Bob Hunt is chief executive of Paradigm Mortgage Services
It was Warren Buffet who said: “In a chronically leaking boat, energy devoted to changing vessels is more productive than energy devoted to patching leaks.” For some readers this may be a useful metaphor, certainly when considering the role of today’s mortgage broker.
The role of the mortgage broker has come a long way since regulation was introduced in 2004 and like any regulated profession it continues to evolve and be shaped by numerous factors. In that relatively short space of time we’ve seen intermediaries (at peak) accounting for more than 60% of all home loans before falling to today’s more modest levels at circa-50%.
We’ve seen a slight move towards fee-based advice models as opposed to an offering wholly dependent on procuration fees and we have seen intermediaries blossom from becoming home loan experts to something more far-reaching – some even moving back to the familiar territory of pensions and investments, more akin to a financial services one-stop shop.
This diversification was necessary for many advisers who were impacted by falling income as a consequence of the declining number of mortgage transactions, and related sales opportunities.
It has also been prompted by a number of other factors including advisers recognising the competitive threats around them if they are not seen to offer a more comprehensive and appropriate service and the real threat of the high-street banks who are able and willing to dual price.
But more than ever, we are now seeing external factors motivate this expansion. In the financial advisers’ space we can clearly see the huge impact the Retail Distribution Review is having. In the mortgage space we have the Mortgage Market Review which, while nowhere near as advanced in terms of its introduction as the RDR, promises to deliver some fundamental changes.
If there is a common theme between both reviews then it is perhaps the notion of ‘quality advice’ and ‘quality advisers’. The regulator is adamant that advisers have to continually improve themselves be that through minimum qualification standards, on-going qualifications and CPD.
We should therefore expect to see advisers continuing to branch out into different sectors and product areas, and ‘prove’ themselves in those areas by attaining the appropriate qualification levels. These are all strings to the adviser’s bow and show a want, and a need, to offer a much more rounded advice experience for clients that take in far more than just mortgage advice.
Mortgage-related insurance has long been a complementary product for brokers to offer their clients alongside a home loan, but advisers have long since branched into other forms of protection. After all, if you are comfortable in offering cover for your client’s house or mortgage payments, it doesn’t take a huge leap of imagination to ask about their other insurance needs.
Where do they get their motor insurance, or if they run a business, do they have commercial insurance need? For advisers who feel this would take time and focus away from their core business, there is always the option of establishing a referral arrangement with a local provider or adviser, meaning your clients’ bond with your business is that little bit stronger, and you get a small financial benefit but are still free to concentrate primarily on core activities.
Other areas beyond insurance that mortgage brokers have started becoming more involved in the distribution of include conveyancing and legal services. The latter in particular has massive potential for advisers and this scope is starting to be realised.
Given that advisers have conducted a thorough fact-find of their client’s circumstances, they are perfectly positioned to know what their legal requirements are likely to be. Bearing in mind they have essentially facilitated the customer with the biggest loan of their lives, it would be remiss on their part if they didn’t help their client fulfil their legal obligations or at least point them in the right direction.
No-one likes to think of the worst case scenario, but when such sums are involved it is important to prepare for every eventuality. This is part of the reason we recently created Paradigm Legal in association with Redstone Wills - to help our advisers cater for such situations if they crop up in conversation with their clients.
When someone passes away it is a tough enough time emotionally and the last thing anyone needs is for the scenario to be further complicated by complex financial issues. Despite this, seven out of 10 people in the UK currently don’t have a will and this is something that needs to be addressed to stop the law – rather than individuals and their families – deciding who inherits estates.
Advisers have therefore travelled a long way in the past eight years and there is no limit on how much further they can progress if they embrace a changing marketplace. They should also remember that, by changing nothing, nothing changes.