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Industry in depth
Leading innovation
28 April 2007
Simon Baker looks at the evolution of the lead generation market and its providers
Lead generation is becoming ever more popular as advisers seek an easy and cost effective way to grow their businesses, but as little as five years ago, lead generation in the form we now know it, didn’t even exist.
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Over that five years, many lead generators of varying repute have come and gone and advisers dealing with less reputable companies have had their fingers burnt. In fact just three years ago there were almost as many negative stories in the mortgage press about lead generation as there were positive ones.
But the last two years in particular has seen the lead generation market clean up its act. Advisers can now buy high quality leads so cheaply that lead generation is becoming more cost-effective than any other marketing method and a fundamental addition to any adviser’s marketing strategy. So how has this transformation come about and what is it leading to?
Evolution
The evolution of the lead generation market, as we know it, was triggered by two key events – mortgage regulation and the increased use of the internet. When cold-calling was banned, some advisers were left with either a static or declining client bank. While established advisers could benefit from a good client base from which they could generate a steady supply of referrals, there were a number of people for whom this wasn’t enough and so lead generation started to play an increasingly important role.
Those people for whom buying leads became hugely effective ranged from new advisers, who wanted to develop a client database; to firms that wanted to increase the size of their business; to much bigger firms that had a large call centre operation to sustain.
At the same time that mortgage regulation was introduced, potential borrowers were turning to the internet in increasing numbers, preferring to surf the net for a mortgage from the comfort of their own home rather than trawling the high street. However, while happy to compare prices on the internet, it didn’t change the consumers’ desire for human interaction – people still wanted the reassurance of seeing an adviser for what is likely to be the biggest purchase of their life and started to use the internet as the logical way of seeking advice after having done some research. As a result of these developments, both the demand for leads from advisers and the supply of leads, in the form of people looking for advice on the internet, increased rapidly and continues to do so.
Three years ago, however, lead choice was limited. As an adviser, you would typically have had to sign a contract tying you in for a set period of time; you would have had maybe only three or four weeks during a year when you could opt not to take leads; you would have had no choice over the type of lead you received or where in the country the lead came from, and you would have paid a fixed price over which you had no control.
Technology was less advanced and manual work-arounds meant that the process could be slow and conversion rates were unimpressive.
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The market started to change just over two years ago. New entrants to the market reformed the way leads were sold, putting the adviser in charge of what leads they bought. The old rule book was torn up, along with the restrictive contracts, and suddenly it was possible for an adviser to choose not only when they bought leads, but how many leads they bought; what postcode they wanted the leads from; the type and size of mortgage they wanted their potential client to have and even how much they paid for leads.
This marked the start of the current era in lead generation; suddenly the adviser was in charge. The price of leads came down – dictated only by the laws of supply and demand – and the quality of leads increased. New technology means that advisers now receive leads within seconds of the potential borrower inputting their details and asking for advice. All of this is good news for advisers. This new method of buying leads was so popular that existing lead generators had to adapt in order to give mortgage advisers what they wanted and keep their customers. As a result the pace of change and innovation in the market picked up rapidly.
The lead generation market is continuing to evolve now, and the rate of change shows no sign of slowing down which is good news for advisers. However along with the positives of cheaper, quicker, better quality leads, as in any business sector, there are also issues to look out for.
The increasing success of lead generation has caused an influx of potential new lead generators who aspire to make an easy fortune. Increased competition can be a positive as it helps to drive the high levels of innovation, improving the level of speed and service for both advisers and borrowers. However not all the new entrants are entirely reputable – many show scant understanding or regard for the complexities of the UK mortgage market, or the liabilities on intermediaries if they buy non-compliant leads.
A question of regulation
There is a growing debate regarding whether or not lead generators should be regulated. Currently they sit outside regulation driven by the high standards imposed by fierce competition and bound only by the fact that shrewd advisers will not buy leads that have been generated non-compliantly. In this way the market is self-regulating, but this is a debate that will continue.
As the Financial Services Authority (FSA) clamps down on mortgage companies that do not follow its rules however, the need for compliance has become increasingly important. Compliant leads are a hot topic at the moment, and with the first mortgage adviser firm having been fined £17,500 for cold-calling it is more crucial than ever that mortgage advisers buy leads that have been generated compliantly.
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It is a little known fact that if an adviser buys a non-compliant lead and phones the potential borrower, it is the adviser who could be fined by the FSA for cold-calling, not the lead generator. The lead generator acts purely as a facilitator so it is the adviser’s responsibility to ensure that anybody they contact has given what the FSA terms ‘express consent’ – that is, the client has requested or given consent for a named intermediary to call.
To ensure that you are not at risk when buying a lead, you need to make sure that the potential borrower sees your name before they submit the form requesting advice; that way they have expressly asked for advice from your firm and have the opportunity for their details not to be sent to you. It is not good enough for the consumer to receive an e-mail with your details after they have requested advice, as they have not then consented to your call, just been informed of it.
Few lead generators currently carry out express consent in a way compliant with FSA guidelines, ensuring the borrower sees your company’s name before they submit the request for information. It is in your interests to check what a lead generator does before you buy leads, not only to avoid a fine, but also as it will help to increase your conversion rates to business, increasing the amount of money you earn per lead.
So where is the market headed? The market will continue to evolve as consumers turn to the internet in ever increasing numbers. Advisers will increasingly buy leads, as long as they fit in with their business requirements and are cost-effective. Currently lead quality can be hard to measure as every adviser will have different conversion ratio of lead to business depending on the type of lead that they buy and how experienced an individual adviser is to buying and converting leads as well as many other factors.
Technology and increased competition will improve the offering for both advisers and consumers however, creating a better match and helping to improve the rate of conversion still further.
While undoubtedly, lead generation will never be right for every mortgage adviser, it will provide an excellent and ever-improving service for a large number of advisers who want an easy, efficient and cost-effective way to grow their business.
By Vanessa Blount, head of paaleads.com
No-one can say the lead generation market has stood still. Indeed, it is almost unrecognisable from its early beginnings. For example, when we launched five years ago it was with just one lead type, mortgages, but now we offer over 15 lead types split over six different categories, ranging from mortgages and life insurance to pensions and investments. paaleads.com was then one of the only entrants in the market, but now it appears the industry is awash with different lead providers, each promising something new, exciting and better than its competitors.
But what has really driven so many lead companies to launch in the UK? And how can this competition actually help deliver clients to you?
Currently only 60 per cent of households have access to the internet, while this is up considerably on previous years it gives some indication of how large a market we have yet to explore. When you further consider that 85 per cent of people (who have access to the internet) use it to source information then the magnitude of this business area becomes apparent, make no mistake, internet lead providers are here to stay.
So when it comes to service, how are lead providers matching your needs? This question takes a little longer to answer, and if you ask any two advisers what they want in terms of “a lead” they are likely to give you opposing answers. With the plethora of lead providers and many different choices of lead types available this means that the broker needs to consider carefully what it is they want to achieve, prior to even picking up the phone to a lead company.
But how can you be certain the lead provider you chose will actually deliver the clients you need, at a price you are both willing and able to pay. For example take the latest “innovative” idea, “Qualified by Telephone” leads. The plus points are that QbT will deliver the client direct to your phone, it will also mean that you do not have to trawl through 10 internet leads in order to convert three, thus saving you time. On the surface therefore, surely QbT is the answer to all critics? Not necessarily, take for example a new intermediary looking to build a client bank, would it not be better for him to take traditional internet leads, and although the conversion rate is likely to be substantially lower that QbT leads, at least he will gain client e-mail addresses which he can then use to market to in the future. Over the long term the return on his investment could be higher than the adviser that took QbT leads.
In summary, an Intermediary must consider carefully the model that best suits their business, allocate a budget, measure the responses carefully and remember - one man’s meat is another man’s poison.
By Andrew Georgiou, Managing Director, Only Leads
AS SURELY as the sun rises in the East, the future of the mortgage selling industry is predicated on leads, and more specifically, how quickly they can be turned around
Let’s face it. Mortgage brokers not utilising online direct marketing technology for mortgage leads are going to be left way behind. In fact, they may as well clear their desks and turn the light out now.
Today the vast majority of business is conducted online, and the key to successful leads generation lies in the application of cutting edge online marketing initiatives. As the majority of leads – hot, cold, lukewarm or otherwise – are generated using these various marketing techniques to convince the mortgage-seeking public to use yours ahead of everybody else, the essence of successful leads generation is to swifly capture that all important personal information and get it over to the broker as quickly as the technology process will allow.
As around two-thirds of adults now have access to a home PS or Apple system, potential mortgage applicants are more likely to use the internet to research their options. In a nutshell, internet leads create a ‘conversation’ opportunity with a potential customer.
Current Financial Services Authority (FSA) regulations do allow the basic introduction to be made by an unauthorised company, although full qualification, as it were, of that lead is not permitted, as this would be a regulated activity and most of these firms act as introducers only.
External factors play an important role in the leads generation market, not the least the general health of the property market. Currently – if the endless property market updates are to be believed - we are in a boom phase, but there is a suggestion of forthcoming volatility if we get a further base rate rise.
Base rate rises, while having an adverse affect on wider aspects of the consumer economy, can have a very positive knock on for the leads market.
In the last base rate rise at the beginning of the year, thousands of homeowners scrambled to switch from standard repayment deals to the certainty of fixed rate mortgages, creating a steady stream of leads opportunities.
Only Leads – part of the financial services-orientated Only Group – has harnessed new technology and is now effectively competing with far bigger, long established players.
Mortgage enquiries are principally generated exclusively online using sister site Only Finance.com, then are dispatched real time to Only Leads’ brokers, with the customers receiving confirmation via email and SMS of where their details have been sent, thus further cementing the relationship and paving the way forward for repeat business.
How can brokers maximise the chances of conversion? Everything needs to happen very, very quickly, and when a mortgage broker buys a lead from a generator – whether it be Only Leads or one of our competitors – there is always going to be a percentage that are not worth pursuing.
And what of the rest of 2007? Only Leads anticipates a renewed surge in business, as more and more leads come from the sub-prime market. As major lenders finally get their acts together and offer sub-prime deals at more realistic prices, then the growing ranks of the UK self employed are going to be looking to switch to more competitive arrangements. The market has a long way to go – it’s a question of keeping a few steps ahead.
ends