As a mortgage broker, there are different ways of running your own business.
You can be totally independent as a directly authorised broker, or you can join a mortgage network as an appointed representative.
The latter choice offers certain benefits and operates as a form of business partnership, for which you pay regular fees and share your commissions.
The major benefit of being an appointed representative in a mortgage network is support with compliance and regulatory changes, but these networks offer other benefits too.
These can include assistance with promotions, customer relations, management, software provision, lender relationships and more.
How do mortgage networks work?
A mortgage network acts as a regulatory umbrella, whereby the appointed representative utilises the FCA Permissions of the network, making the compliance process simpler and less stressful.
Within a network, brokers act as appointed representatives.
They still interact individually with lenders, but they have the backing and support of a network.
Different networks may be subject to specific restrictions on which markets they operate in.
However, the biggest attraction for joining a mortgage network, whether you are just starting out or are an experienced advisor, is additional compliance support.
Coping with the compliance regime
In financial services, compliance is both integral and essential.
As a mortgage broker, you need to ensure your business is compliant and that you keep up with any regulatory changes.
Compliance can be time-consuming, adding to your administrative burden, but a mortgage network can support you with much of this burden, by training, guiding and directing you, in your compliance performance.
As an appointed representative, you will not have to register with the FCA yourself, because the network is the regulated firm, although you will have to go through the less rigorous application of being approved by the FCA as an appointed representative.
Indeed, networks take on a great deal of the responsibility for the brokers that join them.
Usually, they provide you with professional indemnity cover, and will advise on any regulatory requirements in line with its own rules.
What other benefits do mortgage networks offer?
With a mortgage network, you have a ready-made structure for your brokerage.
In fact, some lenders prefer to deal with mortgage networks because they can provide exclusive deals.
Depending on the network you choose, you may also have access to a range of support services, including:
- Training and professional development
- Promotional support
- Complimentary sourcing & KYC systems Customer relations management (CRM)
- A full suite of templates & guidance documents
Things to consider when choosing a mortgage network
If you’re setting up as a mortgage broker, you have the choice of either becoming directly authorised – providing you have previous experience in the sector – or an appointed representative.
If you do choose to join a mortgage network, you should consider various factors, beyond the benefits of compliance support and other services.
Firstly, think about the business you want to have. You must decide what you want from a network, and therefore which network can give you this.
Different networks will have different structures, which allow their appointed representatives varying degrees of independence.
Ultimately though, you are tied into the network you join, and its rules and regulations.
How financially stable is it?
You might be choosing a mortgage network for the protection it offers, but do your due diligence first to check that it is itself financially stable.
You want to feel confident of its stability, so check whether it has a parent company or other controlling influence.
What are its standards of service?
The network you choose should allow you to provide the right product range to suit your individual business objectives and intended client’s needs.
Does it pay its representatives’ commissions in a time frame that will suit you and your cash flow requirements, and what are its payment terms?
Basically, does it value its representatives, and provide them with a level of customer service that reflects this?
What is the network’s charging structure?
Transparency is the key here.
You will be paying regular fees to your mortgage network, so you want to know exactly what it is you’re paying for, and how they calculate this.
Is what you’ll be getting in return value for money? How fixed or stable are these charges, or will you be in for an unexpected shock a few months down the line?
Also, you should get confirmation about what exactly the charges include, such as:
- Retention rate
- Procuration fee or commission
These can vary, and you need to balance them against each other to see what the best outcome for you will be.
You should also ascertain what the notice period is for leaving the network should you choose to do so, as well as any associated termination fees.
What is the alternative to joining a network?
As we have highlighted, the two main ways of becoming a mortgage broker are either via a network as an appointed representative, or by going it alone as a directly authorised broker.
What it involves is using the services of a compliance support consultancy.
This gives you access to support such as:
- Your FCA application for direct authorisation
- Advice on FCA permissions
- Help with drafting policies and procedures
- Data protection advice
- Professional indemnity requirements
- File checks and reviews
It’s a cost-effective alternative to being part of a mortgage network, and it allows you to grow your business as a mortgage broker entirely independently, in the way that you want to.