The Know your Broker initiative is having a real effect on directly authorised advisers and may change the shape of the market place with regards to mortgage clubs.
Over the past year, in an effort to combat fraud, lenders have required an increasing amount of detail regarding the advisers that accept business from and this information gets ever more intrusive. Networks, of course, do due diligence on the advisers in their networks to ensure they are fit and proper people and lenders rightly use this information alongside information provided by the FCA.
Until recently however, lenders would make their own judgments on any directly authorised advisers; but increasingly they now look for added assurances, by asking for an in-depth level of detail from mortgage clubs on the DA advisers who are placing mortgage business via the club.
While it is imperative, as an industry, to drive out fraud and make sure that all cases have come in a right and proper manner through qualified advisers, we need to think of the demands on the directly authorised adviser. As the demands on DAs increase and the information required becomes ever more exhaustive and interrogative, we must be getting close to the point where it has an effect on DA’s behaviour on where they put their business or even on whether they continue to stay in the market.
While we support the need to capture data to prevent fraud, we need to sustain it at a sensible level. If this level of information gathering continues to increase and every mortgage club is required to hold it, there are likely to be a number of effects:
1. Advisers will be less likely to use multiple clubs for their mortgage business. Very few advisers are likely to want to be subjected to in-depth information gathering from three or four mortgage clubs; once or twice is likely to be enough. The result of this is that advisers will have to tie their colours to the mast of one or two clubs; by being restricted in this way it will mean that they do not always have access to the best deals in the market, even though it may well be best advice to advise their client to take a lower rate only available through a different club.
2. Even if the adviser decides to offer their client the best rate, if this is through a club that they haven’t used before it could delay the process significantly if the adviser cannot submit the mortgage application until they personally have undergone checks. This delay could well jeopardise a client’s mortgage or house move.
3. All of these in turn could reduce the number of directly authorised advisers either driving them out of the market or pushing them into networks, which in turn may well reduce the number of mortgage clubs providing DAs with less choice.
The challenge is that these measures are being put in with the very best of intentions. The impact of fraud costs everybody across the industry: lenders, advisers and consumers. We just need to work together to find a medium that is not too draconian.
DAs usually choose to be directly authorised because they want the autonomy of being in charge of their own destiny and the independence of choosing from whole of market providers as to where they put their client’s business. It is good and necessary that there are options for every type of adviser as this independence is vital for a healthy market.
The answer has to be the long awaited authorisation scheme for advisers. It needs to be a system that everyone can trust and believe in. Advisers wouldn’t mind giving in depth information if it was in order to be authorised and only needed to be gathered once based on one set of criteria.
Then this information can be gathered and stored in a central place. It would immediately add trust and would restore faith that the advisers operating in the market are people who are fit and proper to be working in it and it would once again open up the market providing advisers with the freedom to choose how they work and what mortgage clubs they place their business through.
Karen Hedges is mortgage manager, TMA and First Complete