"How much income are all stakeholders, let alone advisers, missing out on because of the vast number of aborted sales that blight our sector each and every year?"
The ongoing quest for advisory income can be a stressful situation for firms, particularly in an environment where we have seen fewer purchases, more refinancing via product transfers, and an economy which is hardly blasting on all cylinders.
That said, and even with some considerable ups and downs over the years, we do still have, not just a compelling mortgage advice opportunity, but certainly when compared with other client wants and needs, an opportunity to hold that client within the business for an array of other products and services.
Notably, and we might well say this through somewhat gritted teeth, but advisers have also benefited from some regulatory movement that has placed them front and centre in the mortgage process, but also pushed them in the direction of providing a more holistic advice service.
I’m thinking specifically of the Mortgage Market Review (MMR) which undoubtedly moved the market towards intermediary distribution in a big way, and of course last year’s introduction of the Consumer Duty rules, which somewhat compel advisers not just to look at the mortgage need, but others such as GI, protection, conveyancing and the like.
Indeed, according to recent research from Octane Capital, as a result of the move towards advice, the mortgage broker industry has grown by 110% in the last 10 years, and is forecast to grow a further 32% by the end of this decade. It anticipates the broker market will reach a total market size of £2.5bn, from its current position of close to £1.93bn.
Now, advisers and firm owners might well look at these figures and raise an eyebrow. Certainly, there are a lot of challenges for the advisory sector and I’ve read a lot about income dropping over the past 12-18 months, and what can be done to improve this.
Of course, a market which has seen a considerable shift from remortgage to product transfer is going to suffer simply because the procuration fees payable for the latter tend to be a lot less than the former.
Overall, it is also fair to say that procuration fees payable by the vast majority of lenders have not kept pace with any kind of inflationary moves. Many lenders pay the same proc fee they have always paid, arguing that the increase in loan levels over the years, mean advisers do get paid more than they used to on individual cases.
However, that might well be difficult to swallow within the context of greater regulatory/business/taxation costs which are a natural part of being active in this sector, and are unlikely to go down.
The other point which I think could and should also be addressed, comes via the nature of our housing market and is tied in with the way it works, or rather in too many cases, the way it doesn’t work.
Recent analysis of data from Home Sale Pack revealed that in 2022, close to 313,000 house sales fell through before completion, and this cost home sellers over £900m. That is a considerable sum alone, but add in the lost income for all those associated with these sales – from agents to advisers to lenders – plus the work it required, the resources used, the costs incurred, etc, only to get to a ‘result’ in which no-one gets paid.
How much income are all stakeholders, let alone advisers, missing out on because of the vast number of aborted sales that blight our sector each and every year? We seem to put up with this as ‘part of doing business’ but it must be having a fundamental impact on the bottom line of all firms.
This is why I believe it’s important to support the work that is going on in our market to improve the home buying and selling process, to deliver greater certainty via upfront information, to not just cut down on the number of aborted transactions, but to help speed up our process which takes far too long, and ultimately results in all of us waiting to get paid longer.
As a business we pay advisers on exchange, but this is rare in our market, and mostly we are all waiting for completion before we see any sign of that income.
Therefore, it’s not just about making the most of all those client needs and ensuring your advice firm covers every single one off, but it’s a wider industry approach required – one perhaps which recognises that costs are greater and procuration fees perhaps need to move with this, and one that understands wasted work on cases that fall through incur all the costs with no income.
Finding solutions in these areas should be able to help firms improve their incomes, and by doing so, perhaps the broker community will be able to celebrate even greater levels of growth in the years to come.
