It’s an ethos to be kept at the forefront of thinking, around which processes must be designed, acted on, reflected on and reported, says Richard Hoggart. But the right finance partners are key to getting it right, and the right broker is also needed on the panel to manage the niche opportunities.
CONC, SYSC, TCF, business plan, approved persons etc, etc, are all terms that we hear now every day. The window is now wide open throughout Northern England, with applications being worked on, and boxes ticked, in lenders, brokers and dealers alike.
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It’s understandable that the main focus is on the application process. The anticipation has been tangible, so there’s a natural and understandable sense of urgency to get everything completed and submitted. But if we look beyond the application process, what new challenges are we then facing? Once approval comes through, what is the expectation of the FCA and how do we all deliver on it?
Positive customer outcomes. Another buzz term to some, but the reality is that this is the key phrase to have in mind. Keep this ethos at the forefront of thinking, design process around it, act on it, reflect on it and report on it. Perhaps it isn’t specific enough, but working with the right partners will help crystalise interpretation into coherent policy.
Dealers need to begin by asking themselves a simple question. How complex is my finance structure? If a dealer is expected to create and deliver consistent positive outcomes, then a complicated finance offering is the last thing that’s needed. How do we keep finance simple? Dealers need to know how finance partners are going to help them achieve this.
The first thing to consider is the number of finance partners on the panel. How does one manage multiple relationships in a regulatory environment open to so much interpretation, inevitably resulting in differing policies and demands? More funders equals more questions and more headaches. Where the temptation might be to load the portfolio with a funder for every possibility, it makes more sense to focus on the core relationships and then appoint a broker to manage niche opportunity, therefore reducing the number of parties that a dealer must directly monitor, report on and comply with.
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By GlobalDataDoes the lender panel help in the assessment of the customers’ risk profile? Gone are the days when the proposal can freely cascade from manufacturer finance provider, to first-string prime independent lender, onto next choice prime, then maybe a mid-prime and a couple of subprimes before it sticks somewhere.
There’s a clear responsibility to respect the customer’s credit rating, which is detrimentally affected by a "propose and hope" mentality. The right broker can manage this responsibility effectively by providing the facility to pre-screen the customers’ risk level, and offering specific solutions to match the right product to the right circumstances and budget.
In the event that the structure of the acceptance is not what was originally proposed, such as in a subprime scenario, how will that be handled? Dealing directly with lenders means the onus of responsibility for this communication will be on the dealer personnel. Is it desirable or even practical to have dealer staff advising and liaising with customers on non-core products? A premier broker has both the capacity and skill level to work on behalf of the dealer to manage the customer outcome in a product area where they are more qualified to do so.
Brokers more relevant
The reality here is that the landscape now makes a broker’s presence on a dealer’s panel more relevant than ever. But it isn’t that simple.
Choosing the right broker is a critically important decision, but if chosen correctly will bring improved simplicity, efficiency and accountability to results. So when choosing a broker it’s vital that the right criteria are applied.
Start with the basics. How detailed is the understanding of compliance issues within the broker? Does it have a dedicated compliance manager who can present and consult on the relevant issues, or just a senior manager who has added it to his other responsibilities?
Can the broker demonstrate how it will manage your proposals through its process in a compliant manner? It certainly should not be assumed.
Does the broker provide technology to help with screening to minimise wasteful searching? Can it report on the activity and search record of each proposal opportunity presented? There should be an expectation of a level of MI reporting to deliver in these areas.
All brokers will offer to talk to dealers’ customers on their behalf, but how are assurances requested and given to ensure a fair, professional and compliant approach is taken to communication. There must a level of trust that the broker will consider the customers budget and affordability when structuring a non-prime acceptance. Demand to know the process and how TCF is delivered and reported on.
The dealer-broker relationship should be at the forefront of providing those positive customer outcomes. But not all brokers are the same. Make them work for their opportunity and demonstrate they are part of the FCA solution. Get that right and everything becomes clearer for lenders, dealers and most importantly, customers.
Richard Hoggart is managing director of DSG Financial Services Ltd
