You are here: Home - Better Business - Business Skills -

The changing face of the mortgage broker: Survival of the savviest?

by:
  • 20/10/2016
  • 0
This week saw the launch of another digital newbie, Dwell Mortgages, to the mortgage advice sector. But as innovations in technology become increasingly common among brokers and lenders, are we heading toward an industry favouring automated solutions over the human touch? Hannah Uttley investigates.

It seems 2016 has been the year for technology start-ups entering the mortgage market. Both Habito and Trussle launched in the last 12 months, while Dwell Mortgages is due to roll out its proposition in the coming weeks. Likewise, a number of fintech start-ups have cast their eye towards the banking sector, but as it stands, Atom Bank is the only one with a mortgage advice proposition confirmed.

The terms robo-advice and digital broker have been used in abundance over the past months, but so far a fully automated solution serviced by ‘robots’ is yet to be created.

Trussle CEO Ishaan Malhi, agrees that the term robo-advice for mortgages in its current form “gives rise to misinterpretation”.

“What we’re doing is thinking about where an adviser feels they can best leverage their expertise. What’s being automated at the moment is a lot of the laborious work which is fully compliant.

“The closest analogy I can think of is choosing to do long multiplications out by hand or using a calculator – the calculator will do it a lot more accurately, and a lot faster,” Malhi adds.

User friendly

Services provided by these new digital players pride themselves on being built with the customer in mind, as well as speeding up processing times and reducing the amount of paperwork for brokers.

In the main, traditional brokers have shrugged off threats that the advice process could soon be dominated by automation, dismissing trendy fledgling brands as services that will only work for the most vanilla of cases and client. Some brokers go so far as to say that the current offering from digital brokers are simply ‘glorified’ fact finds.

Habito’s CEO and founder Daniel Hegarty, believes brokers are focusing on the wrong issue: “When I look at the dialogue around this subject, people are thinking too much about the technology rather than the customer. Customers just want to get great advice quickly and cleanly online and know they’ve got the best mortgage for them.

“Some customers are going to want to do that without ever speaking to a real person, while others are going to desperately want to speak to someone on the phone. I can imagine a world where it is possible for someone to complete a mortgage without ever speaking to a human but I don’t think that’s going to be the whole industry by any means.”

Matt Lowndes, director at Coreco Group, agrees that customer engagement is paramount and something the industry should be focusing on more.

“From where I’m sitting, there’s a real place for advice still. However, can we make the process slicker, quicker and more intuitive to suit customer needs better? Yes, absolutely. There’s definitely a need for that,” he says.

“A more automated system is no different to the broker being unable to contact lenders as and when suits them. There’s a lot that needs to be done with regard to the whole customer experience.”

Giving the customer what they want versus what they need, is a conundrum that will not be easily solved by simply investing more in technology, says Robert Sinclair, chief executive of the Association of Mortgage Intermediaries.

“If a customer walks into this type of transaction just wanting lower cost, then they might be looking at a one or two-year fixed rate product, but it might be that given their particular circumstances and situation a longer-term fix or a tracker might be more appropriate,” he explains.

“Equally, they might work out that a particular product they’d had in mind is not as portable as they’d like or it comes with significant ercs [early repayment charges] all the way through the term, so may be therefore inappropriate for the customer. The success of this type of system is down to the quality of the questions that are asked within the automated process and the validation of the customer’s answers. There also might be inconsistencies in these answers, so it’s important to determine how a customer is then kicked out in order to ensure that those inconsistencies are not validated.”

Regulatory reservations

A fully automated mortgage transaction may be feasible in principle, says Sinclair, but whether it gets the consumer to the right place is a different question.

Compliance and regulation are topics of concern that have been raised by a number of speculators, who query how such an automatic process can comply with the Financial Conduct Authority’s Treating Customers Fairly rules. Some also note that these firms could find themselves on the wrong side of the Ombudsman in future, should decisions be deemed unsuitable at a later date.

Mark Lusted, managing director at Dock 9, a digital agency that works with financial services firms, explains why there are reservations in the industry surrounding technological investment.

“The main regulatory concerns facing the presence of robo-advice in the industry is that the regulator expects the same standards for them as those face-to-face advisers, and it was noted that the regulators hold senior management responsible if this is not the case. So there is a natural caution with a nascent technology like robo-advice.”

Fight or flight

Robo-advice, or digitisation of the process, is a topic that will divide most brokers.

But will this attitude lead to the demise of even the most successful of advisers if they choose to ignore the potential in technological developments?

Sinclair says that while it’s likely that the industry will see a lot of movers and shakers over the coming years, this will not be wholly attributed to firms failing to embrace technology.

“Prior to the financial crisis there were a lot of big firms in our market that don’t exist anymore, in 10 years’ time there will be some big firms who won’t exist anymore,” he explains.

“In the same way that the customer will evolve in the way they want to transact, businesses will also evolve, and some will win and some will lose in that process and that’s the way the world has always been.”

While many brokers are quick to point out the risks in adapting their business models through investment in technology, as James Tucker, managing director at Twenty7tec, noted at a recent industry conference, arguably the greatest risk to brokers is actually “doing nothing”.

There are 0 Comment(s)

Comments are closed.

You may also be interested in