Don’t follow the money, follow the client
Martin Stewart (pictured) is chief executive of The Money Group
The perennial debate around whether the mortgage broking industry needs some sort of overhaul came up again in conversation last week and, just like the proximity to a rat in London, I am never more than 6 feet away from an opinion on the matter.
My take on this is quite simple – the sector needs a thorough shake-up and a change in attitude and it needs it soon. I know, I know, I can already hear the voices of dissent:
“It’s fine as it is”
“If it’s not broken don’t fix it”
“It’s always been done this way”
“If they don’t need brokers, why am I driving a Ferrari for working two days a week?”
And they are all plausible statements. We have survived catastrophe after catastrophe over the years and now I do not even fear an asteroid strike anymore because I am confident if one should arrive a broker will leap up and head the galactic rock away like Virgil Van Dijk at a corner.
No, we are here to stay whether some like it or not and who can argue against the strength of our position? We are an approximate force of 12,000 gatekeepers tasked with controlling and helping to distribute over £250bn of lending each year.
That is a healthy equation to be on the right side of. Throw in the fact that post-pandemic, I would be surprised if we are now not responsible for the best part of 80% of the advice market and at this rate the broker may even outlive the crocodile.
So why suggest a change when everything is going so well for us? Well, personally, that is exactly the time to begin to at least discuss it, when you are on the front foot, you have a following wind behind and you feel invincible by the presence of both.
My vision for the sector is not where it is today but where it could be in ten years’ time – quick heads up – it has fewer brokers in it, but their average earnings are significantly higher.
Some would say that my vision is dystopian whereas I argue it is more utopian.
So, what will the great differentiator be? Simple, it is marketing and for correlation, I use our estate agency friends as a good example. They do not sell houses, they market them and then we, as consumers, come along and buy them.
This is where I feel we need to better understand ourselves as business owners. I think we need to stop focusing on the end product of what we create (the mortgage) and instead focus on the opportunity that we generate (the client) The latter has greater value than the former, we need more long-term interactions, fewer short-term transactions.
I sat down recently and worked out how many financial product touchpoints there were in my life, and I came up with 15. That covers all sorts of banking accounts, investment policies, debt instruments, financing of consumer goods and all the way through to insuring anything on two legs, four legs or four wheels.
Trust me, that is a lot of data held about me by various institutions around the world. So, it annoys me when people say “brokers can’t sell their business because we don’t have renewal income like IFAs”.
No, we do not, and we are unlikely to ever. But while the IFAs can enjoy recurring income we can at least start to build something else – reoccurring income. That is income that is simply happening again but not always repeatedly.
We have already done the hard bit which is finding someone to engage with. Do not believe me? Take me to lunch one day and I will tell you all about the early years of the industry when no one wanted to talk to us about finances. I must be the only person in the UK who left the civil service and managed to take a pay cut.
I was reminded of something someone said to me when 20 years ago the IFA world was trying to work its way in to arranging very profitable group personal pension schemes for businesses. My colleagues would be on the phone constantly ringing HR Directors and battling their way through the objections being thrown at them.
My friend who sat opposite looked up one day and said “They would be better of ringing the MD to see if he wants to save some money on his mortgage “.
And that sentiment is as true today as it was back then. The mortgage is the source of the Nile. Find that and if the consumer is anything like me, there are a further 15 other opportunities to talk to them about.
So, I do believe that it is time for us to focus less on the broking aspect of what we do – that is the day job – and focus more on the wider marketing of our businesses. In doing so we can diversify ourselves so that we do not just look like a mortgage broker we actually look like a proper business and one that has cracked the enigma of how to create low risk, low-cost reoccurring income.
So it is not too late to build a different model and as the saying goes, the best time to do that was ten years ago, the second-best time is now.
Change your thinking and you can change your ending.