The now ubiquitous credit crunch has thrown much into perspective, not least the need for robust business practises that utilise every opportunity to maximise revenue when times are hard.
Yet, it is a daunting task to find new ways of building greater value in a business when the market is against you and consumers are shying away from the housing market while the national press screams its demise from the front pages.
Of course, while much of what works can seem so simple, it is often far easier said than done. Yet, it always pays to take a step back and reflect on whether your business practises are really maximising all the available opportunities.
There is no doubt that the headlong search for new business can no longer be the maxim of mortgage brokers’ businesses.
Thomas Reeh, chief executive of blackandwhite.co.uk, comments: “The global liquidity crunch has certainly brought into sharp focus some severe challenges to the traditional mortgage broking model.
"Building ‘assets under management’ and ongoing renewal income has not been a key focus in a market place fixated with the absolute cheapest price and low levels of customer loyalty.
"The consequence, of course, is that margins are compressed to the point that brokers need to do more business just to stand still.”
As Reeh points out, it is the simple principles that still apply to all business: delivering exceptional customer service to keep customers coming back time and again, and investing in technology that give accurate and up-to-date client information so brokers keep in touch to offer the best solutions at the right time.
He adds: “Delivering personal service is very important and listening to what customers really want is key. Its amazing how often customers are steam-rolled into the perceived cheapest solutions or lowest rate when many customers are actually sick to death of the mortgage merry-go-round.”
Going beyond expectations
Certainly, the concept of giving personalised advice that goes beyond customer expectation to deliver profit and brand value is an idea reiterated by Andy Frankish, managing director of Mortgage Talk.
He believes that every part of a business must be focused on the customer, and adds: “Starting with customer forums and understanding the service that you have provided to the customer is the starting point for any broker.
"The results from these forums will not always be easy to digest. However, as a starting point, they are invaluable in the process of business improvement.
“From there, by adopting a retail approach i.e. right product, right time, right place and right people, every element of a business can be challenged and reviewed to deliver business value.”
Frankish states: “In an industry where we do not deal in tangible products, the success of any financial services organisation is solely reliant upon the team of people employed.”
A lack of continuity
But what of the small broker whose customer services team is himself? What is it that the one and two-man bands can focus on? As Alan Lakey, partner at Highclere Financial Services, points out, a major problem for small businesses is the lack of continuity when it comes to selling a business on.
With small brokerages relying on personal relationships, Lakey believes the answer is to be less beholden to indemnity commission and move to a drip feed commission bases.
However, he adds: “Most small firms rely on indemnity commission. It’s very hard to wean yourself off that and you tend to do it in good times. The next year won’t be that time. Most firms will be retrenching.
“People must work on retaining their clients. A lot pay lip service to it, but don’t necessarily do it so well. Having retained them you’ve got to have a reason to retain them.”
Going beyond mortgages
Lakey, an IFA, explains that if he was solely reliant on mortgages, he would look to expand into allied markets, such as protection and investments to give clients a reason to keep coming back.
He explains: “If a client wants a mortgage and an ISA and you can’t advise on them, then that’s a client lost. There are areas that smaller brokers have to look at or someone like me will steal his business. While they like customers to come back, they are so busy dealing with new business that they don’t give enough attention to it.
"If you’re a small mortgage broker that doesn’t really get involved in those areas, it means the client might be uninsured or go to a bank and end up with an inferior product.”
Rod Murdison, proprietor of Murdison & Browning, likewise advocates going beyond mortgages to focus on building up an ancillary offering that provides ongoing value to brokers’ businesses, such as building and contents and ongoing general insurance policies.
He also floats the notion building a portfolio by putting clients on retainer. He explains: “Financial advisers are so undervalued by the public that the idea of a retainer makes sense.
Instead of a big chunk of money coming out of a contract, you have three or four levels of service where a retainer is paid every month.”
Yet, while some may promote having tie-ins with other businesses, such as accountants, Murdison highlights the difficulties in achieving such connections. Instead, diversifying into other areas of mortgages that a broker may not have considered before is an efficient and beneficial route to take.
He adds: “The good thing with mortgages is that you end up with a tangible product, a physical thing you can move into or remortgage and the client ends up better off.”
Higher education
Lakey supports the idea of brokers actively exploring new areas and taking further qualifications, such as equity release. He says: “I took the equity release exam a year or two back and it makes sense. That is one area that we can definitely pin point is going to grow in size.
"Plus, the procuration fees are sometimes five, six or seven times that of residential. It’s more work, but it’s worth a few pounds.”
Nevertheless, Lakey says taking exams and the like will, of course, take time and feels one of the best ways to further business is to utilise the clients he has by revisiting his database and to even ask his clients for further contacts.
He adds that one market he would definitely advise everyone to get into is the adverse market, a sector likely to grow this year with many more customers falling under the category and with higher procuration fees – albeit for more work.
Yet, Lakey concludes: “A lot of firms get entrenched in what they are doing without necessarily thinking if it works.”
Not an easy pill to swallow
Though it is not an easy pill to swallow, everyone in the mortgage market has to accept that the good times have gone, certainly for the time being, and may never return to what they were just six months ago.
Mortgage intermediaries face some hard work to find new customers, retain the ones they have, and enter areas they have not considered before.
Now is the time for maximising every case and every lead to build an inherent value in your business that can sustain the difficult times, which, as many commentators predict, are a fair way from over.
At the end of the day, re-evaluating a business in times of strife could well prove advantageous, resulting in a stronger and more robust business than before.
