The lead generation industry has come under some heavy criticism in recent months and there have been calls for the industry to be regulated. The theory behind any call for regulation should be to protect both businesses and consumers from unscrupulous lead generation companies, but regulation is the wrong course of action for such a fledgling industry. Regulation could do more harm than good and is a cumbersome approach to addressing the current concerns about the industry.
One of the biggest problems is that brokers do not understand what lead generation really is. Information is a much more effective method of protecting brokers than regulation as it empowers rather than restricts. Only through informing and educating will intermediaries be able to harness the power of lead generation and be in the best position to choose a good lead provider.
Not magic
Online lead generation is not magic; it is merely a useful marketing resource available to financial intermediaries to enable them to target their customers more effectively. In the broadband era that we now live in, most consumers are using the internet to research financial products and services and lead generation enables brokers to reach these consumers. All mortgage lead generation does is connect consumers who want mortgage advice with the brokers that offer that advice. To ignore lead generation is to cut yourself off from a huge percentage of your market and this percentage will only get bigger. The Internet Advertising Bureau, in a recent report, found online lead generation to be the fastest form of online advertising spend.
Often, the industry has come under criticism from brokers because they do not understand how lead generation fits into their business. Lead generation will not make a broker rich and buying leads is not buying guaranteed customers. A lead is essentially just a piece of information. The real work for the broker begins when a broker receives a lead. It is up to the broker to work each lead properly to try and turn it into business. The lead generation company can only try to provide the best quality leads it can. If a broker buys 20 leads and only calls each consumer three days later, then the problem lies with the broker and not lead generation. Regulation won’t educate brokers on how to work the leads. However, lead generation firms should make a greater effort to provide brokers with the right help and support.
Open and transparent
Lead generation companies have been guilty in the past of promising brokers too much in the form of unrealistic conversion rates. This is counterproductive as without setting out realistic targets for the brokers they will only be disappointed and the whole industry will suffer as a result. Like any marketing exercise the effectiveness of lead generation can be gauged by a simple return on investment calculation. If you spend £1,000 a week on leads and generate £5,000 in business then lead generation is working for you. Lead generation companies need to be open and transparent to brokers.
Those that call for regulation often point to the fact that there have been a number of disreputable companies that have taken brokers’ money and not delivered good leads. Regulation may help cut down the numbers of such companies but, as in any industry, there will always be cowboys. A far more effective and cheaper way to cut out the cowboys is again through providing information. Brokers need to be educated as to how to spot a decent lead generator. There are a few very simple rules of thumb for this.
Key points
Firstly, check their stance on Financial Services Authority (FSA) compliance. Lead generation companies are not required to be authorised by the FSA, but most reputable firms will work closely with compliance specialists to ensure that all they are operating within the FSA guidelines. Secondly, check the returns policy offered by the company. Avoid any companies that either do not explicitly state their returns policy or those who will not refund invalid leads.
Finally, and probably the most important issue, is the source of the leads themselves. Find out where the leads come from. Ask to see examples of websites where consumers will be leaving their information. The sites should explicitly state that by registering their information they are agreeing to be contacted by a mortgage broker. Also, avoid any companies that use incentivised marketing to generate leads. This is when companies use incentives to entice consumers to their websites that are either false or have no relation to the information that they are submitting. This includes things such as ‘win an iPod and get a quote’ or ‘1 per cent interest rates’.
Lead generators and aggregators should comply with rules and regulations as any company in any industry should. Those that don’t should indeed be punished but the problem is with the disreputable companies and not the principles of the industry itself. In the end, whether the lead generation sector is regulated or not, it is in the best interests of all reputable lead companies to be as open and transparent as possible about the way they do business and do their utmost to provide as much help and support to both lead buyers and lead sellers. By raising the profile of the industry, everybody will benefit.
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