Brokers told Mortgage Solutions that looking beyond the mainstream residential and buy-to-let markets makes sense, particularly given the potential market difficulties ahead, but suggested that this can be harder than it looks.
Just this week Coreco announced that it was setting its sights on commercial, new build and equity release as part of its own diversification strategy.
But what other areas are brokers looking into? And how important are partnerships for diversifying intermediaries?
Developers need help
James McGregor, director of Mesa Financial, said his firm is always looking for new areas where it can diversify to add value to its client base. He explained: “As a business our whole model was built around servicing our clients financial positions as opposed to focusing on the products.”
As a result, Mesa currently has two big areas of focus for diversifying its business, starting with development.
McGregor added: “The development space is one we have always had a hand in, but believe there is huge growth to be had for advisory firms within this space. As the landscape becomes a lot tighter for developers, with the cost of materials and the cost of lending increasing, and contractors looking more vulnerable by the day, developers will soon need advice navigating the lending market a lot more than they previously did.”
Branching out makes sense
Aaron Strutt, product and communications director at Trinity Financial, noted that in recent years his firm has helped arrange commercial mortgages and bridging loans alongside regular residential and buy-to-let mortgage business.
He continued: “Commercial mortgages can be pretty specialist, so we’ve worked with Connect for Intermediaries and The Loan Partnership to ensure our clients get the best possible deal.
“We could quite easily be entering a tricky period for the mortgage market, so branching out to try and get more business seems sensible.
“More of our brokers are keen to register and arrange equity release to tap into the older borrower market.”
Specialist help needed for struggling borrowers
Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management, said that one area she’s keen to do more with is adverse and sub-prime mortgages, off the back of the ongoing cost of living crisis.
She explained: “It may well be that we see more missed payments and defaults on credit agreements in 2021 through to 2022, with consumers borrowing more to keep up with their rising costs of living. Specialist advice from a qualified whole of market mortgage broker will be vital in these situations to ensure that they can access the most suitable mortgage options.”
Bickford added that this situation would also impact later life borrowers, which “spurred me to spread the word on how releasing equity from their homes can potentially be the answer to a more comfortable retirement”.
Get up to speed with equity release
This was echoed by Dominik Lipnicki, director at Your Mortgage Decisions, said that diversification is important for brokers, noting that his firm looks at assess client’s financial circumstances across the board “which means that advice and referrals are in their best interests in areas such as estate planning, life and health insurances and financial planning.”
He added that brokers who are not qualified in equity release should still look into the sector, or at least work with a referral partner for those instances where a client over 55 might benefit from releasing equity in their home.
“In our aging population and with the cost of living crisis biting, all mortgage advisers should understand how equity release works,” he concluded.
The right skillset
Protection is also a focus for McGregor, who explains the priority has been building out the correct in-house expertise .
He said: “It is rare you come across advisers that have a full skillset in advising on a client’s full protection needs. With the right people in house this can be a huge growth area.”
How to get diversification right
So what do brokers need to bear in mind if they are looking to branch out into new areas of the market?
For McGregor, it’s crucial to first partner with firms that are experts in the field before venturing into that market yourself. He added: “This can be a huge knowledge bank; you can then decide how this can then transfer into your own business.”
Bickford adds that passion is crucial. “Simply offering a transactional service, because it is popular, won’t work. You need to enjoy the topic and feel passionate about making a change, or helping clients in that particular area.”
However, it’s also important that brokers are aware of their own limits. Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, notes that standard residential is now a very complex business, with more and more cases having complicated features, which makes it important for brokers not to spread themselves too thinly.
She added: “I tend to outsource anything too specialist ‒ such as bridging ‒ as you cannot be good at everything.”