FCA proposal to ban proc fees takes flak…
Last week a report from Ami suggested that a ban on lenders paying procuration fees to brokers, as proposed by the FCA, would ultimately be harmful to consumers…
This sounds similar to what happened with pensions advice. People need guidance yet won’t pay for advice, and IFAs are not remunerated any more and cannot work for free.
I’d estimate 75 to 80 per cent of 30-to 40-year-olds have little or no personal pension provision; this is a huge disaster waiting to unfold 20 years from now.
Goodness knows what it would mean in the mortgage market – a very silly idea, FCA! Lenders have just started to really appreciate and value the work done by the intermediary market and the importance of independent advice for the consumer. Why on earth would you now want to ruin it all again?
…for consequences not being thought through…
I concur wholly with the points presented by Samantha Cox but the other potential unintendedconsequence must almost certainly be that the ‘cost of advice’ to mortgage clients would rise.
This would emanate from current ongoing calls for proc fees to rise, which is indeed a fair call given the additional costs born by mortgage intermediaries in recent times. But isn’t it likely that, with the ‘freedom’ to charge fees instead, they would rise substantially above the current norm of circa 0.32 per cent, possibly to 0.75 per cent? How could that possibly be described by the FCA as a “best outcome”?
…but Ami’s intervention is needless anyway…
Removing proc fees would seriously impact on the capability of the industry to deal with demand, and it would push customers back to the banks, which is where most complaints come from, not brokers.
Ami needs to leave alone what isn’t broken… Who actually places business with a lender because it gives a 0.05 per cent higher proc fee, anyway?
…because consumers now see we’re worth it…
I’m sure lenders would love this to happen – let’s face it, the majority are still paying proc fees at 2007 levels!
For clients, it would limit the accessibility of advice. We’re in an industry where, prior to the recession, ‘free’ mortgage advice was the norm. Lots of work has been done since then to inform clients of the importance of our role in the process.
Doing work for ‘free’ undermines the industry’s profile. We shouldn’t have to apologise for needing to cover our costs.
…and lenders can’t have our services for nothing
The reason charging is essential for brokers is quite simple.
First, as professional people we are worth it.
Second, if a deal doesn’t complete then a significant amount of time and effort is spent with no income earned. In no other occupation would you work for, effectively, nothing.
And third, if you do a mortgage for £50,000, a 0.35 per cent proc fee – making £175 – does not cover the cost of compliance, let alone any kind of profit.
There is very little difference in proc fees from lenders and, if it’s made compulsory to show clients sourcing, it would eliminate any bias. Or just standardise the proc fees lenders pay so that all of them pay a set percentage.
But brokers must remain able to charge fees in order to stay in business.