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The Power of Choice | Mortgage Clubs vs. Mortgage Networks

The Power of Choice

The power of choice


When seeking support and growth opportunities, mortgage brokers face ‘The Power of Choice,’ deciding between two paths. The first option involves becoming a mortgage network’s appointed representative (AR). Alternatively, brokers can join a mortgage club as a directly authorised (DA) firm.

Opting to operate as an AR within a mortgage network offers its own set of advantages. However, the independence and flexibility of collaborating with a mortgage club can be significant assets for a firm.

At Connect, we recognise that joining a mortgage club 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 are valuable resources designed to support advisers in preserving and expanding their businesses. However, the specific mechanisms by which mortgage clubs achieve this goal can differ significantly. Each organisation offers unique benefits tailored to advisers’ needs.

For example, one mortgage club may provide an innovative training programme, cost-effective technology solutions, adaptable compliance assistance, and personalised relationship management. Advisers have the flexibility to choose which services to utilise. There is no obligation for directly authorised (DA) firms to engage exclusively with a particular mortgage club.

Moreover, DA firms can collaborate with multiple mortgage clubs concurrently, highlighting the power of choice for advisers. This flexibility allows them to select the best resources for their specific needs.

One significant challenge financial services advisers face is maintaining compliance with regulations set by the Financial Conduct Authority (FCA). Therefore, many mortgage clubs invest substantial efforts in informing advisers about important changes and relevant documentation.

Some principals may choose to join a mortgage network instead of a mortgage club to ensure full adherence to these regulations. This decision underscores the power of choice in how advisers navigate compliance responsibilities.

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

If you’re an adviser in the financial sector, you’ve likely encountered the term “mortgage network” during your career. However, there is a noticeable lack of readily available knowledge and information. Presented in straightforward terms, it clarifies what a mortgage network entails and the advantages it offers to advisers who join one.

This comprehensive guide unravels the intricate tapestry of mortgage networks and mortgage clubs. We aim to provide advisers with a clear understanding of both principles. We explain what they represent and why it’s a compelling choice for financial advisers. We aim to empower you with insights to make informed career decisions, emphasising “The Power of Choice.”

Advisers can access a comprehensive array of compliance tools. These resources include pre-packaged solutions for thorough compliance audits, regular bulletins, fraud updates, and online learning. Continuing Professional Development (CPD) courses are also readily available upon joining. This showcases “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,” 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.