There is plenty to be positive about in the world of mortgage advice, and when you have circa 75% of all mortgage business being originated by the intermediary channel, then you can see why there is a strong degree of optimism for the future.
However, for all those consumers who do use the service of an adviser – for any of their financial needs – it’s still not perceived as an option for a significantly large number of the population, and that’s certainly something we as an advisory community can work on.
I saw a recent survey from MetLife UK which highlighted that taking advice is not necessarily a ‘go to’ option for large numbers of people, even with the financial uncertainty that may have been wrought by the pandemic.
The research revealed that only 27% of people had been prompted to seek financial advice as a result of the pandemic, but it is specifically in the mortgage/housing advice need where there appears to be work to be done.
Of those who may have a need for mortgage advice, 38% said they don’t intend to seek it, 5% said they can’t afford it, 9% haven’t made up their minds, and 13% said they haven’t sought advice yet but may in the future. And when they are seeking ‘advice’, nearly a quarter are turning to their bank, 22% are going to a financial adviser, and 21% are going to a mortgage adviser.
Perhaps even more worryingly, 29% said they are turning to ‘experts and influencers’ such as Martin Lewis, 21% are turning to media/news sources, and 4% to social media ‘influencers’ – the chances of any of those having any sort of authorisation or financial qualification are slim, and they are highly unlikely to be providing tailored advice either.
Overall, therefore, this is a many-pronged challenge for the advice sector. It’s educating those who are thinking they are getting impartial advice by going to their bank, to use an adviser instead; it’s also working with those who think the cost of advice is prohibitory when we have many advisory practices who charge no fee at all; and it’s also about outlining the benefits and protections that come with advice in order to smooth the path to advice.
For every individual who uses advice and has a reason for doing this, there will be someone who doesn’t. That consumer protection message is one we don’t often make enough of. We may not lead on this when it comes to our industry’s consumer messaging, but it’s undoubtedly a positive that simply isn’t there if the client is going direct.
Access to the Ombudsman Service and the Compensation Scheme probably isn’t a prominent reason for using an adviser but it will be absolutely relevant should they ever feel the need to complain in the future, as would be the fact the firm has its PI insurance to fall back on. So, it’s the benefit from having the adviser’s hand on their shoulder to take them through the process and to advise them which route to follow, etc, but post-advice, it’s having all those protections in place which are not there should they go it alone or go direct.
And, of course, it’s being able to explain the reality of a situation. How often have you had to work with a client who had no idea their product came with an ERC? Consumers are often shocked by this. Or are staggered that the very cheap rate product they saw advertised, comes with large fees, that make the overall monthly payment far different from what they thought it was going to be?
Finally, what about one of the key benefits of advice, which they are unlikely to get elsewhere – the time that can be saved by using an adviser. This is not about the ability of consumers to carry out the mortgage legwork themselves, but the time they might have to do so, and in this marketplace, doing it yourself is likely to be far less time-effective than using a broker. Ask anyone who has tried to do a product transfer on their own recently.
So, there are many reasons why the advice route is the one to go down. We have plenty of benefits and examples to share but, particularly in busy times, we might not be so good at promoting them. While there are clearly a lot of consumers who wouldn’t dream of making a major financial decision without impartial advice, there are also plenty who either haven’t considered it, or have, and decided against it. Those are the clients of the future and we need to ensure they are fully educated on this process and the consumer protections it affords, in order to convert them.
Rob Clifford is chief executive of Stonebridge
