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Mortgage industry must not rule out the impact of the RDR

Many in the mortgage sector have been focusing on the mortgage market review and have not really considered the impact of the retail distribution review if they do not have pension and investment permissions. What they will not be able to avoid is the cultural shift that will be required in the UK for both the consumer and the financial services industry as a result of the RDR implementation. Planning time will be limited as it now appears that implementation of the MMR and RDR will be similar. Do not think any longer that if you are not an IFA it will not affect you. It will and you need to prepare.

In normal circumstances, I would be in danger of sounding patronising by listing the must-ask questions but I continue without embarrassment as I know many IFAs simply have not answered some or all of the following.

Do you have a clear plan and strategy for your business? Have you asked yourself the marketing myopia question of what is it I do? Are you constrained by pre-concep-tions, myths or legacy language?

Do your business and business plan and structure focus on the end client needs? If they do not, can I suggest an alternative career?

Do you feel the only way to look after your clients’ needs is to be knowledgeable and qualified in everything?

PricewaterhouseCoopers research from last year suggests that 65 per cent of consumers are prepared to pay if they feel they are getting advice from a specialist. At Personal Touch, we often use the analogy of a hospital. If you have a brain tumour, would you be happier to be dealt with by a GP or a neurosurgeon? This is possibly one of the biggest challenges and I will discuss the solution in my next article.

Have you challenged your own business model? Is it necessary to go it alone or should you work with others and gain efficiencies, support and education? And before some of you start getting hot and sweaty, I do not necessarily mean join a network.

Does your plan clearly set out how you are using technology or will use technology in future to ensure a better customer experience, create a compliance audit trail, reduce duplication and costs and work with your existing clients to build a multi-product relationship?

Finally, and on a positive note, there are a lot fewer of us in the financial services industry now compared with three years ago but I believe the consumer need for advice is probably as great as it has ever been. Our industry has moved from a scary place of mass misselling scandals to one of the most regulated. The opportunity is huge and we must accept the challenges and embrace them to ensure the intermediary sector continues to be seen as the only real quality advice access route for the consumer.

Dev Malle is sales and marketing director at Personal Touch Financial Services


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Oh Dev please do not tell me to charge fees for a service that hardly warrants it

    65% of people may have indicated they would pay a fee but I will have a small wager the amount they would expect to pay for mortgage advice would be nominal as most could do it themselves and will do if confronted by broker fees.

    I have been in this industry for 5 years abd am bleesed with a clinet bank of high income low multiple mortgage clients and can categorically say that not one of them would pay me a fee for my advice though all appreciate the work that I do in arranging mortgages.

    Lets not kid ourselves mortgages are simple financial instruments you do not have to be a rocket scientist to understand them or lenders criteria.

    Brokers are a service provider and clients will not pay for this service they will do it themselves or go to their bank.

    If the mortgage industry becomes a fee charging model 100s more will be out of work thanks to the short sightedness of the FSA

    Do a quick straw poll of your 20 best friends and see how many have paid for mortgage advice and then tell me again that 65% of people would pay for this service


  2. Dear Anon 1.43pm,
    I have been a mortgage broker for 9 years now and have arranged approx 1700 mortgages in that time.
    I have always charged my clients a modest £199 fee for researching and arranging their mortgage. I have only had 1 client who refused to pay me a fee for this work.
    My high network clients are more than willing as they do not have the time to do this work themselves.
    Maybe it is you that needs to value your service more.

  3. So you arrange 188 mortgages per year and pull in 37k in fees on top of the procuaration fee paid to you by the lender

    Of course you do !

  4. Nice article Dev and my money is on R Kackinnon as he felt no need to be Anonymous…

  5. Anonymous | 8 Apr 2011 1:43 pm

    Your point that you’ve been in the industry for 5 years sums this up nicely!

    It is because mortgage brokers are such, and can’t charge fees, that many went out of business over the last few months. These are fellows with little education and, as you say, simply arrange a product. They don’t deem it worthy to charge a fee, and rightly so brought about the mentality of “Hang on, I can get that for free down the road, why should I pay you”.

    The sooner these half wits are out of the industry the better.

    When will these fools realise that, no matter whether it is arranging or advising, why NOT charge for acquiring the knowledge? If you rely on a 3rd party to fund your lifestyle, you are indeed not worthy of being a financial advisor! Actually, you are not – cos you are a mortgage broker.

    Good points Dev.

  6. Tyburn Asset Management 11th April 2011 at 5:01 pm

    Better to take a balanced view. Nobody can deny internet comparison sites and internet penetration are progressing towards complete saturation and adoption.

    The facts of the situation are if you need 75% or less and income multiples fit then most people under the age of 40 will simply be able to go online, apply and get the best rate without a broker. It is however perfectly possible for a broker to levy a small fee say £295 max and for the client to perceive and receive value for this.

    If a broker can live of this £295 per client plus proc fee and accept that many clients will go direct then a good living can be made. The fact is though brokers have lost their business ‘edge’ in the marketplace and all the metrics are lined up for the situation to get worse, the same applies for insurance. Yes it is possible to make a living however long term it’s not a great option.

    What do I mean by edge? Well lets take solar energy systems. Selling solar panel’s to homeowners would have an edge, people don’t buy them online and there is a clear trend of people wanting the products.

    All I am saying is that if you are in the business of selling products mortgages are not a great place to be at present. If you called up a solar panel provider and negotiated £2k commission per sale you would probably do better in the long term.

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