REVIEW
ADVICE
The benefits of diversification Gordon Reid business and development manager, The London Institute of Banking & Finance
F
or many years, it’s been possible for mortgage advisers to make a healthy living by focusing on their core business. Looking after customers in a particular sector of the market has often been sufficient to help maintain and grow a healthy company. Of course, successful advisers have also needed to be accomplished in their specialist areas. Having initiative and drive, great communication skills, and clear objectives are essential attributes to help you achieve your goals. Adaptability has also been a key indicator of success. Now, however, this could be the differentiating factor between those who survive and those who thrive. Focusing on meeting a fairly narrow set of needs carries a risk. And you can no longer afford to put all your eggs in one basket. WHAT IS DIVERSIFICATION?
Diversification is a strategy to enter a new market in which your business doesn’t currently operate. As a mortgage adviser, the great advantage you have is that diversification doesn’t require you to develop a whole new set of skills. Instead, the key is to adapt your existing skills and apply them to a different sector of the financial services market. There are many other products and services which, as a mortgage adviser, you may choose to offer. Some of these, however, are a more natural fit than others, and involve less retraining. For example, the later-life sector is thriving, especially with the costof-living crisis squeezing retirement income while property values remain high. The skills you’d use to be an effective adviser in this sector are the
10
[B]y operating in different sectors, you’ll boost awareness of your brand, which could even mean you retain a higher share of your core market, as well as attracting new business same as the ones you use in your dayto-day role. You’ll need an additional qualification, but you can study for it and qualify in about six months. Similarly, if you’re not currently offering your customers advice across the full range of protection products, you can easily develop your knowledge to do so. This has the obvious advantage of enabling you to help customers who don’t currently have any need to borrow but might, for example, be looking to protect their income as we enter a recession. If you’re prepared to spend more time on developing your knowledge, you could consider studying for a qualification in financial advice. That would enable you to provide holistic financial planning and advice across a whole range of your customer’s needs. Then again, if you prefer to focus on the lending side of your business, what about moving into areas of specialist property finance? Demand for bridging loans, buy-to-let mortgages, commercial finance, and development finance remains strong. Now is a good time to develop your knowledge in these areas. You may also want to start building relationships with specialist lenders and join a relevant trade body or network that specialises in supporting advisers in these types of lending. WHAT ARE THE BENEFITS AND RISKS OF DIVERSIFICATION?
The key benefit of being able to advise in different areas of the market is increased adaptability. You’ll be able
MORTGAGE INTRODUCER NOVEMBER 2022
to bend and flex according to where there’s demand and, conversely, you’re less likely to take a hit if demand for your current skills and services falls. You will be able to attract a broader range of customers and service a wider range of their needs. By securing your income in this way, you’ll be in a better position to plan future developments for your business. Finally, by operating in different sectors, you’ll boost awareness of your brand, which could even mean you retain a higher share of your core market, as well as attracting new business. However, diversification will likely increase the number of processes you have to follow and policies to comply with. That can increase the risk of making mistakes. To reduce this risk, you will almost certainly need to undertake more CPD, even if it is not a regulatory requirement. You may even need to invest in additional hardware and software or employ additional staff. HOW TO DIVERSIFY
The first thing you must do is to complete your research. Make sure you understand the sector of the market you are considering entering. Conferences, webinars, and the trade press can all help here. Our own mortgage conference in November, for example, will bring together experts in mortgages, later-life lending, and protection, with a strong focus on adviser development to discuss the future of the sector and the market. Think about your customers and where you may be best able to serve their additional needs. For example, do you have quite a mature client base, who might benefit from later-life financial planning advice? Or do you tend to have younger customers whose protection needs may be paramount? This approach will give you a strong indication of how you can diversify to complement your current offering. M I www.mortgageintroducer.com
