I sat in on some presentations recently which concentrated on technology and the effect it is already having on the lending market. Speaker after speaker, all clearly advocates of technology adoption, expounded their thoughts on how it was revolutionising their particular sector of the market, before turning their attention to the effect that it was having and going to have on the traditional mortgage broker.
There has been plenty of clickbait stories in the press proclaiming that technology, in the guise of artificial intelligence, the adoption of open banking and ever increasing sophistication of sourcing algorithms, will be the perfect storm which will sweep away the need for face to face human expertise. After all, the idea that a customer could go to the web, source, apply and complete their request for funding all on line without human intervention is hugely attractive.
Every practitioner I have ever spoken to believes that the current mortgage process needs to be quicker and finally technology is beginning to make some differences. Online conveyancing, sourcing and the adoption of APIs are but the start of the revolution.
However, the main concern of human advisers is can technology find a way to replace them?
First of all, let’s look at where technology is eating into advisers’ traditional business. Arranging funding for a customer with textbook requirements, that fit into a standard set of criteria, is tailormade for the automated approach. This is where advisers are going to see the biggest shift. If customers can do it all online (and there are now plenty of online businesses catering for customers who want the convenience and speed afforded by these new operators) why would they need or want traditional advice?
We are all used to buying goods on line because of the convenience (next day delivery) and/ or value (prices can be cheaper), so can we blame people for looking to their smartphones first? Let’s face it, there is a whole generation who expect to find an answer to their requirements online, so why not mortgages and loans?
Let us not forget that lenders too are very keen to part you from your customer when you look at the efforts now being made to attract them to come directly for further advances.
However, before we all panic and head for the exit, how many of your customers actually fit into the cosy world of perfect credit profiles, standard property construction, standard income, gold plated retirement benefits and have been paying down their mortgages and did not take interest only as a ‘temporary’ expedient to keep the costs down?
This is where the algorithms start to fail and the need for human intervention becomes critical to the process. Specialist lending, which looks to provide a home for customers with less than perfect or unusual propositions, covers many avenues. Its rise over the past five years, is a direct response to the criteria straitjacket that exists in many high street lenders.
According to the Intermediary Mortgage Lenders Association (IMLA), specialist lenders’ gross annual lending has increased by 19% year on year. This makes specialist lending one of the fastest growing sectors in the mortgage industry and one in which advisers would be wise to engage.
However, technology can be as much of a helpmate as it is a threat. Adoption of technology in every adviser practice should be embraced, not resisted. More tech businesses are developing facilities for advisers, which link to lenders and provide brokers with the same advantages as their robo adversaries.
Lastly, the rise of technology and the challenge it presents to all advisers, should make us value our client banks much more than perhaps we have in the past. If we do not talk to and review our customers’ needs on a regular basis, they are going to go elsewhere and the first place they will look will be online.
Jeff Davidson is head of intermediaries at Fluent for Advisers