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The IFA who thinks offsets are a great tool for overall financial planning

by: Mortgage Solutions
  • 23/01/2017
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Richard Kay is an independent financial adviser based in Southport, Merseyside and has been advising clients for 12 years. He runs his own business, Kay Capital Management, and offers financial advice across the spectrum including mortgages, investments and pensions.

Richard is a staunch advocate of offset mortgages. He explains: “It is possible for most clients to obtain a benefit by arranging their income and savings correctly each month to maximise the offset account, but some will not consider this as they may deem it laborious. It is the role of the adviser to educate them of the benefits.”

As offsets are clearly more complex than standard mortgages, Richard starts by keeping it simple. He says: “I explain the basic concept of offsets to the client, and the benefits. I then utilise the online calculator to detail the exact amounts that the clients can save based on their personal situation. This really brings the case to life, and it is usually at this point that they start to fully understand the concept.”

He believes that clients can be put off offsets due to lack of understanding of the benefits and that the adviser’s role in this product is crucial, both for the client and for the ongoing client broker relationship.

“Taking time to explain the product is the chance for an adviser to add some value to their relationship and truly help the client pay their mortgage off in the most timely and efficient manner, as opposed to simply searching for the lowest rate on the market,” he says.

“An offset mortgage is an opportunity to potentially help your client to save a large amount of interest costs and time with the repayment of their mortgage.”

He also notes that the retention proc fees on offer from some offset lenders benefit the client and adviser alike.

“They encourage the adviser to consider staying with the current provider, which in turn can help the client too.
For the client there is no conveyancing paperwork to complete and in most cases a surveyor will not visit the property.

“An additional client benefit is that there are no further credit checks required. This can benefit a client if they have had any credit issues since they took out the mortgage. If they returned to the market to search of a new deal they may be rejected by most lenders, however a ‘product transfer’ will allow them to benefit from a new rate.

“Many product transfer rates can be taken out up to two months before the end of the current deal if the monthly cost is decreasing, without paying the Early Repayment Charge. This means that a client can benefit from a reduced mortgage payment early if opting for a product transfer rate instead of returning to the market. It also means the adviser would be paid his or her proc fee early. Also from an adviser perspective the process is much more streamlined with a reduced amount of paperwork needing to be submitted and a reduced compliance requirement.”

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