MortgagesOct 11 2017

Network calls for deal to stop lenders stealing clients

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Network calls for deal to stop lenders stealing clients

A network has called for a formal agreement with lenders to stop them from cutting out brokers from the mortgage process.

JLM Mortgage Services has said it may now be time for a formal agreement to ensure lenders do not contact clients directly, try to renew mortgages without advice and cross-selling other products.

The mortgage and protection network said that since intermediary distribution delivers more than 80 per cent of all business to lenders, there needs to be a formal agreement which means lenders encourage clients to secure ongoing advice and the protection it affords them.

Sebastian Murphy, head of mortgage finance at JLM Mortgage Services, said: “In our view it’s time to put to bed the age-old argument about who ‘owns’ the client, not least because the vast majority of lenders now receive the vast majority of their business via the intermediary channel.

“Instead of potentially going head to head with the adviser for repeat business, we are suggesting a much more collaborative approach, one which fully recognises the source of the initial business – the adviser – and seeks to keep them, and the provision of advice, at the heart of the relationship. 

“Clients are often completely unaware of what they are getting themselves into when ticking a box to change products, or opting to go ahead with a cross-sale; we would therefore like lenders to work with us, refer clients back to their adviser and ensure they have the right deals for their current needs and circumstances.

“A formal agreement and commitment from a lender to do this would go a long way to ensuring client protection and sends a clear message that advice is right, proper and necessary, and it is the original adviser who is best placed to deliver this.” 

JLM said some lenders are increasingly attempting to remove adviser influence by contacting clients up to six months before their deal ends, offering direct-only products via a tick-box format, waiving early redemption charges and providing other incentives.

Clients are tempted by such deals because of ease of change but lenders are not making it clear that advice is not being provided and all forms of client protection will be lost.

JLM is calling on the network, mortgage club and distributor community take the lead in delivering such an agreement, arguing many of the larger players have the power and influence to persuade lenders into committing to such a formal approach to client contact. 

Rory Joseph, director of JLM Mortgage Services, said: “We believe that it is the distribution sector – particularly the larger network and mortgage club players – that are in the strongest position to drive the introduction of such a formal agreement forward.

“After all, the levels of business and the strength of their propositions could be particularly persuasive and should send a message to their own member firms that they are on their side, and committed to keeping business with them.” 

Robert Sinclair, chief executive for the Association of Mortgage Intermediaries, said the investment and pensions marketplace already has had such arrangements but these tend to be informal rather than contractual. 

He said: “With the advent of GDPR in 2018 all firms will have to reconsider what data they hold on their customers, how they use and process this and how they execute contact strategies.

“All agreements between brokers and lenders are individual and contractual and capable of flexing to deliver referral back to the original broker and ensure on-going advice. 

“However, the consumer is actually in control of their own data, relationships and choice and the challenge for all firms is to stay close and ensure they are the first port of call when change is required.

“In highly regulated and competitive market firms will need to establish what works best for them, but more importantly what matters to their customers.”

damian.fantato@ft.com