Where there's a will...

7 June 2010 | By Christine Toner

’Financial planning’ is a phrase often bandied around the industry. Indeed, the equity release market is built on the idea that ensuring clients have a secure and comfortable life in retirement is crucial. But we rarely talk about what happens after this phase. Will writing may be a niche business but it’s one that is slowly gaining more prominence.

The College of Will Writing has seen a marked increase in the number of people applying to train in the skill, with 25% of the current intake being mortgage brokers.

“Twice we have noticed an increase in broker intake,” says Brian McMillan, director-general of the Society of Will Writers and the College of Will Writing. “The first time was when they became regulated and began to take their business more seriously and the second was after the downturn began, for obvious reasons.”

Further proof that will writing is becoming more common as a source of business is that the Institute of Professional Willwriters recently achieved approval from the Office of Fair Trading for its code of practice, showing the profession is clearly on the radar.

Of course, there’s another reason the spotlight is falling on will writing - the need for brokers to diversify. It’s no secret that the credit crunch caused serious problems for brokers. A lack of funding meant placing deals became nearly impossible and as lenders released more direct-only products and the dual pricing battle began it became obvious that brokers who wanted to survive would have to diversify their offerings.

Eddie Goldsmith, senior partner at Goldsmith Williams, says it is important for brokers to offer a range of ancillary services because they provide an opportunity for them to become trusted gatekeepers of their clients’ professional services needs, be they financial or legal.

“Most clients have no way of knowing which companies are best and no basis for comparing the services they offer,” says Goldsmith. “By recommending trusted third parties intermediaries can fulfil their true role as advisers, with all the benefits that brings.”

The view that those wanting to ride out the credit crunch storm need to think outside the box is by no means uncommon.

Bob Hunt, chief executive of Paradigm Mortgage Services, says it is vital that broker firms vigorously pursue cross-sales opportunities that are immediately related to mortgage sales such as protection and general insurance.

“Without question, supporting clients’ needs helps build the value of earnings per sale, develops important customer relationships and perhaps more significantly encourages critical recurring income streams,” says Hunt.

“Given that both the opportunities for brokers to earn proc fees and the value of these fees have fallen dramatically in the past three years as a consequence of lower volumes and the demise of products such as sub-prime, replacing this income is not optional if firms are to survive.”

But while areas already linked to mortgages under the financial services umbrella such as payment protection insurance and buildings and contents are one thing, is will writing a step too far? Apparently not.

“The move into will writing presents an opportunity and, for me, is a natural fit for intermediary firms that can demonstrate the competence for successful diversification,” says Hunt.

But how difficult is it for brokers to move into will writing and is the training required worth the effort?

“There’s a lot of support and software available for brokers but this is an area not to be entered into lightly, without assessing how it all works and undertaking a full cost-benefit analysis,” says Phil Whitehouse, head of The Mortgage Alliance. Hunt agrees that while training in will writing is not necessarily difficult it does require effort, commitment and a degree of professionalism.

“We have teamed up with a specialist will writing business to offer a training programme for brokers which leads to them becoming authorised associates of the firm and covered by its professional indemnity insurance,” he says. “The level of client interaction can be as little or as hands-on as you choose but given that seven out of 10 adults in the UK reportedly do not have an up-to-date will, there’s a big opportunity for brokers to help clients in this area of financial planning.”

Of course, clients are likely to want more than just advisers who can work off templates. They will want professionals who can advise them too. “It’s not difficult to train to write wills and there are plenty of software programs and training courses available,” says Goldsmith. “But being able to answer clients’ queries and concerns about how to protect their estates is a different matter.

“Going outside your chosen field of experience and into the unfamiliar world of legal services is not for the faint-hearted and while there is plenty of potential extra income on offer there are also pitfalls waiting to trap unwary brokers.”

Goldsmith says it’s important for brokers to ensure that if they refer clients to a third party firm they do not put their reputation at risk.
“I don’t need to tell brokers that if a client is let down by a third party supplier it doesn’t just mean the loss of that client but also all their referral business, and may even result in negative publicity,” he says. “So brokers must ensure the firm they refer clients to has a proven record.”

Also, if brokers decide to offer a will writing service themselves they must ensure they are properly trained to recognise their clients’ total requirements, which may go beyond the provision of a will.

“Clients may need a comprehensive estate planning service including lasting powers of attorney, Inheritance Tax planning and reduction of estate advice,” adds Goldsmith.

“These are complicated subjects which, while providing the prospect of attractive financial remuneration, can also result in inexperienced brokers facing negligence claims for which they may not have suitable insurance. So the risks may be greater than the rewards on offer.”

But which option is more beneficial to brokers - referring clients to a specialist or training to do the work themselves?

The more important question may be whether brokers should focus on providing primary services such as mortgages, insurances and investments which generate the bulk of their income or whether their time should be spent providing associated services such as will writing, which take them outside their comfort zone.

“The conclusion most brokers have understandably arrived at is that it’s better to refer specialist work to experts,” says Goldsmith. “Doing so enables brokers to offer their clients these services and generate income while being able to give them access to expertise that would be difficult for them to provide themselves.”

Whitehouse believes it’s a matter of individual choice.

“It depends on how comfortable and qualified brokers are,” he says. “Experience counts for a lot so initially it’s wise for brokers to refer this type of business before they gain the knowledge to embark on it themselves. And there’s also the argument that choosing a good business partner can be profitable for both parties.”

Of course, the remuneration is greater for brokers who have an in-depth involvement in the process. Hunt says that typically referrals to a will writing specialist earn brokers 15% of the fee whereas acting as an associate, fact-finding and submitting information to a specialist earns them an additional 50%.

“There’s a lot to be said for referring your clients to a professional and receiving a referral fee,” he says. “But a three-day residential training programme typically costs £500, which is not too significant an outlay.”

The College of Will Writing offers such courses.

“We run a two-day residential course every month for new people coming into the profession,” says McMillan. “There has been a marked increase in intake since the credit crunch began but not as many are showing an interest as we might have hoped. Maybe some brokers don’t consider this route because it’s seen as a sensitive area but there’s serious money to be made.”

While there are no formal qualifications as will writing is an unregulated profession, McMillan says if advisers are going to take it seriously they will need education.

“Some wills are straightforward but for complicated wills more training is needed.”

Interestingly, the benefit of will writing for advisers works both ways.

“I know a firm where the front office concentrates on will writing but it also has an IFA,” says Whitehouse. “The IFA can often spot a raft of business opportunities and income is divided between the two sides as per their agreement.

“There’s no reason why mortgage brokers should not form such affiliations and put themselves in a position to use wills as a lead generation tool. Offering services other than mortgage-related ones could also help brokers meet their regulatory responsibilities to clients and help build relationships, resulting in strong client retention and referral levels.”

One concern brokers may have when expanding into a field such as will writing is that they are spreading themselves too thin and will be unable to devote enough attention to their core business. And in these trying times it’s not a good idea to skimp on quality.

“The jury is still out on this,” says Whitehouse. “Inevitably, as mortgage business has diminished brokers have been forced to diversify and cross-sell to survive. But it can be a fine line because if they diversify too far from their core proposition they risk becoming a jack of all trades and master of none.

“It’s also the case that due to regulatory demands brokers are expected to offer more holistic advice to ensure the mortgage debt is covered.

There’s a fear that skills could be diluted so firms need to find a balance that works for them in terms of margin and keeping up regulatory standards.”

While there might be plenty of potential extra income on offer there are also pitfalls waiting to trap unwary brokers

But Goldsmith says he has not seen any evidence that the provision of additional services such as will writing has had a detrimental effect on any broker’s core business, at least not when provided via a trusted third party partner.

“I think most brokers are pretty good at providing clients with a menu of services from which they can choose, with some of those serviced by the broker and others referred to experts,” he says.

“Most brokers accept that they can’t afford to be one-trick ponies in the current climate. They need to be able to provide their clients with a wide range of services if they want to successfully keep competitors at bay.”

Of course, will writing is just one way brokers can expand their business model. In the past year several brokerages and networks have diversified into the utilities market, most notably through the Utility Warehouse Discount Club.

The club offers discounts across a range of utilities including telephone bills, mobile phone tariffs, gas, electricity and broadband. But Hunt says there is much more of a correlation between will writing and mortgages than between mortgages and utilities.

“I can see a synergy between helping a client buy the most significant asset they will ever possess and ensuring there is a will in place,” he says. “In doing this the broker is placing themselves at the heart of their client’s financial requirements.

“My view is that advisers should stay focussed on products and propositions that affect their clients’ estates and not dilute their value with all manner of distractions. By offering to assist with the provision of wills and other important legal matters - for example, the provision of enduring power of attorney - intermediaries can gain great client referrals.”

Diversify may be more of a bore word than a buzz word these days since it’s been drummed into brokers incessantly for the past 18 months.
But while the recovery is underway we are by no means out of the woods yet and those advisers wanting to get through to the other side safely should always be on the lookout for innovative ways of expanding their offerings.

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