Umpteen times bitten, twice shy: why free legals should not be the only option

I’m talking of course about ‘free legals’ and the recent publication of broker research conducted by the Association of Mortgage Intermediaries shows the depth of feeling amongst advisers when it comes to the service their clients can receive, and also how those self-same advisers would like more lenders to look at cashback options.

First up, a quick caveat to what I’m about to say. I talk about ‘free legals’ in general terms here and I’ll be the first to admit that you cannot tar the whole conveyancing sector with the same brush. We work with a number of firms who are highly active in the ‘free legal’ space and they do a fine job; however, as last summer showed – and there have been further instances since then – when service standards stumble and suffer, the knock-on effect and damage can be considerable.

‘Free legals’ can work well for some clients but that doesn’t mean it should be the option taken, or in some cases, the only option on the table, especially when it is very simple to offer a cashback option alongside it, and there are distributors like ourselves who can offer quality conveyancing to the client for that cashback amount. In other words, it’s effectively ‘free’ but – and this should not be under-estimated – opt for the cashback and the conveyancer is working on behalf of the client not the lender.

So, back to the AMI research and here are some of the ‘highlights’ if you’ve yet to see them:

• 82% of advisers said the service provided by ‘free legals’ was worse than when a customer chose their own firm – or indeed when the adviser recommended one.
• 52% said these standards were ‘significantly worse’.
• 71% said they had experienced delays with ‘free legals’.
• 73% would only recommend ‘free legals’ on a remortgage.
• 8% do not recommend them at all – which is probably a case of umpteen times bitten, twice shy.
• 57% would prefer lenders to offer a cashback option instead.

It all leads me to think that there is an opportunity for lenders here to differentiate themselves, although I’m quite aware of the formal relationships that are in place with conveyancing firms offering free legals, and the ‘deal’ that lenders get from such agreements, and as mentioned, the representation they receive. Many of those firms need the volume of work that ‘free legals’ can bring but one wonders whether the client is being considered in all of this – at the very least, can we not get to a situation where ‘free legals’ is not the only option on the table and clients/advisers can choose between the ‘free’ option or utilising the cashback.

Nationwide seemed ready to ditch ‘free legals’ completely following a summer of trouble last year, and was offering a very generous cashback amount in its place. But, since then, it has gone back to a ‘free legal’ offering and, I have no problem with that as long as the cashback option is still available and the cashback option can be maintained. Currently it is.

Some critics of cashback suggest the amount on offer isn’t enough to secure quality legal representation for the client but I would wholeheartedly disagree. In both the residential and buy-to-let conveyancing spaces we can offer advisers and their clients’ quality firms and a quality service for just a few hundred pounds, and this even includes a not insignificant broker referral fee. So the argument about what conveyancing can be secured for the cashback should not be relevant, as long as you are using the right distributor.

Interestingly, AMI (in its research press release) says it is going to be talking to lender trade body contacts about this and whether there should be changes made. Some lenders will stick to their guns, and of course it is their right to keep offering ‘free legals’ however if they can also deliver a cashback option then at least they are delivering choice. Then advisers can at least provide an alternative and, judging by the AMI findings, this is exactly what they’d like to do.