It is always interesting to hear the views of others one respects, even if you don’t agree with them. Healthy debate is something all industries should encourage, so I was interested in the view of Jeremy Hall from WestWon on the issue of broker-to-broker introductions, where Jeremy clearly sees a value in fostering these connections (Broker-to-broker business: banned or back in fashion? Leasing Life, January 2013, issue 232).
I suppose the real issue here is: what is a broker-to-broker deal? Is it the ‘umbrella’ scenarios which exist in the market? Well, I suppose that depends on the nature of the agreement between the broker and the network he or she is part of and the finance house’s understanding of that relationship.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
If the relationship is contractual, highly controlled, monitored, with policies and procedures in place and the finance company knows the essence of that relationship, then it’s not broker-to-broker.
Where I agree with Jeremy is that I feel that there is value in bringing people together, creating economies of scale, reducing administrative burden for finance companies and giving people the opportunity to access facilities which could have been unavailable to them in the past. Facilities which can then be passed on to customers to invest and create growth for the UK.
Having said that, we must understand the finance house position in which they have the right to choose who they wish to deal with. After all, it’s their money.
The traditional meaning of broker-to-broker business, where one broker passes a proposal to another broker, which is then just faxed or emailed off as a submission, may not respect that right.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataWe cannot ignore the fact that history has often shown this practice to be dangerous, as there is an increased risk of inadequate, false, naive or misleading information being passed on.
In an age of ever-increasing compliance, know your customer, visibility and contractual obligation, it seems to me three solutions are available.
First, if brokers feels it’s right to remain independent, they also accept the position and understand that a downside may be a restriction in lines. Secondly, a formal an arrangement with an umbrella organisation. Thirdly, both brokers involved in a broker-to-broker deal are open and honest with the funder.
For this last option to work both brokers must advise the funder of the following:
- There has been a referral;
- The customer is aware of the existence of another broker;
- All compliance has occurred;
- The customer has met and elected to deal with the other broker;
- All supporting information has been carefully verified.
Furthermore, this all must be done at proposal stage. Then we respect the rights of the funder to decide if they wish to accept the deal.
Anything else seems to be a breach of contract and one must wonder that if the third choice is not an option in the minds of the brokers, there could be some reason for hiding the truth.
Perhaps it is old-fashioned, but if you sign a contract, you should be prepared to honour it, and that includes respecting the wish of a funder not to get involved in a broker-to-broker relationship.
The finance sector has witnessed many problems in the past few years. If we are still to have a vibrant industry in the future, now is the time to tighten procedures, not relax them.
Allan Ross is managing director of First Independent Finance
