Diversification has been something of a buzzword for mortgage brokers in recent times as many advisers have branched out to offer complementary financial products in addition to their core home loan business. Some of these instances have been motivated by customer demand, others by brokers looking to broaden their propositions and the influence of wider economic conditions cannot be ignored either.
As mortgage activity dwindled after the global financial crisis, many mortgage brokers were forced to consider other options out of necessity. Whatever way brokers arrived at the decision to diversify, you can bet your bottom dollar that few of them regret the choosing to do so and many probably wish they had done so sooner.
Bearing this in mind, it is perhaps surprising that all mortgage brokers don’t offer some ancillary products but a recent article I read in the trade press hinted at why this might be. It polled more than 40 industry figures as to why protection sales weren’t higher and the most common response was that broker apathy acted as the main barrier. As one respondent to the informal poll put it: “There are opportunities for the broker to grow their protection book, but they must want to do it. Most personal finance brokers have fact-finds sat gathering dust with an opportunity to sell protection.”
This indifference would be understandable if advisers were besieged with mortgage enquiries, but the lending figures don’t exactly bear this out. Things are certainly heading in the right direction after a period of plateauing, but not many brokers are being inundated just yet. Other obstacles to mortgage brokers offering insurance products included price and administration. To my mind, these are merely variants on the apathy theme and are justifications that could only be given by brokers that haven’t bothered to challenge their own misconceptions of cover.
The reason I say that is because adding insurance to one’s arsenal really needn’t require much upheaval at all and certainly doesn’t necessitate anything more complicated logistically than processing a home loan application. In fact, for the time spent handling it and the subsequent reward, insurance can be far more lucrative than mortgages. With many networks such as ourselves encouraging their appointed representatives to offer insurance products and offering competitive panels of providers to choose from, it really couldn’t be simpler for mortgage brokers to give it a try. Brokers often find that is not only their bottom line that receives a boost but customer satisfaction is also enhanced as clients can have all their financial requirements sorted in one hit rather than having to carry out several transactions with different specialists.
It may be something of a cliché, but it wouldn’t be much of a surprise to see brokers become more of a ‘one stop-shop’ in future as more and more embrace diversification. We have already seen regulation evolve and expand to the extent where brokers have to take a far wider range of factors into consideration and it is probably a natural extension of this that brokers will identify and satisfy their clients’ insurance requirements in other areas.
Richard Adams is managing director of Stonebridge Group