First published by Financial Reporter
A drop in transactions
Ever since the Government decided to extend the stamp duty holiday back in early March, and introduce a partial holiday, I always felt that September would be an interesting month for the mortgage market.
Many will have looked at the somewhat dramatic drop in housing transactions in July and thought we could be heading for a vastly different H2 2021, compared to H1, but my own view is somewhat different.
Indeed, looking at our own figures for July, August, and so far, in September, while it ‘feels’ a quiet period, the reality of the numbers say something different. Particularly, when looking at mortgage business, and factoring in that we may see a slight spike in purchase completions this month, but we’re likely to see greater parity between this and remortgage/PT business going forward.
However, where we’ve tended to see a noticeable difference is in terms of protection business – a sector which tends to have some notable ups and downs, but which over the course of the year, should even itself out.
The reasons for this in 2021 might seem obvious but are perhaps not all they appear. For example, the easy response would be to think that mortgage business has been so all-consuming that advisers just haven’t had the time to cover off the protection conversation. This tends to be something of a cliché in the market, but that’s only because historically that has been the case.
Completion delays creating a waiting game for protection
However, we have a somewhat different experience this year and that’s based on the time it takes to move through the mortgage process to completion. Estimates differ but the latest one I have heard is that on a purchase chain it now takes, on average, 22 weeks to move from an offer being accepted by the seller to completion, when historically the average has been 13 weeks.
And, of course, there tends to be a greater degree of uncertainty about cases progressing and completions being achieved. Perhaps, understandably, advisers might think there is little point sorting out the client’s protection needs until that completion is about to be achieved or, at the very least, is a little bit closer.
Protection needs can be sorted in a much shorter timescale than mortgages of course. If there are no underlying medical conditions you can achieve same-day turn-around, however if the adviser has any understanding that there are underlying conditions they should obviously not being leaving it late to sort out the protection needs. It will take longer to move these clients through the process.
A lag in protection turn around
However, my point is that advisers – in the current climate – are often feeling no strong inclination to cover off their client’s protection requirements when they cover off the mortgage. This can mean – and our figures appear to back it up – that protection business which you might previously have anticipated coming in the same month as the mortgage application, doesn’t actually turn up until a few months later.
In other words, there is something of a protection lag, but the good news is that the clients concerned are getting the cover they need, it just tends to happen a little later in the whole process.
Now, of course, in an ideal world, you would hope the adviser would sell the mortgage/protection/GI/conveyancing as a complete package at one sitting, because not to do this does come with some risk.
For instance, as stated, advisers might be ‘coming back’ to do the protection at a later date, they may have sown the seed with the client, but for whatever reason, when they do move to provide cover, the customer might have already sorted it out themselves, or carried out their own research which appears to show they only need £10 a month to get cover, when their actual need is £50. In other words, the budget just isn’t there.
Plus, of course, there could be occasions where the adviser does not go back to sort out the protection and this is clearly another missed opportunity, with the client being potentially at risk if nothing is in place, or the cover doesn’t match what is required.
How about a prompt?
This is why we are currently working on something within our Revolution system which will be a regular system prompt and reminder for protection. It will ask the adviser if they are going to cover protection as part of their sales process, and if they answer yes, at various points, it will keep prompting them to ensure they don’t forget this. Alternatively, if the adviser says no, it will prompt them to refer the business to our stand-alone protection proposition, so we can ensure the client gets better consumer outcomes by having their protection needs met. Plus, of course, the adviser will get the referral income from this.
What we don’t want is advisers to say they’re going to do it, and then not do it, or to simply allow that client to wither on the protection vine to a point where they feel they have to do it themselves, or go elsewhere, and potentially not get the right cover.
The protection opportunity remains strong but a variety of factors are potentially changing the way advisers approach this, their ability to ensure clients are covered, and make sure they are the ones providing the advice. Hopefully, with our system changes we’ll be able to support Stonebridge advisers in not missing out, while other practitioners need to make sure they have something similar in place in order to keep that ‘protection gap’ to its absolute minimum.