Recognising the changing market place over the last twelve months with a decreasing market for mortgages and a resulting decreased income from this sector, it is important for mortgage advisers to recognise new business opportunities developing as a result of the current economic climate
There is no doubt that debt advice is a market that is growing fast and will continue to do so for the foreseeable future. There is no question that with unemployment rising and incomes decreasing or remaining flat, many people are going to find it very difficult to maintain their existing credit commitments.
No one perhaps really appreciates the mountain of personal debt that exists and the problems that are being experienced by those people who find their finances out of control.
Did you know for example that today in the UK average unsecured credit debt per household is £21,750, while a house is repossessed every 10 minutes? One person every 4.5 minutes is declared insolvent or bankrupt and one in every 33 is estimated to become unemployed this year. The Citizens Advice Bureau is now dealing with over 7000 new debt enquiries every day while one in six people state that they are unable to cover their credit commitments. The point is further emphasised by the 902,000 people who have missed a mortgage payment in the last six months – equivalent to 8% of all mortgages.
Some startling numbers and you can appreciate why there is an opportunity for you to enter this market and provide a high value service with a range of debt advice solutions to help clients get back in control of their finances.
The debt advice market is not a new one – there are long established companies who have traditionally provided an arm’s length service to their clients with advice by telephone, but the profile of the client is changing. Traditionally, debt management companies have generated their business from direct marketing, and above the line marketing on digital television and the tabloid newspapers. However, with unemployment increasing month by month and predicted to rise by over a million in the next year, traditionally the typical client for a mortgage adviser, who has in the past always managed their borrowings now faces the stark reality of having insufficient income to maintain their payments, and may have limited opportunity to find alternative employment.
These clients need help and whereas they have always been able to arrange a face-to-face meeting with an adviser for their mortgage or other financial services, there is a real gap in being able to get face-to-face advice from a professional adviser on how to cope with these extreme difficulties.
Important steps
So what does it take to get into this expanding market? The first step is to find out more about the potential market. There is a lot to find out and as always the internet is the place to go. It is important to view a number of the websites of top debt management companies.
It is essential brokers find out what the solutions available to the client are – debt management (Trust Deed in Scotland), IVA and bankruptcy. Understand the parameters of each solution and what would be the best advice for clients.
It is important that you investigate the specialist debt management companies. You must ensure that you select the right partner – one that is offering a good range of services, good service, good commission terms and is competitively priced
Debt advice
The debt advice market is not yet regulated by the FSA but there is a strong possibility that this will change in the near future. It is therefore important to establish that your partner is financially strong, can operate in a regulated regime and has current experience of that. Many debt management companies are also in the business of providing mortgage and secured loan services to their clients so you would ideally wish to be involved with them.
It is vital that brokers develop a marketing plan in order to find out the best ways of developing business. As with the mortgage market, there are many ways of going about this and much to consider. Advertising in the local paper, marketing flyers to households in the neighbourhood, developing relationships with local professionals and marketing to your existing clients are all useful strategies.
Finally, the development of a financial plan is essential. Look at the opportunities to develop a business in this area. What are the commissions from providers? Also you must consider the opportunity to charge a fee, while exploring what other opportunities there are to generate incremental sales and income. n
