I am all in favour of more second charge lenders opening up direct access to brokers, which might surprise a lot of people, bearing in mind that Fluent Money is the most successful second charge distributor/master broker in the UK.
There is however, method in my madness. Most of the practitioners in our sector are committed to seeing a wider acceptance of second charge mortgages across the intermediary channel. By opening up access to brokers direct, lenders are doing their bit to eliminate another objection to involvement. If I was a broker coming to second charge for the first time and used to dealing directly with mortgage lenders for most of my business needs, I would not like to be told that indirect contact via third party distributors was my only route of access.
All barriers to entry need to be dismantled if the sector is going to thrive and whether it is about fees, differing processes or just good old fashioned prejudice, education remains a priority. Part of that education means telling new introducers that they have a choice as to how they can access second charge lending, a concept with which I have no problem.
What I do say to brokers is to assess the advantages and disadvantages of direct contact as against using a third party packager/master broker. For brokers with the luxury of a backup team to make the string of individual enquiries to each lender in order to come up with a genuine recommendation based on rate, service and suitability to the client’s needs, then I think going direct can be a positive way to go.
My question to brokers working on their own, without the benefit of a researcher or paraplanner, is how much time do they really have to make that kind of assessment before making a recommendation? Conversations I have had would suggest that because of the need to research further advances and remortgages as well, the answer in many cases was ‘not too much’.
Also, while the number of lenders allowing direct access is growing, the majority still do not, including the two biggest, who are conservatively responsible for over 50% of second charge origination.
The dilemma facing brokers is whether they can square the depth of their research with the fact that, if they ignore the lenders whom they cannot access directly, their recommendations are based on a limited sampling of available sources.
More lenders are likely to offer a direct route, but for the majority using a third party to provide origination, communication and the all important packaging of the case, there is no real business case to make the change.
Naturally, I am an advocate of the packager route and if I was a broker, the positives of having a resource that has access to all the major lenders in the sector, unrivalled knowledge of their individual requirements and the ability, should I choose it, to provide my client with a full advice service, leaving me free to concentrate on new business, is a no brainer.
The more that can be done to educate brokers in the second charge market will always get my vote. Direct access to lenders offers brokers another option to access the market in a way that they want to and if that brings more brokers into the second charge orbit then that is a huge positive for the sector as a whole.
We are all committed to making sure that customers receive the most appropriate advice from the widest range of available borrowing options.
Direct access is another step towards making it easier for advisers to engage with second charge lending and building awareness of all the available resources, including master broker/packagers, that are there to help provide them with all the options they are going to need.
Jeff Davidson is head of intermediaries at Fluent for Advisers