www.mortgagestrategy.co.uk COMMENT
ANDY MOODY
MANAGING DIRECTOR
TCF DEBT SOLUTIONS
in my opinion
There is pressure on brokers to provide referrals to debt advice
companies, but it’s important to carry out a thorough vetting
process to make sure they offer an appropriate service to clients
Do your homework on debt advice firms
Cynics believe the only reason for the
fast spread of debt advice among
brokers is because of the desperation
to replace income lost because of the
collapse of the lending market.
Brokers have had to adapt to the market and
try to supplement their income in other ways
and it is clear that approaching advisers is the
logical choice for consumers wishing to find
help with money difficulties and debt.
‘‘
When faced with clients
needing help it is not
always easy to ensure the
right questions are asked
Along with the inability of debt charities to
process and deal with the huge volume of
enquiries they are receiving, it is hardly
surprising that debt advice firms have
concentrated much of their distribution
strategy on appealing to the intermediary
market.
But problems are beginning to arise as they
do with any niche industry that grows quickly.
The problems have surfaced because service
providers have mushroomed and not all offer
the type of service that advisers should be
recommending.
If we look at the hoops that regulated
advisers and firms have to go through to be
compliant, particular with Treating Customers
Fairly, the dangers inherent in finding the right
debt advice company as a partner to refer
business to are becoming more apparent.
Conversations with brokers provide
compelling evidence that not only are clients at
risk from receiving the wrong advice but that
intermediaries are potentially falling short of
their responsibilities under TCF.
In many cases, advisers are being asked to
put clients in the hands of organisations which
in the main have been trading for only a short
period of time – usually less than a year in
many cases. So evidencing a successful track
record is not easy.
Choosing the right company that will not
only provide a satisfactory result for clients but
also match advisers’ commitment to TCF can
only be done by asking the right questions such
as what advice is being offered, what choices
are being put in front of clients and how much
will they have to pay for advice?
All these seem fundamental but when faced
with clients needing help immediately, it is not
always easy to ensure that all the right
questions are asked.
But taken logically, advisers just need to
ensure they keep in mind certain basic points
and make sure they get satisfactory answers
before committing clients to a regime that is not
in line with their aspirations for meeting TCF
guidelines.
There are six main areas which should form
the basis of any interrogation.
● Choice – There are different types of debt
help, including debt management plans,
individual voluntary arrangements and
bankruptcy for individuals, and for company
debt there is debt restructuring and commercial
voluntary arrangements.
All these are relevant to clients and depend
on their individual circumstances. What is
important is to see that all clients are given the
best chance of getting out of their debt prison by
ensuring the plan they are recommended meets
their requirements. Unfortunately, too many
companies offer only one solution, which might
be unsuitable. So make sure there is a wide
range of advice on offer.
● Fees – Under no circumstances should an
introducer work with any debt advice company
that expects payment upfront. On debt
management plans a charge equal to more than
one month’s agreed repayments is excessive.
Some companies are charging in excess of four
months’ payments. For IVAs, there should be
no charge of any sort to clients prior to the
creditors’ meeting.
● Advice – Advisers need to have written
confirmation that they are only introducing the
client and are not responsible for the advice
given. Many firms say they offer a referral
service when in fact the introducer is still liable
for the advice given. Working with the wrong
debt advice company can mean advisers not only
fall foul of TCF compliance but also leave
themselves open to legal action from disgruntled
clients.
● Cross-selling – This is self-protection if
advisers want to keep their clients. Is a proper
no cross-selling agreement being offered? Some
debt companies are known to sell ancillary
insurance products to brokers’ clients and offer
their own remortgage or loan facilities at the
end of the IVA or debt management plan.
● Intermediary focussed – Few debt advice
companies exclusively deal only with advisers.
Many claim they understand how to deal with
the broker market but fail at the most basic level
by being unable to maintain a proactive dialogue
with them.
Also, administering debt plans after
completion is proving to be a problem for many
firms that have not made the necessary
investment in inhouse expertise and technology
infrastructure to maintain a consistent service
to clients and their brokers.
● Proactive help – How much help is being
given to brokers? This is still a relatively new
market and brokers we talk to are interested in
understanding the process as well as looking for
help with marketing debt advice. The best debt
advice firms dedicated to the intermediary
market offer marketing help in the form of free
websites and written marketing material.
The well-worn path of shopping around in
this market is appropriate for all advisers and
they would be right to be wary of claims made
by some debt advice companies.
By employing common sense and using the
six points above to frame their questions,
brokers can avoid sub-standard offerings.
By getting positive answers, brokers will
ensure they deal with a debt advice company
that will not only give their clients the best
advice by looking at all the options, but
safeguard their compliance with TCF and help
maintain a good future business relationship
with clients.
MORTGAGE STRATEGY May 25, 2009 25
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