Opening new mortgage broker company

[Hero]

Hi there.

First post here and hoping you friendly folk can help me.

I'm hoping to open up a new mortgage broker business.

I've been a mortgage adviser for 10 yrs so am comfortable with the advice side of things but I'm a bit confused about the regulatory side.

I've spoken to several mortgage networks and broadly understand how I'd go about joining a network as an AR.

What I don't understand is the alternative option of becoming directly authorised.

What do I need in order to become directly authorised? What are the benefits of doing so?
What are the financial costs of doing so? What is the down side? Do I still need to join some kind of network or mortgage club? Will lenders deal with me directly?

Any help or advice would you appreciated. I possibly know more than I think I do as I've put in a reasonable amount of research into this but I fear what I don't know and thought it easier to ask basic questions and see where it leads.

Thanks.

 

[Dan Angell-Collins]

Hey Hero,

I've worked with a few mortgage brokers (as a lead generator and as a mortgage adviser) in the past and from my understanding a DA firm has no protection from the FCA as you are directly answerable to them. You will earn larger commissions due to the simple fact there is no AR taking a percentage but it will require higher compliance and admin. A good network will cover your back in exchange for a percentage of the business you put through. They will also be able to get you 'exclusive' offers from lenders that you can pass on to customers.

It's worth looking around and having a chat with several Networks before you settle on one as they all have different terms. Some for example don't take a percentage of your broker fee ;-)

Hope that helps.

Dan

 

[Hero]

I've spoken with several already.

It seems most have minimum income expectations and want a lot of information up front and can also somewhat restrict what you do.

I like the idea of being Da and as far as I can tell you can buy in compliance from an external source.

What I don't get is what the benefits and drawbacks of being Da are.

Thanks for your thoughts though.

 

[tony84]

You will not necessarily earn better commission being DA over being in a network. Some networks/mortgage clubs get better rates because of volume (even after they take their cut). You may also find you get preferential clawback periods.

If you want to go DA you would still have to cover off your compliance, you can do that yourself, pay a firm or take on your own compliance person.

Benefits of being DA:
Your in charge of your own compliance,
You do not have to run things by the network (ie promotions, taking on someone new),
You get to choose the best software for you,

Downsides are you have to be on top of compliance, take out your own PI cover, your own CCL, you have nobody to run things by and if a provider knocks you off panel you do not have a network fighting your corner.

I went with a network purely because I wanted someone to bounce off if I have ompliance issues and because the network is relatively small I can speak to them about expanding.

You will likely still need to complete the same sort of paperwork if you go DA or if you go through a network but instead of waiting for the FCA to process your application (I have had mine in over a month as im going ltd) it should be much quicker within the network - unless you go ltd.