Expert says referral services remove risks
One challenge that most brokers face from time to time is having to say ‘no’ to new business. A broker may turn a client away due to the complexity of a case, or because they did not believe they had the necessary expertise in, or knowledge of, a specialist sector of the market.
So is there a solution?
One expert believes referral services are the answer, providing a holistic solution to the client and removing the risks associated with regulation and compliance.
Removing risk
Jason Berry (pictured), group sales director at Crystal Specialist Finance, said the advantage of using a referral service is that it removes risk for the broker from the advice process.
“The referral partner assumes full responsibility for it; regulation and compliance can be a minefield, not just when you initially set up your own business but also when keeping up with all the ongoing changes too,” he said.
Berry added that a referral service simply provides the broker with another option to manage their cases.
“For example, a broker may choose to manage a straightforward buy-to-let case, but when it is complex like a ‘bridge to let’, they will choose a referral service where the partner can take ownership of the complexity,” he said.
This option is growing increasingly popular, Berry said, with circa 30% more referrals received from brokers in 2023 than in 2022
The majority of these referrals, Berry added, are bridging, commercial and complex buy-to-let, but he said there has also been a rise in development enquiries.
As consumer duty is embraced, Berry said Crystal Specialist Finance sees this positive referral trend continuing.
Increased regulatory scrutiny, Berry said, is now centre stage in the advice process, including Consumer Duty with its four focuses - products and service, price and value, consumer understanding, and consumer support. There is also an increased focus on data management and on vulnerable customers at present.
“Ensuring that these considerations are recognised and advised upon accordingly, as well as guaranteeing that you and your business have the right support in place, has never been more important,” he said.
Choosing a trusted referral partner, Berry said, should mean you can pass your case to them in complete confidence, knowing that your client is in safe hands, and your client is likely to receive the same level of advice and customer care that you would have provided yourself.
“Choose wisely, seek feedback from colleagues and research potential partners so only those with similar values to yourself are selected,” Berry said.
Referring complex cases, he said, should allow a broker time to focus on bringing in new business, and crucially earn a healthy commission.
In short, he said a referral service reduces risk for the adviser from the advice process, as the referral partner takes full responsibility for it.
“This allows the adviser to pass the case to a trusted partner in complete confidence, knowing that your client is in safe hands,” he said.
In addition, Berry said a referral service offers the adviser greater earning potential, as the referral partner will be able to complete a complex case, where the adviser would have likely struggled to.
“So, before you say ‘no’ to a complex case or pass on one where you do not feel confident advising yourself, remember that you have a solution in using a referral service; allowing you to retain business, earn income and keep clients happy all at the same time,” Berry said.
Brokers’ views
Adam Smith, founder at Alfa Mortgages, said that brokers can elevate their performance by embracing referral services when they encounter specialised requirements.
“Drawing a parallel to the medical field, where general practitioners rely on specialists for in-depth expertise, brokers can similarly avoid spreading themselves too thin and excel in their core areas,” Smith added.
James Bull, mortgage broker at JB Mortgages, said referral services are very useful because there is no upfront cost - you generally only pay a referral fee upon completion.
“The trouble is most estate agents already have a mortgage broker that they use, so it is very high competition to get in with them in the first place; once a relationship is in place though, it is usually mutually beneficial,” he said.
What are the pros and cons of a referral service for a broker? Let us know in the comment section below.
