One story in particular that caught my eye this week in the industry press was the report that members of Legal & Generals Mortgage Club have “voted overwhelmingly against the use of dual pricing by lenders.” This is all very well, but isn’t it a bit like Turkeys voting against Christmas? (As one of our office wags put it).
If there is one subject that guarantees to raise blood boiling levels for brokers and lenders alike it is the subject of dual pricing. This type of pricing is nothing new, it has been around for years, although mainly it had been in the brokers favour.
The arguments were simple. By offering better rates to brokers’ lenders, in theory at least, got pre-checked thus better quality clients, did not have to market the products themselves or take the advice risk on. The clients won because they got, on the whole, better quality advice and a much better quality of service than going direct to a lender and not dealing with a decision maker day 1.
Now the boot is on the other foot and we, the brokers, don’t like it.
The lenders argument is as follows. “In a limited market we have a big branch network who cost us money and we can’t have them sitting there twiddling their thumbs. We need to attract clients into the branches to keep them busy and once they are there we need to sell ancillary products such as savings accounts which are desperately needed as we are short of dosh to lend out again.
We can’t just close all our branches, that would not be fair to the local communities or the employees and would be a PR disaster. If we offer brokers the same rates we know that more people would go through a broker, and you would be more successful in selling these products and it would negate our aims.”
Although I do actually empathise with lenders more than the majority of brokers and really do understand their, often good arguments, basically though, what they are saying is that brokers are too successful and people would rather go through a broker to transact!
Getting back to the L&G story then, Ben Thompson, a fine individual and director of mortgages at L&G, stated that dual pricing “is like treating them, (brokers), as second-class citizens. Brokers have long memories and will remember those lenders which have stood by them in difficult times.”
Whether or not the vote was actually a pointless one, (beaks up which Turkeys want Christmas this year), or it was just poor reporting of an important discussion lost in translation, is open to debate. However, Mr Thompson’s comments are interesting and I do agree…in theory.
Brokers do have long memories, I managed to avoid using the Woolwich for a long time as I refused to subject my clients to poor service levels, and now they finally seem to have re-elited themselves and I have had an excellent service from them recently. Really top-draw actually.
If I am not mistaken there are only a couple of lenders who do not dual price, the aforementioned Woolwich, Coventry and Nationwide,who now provide good products and an excellent service. If brokers do have long memories, why are we not all singing their praises, voting for them at all the awards do’s and using them as much as possible?
Let’s face it, some of their dual-pricing competitors’ service is extremely poor at the moment, yet poor old Nationwide and the fabulous Mortgage Works don’t seem to get a look in when awards time comes round. Should they not be feeling a little bit aggrieved after committing themselves to the intermediary market wholeheartedly?
The problem is that lenders know that we have a duty of care to our clients to recommend the best product for them. They know that when things return to normal brokers may find it difficult to steer clients away from market-leading products from providers who were happy to screw brokers when we needed them most. Arguably, they are also screwing the clients when they most need professional and independent advice by forcing them to traipse into a branch.
I do, however, share Ben’s views. What will happen when certain lenders need our love and affection again, in a market where competition is back and rates between lenders are much of a muchness, is that larger groups of brokers, clubs and networks will develop products with and assist those lenders who supported us now.
Now then, is it too early for a Turkey sandwich?