Why you should encourage clients to be open about their finances

Inflation stood at a 41-year high of 11.1 per cent last October, and even though it’s fallen slightly in the last few months, it remains stubbornly high - and well above the Bank of England’s target of two per cent.

At the same time, wages are going up at a considerably slower pace, and the UK tax burden is currently at a 70-year high.

It’s therefore no surprise that many households are finding it difficult to make their sums add up - and that’s where you can help.

As a mortgage broker, you’re in a valuable position where your clients already rely on you for advice and your expertise, which makes you ideally placed to help them through this stressful period.

Perhaps the best piece of advice you can possibly give is that they need to change their mindset regarding their finances.

Specifically, it’s important that people be open with their partner, friends and family when it’s appropriate to do so.

Money can often be a taboo subject that we don’t like to discuss, but if you fail to engage with the topic, it’s easy to make bad decisions and look the other way when problems are mounting up.

But if a person is open about their finances, they’ll be more likely to:

• Spend time making clear financial plans, based on specific goals and targets
• Manage and clear any debts
• Identify potential problems before they become more serious and difficult to manage
• Make sure they’re on track to achieve their targets, and make changes if they’re not on course to get to where they want to be

It’s also important for a person to establish if their financial and lifestyle goals are compatible with those of their partner. 

Otherwise, two people could find themselves at crossed purposes, when they could in fact be working towards jointly-held ambitions and objectives.

Not having this conversation can store up lots of trouble for the future, when they could simply have been open and transparent early on.

A further benefit of being open about finances is that it helps clients recognise successes and accomplishments.

If they’ve achieved a milestone such as paying off half of their mortgage, that’s worth marking and acknowledging - and can make them more confident managing their money going forwards.

Ultimately, if a person is open about their finances, they’re in a stronger position to avoid problems, such as getting caught up in a cycle of debt that they struggle to get out of.

Encourage clients to build a financial plan

This should be a straightforward overview of their costs and income, reflecting everything from their mortgage payments and investments to pension payments and existing debts.

When a client has a clear idea of what’s coming in and out, they’ll be in a much better position to identify where savings can be made, how much money can realistically be put aside for emergencies and whether they’re in a position to achieve wider financial goals.

Remind clients that a financial plan should be a live document, which means it has to be reviewed and updated on a regular basis so it remains fit for purpose.

That can also help you as a broker offer the right advice on mortgages, as it’s important for you to know they have the means to make repayments without suffering elsewhere.

Mortgage holidays for eligible clients

If you feel that a client is worried about the state of their finances, it could be worth pointing them towards options that could help. For example, they might be eligible for a mortgage holiday and use the money saved on their mortgage repayments to pay off other debts. However, you should only suggest this if it’s absolutely necessary, as this can be a costly option in the long term.

Clients may approach you asking about this option, so make sure you’re familiar with the latest rules, terms and requirements, so you can answer their questions accurately and comprehensively.

Check in with your clients

Even if your clients don’t directly approach you asking about cost of living issues, that doesn’t mean you can’t proactively get in touch with them first. A regular phone call or email, perhaps pointing them to resources about how to save money, could make a huge difference to your clients, both financially and psychologically.

So even if they decide they don’t need to speak to you about cost of living pressures, your clients will know that you are there for them if they need you.

Link to The Brokers' Guide to Customer Experience