the Power hour
£1.8m stuck in a Post Office savings account. He’s a fund manager and he admitted was concerned about the 50p tax. We suggested offsetting part of the mortgage against the savings but we also got him into our office in front of an IFA because he needed to sort his personal finances out properly. DH: The challenge is taking the product from that type of high net worth borrower and making it more mass market. You’re never going to get market penetration unless that margin narrows sufficiently to make it more appealing to the broader market. It was launched at mass market with a lot of smoke and mirrors at much higher rates and it didn’t work for a lot of people. We’re in a better market to push it out to a much broader range of people now.
FA: Offset is a mass market product in Australia and we’ve failed to capture people’s imagination in this country. The opportunity is right now and the question is how we capture that. I’m slightly ashamed to say I have an app on my iPhone that counts calories. But in the past three weeks I’ve lost 2.5 kilos. The reason for that is because this app has helped me visualise what I’m putting in my body and the calories I’m burning. If we could do the same on offset and engage with the consumer every time a salary credit goes in then it almost sets a goal for the borrower to think about, rather than being something abstract. SL: I don’t think all offset accounts do this but mine updates me with my balance every time I transact through it. That’s a great thing for the client. You
don’t get that on a day-to-day mortgage because the balance comes through at the end of the year.
oFFset is a good way to talk to clients about Financial Planning more generally which can helP brokers justiFy a Fee. is this a conversation brokers should be having more with clients? Robert Sinclair: The fee issue is different. That’s more about the model of firm a broker wants to run as opposed to the solution they offer a client. I wouldn’t want to drive those two things together. The thing that characterises offset for me is complexity. As someone who looks at it from a regulatory background there is a risk of consumers not understanding the product, therefore making it all the more important the person advising on it understands it properly. Self-selection of this product almost seems beyond most consumers. I think with potential product intervention in the future manufacturers will have to think more carefully about how they deliver it as a result. The fee element is something abstract. That’s more about how brokers ensure they get the right return for the work they do. I wouldn’t want to dictate that to anyone. It comes down to a commercial choice. JC: In the past offset was priced at a pretty significant premium and therefore came with a higher proc fee and as pricing has come closer to parity proc fees have normalised. I don’t necessarily see that as a terrible thing. I don’t think it’s more work to sell an offset tracker than a normal tracker. It might be a slightly longer conversation but I don’t think it should attract a proc fee premium.
OFFSET AN EXCELLENT PRODUCT
www.woolwichintermediaries.co.uk
Offset offers flexibility and financial control to your clients. For intermediaries only 40 mortgage introducer APRIL 2011 Mortgage Introducer Strip ads_180x29_AW 2 31/03/2011 12:47
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