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‘Lenders just as much at risk as advisers’ from market evolution – Legal & General Mortgage Club

by: Kevin Roberts, director of Legal & General Mortgage Club
  • 29/11/2019
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‘Lenders just as much at risk as advisers’ from market evolution – Legal & General Mortgage Club
The threat of disintermediation in the mortgage market is alive and well.

 

Technology, evolution and the demands of increasingly savvy consumers are challenging the way we do business, and the pressure to prove our worth and add value to the end user is greater than ever before. 

For a long time, there has been a widely held view that advisers and mortgage clubs will be the first victims of the sector’s evolution, but this simply isn’t true.  

The industry as a whole faces disintermediation if we fail to evolve, collaborate and prove our value to the end user – and lenders are at just as much risk as advisers.  

 

Evolving is essential

Across financial services, as well as other industries, it is those who have failed to adapt that have fallen foul of technology, change and innovation, not those who have moved with the times.  

Even the general insurance (GI) market, where the death knell of the GI broker has been touted for 20 years or so, has successfully evolved.  

Vanilla risk areas such as basic home, contents and car insurance are no longer the domain of many general insurance brokers, having been digitised, placed on comparison sites and into the hands of savvy consumers.  

Similarly, the strong high street presence of 10-20 years ago is no longer, yet many brokers continue to flourish in the commercial sector and in complex areas where advice is still very much required.  

This shift in focus has led to an increase in the amount of business being by written into managing general agents (MGAs) and has resulted in a growing number of brokers moving up the supply chain.  

These brokers now take on all aspects of the insurance process including underwriting, pricing, servicing and the payment of claims; they effectively rent a balance sheet from the insurer, who takes on the risk but not the work. 

 

Adviser-lender integration

Is it possible that the mortgage market could witness a similar evolution over the next decade?

As advisers search for greater income streams and move into more advice-rich areas, could we see advisers and lenders become more vertically integrated, collaborative and key drivers of change? 

There is a requirement for greater product innovation in the mortgage market at the moment, with products needing to evolve to meet changing consumer demands.  

Advisers hear about the needs of consumers first-hand and can therefore see areas where truly innovative products could help make a difference. However, it is only through collaboration with lenders and other market players that they can help to build and create these products.

It is the duty of lenders and clubs to listen to this feedback and focus on the way in which we can add value by addressing these needs. If we do not, we are all at risk of becoming obsolete.

We need to build great relationships with our customers and with each other by working together to drive the sector forward.  

Evolution and change is essential, and for those who fail to act, the threat of disintermediation is a very real prospect. 

 

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