Other advantages include the master broker’s sourcing capability and understanding of lender criteria. In some circumstances, lender underwriters can base themselves out of the offices of master brokers so they are onsite and can quickly respond to potential business queries, creating a good service proposition.
There is also a choice given on how a firm can interact with a master broker, either as a conventional packager or by referring their client for the full advice process.
Search your feelings
Finding a good master broker can be quite daunting. Brokers receive many emails from these firms – and cold calls in some instances – asking for business.
There is much to choose from, but choice is mostly done by word-of-mouth, by recommendation from a mortgage club or via a panel available through a network.
If a broker considers using a master broker, they need to carry out some due diligence to ensure they are able to provide a good service to their clients. They need to check the fees that the master broker is going to charge in order to ascertain if these are reasonable compared to the rest of the market and that their processes are robust and they are financially stable.
The fees charged are a particularly important part of choosing a master broker. In the second-charge mortgage sector there has been much written about the traditional fee levels charged since introduction of the MCD.
In light of second-charge loans being added to the Mortgage Conduct of Business rules, we have seen movement from master brokers – fee propositions have (and are) changing as master brokers recognise that large percentage-based fee levels might not be acceptable in this new environment. It means that advisers need to understand what those fees are, how they add up, and how they might affect the product recommended.
Where distributors can help is that they have already carried out due diligence on these master brokers and lenders, and if a firm begins to have a problem at all with any of the panel providers they can also step in to help sort it out quickly. Most clubs and networks have a solution for their members.
It is important to put the ground work in and ensure you are comfortable with the arrangement before formalising.
There is no shortage of competition, and many propositions are quite different – make sure you understand what you are signing up to before putting pen to paper.
Christine Newell is Mortgages Technical Director at Paradigm Mortgage Services
Key points
It is difficult for financial advisers to keep up to speed with all the changes and developments taking place.
Master brokers can then help find the most appropriate solution.
