Mortgage Broker Broadcast
Developing your knowledge to help you build a successful Mortgage Broker business. Craig Skelton shares his thoughts and experiences on all aspects of mortgage advice covering everything from operating in the banking world, estate agency based advisers all the way up to working as a self employed broker. He will be joined by experts from within the industry and other business sectors which all play a key part in becoming a successful mortgage broker in the modern world.
Mortgage Broker Broadcast
Contract Clarity: What Every Mortgage Broker Needs to Know Before Signing
The contractual foundations of your mortgage broker business deserve more scrutiny than they typically receive. While most advisors focus exclusively on commission splits when joining networks, the real devils lurk in overlooked details that can dramatically impact your future flexibility and financial success.
Client ownership stands as perhaps the most critical consideration. Many brokers are shocked to discover that some networks claim ownership of client relationships even after departure, potentially allowing reassignment of your hard-earned clients to other advisors. Understanding exactly who maintains these relationships post-separation can make the difference between business continuity and starting from scratch. Similarly, commission structures demand scrutiny beyond headline percentages – hidden overrides, technology fees, compliance charges, and supervision costs significantly affect your actual take-home pay.
Technology infrastructure, compliance support, and exit conditions represent equally crucial considerations. Networks should provide systems that enhance rather than hinder your productivity, with guaranteed data portability should you leave. Effective compliance frameworks should protect without unnecessarily impeding your business. Most critically, understand your notice periods, exit fees, and any restrictive covenants before committing. Under English law, post-termination restrictions are only enforceable if protecting legitimate business interests and remaining reasonably limited in scope and duration – typically no more than 12 months for non-compete provisions.
When preparing to leave a network, careful planning becomes essential. Coordinate notice periods with new authorization, fulfill all exit requirements meticulously, and negotiate pipeline transfers where possible. Throughout this process, maintain professionalism as future references may depend on it. Remember that contracts typically favor the party that drafted them, making professional legal advice a worthwhile investment compared to the potential costs of unfavorable agreements. For additional support with self-employment transitions, explore the Broker Foundry community resources or connect directly to discuss personalized pathways toward greater independence.
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Hi and welcome to this week's the Mortgage Broker Broadcast. I'm your host, craig Skelton, and today I'm getting into a topic that affects every single advisor. I'm talking about contracts. Whether you're joining a network, renewing an existing agreement or considering a move, the fine print matters. I've heard too many brokers, too many stories where brokers who have felt stuck or surprised by closers that they just didn't understand. So this episode will help you spot the key provisions and protect yourself and your business.
Speaker 0:So why do contracts matter? Well, contracts are the foundations of your relationship with a network or a firm. They set out the fees, the support you receive and the restrictions on what you can and can't do. And when you're self-employed, it's tempting to skim and just sign it, especially if you're excited about the new opportunities. I do totally get that, but a lot of the time, advisors are often focused only on fees and overlook the bigger picture, such as charges, professional indemnity insurance, supervision fees, file check charges and leaving fees too, and these costs can significantly affect your take-home pay. So it's important that you have a complete picture of what you owe and when, so make sure you read before you sign. Plenty of brokers have spoken to regret joining a network because of the restrictive clauses that they didn't notice. So a few examples of these are client ownership. Some networks claim ownership of your clients even after you leave. So if you leave, your clients could be assigned to another advisor, another firm. So make sure you retain your client relationships.
Speaker 0:You also need to look at the commission structure. Ensure commission terms are clear and transparent. If a network takes 10%, what is that 10% of exactly? Look for hidden overrides, extras or payaways. Enhanced commission with a limited panel might mean your clients pay more, so decide if you're comfortable with that or not. What also is important is technology and data. Make sure the network's back office systems fit your business model. Ask to see a demo and ensure you can access your client data easily if you do leave. And also as well, compliance and support. Good compliance processes protect your business. They don't hinder them. Ask about the sales processes, the experience of the compliance team and how file reviews are conducted. Inconsistent feedback can cause frustration. And what about added value? A network should be just more than a regulatory umbrella. It should add value to your business with training, coaching, peer development and marketing support too. You just don't want you don't Just want to feel like you're a number.
Speaker 0:And what about notice periods? The length of your notice period affects how quickly you can get authorised elsewhere and start earning again, so you need to make sure you understand that. Find whether you'll continue to be paid commission during notice period and whether your network will novate your renewal commissions to your new firm too. And what about exit and leaving fees? How much will it cost you to leave? Are any fees a one-off or ongoing? Check? If free to join offers, come with any hidden costs later on too. And what about time periods? How long are you committed for? How long a time could keep you from moving to a better opportunity in the future? And what about novation fees? If the network allows you to novate? Ask if there's a charge for transferring your pipeline and your old protection clients.
Speaker 0:What about restrictive covenants and non-compete clauses? If your contract includes restrictive covenants, clauses that limit you to what you can do after leaving, it's crucial to know your rights and just getting a bit technical with regards to law. Under English law, post-termination restrictions are only enforceable if they protect a legitimate business interest and are no broader than necessary interest and are no broader than necessarily. So legitimate interests include the sort of trade secrets, confidential information and, most importantly, client relationships. The scope and duration must be reasonable. Generally, the longest acceptable non-compete period is 12 months. So a non-dealing and non-solicitation clauses such as like, for example, restrictions on working with or accepting business from certain clients, are often limited to those clients who you have worked with in the six to twelve months before you're leaving. There's actually also talk of capping non-compete clauses at three months in the UK, but it's not low as yet. But it's also worth watching out for that as well. And even if a clause appears in your contract, it might not be enforceable if it goes beyond what is necessary, and it's always important to ask legal advice if you are insured.
Speaker 0:One thing that I'll always sort of say with regards to clients is that, no matter what your contract is, at the end of the day the client can choose who they want to use for their mortgage. Now, you may not be able to sort of tout your existing, your old clients or try and market to those people, but if they do find you, they reach out to you and want to use you as your mortgage broker. You're normally okay. So what about preparing to leave a network or firm? So if you are thinking about leaving before the end of the year.
Speaker 0:If you are thinking about leaving before the end of the year, then it's important to start planning now. Plan and stay amicable. Leaving requires preparation and timing. Keep relationships positive. You might need references or support in the future, and timing matters because you need to coordinate your notice period and, with authorization, with your new firm or network and make sure you follow the process. Send resignations by email and follow them up.
Speaker 0:If you need to Complete all the exit requirements, carefully them up. If you need to complete all the exit requirements, carefully values. To do so could delay your new authorization and protect your pipeline. If your contract allows novation, negotiate to transfer your existing pipeline and your renewal commissions. If not, consider the financial impact of losing those payments. And communicate with your clients Once you're allowed and, if you are allowed, inform your clients of the move and reassure them that their service won't be disrupted. Check your contract for any restrictions on contacting clients post-departure and review your compliance. This is one thing that does get overlooked. Review your compliance. Make sure your files are up to date and can withstand an audit. Outstanding compliance issues could complicate your exit and also complicate your future as well.
Speaker 0:So if you are looking to join a network. Here are a few things that I would be looking out for when you're looking to join a new network. Make sure the first thing you do is read before you sign understand exit fees, tie-ins, client ownership and notice periods, splees, splees, splits and fees. Look beyond advisor commissions and commission splits and make sure you know the true costs and all the costs. Ensure commission structures are and panel selections are totally transparent.
Speaker 0:And what about technology? What? What CRM do they use? Ask for a demo, can you use your own? And then also as well, about protecting your business. What does compliance look like? How are you going to get to CAS? Understand the processes and also, as well, just making sure. Wrapped around all this is that you're not just a number. Look for networks that offer training, coaching, support, mentoring, marketing help too, and if you are unsure, if you do have any questions, it's okay to get professional help.
Speaker 0:Contracts can be complex and often tailored to protect the other party. Please remember that at all times, they are often tailored to protect the other party. Please remember that at all times, they are often tailored to protect the other party. So consider hiring a solicitor with experience in financial services to review your contract and explain any terms that you don't understand. It's just a small investment of time and money compared to the potential costs of being stuck in an unfavorable agreement or losing your client base. So that's it.
Speaker 0:That's this week's podcast.
Speaker 0:Contracts may not be the most exciting or inspiring topic, but understanding them is crucial to protecting your business and your peace of mind.
Speaker 0:Take time to read the small print, ask questions and seek advice. And just a quick reminder about the Broker Foundry if you are weighing up a move or thinking about going fully self-employed, the Broker Foundry community has resources and monthly videos with Jonathan Needham and I on getting help in that. So, yeah, there's a YouTube channel called the Broker Foundry. Have a look at that. There are videos and help on there. And also, as well, I do offer self-employed broker pathways, which is three routes of if you're launching as a new broker, building your own brand or wanting to become an AR. I can help you on those three paths. So just check out my website, craigskeltoncouk, or send me a message and we can have a chat about how can I help you. And if you have found this episode useful, share it with other brokers, leave a review, subscribe it so you don't miss future discussions and episodes. Thanks for listening, thanks for watching and, as always, please don't forget to run your own race.