As high lending figures put a strain on broker numbers and the average age continues to rise, what is the industry doing to attract new recruits?
The huge growth in mortgage lending has led to a shortage of brokers and the industry is pondering how to encourage fresh blood into the sector.
Experts suggest that the total number of brokers has fallen from around 30,000 before the financial crisis to approximately 12,000 today, with about 4,000 IFAs writing occasional business. However, nobody claims to have accurate statistics.
Speaking at Mortgage Strategy’s annual Leaders Forum last month, Association of Mortgage Intermediaries chief executive Robert Sinclair said broker numbers were “getting tight” and soon there would be too few to deal with increasing business levels.
Council of Mortgage Lenders data shows gross lending in 2015 totalled £220.3bn, an 8 per cent increase on 2014’s figure of £203.3bn and the highest annual gross lending figure since 2008.
This has caused both brokers and lenders to struggle to keep up with the increased demand. The implementation in 2014 of the Mortgage Market Review has also had an impact, with banks forced to meet tough new mortgage advice requirements on all sales. They have therefore relied heavily on the mortgage market for distribution, with an estimated 70 per cent of cases processed through intermediaries.
Speaking at the Leaders Forum about the strain on broker numbers, Sinclair said: “We look as though we’re about right [at the moment] but… whereas [lending] swung up in the first quarter, protection sales have started to drop off. In my view, that is a sign of pressure.
“It says people don’t have enough time, or are making enough money off mortgage transactions and a little off protection. [So they] drop stuff that is hard work or has compliance risks, perhaps.”
During the 1990s, John Charcol was renowned for its large broker training programme, which created some of the biggest names in today’s mortgage sector. However, the start of the decline in broker numbers from its peak in 2007 was part of a wave of redundancies that swept through the industry in the crisis-hit years of 2008-09. Naturally, several training schemes for new brokers perished and the profile of the industry began to age.
Today, advice firms report filing hundreds of advertisements for trainee brokers, with basic salaries ranging from £15,000 to £30,000 a year. Alexander Hall, London & Country and LSL Property Services are three such firms. Part of their recruitment pitch to young advisers is that they can soon earn commission and significant salary increases if they perform well.
Some big brokerages, such as Countrywide and London & Country, also run large training schemes to maintain their own stream of recruits.
Countrywide’s scheme lasts for a year. It begins with new recruits undertaking a five-week programme, in which they spend three-and-a-half weeks training on Countrywide’s systems followed by one-and-a-half weeks achieving the CeMAP qualification.
London & Country has an academy system for training staff, which it managed to maintain throughout the financial crisis.
Just Mortgages, meanwhile, has a School of Excellence programme for young brokers and says the investment pays off. Group operations director of Spicer Haart and Just Mortgages John Phillips says: “At Just Mortgages, we believe that employee training is not a cost but an investment.
The right training gives young brokers the necessary market knowledge and skills to carry out their work to the very best of their ability, which in turn increases productivity and the quality of their work.
“Lianna Tilley [see box below] is just one of our young brokers who has benefited from the School of Excellence course and, because things are continuously changing in the mortgage market, the ongoing training we offer will help them stay ahead of the curve, now and in the future.”
But some bigger brokerages have traditionally been reluctant to invest in large-scale training programmes, fearing that their best staff will be poached. London broker Coreco hires apprentices straight from school to train as, and become, brokers. The recruits go through a 12- to 18-month programme for advanced CeMAP while working in Coreco’s offices on a living wage.
Coreco managing director Matthew Lowndes says the initiative was spurred by the lack of qualified recruits in the market.
Other brokerages such as John Charcol use a combination of graduate training schemes and promotion of internal staff from other parts of the business. “Some people want to be mortgage administrators and don’t want to go beyond that,” says John Charcol senior technical manager Ray Boulger.
“Others who don’t have much experience of the market might be offered a role as sales support. That is a good way of learning on the job: not only do you get to know the processing side but you have the option to interact with the consultants you work with and ask them questions.
“If you are trying to study on your own, you have to rely on your books. That is fine from a textbook point of view but you need practical experience as well.”
He adds: “We have had specific training programmes for graduates from time to time. We have moved people over from sales support and taken on graduates directly.”
Of course, not every firm has the manpower and resources to launch a full-scale apprenticeship scheme. Training recruits takes time and money, and there is a risk that the employee, once trained, may depart for a rival firm.
But help is available. In August 2015 the Government approved a mortgage advice apprenticeship scheme – with structured units and competencies – which provides funding for firms that take on apprentices.
Smaller mortgage brokers can apply to the Skills Funding Council for support in offering apprenticeships. The council provides funding of up to £6,000 per employer and sets a series of basic standards for the apprenticeship, including taking CeMAP qualifications.
This scheme was developed by lenders and brokers, including: Barclays, HSBC, Leeds Building Society, Lloyds Banking Group, Mortgage Advice Bureau, Nationwide, Openwork, Santander, Sesame Bankhall Group, Simply Biz Mortgages, Skipton Building Society and The Right Equity Release.
Role of technology
At the Mortgage Strategy Leaders Forum, Coreco director Andrew Montlake suggested brokers could be more productive through better use of technology, which would help them to sell more.
Technology combined with better planning could indeed be a leveller for small firms. Experts say the adoption of technology to speed up administration, or the recruitment of paraplanner-type staff such as those in the IFA sector, could lead to brokers being able to write more business.
Sinclair says: “Do we need more brokers? Or do we need technology to simplify the process? Or do we need administrators to do some of the work? I think it’s a combination of these things.
“The quality of the broker in front of the customer is more important than the number. I think it is about how we make these people more efficient and more effective.”
In terms of the wider industry, experts have questioned whether trade bodies should club together to launch a programme to boost recruitment. However, such an initiative would not be quick to implement and there would be no guarantee that lenders, who have the deepest pockets, would agree to participate.
Any individual who wishes to advise on mortgages requires an appropriate qualification that is recognised by the FCA.
The Certificate in Mortgage Advice and Practice is firmly established as the recognised qualification required to advise on mortgage sales, though there are others. CeMAP covers a wide range of knowledge, including mortgage and protection products, mortgage regulation and policy relating to consumers, technical language and tools, and the wider trends in regulation and markets.
There is also a higher qualification, the Diploma in Mortgage Advice and Practice, which can be applied for by CeMAP holders who want to increase their level of qualification.
Education provider the Institute of Financial Services offers specialist exams, such as the Certificate in Regulated Equity Release and the Award in Customer Complaints Handling.
Some brokers have suggested that the exam structure should evolve to fit the modern mortgage market. It is understood the IFS is looking at ways to broaden CeMAP exams to cover more specialist areas such as second charges and equity release.
The Retail Distribution Review, which came into force on 31 December 2012, revolutionised the qualifications required of financial advisers to advise on pensions and investments.
Some brokers want the industry to adopt higher professional standards in order to attract better-quality people to the sector. They call for a wide variety of training programmes, from the larger broker graduate schemes to more sophisticated exams.
“I don’t think the exams have changed much over the years in terms of difficulty,” says Boulger.
“We are starting to see more debate about what needs to be covered. The PFS is looking at it.
“We are seeing more convergence between first and second mortgages; between ordinary mortgages and lifetime mortgages. Although brokers may not offer products directly from these markets, it is really important to understand them. Even if you choose not to advise on second charges, you still have a good understanding of when they are appropriate. Likewise for lifetime mortgages.
“There is no better way of doing that than making the exam broad enough to cover all areas. That will be the direction of travel over the next few years. There will be more pressure to go down that route. The logic of saying that second and lifetime mortgages are different is eroding.
It is increasingly important that advisers have a knowledge of all of them, so the exams need to change.”
Despite the tough qualifications required, brokers think this career remains attractive to young professionals. Boulger says the profession has evolved to become more sophisticated and skilful.
“If you are interested in financial services, you need people skills as well as enough understanding of what is happening in wider markets,” he says.
“It is all very well to analyse the best deal. The days of clients asking for the cheapest product and the broker simply typing the information into a computer and saying ‘Here you go’ are almost over, thankfully.
“It is really important for consultants to engage in conversations about the pros and cons of fixed rates or trackers, and how long your deal is. To have that meaningful conversation, you need to have an understanding of how markets work. Most clients want advice, even if some come in with a clear idea of what they want. A lot are very open to having a discussion.”
Boulger uses the example of offset mortgages to explain how a well-trained broker can add value for clients beyond a narrow bank offering.
“Very few clients want an offset mortgage,” he says. “It is up to consultants to decide when it is appropriate and it is one of many areas where brokers can add value over the banks. Most banks don’t offer offset so, if you walk into a branch –apart from Barclays – the chances are offset won’t even be mentioned because they can’t sell it to you.”
The industry has clearly experienced recruitment pressures during the past decade, with many professionals having left the sector in 2009. With the age profile of those who remain rising steadily, there is room for new blood.
Many brokerages have training programmes or arrangements with schools to launch apprentice schemes, while exam reform is being considered at the PFS.
The impact of the market’s recent growth on firms’ capacity to do business is leading to hundreds of openings. It is a challenge, but most would agree a far more appealing one than having to cut back on numbers in the devastating way seen in the wake of the financial crisis.
Mortgage broker exams
Module 1 (UKFR)
Unit 1 – Introduction to Financial Services Environment and Products (ITFS)
Unit 2 – UK Financial Services and Regulation (UKFS)
Module 1 is assessed in one two-hour exam. ITFS and UKFS each comprise a one-hour objective test with 50 multiple-choice questions.
Module 2 (MORT)
Unit 3 – Mortgage Law, Policy, Practice and Markets (MLPP)
Unit 4 – Mortgage Applications (MAPP)
Unit 5 – Mortgage Payment Methods and Products (MPMP)
Unit 6 – Mortgage Arrears and Post Completion Issues (MAPC)
Module 2 is assessed as one two-hour exam. MLPP, MAPP, MPMP and MAPC each comprise a 30-minute objective test with 25 multiple-choice questions.
Module 3 (ASSM)
Unit 7 – Assessment of Mortgage Advice and Knowledge
ASSM comprises a two-hour objective test with six case studies, each with 10 multiple-choice questions.
Unit 1 – Financial Services, Regulation and Ethics (FSRE)
FSRE is assessed by a two-hour objective test comprising 100 multiple-choice questions. The FSRE objective test is available at over 150 Pearson VUE test centres nationwide, with the result provided on the day.
Unit 2 – Advanced Mortgage Advice (AMA)
AMA is assessed by a three-hour written examination with three elements: a recommendation in response to a pre-released customer ‘fact-find’; a report requiring explanation of a mortgage concept or technical issue; and a short question-and-answer section.
Source: Institute of Financial Services
‘I wanted something more challenging – the natural step was to become a mortgage broker’
Twenty-six-year-old Just Mortgages broker Lianna Tilley spoke to Mortgage Strategy about her experience of starting out in the mortgage industry and how her early training had stood her in good stead
Just Mortgages runs the School of Excellence course, which takes three months to complete and comprises individual courses usually lasting a day.
The SOE is run from Legal & General House in Tadworth. To help with the two-hour commute from Swindon, I was able to stay in the on-site accommodation, alongside my peers.
To ensure we were fully prepared for the exams, we undertook a number of mock tests that allowed me to analyse any potential weak points and gave me time to develop my exam technique. There were just four people in my training group, which enabled us to ask questions, and we received excellent support and guidance as a result. Thanks to the SOE, I have gained the CF1 and CF6 mortgage qualifications, which are equivalent to the CeMap.
Having completed my exams, I was given the opportunity to spend time in a number of Just Mortgages branches. I also took part in a series of face-to-face and telephone-based roleplays so I could see exactly what my first appointment should look like in terms of structure and the possible options and outcomes for the client. This helped me to ensure that, when I was sitting in front of a client, I would be fully prepared.
I then returned to the branch in Stratton, where I am based. Before a client appointment we would recap first appointments and afterwards we would reflect on what had gone well and what I could have done differently.
I previously worked at Barclays as a personal banker and, although I enjoyed interacting with clients, I wanted something a bit more challenging. The next natural step was to become a mortgage broker. Although it is hard work and there is a lot of paperwork, it is very rewarding, particularly when the client finally moves in to their new home.
Just Mortgages offers some great benefits for young brokers like me who are relatively new to the market and, compared to some of the smaller estate agencies, it has an excellent range of lenders to choose from
In addition, Just Mortgages puts a buyer’s protection insurance policy in place, which covers the client’s fees if things go wrong, such as if the property is undervalued. I am also able to offer clients more than just mortgage advice as I also deal with their solicitors and liaise with the estate agent on their behalf.
Although I have successfully completed my exams, I am receiving ongoing support and training on a range of products and policies. I have recently completed a management course, which has proved very helpful in booking appointments and managing estate agents.