With the on-going debate continuing on whether intermediaries should incorporate a fee-charging structure into their business TMA’s April Distribution Indicator focused on DA’s attitudes to this area and its potential implications.
Responding to this issue, 65% suggested that they have experienced a shift in the reward structure with procuration fees playing a less prominent role and fees for advice becoming more important. 35% stated that they did not feel that this was the case.
However, when asked if they had changed from a commission only business into a fee-charging business in the last 12 months just 26% said that they had made the transformation. 9% declared that they were in the process of making the change and 65% stated that they had not changed.
Of those that had not adopted a fee-charging structure only 12% said that this was a future intention; 57% said that maybe they would contemplate such a switch in the future and 31% highlighted that this wasn’t a consideration.
When asked if they thought a shift to a fee-charging basis could result in the loss of clients 52% of DA’s responded that they expected this to result in a loss of clients, 35% stated that they didn’t believe this to be the case and 13% expressed their uncertainty.
The TMA Distribution Indicator is part of a strategic gathering of feedback and views in regard to current market conditions undertaken by the TMA mortgage desk.
A cross section of extensive interviews takes place over the course of a month and the responses are gathered to highlight any potential fears, opening or developments in the market which TMA will look to address in the future.
Phil Whitehouse, Head of TMA, commented:
“The subject of fees and commission is a sensitive and emotive area and one which continues to be at the forefront of most intermediary firms thinking. I agree with the majority of DA respondents that there has been some shift in the reward structure.
"As such firms really have to look long and hard at their individual business and client bank to see what works best for them and work diligently to make sure that whatever decision they make is the correct one.
“There is no right or wrong answer to this issue but firms should not be afraid to implement a charging structure if they can break down and demonstrate exactly what service they are providing for the fee, even if it is only a minimal one for the mortgage search and transaction.
"This will not only provide a small income but importantly offers ample opportunity to cross sell and pick up more lucrative earnings from ancillary sales opportunities in areas such as protection and general insurance cover.”
