He said brokers must widen their proposition past a focus on arranging mortgages to assure the regulator that customers were at the heart of their business.
This week, Gareth Herbert, national sales director at the Mortgage Advice Bureau, talked about the merits of teaming up with a specialist to look after protection sales if its not a core skill for the adviser? So which way is the right way?
Are intermediaries expected to be a jack of all trades; mortgages, protections, retirement planning and GI but wind up being masters of none?
This week’s panel of experts look at the different advice models and give their views on specialising versus diversification.
Peter Brodnicki, chief executive of Mortgage Advice Bureau, says it doesn’t make good business sense for brokers to pull themselves in many different directions.
Mark Harris, chief executive of SPF Private Clients, says while diversifying may be desirable it is easier said than done.
Gemma Harle, managing director of TenetLime, says stay true to your business model when considering diversification.
Peter Brodnicki is chief executive of Mortgage Advice Bureau
Different markets bring with them different challenges as do specialist business models where high levels of mortgage sales per adviser are the norm.
If you are busy with an endless source of new business opportunities, why would you spend your time as an adviser keeping in touch with your clients every year to review their circumstances, when there may or may not be the opportunity for an additional protection sale and at a lower case value? It doesn’t make business sense to an individual adviser but it does make sense to the business they work for.
Some of the best results are being achieved where specialisation is part of the overall proposition. Protection specialists, client bank specialists, buildings and contents specialists, and as importantly, administrators are specialists that often significantly enhance the customer experience. On the mortgage side you also have specialists i.e. new build, estate agency, buy-to-let and commercial.
We should ensure that as far as possible all our customers receive a consistent and high quality service pre and post completion. If that means protection or GI is handed over or mopped up during the sale by a specialist, and existing clients are properly serviced rather than a call out of the blue, three, four or five years later, then specialism is the answer. However, a level of scale is required for that to even be an option.
We have a responsibility to our customers and to be honest when a customer meets with a mortgage adviser, it may be the only time anybody will make them aware of the consequences of not having sufficient or the right sort of protection. We need to ensure that advice is provided and reviewed, but the world has changed as has the role of an adviser, and so intermediary models need to also.
Mark Harris is chief executive of SPF Private Clients
We are known as a mortgage brokerage yet 50% of our revenue comes from other sources – general and commercial insurance, wealth management etc.
The other parts of the business are a very important part of what we do but offering this range of services is easier said than done.
It is certainly easier when you have some scale as a business. It is a real challenge for a two or three man brokerage to have in house divisions covering all aspects of financial planning, for example. This is when it makes sense to partner with other organisations, which can offer services that you can’t. There is no problem with this as long as you choose your partners well and there are controls in place so that that they don’t market to your client on the mortgage side.
Brokers who are keen to diversify must also be mindful of regulation. There are required levels of qualifications, particularly in the wealth management arena. It is not just about whether a small small group of brokers can multi-task, it can be quite a commitment and challenge to fund it yourselves. When we set up our general insurance business 16 years ago it was loss- making for a number of years but now it is an important part of our business model.
Gemma Harle is managing director of TenetLime
We have always encouraged and supported brokers moving from a transactional model to a relationship one, so we absolutely support diversification.
This is all very noble, however, but how in the real world can a one man firm in a buoyant mortgage market achieve this?
Remortgage opportunities will lessen in the medium term as longer-term fixed rates take hold and it’s hard to admonish brokers for making hay whilst the sun shines.
At the very least though, protection and GI business should be introduced to a trusted source, meaning brokers will be both addressing their customers’ wider needs and receiving renewal commission to boot. A step on from this is to consider employing someone from a source such as an industry apprenticeship scheme to train in this side of the business. They would need mentoring but product knowledge and the regulatory sales process can be taught, providing they have the right customer service approach and an ability to sell. If you are part of a network, it can also be very supportive in terms of training assistance.
Diversification should remain true to your core business model however and during the crash, we definitely witnessed firms going a step too far and getting heavily involved in areas such as debt management and will writing. Widening your business model is encouraged but not to the point where cracks start to show.