When you have a part of the market estimated to be worth at least £100bn each year – one that has traditionally been dominated by lenders via direct-to-consumer channels – there is a) no surprise lenders might not be too enamoured to give this up easily, and b) no surprise advisers want to secure a greater share of the pie.
I am, of course, talking about the product transfer sector and it appears that both sides of the ‘argument’ are attempting to set their stall out early in a quest for this potential £100bn-plus business opportunity.
Have their cake
Up until very recently, as Ray Boulger recently pointed out on this very site, “lenders have tended to have their cake and eat it” when it comes to product transfers.
They were gifted the ability to contact customers direct and not have to provide advice, plus as brokers have witnessed, they can also waive early redemption charges (ERCs) in order to incentivise those customers to transfer to one of their own products.
They keep the customer and don’t necessarily have to pay a procuration fee.
Of course, there has been movement over the last 12 months in that regard, with many lenders now recognising the brokers’ role here and introducing retention fees, correctly giving originators the opportunity to complete the product transfer and paying a procuration fee for their trouble.
However, this clearly brings a whole host of issues for lenders, not least the fact advisers will want to provide a full advice service, want to check if that product transfer is the right (and most competitive) product for their client, and if not, then they’ll remortgage them elsewhere.
Clearly, for some, allowing the broker to do their job in that way causes issues in terms of firstly, paying proc fees, but also potentially seeing that customer go elsewhere.
But let’s be clear, such action correctly puts the client’s best interests first.
Even though it’s the right thing for that client to receive advice, and maintain their consumer protections, lenders might argue they have less of a chance of securing that client.
And they’d be right of course. Especially, as brokers have also recently pointed out, if lenders’ product transfer options are not as competitive as they could be.
Adviser enthusiasm a problem
Some lenders might view greater adviser involvement in this sector as a problem, which is why we’re not seeing 100% enthusiasm for it right across the lending community.
Yet, from both a client and an adviser point of view, it makes perfect sense, and with such significant sums of business up for grabs, I can fully understand why advisers want to make greater headway into the product transfer arena.
The important point here to make is around contacting the client early – lenders certainly are when it comes to offering product options, waiving ERCs, and the like.
Wait too long and the customer could already have taken action and used the lender’s technology to transfer – that’s without truly knowing whether the deal is right for them or what’s available elsewhere.
Advisers leaving it a couple of months before deals finish are leaving it too late – six months out (or ideally throughout the entire term) is an ideal time to make that contact and leave your client in no doubt that when they receive their product transfer options, they bring them to you to check against their situation and the marketplace.
It might sound obvious, but you should help these clients make up their minds, and a strong marketing and communication method should be employed to carry that message home.