distribution understanding the value of advice
Clients value the advice they are provided with; it’s advisers themselves who often undervalue their own advice and services
by
Bob Hunt, chief
executive, Paradigm Mortgage Services
Whether we’re aware of it or not we inherently put a value on everything that we do or plan to do, on every opinion that we seek, or for every piece of advice we pursue.
However, while we might look for an opinion on brain surgery from someone at the local pub, we wouldn’t necessarily value that advice particularly highly and we certainly wouldn’t let them operate on us. Clients value the advice they are
provided with so it’s bizarre that advisers themselves often undervalue their own advice and services. This is perhaps best represented by many advisers’ reluctance to charge a fee for the advice they provide. Which leaves many advisers in a somewhat tricky position. How can they prove the value of the advice and the service they provide if they feel unable to charge for it? Intermediaries need to focus on the
growth of recurring income not just on the one-off transactional income that, for example, mortgage advice will deliver. The ideal is that the intermediary firm moves away from being reliant on the transactional nature of mortgage advice; instead they offer a variety of products and services which bring in regular, ongoing income.
It is only by building a business which has a significant level of recurring income that a much more significant, substantial and alluring value can be placed on the firm, particularly if there are ambitions to sell or exit the industry in some capacity. Simple incremental value can be added by boosting additional income
through cross-sale activities but it is often surprising how little attention is paid to these activities especially when one considers the income that can be generated for the amount of time that is invested.
Volume and quality The value of business is not just a concern for intermediary firms; increasingly lenders are looking at the value they receive from those who aggregate business, i.e. the distributor. Let’s be clear, volume of business
remains important to lenders, however volume without value is less important. In today’s market it is not enough just to be able to supply volume; most forward- thinking lenders analyse the cost of receiving business and the value derived through their various distributors. Quality of business is also more important than it has ever been where increased regulatory burdens, not to mention simple business common sense, have created new priorities amongst product manufacturers. Those intermediaries who can demonstrate solid cross-sale processes and results are much more valuable than those who can’t.
Likewise, distributors that can control and influence not just their adviser members but also the source and type of adviser’s clients are also more attractive to lenders than those whose model simply does not allow this level of interaction and communication.
Advisers spend a great deal of time making sure they do the best for their clients by choosing the right lender and/ or provider but do they work as hard for themselves when selecting the best distributor to access those lenders or providers or do they just stick to what they know?
new enVironment This new environment that we are all faced with demands a much closer look at distributors’ models. Take the Mortgage Market Review - this will undoubtedly bring additional costs but the positive is that it will increase professional standards. Some who have existed in the industry for a lengthy spell are inclined to look upon this negatively, as it is likely to require further work towards new qualifications and an overall improvement in continuous professional development. But the MMR should be embraced and not feared - we often hear many in the industry speak of the need to place advisers on a similar platform to those of accountants or solicitors, and the MMR may well offer a step in this direction.
It is only this type of move that will change the public’s perception about the value of the advice they receive - consumers do not hesitate to pay solicitor or accountant fees for the service and expertise provided, so any move towards greater regard for the work that advisers provide should ensure a more favourable reaction to paying for mortgage advice. Only through understanding the value that you offer can you then move to charging fees for advice but at the same time you can move your firm into a shape where it has intrinsic value and is attractive to others because of that value. In order to have a serviceable exit strategy in place, maximizing value is a no-brainer. Ensuring your business architecture/platform is uniform and robust, or that your MI is fit for purpose, or that your segmentation processes work for you, and that you have a proper set out succession plan will all add to the possibility that you’ll eventually secure the value you think your business is worth. n
mortgage introducer AUGUST 2010 33
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