Don’t put all your eggs in the mortgage basket

Regardless of his suitability (or not) to be Lord Sugar’s next apprentice, when anyone looks back at this year’s intake, Baggs will be the name, face and mouth that sticks in our collective minds – probably for all the wrong reasons but after all there is no such thing as bad publicity.

As the candidate from the Isle of Man kept reminding us, he was “only 21-years old” and one couldn’t help think while watching him concoct another super-size portion of BS that, while there is nothing wrong with being an eternal optimist, at some point realism has to kick in.

Dream big by all means however Baggs should certainly have known that simply stating he would make Sugar ‘millions and millions’ was, firstly, unlikely to happen and secondly, hardly the best move to get the job.

Ultimately his nonsense brought him down with Sugar himself having to question his own judgement in keeping him in the process so long.

In looking at Baggs’ often ill-judged comments, it was possible to reflect that a sense of realism often comes with experience, although I fully admit that getting longer in the tooth and seeing how things often pan out can mean that we don’t take the chances we would have in our youth. The ‘folly of youth’ indeed, however we should all try not to get too accustomed to the ‘way we work’ and in that sense we may then not miss out on both the thrill of taking a new risk but the potential for reward that it can bring.

Working in this environment and marketplace certainly requires us all to have a healthy dose of realism coupled with an optimistic outlook – if only to keep us sane. It’s fair to say that anyone reviewing the latest CML lending figures and hoping for a sizeable increase in 2011 is probably some way off the mark.

At our recent MMR workshop, Robert Sinclair of AMI outlined the realities of the situation; this is a £135-£140bn mortgage market at present and this figure may even be less next year. There are six major lenders providing the vast majority of lending and this is also unlikely to change in the foreseeable future – yes, we’ve seen new entrants but the amount they are able to contribute to the overall lending pot is still relatively small.

As Sinclair pointed out, we should make our assumptions, plans and ambitions about the next twelve months based on the market we have right now. He suggested that any adviser thinking that a Bank of China, for example, was suddenly going to ‘help us out’ with an extra £200bn of lending was in dream land. It would be nice but it ain’t going to happen.

Therefore, with this being the case and with the mortgage market likely to continue at this flat level for some time, now would not be the time to throw all your eggs in the mortgage basket.

Yes, the mortgage is important and may well be the product that gets you in front of the client, but it is vital that once you are in that position you make sure you’re able to help that client not just with their mortgage but hopefully with every single other financial responsibility they have.

This would obviously be insurance, protection, conveyancing, etc but it could also be in areas such as legal services/wills or equity release or bridging finance or commercial mortgages. It is all about the wants and needs of the client in their entirety and the mortgage is just a part of this.

The other area which is often overlooked is that of referrals. Advisory firms still struggle with this simple lead generation mechanism which means not just relying on the client to recommend you but actively asking for referrals from their friends and family who could well be in need of your services.

We still hear of advisers who do not mine the referral opportunities that exist with every single client and, given the market we are working in, this is our own version of ‘criminal negligence’.

At this time of year we are all allowed to dream a little; now is definitely the time to be thinking the unthinkable and certainly making sure that, within reason, you take a calculated risk in some areas which may provide a new and considerable income stream.

However, at the very same time we must all be realists about the state of the market and the likelihood, or rather unlikelihood, of anything changing soon.

Couple these two thought patterns together and there is a much greater chance that a happy Christmas will turn into a prosperous New Year and a successful 2011.

And of course I sincerely wish you all of this in the next 12 months.