Most IFAs only transact mortgage business to increase protection and investment business and would gladly turn their back on giving mortgage advice if they could generate the same level of income elsewhere.
The finding was revealed in a survey, conducted by Mortgage.Com. Limited, where 84% of the 300 IFAs surveyed said they disliked conducting mortgage business.
The research suggests that a significant number of advisers could give up on the mortgage market altogether, passing business to the growing number of referral services to avoid regulatory hassle.
Stuart Wilson, sales director at Mortgage.Com.Limited, said: ‘We tried to identify why IFAs wanted to do mortgage business in the first place. We found that it was not the mortgage processing that was the motivation, as IFAs prefer to work on protection and investment business.
‘Over 60% of mortgage advisers have not qualified for the December exam deadline and this is sending worrying signals across the industry. Advisers are looking at ways to outsource mortgage business while ensuring the customer is passed back to them for the protection business, not the lender.’
Mortgage.Com.Limited is the latest referral service to launch. The service allows advisers to earn commission from mortgages without giving advice to customers, bypassing the cost of regulation and the need to sit exams. Advisers simply refer clients to the company, which will source the best mortgage deal, ready-packaged and processed, back to the customer.
According to Wilson, advisers are paid commission of between £100 and £200 for each case referred.
Large IFAs such as Savills provide similar services, as does The Mortgage Operation (TMO). Wilson said that such referral services will become more popular as advisers shy away from referrals direct to lenders.
‘The survey revealed 70% of IFAs feared cross sales. Lenders are adept at providing all-encompassing services. IFAs realise that customers will be offered both mortgage and protection products by lenders. If advisers refer clients direct to lenders they risk losing out on other business. We will see more services like ours emerge to solve this problem,’ he said.
Christian Lennon, marketing manager at TMO, agreed: ‘A lot of advisers object to the exams and feel like they are being made to jump through hoops. Non-regulated products will undoubtedly become more important to advisers and using a service such as ours means they can ensure it is only the mortgage that is outsourced.’
Mike Boles, director at Savills, said less competition could be good news for advisers remaining in the market. ‘We have already noticed a trend of firms withdrawing from the market if mortgages are non-core business. However, this trend could spell good news for those advisers that concentrate on mortgage business and do manage to stay in the market,’ he said.