inspiration. magazine
October 2021
Climate Change on the doorstep Adapting to climate change
Am I Vulnerable? Identifying vulnerable customers
Waking up to Cyber-risk Keeping safe in a digital age
Conference Highlights Recognising the Stars
Consumer Duty Culture is Key
Refer don’t Defer Bringing Protection to Life
Thank You for Being a Part of HLP
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4. Welcome Chris Tanner
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14. D ata is King David Steele
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28. Helping the under-protected back-up their income Jennifer Gilchrist, Royal London
6. C limate Change on the Doorstep
16. P rice Walking James Stewart
Neil Hoare
8. P ainting by Numbers Sean Almond
10. R efer Don’t Defer Jonathan Madeley
Kay Leslie
18. K ey Conference Messages 20. Network of Stars 22. H ow low can we go? Neil Hoare
12. Planning to Succeed in 2022 and Beyond Kenneth O’Callaghan
30. Am I Vulnerable?
24. W aking up to Cyber risk Sajid Kadri
32. 700,000 fixed rate mortgages maturing in 2021 Shaun Almond
34. Guardian Celebrates the brand’s 200th Birthday 36. Three Small Letters, one big Impact. Neil Hoare
26. D uty Calls Kay Leslie
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Welcome I need to start my introduction to this, the latest Inspiration Magazine by congratulating all those Mortgage Advisers and Lenders who worked so tirelessly to fulfil so many customer’s dreams of buying a new home, whilst taking advantage of the stamp duty holiday.
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Christopher Tanner CEO
The volume of mortgages written during H1 2021 was truly remarkable and to see so many complete by the 30th June, with such little disruption to a purchaser’s plans, demonstrates the great service advisers were able to offer.
on the Financial Services Industry. Whether its how to identify and work with vulnerable customers, provide fair pricing for Insurance Policies removing the tempting initial pricing structures, or the new Consumer Care consultation paper, which is a fundamental shift in how advice is delivered, we know that there is regulatory change on the way - all intended to strengthen good customer outcomes. Ultimately, the regulator is asking us as an industry to confirm that the way we treat the customer, is the way we would like to be treated ourselves. The answer may be yes and we already do, but that is not necessarily good enough anymore - our new “Data Driven” Regulator is needing us to prove that we do with evidence and results.
themselves, their family or their lifestyle. Consumer Duty tells us that we need to highlight the risks and signpost a solution and for many customers, the phrase “Your Home May be Repossessed should you fail to keep up the mortgage payments secured on it” is not talked about enough. We know protection can be a complicated solution and one that some advisers prefer to ignore, but under the new proposals, they ignore this at their peril. That is one of the reasons why HLP has created HLProtection, a new referral service for advisers who do not want to talk to their customers about Death, Illness and Disability and the impacts on life of them and their family. You can find more information about this service later in the magazine.
In this Magazine, we look at a number of new initiatives by the Regulator as the new team at the top of the FCA make their mark
We do know that a poor customer outcome is one where the Customer has been left with a big debt and had no discussion about protecting
In addition, there is the green agenda. With the Government identifying housing as one of the key target areas to control climate
change – you can see why lenders are being encouraged to contribute to the challenge. We anticipate the green mortgage becoming mainstream, as incentives are delivered through lower headline rates or rebates towards eco friendly home improvements. At HLP, we have a focus on delivering efficiencies using technology. The double entry of data into 360dotnet and our New Business Control System has now been removed and we will shortly be delivering enhancements to the commission system, improvements into reporting and further integrations such as with Paymentshield to improve the ability to quote on Home Insurance, now that the playing field with Price Comparison Websites has been weakened. There have been significant numbers of homeowners and landlords who have seen their initial rates come to an end over the past few weeks. I would encourage you to continue talking to your customers to find out how you can assist them. On the face of it, mortgage rates will remain low so the re-mortgage and product transfer market will remain strong,
whilst the purchase market finds it’s new-normal post stamp duty holiday. We all know how much it costs to acquire a new customer, so now is the time to make sure we look after them. Have the conversation and don’t forget that means, if you have the permissions, mortgage and protection. The last 18 months have demonstrated how easy it is for customers to change their buying habits from high street to digital, let’s make sure we keep the focus on our client banks and give them the service they have come to expect from a professional mortgage and protection adviser.
“We do know that a poor customer outcome is one where the Customer has been left with a big debt and had no discussion about protecting themselves”
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Climate Change on the Doorstep There are currently 27.2 million households in the UK and the UK Government is committed to build around 1.5 million new homes by 2022. The quality of these existing and new homes and how they are financed not only has a critical role in safeguarding people’s health and wellbeing, but in addressing climate change. In 2019, the government published the Green Finance Strategy, which promoted the adoption of green finance products and services, and pledged to unlock green mortgages for new build homes. Therefore, it is no surprise that Lenders have begun to create products that both incentivise and reward existing and prospective homeowners for adopting the green agenda. Heating and hot water for UK homes make up 25% of total energy use and 15% of our greenhouse gas emissions. A further 4% of greenhouse gas emissions are the result of electricity used in the home for appliances and lighting. Although nearly all homes are naturally ventilated, cooling energy demand is increasing and projected to increase further with rising temperatures. The challenge is clear in terms of improving housing, in England alone, 4.7 million dwellings (20%) failed to meet the Decent Home Standard in 2016, although this had fallen
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Neil Hoare Commercial Director
from 7.7 million homes in 2006. The private rented sector in England continues to have the highest proportion of poor quality housing, as defined by the Decent Homes standard, at 27%. So where does the green revolution start and how does the financial services industry contribute to reducing the impact of climate change? Obviously there is the task of improving existing stock, and then there is the challenge of improving new stock being brought to market. Building houses involves raw materials, people and machinery. So many of the big builders are examining using environmentally friendly building materials, locally sourced to reduce their carbon footprint. They now use electronic machinery rather than polluting diesel engines and many are now implementing electric heat source pumps rather than gas central heating boilers. When it comes to mortgages, whilst there isn’t a universal definition of “green”, lenders offering green mortgages either offer borrowers preferential terms if they buy an energy-
efficient home, or if they commit to improving the efficiency of their current home. Eligibility criteria for a green mortgage varies from lender to lender, but the property’s Energy Performance Certificate (EPC) is typically a key factor and will need to be provided. It is also thought that there are two potential avenues which could explain why a mortgage on an energy-efficient home might be less risky for a lender. Firstly, by making a property more energy efficient, the value of the property may increase, and also future-proof the property from costly mandatory eco-friendly property improvements. Secondly, a household with an energy efficient property will have, in theory, lower energy expenditures and therefore additional disposable income. This could provide a financial buffer for the household, reducing the likelihood of mortgage arrears. Green mortgages are still a relatively new innovation, and it may take several more years of observation and an increased availability of performance data on energy efficiency, loan performance and perceived customer value to understand if customers see their mortgage as a key driver of climate change.
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Shaun Almond Managing Director
Painting by Numbers It’s no surprise that people make poor decisions in their lives resulting in a need to turn to friends and family to bail them out. Indeed we had a Facebook post encouraging us to help out the son and daughter of old work colleagues in their hour of need – a contribution to a £10,000 Vet bill to aid the recovery of their pet dog. My heart says give £20, my brain says “what happened to the pet insurance policy?”
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So what is an advisers job? Some might say that it is to help consumers make the choices they would have made if they had paid full attention, and possessed full and relevant information. But life is not like that, people smoke cigarettes in the knowledge that they aren’t good for them, eat sweets understanding diabetes could be just round the corner, or even fail to save for retirement when income is not certain in old age. Life’s too short, and, in some cases it is, and there can be dire consequences for those they leave behind. So what is an adviser’s job? Perhaps it’s to paint the emotional pictures, after all, we are good at painting when it comes to the home buying process. Picture yourself in your
first home, enjoying the independence and the fact that you can still afford to go out and enjoy life. Picture yourself paying your mortgage off and becoming debt free in twenty five years, owning an asset which you can leave to your children. Wonderful images worthy of an Instagram story. But of course, every positive picture needs to be balanced with the rationale images – a family still in their home if one or both of the income earners were to die, a bank account without any bounced direct debits even though the holder is off work sick or even private treatment for a serious illness, rather than the worry of watching a go-fund me page without donations. The adviser’s job – to identify the benefits and the risks of the customer’s plan of action and helping them achieve the end goal, what the Financial Conduct Authority calls a great customer outcome.
then you can have a huge impact on the outcome of the customer’s decision making. Keeping the conversation simple can help as it is often the myriad of policies and solutions that put the plan at risk, how many of us give the Barista the same coffee order to avoid confusion and disappointment. Life Insurance that reduces in value in line with the balance on your mortgage, an income plan for when you might be off work for more than two months and another to pay the bills should one of you die. For those Advisers who have their roots in Pearl or the Pru, their picture painting will be of the standard of Van Gough or Matisse, for others who haven’t had the life experiences then it could be painting by numbers. Like painting, practice makes perfect, have the conversation and then don’t be afraid to ask for feedback, after all what’s the worst that can happen – possibly a question to ask all your customers.
“Keeping the conversation simple”
What has worked with many companies is the move to an opt-out from an opt-in process. There are very few people in society who don’t have a protection need and by being clear at the start that your customer has to tell you that they definitely absolutely and comprehensively do not need the plan B,
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Introducing
Your trusted referral partner for life, critical illness and income protection.
01392 353899 info@hlprotection.co.uk www.hlprotection.co.uk HLProtection is a trading name of HL Partnership Limited. Registered in England No. 5011722 Authorised and regulated by the Financial Conduct Authority. Registered Office: Unit 1, 2nd Floor, Southern Gate Office Village, Southern Gate, Chichester P0198GR
Refer, Don’t Defer The overriding and consistent theme when it comes to providing protection advice is one of gaps, mismatches, and unmet challenges. Research amongst advisers suggests that they always talk about protection, while most customers say they don’t remember it coming up. The Insurance industry is open and honest in its role in people’s lives, publishing paid and declined claim statistics, but unfortunately most customers don’t believe them. We have customers who either don’t understand the products, or mostly get it wrong when they say they do. We have adviser firms doing well giving recommendations over the phone, whilst research suggests many customers don’t want to talk on the phone. We have an industry saying the impact of Covid-19 should have been driving protection sales, whilst customers are saying it’s not making a difference.
Jonathan Madeley HLProtection
Understanding what is driving these gaps and mismatches could help the industry improve across the board, starting with how you communicate to your potential customers. The biggest challenge we face is how to get the consumer on-side and interested in protection. Do you commit enough resource to reaching consumers? Whether it’s marketing, PR, digital, social, owned or earned, the ROI may not be guaranteed – but if you don’t change, then nothing changes and we are left again trying to fix the roof when its raining, rather than filling the holes when the sun shines. Developing products and improving technology is great and plays a very important part – but arguably these are the easier wins. The tough part is reaching consumers, improving their understanding, and encouraging them to act, making sure consumers are financially secure, whatever life throws their way.
We know there is a lack of consumer trust around claims stats, alongside poor customer understanding around income protection, but strangely there is the view that most people think life insurance is important yet many still don’t have it.
It was no surprise that the last economic crisis caused protection sales to rise for many mortgage brokers. It may well be customers who didn’t take protection the first time, but that’s OK if they get cover in place before their circumstances start to change.
If you would like to register your business with HLProtection, you can visit the website www.hlprotection. co.uk. To find out more about the service, you can speak to either Shaun Almond (shaun.almond@ hlpartnership.co.uk) or Neil Hoare (neil@hlpartnership.co.uk).
Advisers are, and will always be, crucially important in helping families to become more financially resilient, but advisers alone can’t reach everyone and that’s where HLProtection can help, an internal protection referral facility designed exclusively for network members. HLProtection will work as your trusted partner to ensure that your current and previous client’s protection needs are met. You’ll be surprised how many of your clients will find the advice they receive valuable. The model has been proven by the firms that have already piloted the service.
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“Strategy is about choice – what to do and what not to do in order to grow”
Kenneth O’Callaghan Marketing Manager
Planning to Succeed in 2022 and Beyond 12
If you look outwardly across the business landscape, the superior performers within the financial advice industry all have one thing in common. They have a strategy. Michael Porter, a strategy expert and professor at Harvard Business School, emphasises the need for strategy to define and communicate an organisation’s unique position, and says that it should determine how organisational resources, skills, and competencies should be combined to create competitive advantage. Strategy is about choice – what to do and what not to do in order to grow. It’s absolutely vital to hitting your full potential, yet strikingly over 40% of businesses stated that they do not have a formal strategy planning process. Most leaders of advice firms start with the tactic with no real considerations as to the reasoning. The below structure can help you to formulate your strategic plan.
1. C onduct an analysis of your company’s internal environment. Look at your company’s current position and assess it’s internal strengths and weaknesses. What is the company capable of and what are the skills, knowledge and resources that it currently possesses? Identify the gaps and barriers to the company’s progression and highlight what has previously been successful.
2. Conduct an analysis of the external environment Simply put, you cannot be successful and achieve your business goals and vision if you’re operating in a bubble, only looking inward at your own organisation and not considering the impacts on your business from the wider world. It is essential to have a good understanding of what is happening outside of your business, so your strategic planning takes this into account, and you don’t end up being blind-sided by something that derails your plan and therefore your success. Many of the external factors that impact your business will ultimately determine what will work and not work for your business, so you need to know them to build the right strategy. This section should look at the political, economic, social, technological, legal/ regulatory and environmental factors that affect your business. It is also worth considering who your customers are, what they want, their behaviours and what your competitors are doing to ensure success.
3. Summarise with a SWOT analysis A SWOT Analysis is a framework for identifying Strengths, Weaknesses, Opportunities and Threats. It is often presented in a 2x2 matrix and can be used to summarise your internal strengths and weaknesses and the opportunities and threats that the external environment presents.
4. Set objectives Strategic Objectives are the major things you wish to achieve within your plan. Objectives should be specific, measurable, achievable, realistic and time bound. A strong set of objectives usually considers financial, marketing, operational and human resource goals.
5. Develop your strategy A strategy within a strategy? Seems a little confusing. The strategy section of your plan looks at what initiatives you will use to achieve your objectives. For example, if you have set yourself the objective of growing revenue by 25% within 3 years, how will you do this?
6. Develop your tactics Begin by listing out your strategies and going through each one. Identify what needs to happen to make the strategy a reality, including the details that may have been missed at the higher level. Tactics can be smaller, or they could be individual tasks. It’s important each tactic has an owner, someone responsible and accountable for this element of the overall strategy. As an example, here you could list the channels that you will use to advertise your business and who will be responsible for managing them.
7. Finance/Budgeting This is where you will define how you will finance the strategy and set clear and realistic budgets for its implementation. Budgeting, forecasting, and strategic cost reduction can be useful tools. Once you have formulated your strategic plan, you have taken the first step to success. When executed correctly, a realistic plan could allow you to build your capabilities as a business, navigate changing environments and improve your chances of greater success. After all, a goal without a plan is just a wish.
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Data is King 14
David Steele Chief Technology Officer
In 2016 Microsoft bought LinkedIn for $26.2bn, it was a professional network of 443 million users of which roughly a quarter were active every month. Why buy LinkedIn for so much money – the answer is in the data. Microsoft now know where people work, what they aspire to do, where they went to school, who they know, what their interests and skills are. Overnight, Microsoft, a hardware/ software business transformed immediately into a B2B marketing and advertising agency. But what does that mean to the typical adviser firm whose client bank is around 442,999,500 customers smaller than that of LinkedIn and nowhere near the B2B Social media price tag?
Bank Statements tell a great story
The key to building any successful business is anticipating and identifying customer needs, and then satisfying them in which both parties derive value. That means understanding your customers from the data that they voluntarily give you in order for you to give them advice.
Bank Statements tell a great story of the monthly activity, a credit report shows an attitude and utility bills demonstrate a keen eye for prudence. But how many times do we study the data we have at our finger tips? We know that the challenge to retain and develop customer relationships by Banks and new entrants is going to grow, especially as so much more
is driven by digital and importantly, mobile. How many of us now feel comfortable to tap our bank card or point a phone at a terminal, the generation who click and have a delivery the following day is growing. Adviser firms need to move up the value chain and not rely on the fact that the customer needs a mortgage, it won’t be long before the customer doesn’t need a human to tell them which is the most suitable two-year fixed rate. Predicting the needs of customers and engaging with them earlier in the advice process will be key. Talking to parents about the housing needs of their grown up children, talking to children about the later life borrowing needs of their parents, or talking to tenants about their plans to move to homeownership. Ultimately the information all sits in the data capture process, and then having the time to really understand that customer’s needs now, and in the future. For those firms who see their systems as a means of processing a mortgage or a life insurance policy, then they are missing the point of having a database. If you see certain fields on your system as irritants when they are not necessarily required for completing a mortgage application, then creating a long term future for your business will be hard work. If you see the collection of information about your customer as a vital element of the advice process and an opportunity to future proof your business, then you understand the power of data.
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Price Walking James Stewart Policy Manager
In response to concerns that customers who have taken out car or home insurance have “price walked” in to higher premiums, that is they have been tempted by a cheap initial premium only to find that, at renewal, their premium increases without their knowledge, the FCA has introduced a rule that requires home and motor insurance renewal premiums to be set at a price that is no higher than would be offered to an equivalent customer at new business. This is referred to as the equivalent new business price (ENBP). An Insurer cannot therefore discriminate against a customer on the grounds of how many years a customer has held their policy with them (i.e. tenure). Insurers in these markets will no longer be able to dual price and gradually increase premiums over time at renewal until they bear no resemblance to the premium that would be offered if the same customer was a new customer. Although it is too soon to know for sure how this move will affect prices – will Initial pricing go up or renewal premiums go down, at least the FCA guidance should create a more competitive Insurance market, less dominated by comparison websites whose whole ethos is around finding the cheapest price.
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“Embedding the relationship between the overall price to the customer and the quality of the product(s) and/or services provided” Elsewhere in the rules, both manufacturers and distributors will be required to consider whether the products they either manufacture or recommend to customers represent fair value and retain evidence of the analysis. This analysis will be necessary for each insurance product distributed by the intermediary, including pure protection products. Firms will be expected to follow the Treating Customers Fairly guidelines for products, which means we will be expected to know the target market for each insurance product, the characteristics of that product and how these meet the needs of the firms’ target market. By knowing who, what, why and when for the product we will be expected to be able to demonstrate fair value outcomes and be able to evidence the right outcome has been achieved.
Although fair value is not defined by the FCA, value is defined as ‘the relationship between the overall price to the customer and the quality of the product(s) and/or services provided’. So for example, using the Defaqto Compare Tool to demonstrate the difference in price between a five star product and a two star product would be a potential source confirming that the price and product quality delivered a great outcome to the customer. For Advisers there is now a greater sense of a level playing field with the Price Comparison websites. Whilst we still await the practical adoption of the new rules, and we see which way prices go, now would be a great time to address any changes in the Sales Process so that you take advantage of the ability to compete in what is a competitive market.
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Key Conference Messages Why does the Financial Markets Impact the Rates on Mortgages?
Time to think Green
The Mortgage Discussion
“Research from Nationwide BS - 56% of Adults don’t know what CO2 emissions are, 75% don’t know what net zero means and 90% don’t know what an EPC is.”
Prices, Competition, Specialisms, Innovation in the First Time Buyer Market and of course don’t forget that Disney Magic
The Protection Conversation
Tech is with us to stay
Education
Raising customer awareness, don’t assume it’s not needed, Consumer Duty and keep talking Protection.
“69% of homeowners feel that it should have taken less time to get their mortgage”
Remember to take time out of your diary to educate, educate, educate
“With interest rates remaining low over the past 10 years. The relationship between swaps and mortgage rates has shown little correlation, this is because the ultra low rates are a small component of price at a macro level.”
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Keeping you safe “The FCA’s supervisory strategy and programme of work is to ensure that mortgage intermediaries are meeting its expectations, and harms and risks of harm are being remedied and/or mitigated.”
A change at the top for Regulation “Treating Customers Fairly on Steroids!”
Protection Is changing “Crucially, the industry has an opportunity to shift from a “repair-and-replace” [remunerate] approach to one of “predict and prevent” across all segments: life, commercial P&C, reinsurance, personal lines, and brokers.“
A Price that’s fair “Customers can trust that firms are offering long term fair value. Consumers who remain with their insurance provider can be sure that they will not end up paying high prices simply because they have not switched provider. They no longer need to search, switch or negotiate at every renewal.”
Think with positive outcomes “Be motivated by what you’re seeking to achieve not motivated by what you’re seeking to avoid. It’s really important for us to be motivated by what we see as the rewards for winning, not what we don’t want to happen.”
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Best Adviser Firm North, Northern Ireland & Scotland AMG Financial Solutions
Best Adviser Firm Midlands & Wales
Best Adviser Firm South West
SJ Mortgage Solutions Ltd
Yes Mortgage Services Limited
Best Adviser Firm for Specialist Lending
Best Adviser Firm for Protecting the Financial Future of their customers
The Buy to Let Broker
Best Adviser Firm for File Quality Fidenti
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AMG Financial Solutions
Best Firm for Business Growth Independent Mortgage Associates
Best Adviser Firm South Michael Usher Mortgage Services
Best Adviser Firm for Later Life Lending Dartmoor Financial
Best Adviser Firm for Mortgage Quality Impartial Financial
Best Adviser Firm for Customer Engagement
Best Adviser Firm for Customer Outcomes
Best Firm for Investment in their People
Bell Financial Solutions
Zing Mortgages
Integrity Mortgages
Best Overall Adviser Firm
Best Residential Lender
Best Buy to Let Lender
Mortgage Experience Ltd
Halifax
TMW
Best Specialist Lender
Best Specialist Distributor
Best Protection Partner
Precise Mortgages
Fluent
Royal London
Best Technology Service Provider
Best BDM Team
Best Supporting Business Partner 2020/21
Twenty7Tec
HSBC
Legal & General
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Neil Hoare Commercial Director
How low can we go?
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Q3 in the mortgage market has been one of quiet reflection after the rush to complete property purchases before the 30th June. That doesn’t mean that lending has in any way fallen off a cliff, there has been change of tack to remortgage and product transfer. However, lender’s appetite to drive mortgage volume hasn’t been diminished, record low headline rates for those low risk customers in low risk housing are on offer. The word for the day “low” and the feeling is that the word might become “lower” or even “lowest.” The reason for the drive to increase mortgage lending – Lender’s capital positions, there has never been so much money floating around in bank accounts and ring-fencing, the rule that states retail cash can only be used for retail activities, means the cash cannot be invested in stocks & shares. When the pandemic hit, the UK Population’s reaction was to financially de-risk themselves. Many mortgage holders took payment holidays on their debts and used the spare cash to pay down expensive credit card balances and loans to the tune of £20bn, and when it came to businesses, according to the Bank of England, businesses’ cash balances increased by around £132 billion (around 25%) since end-2019 much of this coming from external financing. 48% of SMEs now hold at least one month’s worth of turnover as cash reserves in February 2021, compared to 39% in the previous year. Of course, many commuters aren’t commuting, many holidaymakers aren’t holidaying, and many shoppers
The word for the day “low” and the feeling is that the word might become “lower” or even “lowest.” just aren’t shopping. This money just sits in their bank accounts. As of May 2021, over 80% of households that had taken out mortgage payment deferrals had returned to full repayments after their deferrals ended. According to the Bank of England’s stability report, nearly 450,000 residential property transactions took place in 2021 Q1, or one and a half times the average quarterly level over the past decade, and the highest since before the global financial crisis. The combination of the stamp duty holiday, structural factors such as households prioritising additional space to accommodate flexible working arrangements, increased savings accumulated during the pandemic, as well as the continued low interest rate environment have all contributed to the strong levels of business. The assumption is that all these factors will drive a strong housing market past the 30th September deadline for the final phase of the Stamp Duty holiday in England. One of the Key drivers of House Price is the cost of borrowing and, as interest rates remain low, then the cost of buying a home will continue to rise. As house prices increase, then LTV levels in Lender back books of mortgages reduce, releasing further capital into the market meaning an increased urgency to convert capital
into lending. And that’s not including the capital that lenders can acquire from the Bank of England under the Term Funding Scheme (TFS). Early on, it was identified that when interest rates are low, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn could limit their ability to cut their lending rates. The TFS offers four-year funding at interest rates at, or very close to, Bank Rate, hence giving lenders access to very cheap funding. So what’s the conclusion? Expect low mortgage rates to continue for some time to come as excess capital washes itself through the system. Lenders need to lend, so see strong competition for low LTV customers. There will be a drive to reduce costs, so see more assertive actions to retain customers via product transfers and more investment in technology to remove human intervention in the mortgage process. House prices could remain high, as low stock levels drive demand for desirable property and of course the requirement to have a garden will impact on the need for flats, although with the re-purposing of town centres away from shopping towards hospitality, then we may see buyer appetite for flats return, especially for those first time buyers.
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Waking up to Cyber risk Sajid Kadri IT Development Manager
According to the Office for National Statistics data, internet use in the UK is at a record high, with 92% of adults recorded as recent users. Those aged 55-and-over are driving the fastest pace of growth. There are indications that the internet will be age-neutral by 2028, with virtually 100% of all ages using the internet. Whilst more younger people (65% of 16-24 year-olds) have increased their online shopping over the last year, there is still a number of older people who have upped their usage, too (39% of 55+ yearolds). It is out of-date to think of the internet as a tool for the younger generation. This usage has impacted on the scale of online fraud with a deluge of opportunities for fraudsters being reported over the past year. The current online environment, combined with the challenging economic conditions and increased financial strain on consumers, has created the perfect storm for fraudsters to exploit the most vulnerable. The scams range from attempts to sell people unsuitable car insurance to, at worst, stealing their entire retirement savings. Imitation websites that copy-cat well-known financial services brands, and misleading adverts are now commonplace. The impact on victims is not just financial either, it has a detrimental effect on people’s mental wellbeing too.
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According to the latest Aviva Fraud report: • More than two in five (42%) have received emails, texts, phone calls and other communications that mentioned coronavirus and which they suspected to be related to a financial scam. This is almost double the number of people who reported being targeted by a Covid-19related scam a year ago (22%). • M ore than two in five (43%) of those who received a communication that they suspected to be a financial scam didn’t report it. This is a slight improvement on last year (46%) but there is clearly still more work to do in encouraging people to report fraud. • One in eight (13%) have been the victim of a financial scam which related to coronavirus: - 25-34 year-olds were the most common victims of fraud (31%) followed by those aged 16-24 (23%) - Almost nine in ten (85%) victims said the fraudsters pretended to be from a company they already deal with. 46% said being the victim of a scam negatively affected their mental health, their trust in others (45%) and their confidence in the financial services system (37%). The government has drafted their ‘Online Safety Bill’ which aims to make UK a safer place and to impose a “duty of care” on social media companies, and some other platforms that allow users to share and post material, to remove “harmful content” or misleading information. We know that since September, Google now require all advertisers selling a financial product on its platform to be authorised by the Financial Conduct Authority (FCA) or exempt. Whilst creating additional administration for those of us in Financial Services, it’s a welcome move to try and disrupt those that don’t have good customer outcomes at their heart. It’s a further demonstration of the importance of ensuring the scope of the Online Safety Bill includes financial scams promoted by paid-for adverts.
Internet use in the UK is at a record high, with 92% of adults recorded as recent users
So what can we do to help our customers? The first step is to encourage reporting of misleading websites, emails, phone numbers, phone calls or text messages deemed to be suspicious. Remind customers not to give out private information (such as bank details or passwords), reply to text messages, download attachments or click on any links in emails if they are not sure they’re genuine. Customers can forward suspicious emails to report@phishing.gov. uk so the National Cyber Security Centre (NCSC) can investigate it. Text messages can be passed on to 7726 – it spells out SPAM. It’s free – and this will share the suspected rogue text with the customer’s mobile phone provider. When it comes to adverts, customers can report suspected online scams or misleading messaging to the Advertising Standards Authority, including those found in search engines, websites or on social media, or to Google, if found via Google search results. If your customer believes that they have been the victim of an online scam or fraud, they can contact Action Fraud, either online or by calling 0300 123 2040.
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Duty Calls The challenge for many firms will be evidencing that a customer first culture is front and centre in their business. 26
In 2018, the FCA released a discussion paper called Duty of Care, asking for feedback on their proposals for a radical shake-up of the delivery of advice. The Regulator felt that customers weren’t being provided with the level of information that they needed to make informed decisions or, where a risk had been identified, the customer was not being signposted to a potential financial solution. The end result, a new proposal called ‘Consumer Duty’ relating to products and services sold to ‘retail clients’. This is a wide term that includes all clients other than professional clients i.e. government bodies or large corporates. Where the FCA regulate the provision of financial services to SME’s it applies to those too. The FCA believes that firms must do better, although it has not been specific in which markets and so expect all firms and markets to raise their game. Firms being required to ask themselves what outcomes consumers should be able to expect from their products and services, act in a way that looks to break down the barriers that might hinder these outcomes and assess the effectiveness of the outcomes on the customer. Essentially the FCA is asking all of us in the Financial Services Industry, be it Insurer, Lender, Adviser or distributor, to consider whether I would be happy to be treated in the way my firm treats its customers and would I recommend my firms products and services to my friends and family? The proposal starts with a new Principle of “Consumer” and describes three key behaviours which cut across the rules and four outcomes it describes as key elements of the firm, effectively describing what it thinks should be
Kay Leslie Compliance Director
the relationship with the customer. Many in the Industry feel that the existing high level principles including Treating Customers Fairly is enough, but this new Duty is coming and the FCA acknowledges that it will require a fundamental shift in culture and behaviour in firms to constantly focus on customer outcomes and put the customer in a position where they can act and make decisions in their interests. What the FCA is looking for can be broken down into four key outcomes, the first being communication. This applies to every stage of the product/ service lifecycle, from marketing, to sale, and then post-sale care service, yet must be appropriate and take into account the likely recipients of the communication, with particular care given to communication with vulnerable customers. It should also take into account the complexity of the product or service the firm is offering and the channels that are used to communicate, and if issued at the right time in the advice process. Next, we need to make sure that the right products are targeted at the right consumers, and reasonable steps are taken to avoid consumers to which the products wouldn’t be appropriate. Responsibility for this sits with everyone in the distribution chain and each should reflect the extent to which they are able to control or influence choices about the product design, its operation and distribution.
The third outcome is centred on the disclosure of the scope of service and those charges that might be incurred, with particular reference to those who are vulnerable and may have a range of needs. Finally, we are introduced to ‘fair value’ measures which dictate that the cost of the product reflects the value of the product/service and is reasonable, relative to its expected benefits. What this outcome does not do is to require firms to offer products at or below a set price, cap operating margins, prevent firms from charging different prices to different groups of customers, although each must be justified as fair value, or mean that firms have to point customers to potentially better or cheaper products offered by another firm, except when it comes to free debt advice and the Financial Ombudsman Service. Much of the work to embed Consumer Duty will fall to us as the Network to decipher and implement, especially around delivering the data sets that prove one way or another that this principle is being practiced. It will mean a change of business operation for some and for others a focus on best interests and fair value could be an issue. December will be interesting when further details are expected to be published for consultation – so look out for more information as this new regime is rolled out.
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Helping the underprotected back-up their income Jennifer Gilchrist Protection Specialist
The UK has certainly been through its share of ups and downs recently - arguably more downs than ups – but fingers crossed, things are finally starting to turn around. Now that we’re emerging from the Covid-19 crisis, we can reflect on what this period of uncertainty has taught us. One of the things the past 18 months has highlighted is the financial vulnerabilities of certain groups within our society. In the grip of the first UK lockdown, many people were concerned about meeting the cost of keeping a roof over their heads as businesses closed or they became too ill to work. In March 2020, the Government announced that homeowners would be able to apply for up to three months mortgage holiday – this was later extended to up to six months1. However, tenants in the UK who were struggling to make rent payments had to rely on their landlord firstly
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applying for a mortgage holiday, and then passing the relief onto them. It wasn’t until five months into the pandemic, in August 2020, that the Government legislation was passed protecting tenants from forced eviction for six months if they fell into rent arrears due to the crisis. I know this was an unprecedented time in all our lives, but as a company focused on helping people build their financial resilience, the disparity in the different levels of support available to these two groups - homeowners and tenants - got us thinking. And it turns out things aren’t much different when it comes to protection.
A lack of signposting to advice As advisers, you’ll no doubt have noticed that there’s a lack of routes to advised protection for people who rent in the UK. Typically, the reason most people will initially seek out and speak to an adviser is to arrange a mortgage, and the protection conversation naturally follows on from this. However, as tenants aren’t
seeking this type of professional advice, they’re often unaware of their protection needs – leaving them in a vulnerable position.
Changes in the rental market The same report also showed that there’s a growing rental market in the UK. Since 2007 the number of households privately renting has increased by 61%. And this trend is expected to continue.3 For many people, renting is no longer seen as a stepping-stone to buying their first home. It’s a lifestyle choice, especially in large cities, such as London, where buying is just not seen as a viable option, even for older professionals. In fact, Hymans Robertson found that the average renter has been renting for over 10 years, and the number of middle-aged renters doubled between 2007 and 2017. Furthermore, 50% of all children born in 2018, were born into rented accommodation 3.
Plus, tenants tend to spend a higher proportion of their salary on housing costs. For example, in London rent accounts for, on average, 65% of a tenant’s income – 20% more than a homeowner in London spends on a mortgage. With rent costs higher than mortgage costs in many areas in the UK, it may also be more difficult for renters to save enough to cover emergencies.3 So, can we, as an industry, afford to let this growing group of tenants remain under-protected and more at risk of losing their home if they can’t pay their rent and essential bills if they’re too ill to work due to illness and injury?
3.A report by actuarial firm Hymans Robertson, showed that only 8% of tenants were informed about any protection products as part of the lettings process, with only 2% informed about income protection.
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Am I Vulnerable? Kay Leslie Compliance Director
In a ‘Dear CEO’ letter issued in 2020, the FCA indicated that a key focus in its ongoing supervision will be on vulnerable customers. A vulnerable customer is defined as someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm does not appear to be acting with appropriate levels of care. Any customer could become vulnerable at any time, the risk of this is affected by four main factors (key drivers of vulnerability): • Health – health conditions or illnesses that affect the ability to carry out day-to-day tasks • Life events – such as bereavement, job loss or relationship breakdown • Resilience – low ability to withstand financial or emotional shocks • Capability – a lack of financial capability, literacy or digital literacy/skills.
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In the FCA 2020 Financial Lives Survey (ending in February 2020) the findings suggested that just under half of UK adults, aged 18 and over (24.1 million people), display one or more of these characteristics. This had risen to 27.7 million as of October 2020. You don’t need to use the term ‘vulnerable’ in your interactions with consumers but you should focus on what harm or disadvantage customers may be vulnerable to and how they can respond appropriately. All those involved in delivering advice to customers should take time to understand: the circumstances and characteristics of consumers in their target market or customer base being or becoming vulnerable; what harm(s) or disadvantage(s) they may be vulnerable to, how this might affect the consumer experience and outcomes and what the firm can do to reduce the risk of harm. Acting early could prevent the risk of harm from growing or emerging. We will be ensuring that our governance, processes and systems support all relevant advisers and staff to meet the needs of vulnerable customers when carrying out their roles. Anyone dealing with the
financial affairs of the customer must understand their target market’s vulnerabilities and what this might mean in practice for their roles. This will mean that firms should ensure their staff are able to recognise characteristics of vulnerability (and adapt processes accordingly) but do not ‘probe’ customers too deeply simply because they think they need to in order to meet the requirements. Ultimately, we all need to be proactive in offering support to customers and recognise their needs however we communicate with them. We need to be able to adapt our approach to deliver a service that meets the individual needs of vulnerable consumers and not discourage any additional time taken in delivering a great customer service. We know advisers may come across challenging situations and firms should be able to offer practical and emotional support where appropriate . Firms should deliver good customer service that takes a flexible approach to the individual needs and circumstance of vulnerable customers and provide specialist services where appropriate.
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700,000 fixed rate mortgages maturing in 2021. Shaun Almond Managing Director
During the first half of the year, the stamp duty holiday has focused many adviser’s attention firmly on the purchase market. However, it’s important to not take your attention away from your existing clients. There is an even greater opportunity for remortgage business. According to Legal and General Mortgage Club, there are 700,000 fixed rate mortgages due to mature in 2021, totalling £242billion and due to peak in the second half of the year.
1. Regular client communication helps build your relationship It’s important to keep in regular and consistent contact with your clients with high quality content. It can be years before your client’s mortgage or protection policy needs reviewing and you need to be able to maintain your client’s attention throughout. Signing up to HLPartnership’s monthly client e-newsletter can help you to do just that. The service is fully managed, personalised and branded to your business and the open rates exceed the industry average.
2.Check in points and catch ups Integrate check ins and reviews as a part of your after sales service. It helps to build rapport with your client, understand changing circumstances and improves the level of service that you offer your client. All of which, result in increasing customer satisfaction and when applied on a consistent basis, improve your customer retention rates. If you haven’t done so already, check in with your existing clients to catch up.
The question now is, how are you communicating with your existing clients? It is no surprise that increasing your customer retention will boost your profits and help you to provide the best service to your clients. As we move through the year, it could be an important exercise to work out what percentage of clients that you retain.
3.Using your CRM effectively
If you’re customer retention rate is looking a little poor, there are a number of tactics that you can employ to improve your retention rate.
Remember, it can be more cost effective to retain existing clients than it is to attract new ones. Investing time and effort into your existing clients will reward you in the end.
As a member of the network, you enjoy the benefits that a mortgage specific CRM system provides. By inputting the correct data, you will have access to all the review dates and a campaign management system that you can use to contact them.
“The question now is, how are you communicating with your existing clients?” 32
Meeting the challenge By Polly Johal, Regional Key Account Manager, the West Brom for intermediaries Applying for a mortgage can present different challenges depending on the needs of the customer, when placing a case with a lender. At the West Brom for intermediaries we are here to provide you and your clients with the necessary support. This support is underpinned by outstanding service, as recognised in the Financial Adviser Service Awards 2020 where we were proud to earn the highly coveted five star rating for the third year in a row.
Our key criteria Outlined below are just a few examples of where we can accommodate customer requirements through our lending criteria and underwriting approach. Supporting professionals: • Applications based on a borrower moving employer within a professional occupation considered subject to employment reference. • Applications from borrowers entering their first employment within a professional field (for example doctors/teachers) will be considered subject to employment reference and first payslip. • Professionals policy – borrowers in first job and first contract considered e.g. nurse, teacher, vet, doctor. • Stipend and Bursary accept 100% of income – student nurses and PGCE. Fixed Term Contracts: • Subject to 12 months’ continuous fixed term contract employment within the same occupation. New fixed term contract replacing an employed position held in the same skill set, for instance a NHS worker moving trusts and have 6 months remaining. Bank Nursing: • Permitted subject to applicant receiving this income for a minimum of 12 months (50% of income can be used if this is a second job). Our full lending criteria is available on our website by visiting www.wbfi.co.uk We will continue developing our criteria and broker proposition throughout the year and very much look forward to working with you and your clients.
Registering with us To register with us, simply visit our website at wbfi.co.uk or contact our Intermediary Sales and Support team on 0345 241 3597 or email us at ist@westbrom.co.uk
wbfi.co.uk
ist@westbrom.co.uk
0345 241 3597
Head Office: 2 Providence Place, West Bromwich B70 8AF www.westbrom.co.uk ‘the West Brom’ and ‘the West Brom for intermediaries’ are trading names of West Bromwich Building Society. Criteria is subject to change, please check before submitting applications.
A15320-10/21-01
Guardian Celebrates The Brand’s 200 Year Birthday With Special Offer For Critical Illness Cover Applicants
The Guardian brand turns 200 years old this year, and to celebrate its birthday, the protection challenger has announced a special offer for new applicants. Clients who apply for its award-winning Critical Illness Protection or Combined Life and Critical Illness Protection between 1 October and 30 November 2021 will be eligible for two months’ cashback, each of which will be equivalent to one month’s critical illness premium – to mark each 100 years of the brand. The two cashback payments will be paid in December 2022 and December 2023. Jacqui Gillies, Marketing and Proposition Director, Guardian, said: “This is an opportunity that doesn’t come along too often, so we wanted to celebrate the brand’s bicentennial by doing something special to mark its birthday. As well as arranging a big party for our valued partners, we thought let’s give out some presents! So, between now and the end of November, we’re giving all clients
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who apply for our Critical Illness Protection or Combined Life and Critical Illness Protection, not just one, but two months’ cashback. That’s one to mark each 100 years.” The special offer applies to all types of adult critical illness cover; Level, Decreasing, Increasing and Family Income Benefit. The offer doesn’t apply to Life Protection or Children’s Critical Illness Protection. Policies that start after 30 November will still be eligible, providing Guardian receives the application within the offer period. There’s no minimum premium requirement. Each cashback payment is subject to a maximum of £400 for each qualifying critical illness cover. To be eligible for the first cashback payment in December 2022 the policy must be in force and premiums up to date on 15 December 2022. To be eligible for the second cashback payment in 2023, the policy must be in force and premiums up to date on 15 December 2023. Full terms and conditions are on Guardian’s website. Each cashback payment will be made direct to the bank account used to collect the monthly premiums.
IT’S OUR BRAND’S 200TH BIRTHDAY IT’S YOUR CLIENTS WHO GET THE PRESENTS
2 months’ cashback on critical illness cover premiums.
To celebrate our brand’s bicentennial, every client who applies for Critical Illness Protection or Combined Life and Critical Illness Protection between 1 October and 30 November 2021 will be eligible for 2 cashback payments, each of which will be equivalent to one month’s critical illness cover premium. Terms and conditions apply.
GFS A 0384 0921
For more information, visit: adviser.guardian1821.co.uk
Guardian Financial Services Limited is an appointed representative of Scottish Friendly Assurance Society Limited. All products are provided by Scottish Friendly. Guardian Financial Services Limited is an appointed representative of Scottish Friendly Assurance Society Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Registered office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ. Registration number 110002. Guardian Financial Services Limited is registered in England and Wales under number 11115769. Registered office: 11 Strand, London WC2N 5HR.
Three Small Letters, one big Impact. The Financial Conduct Authority is on a journey of change, addressing a number of challenges in our Industry. It’s not just the UK driving change, much of the work undertaken here in the UK has engaged the attention of regulators globally with Environmental, Social and Governance (ESG) issues rising to the top of the agenda for big and small businesses alike, investors and the wider society. The Regulator believes that tackling these issues will advance the objectives set for them by Parliament, with the outcomes directly contributing to the stability, fairness and effectiveness of the firms, markets and infrastructure that together make up the financial sector. Financial services firms and regulators therefore have a strong shared interest in moving towards a more diverse and inclusive industry. The direction of travel is driven by research which demonstrates the evidence of correlations between diversity and inclusion and positive outcomes in risk management, good conduct, healthy working cultures, and innovation. Nonetheless, despite years of discussion and many research studies, the conversation about diversity and inclusion in many ways is
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Neil Hoare Commercial Director
still in its infancy and the FCA believes as an industry we can all do more. The Regulator has highlighted a number of initiatives that are creating a clear momentum for change, initiatives that are building around the world. Social movements and increasing investor focus have led to global conversations, in particular about gender and race. Against this background, the FCA is making their expectations of firms clearer and to root them in their statutory objectives, supported by the Public Sector Equality Duty introduced by the 2010 Equality Act. A recently published discussion paper was felt to be an important step towards making rapid and more substantive progress across the financial sector and, with that request for responses now closed, the financial services industry awaits its next steps. The FCA’s goal is to see increased diversity and inclusion in financial services translate into safer and sounder firms with better internal governance and risk management, a more innovative industry, and financial products and services that meet the diverse needs of consumers.
To achieve this, they do not intend to prescribe a “one size fits all” approach to diversity and inclusion, but the FCA does believe that policy has an essential part to play in driving change and they want to work with a wide range of stakeholders, within and outside the financial services sector, to understand the best approaches to take. This is a journey that regulators and the regulated are on together and it is recognised that there will be firms that make good progress and be highlighted as such. But there will also be firms who choose to ignore their role to play in the ESG and the FCA will not hesitate to take action where we see shortcomings, particularly where those impact on consumers and market outcomes. Ultimately, everyone’s goal is to see an increase in diversity and inclusion in financial services which then translates into safer and sounder firms with better internal governance and risk management, a more innovative industry, and financial products and services that meet the diverse needs of consumers.
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