Case study: ‘A timber frame has most lenders running for the hills’ – broker
The old timber construction would have sent many lenders running for the hills but Tesco, says the mortgage adviser from Bournemouth, was willing to take the valuer’s comments on board and offer the loan.
“Many lenders who have been in the market for some time have quite an antiquated approach,” he says. “Their systems are time consuming to use and they ask unnecessary questions. Tesco is one of a number of lenders taking a fresh approach – most likely because it is so new to the intermediary market. It has come out with a clean slate and a fresh proposition.”
Central to that proposition is its investment in technology – something that much of the market has yet to fully get to grips with. And with good technology comes greater efficiency.
“Essentially I would say its application systems are simple and clean”, says Russell. “They work with desktop PCs as well as mobile devices and tablets – they are actually designed to do so and as a result they’re really slick. Perhaps most important though is the fact the questions they ask are concise. Many lender application systems suffer from years of bloat and are full of redundant questions that just make the process longer and are not really necessary. Tesco cuts right into this, meaning you are never going to spend more than 30 minutes on a decision in principle and application.”
In a world where increased regulation is already making the work of a broker more cumbersome and time consuming, simplicity is something everyone wants and Russell says this is where Tesco Bank excels.
“It has avoided the pitfall of over complicating contact, by offering web chat, telephone support and of course BDM support,” he says. “It doesn’t force you down any arbitrary route for criteria questions.
It is a broker-friendly lender with a straightforward approach and that’s worth an awful lot.”
Adam Russell is a mortgage adviser at Elite Financial an Openwork AR
Enness: ‘Find a niche and stay in it’ – the in-depth interview
Specialist Lending Solutions: How has the market changed since you launched 10 years ago?
Hugh Wade-Jones: First of all, high street broking has evolved; 10 years ago, lending criteria was much softer and persuasion, pressure and influence were vital to get a deal done. Placing a deal with the right lender was the start, but hiccups and bumps were much easier to sort out with negotiation and charm.
In terms of the lender landscape, it has changed beyond all recognition and very few of the lenders have survived in their original guise. Lenders are now much more rigid, driven by regulation, and still carrying the remains of the financial crisis. Therefore, brokers need to be much more detailed, accurate, organised and analytical, because a lender’s ‘no’ is now almost fatal. Self-certification, fast track and securitisation certainly made things easier, and now brokers have to be much quicker to adapt to the market.
There have been changes every year – elections, wars, failing banks, increasing regulation, a referendum and so on. They cause a lull in activity while everyone worries and absorbs these changes, but everything soon returns to ‘normal’. Political and economic change is just something to deal with.
It is possibly a little disappointing that from a technology point of view the lenders have not progressed further, as the same fairly basic processing issues exist which I hoped might have been ironed out in a decade. Some of the smaller, more niche banks and lenders are looking to address these, however, which is great.
SLS: Your launch was around the same time as the start of the credit crunch – were there any regrets when you came to market?
Islay Robinson: We set up Enness in 2007, the same week Northern Rock crashed, so it was a very challenging market to enter. The banks weren’t lending to mortgage brokerages – or anyone – but we manged to secure a £30,000 overdraft from Allied Irish Bank. Unfortunately, they were one of the hardest hit, so they withdrew the facility which put us in a very precarious situation for a few months.
Entering the market when we did, in what was essentially economic Armageddon, was definitely the most challenging part of the last ten years. As a young company, with three employees in a small office in Battersea, navigating the difficult climate and managing to stay afloat during our first two years was extremely difficult and required a lot of resilience and belief in Enness.
However, without that experience, we would ultimately not have been as successful as we are today. A decade on, those three employees have grown into over seventy expert Enness staff, based in London’s Mayfair, Dubai and Monaco.
What would you have done differently had you known the way the economy was going to go?
IR: Nothing, we’re glad we didn’t know – starting when we did, we’ve accepted we can’t rely on the market for a foot up, so have created opportunity instead of lamenting markets. It may have also made us hesitate on timing or acquiring the resources we needed, and made us stick to the perceived ‘safety’ of our current company.
Incredibly, the London market has continued to rise over the decade and rates are currently at an all-time low, so we don’t have many complaints. We’ve built one of the strongest and most recognisable brands in the industry and have a huge growth curve planned, so the economy hasn’t been too much of a hindrance.
What is the biggest lesson you’ve learnt in the last 10 years?
HWJ: Find a niche and stay in it – there have been many changes in the property and mortgage markets over the last ten years, and as our clients have adapted, so have we. However, staying in our niche of high net worth mortgages for clients with complex requirements has meant we’re not competing with the mass market brokerages.
Diversification is key – we’ve also always understood that diversification is essential for growth, so as our company’s grown, so too have our specialist divisions. This has enabled us to retain clients, by being able to look after all their property and business financing requirements.
Don’t avoid the hard decisions – hiring, trying new things, and changing them if they aren’t working. We’re not afraid of making the big calls and that’s what’s built the company to where it is now.
People build the business – hire the right ones and help them grow and develop is the most recent lesson we’ve learnt. We’re very proud of who we have here and have developed an incredible team.
Watch the pennies – we run lean and spend our money in the most valuable places. Cashflow is an art and needs to be practiced.
Would you say brokers are in a better position now or 10 years ago (before the real downturn took hold)?
IR: Ten years ago, brokers were literally printing money, so, on one hand, they’re in a far worse position, but they’re far more integral to the process these days given the levels of complexity involved in lending. So, for those that have found a niche or have a strong foothold their true value has never been higher.
What will be the biggest issue in the market in 2018?
In the UK from a mortgage perspective valuations in conjunction with changes in stress testing. One or the other would be challenging but both at the same time will be an issue. Internationally it will be the continued consolidation of the major high street and private banks leaving some areas without a clear local lending proposition and lack of access to alternatives. Hopefully, this is where Enness will be able to add huge value with our international reach and vast lender panel.
What’s next for Enness?
HWJ: The next decade is set to be a very exciting one for us, on a global scale. Our international focus and outreach is a huge part of our business, and we are looking forward to further opportunities of lending in many different countries. In ten years, we plan to provide a specialist service to high net worth individuals with complex financing requirements worldwide.
Furthermore, Enness is primarily a high net worth brokerage, but we will look to become even more holistic than we are now, by extending our secondary services offering. Enness Global Insurance, a new broker for HNW international general and personal insurance, launches in October.
Case study: ‘Brokers can get comfortable with what they’re used to’
Newly-qualified but having worked in the industry on the admin side for several years, Emma says when Tesco launched into the intermediary market in 2016 she was more than willing to give the brand a try.
“Some brokers can get comfortable with what they’re used to,” she says. “However, I’m always willing to give any new lenders a chance.” It’s a choice that she says has paid off.
“For most mortgage brokers the rate will always be the primary factor when sourcing, however when you find that a few lenders are competing on rate there are three things that, for me, will prove to be the deciding factor – how efficient their underwriting service is, how easy their systems are to deal with and crucially how they interact with customers post completion. Having used Tesco Bank several times I would not hesitate in recommending the lender on all three points.
“The processing system is so straightforward that even when I’ve submitted complicated cases, they’ve been as easy as the most vanilla of applications. With other lenders I’d fully expect to hear from an underwriter when I’ve submitted a non-standard case, despite the fact I’ve included all of the necessary documentation. Very rarely has an underwriter at Tesco Bank contacted me to request more information and I have never had to raise any case to my BDM. In fact, any dealings I have had with Paul Woodward, my BDM, have been fantastic.
“I work with remortgage customers on a regular basis and find that Tesco’s Switch and Save deal which sees legal fees paid by the bank is a great option – with the five-year fixed rate proving very popular at the moment.
“Tesco Bank may be fairly new to the intermediary market but I’d recommend any broker give it a chance. A forward thinking lender with a desire to deliver what brokers want and a clear understanding of what matters to the intermediary sector – I can’t fault it.”
Emma Hodgson is a mortgage adviser at Opal Financials
The road to CII Level 4 certificate – Part one – Vishal Pandya
I wanted to study to get more up-to-date with the sector. It had been 10 years since I had originally sat my mortgage exams in 2007, when it was a hugely different market from today.
The other reason for studying something new is to enable me to diversify my capabilities by understanding the more complex needs and circumstances of today’s clients.
It therefore made sense for me to choose the ‘certificate in advanced mortgage advice’ – a level 4 qualification offered by the Chartered Insurance Institute. This is the highest level of qualification for the sector, and in addition to giving me more in depth knowledge, the qualification will allow me to use the ‘Cert SMP’ designation as a member of the SMP.
In the world of pensions and investments, advisers aim towards the level 6, chartered status (even though regulation only dictates that a level 4 qualification is necessary for the provision of advice) and consumers seek out such individuals out to look after their needs.
Similarly, in the mortgage and protection world, this level 4 qualification enables advisers to demonstrate their understanding of the responsibilities that come with being a professional and their commitment of maintaining the highest level of professional standards.
I eventually found inspiration to open up my book and read the syllabus after watching a historic video of the Society of Mortgage Professionals (SMP) road shows – during which a case study was presented on bridging finance to give delegates a better understanding of the level 4 qualification.
And when I opened up the text book to see whether bridging finance was actually a big portion of the learning, something amazing happened: I began to read more of the syllabus, which got me more intrigued (there was information on the mortgage credit directive and upcoming buy-to-let tax changes…topics which were being discussed at great lengths at the time).
My initial curiosity led to me reading the whole syllabus and then got me started on the actual course material. Subsequently, I even attended a revision workshop.
Going back to bridging finance, having never dealt with it before, I have taken away a lot from this qualification that could be useful. For instance, I had no idea that when applying for bridging finance that is secured on both a client’s new home and their current home where the intention is to repay the finance from the eventual sale of the current home and partly from a mortgage on the new home, the lender is required to assess the value of the current home and request a copy of the new mortgage offer.
I also learnt that closed bridging loans are only available once contracts have been exchanged on a property sale.
These may be facts that are obvious to an advisers who deal with bridging finance on a regular basis, but is certainly useful for me to know if I ever get involved in that aspect of lending.
My tip to you today is not to get on to your next item of professional development immediately if you are not completely ready to do so. Choose to delay it if you must, but do at least take that first step by planning for it and scheduling it in your diary.
And when the time comes to do it, don’t delay any further. That would be procrastinating. Keep it manageable by spending 15 minutes carrying out the task at hand and as you progress and get a sense of achievement, you may just want to enhance that feeling by doing more.
The CII Level 4 certificate in advanced mortgage advice launched in August 2014 in the wake of demand from advisers. It goes beyond the FCA’s minimum exam standards and puts mortgage and protection specialists on par with their investment counterparts.
Case study: How to make post valuation queries drop 23%
Joe Miller operations director for SDL said: “We selected eTech for our property risk requirements as the organisation to help our growth strategy in residential surveying due to its nnovative technology and their aptitude for further development in this sector.
“Since we launched with SMART Survey our Post Valuation Queries have dropped by 23%. The PVQ process is getting more complex and intelligently mapped lender forms on the iPad eradicate errors and omissions to manage this challenge effectively.”
In recent years, the RICS has been much more prescriptive about comparable analysis. In response to this we have built an integrated comparable tool working with Rightmove’s Surveyor Comparable Tool (SCT) within SMART Survey that smartens up the analysis process, ensuring a level of quality and consistency previously unavailable to surveyors, whilst providing efficiency savings to the surveyor at the same time.
SDL Group manage a field force of 70 employed surveyors as well as distributing thousands of jobs per month to a controlled panel of 160 independent firms.
Miller added ”Work-life’ balance is an overused phrase but one of our objectives has been to deliver exactly that. Surveyors spend the same time in a property carrying out the valuation but our work with Rightmove has made the comparable analysis process much more efficient.
This delivers an improved working day and greatly increased productivity. We see surveyors’ signing off up to two hours earlier each day as well as achieving a 25% uplift in productivity.
We have brought a community of surveyors together and made technology available to some firms who might have thought it beyond their capability to adopt.
Mark Blackwell, lending and surveying director at eTech said: “We are very proud to see our relationship with the SDL Group increase significantly with the launch of Survey Hub into their growing operation. Helping surveying firms get the right data and insight on property is invaluable to lenders as it increases their understanding of collateral risk and increases the efficiency of their mortgage approval service.”
Ask the expert: How do you deal with a potentially vulnerable client? Stuart Wilson, more 2 life
Answer: Assessing and defining the needs of vulnerable clients has long been an issue in the financial services industry and remains an important topic today. According to the World Health Organisation, 15% of adults over the age of 60 will suffer from a mental disorder and two-thirds of British adults say they have experienced mental ill-health at some point in their lives.
To address this issue, the Financial Conduct Authority (FCA) launched a paper back in 2015 looking at consumer vulnerability. Through this paper, the regulator aimed to broaden the industry’s understanding around this issue and provide help and resources for firms looking to develop and implement an appropriate strategy.
Having this strategy in place is especially important for advisers and lenders operating in the equity release industry. The most popular age bracket to take out equity release products is between 65 and 74, and all of these customers are deemed to be vulnerable by the FCA.
As such, it is important that advisers know how to deal with vulnerable customers and to be on the lookout for any red flags that show the customer has been coerced in any way. Advisers also need to be constantly monitoring for any mental health issues, language difficulties or any indication that the customer has recently been through any life changing events (otherwise referred to as dynamic issues) such as divorce or experienced a bereavement.
At more 2 life, we have appointed a trained Customer Vulnerability Champion in order to promote greater awareness of these issues. Our call handlers are encouraged to obtain and clarify as much information over the phone from a customer if they deem the person to be in a vulnerable position. Whether the query has been resolved or not, all details and contact related to the case will be sent to the Customer Vulnerability Champion who will monitor the situation closely and make further contact if it is deemed necessary.
The recent Equity Release Council whitepaper reaffirms the fact that adviser education on dealing with potentially vulnerable older borrowers needs to be addressed, and that greater understanding needs to be introduced in the sector. Advisers should always be looking for the bigger picture and willing to challenge what a client says, if necessary.
Equity release is not a one-size-fits-all, tick-box exercise. As such, advisers have to be 100% sure that it is suitable for their clients. If speaking to a potentially vulnerable client, advisers should make sure they remain vigilant and look out for any warning signs. Above all, listen to the customer very carefully, and raise any concerns immediately with colleagues, senior management and compliance teams.
The low-value, semi-commercial buy to let – Case Study
The client wanted to purchase a semi-commercial property as an investment. The property was a low-value building with a newsagent on the ground floor and a one-bedroom flat above.
Due to the low value of the property, £62,000, many lenders would have considered this to be unmortgageable.
A lender was identified to finance the deal but this would have taken a couple of months to get to the completion stage. The sale was agreed on the understanding it would be completed within 28 days.
Only one mortgage lender would consider this deal and would have taken too long, so we turned to the bridging market.
I approached bridging lender HFBS to finance the deal within the timeframes, which it secured against three properties. The client was able to offer the new semi-commercial property as security as well as two low-value standard residential properties (worth £40,000 each).
HFBS met with the client at his home address to discuss requirements, needs and future plans.
A full commercial valuation on the new purchase was required but we were able to rely on drive-by valuations for the two residential properties as they were both standard two bed mid-terraced houses – this kept upfront costs to a minimum.
How I switched my mortgage advisers on to second charges – Paul Flavin
With 14 mortgage advisers, Zing is definitely not under the radar, so it’s even more important that we conform when new legislation comes in, as well as being proactive in searching for sales opportunities. You can’t avoid these rulings so it is better to make the most of them.
Steer clear of undermining your adviser
The first step is to encourage an in-depth understanding of when a second charge would be the best option for a client. Demanding that an experienced adviser must produce a second charge quote for every remortgage case where fund raising is involved can belittle their ability.
If a client has sufficient income, equity and good credit, there is no need to waste time comparing the cost of remaining with the current lender’s SVR and raising a second charge at, say 4.5%, when you’re fully aware that switching the whole amount to a two-year fixed first charge with minimal fees and a far lower rate is the correct advice.
Training advisers to be able to distinguish this empowers them, giving them the confidence to make the right recommendation.
Pair up with a seconds broker who offers tangible value
The second factor in beating those initial adviser objections is pairing with a company that can deliver a quality of customer service that you’d be happy to put your name to.
‘Trying to edge round the fee issue is pointless,
not to mention slippery’
Any fee charged is only an obstacle in the absence of value. Once a client understands why a second charge would work best for them and what the fees actually cover, they are usually happy to proceed. Trying to edge round the fee issue is pointless, not to mention slippery. Bring it up at the start of the conversation then explain why this is the best option.
When the client has bought in, hand the case over then sit back and enjoy the rewards, confident that your proven second charge broker can deliver as promised.
Book in your follow-up review
It is this confidence in our chosen second charge broker, combined with effective adviser training, that has seen a massive increase in the number of second charge loans being put forward.
However, we always book follow-up reviews with our customers to ensure that we offer to remortgage away from the second charge as soon as circumstances allow. Conveying that a second charge loan is often a short-term solution while other matters are resolved means that you are offering your clients a full and transparent service.
Mortgage broker moves online with ‘Mortgy’ fintech launch
The free service, launched by mortgage broker Danny Matthews, combines digital elements with human advice in a bid to save time for the client and adviser.
Mortgy works in a similar vein to the proposition launched by mortgage broker Trussle last year, directing clients through an online fact find before giving the customer advice and recommending a product via a telephone conversation. Matthews said he would continue to serve his existing clients on a face-to-face basis due to their location.
Using Mortgy, Matthews said he intends to significantly reduce the amount of paperwork involved in the application process while finding a suitable mortgage deal for customers online and by telephone within 30 minutes.
Matthews, who has also worked as an insurance adviser, decided to launch the service after carrying out his own customer experience research over the past two years to find out what consumers wanted when obtaining a mortgage.
“As I expanded my business from insurance to mortgages I felt myself becoming increasingly more frustrated with the old-fashioned processes, especially when you apply for a mortgage,” he said. “We now have better technology and the regulator is much more favourable about the idea of shared data, software integrations and cloud technology to create a safer and better user experience.”
However, Matthews does not feel customers are quite ready to move to a fully automated advice model and believes they still appreciate human intervention when searching for a mortgage.
“Even though the technology is fantastic at helping to solve inefficiencies involved in obtaining a mortgage, I do still think there needs to be a stop button on the back end to say ‘hang on, we need to talk to this client now’ because no one situation is the same.”
From the back end of Mortgy, Matthews can see how many users are on the website and how far applicants are with the fact find process, allowing him to intervene at any time if needed.
Matthews explained that he has ambitions for the service to be used by third party stakeholders such as estate agents and conveyancing firms in the future, but that his main focus at present was to build and expand his business using the online tool.
Why be a mortgage broker? Simon Checkley
Post-MMR, MCD and post-Brexit market, many homebuyers are feeling left in the dark about their options and need independent guidance more than ever with their mortgage applications. A knowledgeable and reliable mortgage adviser therefore becomes a vital element and a key facilitator in the purchasing equation. However, as a career choice, mortgage broking is all too often dismissed as a purely administrative role.
What is less commonly recognised is that relationship building is probably the single biggest part of what we do as an industry which is why there is so much more to it than ticking boxes and number crunching. In spite of this, mortgage broking still fails to present itself as one of the most appealing options to the graduate market even though many of them will look to pursue a career in finance.
Some of the latest graduate research shows the banking and finance industry as one of the primary growth areas of graduate placements for 2016, with the number of overall UK graduate vacancies on offer having risen by 7.5% year on year.
Despite this, many graduates will be unaware of the numerous placements that can also be found at smaller, more bespoke financial institutions such as independent mortgage brokerages looking for fresh talent and a wide range of skill sets.
Some of the benefits of these placements include working in a supportive and exciting environment that focuses on individual training and the development of core business skills. Furthermore, and although there is additional training in the form of the CeMap exams, these costs are covered by the employer so the individual receives a valuable industry qualification with the added reassurance that the company is truly invested in the future of their new talent.
Through the Private Finance Academy, new recruits are welcomed into a team of experienced mortgage advisers and work alongside them by conducting research and assisting with real-life applications from day one.
Simon Marsh, a senior mortgage consultant who joined Private Finance in January 2014, describes his experience as one of the best ways to gain access to a career in finance: “Having trained through the academy route at Private Finance, I can thoroughly recommend it as one of the best ways to embark on a career in finance. I began my career assisting senior brokers with the progression of their cases and moved on to shadow and paraplan for one senior broker, conducting research and providing solutions to clients’ needs.
“This was really the best way of training as I worked side by side an experienced broker, who passed on invaluable knowledge regarding the analysis of client situations.
“When I first joined Private Finance I thought I could push myself through the system quickly. I read everything I could and absorbed as much as possible, but I eventually realised that there really isn’t any substitute for time and experience, so just let the system do its job. My advice to those looking to get into the industry is be patient. It can take a while before actually taking on your own clients but it’s well worth the wait as you become a much better broker for it.”