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What the mortgage market can learn from RDR – John Cowan

by: John Cowan, executive chairman at Sesame Bankhall Group
  • 17/11/2016
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What the mortgage market can learn from RDR  – John Cowan
It’s nearly four years since the implementation of the Retail Distribution Review (RDR), John Cowan, executive chairman of Sesame Bankhall Group, discusses what the mortgage market stands to learn from its wealth counterparts.

Opinions are mixed as to its impact, but what is undeniable is that standards have risen and there are clear processes in place to help customers in the savings, investment and retirement planning sector of our financial services market.

So how does this compare to the mortgage world, and what lessons can be learnt from the RDR experience?

Living with volatility

Any client wishing to use the services of a wealth adviser can take comfort from being taken through a process of identifying attitude to risk and their abilities to live with volatility and capacity for investment loss.

Virtually all wealth advisers have developed a client value proposition which sets out the services on offer and the customer journey. There is lots more work to do, of course, with increasing regulatory scrutiny set to raise industry standards even further.

I have recently been involved with a mortgage and protection business which is incredibly passionate about its social responsibility to educate clients on the variety of risks that accompanies taking on a mortgage – something I found very uplifting.

There are other firms which take an entirely different approach and feel that their primary job is to help clients find the right mortgage and thus secure the property they have set their hearts on.

For many mortgage advisers discussions around risk are very challenging. After all, these are sensitive issues about illness, unemployment and death – and most of us would rather avoid thinking about them.

This is compounded by the fact that these conversations are often taking place at a stressful and busy time when clients are in the midst of buying a new home and taking on an increased burden of debt.

But this is the very reason why this is the right time for the “What happens if…?” conversation to take place.

When you take a step back the key question is a simple one: does the client or clients have a suitable plan in place to protect themselves and their family financially in the event that tragedy strikes?

Remove barriers to protection

What those scenarios might be and the financial impact they could have will vary widely of course, but this is precisely where the professional adviser can demonstrate their expertise.

During the course of these conversations there will be some customers who have already given this issue a great deal of consideration and have a robust contingency plan in place, with all their needs protected. If this is the case then that’s great news and everyone can sleep comfortably in the knowledge that the conversation has taken place – including the adviser.

Some people in our profession will point to potential barriers which we need to overcome in order to make it easier for advisers to have these conversations – and I believe they have a point.

Advice processes need to be as slick as possible. Advisers need to be able to tap into the right training and development support in order to hone their skills in this emotionally sensitive area. Lenders and providers also have an important role in making their application and underwriting processes as quick and simple as possible.

These are all areas where we need to work together to improve, because it’s what our customers deserve. If there is one valuable lesson that the mortgage world can learn from the experience of RDR, then for me it comes down to a conversation about risk – and the “What happens if…?” question – which should form part of every customer conversation.

I believe it is our social, moral and collective responsibility to do so.

 

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