Are all referrers and brokers the same?

The finance industry has been very much in the headlines these last few days, following a landmark legal decision against companies providing car finance, Appeal Court judges on Friday ruled in favour of three car buyers, who claimed that hidden commissions on their deals added thousands of pounds to the cost.

“The consumers were very poorly served by the brokers and the lenders alike,” the judges said. They said consumers have the right to know about the commission arrangements between the lender and car dealer to ensure fairness.

Whilst this has primarily been centred around car dealers, acting as brokers/referrers, rather than specialist brokers, it has rightly led to the whole industry looking at their practices and many lenders have temporarily stopped taking new business, until this review is complete.

I welcome these reviews. As someone that has been in the industry for 30 years, I have regularly called out other practices (which coincidentally are still going on and not being reviewed), which I believe to be unfair to clients, and constantly asking for clearer, fairer, finance agreements.

I do believe though that brokers serve a vital role to businesses, in saving them both time and money, and if they are using their industry knowledge properly, searching the market for the best deals for their clients.

Let me give an example as to how I, as a broker, work. I recently received an email enquiry from a potential new client, a construction company, looking for some comparative figures on two new projects they were looking to fund. One was a specialist piece of plant and one, an annual software renewal, that they prefer to pay monthly.

I then spoke to the client on the phone to introduce myself properly and find out more about their business.

Having already known the cost of each item, and the term required for the funding, from the initial enquiry, it would have been very easy to send a "one size fits all" quote back to the client for their review. However, from my lengthy experience in the industry, I knew that every business is different, as is their cashflow and I would rather understand their exact requirements and put together a bespoke option for them. This can often look very different to the structure of the offering put together by a competitor.

When putting together a quote for a client, there are very much two elements. Firstly, as I’ve outlined, understanding the client's requirements and then, going to our lenders to see who would be best suited and able to offer the most competitive option.

I work with a large panel of lenders, ranging from high street banks and specialist finance houses, to private investment companies. Each of these will have their own offerings, rates and client requirements.

Having looked at all the information as well as reviewing the latest accounting data for the client, I prepared 3 different options to the client (for each of the two requirements), for their review. One of these options was structured very differently to the others, suited their cashflow better and saved them around £3,700 in interest, for the piece of plant alone, over the term.

In his book “Anyone can do it”, Dragon’s Den investor Duncan Bannatyne tells us “I got a particularly good deal from BNP, as a broker I’d used had told me they were desperate to get into the UK commercial market. I might have preferred not to pay a broker’s fee, but it worked out cheaper to pay for his knowledge and I’ve often found that specialist expertise can be worth the relatively small investment it requires”.

 We're not all the same. What can I fund for you?!