Responsible Lending: The Broker Balancing Act

Fri 3rd February 2017

The general public can be incredibly suspicious, especially when it comes to the sales environment in financial services, says Sarah Jackson, Director, Equiniti Pancredit.

Many clients of both secured and unsecured loan brokers will happily listen to their guidance, only to view with scepticism the products the broker eventually recommends. In most cases this is because the client, rightly or otherwise, perceives a conflict of interest. Knowing that the broker must be commercialising from the deal (often in a way that isn’t visible to them), they question whether their advisor is acting in their best interests. ‘Aren’t they just steering me toward a product that gives them the biggest margins?’

There is an awkward truth to this. Brokers, just like all businesses, are driven by the profit motive. How they stand to prosper the most is sometimes debatable. Few would argue with the notion that commercially impartial advice generates trust and leads to repeat business, but in the loans market in particular, how often is that piece of business likely to be repeated? Cold commercialism could, in theory, drive brokers to recommend only the loans that offer the highest returns, leaving less profitable products undisclosed despite being a better fit for the client’s circumstances.