Lenders should pay brokers trail commission as more customers take out longer-term fixes, David Copland, director of The Mortgage Alliance, (TMA Club), has argued.
He said that brokers should receive money from clients on longer 5-year fixes because lenders still receive the interest from the customer.
Copland (pictured) said he’s seen a rise of the longer-term fixed rates over the last 12 months. So with more clients on longer deals, brokers receive less recurring business as they have fewer customers remortgaging every two years.
He said: “I think if the lender is earning interest from that client for five years, why isn’t the broker being paid a proc fee – because he’s introduced the client to the lender?
“I think the broker should get paid something like 35 basis points for the first two years and then on years three, four and five should receive five basis points.
“Then they start building up a recurring income and their business becomes worthwhile. I don’t know why we don’t have this in the UK.
“I wouldn’t want to pay that upfront. I get 35 basis points for two years and 50 for five years but I’d prefer it’s paid as a trail.”
However Copland reckoned 2-year rates are better for clients than longer 5-year deals.
He added: “It’s a long enough period where anything could happen like someone moving or splitting up.”
TMA has grown substantially since last year, making two acquisitions so far in 2018 including Personal Touch Financial Services (PTFS), adding £5bn to the group figures for 2017. The club has also recently partnered with Interbay and added Masthaven to its lender panel.
In March 2017, it hired Robert McCoy from PMS as senior product and business manager and two years earlier Lisa Martin left the same company to become group development director at LSL Financial Services, which owns TMA.
And in 2018 TMA is on track to achieve its target of £7.2bn in completions for the year.
Copland said: “We’re looking to attract some of our big competitors and if we do that could we could achieve £9bn. But it’s hard to get people to leave. The challenge is convincing them our mortgage club is better than the one they’re currently at.
“We’ve grown last year and we’re still building. We strive to come up with the best proposition for directly authorised intermediaries.”
Part of this growth is innovation with technology, helping their brokers to keep up with the competition.
Copland added: “We don’t want new entrants pinching business from our current brokers so we have to help our brokers come up with digital solutions they can use.
“At the moment brokers spend an enormous amount of time filling forms in with clients. Digitialistion will end all this paperwork so when the broker sees the client they will just be doing the advice piece.”
TMA introduced the Smart Search electronic identification system last year.