Generating interest

Despite well publicised examples of bad practice in the sector, in a world without cold calling, brokers can\'t afford to overlook the potential of third-party lead generation, says Barney McCarthy

Love them or loathe them, lead generation companies are playing an increasingly important role in the life of the intermediary and in a competitive market, brokers must assess all possible methods of attracting new business if they are to retain their margins.

While larger brokers may dismiss the need to use a third-party organisation to generate business leads for them, preferring to rely on word of mouth referrals and the strength of their brand and marketing operations, for brokers who only employ a couple of advisers and do not have access to limitless advertising budgets buying in leads is a vital way of continuing to secure cases.

But despite the valuable services it provides the lead generation sector still has a less than salubrious reputation and the integrity of several online companies has been questioned after questions about the quality and quantity of leads provided.

It is perhaps because lead generation companies fall outside of the jurisdiction of the Financial Services Authority that some pundits remain critical of them and their practices. But while the FSA does not regulate the companies, a change in the rules regarding cold calling has fuelled brokers’ need to use lead generation specialists.

After taking over the regulation of the mortgage industry, one of the changes the FSA imposed was to ban unsolicited real time credit promotions, meaning brokers could no longer cold call clients. The rules even state that intermediaries must seek permission from their existing client base and must get authorisation from a customer upfront if they wish to contact them when their mortgage expires.

This regulation was intended to make established brokers a lot more careful about who they contacted and when. But it also posed a problem for those starting up. With no existing database to work from and hence no referrals, and with cold calling outlawed, intermediaries who are new to the market have a barrier placed in their path from the offset. This is where lead generation companies can be of use to brokers.

So what place do lead generation companies have in the evolving mortgage market? Vanessa Blount, head of paaleads.com, says lead generation companies are perfect for intermediaries who are flexible in their approach toward attracting new clients. “InterLmediaries should start using this medium as soon as possible or they run the risk of being left behind,” Blount warns.

“As well as adding value to new businesses, lead generation firms are an obvious way to increase profitability.”

With close to two-thirds of adults now having access to a computer at home, potential mortgage applicants are more likely than ever to use the internet to research the options available to them, and purchasing online leads is an effective way of capitalising on the relatively new market created by an increasingly technology-savvy public.

As well as paying external lead generation companies in an attempt to secure new business, intermediaries can also use technology to their advantage by generating leads through their own websites.

While acknowledging that smaller brokers may not have the sophistication or capacity to support such developments, Frank Eve, managing director of Frank Eve Consulting, says brokers should be alert to the possibilities.

“By enhancing their own consumer-facing websites, brokers can cut out the middle man and generate leads themselves,” Eve says. “If a function exists on the website whereby enquirers can leave their details, brokers can follow up those leads.”

Although this seems a fairly obvious thing to suggest, many intermediaries are still not harnessing the capabilities of the internet and optimising their websites.

IFA Promotion is a public relations and marketing company that is fully aware of the power of the internet and the link it creates between clients and brokers. IFAP’s press, web and broadcast PR programmes have put 500,000 consumers and businesses in touch with local independent financial advisers in the past 12 months alone. The company helps consumers access independent advice and assists IFAs obtain these leads with a strategy that includes advertising and PR, natural site optimisation, search engine listings and white label versions of the service. IFAP lists more than 5,000 members and ensures they authorised by the FSA. Brokers can pay a one-off joining fee for lifetime membership or if they wish to take advantage of the online marketing facilities and lead generation capacity, pay a charge of 250 per year.

Karen Barrett, marketing director of IFAP says intermediaries can soon make a return on their investment. “We know from our research that the average fee a broker receives on a successful lead we have generated is 570,” she says. “This means brokers can recoup their 250 investment with just one case. If brokers are not realising the capabilities of the internet they are losing out on business.”

One of the most important things for brokers to bear in mind when using lead generation companies is that their expectations should be realistic. Even the most effective companies will only provide three or four hot leads in 10. A lead is just that – an introduction to an applicant who may want a mortgage or product. Brokers still have a fair amount of work to do if they are to successfully convert the lead – the case is not handed to them on a plate.

The influx of lead generation providers in the past year or so means the quality of leads generated has suffered. Kevin Paterson is national sales director of Park Row Associates which owns 33% of Advice Online, a lead generation website. In April this year, the site was generating 5,000 leads a month but Paterson warns the saturation of the sector with new firms has compromised more established companies.

“There has been a quality drop as more lead generation firms emerge,” Paterson says. “It also costs more to place links on search engines. This is the effect of more companies vying for the same leads.”

As well as warning brokers to be careful of what they expect from lead generation companies, Paterson says they must be savvy when it comes to dealing with online companies who demand money upfront. “I have no sympathy for brokers who part with money before they have determined the quantity and quality of leads,” he says in response to complaints that intermediaries are being stung by online lead providers. Paterson also dismisses the notion that lead generation companies are only of use to smaller brokers. “Brokers have always bought in new business. All that has changed is the origin of the leads. Rather than using call centres, brokers are now going through the internet.”

And Blount also disagrees with the theory that only unsuccessful brokers turn to lead generation companies. “The smart individual that can adapt and is looking to grow his business will benefit from leads,” she says.

“Most brokers will look at different methods and try internet leads, returning to them when required.”

Larger brokers maintain that external lead generation companies are of limited use in their day-to-day business. Mark Harris, managing director of Savills Private Finance, says that start-up businesses or those with no brand may have to turn to the companies but that organisations such as SPF can generate their own business.

“Using lead generation firms does not work for our model. We prefer to build relationships through a network including solicitors and estate agents,” Harris says. “I hope the day never comes when SPF has to buy leads as I fear that would be the beginning of our demise.”

James Cotton, mortgage specialist at London & Country, says the Bath-based broker has always relied on providing its own lead sources from existing clients and referrals.

“This is better way of generating leads, along with affinity partnerships. You have a better idea of the quality of the leads. It’s less of a lottery than buying them in,” he says. Although Cotton says the conversion rate is also higher from L&C’s preferred method of generating new business, he adds that as technological developments make lead generation sites more sophisticated, larger brokers will keep an eye on their progress.

Although some of the new breed of online lead generation companies have given the sector a bad reputation by not producing the quantity or quality of leads promised, Blount argues that only bad experiences are reported. While intermediaries will complain and contact the press if they encounter problems, they are less likely to shout about it if they have had a good experience.

Brokers must enter arrangements with leads firms with their eyes open.

“It has to be the responsibility of the adviser to minimise risk to themselves and they should not deal with a company that wants upfront fees and long tie-in periods,” Blount says. “Intermediaries should check out conversion rates to be sure of what they are buying in to.”

As well as generating new mortgage business through subscribing to lead generation companies, brokers can use the facilities such companies provide to enhance their profile. Smaller intermediaries often do not have a budget for advertising but can harness the impact of the campaigns large lead producing companies produce.

IFA Promotion runs adverts in the national press – a medium far beyond the means of the one-man band broker. The adverts contain website addresses and the company’s homepage contains a ‘Find your local IFA’ facility. Even if brokers feel like this is a long shot, if they are the most relevant intermediary for the enquirer in the vicinity the lead will be filtered through to them. Signing up to a marketing and lead generation package and maximising the potency of their own websites are just two of the ways that intermediaries can compensate for modest advertising spends.

With even larger intermediaries now admitting that they will keep abreast of progress in the lead generation sector it would be remiss of smaller brokers not to look into what is on offer. With the mortgage market as competitive as ever, brokers must explore all possible avenues. And with computer usage on the rise and the majority of new mortgage applicants using the internet to source and research the product that is right for them, brokers can capitalise on this lucrative subset.

The larger lead generation companies are becoming more sophisticated in their approach and it can only be a matter of time before smaller companies follow suit or fall by the wayside.

The most important thing for intermediaries to remember when dealing with lead generation companies is that they are outside FSA jurisdiction and, even though the more established leads companies operate in the correct manner, brokers should be careful they themselves are acting within FSA regulations as the liability will lie with them.

As with any sector striving to expand, lead generation has a few companies dominating the market and attempting to drive it forward. But in time the less reputable companies will be exposed and the practices used by the majority will be honed.

External lead generation companies are playing an increasingly important role in the mortgage industry and if intermediaries have not used them yet, they could do worse than explore the possibilities – it might just be the most lucrative experiment they undertake in the next 12 months. l

Public relations is an alternative way of generating mortgage leadsMark Llewellyn-Slade is managing director of Llewellyn-Slade PRWe run the Mortgage Clinic – a scheme in the national media to help lenders and brokers generate leads.

Brokers and lenders are increasingly turning to public relations to raise their profile, enhance their reputation and ultimately to generate consumer leads. Strict FSA regulation of cold calling and advertising has led to increased interest in and use of PR, which is not regulated in the same way and allows much more flexibility.

Many lead generation firms also have bad reputations so firms are keen to find viable alternatives. We are seeing a lot of demand from brokers and lenders of all sizes for opportunities to comment on and provide advice on mortgage matters in the national and regional press, online and on radio and TV.

Brokers and lenders find that coverage in the consumer media offers the added benefit of enhancing their reputation, which in turn builds trust. Trust is the key to the sales, especially in the financial services sector.

Companies like the fact that we are one of the few PR firms to work on a payment by results and pay as you go basis rather than demanding a monthly retainer. Whenever possible we aim to include our client’s telephone number or website address within the coverage, though consumers can get in touch with our clients easily by tracking them down via search engines and other sources such as Yellow Pages.

Lead generation should be added to the list of regulated activitiesBill Warren is compliance director of Complete Mortgage and Loan ServicesHaving passed the first anniversary of FSA regulation, it seems major changes to the rules or additional activities coming under the scope of the watchdog, are unlikely.

The FSA’s review of the effects of statutory regulation will start at the end of this year but results won’t be out until the end of 2006. After this, if changes are proposed they will only come to pass after lengthy consultation. Having said that, there is no reason to hold back on expressing opinions, and I for one would approve of any move to add lead generation to the list of activities that are regulated.

Lead generation is at the core of mortgage broking as we know it, and it can reasonably be seen as the outsourced equivalent to financial promotions. Whereas financial promotions must now follow detailed and specific rules – including those set out in MCOB3 together with various other codes and directives – lead generation by third-party firms that are not regulated does not have to follow all the MCOB rules. This means that the onus is on the adviser firms that buy in the leads to make sure they have been obtained legally. And this is in addition to making sure leads are commercially viable, producing a reasonable proportion of successful introductions.

For brokers to be confident about the lead generation companies they employ, they should check thoroughly every aspect of the deal including references, guarantees, penalties, break clauses, charges, payment terms and more. In particular, from the point of view of compliance with FSA rules, they must beware of lead generation suppliers that are based offshore who might try to avoid the call calling ban. Bringing lead generation more clearly within FSA regulation would help safeguard brokers and the consumers they serve.

My business is reliant on internet leadsI started my own brokerage in 2002 after a career in financial services and mortgage sales spanning 42 years. I quickly realised I would need to pull out all the stops if my business was to stay afloat.

Seeing the potential of the web, I started looking into internet lead generators. This was how I stumbled across paaleads.com. I find the services provided by this firm to be both flexible and reliable. No matter what my requirement for leads, it is always able to supply me with the volume I need.

Other introducers I have tried can only supply me with leads on an ad-hoc basis. For this reason I consider paaleads.com to be one of the most reliable sources of new business.

On joining up, I committed a budget to spend on leads based on my cash flow and my need for clients. I knew I would have to take the rough with the smooth with any marketing initiative I tried, so expected a 10% conversion rate. The first three months’ of membership saw me spend 320 on leads but this was soon followed by a return of 1,940 on the leads that I had converted in the same time. One of these clients has become a repeat client and has referred me to her family and friends, netting further earnings of around 5,000.

I contact the leads as soon as I get them. If I leave a lead for longer than a few hours it goes cold and I end up losing the business. Even if I can’t get hold of the client at first, second or even third attempt I persevere. I convert around three out of 10 leads supplied, of which one to two come back to me with repeat business. I also get around two referrals from each lead that I write business with. Paaleads.com has been the mainstay of my business for the past few years. If I hadn’t been buying leads, I would probably have had to shut up shop a long time ago.

What to ask your prospective leads supplierJustine Tomlinson is marketing director of Mortgage NextWeb generated leads are time critical as a customer is searching for mortgage information and will look at a number of sites which may result in the completion of several enquiry forms.

It is vitally important for a lead generator to have a system in place that provides an immediate response, and the adviser receiving the lead must make contact as soon as possible to maximise conversion potential. Essentially, internet leads create a conversation opportunity with a potential customer. FSA regulation permits an introduction to be made by an unauthorised company but full qualification of that lead is not permitted, as this would fall be a regulated activity and most of these firms act as introducers only.

Therefore, advisers must have realistic expectations in terms of conversions – between 20% and 40% would be reasonable.

Dubious lead generation practices such as payments taken upfront without providing the correct level of leads, line transfer of leads from abroad and non-compliant websites have come to light. Ultimately the liability lies with the regulated adviser who receives the lead. But there is a good range of compliant companies to choose from.

There are a number of questions an adviser should ask when thinking of using a lead generator. These are:

  • Is there a UK telephone number that can be used during office hours?
  • Is express consent obtained from the customer by showing the name of the adviser company?
  • What is the conversion rate?
  • Will the company provide references of real advisers who use the service?
  • What is the payment method and refund policy?

It is also important to understand how the firm complies with FSA regulations – networks will certainly be able to provide assistance with this. For example, Mortgage Next provides a panel of approved lead generators that have been comprehensively compliance checked and are achieving realistic conversion rates.