Ancillary products may end up being more valuable that the mortgage, writes Harpal Singh, managing director of Conveyancing Alliance Ltd
The debate around just how much mortgage lending passes through the intermediary channel each year has always been an interesting, if sometimes confusing, one. Even with the FSA collecting (one hopes) all the necessary data we have still had some startling differences with, for example, the CML’s figures which have historically been slightly higher.
Now, however, we learn that the CML has had to change the way it calculates intermediated sales with the resulting news being that as a channel, broker/adviser-led business is far closer to 50% than we might have expected and/or wanted. Indeed, the CML’s estimate of brokers’ share of mortgage business for Q4 last year has been moved down from 58% to 52%.
In the past 10 years, and admittedly this has not always been based on ‘official’ figures, I cannot remember the figure ever being this low. Indeed, at one stage when talking about intermediary share we have heard numbers in the region of 65/70% bandied about. We used to hear through the grapevine that, for a number of major lenders, the figure was even above this – try 75%. This was shown as evidence that mortgage intermediaries/brokers/advisers were much in demand by both consumers and lenders and that we had a very strong sector.
Now that this figure is closer to 50%, how do we feel about the current strength of the intermediary marketplace? Clearly, the amount of total lending has taken a hammering over the past few years, which makes it (to my eyes) a far more worrying situation. Not only is the intermediary share falling but the overall amount of mortgages it represents has also taken a tumble.
The obvious counterpoint to this is that mortgages are not the only product available on the tree, and one hopes there are very few firms out there who are attempting to get by on mortgages alone. If they are, then I would suggest they change their business model immediately. The mortgage is clearly important, it is often the product that gets clients through the door in the first place, however advisers still need to ensure they are focused (and able) to advise on the whole gamut of products that a client may well need alongside the mortgage.
The big question is whether this is a signal of a further fall to come in intermediated mortgage sales? We know there are considerably less advisers than a few years ago chasing less business, so is this downward trend reversible or is it likely to get worse? My own opinion is that we should not think it is going to suddenly hit the 65% mark anytime soon I might even be as bold to suggest that slipping below 50% is likely particularly when we consider lenders’ tightened criteria and the difficulty many prospective borrowers are now having in trying to get a mortgage.
This all means that the mortgage may be the starting point for a client relationship but it is likely to be less important to advisers than say their insurance/protection/conveyancing/savings/will needs. It is likely to be these so-called ancillary products that will be the ones that drive advisers’ businesses and there will be far less dependency on mortgages going forward.
I think, to be fair, most advisers have already recognised this however when the drop in intermediated sales is put out there in black and white it can underline the message even more. We all know that clients have myriad product needs and, in this environment, it is up to advisers to make sure they can service as many of those needs as possible. And even if they can’t do this directly, they can introduce to a ‘man/woman who can’ therefore keeping in close control of the client and earning income throughout the process.
With the mortgage market as it is, advisers have to service clients in the round it does not matter how they got to them, it is now about recognising the importance of keeping hold of them and catering for all their advice/product needs. The mortgage is but one of these.