While I appreciate that the Christmas party season is now in full effect, and we are all in some way, turning our attention to the holiday break, it’s also the case that we’re just weeks away from a new year, and there’ll undoubtedly be plenty of thought given to how this might pan out and the lot of the mortgage adviser throughout 2019.
At present – given the political to-ing and fro-ing – we can’t say with any certainty what might happen across the key areas that tend to define the housing and mortgage market. Brexit – if it happens – will be all-encompassing and is likely to leave few sectors unscathed. What course will interest rates run in 2019? What might happen to house prices? What about incomes and living standards? How might UK employment be impacted?
Ordinarily – with something approaching a status quo – we might be able to tackle the above questions with something like a degree of certainty even if we’re slightly unsure of what the real results will be. Throw Brexit into the mix and the ability to do so flies out of the window.
Even over the course of the last few months I’m sure you’ve already witnessed the results of such uncertainty. While many advisory practices will continue to perform strongly there’s no doubting that, for example, many potential purchasers and sellers are much more cautious, preferring to adopt a ‘wait and see’ approach if they’re able to.
While the remortgaging market provides a strong underbelly, coupled with sectors such as product transfer, specialist, later life, etc, we might well consider that providing mortgage advice on its own is not going to be enough over the course of the next 12 months and beyond. Clearly, the provision of mortgage advice will be important but firms might well need to look at the time they spend on such activities and decide which earns the most reward for the time they are spending on these clients.
No-one denies that, for many firms, it’s the mortgage that brings the client through the ‘front door’, but there’s also opportunities across other products to ensure that – in discussing the full range of client needs – the adviser greatly enhances the income they can secure and, rather importantly, receives a regular basis going forward.
We recently crunched the numbers in terms of ancillary sales and found that, based on the average amount of time spent on each product, it was in areas like life, protection and GI were the adviser could earn the most.
For example, on a mortgage case of £200k, with a sale and administration time of eight hours, the average amount earned per hour would be between £113-£175; compare that to a GI policy premium of £30 per month, 30 minutes spent by the adviser and we’re looking at, on average, £288 per hour. And for a life policy of £40 per month, with 1.5 hours spent on it, the income would be £678 per hour, which is a drop in the ocean when you add an income protection policy of £30 per month to a protection sale, which takes 20 minutes and can generate, on average, £2,289 of income per hour.
So, advisers should be able to recognise that, out of all these products it is the mortgage that delivers the least income. Again, we must all acknowledge the main reason why clients come to you – for mortgage advice – but it’s clear, looking at the income that can be generated, that to neglect these other product areas is a huge mistake. Protection alone can deliver in spades and the regular, ongoing trail commission aspect to it means that you are ‘banking’ future income which – should the market take a downturn – could be hugely important.
In effect, by advising in these areas you can help both your clients and your own business navigate Brexit which looks like it will be uncomfortable at best. At the same time, you’re clearly doing right by your clients and potentially providing them with a very strong safety net should the worst predications around us leaving the EU come true.
There is clearly a lot of water to flow under that particular bridge but the fundamentals of helping clients across other areas, not just on the mortgage, is going to hold true whatever the environment. Make sure that your business is in the best position possible to do this throughout 2019 and beyond, and if you are looking for greater levels of support in this area, make sure you seek out a like-minded business that can help get you to where you (and your clients) want to be.
Richard Adams is Managing Director of Stonebridge Group