a new MCD-compliant pipeline of business. Not every lender has switched, however. Some have decided to sit it out a bit longer under the CCA regime, but these should follow imminently.
There have definitely been some challenges for all lenders and master brokers, mainly around technology and getting systems up-to-date. It is still early days, and we will all no doubt need to make further changes as we move forward, but ultimately the changes are all for the greater good and it is not as though the regulatory changes have crept up on us. It has actually been relatively straight forward, so far. I have not heard of anything going drastically wrong, and the first MCD-compliant second charge is likely to have completed by the time that you read this article.
The challenge moving forward will be to for master brokers to ensure that they have the resources to manage the increased level of enquiries. Providing full advice obviously takes considerable time and those that have not given ‘mortgage advice’ before may initially find it a struggle.
There has been some debate recently about whether brokers should be nervous about the need to hand control of the client over to a master broker. I personally do not know why they should. We would always set out the basis on which we will transact with their clients, there will always be a no cross-selling policy in place, the client will remain the broker’s and it is the master broker who will, in the main, be liable for the advice. Most master brokers have been operating in the sector for many years and have built up their experience over a considerable period of time and so are armed with the required experience and expertise to do the best possible job for the client, therefore surely referring their clients is the best possible solution?
At Brightstar we also have the benefit of a predominantly CeMap level 3 qualified team, with the majority of us having come from a regulated mortgage background. So this change is nothing new, we are simply advising on seconds now where we had on firsts previously.
The coming weeks and months will be the biggest challenge as brokers look to align with a partner, understand their processes and build up new relationships. Having long-standing relationships will obviously aid this transition significantly and prove to be beneficial to both the brokers’ proposition and of course the clients’ offerings.
Bradley Moore is director of second charge loans at Brightstar