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Diversification | 9
others have significantly adapted their business practices to were urged to look outside the confines of mortgages to
ensure survival, continued profitability and, in a growing find product areas which could ‘fill the void’. It might
number of cases, real prosperity. sound obvious, but businesses should stop doing things
that don’t make money or incur unnecessary costs; in equal
Change is a constant measure they should target those activities that generate
The old adage ‘change is a constant’ has been value and set specific improvement goals.
severely tested, no more so than for those Recent research from Datamonitor suggests that a signif-
firms entirely focused on the mortgage icant number of firms have taken matters into their own
market. However, it is encouraging to note hands and looked at a number of possible markets that
how many firms have recognised there is a were likely to hold up in a recession. Three-quarters of
life beyond mainstream/sub-prime mort- mortgage intermediaries who responded to the survey said
gage advice, and that with the right they were ‘maximising cross-selling and commission
approach they are best placed to benefit from opportunities in order to compensate for lost income in
the (slight) upturn we are seeing in a number other areas of their business’. While the more obvious sec-
of areas. tors such as general insurance and protection were high on
There is of course a danger that the ‘green the list of diversification opportunities, firms were also
shoots’ many believe are now pushing through looking ‘outside the box’ in areas such as selling utilities
is nothing more than ‘shop talk’, designed to (gas and electricity), plus focusing on debt management –
talk ourselves out of recession. However, plac- one area likely to grow in difficult economic times.
ing a particularly hard cautionary hat on, it is The study also found that mortgage intermediaries were
possible to be much more optimistic about the looking to the IFA sectors of pensions and investments as
future of the mortgage and housing markets another area to explore although respondents acknowl-
than a few months ago. By this I mean that buyer edged that the regulation and qualification requirements
demand seems to be on the rise, first-time buyers necessary would impact on their ability to offer advice.
(those with the requisite large deposits) are show- Compared to offering general insurance products, for
ing much more of an interest in purchasing, and example, the cost of becoming an IFA would be much
house prices have (perhaps) bottomed out. more and mortgage intermediary firms would need to plan
This does not however mean a return for the and prepare carefully before making this move.
remortgage market with Bank Base Rate still so low
and many borrowers willing to wait and Cross-selling
The three-quarters of firms who say they are actively diver-
see while they sit on their lender’s low SVR rate. Plus we sifying away from mortgages is positive news, however it
must not forget that any bounce we might be witnessing in still leaves a significant minority of firms who are not
lending is coming from a particularly low level. Lenders are pushing into new or developing sectors - for example, the
still risk-averse, many sectors a la buy-to-let are still in the growing area of shared ownership products - and perhaps
doldrums and wholesale markets are non-existent. We con- missing a trick. In our experience there are a number of
tinue to work reasons why firms might not be taking the cross-selling
within a much opportunity seriously. Some are simply set in the ways and
suppressed mar- do not want to diversify into areas, particularly where they
ket, and that is feel they have no expertise; others will look at the opportu-
unlikely to nities but have a business model which is ill-equipped to
change for some get the most out of a new sector.
time yet. Essentially, firms are looking for more help and support
before they feel confident and comfortable offering advice
New in a non-mortgage sector. Confidence plays a huge part
sources of here where even in areas which one would feel are a natural
income fit for intermediary firms such as general insurance and
If intermediaries protection we have seen firms unable to make the move. A
and advisers can further problem is that many firms want (and often need)
recognise that to make the transition overnight – this is unattainable
any return to a given that time and effort must be spent on, for example,
strong mortgage gaining the right qualifications and product knowledge.
market is still Systems and processes must also be put in place which can
some way off, monitor the delivery of best advice and, from a regulatory
they must also be point of view, the firm must ensure it is compliant with the
aware that their rules and regulations that come with any sector.
income must
come from a dif- Commitment
ferent source. All this requires a time and investment commitment that
Market diversifi- some firms are not able to make. There is, however, plenty
cation has there- of help and support for intermediary practices looking to
fore been diversify – it is simply a question of finding it and taking
something of a advantage. Paradigm Mortgage Services works closely with
mantra over the both our provider partners and members to ensure they
last year as firms have access to a diverse array of new product opportunities September 2009 Mortgage Introducer
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