SEPTEMBER 2020
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THE UNCHANGING FCA BUSINESS PLAN IN A CHANGING WORLD The publishing of the FCA’s business plan is always an exciting moment in the exhilarating world of compliance. What clues can we get about how the FCA will focus their attention over the course of the next year? Are there any surprises we weren’t expecting? Has it been knocked for six by the current pandemic?
CAN THE MORTGAGE MARKET BE ETHICAL? As consumers become more concerned with ethics, Platform explore how our industry can help to address this.
ADVISING IN UNCERTAINTY Accord discuss how feeling in control of your finances is fundamental in a crisis and having a trusted adviser never more valuable.
HOW DIET CONFUSION CAN HIT HEALTHY EATING AIG Life research shows more than two out of three adults find it hard to eat healthily despite millions going on diets at least twice a year.
The latest news and views for professional advisers use only. If you are not an adviser, please contact your financial adviser for advice.
Service Charter Here at PMS, we’re passionate about the service we deliver to you and believe the key to great service is doing the basics consistently well. We also believe that you should know exactly what kind of service you can expect from us and that you should feel confident that you will receive it every time, no matter which department you’re dealing with. That’s why we’ve created our Service Charter, built around three core principles and ensuring that you always know what to expect from us. We’ve listened to your feedback from the annual member and client survey, as well as the feedback you send through We Listen, and have identified the key commitments that matter to you.
Honesty – behaving with integrity •
We will find solutions and set expectations to your queries, keeping you updated every step of the way • We will be clear, concise and open with you, you can count on us to do the right thing • We will always aim to give you an answer within a realistic timeframe and will always keep you updated until your query is resolved • If we make you a promise, we will keep it
Communication – keeping you informed every step of the way •
We will adopt a resolve and respond approach to your requests, aiming to settle your query at the first point of contact
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We will put people first and always try and communicate with you in a way that suits you
Ownership – taking responsibility •
We will aim to give you a single point of contact to resolve your query. If we do need to pass you onto another department or individual, we’ll ensure a seamless handover, as well as informing you of your new point of contact
We would love to hear from you with regards to our Service Charter, any suggestions that will help us make the service even better, or feedback on the service you have received from PMS that you would like to bring to our attention. Our We Listen feedback framework is here to ensure you are heard. You can contact us by emailing welisten@sbg.co.uk or call 0345 230 8000.
We have identified the three key commitments that matter to you
WELCOME
TO THE LATEST EDITION OF DISCOVER In this issue of Discover, we transition back to our usual format with a bumper edition as we bring you up to date with the latest news and insight across the market from our partners. We delve into the key areas of focus for the FCA in their yearly business plan as they continue to focus on good customer outcomes and we take a look at their response, to the ongoing Covid-19 pandemic. We hope you enjoy the latest issue of Discover. Best wishes, The PMS team
IN THIS ISSUE 04 The Unchanging FCA Business Plan In A Changing World PMS
15 What The Stamp Duty Changes Really Mean For Landlords Gatehouse Bank
26 Mental Wellbeing And How We Can Improve Access To Insurance Scottish Widows
06 What’s Next For 90% LTV Mortgage Lending? Skipton Intermediaries
16 Is The Limited Company Structure Right For Your Landlord Client? Aldermore
28 At Legal & General, We Believe In The Importance Of Support Legal & General
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Lending In Later Life: The Adviser, The Market And The Lender The Tipton & Coseley Building Society
09 Advising In Uncertainty Accord Mortgages 10 Can The Mortgage Market Be Ethical? Platform 12 Relationships: The Key To Keeping Mortgage Clients Coventry for Intermediaries 13 A BTL Strategy For A Post-COVID World Landbay 14 State Of The Buy-To-Let Market: The New Normal Zephyr Homeloans
EDITORIAL / DESIGN TEAM
How To Help Limited Company Landlords Enjoy A Different Kind Of Holiday This Year Precise Mortgages
How COVID-19 Has Affected The Housing Market And What Paymentshield Are Doing To Help You Paymentshield
19 Are HMOs Still A Viable Investment In The Wake Of COVID? Foundation Homeloans
31 How Diet Confusion Can Hit Healthy Eating AIG
20 How Brokers Can Help Their Self-Employed Clients Kent Reliance
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22 Opportunity For Specialist Lenders Post-COVID Bluestone Mortgages 23 Why Older Borrowers Are Remortgaging Or Moving Leek United 25 How To Keep Your Client Communications Secure Aviva
COVID Casts A Whole New Light On ‘ Protecting Income’ - For Both Clients And Advisers LV=
33 Property Insurance - What Does Non-Standard Mean Anyway? Ceta 34 Digitisation Of The Conveyancing Journey Optimus
Phil Bragg
Lauren Spurrier
Senior Marketing Executive
Design Executive
This publication is issued by PMS. PMS is a trading style of Premier Mortgage Service Limited a company registered in England and Wales with number 5011650. Registered office: Pixham End, Dorking, Surrey RH4 1QA. This document is for use by financial advisers only and is not approved for use with customers. The views expressed in this publication maybe those of individual authors and do not necessarily reflect those of the Sesame Bankhall Group. Whilst every effort is made to ensure that contents of this publication are correct, we cannot guarantee complete accuracy and do not accept responsibility for errors. No reproduction of any information within this publication is permitted without prior written consent from the Sesame Bankhall Group. © 2020 Sesame Bankhall Group.
SEPTEMBER 2020
Compliance
Paul Fothergill Compliance Policy & Regulatory Development Manager
PLUS ÇA CHANGE – THE UNCHANGING FCA BUSINESS PLAN IN A CHANGING WORLD The publishing of the FCA’s business plan is always an exciting moment in the exhilarating world of compliance. What clues can we get about how the FCA will focus their attention over the course of the next year? Are there any surprises we weren’t expecting? Has it been knocked for six by the current pandemic? Unsurprisingly the latest edition of the business plan focusses heavily on the FCA’s ongoing response to the Covid-19 pandemic. The regulator has been scrambling to ensure that markets continue to function well and that consumers are being treated fairly by firms. If this sounds familiar to you, it’s because you’ve heard it before. The FCA is nothing if not consistent with the business plan, given that the plan looks to help the FCA to meet its strategic objectives of protecting consumers, protecting financial markets, and promoting competition. The Covid-19 pandemic has caused a great deal of upheaval in society and consequently in financial services, but the core tenets of the FCA will not change because of this. We are seeing a rise in the number of consumers whose finances are in difficulty, whilst firms adapt to cope with the loss of business. Although the pandemic may be unlike anything we have experienced before, the economic effect on individuals and businesses is not. In many ways, the work undertaken in previous years to focus on vulnerable customers, firm resilience, and fair treatment for all has helped to make financial services more resilient. Despite the similarities every year, within the broad context of their strategic objectives, the FCA focusses in and out on different areas of financial services, peeking under rocks and looking for the creepy crawlies. The priorities that the regulator has promised to look at over the next few years include the intriguing “transformation of the FCA”. The goal of this priority is to improve the way that the FCA operates internally. The regulator has stated that it wants to make faster and more effective decisions and to operate in a more integrated way across the organisation. Achieving these goals
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would be a good achievement in making the FCA a more effective regulator. The slow nature of the FCA’s response to issues and bad apples within financial services can sometimes be frustrating, particularly for firms who follow the spirit of the regulations and look to do the best for their customers. Better integration at the FCA should also help to improve direct interactions with firms and mean that responses are quicker and deal promptly with the issues raised by firms. A final point of interest from the business plan is a further mention of fair value. Again, this is nothing new, with mentions of fair value in financial services in many of the FCA’s recent publications. The specific focus of fair value in this year’s business plan is related to digital offerings. The concern of the FCA is the rise in digital offerings is meaning that some consumers are not being treated fairly in the pricing and other terms they receive. The plan states that consumers should be able to benefit from digital innovation and competition and to have confidence that they are getting fair access, fair price, and good quality. This appears to feed into similar work undertaken in the insurance market, where the FCA has looked at value in the distribution chain. It would seem that this will be extended to look at digital offerings to establish how much of the consumer’s payment goes to providing the product and how much goes to providing services along the way. As ever, the latest version of the business plan is not rocket science. Any financial services firm worth their salt knows that putting the customer at the centre of your business is the right thing to do for both the customer and for your business. The efforts of the FCA will continue to focus on customer outcomes. With a new Chief Executive, Nikhil Rathi, appointed in June we can be sure that he will be keen to build a legacy. The hope is that if this can result in faster and more effective responses from the FCA, then the benefits will be felt by all the firms doing the right thing.
As part of our COVID-19 Support Hub, the central location where you can find the latest key updates, tools and resources from across the industry and beyond, don’t miss our all-new series, The Adviser Podcast. This podcast is designed to help you navigate through uncertain times.
LISTEN NOW
Residential
Alex Beavis Head of Mortgage Products
WHAT’S NEXT FOR 90% LTV MORTGAGE LENDING? As Head of Mortgage Products, there’s one question I’ve continually been asked as the mortgage market has kick-started over the last four weeks. No, it’s not “are you on mute?”, though that’s probably a close second. In almost every recent (Teams/Zoom) meeting, be it with Skipton BDMs, brokers, the press, or even my own friends and family, the burning question remains the same: “when will I be able to get a 90% LTV mortgage?”. The answer, of course, is “right now”. Whilst 90% LTV products have largely disappeared, a 90% deal can still be found from the handful of active lenders, although securing one generally requires significant patience and effort. Based on what we’ve seen so far, 90% deals tend not to hang around long and are likely to include a raft of restrictions. First-time buyers (FTBs) only, five-year fixed rates only, no new build, no furloughed income, max loan restrictions, max term restrictions, weekend applications only, and yes, a very early start to join the virtual queue for access to a limited daily tranche. So why are lenders being so cautious? Why do products emerge briefly, before rapidly disappearing? And what might the future look like for smaller deposit lending? I’ll have a stab at answering these, though as I’ve written elsewhere recently, most current forecasts are about as useful as a chocolate teapot.
Full Service History There are three main issues at play. The first, and perhaps the most visible barrier, remains service. As we’ve seen with Accord, Coventry, Platform and the handful of others who have re-entered the 90% market; doing so without being overwhelmed with demand is a difficult challenge and the primary reason lenders have restricted access to new deals. We must remember that lenders too are working from home.
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Underwriters in kitchens, BDMs in garden sheds, call centre staff on sofas. Whilst the car is running, beneath the hood, the usually welloiled, high performance engine has, in many cases, been replaced by hamsters in wheels, sticky tape, and a huge amount of effort and desire to do the very best to continue to support brokers and customers with their mortgage needs. For any lender sticking their head above the 85% parapet, the barrage of 90% case fire that follows must be processed on top of their share of 1.8 million customers looking for a route out of mortgage payment deferrals, an overall upswell in demand for mortgage finance, a valuation backlog (though largely cleared now) alongside the significant challenge of running the bank from home. On this front, I urge Intermediaries to be patient with lenders experiencing service issues, especially if dealing with a 90% case. Whilst the market is nearing full match fitness in terms of demand, lender service still has significant knocks from which to recover.
Stimulus Side Effects Paradoxically, the next issue is a side effect of wider government support for the economy. Whilst helping millions avoid hardship throughout the COVID-19 crisis, government intervention has itself created material uncertainty around the underlying health of our economy, and indeed, the mortgage market itself. The key question for lenders remains what will happen from October when support for employed and self-employed incomes is withdrawn and the facility for customers to defer mortgage payments has ended. How many of the 1.8m customers with mortgage payment holidays will be able to resume full payments? How many furloughed customers will still be fully employed? The answers to these questions will impact us all, but in the mortgage
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market, a more negative outcome will materially impact lender capital requirements and impairment costs, in turn restricting ability and appetite for new lending, particularly high LTV. I must stress here that the economic data so far is encouraging. The majority of payment deferrals are being repaid, arrears across the industry remain low and the unemployment rate, whilst higher, is yet to reach anything near the levels seen in the last recession. However, the point remains that whilst uncertainty persists, lender appetite for 90% lending is likely to remain subdued.
House Price Uncertainty Nobody wants to catch a falling knife. Closely linked to the above point around uncertainty in the jobs market is concern about the potential for house price deflation. Clearly, customers purchasing at 90% LTV are most vulnerable to negative HPI movement and lenders across the market have publicly, and rightly, stated a desire to protect borrowers from negative equity. Again, whilst current data is encouraging, such concerns remain legitimate. Until we’ve seen the worst of the economic effects of COVID-19, house prices, particularly in London and the South East, may yet decline if a rise in joblessness restricts access to borrowing and reduces demand for property. For those who do lend at 90%, I’d expect to continue to see restrictions on max terms and a limited supply of shorter fixed term mortgage deals until we see more certainty on the future trajectory of house prices.
SEPTEMBER 2020
90% Optimism To conclude on a positive note, none of the obstacles I’ve highlighted here are insurmountable. The handful of active lenders in the 90% market already demonstrate this. Assuming we continue to see positive data, I’d expect lender provision to slowly expand (albeit with many of the existing restrictions), thus in turn relieving the service concerns of being the only game in town. I’d expect to see more lenders consider Shared Ownership lending, especially with the upcoming restrictions to Help to Buy, and if economic concerns persist, more lenders considering mortgage indemnity insurance to underwrite high LTV lending to enable them to support more first-time buyers and purchasers. Expect more ‘family assist’ and ‘guarantor’ style mortgages too. Failing that, and if a lack of high LTV mortgage finance itself begins to negatively impact house prices, it would not surprise me to see a renewal of the government backed Help to Buy Mortgage Guarantee scheme, aimed at providing lenders with support for high LTV lending and getting FTBs and low deposit borrowers moving again. For now at least, it’s time to stay tuned to lender updates, keep refreshing the sourcing systems, keep patience with slower than desired service, but above all, keep the faith that the market will normalise eventually with mortgages available to all customers who can afford them. These views are Alex’s own.
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Richard Groom Head of Mortgage Sales
study by Best Advice showed that the most popular use of equity release was to fund home improvements.3 Other common reasons include moving to a retirement property, or releasing funds to enjoy their retirement comfortably. Another contributing factor that cannot be ignored is the importance of the Bank of Mum and Dad. It is widely recognised that parents are spending more money on helping their children to buy their first home, with the average donation now being £24,1004, collectively making the Bank of Mum and Dad one of the top ten UK lenders4. But how are they funding this? That’s where later life mortgages come in. By releasing equity to gift to a family member the older generation can make life easier for the first time buyers to get on the mortgage ladder. Many older borrowers have mortgages coming to the end of their term but do not have a repayment vehicle to pay off their mortgage. UK Finance quote some 20,000 borrowers aged 65 and over have interest only mortgages set to mature this year alone. Many of these took interest only mortgages out backed by an endowment policy, ISA or pension. A large number of these loans will mature with a shortfall, and these borrowers will be looking for a new mortgage as a result of this5.
LENDING IN LATER LIFE: THE ADVISER, THE MARKET AND THE LENDER With people living for longer, the UK has an ageing population1. As a result of this people are working for longer and borrowing later into their lives, creating a need for mortgage lenders to support last time buyers as well as first time buyers.
The Adviser With continued growth expected across the later life market, what do brokers think of the future? A recent Best Advice survey showed that of those asked 44% of advisers were clearly active in the market, with a further 31% confirming they are expecting to start writing later life business in the next 24 months. As much as 36% of advisers think that later life lending is likely to make up the majority of their income, this alone confirms the potential of the market and the growing interest advisers have in the area3. With product innovation and more lenders coming to market, the opportunities available for advisers and their clients has increased. This means that advisers no longer need to rely on equity release as the sole option for this growing group of clients.
The Market Research shows that later life mortgage demands are growing,2 but with high demand what is it that clients actually want? A recent DISCOVER PMS
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The Lender The Tipton understand that everyone’s needs and circumstances are different when looking for later life mortgages. With their standard later life range, clients can borrow up until their 95th birthday, meaning they can borrow into their retirement or if they are already retired. These products work to a set mortgage term, and the mortgage can be on either a repayment, or interest only basis. The Tipton have also recently amended their standard later life criteria. Where both applicants are retired but cannot prove affordability in sole name, applications can be considered if there is enough equity available to downsize to a two-bedroom flat/house within 5 miles of the mortgaged property. Alternatively, the Society’s RIO range allows clients to use the sale of their home as their repayment strategy (provided they are receiving pension income and have a minimum of 40% equity in the property), satisfying clients’ needs if their historic repayment plans haven’t worked out. In contrast to standard later life lending products, RIO mortgages have no fixed term, and can run until a life changing event occurs. For both product ranges applications on purpose-built retirement properties can also be considered.
https://www.ons.gov.uk/peoplepopulationandcommunity/ populationandmigration/populationestimates/articles overviewoftheukpopulation/august2019
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https://www.estateagenttoday.co.uk/breaking-news/2019/4/ older-last-time-buyers-now-a-growing-part-of-the-market-figuresreveal
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Best Advice Intelligence: Later Life Lending Report (May 2020)
https://www.moneywise.co.uk/news/2020-06-29/bank-mum-dadset-step-high-ltv-mortgages-dry
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https://www.mortgageintroducer.com/a-bright-future-ahead-forlater-life-lending/
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Residential
Nadine Edwards Corporate Account Manager
ADVISING IN UNCERTAINTY Feeling in control of your finances is fundamental in a crisis and having a trusted adviser never more valuable. Nadine Edwards, Corporate Account Manager at Accord Mortgages examines how brokers can provide the reassurance clients need when there are still so many unknowns. Whether it’s deciding if you’re comfortable going back to the pub, knowing where is ‘safe’ to go on holiday or being happy to send children back to school, we are constantly being asked to make decisions with very little evidence that what we choose will be the ‘right’ answer. It’s about judgement, understanding all the ‘facts’ and weighing up the risks. Making financial decisions should be no different, but for the majority of consumers, there is an added veil of mystery and many feel they are underqualified to make those choices without professional advice.
Understanding their needs Whilst this demand is great for advisers, when there is so much uncertainty, how do you ensure you’re presenting the best customer outcome? Whilst none of us know how the next few months will play out, the fundamentals of providing financial advice has not changed. Take a holistic view of your clients’ situation, explore their priorities and understand their motivations. Then you can provide them with the most suitable options to help them achieve their goals. For many homeowners, the lockdown will have confirmed one of two things. Either they are ready to move, wanting more space or a change of location, acknowledging that living within a reasonable commute time will no longer be crucial. Or, they may want to improve their existing property and need to release equity to enable this. However, with the economy unsettled making any financial commitment will be loaded with anxiety, so clients need to understand all the options and potential scenarios which may play out to ensure they can make the best decision for their circumstances.
Understanding what’s possible From a broker perspective, the range of options available will be dramatically reduced from where it was at the start of the year, so it’s important to keep abreast of lender updates and ensure that the client has a solution which is feasible for them to take. Given the impact the pandemic has had on employment, it’s likely there will be an influx in more complex cases and brokers
SEPTEMBER 2020
will need clarity around how lenders treat customers who have been financially impacted by the virus. Working with a lender that has a greater level of understanding and flexibility when looking at income assessment may be critical for the success of your application. Likewise, some lenders are still non-committal on how they will review applications from clients who have taken a mortgage payment deferral.
The route to advice And then there’s the actual giving of advice. Many brokers will be starting new relationships with clients remotely, unable to meet in person for obvious reasons. For some this has improved productivity, allowing them to fit in more meetings, with no travel needed and at times which are convenient to the client e.g., a zoom call over lunch. Customers have shown that they’re happy to deal over the phone, online and via video calls and with social distancing measures set to be in place for the foreseeable, brokers need to adjust their businesses to ensure this is not a temporary fix, but something they can continue to offer. Recent research by Twenty7Tec found that 77% of advisers expected to continue using telephone and video conferencing as their primary means of communication. Whilst nothing can replace the strength of a face to face relationship, given the convenience and efficiencies more virtual encounters present, advisers are likely to rely on a hybrid of communication channels as we emerge out of this pandemic.
The value of advice With so many things in the balance, there has never been a more important time to get professional advice. So make sure you are marketing yourself properly locally, engaging with existing clients regularly to promote recommendations and utilising all the networks you can to drive business. There are plenty of hints and tips on doing this cost effectively within our Growth Series. And, whilst none of us can say for certain what things will be like in a year, or even six months’ time, any adviser knows how to prepare accordingly, highlighting the potential risks and rewards of particular options to ensure your client is comfortable with the decisions they finally make. For the vast majority of clients, the impact of the pandemic on their employment, their families and their finances is likely to last an extremely long time. As an industry we can be there to support them, adapting our services to reflect the changing needs and come out of this crisis stronger than ever.
Residential
Carolyne Gregory Head of Retail Lending
CAN THE MORTGAGE MARKET BE ETHICAL? As consumers become more concerned with ethics, what can our industry do to address this?
Written policies are a good start alongside staff training, so the whole organisation is on board.
An ethical mortgage market sounds great, doesn’t it? Something we can all get behind with no room for argument.
At Platform and The Co-operative Bank we call this ‘ethical governance’. Our customer-led Ethical Policy is written into our constitution and Articles of Association, and an independent Values and Ethics committee of the Board ensures accountability and reports on performance.
The important question is… what does it actually mean? While ethical means morally good, how that’s defined differs from one person to the next. And shoehorning such a far-reaching and subjective concept into a regulated financial market is no easy task.
Red lines In one respect, the regulator does the job for us on residential lending, with MCOB, responsible lending, and treating customers fairly. Job done. But of course, it isn’t. What about the bigger picture of industry ethics, not to mention unregulated lending? No matter how fairly we treat borrowers, we can’t really call ourselves an ethical industry if we engage in practices that our clients, colleagues and communities wouldn’t consider morally good. For example, talking the talk on diversity without walking the walk or failing to consider our environmental impact.
Proof positive It’s one thing for a financial firm to say it’s ‘ethical’, but how is it proving this isn’t just words without action?
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As a broker, a good start is to think about your ethical purpose and goals and include them as part of your business’s values.
Future-proofing What was a ‘nice to have’ concept 25 years ago has moved from the fringe to the mainstream. A business’s ethics and purpose are more important to consumers than ever and an important a factor for those who are looking to make ethical choices about who they work with. What’s relevant for a retail bank won’t be the same for a brokerage, but there’s still a business case for having ethical credentials. In 1999, the size of ethical consumer market in the UK was £11.2bn. Today, it’s four times that at £41.1bn, according to the Ethical Consumer Markets Report for 2019. Our clients are increasingly concerned with how ethical we are. So, how do we start creating a more ethical mortgage industry?
Beyond lending You already advise responsibly and transparently under statutory regulation, but that’s not enough. Consumers want to know how ethical your business is. If you have a company pension fund, for example, are you investing ethically?
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When you accept clients, are they screened before you take the business? The Co-operative Bank proactively screens suppliers and other organisations to ensure the businesses we work with don’t conflict with our customer-led Ethical Policy. Last year, the group declined the business of a consultancy firm involved in advising on arms brokerage services and a farming business that didn’t meet adequate standards of animal welfare. Your clients may not need to be screened like this, but what about the other businesses you deal with? Which firms are you and your clients comfortable dealing with?
The ethical workplace Diversity in the workplace has come to the fore and the HM Women in Finance Charter has been instrumental in driving change within our industry. But more needs to be done.
charity. We have helped fund its national helpline, which supported over 8,000 young people calling for help in 2019. This was made possible through our donations, driven by your clients, and which now stand at over £1.1m since 2017.
Environmental commitment You probably already do what you can to recycle – minimising waste and being more energy efficient. For small businesses it reduces your costs as well as your environmental impact. You could extend that commitment by making sure that your suppliers are upholding your environmental expectations, for example, or set goals to improve your recycling. We have a goal of zero waste to landfill by the end of 2020, for example.
Make a start
Plus, to be inclusive means to treat all people equally. You could start by ensuring all staff in equivalent roles are paid equally. Become a Disability Confident certified employer, sign up to pay the National Living Wage and speak to advisory bodies such as Inclusive Employers for support on inclusion.
Consumers are increasingly keen to deal with businesses that share their own values and ethics. Our Ethical Policy is customer led and shaped by more than 320,000 customer and colleague views over the last 25 years. In smaller businesses, this could be a simple discussion between employees, management and clients.
Charity and community
Ultimately, it’s a discussion about what sort of business you want to be, and what commitments you will make to achieve that goal.
The mortgage industry already works hard to support charities, both in local communities and nationally. It’s a way to use your business to support causes in line with your values and ethics. At Platform and The Co-operative Bank we commit to causes that are close to the hearts of our customers that they want us to support. For every new mortgage completed or switched with Platform, we donate to Centrepoint, the UK’s leading youth homelessness
SEPTEMBER 2020
Residential
Jonathan Stinton Head of Intermediary Relationships
RELATIONSHIPS: THE KEY TO KEEPING MORTGAGE CLIENTS The years between remortgaging are filled with many things for a home owner – typically, not thinking about one’s mortgage adviser. But those expert advisers don’t want to lose their clients at the end of every two, three, or five-year cycle. They know they have the expertise necessary to continuously help clients get the best deals and have their needs met at every step of their homeownership journey. At Coventry for intermediaries, we do everything we can to support you in securing new deals for your existing customers, because we know how valuable brokers are. We have developed our product transfer policy over time. We were among the first lenders to pay brokers competitive procuration fees for product transfers and to make new business products available to existing customers. We alert you to a product maturity a week before we write out to your customers, prompting them to get back in touch. When we then do write to them about their options we suggest they talk to their broker, if they have one. You can also request an illustration and even secure a new deal for your customer with us up to four months in advance of maturity. Yet we continue to see around 30 per cent of our members who came to us through brokers, contact us direct at the time of maturity. It is always the customer’s choice to decide what works best for them when they need a new mortgage product. But we hope to provide valuable insights to you on how to nurture relationships over time and keep customers coming back to help them navigate their options in a sustainable, trusted mortgage market.
The importance of communication Nearly half (46%) of borrowers who remortgaged in October 2019 opted for five-year deals, according to data from conveyancer LMS. If the client doesn’t hear from their mortgage adviser until the end of those five years, how likely are they to remain a customer? This is where you as a broker need to get creative in how to stay in touch and become a more familiar presence in your clients’ lives. An email newsletter is a great way for you to keep your clients up to date with what’s going on in the market, highlighting new
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lenders or explaining how rates have changed. This could be a regularly scheduled newsletter, or more ad hoc advice based around significant events, like base rate cuts or, of course, a global pandemic. Your online presence is also essential. Keep your website fresh not just for new customers, but also to direct existing customers to additional services they might not have used previously. Many brokers are also using a range of social media, from Facebook to podcasts, to share engaging, relevant content and connect with clients. You need to be accessible to all potential borrowers, regardless of their demographic. Social media platforms can help you identify and engage with potential clients you may not have previously know about, making them aware of what’s special about your service and how you can help.
Don’t stop at mortgages The more products and advice touchpoints involved in your relationship with your client, the better for you and for them. Protection products are an absolutely essential conversation for you to be having with all of your clients, as made clear by the pandemic. Partnerships with pension advisors, equity release advisors and financial planners are also important, with a wide range of benefits – referral programmes between like-minded but non-competing advisory firms can ensure customers don’t go elsewhere in search of a service you don’t offer, as well as offering up potential for additional revenue streams. As we step forward into a world marked by a vastly different housing market and economic outlook, at least for a time, borrowers will need the support of trusted mortgage advisers more than ever. Continuing relationships with existing clients should be just as exciting as contacting new customers. The market is open for business, and remortgage customers and home-movers alike need your insights to get the right product and make the most out of their individual situations. For more tips on how you can build stronger relationships with existing customers click here to read our guide.
Buy to Let
Paul Brett Managing Director
A BTL STRATEGY FOR A POST-COVID WORLD The latest mortgage figures from trade body UK Finance revealed that 5,700 buy to let mortgages were approved in December last year, up 3.6 per cent on a year earlier and regardless of current circumstances, the demand for rental property has remained strong.
Rental void periods and payment arrears on HMOs are, generally speaking, less impactful on earnings than single lets, with multiple rent paying occupants allowing for shortfalls elsewhere, as opposed to the ‘void periods’ or loss of income on entire properties that can result from incidences of this kind with standard BTL property.
Available evidence suggests that property in the private rented sector increased by 63% between 2010 and 2017 and that this percentage has not changed dramatically to the present day.
HMOs can offer better tax advantages than single lets, with Plant & Machinery Capital Allowances, for example, allowing landlords to claim income tax relief on qualifying items within communal areas; allowances which can sometimes be offset against non-property income.
New figures tell us that 55% of landlords represent 79% of private rented property and with those landlords becoming more forensic in their purchases and professional in the management of their portfolios, the need for expert advice has never been so important. In short, rental demand is high, landlords have become more professional and require good advice, but what areas should you, as a BTL specialist, be recommending to your landlord clients?
HMOs for better results If you provide assistance to landlords, then you should be looking at the attractions of Houses of Multiple Occupation (HMO). Although stamp duty has been suspended temporarily, which is a boost for landlords looking to buy, there is no doubting that rental yields will still be under pressure due to the earlier loss of tax relief and the stamp duty surcharge. Also, changes to affordability continue to mean that larger deposits could be required for purchases, although the suspension of stamp duty will help. As a consequence, landlords have been looking at divesting those investment properties whose yields have been the most affected and are looking for property which can offer higher yields; which is where HMOs come in. An HMO is property rented by at least three separate people (different households) but where amenities like kitchens, bathrooms and toilets are shared. Typically converted property forming additional rental spaces and generally cheaper than traditional types of rented accommodation for prospective tenants.
Higher yields Research results vary but a strong average points to HMO properties producing the highest yields in the first half of 2019 with an average 6.3 percent when compared with the average rental yield of 3.5 percent as of April 2020.
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With rising populations in metropolitan areas driving up demand for affordable housing, the opportunity to earn more income from fewer properties means that many landlords can reduce the administrative/managerial work associated with multiple single let portfolios and concentrate on fewer households.
Potential drawbacks Although mandatory licensing by local authorities is required on properties with five or more tenants and are subject to minimum room size regulations, local authorities have the power to enforce stricter rules should they wish to. Therefore, having an understanding of local licensing and room size rules, together with planning rules is imperative. The cost of conversion to an HMO needs to be taken into account and potential lower capital appreciation than single occupation let because of conversions.
Landbay can help We can provide you with access to the expertise to help you improve your understanding of this potentially lucrative niche as well provide the kind of products and service to impress your landlord customers. We can provide assistance either via our external BDMs, or on the phone with an expert from our inhouse team. Landbay is the ‘go to’ lender for every adviser wishing to provide today’s landlords with the tools to maximise the value of their existing and future BTL portfolios.
Buy to Let
Paul Fryers Managing Director
STATE OF THE BUY-TO-LET MARKET: THE NEW NORMAL Covid-19 has affected every aspect of our professional and personal lives. As restrictions begin to lift in the UK and elsewhere, we are starting to be able to understand the longer-term effects of the pandemic on the economy, our lives and what the ‘new normal’ may look like. The residential and buy-to-let markets were both significantly impacted during the initial stages of the pandemic. The stay-at-home order prevented surveyors from visiting properties, contributing to the nearly two-month halt in the housing market. However, now house valuations are again possible, demand has returned and the UK property market is demonstrating its resilience. Although the homeowner market was perhaps the quickest to recover, it also quickly became apparent that landlords and investors had not lost their appetite within the buy-to-let sector either. Tenant demand has risen, and it looks as if it will remain healthy for the medium to long-term. In its recently released quarterly Rent Index, The Deposit Protection Service (DPS) - which is also part of the Computershare group - showed that by July the number of new tenancies being recorded was nearly back to prepandemic levels. New rentals registered with The DPS had fallen from almost 60,000 in March to just over 32,000 in April, but June saw a swift recovery, with just under 56,000 registrations. So, why did buy-to-let lenders restrict lending during the lockdown? The lockdown had the effect of creating nervousness within the specialist funding markets. Unlike a high street bank, which can raise the majority of their funds through deposits and investments, many buy-to-let and specialist ‘non-bank’ lenders require a functioning securitisation to fund their business models. Often
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referred to as ‘capital markets’, the model depends on funding for long-term debt – such as mortgages – being bought and sold. Often, an investment bank provides the funds for the likes of Zephyr and other buy-to-let and specialist lenders to originate new mortgages. Once a tranche of mortgages or loans has reached a desired scale, the funder then sells the economic interest in the mortgages back to investors through a securitisation deal. The capital markets were incredibly cautious because of the lockdown, but the restrictions eased relatively quickly, bringing capital markets back albeit a more cautious one. Unlike the ’08 credit crisis, a number of securitisation transactions occurred relatively soon after the lockdown ended, and the tentative signs are that investor confidence has remained relatively steady. As the ‘new normal’ begins, we’ll likely see some rollercoaster moments in the next few months or even years. The future of the BTL market is looking positive, and Zephyr Homeloans is committed to working with our portfolio landlord clients by offering some highly competitive rates and criteria. The buy-to-let mortgage market supports the private rental sector. As the lockdown continues to ease, new demands for lets are increasing with an expected return of tenancies to pre-pandemic levels over the summer, according to The DPS. Tenant demand is likely to stay strong. People may need to access more quality rental properties if the ability to access mortgage finance becomes more constrained, either as a result of employment issues or a lack of higher LTV deals being available. The professional landlord with a reliable portfolio of good properties is likely able to absorb some financial ‘shocks’. Landlords seeking to expand their portfolios should consider that estate agents are expecting a sharp increase in demand for properties with a garden. Now that people are working from home indeterminably, there may be a migration to the shires from the city for families seeking more space, a garden and a garage. Despite the pandemic, Zephyr Homeloans moved quickly to continue providing services to its clients as the market re-opened. Our ability to ride the market’s ‘rollercoaster’ brought on by the pandemic demonstrates our business stability and we’re looking forward to continuing to build our business over the coming months and years. The BTL market – like any other market – will have its peaks and valleys, but the rapid market opening and demand for BTL lending is a positive sign for the future.
Buy to Let
Simranjeet Gill Intermediary National Key Account Manager
What motivated Sunak and Johnson is likely, in part, to be the fact that demand from landlords helps to support valuations and any slide in house prices would have a detrimental impact on consumer confidence and spending. This would hurt Britain’s economic recovery. The sums involved are colossal. The property market in England alone is worth £6.06trillion1 and, during lockdown, commentators suggested property prices could fall by 5% at best, and 23% at worst2. Although the early signs when the market re-opened in May were encouraging, there was no guarantee that consumer confidence could be maintained.
WHAT THE STAMP DUTY CHANGES REALLY MEAN FOR LANDLORDS Landlords have had a tough few years. Mortgage interest tax relief began tapering off in 2017, reducing how much landlords could offset against income tax. Capital gains tax now has to be paid within 30 days of selling a property, rather than during the next annual tax return. With this trend of a tightening tax regime firmly established, when the Chancellor, Rishi Sunak announced a series of measures to help the UK’s post-lockdown economy in early July, few expected any help for landlords. Yet changes to how stamp duty will be paid between now and March 2021 offered a surprise boost for anyone in the market for a second property. While the 3% surcharge on second homes up to £500,000 remains in place, this will be the only payment needed to the Treasury on those properties purchased until next March. It raises questions about why the Government has provided a carrot to landlords, when the trend in recent years has been to only offer the stick. The good news is that it indicates this Government may be more supportive of landlords, and that it recognises they have a big role to play in the property market, particularly at a time of economic difficulties. It puts distance between this administration and the era of David Cameron and George Osborne, who implemented many of the tougher Buy-to-Let tax changes, suggesting there may have been a change of direction at the heart of government.
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They needed to inject confidence, and a stamp duty change that is universally accessible achieves this. It could also dramatically stem the tide of landlords who have been leaving the sector in the past few years. Around 222,570 of them have left the market since 2017, making the 2.66million still operating the lowest number in seven years3. Of those who remain, 30% are estimated to own more than one Buy-to-Let property, the highest proportion on record3. It underlines that it is the accidental landlords, often with one rental property, who have been hit hardest by recent tax changes and most likely to have left the market altogether. Yet sustaining the Buy-to-Let market is going to be even more vital now. Firstly, the rental sector is evolving, and there is a sizable and growing proportion of people who prefer to rent owing to its flexibility. There are now also more older renters, with an 81% increase in 34-44 year olds in rented accommodation between 2008/09 and 2018/19, and a 43% rise in 55-64 year olds over the same period4. Nearly one in five homes is privately rented4, and this is predicted to grow to one in four by 20255. However, we may additionally see more people needing to live in the private rented sector over the next few years owing to the economic consequences of the coronavirus. If the UK has fewer landlords, and potentially fewer properties on offer, that will drive up prices in the rental market, narrowing choice and possibly driving people further away from workplaces and their families. The stamp duty cut may not entice accidental landlords who have left the market to return. However, it offers great scope for an expansion of the rental market between now and next March. It is also well timed, with providers including Gatehouse recently allowing their criteria to revert back to where it was pre-lockdown, not just for single units but Multi-Unit Freehold Blocks too. Many professional landlords may see the aligning of these two stars as a strong short-term opportunity which, after some challenging years, is just the invitation they need.
Number of dwellings in England multiplied by Land Registry average house price in England (£248,241)
1
EY predicted falls of 5% and Deutsche Bank predicted falls from 9-23%
2
3
Hamptons International Lettings Index
4
English Housing Survey 2018 to 2019: headline report
5
English Housing Survey 2017 to 2018: headline report
Buy to Let
Nick Parker Head of Intermediary Distribution
IS THE LIMITED COMPANY STRUCTURE RIGHT FOR YOUR LANDLORD CLIENT? Recent Aldermore landlord research shows three in five believe being a landlord is more difficult now than it was five years ago, even before lockdown. The regulatory reform, stamp duty additions and tax rule changes have meant many landlords have had to reassess their portfolios, with a gradual shift towards professionalisation becoming more common. It is easy to see the appeal as a limited company structure can bring advantages but its benefits can greatly depend on individual circumstances. The main benefit of the structure comes in the form of potential lower taxation than when in an individual’s name. This is more so the case with the Government gradually limiting the amount of tax relief landlords can claim on residential property finance costs, shrinking to nothing in 2021.
•
Getting expert tax advice should always be a first step in the process for clients as there do remain some disadvantages to the structure. These include: •
Time-consuming and potentially expensive, but long term advantages can outweigh short term complicated processes.
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No Capital Gains Tax allowance. Unlike a private individual, companies don’t qualify for Capital Gains Tax relief on the proceeds of a property sale (also, as of 1 August all Capital Gains Tax is required to be paid within 30 days of being billed).
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Limited company running costs. Operating a limited company comes with fees for things like preparing the annual accounts, Companies House filings and more through accounting.
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Additional taxation. Existing buy to let properties are technically sold and purchased at the market value to the Ltd Company, which can trigger both Capital Gains Tax and stamp duty land tax
Advantages include the following: •
Offsetting 100% mortgage interest. Cuts to private landlord tax relief allowances do not affect limited companies.
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£2,000 tax-free dividend relief. This means company shareholders can potentially take £2,000 per year in dividends tax-free.
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Profits can be re-invested. Helping to grow a portfolio more quickly as there is no income tax on profits retained within the company, so there’s more cash to reinvest. Corporation tax is payable on trading profits, but this is lower than higher rate income tax.
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Legal separation. The company and its finances are legally separate to the people who run it – this limits the level of personal liability a landlord can face.
How does it work? There are two different structures a Limited Company can take; a Special purpose vehicle (SPV) or an existing trading company. Special Purpose Vehicles are set up for one specific purpose or transaction, in this case to hold property. A trading company is
Buy to Let
one that has a primary activity other than owning property. This is a company which trades in business sectors other than property ownership/management or where an SPV has moved on from its initial reason of set up or single trade. Lenders mostly prefer SPVs because they are easier and quicker to understand, underwrite, and are perceived as being lower risk. But trading companies hold benefits for landlords that have expansion ambitions outside of property.
Post-lockdown The growing shift towards professionalisation will be increasingly reliant on specialist lenders for its continued growth as through personal underwriting these lenders can take the time to explore and truly understand the client’s needs and circumstances to get ideal outcomes, in particular for those with more complicated portfolio structures. This will be more the case in a post-lockdown environment where payment holidays, bounceback loans and future economic shocks will need to be taken into account with mortgage applications. Brokers will be on the frontline in terms of ensuring clients’ applications have sufficient information to be accepted. Recent landlord research from BDRC BVA revealed that eight in ten (81%) landlords expect to be negatively impacted as a result of the virus, and almost half of landlords predicting they will suffer financial hardship post-lockdown. Underwriters will be looking for brokers to demonstrate a thorough understanding of their client’s individual circumstances and to
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provide comprehensive supporting narrative to help ensure these applications get to offer sooner.
Aldermore Bank’s solution Aldermore Bank is at the forefront of the professionalisation trend. We will lend to trading companies and SPVs, so landlords do not have to be totally focused on property to qualify. Lending for limited company mortgages does often require additional security, such as a personal guarantee from the named individual on the application covering 100% of the lending, and, in certain circumstances, a fixed and floating charge in the company. But there is no minimum time a company must have been established to apply. Aldermore allows portfolio landlords to have multiple securities on a single loan, helping ease management and reduce fees. What’s more we waive Early Repayment Charges (ERCs) for existing borrowers looking to incorporate mid-term, helping to reduce costs of converting to a LTD Company structure. The shift to professionalisation will continue the next decade and its success will rely greatly on good advice and expanding options open to landlords and ease of transition for them.
Buy to Let
Liza Campion Head of Key Accounts
HOW TO HELP LIMITED COMPANY LANDLORDS ENJOY A DIFFERENT KIND OF HOLIDAY THIS YEAR This is usually the time of year when millions of us would be jetting off for our annual summer holidays, but unfortunately COVID-19 has put paid to many of our dreams of a fortnight of sun, sea and relaxation. However, if you’re a limited company landlord, there’s still one holiday you can enjoy in the next few months – the recent announcement of a Stamp Duty holiday until 31st March 2021. While Rishi Sunak’s Stamp Duty freeze on the first £500,000 of property purchases is good news for the housing market as a whole, it’s a great opportunity for limited company landlords and those who’ve been thinking of incorporating their buy to let business. Let me explain why. Say you’re a limited company landlord who’s looking to grow your portfolio. You’ve seen a new investment property which is selling for £232,000 (the average UK house price)1. Although you’ll still have to pay the 3% surcharge that’s payable on second property purchases, instead of paying £9,100 in Stamp Duty you’ll now only be paying £6,960 – that’s a saving a £2,140. Imagine how much you could save if you were looking to buy more than one property. You could use the money you save in Stamp Duty to put down a larger deposit or invest in more properties. Landlords who’re thinking of running their buy to let business in a limited company structure could also benefit. Many of them might have been put off incorporating in the past as the process involves ‘selling’ their properties to the business which would normally incur a Stamp Duty charge. The holiday means they’ll now pay considerably less tax if they do it before the end of next March. If you have a customer with a large portfolio of properties who’s considering incorporating, they could end up saving tens of thousands of pounds. Unfortunately many lenders have tightened their criteria requirements, meaning that a lot of buyers, limited company
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landlords included, may now struggle to secure the mortgage they need. It’s a similar situation for the UK’s millions of self-employed workers. The latest statistics show that 2.7 million people who work for themselves have had to turn to government schemes to help keep them afloat in recent months. Meanwhile, a growing number of lenders are now asking for multiple months’ worth of business bank statements and confirmation from accountants that their customer’s business hasn’t been impacted by the pandemic. Many of the self-employed who’ve had to rely on support recently, may find it particularly difficult to provide this information. So where do you turn to help your limited company customers make the most of the Stamp Duty holiday? This is where Precise Mortgages could help. We‘ve designed a range of products and criteria specifically for limited company landlords, and treat every customer as an individual, taking their unique circumstances into account and judging each case on its own merits. With more than a decade of experience of helping brokers develop their customers’ buy to let businesses, just as we were here for you yesterday, we’re here for you today and we’ll be here for you tomorrow to provide support for your limited company landlords. To find out more about how we could help your limited company landlords, contact a member of our Sales Team or visit www. precisemortgages.co.uk
https://www.gov.uk/government/news/uk-house-price-index-formarch-2020
1
https://www.gov.uk/government/collections/hmrc-coronaviruscovid-19-statistics
2
Buy to Let
Katie Newell Brand Manager
ARE HMOS STILL A VIABLE INVESTMENT IN THE WAKE OF COVID? The property market has made a partial recovery quickly with Rightmove reporting a ‘mini-boom’ of 2.4% increase in asking prices in July compared to March before the lockdown. The long-term equity increase gains from investment property may yet prove to remain robust, however, the short-term returns, namely from rental income, could suffer the fall-out of Covid’s impact on employment for a while to come. At the start of 2020, overall rental yields were already trending downwards and, in Q1, dropped to 5.3%, the lowest in ten years (BVA BDRC 2020 2010), putting a squeeze on profit margins. Even before the Covid 19 lockdown, landlords were under pressure to maximise their portfolios where possible. The reopening of retail and some of the hospitality sector will come as a welcome relief to landlords who have supported lower-earning tenants over the last few months. Rental yields have recovered to a healthier 5.8% (BVA BDRC 2020 Q2). Many landlords will now be considering how to use their portfolio to compensate for lost earnings during the lockdown, looking for ways to use their yield and capital to best effect. Others may be diversifying into a new tenant type market to reduce the risk of upcoming economic changes. At the same time, some property types like holiday lets may take some time to return to being able to generate income at the rate seen in previous years. The lending landscape may be changing but Houses of Multiple Occupancy could continue to be a viable choice for property investors. The reason is straightforward, with rental yields of 6.9%, HMOs exceed the earning potential of flats and houses by quite some way. HMOs are one of the fastest growing areas pf property investment which makes them a potential route to profitable business for any mortgage intermediaries who are willing to broaden their understanding of specialist property mortgages.
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In November we reported that one in five landlords now have an HMO as part of their portfolio, and according the data by BVABDRC, landlords generally branch out into HMOs after their fifth property. This immediately means that you can identify which of your current landlords might be on the edge of considering taking on their first one or who may already have one. These properties can house a large number of individual tenants such as students or construction workers, young professionals or graduates, thus allowing a landlord to negotiate individual tenancy agreements for cumulatively much more than a single family occupying the property. Interestingly, we saw a keen interest in two year fixed rates for HMOs in July, which indicates that landlords, understandably, are only willing to commit short term in this unpredictable market. It is for this reason that we have also opened up our product range to include an ERC-free discount, giving landlords complete flexibility to remortgage should they wish to. When preparing an HMO case, it’s important to ascertain the type of tenant. Unlike Foundation, not all lenders will consider HMOs let out to students. Furthermore, Foundation’s 125% ICR for limited companies and basic rate tax payers, particularly when calculated at pay rate when using a 5-year fix, allows a potentially generous loan amount based on the rental income. Foundation Home Loans has also recently introduced a range of new Buy-to-let products for HMOs up to 75% for 8 bedrooms and a maximum loan size of £1.5m. It’s an unprecedented time, but with your help, these landlord clients can find the right solution and feel confident in their transactions.
Specialist
Scott Phillips National Account Manager
HOW BROKERS CAN HELP THEIR SELF-EMPLOYED CLIENTS By Q4 2019 there were more than 5m self-employed people in the UK, a huge increase from 3.2m in 20001. With the self-employed now making up 15% of the entire labour force, it’s a sector of the market that can’t be ignored, and one that is currently experiencing a noticeable impact from the current COVID-19 crisis. Although those self-employed are receiving government support through the Self-Employment Income Support Scheme (SEISS) to cover some of their losses, it’s not as generous as the scheme for those on furlough, and there are more stringent eligibility criteria. For instance, those that have registered as self-employed since April 2019 won’t receive any help and they have to have made less than £50,000 in trading profit in 2018-19. While it’s reassuring that most lenders have by now confirmed their position when it comes to accepting self-employed applicants, your customers may still be concerned about their suitability for mortgages or remortgages going forward. So how can brokers help?
Specialist knowledge pays dividends Many high street lenders are hesitant to lend to what might be perceived as ‘riskier’ groups, such as the recently self-employed. But there are other lenders available that can be more flexible and willing to assess on a case by case basis. Good brokers have existing relationships with specialist lenders and can pinpoint those that are able and willing to cater for complex client needs. Brokers are also able to keep abreast of product changes, and therefore know which lender has a suitable product for their client’s specific circumstances. This knowledge is invaluable.
Making the most from lender relationships to improve client outcomes Once brokers have identified a supportive lender with the right product for their client, the goal is to guide the client through the process as quickly and smoothly as possible. This involves presenting the best possible case for getting the mortgage approved. There are several steps brokers can follow to do this. Make sure your client is using a chartered or certified accountant. Most lenders won’t accept information from a book-keeper, so try and ensure they are using a professional who will be accepted by the chosen lender. An accountant will also ensure that all the accounts and self-assessment tax submissions are up to date before the bank is approached. Lenders will also look at information on tax returns. Whilst these used to be from HMRC’s SA302 forms, lenders have now been told to look at an accountant’s own systems for tax year overviews.
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Specialist
Therefore, it’s best to check that the client is aware that the accountant has this information before applying. Some lenders will accept individuals if they have been self-employed for a minimum of 12 months. If this is the case, the accountant will typically need to provide a finalised set of accounts for the first year as well as an income projection for the following year to the lender. Having these to hand helps to speed up the process. If your client’s business has made a loss over the last few years, or has seen a reduction in net profits, an explanation will need to be provided to the lender. This doesn’t necessarily mean the client won’t be approved for a loan. However, they should check with their accountant about this prior to an application being made just in case.
Additional considerations to improve results There are also additional details brokers should consider ahead of submitting an application to ensure it meets a lender’s expectations and approach. •
For full-time employees, lenders will want to see a salary history. If this isn’t possible for those who are self-employed, some lenders may want to look at the company’s accounts to see if it has a positive net worth. Having a positive assets vs liabilities figure can be crucial in getting a loan approved.
•
Some lenders don’t treat contractors as self-employed; instead they’ll use the contractor’s daily rate as a guide for salary.
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For contractors under the Construction Industry Scheme (CIS), the client must have kept and filed the vouchers as the lender may want to see this during the underwriting process.
How Kent Reliance for Intermediaries could help For those concerned about not meeting ‘mainstream criteria’ requirements, the specialist lender operates a little differently to others by individually assessing each case, providing a more human and considered approach to underwriting. Here are some of the ways Kent Reliance for Intermediaries has tailored its product ranges to help the self-employed: •
Self-employed applicants and contractors considered
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For those on the Self-Employed Income Support Scheme (SEISS), current income will be used for affordability purposes where evidenced
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Where the landlord has income that’s unrelated to buy to let, and is in receipt of SEISS income, the application can be considered
For further information, why not get in touch with your local BDM, use live chat or call 01634 888260 to speak to the broker liaison team.
1
Office for National Statistics – Annual Population Survey
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Specialist
Steve Seal Managing Director
OPPORTUNITY FOR SPECIALIST LENDERS POST-COVID How the specialist lending market can gear up for a postcoronavirus future Nearly two million people have been on mortgage payment holidays1, over nine million have been furloughed2, and 2.8 million were said to be unemployed as of May, rising from 1.2 million in March3. These are just some of the devastating effects of the coronavirus outbreak, which has left households up and down the country in a much more vulnerable situation than they were at the start of the year. While some of these households may recover in the short-term, others may not – and the longer-term impact could be even more detrimental to their financial positions. The mortgage market has been significantly impacted by the coronavirus pandemic, and specialist lenders have certainly not been an exception. Although some have been successful in this and we are starting to see the market return to normal operating models, it will be a while until we know how the specialist landscape is set to look following the crisis. One fact that’s clear already, though, is that post-crisis, the specialist lending market will be more important than ever. Take payment holidays, for example. While the regulator has confirmed that payment holidays should not affect people’s credit scores4, it is not yet clear how high-street lenders will take these into account when assessing a customer’s affordability for a mortgage in the future and could lock them out of mainstream lending. The same could apply to borrowers who have experienced a change in income, perhaps as a result of redundancy, or unemployment. Specialist lenders, however, could provide individuals like these with the financial lifeline they need – and it’s vital that the market is equipped to serve these borrowers in the wake of the crisis. After all, even households that recover from the impact of Covid-19 in the short-term may find that they need specialist help later on.
What can the specialist market do in the short-term? It will be crucial that the growing pools of consumers who have taken a hit during Covid-19 can continue to access specialist support after the crisis – and broker engagement will be vital here. Over the coming weeks and months, specialist lenders can be encouraging advisers to tap into this market and the various opportunities available. This will ensure that brokers are geared up for a post-coronavirus future, in which there will be a greater number of customers looking for specialist lending. Ongoing support for existing brokers will also be essential. With the market changing almost daily, regular updates on product changes will help advisers stay aware of the specialist solutions which are readily available at any given time.
Looking ahead to the longer term Opportunities also exist for the specialist market in the longer term. First and foremost, there could be an opportunity for specialist lenders to work with technology providers and develop platforms that help improve customer outcomes.
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Initiatives such as Open Banking could start to gain more traction in the specialist lending market. It’s likely that demand for tailored financial solutions will increase post-pandemic, as we see more consumers fall into the “non-vanilla” bracket of customer. With this technology promising faster and easier processes, lenders in the specialist market could have the perfect opportunity to capitalise on the opportunities. The lockdown and introduction of remote working will have no doubt already prompted some lenders to think about how technology could improve their business over the longer term. Investment in technology should continue where possible for lenders, to ensure that the momentum they had achieved in this area pre-crisis is not lost. We could also start to see mainstream lenders doing more to direct borrowers to specialist solutions in the future. Concerningly, being rejected for lending on the high street is likely to become a familiar scenario for more people once the pandemic subsides, which could have a hugely detrimental impact on customer confidence. Last year, Bluestone’s Specialist Lending Tracker found that almost half (45%) of consumers who had their mortgage application declined by a high-street lender would be reluctant to apply for one again in the future. This stresses the need for high-street lenders to be referring customers to intermediaries who can guide them to a specialist solution, in instances when they are unable to help. While the market focuses on the short-term, however, keeping brokers engaged and active will be paramount to ensuring its future survival. Although it is not clear what the new ‘normal’ will look like for the sector post-coronavirus, it’s advisable that lenders who are in a position to, use this time to prepare and gear up for the future. This will ensure that the millions of customers who have been impacted financially by the pandemic are able to access the financing they need later down the line.
https://www.ukfinance.org.uk/press/press-releases/lendersgrant-over-million-payment-deferrals-to-mortgage-holders-inthree-months
1
https://www.gov.uk/government/collections/hmrc-coronaviruscovid-19-statistics
2
https://www.ons.gov.uk/employmentandlabourmarket/ peopleinwork/employmentandemployeetypes/bulletins/ uklabourmarket/june2020
3
https://www.fca.org.uk/news/press-releases/fca-supportcustomers-struggling-mortgage-coronavirus
4
Specialist
George Simpson Business Development Manager
WHY OLDER BORROWERS ARE REMORTGAGING OR MOVING There are now more mortgage choices than ever before for older borrowers planning the next phase of their lives. These provide solutions for an increasing number of situations needed by a population that is growing older. In the past there were barriers such as affordability restrictions or strict age limits when an older borrower was looking to move to a more suitable property or re-financing to pay off debts or raise capital. However, lenders have responded to the demands of the market and developed new products and criteria that better suit the changing market for lending in, and into, later life. If a customer is looking to remortgage they often do this to be able to fund another aspect to their life going forward, such as purchasing a second property or a Buy to Let, help a family member get on the housing ladder by providing all or part of their mortgage deposit, or consolidate any accrued debts and have a lump sum for home improvements to enjoy their retirement. Another key reason people want a new mortgage in later life is to purchase a house that’s more suitable for their retirement and better suits their anticipated lifestyle. For example, we recently had a case where an applicant aged 73 was looking for a mortgage to enable him to relocate back to the
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area that he was originally from. He was looking to do this on the repayment basis and required a mortgage term of 20 years, taking him to age 93. He had sufficient pension income to support the loan required, which was below 70% LTV, and as Leek United have no maximum age1 we were able to provide the mortgage that he required. Lenders are continuing to improve their criteria to be able to help older borrowers who are either in retirement when the mortgage is taken out or will be retired when the mortgage term comes to an end. Pension income can also be taken into account by lenders when considering older borrowers, such as income from selfinvested personal pensions (SIPPs) and more favourable options where there is evidence of a pension being in place to help with future repayments. Age limits are also increasing and as long as the customers have suitable income projections more lenders will consider them. This market has been helped by house prices having risen in recent years, providing homeowners with some equity in their property that offers them more choice for a well-planned life in retirement. With the sharp rise in property value in recent years many have assets that provide good security for lending decisions to be made when considered alongside income. It looks like mortgages and remortgages for older borrowers will continue to be a key part of the market and will provide opportunities for intermediaries and lenders to further develop their business growth.
Each case is assessed on its own merits. Loan to Value (LTV) restrictions will apply based on age at the end of the mortgage term: In to retirement - 80% LTV. In Retirement - 70% LTV.
1
WebChat now available! Now it’s even easier to contact our Mortgage Helpdesk.
Service is key to us, and since we live in a digital age, we recently introduced our live chat feature. We believe this feature will become an integral part of our service toolkit by providing another method for you to communicate with us in real-time. Our friendly team is on-hand and happy to help via WebChat, as well as over the phone, 9am – 5pm from Monday to Friday.
Protection & GI
Ian McKenna Managing Director of FTRC
HOW TO KEEP YOUR CLIENT COMMUNICATIONS SECURE The COVID-19 lockdown has seen widespread evidence of increased activity from fraudsters. Here are some simple steps you can take to protect your business and your clients.
should take. I’m frequently surprised to see about one in five IFA firms using a webmail address (ie. Gmail, MSN and Hotmail) for professional email communications.
Protect your client meetings
As long ago as 2008, the FCA Data Security in Financial Services report explicitly stated that webmail systems are not sufficiently secure for client communications and should not be used for such purposes. At the time, the FCA warned that they would revisit this subject and take action against firms who have not followed their guidance.
When using virtual meeting software you should make full use of all the available security features. Many systems can set a password for the meeting so only those you invite can join. You can also use lobby features to approve people before they join the meeting. Links to join the meeting should never be posted online and only shared directly with participants. If you have a virtual meeting system available within your firm’s client portal, sticking to this can offer a further level of security.
Use a secure client portal Fraudsters imitating an adviser firm’s email address and attempting to interrupt client communications is a major cyber risk. To reduce this risk, wherever possible, conduct all client communications via secure portals. It is good cyber security practice to only accept instructions involving financial transfers from clients via your secure client portal. I have come across many firms who have stopped identity fraud involving tens or even hundreds of thousands of pounds in this way.
Ensure your emails are encrypted Some clients will not use a client portal so encrypted email should also be essential to use with them. Sending an email that is unencrypted is like putting a postcard in the mail. Anyone who can find it can read it. Financial criminals have highly sophisticated programs that search out unencrypted email. These programs recognise the structures of account information details and other financial information necessary to commit fraud. Sending sensitive client information, either financial or medical, in an unencrypted email is a serious breach of GDPR; it is essential that any email with sensitive data is encrypted. Historically, this has proven difficult as not all platforms and insurance companies have accepted encrypted email. Recently Origo, a fintech company, has adopted an industry solution to meet this need, Unipass Mailock. Over 35,000 advisers working in our industry already use Unipass Identity to log onto websites and other electronic services, so adopting Unipass Mailock is a natural step and a great way to ensure that all your email communications can be suitably protected. Having one system across the industry will make it far easier for advisers as they can be confident that all insurers and platforms will accept the same encrypted email format. That said, not everyone is moving to embrace this change as quickly as they should do and I believe it is urgent that they do so.
Don’t use webmail providers There is another important step to email security that all advisers
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With over 50% of the FCA‘s 2019/20 business plan focused on the impact of technology, and especially cybersecurity, it is a “when” not an “if” this action will be taken. Any firm still using any of the above for client communication is leaving themselves open to a significant regulatory fine, so it must be time for firms to implement their own email addresses. This is relatively easy to do and your usual IT support company should be able to assist. While it may seem that implementing the above practices will make client communications slightly more complicated, it will also make them far safer. I’m a strong believer that businesses should highlight their cybersecurity practices to clients. The vast majority of people will respect and value an advice firm that goes that extra mile to ensure their financial security. After all it is their money you are protecting.
Protection & GI
Johnny Timpson Technical and Industry Affairs Manager
MENTAL WELLBEING AND HOW WE CAN IMPROVE ACCESS TO INSURANCE The focus of the current public health crisis has understandably been on the human cost of the virus as the medical community has battled to ensure patients are provided with the care and services they need. The World Health Organization recently issued a warning of a looming mental illness crisis as millions of people worldwide are forced into isolation, poverty and anxiety by the pandemic. It is estimated that up to 23m people* in the UK could be struggling with poor mental wellbeing since the outbreak began. While mental health discourse has become more prevalent in recent years, almost one in three people** still wrongly believe that a history of mental health issues will harm their prospects of accessing protection insurance. According to Mental Health UK, poor mental wellbeing affects more people every year than cancer or heart disease**. Being so common, why is there still such confusion when it comes to customers financially protecting their own and their family’s health? Our research tells us that one in three UK adults believe someone who has a history of depression will have more trouble accessing protection insurance. The number of people believing that mental health conditions will impact their access to protection is high across the board, from anxiety (with 25% believing it will restrict their eligibility)† and bipolar disorder (35% )†, through to schizophrenia (43%)†. It is so important that we help people to understand that mental health is treated in the same way as any other illness or ailment. At Scottish Widows, life cover terms are offered to 96%†† of customers who disclose any kind of mental condition with 78%†† being offered standard rates.
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Improving disclosure rates (the number of customers who specify on an application that they have a mental health condition) is something that we need to improve as an industry. The mental illness disclosure rate of policy holders at Scottish Widows currently sits at 14%††. While this is an improvement from previous years, we recognise that there are many more people out there who would benefit from financial support during a challenging time but are not making themselves known. There are a few practical things that can be done industry-wide to ensure we are being as kind and considerate as possible to those dealing with mental health issues.
Signposting One in three people (33%)† do not think the insurance industry does enough to support customers with mental health issues. I am saddened by this statistic but it serves as a reminder to advisers and insurers that more must be done. Back in January, the British Insurance Brokers Association (BIBA), who lead the Access to Insurance Signposting Working group, launched its 2020 Manifesto with an objective that I fully support: where we can, better access to protection insurance must be granted for the majority, not a select few. The RedArc Personal Nurse Advisers are one example of how the industry can point people in the right direction for practical advice and emotional support in handling a mental health issue, whether it be related to illness, disability, trauma or bereavement. By empathising and taking time to get to know people, they are able to offer a compassionate service that can make all the difference.
Protection & GI
Lifting the lid on underwriting More than one in four (27%)† of people do not feel comfortable discussing their mental health with an insurance company. The first step in reducing this percentage is opening up and being more transparent about our processes, explaining step-by-step how applications are handled from the start. The more detail we can share with customers on how their application is assessed, the better. Given that different insurers can assess similar medical disclosures differently, a rating of 25% can make a significant impact on the cost of a policy throughout its term, so this raises the question whether the underwriting outcome should form part of the recommendation process. At Scottish Widows, we feel this is the next natural step for the protection market and this is why we have supported all attempts by Iress, Ipipeline, and UnderwriteMe to deliver a comparative service for underwriting assessment. We know some insurers are standing back from this, but ultimately it will be up to the distribution channel to determine how it wants to sell protection – and whether they want to find better and more efficient ways of fulfilling the protection needs of their customers Technology continues to develop and this can be demonstrated through Underwrite Me as it allows for a single application journey for a customer to get a set of final, fully underwritten guaranteed prices. By creating a standard, yet comprehensive application form, with dynamic underwriting rules that can be configured for each provider independently, this creates a true comparison service,
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one which takes into account the disclosures on the application form in advance of offering a price. This creates the transparency for a customer of the actual price to be paid, making insurance more accessible, and pushing to break down more of the myths that surround underwriting and pricing. Time will tell on how successful this will be in informing customers, but the transparency will challenge all providers to have clear strategies on risk selection, opening the market up to greater innovation and thinking in this space. And the ultimate winners are customers as more offers of cover are made available. Find out more about Scottish Widows’ underwriting philosophy and how we can support your clients at scottishwidowsprotect.co.uk
*Source: International Travel & Health Insurance Journal. ** Source: Mental Health UK. † Source: Scottish Widows Consumer protection research 2019. †† Source: Scottish Widows Mental Health Stats 2019.
Protection & GI
Craig Brown Director, Intermediary Insurance
AT LEGAL & GENERAL, WE BELIEVE IN THE IMPORTANCE OF SUPPORT Our strategy is intermediary designed, meaning we put intermediaries at the centre of everything we do. In today’s uncertain times, we recognise that supporting you, intermediaries, has never been more important. We designed our support structure to meet the needs of our intermediary partners and deliver fantastic client outcomes. Alongside this, our service proposition provides advisers and businesses with end to end support - including sales training, system and pipeline management, quality and retention, plus claims information.
Dedicated Support Teams In place to support intermediaries, our dedicated relationship management teams consist of over 40 professionals who provide advisers support both face to face and by telephone. Each region has two dedicated Business Development Managers (BDM). These roles provide consistent contact, with a personal and friendly approach. Individual relationship managers are also on hand for some of the larger networks.
“In 2019 our relationship management teams were extremely busy taking calls and having face to face meetings” ‘MUTAL’ is the acronym for our Medical Underwriting Technical Advice Line - a team of expert pre-sale underwriters. This team are on hand to provide intermediaries with a rapid response to queries and an accurate indication of terms for their clients. MUTAL takes
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on average 8,166 protection calls every month from over 6,800 separate protection-selling firms. It can take just 4.30 minutes to assess any medical, financial, occupational and hazardous activity impact on an application. MUTAL can be contacted on 0370 333 3699 or mutal@landg.com (Call charges may vary. We may record and monitor calls) With a purpose of bringing our business partners and our operational teams closer together our Partner Relationship Team (PRT) is one the first of its type in the industry. Our PRT focus on areas such as knowledge and system training, improving processes, and technology management.
Learning and Product knowledge Supporting intermediary learning and product knowledge is one of our priorities, so our BDMs and Market Development team provide regular training on topics covering market, products and sales skills. Our Market Development team consists of five specialist trainers with over 135 years of combined experience in the industry. In 2019 they delivered webinars to almost 5000 advisers, with 190 workshops and events were attended by 7013 advisers. “All of our intermediary education content is accredited by the Chartered Insurance Institute for the purpose of structured Continued Professional Development (CPD,). Which we believe is unique in the market” Richard Kateley, Head of Intermediary development. Webinars play a big part in our learning provision, and we work on regularly evolving this content. Our expanded programme of live
Protection & GI
webinars includes 13 currently available. In addition, our exciting new virtual workshops have been launched. These are short, interactive and operate remotely. You can see our current range of webinars here.
Useful Online Tools Online tools are particularly vital when physical proximity and travel are a challenge. With this in mind, we’ve made even more updates to our online options in 2020, so that virtual help is always available. Our application platform (OLPC) allows intermediaries to submit, track and manage all aspects of their applications, and we give almost 84% of lives a decision at point of sale. All of this of course means the most up to date information for clients, obtainable faster. Making it easier to connect with us, our live web chat tool is accessible via OLPC and helps deliver support, quickly. And now we’ve made it even better. You can download your chat transcripts, giving a record to refer back to later if needed. We understand it is helpful to receive support with customer conversations. This is why we’ve created new sales aids for our Income Protection Benefit in addition to our existing selection, all designed to help intermediaries talk to clients. These include: •
6 steps to selling Income Protection
•
Income Protection Infographic
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•
Customer and Adviser Guides
•
Cover E-Book
Our new Adviser Toolkit includes all of the above and more, such as benefit calculators, product guides, links to workshops and the latest webinars.
Evolving processes with changing times As the current world evolves, so too have our processes. We’re working hard to identify innovative solutions to ensure we support your customers through this challenging time, and help them access vital protection cover.
Digitised Trust form process Our current Trust form process requires documents to be physically signed and witnessed. We recognise this may not be possible or safe for many people right now. Therefore we’ve introduced an alternative digital solution where trusts can be established without the need for a witness signature. This will give you another opportunity to contact clients whose policies are not currently in trust, and offer guidance. If you would like to learn more about the support Legal & General provide intermediaries, please contact your usual account manager.
Protection & GI
Brian Coulton National Account Manager
HOW COVID-19 HAS AFFECTED THE HOUSING MARKET AND WHAT PAYMENTSHIELD ARE DOING TO HELP YOU Over the past 5 months coronavirus has drastically changed the way the world works and will continue to affect it long into the future. Social distancing has made it harder for people go out and continue with their lives and furlough has meant thousands of people were unable to work and lost part of their income.
Paymentshield research shows nearly half of advisers (47%) admit to missing opportunities to sell general insurance. When it comes to remortgage and product transfer clients this is because of renewal dates not matching, cancellation fees, or simply because clients perceive their existing policy to be meeting their needs.
These changes have had a massive impact on financial advisers especially those selling GI, as home moves and first-time buying has stalled. The Guardian have reported that new home loans have fallen by 90% since the start of COVID-19, which is the lowest it has been since the early 1900’s.
Paymentshield are aware and understand the struggles facing advisers and clients at this time, which is why they have launched 2 new initiatives to help those clients that need it most, whilst helping you energise your business.
Prior to COVID-19, in December 2019 the housing market was doing well – there were around 29,000 new first-time buyer mortgages written (a 0.3% increase on Dec 18), roughly the same number of home mover mortgages, this time an increase of over 3% from Dec 18. However, the remortgage market saw the biggest jump with an increase of 5.9% compared to 12 months earlier. Experts predict that the housing market could be back to near normal levels by Q3 2021, a survey carried out by Blandy and Blandy solicitors recorded that 79% of people predicted that the number of transactions would increase and potentially return to normal levels. Rightmove have noted that house prices are around 1.9% higher now than pre-lockdown, with the number of people who have suffered financial losses in 2020, rising prices could be an off-putting factor when it comes to purchasing a new home. With the slowing of new mortgages being written, now is the time to focus on your remortgage, product transfer or equity release clients, as those clients who may have been looking to move or purchase a new home may not have the confidence or the disposable income anymore.
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The first initiative is an average 22% price discount for your remortgage, product transfer and equity release clients for their Defaqto 5 Star Rated Home Insurance. This approach is designed to help you create a steady and recurring income even while COVID-19 continues to affect other areas of your business such as first-time buyers and home moves. Paymentshield now also offer a 3-month payment holiday on their Home Insurance. This will allow your clients to take a 3-month payment holiday at the start of their policy and pay the annual cost (including credit) over the remaining 9 months. This offer could be attractive to any clients who may be worried about any cancellation fees they may incur when cancelling their current policy. To further support advisers, Paymentshield have created dedicated materials which includes eBooks such as; 7 steps to supercharge your remortgage sales, 22 questions you should be asking yourself and your clients, and how to grow your GI business from you cancelled clients. Download them now from their adviser website and help light your path to growth – www.paymentshieldadvisers.co.uk/toolkit
Protection & GI
Sue Helmont Marketing Director
Medical professionals including doctors are seen as the best source of support on nutrition and diet – nearly half (47%) of people trust them the most but Government health guidelines are only trusted by 27%. People seeking diet and nutrition advice are wary about troubling the NHS for support – nearly three out of four adults (73%) say people should take more responsibility to ease the pressure on NHS services. To help people manage their health and adjust to the ‘new normal’, we have worked with nutritionists to create four free fitness and nutrition guides – eat well to feel well, how to exercise at home, good mood foods and nutritious kitchen essentials. They offer tips and advice on staying healthy while social distancing and spending more time at home. The guides give a glimpse of the personalised support that AIG protection insurance customers can seek from its Smart Health app and online wellbeing service to improve their general wellbeing, mental health or manage a medical condition. Smart Health was launched in August 2019 to give our new and existing customers unlimited, 24-hour access to health services. It provides access to an online UK-based GP as well as diet and nutrition advice, as part of their protection insurance and at no extra cost. ‘The foods we eat can have a profound effect on our wellbeing. In these times of stress and uncertainty, we can take small steps to look after ourselves – both physically and mentally. Yet knowing where to start and changing eating habits isn’t easy.’
HOW DIET CONFUSION CAN HIT HEALTHY EATING Research1 from AIG Life Limited shows more than two out of three adults find it hard to eat healthily despite millions going on diets at least twice a year. The nationwide study highlights a hunger for nutritional advice with 40% of adults saying they go on a diet at least every six months to keep their weight down. Around one in eight (12%) are permanently dieting with women more likely at 14% to be full-time dieters than men at almost one in 10 (9%). But the dieting effort is not paying off. Nearly one in three (30%) say their weight gradually creeps back up again. Our study found 67% of adults say eating healthily is hard with one in five (20%) finding it very hard. Finding reliable advice is difficult – 61% of those questioned say there is too much conflicting advice on diet and nutrition while 60% blame the variety of fad diets around.
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‘Smart Health nutrition experts can recommend the best foods to eat whatever someone’s circumstances – whether you’re gluten free, want to improve your immune system or need help finding new healthy recipes that will go down a treat with the whole household.’
Smart Health Smart Health provides your clients with the tools they need to manage their health and wellbeing. It offers unlimited access to six services; a 24/7 UK-based GP, second medical opinion service, mental health support, a health check, access to nutrition consultations and an online fitness programme developed by professionals. Smart Health is available 24 hours a day, 365 days a year and at no additional cost to you. All elements of the service are also available to your clients’ immediate family, including their partner and children up to the age of 21. Find out more: https://www.aiglife-smarthealth.com/
1 Research conducted by ID Insight Consulting among a representative sample of 2,008 working adults aged 18 to 65 between 8th and 15th April 2019
Protection & GI
Siobhan Rowland National Account Manager
COVID CASTS A WHOLE NEW LIGHT ON ‘PROTECTING INCOME’ – FOR BOTH CLIENTS AND ADVISERS The COVID-19 outbreak has clearly brought the issue of financial resilience into the spotlight. Press headlines have repeatedly commented on how the sudden change in circumstances has exposed the financial fragility of millions of workers, as they suffer significant drops in income or earnings have stopped altogether. So, against this backdrop what are the prospects for protection advice and take up? Out of adversity, might protecting income rise to the fore?
The changing view of income For some, the ‘it won’t happen to me’ reaction towards protection may have changed from a distant and intangible concept into a much clearer viewpoint. In such times, we’re more conscious of our daily outgoings, and our dependents. Your clients are now appreciating the real value of their most valuable asset (after health)…their income. Many people’s outgoings have become uncluttered whilst we have been in lockdown, with the removal of ad hoc luxury spends such as going out, and holidays. Their bank statements over this period will also give a clear picture of what their base level outgoings are. Making this a perfect time to talk about protecting income.
Income in life and in death When we talk about protecting income, we should also think not just about the client themselves, but also their families. Protecting a household income becomes just as important when that income is removed due to death as well as illness.
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Many clients may have taken out life insurance to protect their mortgage payments and to help keep the roof over their loved ones, should the worst happen and they pass away. However, in this situation, even if the mortgage is paid off the bills don’t stop. Their regular living expenses continue, which may leave loved ones/family members exposed and financially vulnerable. Talking to your clients now about Family Income Benefit as well as Income Protection is where you can ensure they have a complete Protection Portfolio – protecting them against a range of risks and giving them more peace of mind. And as we transition fully out of lockdown (and again are able to spend money on luxuries such as holidays and nights out), clients will have had time to adjust their disposable income to accommodate that new much needed policy premium.
Making that Protection Portfolio affordable LV= are income specialists and we have a fantastic range of sales aids, tools for advisers and suggestions on how to help grow your business. Protecting income at LV= doesn’t need to be expensive, with lower cost options available such Budget Income Protection or Budget Personal Sick Pay. Our Flexible Protection Plan, which includes our Critical Illness cover, Life insurance and Family Income Benefit, is the only menu plan in the market offering specialist income protection. Because it is a menu, your client will benefit from just one application, one set of underwriting and one direct debit. To find out more about the LV= protection proposition, please visit LV.com/adviser/protection, contact your LV= account manager or call us on 0800 032 4219.
Protection & GI
Kevin Paterson Director of Sales & Marketing
PROPERTY INSURANCE – WHAT DOES NON-STANDARD MEAN ANYWAY? Ask most people what they think is meant by non-standard home insurance and the chances are you will hear about thatched roofs or properties that have been flooded and whilst these are viewed as non-standard property risks they are only the tip of the iceberg and the true picture is much more common. I am going to try and explain why this is now ‘a thing’ and why every broker should know about it and more importantly what they can do to help their clients and at the same time open up an additional lucrative income stream that will help to build embedded value in their business. Mortgages exist today for a myriad of risks, property type, location, age etc as well as financial and credit worthy-ness of the borrowers, but actually the same situation arises with home insurance, but this is just not talked about as much. Today, everything it seems is driven by data, you hear terms like big data and data analytics used a lot but what does it really mean? There are an ever-increasing range of products, services and information that is moving to a digital platform and with that comes the ability to combine various different types of data and just like a jigsaw a clearer picture emerges which in the case of insurance companies give them a much better insight into the risks they are covering. As insurers have been able to get more accurate data, in many cases they are now able to drill down to an individual property at postcode level, they have worked out what risks they don’t want as well as the risks they do want and this has led to a rise in nonstandard. Indeed, two similar properties in the same street could conceivably today be charged completely different premiums by the same insurer because of access to more accurate data. There are more than 27 million properties in the UK, and it is estimated that approximately 30% (£7m) fall into the non-standard category estimated to be worth more than £1.5bn GWP annually.
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There are four main areas of risk assessment when it comes to property insurance, Property type, which focuses on the construction of the property, then the location, and or condition of the property, so is it in a high risk area or maybe the property has previously suffered from subsidence or is undergoing renovation work. The third type of risk assessment is usage, for example, is the property used for business purposes or is it partially or fully let or left unoccupied for long periods of time. The last area of risk focusses on the policyholder, do they have a high claims history or poor financial circumstances. All of these will determine whether the risk is a standard vanilla risk or if it falls into one or more of more than 31 different types of non-standard risk. The good news is that here at Ceta we have developed an easyto-use online platform that dynamically asks the right questions in order to be able to accurately quote, compare click and buy home insurance for a whole range of non-standard property risks. Here is a snapshot of the most common non-standard quotes we do: •
Listed building
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Non-standard construction
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Flat roof
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Subsidence/Underpinned
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Flood risk
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Business use
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Unoccupied property
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Holiday home
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Poor credit history
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Declined/refused
•
High risk occupation
•
Claims history
Conveyancing
Alan Young Managing Director
DIGITISATION OF THE CONVEYANCING JOURNEY As we approach almost half a year since the Covid-19 lockdown came into force, we have all adapted to working within what is considered to be the ‘new normal’. Mortgage brokers, conveyancers and the wider property sector are either continuing to work from home, or are now operating within the boundaries of a sociallydistanced, safe working environment that adheres to the very latest government guidance. With organisations having to make swift adjustments to instigate their remote working continuity plans, the flexibility provided by online or cloud-based applications has really come into its own. In fact, many businesses are now looking at ways of extending this further to provide additional service enhancements, cost savings and efficiencies across the board, with technology solutions forming the basis of that change. In fact, I believe that we will see an acceleration of tech trends as the industry considers alternative digitised ways of progressing transactions, driven by the realities that buying and selling properties in a socially-distanced world creates. I was interested in reading the Conveyancing 2030 Discussion Paper*, which was recently published by the Council of Licensed Conveyancers (CLC). It laid out a succinct and thought-provoking view of how the practice of property conveyancing has the potential to change in the next decade. It focused on six key areas of potential future development for property transactions, with the overall aim of raising questions and issues for it as a regulator to discuss, analyse and address. The CLC’s discussion paper ultimately encourages an open dialogue across the industry regarding the future of the legal property transaction process and raises some valid questions as well as bold areas of debate. The first point raised within the paper is that “property conveyancing will be fully electronic by 2030” and goes on to tell a story of technology innovation raising its tempo in the sector; from lodging documents, to greater automation of tasks, to seamlessly transferring funds. It also considers the “centrality of digital data” and the way in which this should be regulated. After all, if all conveyancing data is to be fully integrated and transacted via case management systems DISCOVER PMS
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using data APIs, conveyancers will become more reliant on the trust built with the supplier and the underlying data. In which case, the quality and transparency of data will be central to powering the successful evolution of conveyancing. What we are already seeing is that the market is responding to many of the areas discussed in the CLC’s paper, having already witnessed the first online property transaction by blockchain, the first ever digital mortgage deed has been entered into the Land Register, the ability for mortgage offers to be made online, and the UK’s first fully digital mortgage settlement to have taken place. There will be more to come and, spurred on by the pandemic and a new-found energy to re-look at how things can be done, we are likely to see a great deal of change over the coming months and years. At Optimus, our entire foundation is based on innovative technology that is shaping new rules for conveyancing. Using a combination of tech integrations, fixed-pricing and high-performing solicitors, we make it simple for brokers and introducers to access a panel of approved conveyancers, via a one-click instruction, and with real-time notifications on case progression via a secure digital environment, to maximise connectivity and transparency at every step of an instruction. While the industry focuses on adapting to a more digitised era, we do however need to consider related ‘digitised complexities’ that may arise, such as an increasing focus on cybersecurity, privacy and data sharing rules. These will almost certainly rise up the corporate agenda as the market continues to evolve. While 2020 has so far been the most unusual of times, it also stands to be a time of change for our industry, with technology and digitisation positioned firmly at the forefront. I for one am excited at the shape of things to come.
*https://www.clc-uk.org/wp-content/uploads/2020/01/CLCConveyancing-Discussion-Paper-web-spreads-1.pdf
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SEPTEMBER NOVEMBER
VIR TUA WH L EV ENT AT’ SO S N?
With a continued focus and evolution of SBG virtual events, we feel it is essential to remain engaged with yourselves to ensure you still have a wide choice of learning.
Extra Live Events 08.09.2020
10:00am
Mortgage Extra Live
09.09.2020
10:00am
Protection Extra Live
15.09.2020
10:00am
Mortgage Extra Live
16.09.2020
10:00am
Protection Extra Live
22.09.2020
10:00am
Mortgage Extra Live
23.09.2020
10:00am
Protection Extra Live
29.09.2020
10:00am
Mortgage Extra Live
30.09.2020
10:00am
Protection Extra Live
Future Learning Events
06.10.2020
10:00am
Mortgage Extra Live
03.09.2020
10:00am
ESG - BNY Mellon
07.10.2020
10:00am
Protection Extra Live
10.09.2020
10:00am
Stress for Success - Janus-Henderson Investors
13.10.2020
10:00am
Mortgage Extra Live
16.09.2020
02:00pm
Macro Update - Fidelity
14.10.2020
10:00am
Protection Extra Live
08.10.2020
02:00pm
Art of Wow - Janus-Henderson Investors
20.10.2020
10:00am
Mortgage Extra Live
14.10.2020
03:30pm
Prudential
21.10.2020
10:00am
Protection Extra Live
20.10.2020
10:00am
Successful Options in Retirement - Architas
27.10.2020
10:00am
Mortgage Extra Live
10:00am
Protection Extra Live
10:00am
Equity Release and Later Life Lending Aviva / Hodge / Scottish Widows / Iress
28.10.2020
22.10.2020
03.11.2020
10:00am
Mortgage Extra Live
10.11.2020
03:30pm
Brainworks - Janus-Henderson Investors
04.11.2020
10:00am
Protection Extra Live
17.11.2020
10:00am
Aberdeen Standard
26.11.2020
10:00am
Sustainable Investing - Liontrust
We have worked to offer you the most interesting content, and ensure your CPD requirements are met. For those of you with a Learning Hub licence, the catalogue of learning material is currently expanding by the day, and we are monitoring to ensure everything is current and beneficial.
Pension Transfers Skills Workshops Business Development Skills Workshops 02.11.2020
09:30am
04.11.2020
09:30am
10.11.2020
09:30am
12.11.2020
09:30am
This virtual classroom session is designed to get you thinking like a Managing Director. We will consider how you can achieve growth through various methods of expansion, while also giving thought to your succession or exit plan intentions.
14.09.2020
09:30am
15.09.2020
09:30am
16.09.2020
09:30am
17.09.2020
09:30am
18.09.2020
09:30am
This workshop, earning you up to three hours’ CPD, is designed to give you a firmer understanding of how to deliver compliant advice in this complex area. We will also be covering in detail the FCA papers PS20/6 and GC20/1, and what impact these new rules may have on your businesses.
Leadership Development 2020 Leadership & Management Excellence Our Leadership Development modules are dedicated to discovering, studying and understanding the best techniques and trends in the core areas of management and leadership. The modules are designed to strengthen the way you as a manager get the best out of yourself and your people. It will give you the skills and tools you need to master the challenges and opportunities facing your business now and in the future. From crafting your communication style and getting the people culture right, to building and creating positive mind-set, to embedding continuous change and managing talent, to simply becoming a more agile leader, these modules will provide you with the tools, action-planning and confidence to take on a wide range of business issues. Cost per module: ÂŁ150 +VAT All costs are payable upon committing to the module, and are non-refundable.
08.09.2020
Leadership essentials
17.09.2020
Communication and development through coaching and feedback
22.09.2020
Leading through change
29.09.2020
Decision making skills
08.10.2020
Setting direction and managing performance
20.10.2020
Presentation skills
29.10.2020
Employment law and sensitive issues
03.11.2020
Stakeholder management
10.11.2020
Productive team meetings
19.11.2020
Brilliant basics and customers experience
24.11.2020
Recruitment and interviewing skills
02.12.2020
Influencing skills and team motivation
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