There is a scene in the film The Untouchables where Al Capone (played by a thick set Robert de Niro) is holding court at a dinner populated by his legion of Chicago lieutenants. Capone is not best pleased by the work of Elliott Ness, and he uses a baseball metaphor to impress on his men the need for them to pull together. A batter standing on the plate needs to display individual brilliance, he says; however, when that same man is out in the field, he is now part of a team. “Teamwork”, the subordinates repeat; without a team, the individual is nothing.
While Capone goes on to demonstrate the uses of a baseball bat rather more forcefully than his lieutenants might like, his initial baseball metaphor holds true. Although intermediary firms may currently feel that they now stand alone, without a team, they are unlikely to make it through these particularly difficult economic and market conditions.
In the mortgage industry, individuals and firms cannot stand alone. Where would advisers be without clients? Where would they be without providers’ products to advise and recommend on? How would they source the products that are available without the sourcing systems? Brokers are all interlinked in so many ways, and the industry fails where one part of the chain decides it no longer needs the others.
It is therefore vitally important that those who intend to remain in the mortgage market secure the relationships which they may have either let slip or previously assumed that there was no chance of forging. The economic slowdown has taught us many lessons about the market, most of them unpleasant. However, one thing we must learn is that all bets are off. In years gone by, allegiances and alliances were formed and often seemed set in stone. Many firms felt that they could not break the relationship chain in order to cut a deal and forge a new partnership.
Those days are over, and with people leaving the industry in substantial numbers, one can only surmise that their relationships will also be dead in the water. The news about the contraction in broker numbers is not a cause for rejoicing. Any market needs competition, and it seems ironic that at a time when consumers need financial advice perhaps more than ever, they will face greater difficulty in finding that advice.
The Association of Mortgage Intermediaries (AMI) recently estimated that around 40% of brokers will leave the market in 2009. This follows the 769 firms that left in quarter four of 2008. This is a substantial number, and there will be many this month who will not renew their permissions with the FSA to conduct business. This year, we have already seen a number of high-profile firms exit the market, and it will not end there. However, it is one thing to sit and look at these exits and get depressed about the market; it is another to review one’s own business model and strive to make the best of the opportunities that still exist.
If AMI’s predictions do come true, then there will clearly be issues to address for those that remain. Notably, how do those firms continue to operate within this new market, and how do they continue to gain clients, provide an advice service and make a profit? With so many firms out of the way, there will obviously be something of a vacuum of mortgage advice and it is important that those remaining do their utmost to fill this. This means that now is the time to stand up and be counted; now is the time to review the firm’s proposition, ensure it fits the new market environment and seek a competitive advantage over those that remain.
In this situation, we have decided to take the bull by the horns and not only stand up for our proposition but shout as loudly as possible about the continuing need for consumers to seek professional mortgage advice. We believe there has been something of a void in terms of firms pushing the intermediary message; there has been no coherent pattern for the intermediary market to get behind and too few firms are willing to position themselves as ‘go to’ propositions for those seeking mortgage advice.
The back-foot approach that many firms have adopted is perhaps understandable given the battering the intermediary market has taken recently. The list of issues we have all had to contend with seems endless – dual pricing, product withdrawals, never-ending criteria changes, falling property transaction numbers, the impact of internet search engines. And yet mortgage advice is still in demand, and one can just about sense a slight turnaround in terms of market activity as well. It may be somewhat anecdotal but we have already seen the recent RICS survey which said buyer interest was on the rise, while Conveyancing Alliance Limited also revealed an increase in purchase activity in 2009.
Many potential borrowers are now looking at the property market as one which has bottomed out; one which they are looking to return to, be they first-time buyers, home movers or investors. These may not be the remortgagors of old, that often made up the bulk of most brokers’ business, however they are a potential new source of business that firms should actively go after. We are therefore back again to building relationships and ensuring that where the clients do exist, your firm is able to prove its worth and provide the service.
One relationship which has lapsed is with local estate agents. In years gone by, agents cottoned on to the fact that with a booming market, it made sense for them to have in-house mortgage advisers that could provide another income stream. This is certainly not the case anymore: advisers operating from estate agents’ offices have just about disappeared.
Most homebuyers stepping into an estate agents’ office will still need mortgage advice. If the agent cannot provide this in-house, then who do they recommend to their clients? Why isn’t it your firm? We have worked with a number of estate agents, both those with physical practices and the increasing number of online-only operations, to ensure the mortgage advice needs of their clientele are met. If purchase business increases, then this new breed of purchaser may have no adviser allegiance, no experience of using an adviser, and so the intermediary has plenty of opportunity to forge this relationship and ensure that it not only lasts but potentially brings in future referrals.
Do not be put off, just because an agent already has an existing relationship with an adviser. It may well be that the agent is not getting the service they wish from their existing intermediary firm, but they have not yet got around to looking for alternatives. Also, many agents will want to keep costs down for their clients, therefore the relationship that they will want is with a firm that offers fee-free advice. A number of larger intermediary firms have to introduce a fee structure for their clients – this may not be the right proposition for agents to offer anymore and therefore a new relationship could be forged.
Think of the other professional firms in your area which could provide clients for your business. Local accountants will have many individuals and firms on their books that need financial and mortgage advice. Now is the time to ensure they are aware of your services. There may also be IFA practices that no longer offer mortgage advice: they too could be looking for a trusted partner to provide this service while keeping control of their clients’ affairs.
Relationships and business partnerships go beyond the intermediary firm’s simple acceptance of the clients of other professions. This is a two-way street, and existing clients of the intermediary will have other needs which should be addressed, if not by the firm itself, then by introduction to another specialist. Diversification has been a key word for all mortgage intermediaries particularly over the last 12 months, which has meant many firms exploring other sectors and providing additional services, rather than just mortgage advice. How many intermediary firms are able to offer a will-writing service? I would imagine very few, but there is surely an opportunity to put the client in touch with a firm that can meet these needs.
We hear much about the ‘360-degree’ broker, but this should actually mean the servicing of the ‘360-degree’ client. Think of all the financial and financial-related needs you have. It is not just the mortgage but insurances, savings, investments, banking, loans, credit cards, utilities – the list goes on. To survive in the modern world, we all need to ensure that we get the most appropriate and most competitive products available. This is where the intermediary comes in, providing a service that the client simply cannot do without. In order to provide these services, the firm must build new relationships in these areas – again no firm is an island, and they cannot offer the necessary products or services without the partnerships already being in place.
The key point in all this is visibility. If no-one knows the firm exists, then the market will be even tougher. As Capone himself might have said, you need to put yourself about a bit. Make the initial contact and ‘sell’ the advice and services that you are able to offer.
For example, how about using the local newspaper? Offer to write a weekly financial advice column and set yourself out as the local expert in the field. Marketing is an essential part of any business enterprise; those that want to survive the recession and the downturn will need to keep their firm highly visible throughout. The market will eventually recover and those that have worked hard to keep their exposure high, and built and nurtured new and existing relationships, will be the first ones to benefit from any upturn. n
Martin Gilsenan is corporate relationship executive at Email Mortgages
