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Should your business be offering mortgage advice?

Advisers talk about how offering mortgage advice has brought them new financial planning clients and helped instil longevity into their business. Fiona Bond writes

With mortgage lending recently hitting a seven-year high, is now the right time for advisers to be branching into mortgage advice?

The answer to this question is a resounding yes, according to David Thomas, joint managing partner at Chadney Bulgin.

He says: “If you asked me today whether I would start a mortgage business, I would say yes. From a business perspective, I would strongly encourage firms to offer both wealth management and mortgage advice, as there can often be a crossover in needs.”

Thomas knows better than most; Chadney Bulgin was previously an 80% mortgage-driven business, turning around some 300 mortgages a month, before the Financial Crisis hit and slashed that number to 60. Today, the firm processes between 140-150 mortgages a month, accounting for around 40% of its business, with the rest of the focus on financial planning.

The Hampshire-based firm has 12 mortgage advisers, providing a whole of market review, and Thomas believes mortgage advice remains a growing area.

“In this business, you see a very broad range of people come through the door. It’s not just young first-time buyers but also older, wealthy clients looking to buy properties. The buy-to-let property market has been buoyant and property remains high on many people’s priority list,” he says.

Advisers offering mortgage advice often do so with the view of turning clients into financial planning clients. Chadney Bulgin goes through a fact-finding process with all clients to see whether financial planning would benefit their financial situation. Thomas estimates that around 20-30% of all mortgage clients go on to become financial planning clients, with “10% joining almost immediately”.

Long-term, accumulating clients

Rohan Sivajoti, director, Postcard Planning, agrees that offering mortgage advice provides the opportunity to build long-term clients, and believes starting off with a younger clientele paves for the way for future growth.

“Mortgage advice is what my demographic is looking for. With people buying houses later in life, largely due to affordability, as a 29-year-old many of my friends have just bought or will soon be buying houses. As this is the demographic in which I wish and choose to work, it’s imperative for me to offer a service that they need right now,” he explains.

“They tend to come in rather short-sighted and blinkered into just wanting a mortgage, but it’s my job to make them see the bigger picture. I’m yet to meet a client who hasn’t gone on to want a full financial plan. It might not have been what they were looking for but it’s what they need and the results are brilliant,” he adds.

Sivajoti says as an adviser he feels the need to help his generation, as they’re “unlikely to see house price growth like our parents”.

He says: “The earlier people plan the better and the more people I can help at a young age, the better.”

An effort to draw in younger clients is familiar to founder of Banks Wealth Management Steve Danson. The Lancashire-based firm is looking to increase its share of the 30-40 year old age group, and three years ago made the decision to set up a mortgage department as a means of targeting that market.

Danson says that while many advisers might shy away from younger clients on the basis they are unlikely to be the most lucrative for their firm today, he takes the long term view that younger clients will be accumulating wealth and with it a need for financial advice.

Cover of SP - C BuddScreen Shot 2015-06-18 at 11.19.12He says: “Over the three years in which our mortgage adviser has been employed, she has arranged many mortgages for clients in many different circumstances. Some of those clients have been referred back for investment/pensions advice. We have also had clients who have had the need for a mortgage on a number of occasions.”

Increasingly, advisers are recognising the need to meet all of their clients’ requirements under one roof, including mortgage advice.

Rowley Turton director Scott Gallacher says: “We offer clients and their immediate family mortgage advice. In our view it’s all about self-protection and offering our clients everything they need, so there’s no desire on their part to seek out another adviser.”

Profitable business

While there is little doubt that the mortgage market has changed over recent years and with it a growing need for advice, many advisers will be asking themselves just how profitable a business it is.

Sivajoti says firms concerned about the revenue versus the time and cost to the firm need to look at the long-term value.

“With regard to revenue, it does drive good money towards the business. I imagine most advisers wouldn’t want to work with this type of typically cash-poor client, but as I’m young I look at the bigger picture,” he explains. “This client is going to be my client for at least 30 years and the long-term value to me is staggering.”

Danson says his mortgage department is building in value, but the main benefit for the creation of a mortgage arm is the steady flow of new clients.

“The mortgage department gets more brand new enquiries from non clients than the investment department,” he says.

Providing mortgage advice also allows firms to explore different, more specialist areas to increase profitability.

“With the mortgage business, you can drill right down into specialisms. We are currently looking at employing protection specialists, as that’s an important area,” says Thomas, and cites other spin offs such as building and contents insurance as potential areas of interest for advisers.

However, he warns that firms looking to open a mortgage arm need to appreciate “there’s a lot of learning to do, with the various criteria lenders have.”

He says: “It’s an interesting business but advisers need to be aware of the change in capital adequacy rules and consider what is required of them as a business first.”

Visit the Chadney Bulgin website

Visit the Postcard Planning website

Visit the Banks Wealth Management website

Visit the Rowley Turton website

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