Advisers have, over the last year, begun to change their mortgage business model so as to bridge the gap between intermediary and superior direct offerings. But is this a gap too far? Can advisers still compete in such a one-sided mortgage market?
Thanks to dual pricing, HBS has found that a client can save as much as £208 every month over the first two years of their mortgage if it was originated directly from the lender.
Dual-pricing has become a way of life for UK mortgage intermediaries in 2009, and most have begun to change their proposition accordingly – this is illustrated in HBS’ data, which shows a 300 per cent increase in the number of mortgage advisers processing fees through its systems.
Many have now come to the conclusion that there is simply no room for a business to survive on proc fees alone. It’s a case of finding the best mortgage for the borrower, possibly for a fee, and then if that is a direct product, trying to sell other products around the mortgage.
In a recent interview, First Action Finance head of communications Jonathan Cornell told me that as dual pricing becomes the norm, advisers have to prove their worth as complete financial service agents rather than simply mortgage brokers. He said that his firm had found that clients are much more likely to sit down and talk about pensions, protection and investments if the adviser had been honest and pointed them towards a direct mortgage.
But, as the Association of Mortgage Intermediaries revealed this week, there are concerns within the mortgage sector surrounding this new change in direction. Personal Indemnity cover may not be valid if an adviser points a client towards a particular direct product. This is not to say every case will leave advisers open, but for the likes of Personal Touch Financial Services, it’s a real worry.
So is £5000 just too much of a gap? Is this proof that for mortgage intermediaries it’s time to head for pastures new? And for IFAs, is it safer to just move away from mortgages completely? Or is this just a symptom of a transient market that will move in the opposite direction once the upturn comes?
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