Ben Marquand: The mortgage market is looking at a downturn well in excess of 15% this year, and according to the Council of Mortgage Lenders only 25% of existing and 35% of new mortgages have some form of mortgage protection insurance. So is it a simple case of brokers selling more insurance to prop up income losses from mortgages?
Phil Rickards: We have reviewed procuration fees recently and if you are operating in a market where there is a considerable shortage of funding, margins have become tight. It doesn’t take a genius to work out you are going to have to review your procuration fee structure. Procuration fees have gone up considerably in the past few years.
Alan Dring: My research over many years has shown about 75% of advisers do not cross-sell because the gravy train has been sufficient to sustain their aspirations. The reality of life is that procuration fees became such an income stream that it distracted them from what they were trying to do. I think I would sum up it as ‘knowledge is power’, and most brokers don’t know their clients. It is very difficult to cross-sell to somebody you don’t know. The knowing process takes time. It is not a two-hour process.
BM: So brokers can’t cross sell effectively because they don’t know their clients?
Jonathan Cornell: In regulatory terms, we do know our clients. But in terms of soft facts – what we know about our customers’ dreams, goals and aspirations – admittedly we perhaps don’t all know the answers. We are mortgage brokers, not IFAs, so we can’t help with savings nor pensions planning. But in terms of protection planning, I think the typical mortgage broker has not been that bothered. They have made enough money from the fees that they never really had to consider protection.
David Sheppard: On the know-your-customer issue, I think a lot of brokers work to a case of knowing their client from a mortgage perspective, but does the fact-finding process actually give you enough information to be able to give good advice on protection? I think it would be better to say applied knowledge is power, because knowledge means nothing if you don’t use it.
PR: The whole topic has become much more interesting given the way the market has moved. It’s about making sure brokers understand their clients’ needs and make the appropriate recommendation. You have to have faith in the professionalism of mortgage brokers to make those recommendations. But time is of the essence. When you are in front of a client, you only have a limited about amount of time – can you go through all those various product sectors? Yes, you should, but in reality, do they?
AD: With all the scaremongering in the headlines, how many brokers are talking to their clients about their current arrears fears and potential? Very few, I’d say. If you look at the added value of an adviser, the confidence I would want as a client is borne out of a whole raft of extended options that I don’t think most brokers capitalise on. I think the arrears question is a big one. How many people coming off short-term deals this year are worried about going into arrears? I think the extension of cross-selling starts with selling yourself and then you sell a broad expanse of options.
BM: So could the threats in the market actually be an opportunity for brokers? Are we saying that if brokers are not re-visiting clients’ protection needs, then they can’t complain when a lender does?
PR: It is an emotive subject. You could use the example of BM for general insurance. We have a requirement to make sure every customer has the minimum amount of cover in place, so all we do is make a call, and if the broker has arranged the buildings and contents insurance for that client then we end the call. We can’t say fairer than that.
Nick Baxter: People often throw their toys out of the pram when they see the lender marketing to the consumer. When I had a consumer-facing arm, with every client I ever saw I would say, ‘I am placing you with XYZ, and your letterbox will flap like hell from the moment you complete. But if you see a product you think you might want then come back and see me, because rather than just being able to work with that one lender, I will shop around and find you a better product’. I saw lenders’ marketing spend as one of my really effective marketing tools.
BM: What is the biggest thing brokers need to overcome – is it a time issue, a skills issue, or an organisational issue?
NB: There are a lot of organisations and distributors who do a lot of due diligence and help brokers to narrow the choices so they don’t have to research the whole market. However, they do have to put some effort in to be clear on what the product is and how they need to sell it.
DS: I think that brokers must position what it is they can do for clients at the outset. Another area where we are probably guilty is how we brand ourselves as ‘mortgage advisers’. You have to put yourself in a niche where the automatic presumption from the client is, ‘this guy is going to sort out my mortgage for me’. Whereas if brokers were using their initial disclosure document correctly and explaining their services right from the beginning, which some surprisingly do not, then that would give them a far better chance of making cross-sales.
BM: What timescale works best for brokers to go back to clients? Every year, every six months, or is everyone different and it just comes down to getting to know your client on day one?
JC: Everyone is different. If you have someone on a 20-year fixed rate, it is pointless calling them up every six months and asking if they need anything. But if you look at a lot of the deals that were being sold – whether they are two years or five years – quite a lot of them are trackers with no early repayment charges. So while the current market suggests it is going to be unlikely you will be able to remortgage someone and save them a lot of money, historically we have been able to re-finance a lot of long-term tracker deals more cheaply during the term. Also, everyone knows someone who needs a mortgage, so if you contact them regularly, you are much more likely to get referrals rather than waiting for the phone to ring.
BM: If we assume a large proportion of people are feeling more of a pinch, how do brokers go about gaining the right degree of knowledge in order to feel more confident selling other products?
PR: One successful model is to make sure you are a firm that has embraced technology. Technology has a massive part to play in helping firms to re-visit client banks and also with record-keeping and research.
BM: What about training in selling insurance products? Who offers help?
JC: In terms of ancillary sales, such as general insurance, HBOS is good. Especially if you want someone to come and talk to you or train your team, they are very obliging. Similarly with its conveyancing proposition. You can get someone from a life assurance company to come out and talk to you, but they are not really going to help you re-write your process to help your team sell life insurance.
BM: In terms of training the next generation of advisers, if we want people who have the skills to sell a wide range of products, where are we going to find them? Are we going to end up with training academies for potential advisers?
NB: I think a lot of distributors help out. We have worked with a number of providers to put together regional seminars for our members to come through. We might only have 10-15 people in a room as a workshop session, but it helps them sell more products. Other mortgage clubs also do this.
JC: There are a few firms taking on staff. I think some of the bigger broker firms, such as Alexander Hall, have a phenomenal sales process they put people through over a year or so. They take on a lot of people and the ones that don’t make it get replaced by the next batch. It would be interesting to look at training academies, where we give our recruits to someone else so they receive training in a generic sales process and learn how to sell other products. But like everything else it depends on the cost. If it is prohibitively expensive then you would think, let’s just do it ourselves on the cheap.
NB: I think that is fine for organisations such as Jonathan’s, but we have got to bear in mind the general make-up of our industry. Most mortgage sellers are less than three sales people strong. If you are a big organisation, you can put together these academies for your staff, but it’s not the same for most brokers. I think about half of these smaller firms are in networks and therefore can access training facilities that way; the other half are sole traders who need other organisations to assist with training. It comes back to joint partnerships.
PR: As a lender, I do not want to sit here and say I think we are doing all we can for brokers in terms of helping their cross-sales opportunities, but we pretty much are. Our business development managers are out there talking about things like our general insurance and conveyancing because the lending volumes are less than they were.
BM: We have mentioned protection, but should we not be saying look at the basics first – the conveyancing, home information packs (HIPs), etc?
NB: There are a number of products that are required on day one, which if the broker doesn’t fix will be fixed by someone else. A lot of brokers aren’t involved in fixing those other products. The general insurance side is the real big one. What percentage of general insurance is arranged by brokers automatically? The answer is very low. I am not sure we need to go off in all the different areas until such time as we can cure this one.
Richard Farr: We have been saying for some time that brokers need to diversify and make every single transaction count. So surely you have to take the low-hanging fruit first. It is well known what has to be done; it is about getting the sales processes aligned so you extract the most out of each product.
NB: So have we perhaps confused the issue by saying, there is general insurance, there is conveyancing, et cetera. Should we just start with the low-hanging fruits? We can say to our brokers, ‘we can help you arrange any types of products that your customers might need’, but have we actually confused the issue and they are voting with their feet?
AD: Creativity and communication are the two elements that make cross-selling that much easier. The likes of conveyancing and HIPs and everything else, while modest in the scheme of things, is like using sprats to catch mackerels. The two essential things you need are to convey it and to get a HIP. They need to be considered as the sprat. They won’t be massive income generators but cross-selling is all about being creative. It is about showing your clients that you have what they want.
RF: There is lots of debate about the potential for growth in the equity release market. I think lenders are looking to diversify, not least because there are different funding models within this sector. I think there is also a lot of interest. Our research says this is the second-most popular area of diversification our members are looking at. What sums up the issue of diversification is the fear of something unknown. You have to do it right. I would say not only equity release but also protection sales are just as important. I have had members asking me, ‘if I diversify am I leaving myself more exposed to regulatory rigour?’ My answer is, if you have the permission to sell them and you are not regularly selling them, it is then that I think you are leaving yourselves more exposed. n
