Moving from ‘About right’ to ‘Right’
When we started our Consumer Duty journey the one thing that stood out as a key job was reviewing our fees under the ‘Price and Value’ outcome. I am so glad we dedicated time and resource to this exercise, the end results were satisfying and we have made genuine changes to ensure our clients can be confident they are everything to us.
Pricing has always been high up on our agenda internally and we set out clear guidance on broker fees a few years back now to ensure that our clients would be charged the same no matter who in the group they dealt with.
In 2022 we completed a case for a client that had previously been declined on affordability by a large national mortgage broker. It was in fact the broker fee tipping the balance on affordability and their fee in this instance was much higher than we had previously seen from this firm. I’ll not mention the firm in this case as they may well have changed things since or perhaps someone made an error at the time and we don’t claim to get everything right ourselves. What this did do for us though is vindicate our move some time before to a consistent fee structure. For me, whatever the outcome of this exercise we had already passed the first test before we knew it was coming.
We decided a market review would be the logical place to start. Comparing pricing against our peers is the best way to find out if what we are charging and how we charge it can be considered fair.
We decided to input the search terms we pay for into google and see who our current competition is. We followed this up with a look at these firms websites and their published terms and conditions. The findings were interesting to say the least. Using around 15 other firms that market in the same space as us we discovered that the market is far from joined up. Just a few examples….
Broker pricing ranged from £0 to £2,995 on a fixed fee basis
Some charge a %age of the loan amount and this ranged from 0.5% to 2%
Some charge a fee for a Decision in Principle which is in some cases deducted from the final fee (but not always)
Some charge an application fee and in many cases, this is not refundable
Post review fee review, what did we find?
We concluded that overall, we were comfortable that we provide fair value on our pricing and here’s why…
We charge a fee but only if we get our client an offer
If the mortgage does not complete then that fee carries over to another application
If you come to us for a mortgage then you are charged the same no matter who picks up your call
We have fee scale across the group which our advisers adhere to and depending on the complexity of the case you may be charged more.
We believe our charging scale represents fairness regardless of which fee is attached to a clients’. In return for that fee we have created a uniquely layered process that that delivers great outcomes to clients and our lender partners. Our review concluded that our application to offer percentage is ahead of our peers. It is difficult to quantify if this is our process or the way we charge our fee but feedback from clients would suggest it is both.
Moving from ‘About right’ to ‘Right’…
Pricing in this market is difficult, that much is obvious.
Following on from our research and our internal review panel discussions we have moved several price points down (none have gone up). We hope this will mean even more clarity and consistency for advisers and of course our clients. In the current climate it’s a big call to reduce pricing but the feedback internally has been positive. We are adapting our CRM to provide better fee MI meaning we can track and monitor our business to ensure we are doing as we say.
What we will continue to do is provide the absolute best service levels we possibly can, ensuring that clients dealing with Simply stand the best possible chance of securing their mortgage with the minimum of fuss and in record time. We know how good we are, maintaining our position is where the effort goes.
We will review fees formally every 12 months from now on and with some exciting tech being launched in the business over the coming months, I believe we will see long term opportunities to reduce our core fees and I have faith that we will be brave enough to make that call and ensure fairness and value are at the heart of all our decisions.
Liam Atkins
Chief Compliance Officer