With lenders offering direct mortgage switches, brokers must new use tech solutions to engage with customers and explain the value they add.
The FCA’s Mortgage Market Study points to a shift in the market that could have serious consequences for intermediaries.
I don’t mean the potential for an increase in execution-only business.
We risk ignoring a much more serious threat that’s already on us: The growing popularity of product transfers. Over three quarters of consumers switch to a new mortgage within six months of the introductory deal ending and moving to the reversion rate. It’s nothing new, but as the FCA notes, that move can be either to a new lender or to a new rate offered by the existing lender.
There’s little doubt which of those is growing faster: According to UK Finance, 292,500 homeowners switched product with their existing provider in the second quarter of 2019. That’s an increase of 7.3 per cent year-on-year. And only 164,100 of those were on an advised basis. By value, meanwhile, internal switching was up 16.3 per cent over the same period on the previous year to £41.4bn; only £24.4bn switching with advice.
Explaining the benefits
With longer term fixed rates on the rise it’s increasingly clear that brokers need to adapt to defend against the threat this line of business poses to their revenues.
First, they have to get the message out about the value of advice. Lenders have a persuasive offer to customers in terms of a simple solution. They can finalise business with little or no paperwork. Advisers need to address that challenge head-on, stressing the wealth of information they have, and their ability to get customers the very best possible rates and deal for their unique circumstances.
Data from intermediary-focused tech firm Twenty7Tec shows that advisers have access to up to 12,000 different mortgages. Going directly to lenders, customers reduce that number to just 2,000. Yet Legal and General Mortgage Club’s recent survey shows many people don’t understand how an adviser can help. In fact, more than a third of those who didn’t seek advice said they thought an adviser’s job was to help the lender.
We need to get better at explaining the benefits of advice and the value independent brokers bring.
And we can explain that only if customers are listening. The best way of ensuring they are is to maintain a good relationship with the client throughout the whole life of their mortgage deal and beyond.
That means keeping the relationship alive and the client engaged throughout the three to four months it usually takes from finding the perfect property to completion. But it can’t stop there, otherwise lenders will use that opening. Many are getting in touch with customers well before the end of their fixed term to offer them the opportunity to switch with no fees – cutting the adviser out altogether.
Advisers need to maintain the relationship over the entire mortgage journey, but as fixed terms become longer and customer expectations grow, that’s becoming harder. Traditional, manual processes can lead to confusion and existing clients can be forgotten as advisers fight for new business.
That’s why brokers need to employ technology to automate and enhance the process An end-to-end solution goes beyond ensuring customers are mapped, tracked and managed; it ensures regular and meaningful client interaction. Tools can automatically provide the customer with monthly updates on the house value, their outstanding mortgage and equity position, as well as the available options throughout their fixed term.
Workflow style systems, such as Smartr365’s MortgageKanban, provide visual representations of work items and automate key contact points in a customer’s journey. This means less time is spent on admin, and more on building new relationships and providing an effective and comprehensive service.
And, when the time comes to discuss the options available for remortgaging, meanwhile, these systems don’t just generate the appointment for the discussion; they ensure all the information on the customer and the market are at the broker’s fingertips.
Of course, technology is not enough on its own. Brokers need better public awareness of their role and they still have to work to develop strong client relationships. But if they can work on these areas and use the technological tools available, they have an offering for clients that is as compelling as ever. Whatever the challenges, brokers continue to add real value for clients, and it could be unwise to write them off.