Three steps to successful fee-charging

11 January 2010

There has been a lot of comment in recent months about dual pricing and lenders taking intermediary business inhouse as they try to build margins in a shrinking market. Understandably, there has been a backlash from brokers struggling to survive.

But what if instead of adopting the King Canute approach you accept the inevitable, embrace these developments and try to find a way to make them work to your advantage?

Often the simplest solutions are the ones right in front of us and this is the case with the changes to the mortgage advice sector in the past couple of years. If you start from the premise that fee-free mortgage advice is dead and think how you can adapt your business to make money you’re halfway there.

For many years I have advocated the benefits of charging clients for the knowledge you possess. In many cases this has been acquired over years of experience and, in some cases, trial and error. Brokers learn things that no sourcing system will ever be able to teach them and if ever there was a time for this type of service surely it is now.

Why not break the sales process down into three identifiable sections and talk your clients through these and the services available in each?
Start with sourcing. Helping clients to source a mortgage deal from across the whole market rather than just the intermediary route has as much value today as ever, if not more.

Clients may reject one or all three stages of the service you offer but you won’t know if you don’t try

Many brokers have shied away from this route for fear of losing cases to lender-direct deals. But instead of fearing this outcome you should embrace it by highlighting to your client that for a fee of, say, £149 you will collect all relevant details from them and source the most appropriate solution from the whole market including all deals whether they are via lenders or not. Present this work to clients in a professionally-produced report.

Stage two is the placement of business. Give clients a choice and they can either take your solution for which they have paid you and make their own arrangements or place the business with you if it is via an intermediary route and your costs are covered by a proc fee.
But you could offer clients a third alternative. This would be a coaching facility along with a direct lender deal. Today most lenders are looking for reasons not to lend so cases have to be presented in the right way to get through.

Clients are not necessarily best placed to do this without help, which is where your coaching service comes in. You can ensure that they say and do all the right things, making sure they present the right pieces of information and do not volunteer additional unwanted data that could jeopardise their case.

You could help them complete the paperwork and understand what the lender is looking for and what pitfalls there may be. Importantly, this service will help clients understand that they will probably only get one shot at it as rejected applications are registered on the Hunter system, as are previous credit searches. This reduces their attractiveness to other lenders should they get rejected. A fee of £199 is not unreasonable for this service and while it is not the same as previous proc fees, when combined with stage one at least it’s a decent recompense for time spent on the case.

Then you move on and explain stage three - clients will need one or more insurance solutions. This is a sourcing service you can again provide for them which is paid for by the commission you receive from insurers, thus minimising the cost to your clients and saving them time and money. Of course, they could reject this and source their own policies but as we all know insurance is not that simple and often requires advice - something price comparison websites can’t provide.

Clients could simply reject one or all three stages of the service you offer but you will never know if you don’t try. I recently tested my theory on a friend of mine who is active in the mortgage advice sector.

Interestingly, he was already doing part of the service but after we talked it through he was excited about the prospect of extending his proposition to take in the additional areas I have highlighted here and resolved to try them out the following day on two client interviews he had
planned.

The next day I got a call from my friend to say that the new service worked like a dream, and more importantly it made perfect sense to the client who was more than happy to pay for the expertise on offer.

I suspect this is not a million miles away from what you currently do but importantly it embraces change and helps you adapt your business to the new environment.

I can’t take any credit for this. We work with brokers and this is what many of the more successful ones are doing. I have simply recognised that fact.

Much has been said about how brokers need to diversify to survive, so work your general insurance business and explore parallel opportunities such as debt management and individual voluntary arrangement referrals as well as upping your permissions to encompass other areas of expertise such as pensions and investment advice.

But don’t ignore the fundamental skills and expertise that have been built up in your business over many years and value that knowledge while helping your clients in this extraordinary market.

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