I sat next to a friend at a dinner last week, who would describe himself as a busy mortgage broker – and at the moment he is very busy indeed.
I asked him if it was true that when the mortgage volumes increased that the proportion of protection business fell. As you can imagine he was slightly surprised that this old adage was still considered as correct!. His view was that mortgage advisers that remain active today have survived a very tough few years, so that the quality of the advisers in the market today is pretty high.
They want to be able to take advantage of this busy time and write as much profitable business as possible. They want to continue to service their existing clients and get them the best possible deals. They want to get client referrals as it is the cheapest and best way of delivering new prospects; and they want to provide a range of protection benefits as an important part of the recommendation process.
However, he is spinning a lot of plates at the moment and the sheer volume of activity means that things can slip. Occasionally, with the protection sale nearer the end of the process, it doesn’t always get as much attention and the risk is it can fail to complete. Given that the average commission can be around £800-£1000, this is substantial revenue that can be lost.
Could there be a better way? It seems, like everything, there is a tipping point – when spending a bit of time reviewing activity and processes could add longer term value and income to a business. This might mean recruiting someone to help with admin – extra cost. It might mean turning business away – losing money – and it could also mean reviewing processes to find a more efficient way of writing the business – additional income and time.
Change is always difficult and change during a busy period adds its own risks. Making it easier to write protection is mentioned frequently in these columns and there are a number of initiatives underway at the moment. But the underwriting and application processes haven’t fundamentally changed for many years. Outsourcing different aspects of the administration process is a well trodden path for a number of advisers, who value the services a third party brings in managing the protection administration for them.
An interesting development is the inclusion of an online protection solution for customers hosted on an adviser’s website. Advisers can recommend the product solution in the normal way and leave the customer to apply and complete the application form in their own time on line. Or they could make specific products available, such as term or mortgage term products, on an execution-only basis where the customer selects the product from a specific panel of providers chosen by the adviser.
As more customers look to transact certain aspects of their financial planning in different ways, providing advisers with this facility and allowing advisers to adopt different charging structures based on the services and type of advice provided could help. It also mitigates any future non-disclosure issues with the adviser as the clients are completing the application questions themselves.
I suggest this approach could be used selectively with customers who know what they want, for customers you want to deal with remotely and when there are too many plates spinning.
Neil McCarthy is sales & marketing director at Direct Life & Pension Services