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The Power of Choice | Mortgage Clubs vs. Mortgage Networks The Profound Option

The Power of Choice

The power of choice


When seeking support and opportunities for further growth, mortgage brokers and advisers face ‘The Power of Choice,’ deciding between two distinct paths. The first option involves becoming a member of a mortgage network as an appointed representative (AR).

At the same time, the alternative path leads to joining a mortgage club as a directly authorised (DA) firm. Although opting to operate as an AR within a mortgage network offers its own set of advantages, ‘The Power of Choice,’ the level of independence and flexibility associated with collaborating with a mortgage club can be a significant asset for a firm.

At Connect, we recognise that the decision to join a mortgage club is a matter that demands careful consideration. To assist you in making this decision, we have compiled this article. Here, you can gain comprehensive insights into mortgage clubs, including fundamental concepts like their purpose and operation.


Understanding mortgage clubs and their functionality


Mortgage clubs serve as valuable resources designed to support advisers in both preserving and expanding their businesses. However, the specific mechanisms by which mortgage clubs achieve this goal can differ significantly from one organisation to another.

For instance, one may offer an enticing package with an innovative training program, cost-effective technological solutions, adaptable compliance assistance, and personalised relationship management.

Nevertheless, deciding which services to utilise remains entirely at the discretion of the directly authorised (DA) firm, as there is no obligation to engage with a particular mortgage club exclusively. In fact, DA firms can collaborate with multiple mortgage clubs concurrently, highlighting the power of choice for advisers.

One of the significant challenges faced by financial services advisers pertains to maintaining compliance with the regulations established by the Financial Conduct Authority (FCA). This is why many mortgage clubs invest substantial efforts in keeping advisers well-informed about significant changes and relevant documentation.

To ensure full adherence to these regulations, some principals may opt to become part of a mortgage network instead of a mortgage club, underscoring the power of choice in how advisers navigate their compliance responsibilities.


Distinguishing between mortgage clubs and mortgage networks


The primary distinction between a mortgage club and a mortgage network lies in the level of authority they exert over a firm. In the case of a mortgage network, firms cede a portion of their autonomy, subjecting their processes and communications to approval in alignment with the guidelines established by the Financial Conduct Authority (FCA). Clearly, this curtails the degree of liberty and flexibility that advisers can exercise in their day-to-day operations.

Conversely, when working as a directly authorised (DA) firm within a mortgage club, advisers maintain complete control over how they choose to handle compliance, exemplifying “The Power of Choice.” They adopt a more advisory and consultative role, highlighting the benefits of “The Power of Choice” in shaping their business operations.


Exploring mortgage networks | What advisers need to know


If you’re an adviser operating within the financial sector, you’ve likely encountered the term “mortgage network” at some point during your career. Yet, it’s worth acknowledging that there is a noticeable absence of readily available knowledge and information, presented in straightforward terms, that clarifies what a mortgage network entails and the advantages it offers to advisers who decide to become a part of one.

In this comprehensive guide, we embark on a journey to unravel the intricate tapestry of mortgage networks & mortgage clubs. We aim to provide advisers with a clear and unambiguous understanding of both principles, what they represent, and why it’s a compelling choice for professionals in the financial advisory field. Our mission is to empower you with insights that enable you to make informed decisions about your career path, emphasising “The Power of Choice.”

Advisers can gain access to a comprehensive array of compliance tools. These resources encompass pre-packaged solutions for thorough compliance audits, regular compliance bulletins, fraud updates, and online learning and Continuing Professional Development (CPD) courses, all readily available upon joining, showcasing “The Power of Choice” in shaping your professional growth.


Understanding procuration Fees: A vital aspect of adviser decision-making


In the discussion of “The Power of Choice”,  procuration fees, often called “proc fees,” hold significant sway in the decisions advisers make when selecting a mortgage club to partner with. These fees represent a crucial component of the financial arrangement between advisers, mortgage clubs, and lenders.

A procuration fee is a monetary compensation that a mortgage club disburses to the adviser, and the exact amount is pre-determined based on a percentage that is mutually agreed upon by the mortgage club and the chosen lender. This percentage varies and is negotiable, which gives rise to a considerable degree of flexibility in the process.

One of the fundamental advantages of procuration fees is that mortgage clubs, through their negotiation power and affiliations, can often secure more favourable procuration fee rates compared to individual firms that engage with lenders directly. 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 the decision-making process, highlighting the power of choice. It enables advisers to choose which mortgage club to align with, ensuring their business thrives and prospers while exercising their own power of choice.


Distinguishing the proc fees between mortgage clubs and mortgage networks 


Mortgage clubs and mortgage networks are both intermediaries in the mortgage industry that connect mortgage brokers with lenders and provide various services to support the mortgage application process. The primary difference between a mortgage club proc fee and a mortgage network proc fee lies in the relationship between the broker and the intermediary and how they are compensated.


Mortgage Club Proc Fee:


  • Mortgage clubs are typically membership-based organisations or groups that bring together mortgage brokers. Brokers can join a mortgage club to access a panel of lenders, exclusive mortgage products, and additional support and services. The Power of Choice is in the hands of the brokers.
  • Mortgage clubs often negotiate special deals and terms with lenders on behalf of their members, including commission rates.
  • The mortgage club proc fee is the commission that a lender pays to the mortgage club for introducing a mortgage broker who is a member of the club. This fee is then shared with the broker.
  • The broker’s income is derived from the proc fee paid by the lender and is often a percentage of the loan amount or a fixed fee.


Mortgage Network Proc Fee:


  • Mortgage networks are similar to mortgage clubs in providing support and services to mortgage brokers. Still, they have a more direct relationship with brokers who become appointed representatives (ARs) of the network.
  • Mortgage brokers who join a network become ARs and are authorised to trade under the network’s regulatory umbrella. They often receive compliance support and access to a panel of lenders. The Power of Choice is retained by the brokers within the network. 
  • The mortgage network proc fee is the commission a lender pays to the network for business introduced by one of their ARs. The network then pays a portion of this fee to the individual broker (AR).
  • Mortgage network proc fees are typically shared between the network and the AR, with the network deducting its share to cover administrative and compliance costs.
  •  Directly authorised (DA) firms can opt to become part of a mortgage network, essentially enjoying the advantages of a dual approach. In doing so, they can also benefit from a compelling commission structure offered by the mortgage network. This arrangement allows DAs to leverage the best of both worlds.

In summary, both mortgage clubs and mortgage networks play a role in connecting mortgage brokers with lenders and can receive proc fees for facilitating these connections. The key distinction is the nature of the relationship between the broker and the intermediary (club or network) and how the proc fees are divided between the intermediary and the individual broker.

Mortgage clubs generally have a more indirect relationship, while mortgage networks have a more direct, regulated relationship with their appointed representatives. The proc fee distribution can vary based on the specific arrangements and agreements between the broker, intermediary, and lender. The Power of Choice is evident throughout this decision-making process.

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