Over the past few years there has been a steady decline in many financial markets. And to date it is showing no sign of abating, as it was recently announced the FTSE 100 had fallen for a record number of consecutive days. Due to this, margins are being cut on various products in different financial sectors and this will obviously have a negative on financial advisers’ potential income stream in the future.
However, one sector that bucked the trend in 2002 was the mortgage market and many businesses from outside this sector, such as stockbrokers and pension specialists, are looking to join the big mortgage bubble.
Given the need for financial advisers, and especially mortgage advisers, to keep ahead of the competition and to generate additional income, they are currently in a fortunate position as there are still real opportunities in the mortgage market. It is not a case of working harder, just smarter. Product diversification is key for those wanting to prosper in the future, and to facilitate the requirements of statutory regulation many advisers are now completing financial appraisal forms and obtaining valuable information about their clients.
Reaping the benefits
An adviser can use this information to satisfy customer needs, not only areas such as mortgages but also in payment protection, general insurance (including buildings and contents), personal loans and credit cards. Giving full financial advice enables the adviser to reap the benefit of such information. For example, if a remortgage exercise is not the best solution for a client’s financial needs but a personal loan to refinance a credit card is, then the opportunity for the adviser to complete this business online and get the appropriate procuration fee is waiting to be grasped.
There is an old saying in business ‘Look after me and I will look after you’. The more products an adviser is able to provide to meet their clients’ requirements, the stronger the relationship, and the income stream should last a lifetime.
It could also be said a true adviser is now a ‘walking bank’ who brings financial services to the client instead of the client going to the bank branch.
So what are these products? The most obvious one for mortgage advisers is mortgages themselves. In such a competitive marketplace the number of product providers and total number of products is vast, and has grown considerably in the last five years. Mortgages are no longer products whose sole purpose is to buy property. The sheer variation in home loan products means a mortgage has the potential to be a sophisticated financial planning tool. With stock markets showing little sign of recovery, more people are looking at investing in property. As such, buy to let is becoming a rival to pensions as a retirement planning tool, while self-certification loans can be used by small businesses as a means of raising capital.
The products range from prime business to complex adverse and some providers are also turning to the second charge market to secure lending.
Not only are older people looking to release capital from their property, but parents are also looking for new ways to finance the spiralling cost of sending their children to university. Equity release is another area of growth which advisers are now beginning to recognise. Recently the Bank of England produced figures showing record levels for equity release. This area has become particularly attractive for Inheritance Tax (IHT) investment planning.
The next most logical area to move into is that of general insurance, and especially buildings and contents insurance. It is still a surprisingly common oversight among mortgage advisers not to facilitate the buildings and contents requirements of their clients. All too often a mortgage application is completed and the insurances are handed on a plate to the lender to arrange. To say advisers are giving money to lenders is an understatement when taking into account the commission payments and renewable fee income on an annual basis. In many circumstances the adviser only has to go online and set up the policy, or alternatively just tick a box on an application if the mortgage is being applied through a packager.
Commercial sense
If advisers are looking to get more involved, or are already involved, in commercial mortgages they can supplement the procuration fee on the mortgage with a number of insurances. Various products are also available online for commercial customers. Commercial loans have always been big business and the additional income related products offer additional support. For example, dedicated insurance policies to cover specific trends and option such as goods in transit, legal expenses, loss of income, and theft by employees.
If the commercial mortgage is a buy-to-let deal then specific buy-to-let insurance is another product area that is growing rapidly. These types of products can include covering landlords contents, properties occupied by DSS tenants, students or even unoccupied periods.
Another increasingly common insurance is income protection. A growing number of people are becoming self-employed, or work on short-term contracts or in ‘non-traditional’ bands of employment. With fears relating to a downturn in the economy there has never been a better time to sell mortgage protection insurance to provide peace of mind for clients. The new breed of income protection products being marketed by more innovative providers and networks are not only cheaper than older style products but also provide a range of additional benefits such as cover from day one, and other benefits such as help to write a curriculum vitae.
Recent announcements within the life assurance industry and likely changes to critical illness policies may also offer brokers an opportunity to review their client bank and offer timely financial advice.
Another idea is medical insurance. It is a fact that the majority of people would like to have private medical insurance (PMI). And again, the process can be simple ‘ with online applications and competitive commission rates. Cases can vary between comprehensive ‘ to include all inpatient and outpatient treatment ‘ to budget plan ‘ some for inpatients only or even cash plans.
Other insurances that could also be sources of additional income include travel, pets, caravan, weddings, medical equipment, machine and sports equipment.
Another lucrative addition to an advisers’ range of services is personal loans. With credit card debt rising to an all time high, a growing number of people are looking to consolidate their debt in this way, and more advisers are recognising they can complete a personal loan application and transaction for their clients online. It is a simple non-time consuming exercise that can again generate additional income. In the past, many potential clients have been left to their own devices and invariably have taken a walk through their high street bank branch door or responded to direct mailing. How simple it could be to say to a client: ‘If you are thinking of arranging a personal loan, please come to me first. I am just a phone call away.’
Commission is favourable and an adviser can generate income for as little as 15 minutes work. Again, increased commission can be generated with the sale of payment protection associated to the loan.
Having mentioned credit cards already, it is also worth noting they can also be a way of generating business. A simple credit card application, which has been accepted, is again a potential commission to be made. There has never been a better time to get involved in this type of business and yet again advisers are only a phone call away. Many adverts prompt the transfer of balances from competitor cards offering interest free deals. An adviser can easily complete a credit card application and earn either an introductory fee, or a regular commission payment based on usage and outstanding balance.
While these products are commonly used in the financial services industry other opportunities are also coming to the fore.
Good will writing
Many mortgage advisers are now looking to move into the will sector in order to get a lead into complete financial advice. This is an opportunity to introduce a complete financial review and obviously can include IHT0 planning, as advisers can link up with providers who will provide assistance in the process and cover areas such as standard wills, property trusts, discretionary trusts, and lifetime Interest in possessions trusts.
So where can mortgage advisers go to get these products? Market research has proven in the past that the easier the process the more likely the sale, and consequently mortgage and insurance product providers are changing their strategy and are now trying to design a ‘one-stop shop.’ Developments in technology are now enabling advisers to source from a panel of providers not only for mortgages but also the products described. This means the financial adviser now becomes a ‘walk-in bank’ or if heavily involved in technology, a ‘virtual bank’.
Working smarter and not harder to increase income streams can only be good for the adviser and their clients. With true financial planning advice, clients do not want to go anywhere else and see their financial and increasingly their mortgage adviser as the answer to their present and future financial needs.
