"Some of these are threats to intermediation, some of those are opportunities, and it might depend on the strengths and weaknesses of your business with how you are able to cope, and capitalise on, them."
That said, there are a number of key issues that are likely to raise their heads throughout the next 12 months and beyond. Some of these are threats to intermediation, some of those are opportunities, and it might depend on the strengths and weaknesses of your business with how you are able to cope, and capitalise on, them.
Here are a few key issues we think could be important in the year ahead – how is your business structured to deal with them?
Execution-only – much has been written about this in 2019, and we suspect there will be a far greater push in this business area, particularly by lenders in 2020. We have a regulator which is, shall we say, sympathetic to the execution-only cause and it clearly wants to see practitioners utilising technology to offer routes to market.
What we cannot understand is suggestions that advisers want to conduct execution-only business with lenders; it goes against everything we should be doing as professionals, it devalues our own offerings, and sets an incredibly bad precedent. Effectively, execution-only suggests advice is worthless. Those advisory firms pushing at this door need to have a real think about the consequences of such action. This isn’t just turkeys voting for Christmas, but allowing the farmer a lie-in, while they take themselves off to the abattoir.
Later life lending – we’ve described the current situation with RIO/equity release/mainstream mortgages with higher maximum ages as being ‘brutally siloed’ at present. Whether this changes is really dependent on the regulator’s vision for later life lending advice and whether it feels the current arrangement is working for a consumer group which can be incredibly nervous about taking out mortgages in later life.
It’s also a nervous time for advisers – one of the reasons why RIO, for example, has yet to take off is because advisers are fearful they are not providing appropriate advice. If you only offer advice in one of those silos, then you clearly run the danger of putting the clients into an unsuitable situation. We therefore need a far greater commitment to delivering holistic advice in this area – especially given that the home is by the biggest asset for most people and needs to be considered when thinking about later life/retirement finances.
The current situation also means that providers tend to stick to their later life knitting – only offering products in one area when the market would benefit from a joined-up approach. It’s a great opportunity for advisers but the complications with the current later life lending situation are undoubtedly holding some firms back – perhaps 2020 could be the year to solve this conundrum.
Client relationships – this year’s Canada Life research into advisers’ relationships with their clients certainly caused a stir, not least the conclusion that nearly half of all consumers had not been contacted since their initial dealings with their adviser. There is clearly a real danger for advisers in adopting communication practices which effectively leave any contact until X months before the renewal date.
We know that the direct-to-consumer models will only get better and better, particularly in the vanilla remortgage space, and if we do nothing our client books in these areas will be dead in a few years. In that sense, a change is needed, and perhaps it should be more along the IFA model of regular, yearly client review meetings, plus perhaps a move to a trail commission model whereby we are able to prove that regular contact and regular service/advice has been provided.
IFAs were forced into this model but perhaps it’s time it was introduced into the mortgage market? It may allow us to focus more on long-term relationships, and provide opportunities for more constant contact where we can check on the client’s needs not just for the mortgage, but also protection and GI. Certainly in the later life space a trail commission approach could be more than useful – currently commissions are high but lenders/providers might be able to facilitate a different approach.
We might have the current regulatory framework to get over in order to deliver change but it may be time to think radically in this area in order to develop far longer-term relationships and to ensure the client stays on the books for many years to come.
Food for thought perhaps as we move into 2020. One thing is certain, this market will not stand still and it could be the early adapters who have the most to gain.
