There is a dramatic distinction between how much the very best advisers are earning from their new clients compared to the most ineffective. Those very successful advisers appear to think beyond the perceived value of the initial opportunity, frequently using the very cheapest leads – which many other advisers dismiss – to make many thousands of pounds.
So here are some of their secrets on how you can think wider than the norm and turn a £5 lead into over £5000 with a little time, patience and some old-fashioned sales skills.
The lead
Firstly, where do you get a new client opportunity for just £5? Most established lead generators now offer bidding systems for buying leads. When you bid for leads, you choose what you want to pay; this means that advisers themselves set the price or ‘market value’ for that opportunity. £5 is the typical price for a first-time buyer lead through Leadbay at the moment, due to the number of first-time buyers looking for advice and the perception that FTBs are worth less than purchase or remortgage opportunities.
So here’s a realistic example of how you could earn more than £5,000 from a lead that many advisers would consider unplaceable:
You buy a first time buyer lead for just £5. You sit down with your potential client and despite your initial impression determine that he or she wants to buy a £120,000 house, is earning £25,000 salary and has a deposit of £6,000 - meaning they need 95 per cent loan to value and an income multiple of 4.6.
You could tell the client you can’t help them and move onto the next one, or you think beyond this single case and consider the family of your new prospective client.
The parents
In recent years an increasing number of parents are helping to provide their children with money to get on the housing ladder; therefore it is shrewd to have the conversation with your first-time buyer as to whether their parents will help them. At the very least, this is likely to get you an introduction to the parents – two more potential clients.
If the parents are keen to help this could easily mean a remortgage on their house. Your factfind identifies parents with a house worth £250,000, a current mortgage of £160,000 and a willingness to increase their mortgage to £175,000 to release £15,000 to help their offspring with their deposit.
Assuming it is a prime mortgage, this should be easily achievable given the loan to value on the property, while still ensuring the parents get one of the more competitive mortgage rates.
The remortgage alone is likely to earn you £613 based on a proc fee of 0.35 per cent in addition, the parents are likely to need more life assurance to cover their larger mortgage – possibly two policies at £20 per month, earning you £960 and, if you have the right contacts in place, you should get a referral fee for the conveyancing of the property of at least £100.
Total return on £5 investment so far: £1,673
The grandparents
A £21,000 deposit should be adequate for your first-time buyer on their £120,000 house to meet a lender’s LTV calculations, but the income multiples for your client are still four times salary - a multiple that still isn’t accepted by many lenders.
However, you have other options. Figures from Stuart Wilson at the Equity Release Club show that more than 1 in 10 people use equity release to help a family member with their purchase - and this is increasing.
So the next step is to ask for the introduction to the grandparents. This could be an alternative or an addition to the parents’ help; either way, you already have two referrals from the first-time buyer and will come across as both helpful and proactive to your new client.
The grandparents in our scenario are happy to help, and your factfind shows they have a £200,000 house and no mortgage. Once they have considered equity release it is not unusual for people to want to release equity for more than one purpose so it is likely that they will then release money for either home improvements, a holiday, to clear credit card debt, or just to improve their standard of living. A £40,000 release would be reasonable , with £15,000 going as a gift to their grandchild.
Your first-time buyer now has a £36,000 deposit, making both the LTV and the income multiples fit comfortably within most lenders’ criteria.
In addition you are likely to have made £1,500 of fees from the equity release advice. As equity release is such a complicated area, it would be worth recommending a specialist law firm e.g. one of the members of the Equity Release Solicitors Alliance (www.ersalaw.co.uk/) as they have specialist experience to ensure your case goes through quickly and smoothly.
Potential income from the grandparents: £1500
Cumulative return on £5 investment: £3,173
The first-time buyer mortgage
As you are now in a position to help your first-time buyer client you can find them their mortgage for £84,000. With a proc fee of 0.35 per cent this will earn you £294. Of course your client will need conveyancing too and is likely to need life assurance, income protection, critical illness cover and house and building insurance. All of which will raise you higher in their esteem while potentially earning you an additional £2,000 or more
Total potential income from first-time buyer: £2,294
£5 investment is now worth: £5,467
Even though we’ve achieved the £5k return we set out for, there’s still plenty of potential business left to write.
Aunts and uncles
If you are going through the equity release process with the grandparents, it is advisable to have a conversation with their children, as they will obviously be affected by the reduction in the value of their parents’ property either in the will or where health care is concerned if the grandparents were to become infirm.
Once you have dealt competently with the mortgages of the other people in the family, you will have gained the trust of at least two generations of the family so are in prime position to help any of the parents’ siblings with any of their financial requirements. At the very least you have gained another referral.
In time this could mean that you also look after the remortgage of the your original client’s aunts and/or uncles. With even one more remortgage of a £250,000 property, with a £160,000 mortgage and associated conveyancing and life assurance requirements you could earn approximately another £1,600 per sibling.
Looking forward
By looking after your initial client, their parents, grandparents and just one aunt or uncle you are likely to have made over £7000 – all from a client that initially looked unplaceable and which your competitors are likely to have dismissed.
But it doesn’t stop there – your first-time buyer is only at the beginning of their financial lifecycle. By doing a good job when you first meet them, helping them to get on the housing ladder and looking after all their general insurance needs you are likely to have gained a client for life.
By keeping in regular contact with that client you should be able to continue to help them with all of their forthcoming remortgages, house moves and insurance needs – and if you don’t deal with pensions, savings and investments, you can refer them to someone who does - you reinforce your client’s opinion that you can deal with all their financial needs and you can get another referral fee!
