Lenders need to look at implementing trail commissions, argues Jason Berry of Safe&Secure
Anyone involved in the mortgage marketplace over the last 10 years can reflect back and identify some actions that with hindsight they would like to have completed differently. It follows that if intermediaries and lenders keep undertaking the same actions then the same results will occur.
So just what is being done now to prove a stronger marketplace can exist and importantly demonstrate lessons have been learned?
Intermediaries appear to be pro active as they change business structures, diversify into new areas, or consolidate with like minded new business partners.
Lenders, however, whilst demonstrating some synergy with intermediaries (for example: the Lloyds/HBOS changes, Platform’s mainstream move, the Chelsea/Yorkshire merger) can definitely do more.
Clearly one of the areas that will build firm foundations for the future and deliver more mutual benefits is building passive intermediary income streams by paying procuration fees on a monthly basis for an agreed period or until customer arrears occurs.
Whilst I recognise how important cash flow currently is for intermediaries, and any move away from upfront reward creates some short term pain, it is no coincidence that those intermediaries best placed to invest and/or profit in the future are the ones demonstrating existing strong residual regular incomes.
This efficiency does not occur by chance or without skill and it certainly does not occur unless the relationship between manufacturer of product and distributor/seller of product is anything but transparent.
This transparency is crucial for Treating Customers Fairly and lenders need to immediately start providing much better management information and stop hiding behind data protection as an excuse of preventing the effective information supply.
Embracing such activity should see best practices adopted in a similar way intermediaries and life assurance/general insurance companies currently control policy persistency or lapses.
A clear outcome and massive lender benefit would see some of the ridiculous arrears levels which spiralled almost uncontrollably during the last 30 months managed far more effectively with the intermediary/lender/consumer all playing a part to work together towards sensible solutions.
Whilst I accept lenders’ systems and controls may need to be modified in order to implement some change this investment is mitigated with small percentage improvements in arrears numbers and/or reduced losses on repossessions. Also future prevention is better than a cure.
Similarly I also understand concerns any lender breaking from the pack may have regarding poor, low volumes as they stand in isolation and are possibly selected against but the market of tomorrow is less about volumes and market share and very much about procuring the right asset from the right consumer from the right distribution at the right price. To quote Napoleon, “Show me perseverance and I will show you victory.”””
