Surely it is better to work smart than to work hard if the same rewards can be achieved by either method? But what do people really mean by working smart? Is it possible to avoid hard work by clever dealing and is there ever really any substitute for honest graft?
This is a conundrum brokers in the mortgage market have been chewing on for years, and many have succumbed to lockjaw before ever finding an answer. Looking at the payment protection insurance (PPI) market there are many sides to the work smart not hard philosophy.
A powerful position
Most now believe that in terms of mortgage payment protection insurance (MPPI), lenders have been working smart for years. They enjoy a wonderfully powerful position at the point-of-sale and have used it to their own advantage by selling high margin MPPI to their captive audience. Profits are huge, the work involved minimal, and in an uncompetitive environment they have been able to make hay unhindered.
Certainly there is no doubt lenders have taken every benefit from the MPPI market, but how smart have they actually been?
By selling products that are poorly designed, expensive, complicated and inflexible, lenders have made things easier on themselves, but in turn made them harder on their clients. This is slowly coming to light and consumers are realising how poorly they have been treated by lenders. More and more are refusing to buy protection and many are now investigating whether they should be compensated for policies which either do not pay out when called upon or are inexcusably expensive.
Caveat emptor is all very well, but when sales processes are so inadequate as to allow policies, which clients cannot claim against, being sold in large numbers at prices, which could not be justified in a competitive market, then it is time to question how smart market practitioners are actually being. Indeed many simply believe such practice destroys the long-term value of the market at a time when it should be expanding.
The bottom line
The bottom line is that, slowly, the reputation of MPPI is being eroded, while consumers turn their backs on a product, which at its best should offer excellent value and cover. It is not only consumers turning their backs on the protection market, but also brokers who are now considering walking away because of all the negative publicity that surrounds the market.
Why would a broker operating a well run, client-focused firm want to open up his business to charges of profiteering? Why would such a broker want to face the possibility of future client complaints over protection insurance which many feel are inevitable given the raft of offences that the market seems all too happy to continue perpetrating? But is this the smart thing to do? Is giving up a valuable client service and a healthy revenue stream the way to make a business work?
Brokers walking away from the protection market may feel they are opting for an easier life, but the reality of the situation is that they have a duty of care to their client, and through that duty are bound to investigate how they can meet the financial obligations of the credit they are arranging, whether it be in the shape of a mortgage or a loan.
In fact, just as offering protection insurance, which is over priced and poorly designed, is not treating customers fairly, offering them nothing to protect their financial commitments is equally poor practice. Brokers cannot simply cherry pick the services and products they want to offer clients and must deliver on all of their needs.
Delivering customer needs
In any service-driven industry, such as mortgage broking, the smartest way to operate is to deliver on customer needs, quickly and effectively. There is no doubt that parts of the protection market should be given a wide berth, but not at the exclusion of the whole market. For those prepared to look they will find value, flexibility and great design available.
However the irony is that to do so will mean having to work a little harder for less commission. This may be the case, but in turn they should expect to sell more of the product given its superior quality.
Working hard and working smart are not mutually exclusive and indeed they should go hand-in-hand. Working smart is not about cutting corners or simply cashing in where possible. It is about delivering on what clients want and need. In turn this means searching out the best products at the best price with the best service. This cannot be done without hard work.
The most successful intermediaries are invariably those who work the hardest. Ignoring the problems in the protection market will not make them go away, but working around them will allow brokers to continue earning from the market, while actually serving the needs of their clients. Surely the smartest solution of all?
Simon Burgess is managing director at Britishinsurance.com
