The power of choice
Understanding mortgage clubs and their functionality
Distinguishing between mortgage clubs and mortgage networks
A mortgage club and a mortgage network differ primarily in their authority over a firm. In a mortgage network, firms give up some autonomy. Their processes and communications need approval per Financial Conduct Authority (FCA) guidelines. This reduces the freedom advisers have in their daily operations.
On the other hand, directly authorised (DA) firms in a mortgage club keep full control over compliance. This setup exemplifies “The Power of Choice.” Advisers take on an advisory and consultative role. They showcase the benefits of “The Power of Choice” in shaping business operations.
Exploring mortgage networks | What advisers need to know
Understanding Procuration Fees | A vital aspect of Adviser decision-making
In the discussion of “The Power of Choice,” procuration fees, often called “proc fees,” greatly influence advisers’ decisions. These fees are crucial to the financial arrangement between advisers, mortgage clubs, and lenders.
A procuration fee is a monetary compensation that a mortgage club pays the adviser. The exact amount is pre-determined, based on a percentage agreed upon by the mortgage club and the chosen lender. This percentage varies and is negotiable, allowing considerable flexibility.
One key advantage of procuration fees is that through their negotiation power, mortgage clubs can often secure more favourable rates. Individual firms dealing directly with lenders might not achieve such favourable terms. This can be a compelling incentive for advisers to partner with mortgage clubs.
It’s important to note that the procuration fee system is a key factor in decision-making, highlighting the power of choice. It enables advisers to choose which mortgage club to align with, ensuring their business thrives and prospers. This system allows advisers to exercise their own power of choice effectively.
Distinguishing the proc fees between mortgage clubs and mortgage networks
Mortgage clubs and networks connect brokers with lenders and offer support for the mortgage process.
The main difference between a mortgage club proc fee and a mortgage network proc fee is how brokers and intermediaries are compensated and related.
Mortgage Club Proc Fee: Mortgage clubs are membership-based organisations that unite brokers. Brokers join to access lenders, exclusive products, and services. They retain the Power of Choice.
Clubs often negotiate special deals and terms with lenders, including commission rates. The mortgage club proc fee is the commission lenders pay to clubs to introduce brokers. The broker then receives this fee.
Broker income comes from the proc fee, usually a percentage of the loan amount or a fixed fee.
Mortgage Network Proc Fee: Mortgage networks are similar but have a direct relationship with brokers, who become appointed representatives (ARs). ARs trade under the network’s regulatory umbrella, receiving compliance support and access to lenders. The Power of Choice remains with brokers in the network.
The network proc fee is the commission a lender pays for business introduced by ARs. The network then pays ARs a portion of this fee.
Fees are typically shared, with the network deducting its share for administrative and compliance costs. Directly authorised (DA) firms can join a network, enjoying a dual approach and compelling commission structure. This setup allows DAs to leverage the benefits of both models.
In summary, Mortgage clubs and networks connect brokers with lenders and earn commission fees for facilitating these connections. The key difference lies in the relationship between the broker and intermediary and how fees are shared.