One of my goals, running up to the final phase of regulatory convergence in 2016, is to persuade more brokers to embrace secured loans, not because they have to, but because they want to.
Why? Simply because second charge loans can no longer be ignored and yet many brokers are still resistant and that is a shame; it tells me just how much of a job we still have to do to demonstrate the value of these products.
With the regulator expecting every client seeking to raise capital secured against their property to have been informed that a secured loan may be more appropriate, brokers will need to consider whether they still want to be claiming to be offering a whole-of-market service or a more restricted version.
Maintaining service
I want brokers to see secured loans as an integral part of their offering because in many circumstances a remortgage might not be in the client’s best interests. Not offering clients all the alternatives makes it difficult to maintain a service which tells clients that they are getting advice based on a full examination of all available options.
The pros and cons have been argued but I know that the secured loan proposition which we take forward into 2016 is, by any measure, a cost effective, simple and fast solution to the needs of many clients seeking to raise capital.
My regret is that I cannot do a personal one-to-one with every broker who is still unsure of or unreceptive to the secured loan argument. Many of the arguments and objections I tend to come up against are largely historical. Secured loans have a less than reputable past and that legacy has persisted. Today’s second charge proposition is so far removed from that historic position as to be almost unrecognisable.
The reality of a second charge loan is one of low rates (we start from 4.5%), transparent terms and conditions, legal and valuation fees borne by the packager and early redemption charges of not more than two months. If I was to offer this as a brand new product with no historical baggage, we would have a stampede.
Changing perceptions
I am pretty sure that every open-minded broker with a genuine desire to ensure his or her client has the best advice, would come away from our discussion seeing how viable a secured loan can be in the right circumstances. Perception is as powerful as reality. Helping to modify existing perceptions and establish the credibility of the sector, rather than simply expecting brokers to comply because of a regulatory requirement, is the only way to build trust and establish common ground between the industry and the intermediary sector.
In the meantime, I would urge every adviser, who seriously believes in the concept of offering a full advice service to clients, to put aside any preconceptions and take a long hard look at secured loans themselves. Second charge loans should have their place in the advice given by every broker.
