When asked what direction fees were likely to go in next, given the recent tendency toward increases from lenders across the board, the panel argued that proc fees were only part of the issue – and that advisers undervaluing themselves was also a key problem.
Charles Haresnape of Aldermore, said:
“The fees that have been moved up have actually been increased from a fairly low place, which I think is right – some have been too low. One option is to increase proc fees generally across the board, but somebody has to pay for it.
“At the moment, profit margins are miniscule and we would have to pass that on somewhere; if we put proc fees up, it would generally have to go into the pricing of the product somewhere. We should, as lenders, pay an appropriate fee to intermediaries for the great work that they do and the advice that they give – but there are still a lot of intermediaries who undervalue themselves to clients.
“Some are still doing it for free or very low amounts, and if you think about lawyers, accountants, and other professionals – which intermediaries undoubtedly are – they’re charging much more. I’m only hearing a lot about the debate around proc fees and that lenders should pay more. I’m not hearing the fuller debate about what is the appropriate fee to charge a client for the two, three hours work and advice, especially when it’s work that is fundamental.”
Alistair Ewing of Blimey! Loans made the comparison with the fees for secured loans, noting that these were much higher and added that he thought advisers were wary of charging higher fees and of the perceived need to justify this to the client in the mortgage market, which has tended to have lower fees.
Other panel members agreed, with industry stalwart John Malone emphasising that the fees currently charged by advisers are merely fees appropriate for the amount of paperwork and that advice fees should be much higher. Malone also spoke out on an issue that he said he had championed for many years - network members being paid more than Directly Authorised brokers, adding that this was ‘immoral’ and ‘must change’.
Audience member John Stevenson, of JS Financial Advice Services, asked whether there should be a standardisation away from proc fees based on percentage of the deal and towards a flat fee, and whether this move would help.
The panel members responded by agreeing that the structure of procuration fees as a whole ‘should be debated’, particularly with a focus towards a minimum fee.
Panel chairman Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, concluded the session by clarifying the trade body’s stance on procuration fees.
He said:
“The European Mortgage Credit Directive gives home states the power to ban commission, so the directive is ambivalent on this. There has been great pressure in Ireland to ban proc fees and it’s already banned in Holland across all products – there has been a drift across Europe towards it being taken out of the equation as part of the advice sphere.
“However, from the AMI perspective, we are lobbying hard to keep procuration fees and commission as part of the market place.”
