Pipeline pressure: Why growing business doesn’t mean growing profits – Flavin

In today's mortgage market, many advisers are experiencing a puzzling problem. Their business pipelines are getting bigger, but their bank accounts aren't reflecting this growth.

What’s causing this disconnect, and more importantly, how can advisers adapt to protect their cash flow? 

 

The slow-motion market 

Estate agents across the country are telling a similar story. Properties that once moved quickly through the sales process now seem to crawl. Where agents could previously ‘turn stock’ (complete the full sales process) four times annually, they’re now managing just two-and-a-half turns per year. This 37.5% slowdown isn’t just a problem for estate agents – it creates a ripple effect that directly impacts mortgage advisers. 

For advisers, this market slowdown means that the commission payments once expected within three months are now taking five months to materialise. This extended timeline puts enormous pressure on business cash flow, even as advisers work harder than ever. 

 

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Why are cases taking longer? 

Several factors are contributing to these delays: 

Lender processing backlogs 

Many lenders are struggling with staffing issues and increased application volumes. What once took days now often takes weeks as applications sit in queues waiting for review. 

More complex cases 

Today’s borrowers often have more complicated financial situations. The rise of self-employment, multiple income sources, and complex credit histories mean each case requires more documentation and scrutiny. 

Conveyancing bottlenecks 

The legal side of property transactions is experiencing significant delays. Many conveyancing firms reduced staff during quieter periods and are now struggling to handle current volumes. 

Local authority searches 

Some local authorities are taking months rather than weeks to return search results, creating unavoidable delays in the purchase process. 

 

The fall-through problem 

Alongside these delays, advisers are dealing with another troubling trend: higher fall-through rates on property purchases. When a sale falls through, all the work an adviser has put into arranging the mortgage comes to nothing. No completion means no commission, regardless of how many hours were invested. 

These fall-throughs can happen for various reasons: 

• Buyers are getting cold feet due to economic uncertainty
• Survey issues revealing property problems/down values
• Chains are breaking down because of delays elsewhere
• Buyers are losing mortgage offers as extended processes push them beyond offer validity periods

 

The cash flow crunch 

The mathematics of this situation creates a perfect storm for adviser cash flow: 

1. Extended pipeline: Cases taking five months instead of three months to complete (a 67% increase in time)
2. Higher fall-through rate: More cases failing to reach completion at all
3. Resource allocation: Staff time tied up in cases that take longer to pay out

This combination means that even though advisers might be writing more business than ever before, their actual cash receipts are becoming less predictable and often lower than expected. 

 

The hidden costs

Beyond the obvious impact on commission receipts, these extended pipelines bring additional costs: 

Customer service pressure 

Longer processing times mean more client queries, updates, and management. This increased communication requirement can significantly add to workload. 

Repeat work 

When cases exceed mortgage offer validity periods, advisers often need to resubmit applications or find new products, essentially doing the same work twice for a single commission. 

Also, many brokers offer to replace the mortgage should a lower rate become available during the application process. Obviously, the more time that lapses, the more likely a rate reduction, causing more resubmissions. 

Staff morale 

Teams working hard but seeing fewer cases complete can experience motivation challenges, especially when remuneration is linked to completions. 

 

Adapting to the new normal 

So, what can mortgage advisers do to protect their businesses in this challenging environment? 

Manage client expectations early 

Be upfront with clients about current time frames. Setting realistic expectations from the start prevents disappointment and reduces the time spent managing client queries. 

Be on the front foot with keeping clients informed, making weekly updates part of your process. 

Review your fee structure 

Consider whether your current fee structure remains appropriate in an environment where cases take 67% longer to complete. 

Options include: 

• Application fees to cover initial work
• Staged payment structures
• Higher overall fees to reflect the additional work and extended time frames
• Administration fees for rekeying cases when rates drop

 

Diversify income streams 

Protection sales, general insurance, and other complementary products can provide faster income to support cash flow while mortgage cases progress. 

Streamline your processes 

When external factors slow things down, internal efficiency becomes even more critical. Review your case management systems to identify any areas where you can save time. 

There are many tools and artificial intelligence (AI) assistants that can help with document chasing and analysis so embrace anything that can help with efficiency. 

Build strong lender relationships 

Understanding which lenders are processing cases more efficiently can help you place business where it’s most likely to complete promptly. 

 

A cash flow management strategy 

Every adviser business needs a robust cash flow management strategy in the current climate: 

Cash reserve planning 

Build a business cash reserve that can cover at least 3-6 months of operating costs, accounting for the extended pipeline period. 

Regular pipeline reviews 

Weekly pipeline reviews are essential to identify stalled cases and take proactive action. 

Financial forecasting 

Adjust your business forecasting to account for longer completion times and higher fall-through rates. 

Looking to the future 

Will processing times improve? Most industry experts suggest that the current extended timelines represent a ‘new normal’ rather than a temporary situation. While technology improvements may eventually speed up some aspects of the process, advisers should plan their businesses assuming that the current timeline will continue. 

 

The silver lining 

Despite these challenges, there are opportunities for well-prepared advisory businesses: 

Value of advice 

The more complex and time-consuming the mortgage process becomes, the more consumers value expert guidance through it. 

Competitive advantage 

Firms that can manage these extended pipelines effectively gain a competitive advantage over those struggling with cash flow issues. 

Business valuation 

Advisory businesses with solid cash flow management strategies and diverse income streams are attracting higher valuations from potential buyers. 

 

Taking action today 

What can you do immediately to address these challenges? 

1. Analyse your current pipeline: Calculate your average case completion time and fall-through rate.
2. Review your cash reserves: Ensure you have sufficient reserves to weather extended payment time frames.
3. Examine your fee structure: Consider whether it remains appropriate for longer processing times.
4. Communicate with clients: Set realistic time frames from the first meeting.
5. Build lender relationships: Identify which lenders are processing efficiently in the current market.

 

Conclusion 

The extended pipeline challenge isn’t going away anytime soon. However, by acknowledging this new reality and adapting your business model accordingly, you can maintain a healthy cash flow despite longer completion times. 

Remember that growing pipelines are still a positive indicator – they show your business is winning clients and writing mortgages. The key is to ensure your business model accounts for the extended time to completion so that your cash flow remains as healthy as your pipeline. 

By taking proactive steps today, you can ensure your business remains profitable even as the mortgage process continues to move in slow motion.