Understanding Mortgage Broker Contracts: What Every Adviser Needs to Know
In the fast-paced and often complex world of financial services, understanding your contract is not just important—it’s essential. Whether you’re about to join a new network, renew an existing agreement, or contemplating a move to self-employment, the terms outlined in your contract can shape your earnings, control your client relationships, and impact your future decisions.
In this week’s episode of The Mortgage Broker Broadcast, host Craig Skelton breaks down the key components of broker contracts and offers actionable advice to help you protect yourself and your business.
Why Contracts Matter for Mortgage Brokers
Your contract sets the foundation for your working relationship with your network or firm. It defines:
- Fee splits and commission structures
- Support and services provided
- Your obligations and restrictions
Many brokers, particularly when excited about a new opportunity, focus only on headline fee splits and overlook crucial details like:
- Professional Indemnity (PII) insurance costs
- File check and supervision fees
- Exit charges and novation fees
These overlooked charges can significantly impact your take-home pay.
Red Flags to Watch For in Broker Contracts
1. Client Ownership
Some networks claim ownership of your clients even after you leave. If this clause exists, your clients may be reassigned to another adviser. Protect your relationships and ensure the contract allows you to retain client ownership.
2. Commission Transparency
If a network says they take 10%, make sure you know 10% of what. Look for:
- Overrides
- Payaways
- Enhanced commission tied to a restricted panel (which may mean your client pays more)
3. Technology and Data Access
Check if their CRM or back-office systems fit your workflow. Ask for a demo. And most importantly, confirm if you can access your client data should you decide to leave.
4. Compliance and Support
A strong compliance team should support your business, not hinder it. Ask:
- What is their CAS process?
- How are file reviews conducted?
- Is compliance feedback consistent and helpful?
5. Added Value
You shouldn’t just be another number. Look for networks offering:
- Training and coaching
- Peer development
- Marketing support
Notice Periods and Exit Clauses
- Understand how long your notice period is and whether you’ll be paid commission during this time.
- Novation: Will your renewal commissions transfer to your new firm?
- Leaving Fees: Are they one-off or ongoing?
- Commitment Duration: How long are you tied in?
Restrictive Covenants and Legal Considerations
Post-termination restrictions, like non-compete or non-solicitation clauses, can limit what you do after leaving a firm.
Under English law, these are only enforceable if:
- They protect a legitimate business interest (e.g. trade secrets, client relationships)
- They are no broader than necessary
- Generally, non-compete clauses over 12 months are considered excessive
Even if a clause is in your contract, it may not be enforceable. If in doubt, seek legal advice.
“No matter your contract, clients ultimately have the right to choose their broker.”
You may not be able to actively market to previous clients, but if they find you and choose to continue working with you, you’re usually within your rights.
Planning to Leave a Network? Start Now.
If you’re considering a move before the end of the year:
- Stay amicable: You may need references later.
- Coordinate your timing: Align your notice with new authorisation.
- Follow exit procedures: Submit resignation via email and complete all required steps.
- Protect your pipeline: If novation is allowed, negotiate to transfer existing pipeline and renewals.
- Inform clients: Once permitted, reassure them their service won’t be disrupted.
- Compliance check: Make sure your files are audit-ready to avoid delays or complications.
Choosing a New Network? What to Look For
When vetting a new network:
- Read before you sign: Especially exit fees, tie-ins, and client ownership clauses
- Split and Fee Transparency: Ensure you know the real costs
- CRM and Tech Stack: Will it work for you? Can you use your own?
- Compliance Support: Understand how you’ll get to CAS and maintain file quality
- Support Culture: Look for networks that provide true mentoring, business development, and community
Final Thoughts
Contracts may not be the most glamorous topic, but understanding them is vital to your longevity and peace of mind in the mortgage industry. As Craig says:
“They are often tailored to protect the other party – not you.”
Before you sign:
- Ask questions
- Seek advice
- Take time to understand the small print
If you’re weighing up your options or looking for a new home for your business, The Broker Foundry offers a wealth of resources, including monthly videos and one-to-one coaching options.
Explore the Self-Employed Broker Pathways tailored to your goals – whether you’re launching your career, building your own brand, or becoming an AR. Visit craigskelton.co.uk for more info.
And if you found this blog helpful, please share it with another broker, subscribe to The Mortgage Broker Broadcast, and leave a review.
Keywords: mortgage broker contracts, self-employed mortgage adviser, leaving a network, novation fees, client ownership, commission splits, financial services compliance, restrictive covenants, joining a mortgage network