The mortgage advisory sector appears to have been preparing for the lender ‘fightback’ – when it comes to securing mortgage business – for some time now. Ever since the Mortgage Market Review (MMR) placed the ball firmly in adviser’s court, we have heard that lenders are working furiously ‘behind the scenes’ in order to take back the business they have lost to the intermediary distribution channel.
While I don’t deny that this type of work is ongoing – and the market is undoubtedly a moveable feast – when it comes to ‘returning’ swathes of business back to those lenders who are operating direct to consumer, then it would appear that we’ve seen no big u-turn in recent years. Indeed, if anything the amount of business channelled via intermediaries has grown and grown, to a point where many lenders no longer have any direct operation, preferring to put all their eggs in the intermediary basket.
That, of course, is not the same approach for all and I fully recognise that when you have branches and telephone sales channels to supply, you are still likely to put significant resource into them. We have been constantly told that it will be through technology that lenders will begin the cavalry charge, and to a certain extent this is true.
We know that the tech being utilised by many mainstream lenders, specifically for dealing direct with consumers, is pretty slick to say the least. Many an adviser will opine that the tech they have to use to engage with lenders is nowhere near as fast, user-friendly or ‘top of the range’, and if it were, then perhaps they would be able to deliver more business to their front door.
Certainly, in an area like product transfers (PT), you can see lenders upping the technological ante in order to make that process as smooth as possible. And yet…the latest product transfer figures show that intermediaries have actually taken a bigger quarter-on-quarter share of PT business then they did in the previous three-month period, and therefore even (on what you might call) the lender’s natural battleground, the intermediary flag is well and truly up.
That, however, will not stop lenders from looking to secure as much business as they can via direct methods, although you do sometimes get the feeling that they also want to acknowledge the importance of advice and recognise how valuable it is for consumers. Take, for instance, the recent announcement by Nottingham Building Society that it is offering a ‘branch-based video mortgage advice service’ to those customers who make it into their premises.
Now, previously you might have immediately adopted a position which says, ‘Well, that’s all well and good but the ‘advice’ only goes so far as Nottingham’s products’. But not in this case because customers going into the branch, and using the service, will be dealing with a Nottingham adviser “who can search and compare products from more than 50 lenders”.
In a way, you might applaud Nottingham for going down this route, but part of me can’t help but think they have actually created a half-way house that doesn’t particularly work for both parties. If you’re going to offer advice why not do it via a truly independent adviser who can access the entire whole of market – there are quite a few more lenders operating than just the 50 or so they appear to have access to here.
In a way, the Nottingham have obviously utilised the available tech to create an offering which should provide advice to customers, and keep them in branch – perhaps to sell other products to them? But, at the same time, it’s also created a proposition which could still leave the customer being recommended a product which isn’t the most suitable for it. And that would be a real shame.
There’s no denying however that banks/building societies with a high-street presence have to rethink how they get customers in, and how they can sell their products to them. I read recently of Santander, for example, not using technology so much as coffee and a flexible workspace to try and get people in, to provide wifi and refreshments, and (one assumes) perhaps press home the product offering as well. Whether this can truly work, when the coffee house market in the UK is so competitive is another matter entirely but perhaps it’s worth a try.
So while the advisory community should not be complacent, neither should it be fearful that lenders are throwing the proverbial kitchen sink at their tech/direct offerings in order to claw back ‘lost’ mortgage business. For many, there is no other way but the intermediary channel, but for the bigger operators there will always be that need to feed their direct propositions and we should not expect this to change anytime soon.
Tim Merrey is Head of Software Development at Stonebridge Group