How to Advise in a Rising Market

Many brokers are now operating in a new environment, the likes of which they’ve either never experienced before, or not for a very long time.

For example, following a lengthy period of steady house price growth, something which even a global pandemic failed to stop, activity in the market now seems to be cooling.

This was apparent in the latest figures from Halifax, which showed UK house prices fell for the first time in more than a year in July 2022. Similarly, new data from RICS indicated that one in four property professionals saw a fall in new buyer enquiries during July - this was the third consecutive month in which a decline was reported.

The cost of living crisis is undoubtedly a major factor behind this trend, and it’s an issue that’s having a significant impact on other aspects of the mortgage market too. UK Finance, for instance, has warned that “early signs of pressure” on household finances could lead to mortgage arrears going up, and therefore advised customers who are experiencing financial problems to get in touch with their lender as soon as possible.

These are conditions that we’re not all used to, from intermediaries and lenders to prospective house buyers and existing mortgage holders.

So as activity in the market falls and consumer confidence wanes, it’s more important than ever for brokers to adapt to the changing operating environment and make sure they’re adding genuine value to their clients.

What brokers can do

The first step brokers can take to respond to this new environment is identify and address any gaps in their in-house skills and expertise. This could involve hiring in-house specialists in certain areas, or alternatively, building relationships with external advisors and outsourcing some client work to them when necessary.

This could be crucial as many clients are presenting with highly specific needs and circumstances, such as buy-to-let investors.

Many landlords will currently be wondering how to make the most of their investment in a climate of rising interest rates and renters becoming increasingly concerned about how they will pay their rent.

At the same time, some are becoming jittery and thinking of selling at least some of their rental properties. As figures from HomeLet show, around one in five landlords are looking to sell up some or all of their buy-to-let portfolios, with those in London being particularly keen to sell up.

Landlords are a good example of specific segments of the market with their own unique needs and circumstances, requiring tailored advice, insight and understanding.

Another good example are those people who have opted to delay selling up and moving and are instead concentrating on upgrading their existing property. 

By identifying these groups and building a proposition that can adequately meet their needs and goals, brokerages could be in a strong position to withstand the current crisis and enhance their reputation in the process.

However, there’s little or no point in zeroing in on particular areas of specialism if the wider marketplace doesn’t know about it, so marketing will be crucial. (Watch our Marketing Masterclass Part 1 and Part 2 to learn more).

After building an offering for these groups, brokerages must concentrate on promoting their specialist services to consumers, so people recognise the company brand, view them as experts in a certain field, and understand what help they can provide.

Focusing on a specialism is only one approach, though; another approach could be to provide more holistic financial advice on financial issues other than mortgages, such as critical illness insurance and income protection.

The current economic climate could give brokers an opportunity to position themselves as an alternative to banks for financial advice, and the go-to place for guidance on how to withstand the cost of living crisis.

Again though, this will depend on having the right expertise in-house, or a network of specialists a client can be referred to if it’s appropriate to do so.

As you’ll almost certainly know by now, the Financial Conduct Authority’s new Consumer Duty, which means communication must be clearer throughout the advice process, is due to be implemented in April 2023.

Brokers should therefore spend the next few months making sure that they are fully compliant with its demands, putting their customers’ needs first and meeting higher standards of consumer protection.

Adapting to regulatory changes can be difficult, but if anything, the Consumer Duty highlights issues that every broker should already be prioritising, as the need to add and demonstrate the value they offer is perhaps stronger now than ever before.