This week, Fincorp made some interesting comments about ‘throwing Stones’ - suggesting that some brokers were guilty of recommending certain lenders to clients based on procuration fees alone.

I spend an awful lot of time researching the market place and lenders - more time than I would like if I am totally honest. However, in the current market this is a necessity in my view. Lenders are constantly moving rates and fees around and we still have many new entrants into the short term funding space. Next week alone I am meeting six lenders and no doubt will speak on the phone to several others. Not only about specific client transactions – generally just establishing rates really on offer, fees and appetite for different sectors etc.

Consequently, from this research I have drawn up a list of lenders in this sector who seemingly have no purpose in life. These lenders are weaker than many other lenders for:

Rate, fees, service, reliability, speed and underwriting flexibility.

I say ‘drawn up’- I started, but the list got so long I decided I had proven the point to myself and stopped there.

If you are not in the top quartile for any of these things as a lender, surely brokers should not be introducing business to you? There are better options available to the client.

However, there are some big industry names on this list whom we are told are writing phenomenal volumes of business. If this is the case then why? How?

Perhaps because the market is so fragmented (and getting more so) not everyone is spending the time on researching the industry they purport to be in properly. Not enough CPD. Instead, my view is that many brokers who are not specialists are just succumbing to the friendly BDM with the fancy logo and some free pens. If you don’t know your eggs, it is an easy trap to fall in to when it comes to a name all over the industry… The press report they are lending money hand over fist, so they must be good, right? 

They are also more likely as not to be offering to pay back a significant percentage of the arrangement fee back to the broker. My view is that these brokers are not greedy, just lazy - taking the path of least resistance. The lenders on my list seem to be making a living out of this weakness (and a bloody good one at that too), if the figures being reported are anywhere near accurate.

Brokers: get off your lazy arses and go hunt out the best deals for your clients. In the long term, you will get a faithful client for life and earn more money. If you don’t, you will get found out at some point.

Lenders: if you’re not on the edge with fees, rates and service - you’re taking up too much room…….

Commenting on the article, Russell Martin from Finance 4 Business said: “A client engages the services of an intermediary/broker to secure a deal that satisfies their requirements. The broker has a duty of care to the client in securing the best deal for them.

“Often, people assume that this is always driven by cost. I can say without question that this is not always the case. There can be many reasons why a lender is deemed best choice, too many to list here. However, the client has a right to know what is available to them.”

Russell added: “At no stage in the process is there a consideration for what we earn from the lender. The procuration fee received is a reward for volume and quality of business.

“I have not experienced a broker chasing a proc fee, however, I can envisage this happening. As the market grows, the number of lenders increase. The newer smaller lenders may find it difficult to achieve a panel appointment with the larger broker/packagers so may incentivise smaller brokers with enhanced payments. I’m not sure if as your contributor states this is down to laziness, or lack of knowledge.

“The AOBP is very advanced in introducing a short-term lending qualification. This has been very well received by both the broker community and lenders alike and should go a long way to avoiding this type of activity.”

Simon Allen from Total Business Finance stated that he agreed with some of the article, but stated: “…what is missed in choosing a lender is relationship, product range and how they treat clients when the loan goes wrong. I can get better rates and service with some lenders because of the quality of what they receive from an experienced packager. So there may be lenders that Enness don’t deal with that could offer a better experience than their current lender panel.”

“I do agree that there are some lenders in the market that I will never use and I wonder where they get their business from. Sadly, I think there is a lot of spin in this industry and there is some laziness but that will never be wiped out completely. The more transparency there is with lenders the easier it will be to compare offerings. I do a lot of exit finance and when I see the lender chosen to do the bridge by the introducing broker I do wonder why that lender was chosen,” he concluded.