The benefits of looking beyond free legals for advisers and clients – Singh

When a product comes with ‘free legals’ – or, as they now tend to be called because of an acknowledgement there is nothing ‘free’ about them, ‘fees-assisted’ legal services – there may be a temptation to regard the conveyancing requirement as dealt with, particularly when the alternative appears to involve asking the client to find and pay for their own conveyancer.

However, that is increasingly an incomplete picture because cashback alternatives are readily available across the vast majority of mainstream lenders’ remortgage product offerings, often allowing the borrower to take a cash contribution towards conveyancing instead of using the lender-arranged legal service.

For advisers, that should create a conversation rather than an automatic decision.

What does the client actually get?

As mentioned above, the terminology used around lender-arranged legal services is worth considering because ‘free legals’, ‘fees-assisted legals’ and similar descriptions can cover different propositions, and they do not mean there will never be anything for the borrower to pay. Quite the opposite.

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Depending on the proposition and transaction, there is likely to be work or costs that sit outside the standard service, which is one reason advisers should understand what is actually included rather than relying solely on the headline description.

The alternative cashback route also needs to be considered in context because the amount available can represent a significant contribution towards independently arranged conveyancing and, in some circumstances, may be sufficient to cover most or even all of that cost.

That potentially gives the client greater choice over who handles their transaction while allowing the adviser to recommend a conveyancing solution they know and have confidence in, rather than simply accepting whichever legal provider accompanies the mortgage.

Compare the whole proposition

None of this means cashback will always be the better option, nor should advisers automatically disregard a lender-arranged legal service, because the right answer will depend on the mortgage product and the client’s circumstances.

One particularly important consideration is whether the mortgage pricing is identical between the cashback and lender-legals versions, because that is not necessarily the case across every lender and product.

The comparison therefore needs to go beyond asking whether the client would prefer cashback or legal fees to be covered, and instead consider the mortgage rate and product fee alongside the value of the cashback, the likely conveyancing cost and what each legal service includes.

That is no different in principle from the work advisers already undertake when comparing products with different rates, fees, incentives and overall costs, because the most attractive headline feature does not necessarily produce the most appropriate overall outcome.

A panel needs to be managed

This also raises a broader question about what advisers should expect from a conveyancing distributor when opting for a cashback arrangement, because access to a quoting system and a list of law firms should only be part of the service.

A properly managed panel should involve knowing the firms on it, understanding their service levels and capacity, identifying where individual conveyancers have particular strengths and maintaining the relationships required to address issues when they arise.

For a remortgage client opting for cashback, that means an adviser should be able to understand what an independently selected conveyancing option will cost, what is included and which firm is appropriate for that particular transaction.

The distributor should be adding knowledge and support to that process rather than simply presenting a series of prices and leaving the adviser and client to work everything else out themselves.

Make conveyancing part of the advice conversation

Advisers spend considerable time establishing the client’s circumstances and assessing different mortgage products before making a recommendation, yet the conveyancing element can sometimes still be treated as something that happens afterwards and largely outside that conversation.

With cashback alternatives now so widely available, I think there is a strong argument for changing that approach, particularly because advisers have an opportunity to help clients understand that accepting the lender-arranged legal service is not necessarily their only, or best, option.

This is not about suggesting one route will always be better than another, because it won’t, but it is about making sure the client understands the choice available and what each option actually means.

If cashback can fund most or all of an independently selected conveyancing service, that surely deserves to be considered alongside the lender-arranged alternative rather than overlooked simply because ‘free’ or ‘fee-assisted’ legals appears on the mortgage product?

For advisers who want to remain involved throughout more of the client’s transaction, that conversation should increasingly be part of the service they provide.