It is important to ensure that, even in the good times, your business is manageable and your strategy effective
Depending on how long you have been in the industry, the chances are that you are used to dealing with highs and lows. Anyone who operated in the mortgage sector in the run-up to, and during, the credit crunch will certainly have learnt how to deal with this rollercoaster of a market.
The housing boom where mortgages were advanced to anyone who asked, house prices soared and buy-to-let became a get-rich-quick scheme was followed very quickly by a period in which record numbers of properties were repossessed, businesses closed and banking stalwarts collapsed.
Flurry of activity
There were fears we were heading for another rollercoaster ride this year as Government-led changes and regulation – surrounding the buy-to-let industry and the Mortgage Credit Directive – came into play. The first quarter of 2016 saw a flurry of activity as buy-to-let investors and second-home buyers rushed to complete on their purchases before the new 3 per cent surcharge was applied to all stamp duty bands. Meanwhile, impending changes to regulation saw a surge in second charge business.
The worry was that, once the MCD had bedded in and the stamp duty deadline had passed, the market would plummet and brokers would be left scrambling for business. Thankfully, that does not seem to be the case. Even with business dropping slightly, the market has continued to be busy.
Saying that, a busy market is not without its downsides. Indeed, from what I have heard when speaking to the intermediary community, some brokers actually have more business than they can cope with. While I am sure most brokers would not complain about being busy, if you are unable to cope with business levels, you need to make some changes. If this new pace of work is the new norm, we have to get used to it.
Brokers need to question what effect this will have on staffing levels. Does the company have the capacity to cope? How will the increase in volumes impact their work life/home life balance? And will profitability be affected?
Rather than struggle on and risk losing business – or, worse still, make mistakes – brokers should be looking at their business models to see where changes can be made.
Start by looking at your systems. Using the right technology, you will be able to manage your customers more efficiently. As most brokers will attest, paperwork can take up much more time than it should. Do not waste valuable hours on this – technology can make things easier.
A good system will enable you to make sure you are not ignoring any existing client needs, even helping you to contact them automatically when the end of a mortgage term is looming.
A potential consequence of an increase in business is that brokers are so busy dealing with new enquiries that they do not have the time to properly address existing clients’ needs. In other words, the broker may neglect things like product transfers or selling life and general insurance products.
This is a risky strategy. By ignoring ancillary products, you lose a valuable trail income and become too reliant on new mortgage business, which could dry up if the market turns again. What is more, if you are not satisfying your customers’ needs, you risk losing them to someone who will.
Cross-selling will always be important for giving a business a future income, not to mention integral worth should the business be sold. Focusing on this busy period without looking ahead at where your business could be in one, five or 10 years’ time is shortsighted.
Buyers will want to know that your business has as much chance as possible of being profitable in the long term, and cross-selling is vital for that. Remember that to save time you can refer your clients to specialists, who will handle the case, and the required compliance, for you.
A booming market is always preferable to a bear market but both come with their problems.
It is important to ensure that, even in the good times, your business is manageable and your strategy effective. Review your business model often and ask yourself the following: is this how I want my firm to run in the future or should I be doing things differently?
Phil Whitehouse is managing director of MCI Mortgage Club