In the mortgage market we must always make time to consider emerging risks, such as the real or perceived threats that could materially damage the advisory community.
Such threats have been many and varied in the past – in my time in the market they have moved from the introduction of statutory regulation from a self-regulated regime (hard to imagine, these days), to dual-pricing by lenders, to the Credit Crunch, to direct-only distribution channels, and today they include, for instance, robo advice and execution-only.
The point is that threats to the sector and to your business will always exist and it’s therefore about broker firms recognising them and planning and preparing effectively to stave off any impact the risks would have.
Just recently, there’s been a lot of market chatter about whether the advisory sector will be able to hold onto its vanilla/mainstream business, given an increase in options for robo advice and the view that the FCA is keen to facilitate more execution-only business for those borrowers who it believes do not require advice.
There is so much wrapped up in that one regulator stance that it’s difficult to unpick, but my view is that advisers should not simply be rolling over when it comes to mainstream, residential business, and conceding it to non-advised or robo solutions. Of course, there are growing opportunities in the specialist and later life lending markets for advisers, and I would encourage firms to pursue those, but that doesn’t mean the ‘bread and butter’ of residential mortgages can’t still be a foundation of any mortgage broking business.
It may well be that, over time, brokers shift slightly towards these more specialist sectors and there’s no doubting that having skills and experience, and a quality service proposition in these areas, is going to be valuable. However, the nature of securing a mortgage – and the importance of that mortgage to an individual’s overall finances – often means that there is real demand and need for advice, whether you are regarded as a ‘vanilla’ borrower or not.
In other areas too, there appears to be a perception that the mortgage advice market is simply about the provision of advice in certain sectors and not others. For instance, we will all be acutely aware of how business has fared in the purchase market over recent years; market data tends to reflect a ‘bumping along the bottom’ view of activity here, when actually – if advisers can get their marketing and service proposition right – there is still a considerable amount of business to aim at and a healthy first-time buyer sector, for example.
Stonebridge’s own data reflects how the perception of today’s market as unduly reliant on remortgages is, quite frankly, wrong. At the end of last year, our purchase/remortgage split was 43%/57%, however at the end of this half-year, that had changed to 52%/48% in favour of purchase. I suspect there would be few commentators predicting that the majority of business, across a large network like Stonebridge, would be in favour of purchase, but that’s exactly the case and perhaps shows that there are considerable amounts of business to be secured, but you need the right resource and support to successfully go out and get it.
And that’s an increasingly important point, regardless of the mortgage sectors you are targeting. It’s quite one thing to be aware of where the market is potentially heading and the opportunities that exist, but it’s another to actually develop and finesse your proposition to secure the market share available to you. In that sense, having a network powerhouse fuelling your ambitions can make all the difference, providing an advisory firm with the right tools and ensuring they have a pathway to follow towards greater levels of business.
In product areas, specifically outside the traditional ‘comfort zone’ of a business, where the qualifications, training and knowledge required is different to the mainstream, that support is vital. It also allows a firm to continue developing its mainstream offering but, at the same time, tap into those other product sectors which may be even more important to the business in years to come. With such a strategy, no opportunity needs to be neglected and the firm should be able to present its proposition to as wide a range of clients as possible.
Rob Clifford is a chief executive of Stonebridge Group