There is no denying that the mortgage industry is undergoing a revolution at the moment. With advisers falling under the control of the FSA, compulsory examinations in the not too distant future, and the review of the Consumer Credit Act on the horizon, most of the market’s attention is on regulation. However, there is still a steady flow of technological developments giving brokers the tools to improve their business processes.
As far as the press is concerned, column inches have focused on the emerging trading platforms and the race to gain the support of lenders, not to mention the automation of various processes such as online applications and credit checking.
This news all tends to come from the technology providers, but what do advisers make of these latest developments and how are they affecting their day-to-day business?
It is a fair bet that few advisers have seen their business revolutionised by technology, but equally few do not rely on technology in some shape or form.
It is still theoretically possible to complete a mortgage without a computer. However, according to James Rodea, business development director of Hamptons International Mortgages, this can be unnecessarily time consuming. He says: ‘You can start off without using too much technology. However, as soon as you get to a certain number of cases, tracking them and chasing the lenders without some form of computer system to log them and record details would be very difficult. It’s also very hard to source the best deals without using a system like Mortgage Brain, but in terms of the actual processing of the mortgage it’s all pretty straightforward.’
As Hamptons only set up its mortgage broking arm in November, the company is building up its systems from scratch and is not too badly burdened by older systems that must be integrated into the present operation. However, it is finding that the necessary systems are not readily available and as a result it is looking at bespoke options. Rodea says: ‘We are shopping around for a database provider but it is very hard to find one that provides both mortgages and financial planning software, normally they are custom made for either mortgages or financial planning, but not both.’
Integration is the key
William Law, managing director of IFA Law & Company, found his company in a similar situation to Hamptons, with problems arising from the fact that different software packages do not integrate with each other. He says: ‘We rely on technology for the vast majority of our mortgage process, from illustrations, to tracking the progress of cases or organising things to do ‘ it is all computerised. We use a sourcing system to find the best deals online but all the back office functions are computerised on our own system. We didn’t want to create our own but we had to. Unfortunately there is not one mortgage tracking system that allows you to do it all, from the illustration to the back office work, which is very poor. Especially now that the FSA is taking over, there should be an integrated system available.’
Rod Murdison, proprietor of mortgage brokers Murdison & Browning agrees that it is difficult to find suitable software and with bespoke products costing so much, most advisers have to make do with a less than perfect system. He says: ‘I bought ACT, the database management system off the shelf. The difficulty is most people are one or two-man bands and the sheer cost involved in buying bespoke systems is vastly out of our range.’
However, while the system may not be ideal, it has enabled the brokerage to manage its client database more effectively. Murdison says: ‘I am only just getting into database management. If we go back four years or so most special rates had redemption penalties, so once a mortgage was signed that was it, until the client moved, so mortgage broking was all about getting as many new clients in as possible. Now the mortgage situation is more fluid and it’s a case of managing a portfolio of clients that may have remortgaging opportunities.’
It is obvious that technology in the mortgage market is progressing in fits and starts. Ideally an uncomplicated mortgage case should need no manual input from a human at all, but even using systems to their maximum, different lenders and sourcing systems will have a number of different ways of gaining access, finding information and presenting that information. This is time consuming and as a result advisers would rather use just one piece of software.
Joined up thinking
Neil Franklin, partner at Franklins Financial Services, puts the case well. He says: ‘Everybody seems to be going off down their own little road, trying to make money by themselves and everybody is reinventing the wheel. I would like to see a consistent database system. One of the problems, to use Mortgage Brain as an example, is that they run their own database. So effectively I would have a database on Mortgage Brain, and a database on my own system for a variety of financial planning services, but no way of transferring information between the two. Not only is this annoying but there are genuine problems with keeping multiple databases, you are either duplicating or keeping it all in one place, making things difficult to find.’
Judging from this sample of mortgage advisers, database management is a subject close to their hearts. With the Government announcing in December that the FSA is to regulate advisers directly, the degree to which compliance can be automated is becoming increasingly important, but it is still far too early for any assessment of future compliance software needs under the new regime.
However, technology can help advisers meet existing compliance requirements.
Murdison & Browing, a smaller operation and therefore more typical of the industry norm, uses the compliance functions available through its mortgage sourcing system when possible. Murdison says: ‘Everything that helps with the compliance function, particularly automatically produced paperwork from the mortgage systems, is welcome.’ However, Murdison does foresee a further compliance burden: ‘I can see mortgage broking following the path of other financial services, where you must clearly show that you have given best advice. This means you would be obliged to keep more than one system going,’ he says.
There is no doubt that a bespoke system can have more powerful compliance functions. Hamiltons does not intend to use its sourcing system as a compliance database. Rodea says: ‘We don’t expect to rely on our sourcing system for compliance at all. We have applied for Mortgage Brain, and it will just be used to make sure we are aware of the deals in the marketplace.’
Law & Company is further down the technology road than Hamiltons and already has a bespoke system in place with compliance functions built in, but the situation is not perfect as compliance requirements are not finalised. Law says: ‘We have a paper-based system for compliance as well as our own software. We would like to use an off-the shelf system, if there was one, as there is no point in us fine-tuning our system every time something changes. If someone would create a suitable system then we would use it.’
It is not surprising therefore that paper records remain the most trusted method of warehousing data to ensure future compliance issues do not raise their head. Computer systems go out of date and can be corrupted, leading to unreadable files. While electronic backup is seen as sensible, advisers are reluctant to abandon traditional methods of data storage.
Franklin says: ‘A mortgage can last a long time. I have had people get back to me after 17 years, so if you have not got records you can access then you may have a major problem. It is all very well storing records electronically but in 20 years chances are that nobody will know how to access them.’
Overall, it seems the main problem is the integrating of back and front office functions, however the importance of compliance functions can only grow as the regulatory mist clears. Over time the market will move more and more towards technology as a means of doing business. Some lenders can accept applications electronically, while all the time more and more parts of the process are being automated.
Technological development has so far been fragmented, but with most aspects of the mortgage sale now automated it cannot be long before each individual process is integrated to the next. Only then will technology genuinely meet the needs of the adviser.
Technology can now assist advisers in most aspects of the mortgage sale.
The lack of integration between front and back office systems is a major source of frustration for advisers.
Off-the-shelf software packages can seldom meet all the requirements of individual broking firms.