Looking to set up self employed mortgage broker

[Nowhereman]

Hi all

I have recently started as a mortgage advisor for an estate agency. I'm new to the industry and my future plans after a year of being a mortgage advisor for this estate agency is to go self employed .

I was just wondering how much it would cost to set up and run. As far as I know I would have to think about the following things -

Network fees ( to Join a network)
Professional indemnity insurance
Dpa licence
Internet fees (to host my website)
Consumer credit licence
Trading name

Could someone tell me how much I would expect to pay for things such as network fees, professional indemnity insurance etc and if there is anything else I would need to pay for. Is it a good idea to go it alone ?

Thanks

Jo

 

[tony84]

Network fees ( to Join a network)- Will depend on the network and expected turnover. I pay approximately 15% of my turnover but I expect that to come down slightly. Under my old network I paid approx 17% plus £150 a month.

Professional indemnity insurance- Usually this would be included in your network costs.

Dpa licence- £35 a year.
Internet fees (to host my website)- Im sure you could get a hosting account for maybe £20 a year.
Consumer credit licence- This is still all up in the air. Nobody seems to know. Its highly expected that your network will need a CCL and companies under the network can just use the networks.

Trading name- You dont have to pay for this.

 

[Nowhereman]

Thanks for the info

So the network will charge a monthly fee and take a percentage of your case size?

Are there any networks that take just a percentage of the cases you write . The reason why I ask is that I imagine for the first few months I will have very little cases.

 

[tony84]

It will depend on the network.

The bigger ones tend to take both, the smaller ones will just take the percentage of the case size. I was the same as you when I started out, I wantd a company that would just take a cut of anything earned as that would help my cash flow.

I did come across a network who took a percentage and charged £15 a month (for software) which wasnt too bad and another company who charged just a percentage of anything earned.

 

[Nowhereman]

That's encouraging to know,as I'm starting I'd rather be part of a network which takes a cut of everything I earn rather than pay a high fee a month.

Can I ask which networks they were? Any recommendations

Cheers

 

[tony84]

Ive sent you a PM.

 

[Localmortgage]

Hi, I've been an advisor for 10 years and I have been looking into this myself. I've got the client base and have got the Internet side of things sorted but it's the networks I'm confused with. Any advice you can give me with regards to this would help? Thanks

 

[tony84]

What advice are you after?
If you have been an advisor, you must have CAS?

If you have CAS, a client bank, a way of generating business (ie your website) you must have the pick of the networks? You have more than I did when I joined a network as I only had CAS... and a client bank of 2.

 

[Localmortgage]

Sorry I wasn't clear on that, I've been an estate agent based advisor for that time for mortgages and insurance. I was looking at setting up myself as I've a large client base and a lot of my business is on referrals. I'm not directly authorised so I'll have to look into that too. There are other advisors in my area but they are unwilling to discuss how they went about it which is fair enough

 

[tony84]

You have 2 routes:
DA - Directly Authorised - This means you apply to the FCA, they take a fee and review your application and set you up. You get no compliance support with this and would need to put your own systems/procedures in place.

RI - With a network - This means you find a network you like and are happy with, fill out an application form and follow their guidelines.

For both of these you will need a DPL - £35 a year, you will also need your CCL interim permission, no idea on cost maybe £200? Nobody knows what will happen with the CCL yet. Its all a bit up in the air. Im debating going DA but im waiting until the CCL issue resolves itself before I decide.

I think whilst you are getting up and going the network is a good idea. Once you are on your feet, you can then look at going DA as you will probably earn more being DA due to not having to pay a network a cut of your commission.

 

[Feldon]

I think your biggest overhead will be marketing. As a mortgage adviser to an estate agent you will get a steady stream of inquires from the sales team, however going s/e you are going to have to rely on generating your own leads. I was a mortgage adviser briefly just before the recession and it is hard, very, very hard to gain leads from scratch. Whilst networking is good, I suspect that it will be a slow burn as you build up trust with whatever network you join. I would advise against buying leads, i tried it and it was a very poor return, mainly from customers who were tricked into giving their details to get mortgage quotes etc. That leaves you generating you leads either by traditional routes of advertising, newspaper, local magazine, leaflets and online marketing all of which cost money and in the early days lots of it. Also build relationships with small independent estate agents without in house mortgage advisers, will writers, financial advisers, accountants etc.

 

[help4545]

Before you jump from being employed to self employed which is a big step just a word of warning.

Lenders have a major change up there sleeve if this goes ahead in short it will mean small brokers (small by means of turnover) will have no access some lenders.

Now its not 100% yet that something will happen, but something along the same lines will/has to be happen. Make sure you could make the jump back to employed broker before you take the big step.

 

[tony84]

Lenders have a major change up there sleeve if this goes ahead in short it will mean small brokers (small by means of turnover) will have no access some lenders.

News to me?
I cant see that happening, most brokers are small 1-2 man bands. It would put half of brokers out of business overnight.

 

[Feldon]

I would say more than half of brokers went out of business 6 years ago, as did half the networks. The fact that mortgage lenders have tightened up the process of lending even more and mean most client interviews will take up to 3 hours will mean it is even harder to gain business.

 

[tony84]

A lot did go out of business but this would put a lot more out of business.

It is only takes a reported 3 hours in banks, advisors still only take an hour or so. My process has not changed in the main following mmr.

Also getting a mortgage has not got any more difficult following mmr, the only changes are on affordability, not really criteria (in the main - the odd exception being things like interest only for residential mortgage).

 

[help4545]

Its not about how many advisors are in the firm, its how much business you send to a lender and lots of different factors involved. Which I cannot post about.

Yes it will put most out of business and that is the whole idea.

Its not about how advice is given either, lenders have one big problem a lot bigger than people not been able to afford there mortgages.

 

[tony84]

The majority of lenders rely on brokers in order to hit their lending targets.

Even using them occasionally could be a couple of hundred grand towards their millions.

You may know something I dont but I cant see lenders doing that.

 

[help4545]

Even using them occasionally could be a couple of hundred grand towards their millions.

Y

Nice to think this was true and in an ideal world it would be true, but the world has changed.


Lenders don't rely on brokers, Lenders use brokers as they see fit.

 

[tony84]

The majority of lenders would lose a massive amount of business if they cut off brokers.

100 brokers sending 1 x £100k mortgage is £10 million.

Skipton does 85% of its lending through brokers. Im sure there are lenders with smaller amounts than that but it does show that we are important to the majority of lenders.

 

[help4545]

Thanks I can do maths.

I give up. Taxi

 

[businessfunding]

alarmist claptrap

 

[Talay]

Turn the table around and look at it from the customer perspective.

I guess the average mortgage where I live is £250k to £500k yet the local mortgage market offers nothing in terms of visible trustworthy advisors. There are a couple of spivs operating and the usual attached to lawyers, estate agents mob etc. but no-one credible and visible.

How would you market yourself to this potential customer base ? When considering a strategy, how much would it cost ? How slow would be the burn ? Where is your break even point and how long can you sustain yourself ?

All these and more are the crucial questions because you need to be able to hold out enough for your marketing efforts to come to fruition.