Re: brokers vs direct
- From: john boyle <john@xxxxxxxxxxxxxxxxxxxxxx>
- Date: Fri, 30 Dec 2005 20:52:25 +0000
In message <1135932622.056819.32380@xxxxxxxxxxxxxxxxxxxxxxxxxxxx>, sylvian stone <sylvian_stone@xxxxxxxxxxx> writes
It varies between types of products, but usually the insurers / banks who create these products factor in the cost of 'distributing and marketing' the product. Therefore, they will pay a fee or commission to the broker, but if you go to them directly, they will just pocket this amount, or use it to incentivise their own salespeople.
When it comes to mortgages, a broker will also charge you a fee - say 1% of the loan raised, as well as taking the procuration fee from the lender. Therefore, I've often found that if you do your homework, you can save this additional fee by going directly to the lenders - although, please correct me if I am wrong.
Mortgages are now regulated by the FSA. To be a true 'independent' mortgage broker you must a) offer the products from the whole of the market, and B) give the clients the choice of the broker being remunerated either by 1) commission (or procuration fee) only, 2) Fee Only, or 3)a combination of both fee & commission. Many supposed 'independent' brokers such a charcol online and Bradford & Bingley Market place are not 'independent'; because they only offer a limited range of mortgages that they have pre-selected from the whole of market.
Mortgage lenders obtain most of the lending form brokers and they prefer obtaining mortgages through this route because a) the cost of regulation is born by the broker, b) the risk if regulation (and the blame if it is duff advice) is born by the broker and c) it is considerably cheaper for the lender if all customer contact is conducted by the broker, d) many lenders now get the broker to input the mortgage app directly to the lender's computer making it even cheaper for the lender. All this means that the lender will likely offer better deals to brokers than through their own branches. The branches, of course, can not give independent advice and some do not even give 'advice', i.e. they will let you come in a buy the wrong product and you have no recourse if the gave no advice.
Some mortgage brokers do charge exorbitant fees like the 1% quoted but many independent brokers will charge something like £250 which is only payable AFTER the mortgage has completed.
So, all in all, there should bemerit in going to a broker but pick with care. Be sure to get one who gives FULL ADVICE, and is truly INDEPENDENT (see definition as above)
With regard to insurance, I suspect that the margins are so tight on these products, that you will probably save little going one route or the other.
Again it is the cost and risk of compliance that is the problem for the insurers now that all insurance products are regulated by the FSA. Many insurers will; not deal direct for this reason.
--
John Boyle
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