Mortgages

147 | Challenges of today’s mortgage adviser: how to keep up in the market | CeMAP TV

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Tutors:

  • Michael Nicholls, Relationship Director, The London Institute of Banking & Finance
  • Simon Broadley, Managing Director, TenetLime

Learning outcomes:

  1. How today’s mortgage market stands and what is expected of mortgage advisers
  2. Why CeMAP Professional is needed in today’s mortgage market
  3. The advantages of additional voluntary qualifications for mortgage advisers

Channel

Mortgages
PRESENTER: Hello and welcome. You’re watching CeMAP TV with me Jenny Ellis. And this is the first in a series of programmes that’s going to be looking at the mortgage market. But today we’re going to be looking at CeMAP Professional: what exactly is it and why is it needed? I’ve got two experts with me today to discuss, let me introduce them to you. We have Michael Nicholls, Relationship Director, London Institute of Banking and Finance, and Simon Broadly, Managing Director of TenetLime. Now there are three key learning outcomes: how today’s mortgage market stands and what’s expected of mortgage advisers; why CeMAP Professional is needed in today’s market; and the advantages of additional voluntary qualifications for mortgage advisers. So Michael first question to you, what exactly is CeMAP Professional? MICHAEL NICHOLLS: So we launched CeMAP Professional last August, and it is our recognition badge for qualified mortgage advisers who wish to maintain their mortgage knowledge through carrying out CPD throughout the year. CeMAP Professional gives them a badge, a logo, which they can use in their business stationery, in their signatures, email signatures. And they have access to CPD resources, and also it enables advisers to demonstrate their credentials to their clients. PRESENTER: But this isn’t compulsory to be a mortgage adviser, this is an additional qualification. MICHAEL NICHOLLS: Exactly yes. This is an additional recognition badge for CeMAP qualified advisers who wish to demonstrate that they are actually keeping up to date with their skills and knowledge of the mortgage industry, even though there’s not a regulatory requirement. PRESENTER: So then how has CeMAP Pro developed from CeMAP? MICHAEL NICHOLLS: So CeMAP is the level 3 regulatory qualification, which people take to become a qualified mortgage adviser. It’s actually been around since before mortgage regulations, so pre-2004, and we’ve actually had over 100,000 people actually complete this qualification. So that tells you about the brand awareness and the British love of property, and everybody wanting to go into that industry. So CeMAP has developed over the years. We now deliver it in a variety of different means. We have online resources. It’s delivered through training companies, even some schools and colleges are delivering it, as well as through employers that offer it to their staff as a means of becoming qualified. PRESENTER: And the mortgage market is constantly evolving, so how does CeMAP Pro keep up to date? Does it constantly evolve alongside it? MICHAEL NICHOLLS: Yes, the Financial Conduct Authority has exam standards for mortgage advisers, as it does for any other regulated advice, whether it be pensions, investments. So the first thing we have to do is make sure CeMAP reflects that FCA exam standard. We review the syllabus at least once a year. Obviously it’s updated every time there’s budget changes, legislation changes; for instance stamp duty levels, things like that. So we constantly update the materials through the year, and obviously let students know which version of the materials they’ll actually be examining and being examined on when they take their exam. PRESENTER: And just to give me a taster, what sort of things are covered, is it really the entire broad mortgage market? MICHAEL NICHOLLS: Well it’s interesting, because CeMAP has quite a high brand awareness within the financial services industry. It’s often the initial exam that somebody who’s entering the industry for the first time wants to take. So they may not actually have a long term view of becoming a mortgage adviser, but CeMAP is that stepping stone to just learn about the industry. So the structure of CeMAP is very much in three parts, so there’s three different exams within the overall qualification. The first one is very much around the financial services industry generally, about products, about legislation, about the structure of the industry. So it’s quite a generic introduction for somebody who is new to the industry. The second part is more practical around the application process for mortgages, about law, legislation, property legislation, and the final part is the examination around more soft skills in the advice process and actually dealing with client scenarios. So that’s really putting into practice what the student learns in the initial part of the qualification. PRESENTER: And, Simon, I saw you nodding your head. What’s been your experience with CeMAP and CeMAP Pro? SIMON BROADLEY: I think I’d echo exactly what was said there that the awareness in the industry and that term of a stepping stone as the initial professional qualification for somebody that’s looking to come into the FS industry is certainly something that I’ve seen amongst our members, and in previous roles I’ve had within the industry. And I think anything that we can do as an industry to continue to cultivate that level of professionalism, and that level of wanting to better ourselves as professionals in this industry for the benefit of our end customer, then I think that can only be a good thing. PRESENTER: So let’s look at the market now for mortgage advice. How has it changed and what’s really expected of mortgage advisers today? SIMON BROADLEY: It’s changed hugely, it’s often said. But the pace with which things have moved, certainly in the last five years, has been phenomenal. The first thing really I would say is the level of professionalism and the level of scrutiny, both from the perspective of the regulator and the end consumer on the behaviour of advisers, is greater than it’s ever been, the focus on competence of advisers, the focus on the quality of the advice. And then finally are those advisers and is that process driving the right consumer outcome? That focus has never been as great as it is today. The second area has been the shift from a lender and a product provider perspective away from the direct distribution channel into intermediated sales. I personally don’t think that will change back; I think intermediary sales is here to stay for a little while. Why that’s been positive is that it’s resulted in those lenders who previously would have invested their time and their effort in their own sales force, in their own branch network, diverting that focus through to how can they engage with brokers? How can they support brokers and how can they help develop the skills of brokers, which again can only be a good thing for members that, customers that have advice, receive advice and members that have CeMAP. And then the final piece really where I think we’ve got a little bit of room to grow is technology. I think when you look across at other industries we’re not as evolved, or we haven’t embraced technology to the extent we perhaps could and should. And that puts a greater onus on the end adviser to hold it all together. But it would be interesting to see how the new market entrants from the fintech space and things like open banking cannot replace what an adviser has done for many years, but supplement it and support it. So they can spend more time facing their customers, rather than pushing paper. PRESENTER: OK. So you mentioned brokers, so what sort of concerns are you hearing from that part of the market? SIMON BROADLEY: I would say probably the biggest concern or challenge is time, is time management. I’ve got an awful lot of respect for how brokers work on a day-to-day basis. That it’s a constant juggling act between meeting with their customers, delivering their expectations, but also juggling with technology, sourcing systems and various other bits and pieces, as well as keeping abreast of regulatory changes and the ever evolving product landscape. And that’s where we as a network hope we can add value. That we take the sting out of some of that and we can simplify those changes, and break them down into bite sized chunks and help our members through that learning process so that they remain up to pace with how the market’s evolving. PRESENTER: A lot of emphasis has been put on the mortgage market, and then we’ve had the Mortgage Market Review. Why now, why has this come out now? SIMON BROADLEY: So MMR was back in 2014, and again back to the pace with which the market’s evolving, I think it’s right that the regulatory has now said OK we’re three, four, five years into that now, let’s take stock of how the market has adapted and responded to that change: is it driving the right outcomes that it was seeking to do in the first instance? And I’m led to believe that the findings from that will be due any day now. Really the focus has been about that end consumer, and ensuring that they are furnished with the facts and the support to allow them to make an informed decision. Now that might be an informed decision on selecting a broker. It might be an informed decision on whether a product is suitable for them, or which direction to take their enquiry. But I think again it’s very encouraging that the regulator’s looking at the end consumer and understanding how can we make their lives simpler. What I would temper that with is my personal hope is that whatever the outcomes are that they’re balanced and that they reflect what we have is currently a very well-functioning mortgage advice market. Yes, there’s always room to improve outcomes, but relative to where we’ve been five, 10, 15 years ago, we’re in sound health. PRESENTER: And we’re actually going to have a video on the Mortgage Market Review, so do keep an eye on the channel. Well now let’s look at CeMAP Pro in a regulatory environment, and what’s required from advisers from the FCA Michael? MICHAEL NICHOLLS: Well interestingly in the mortgage industry the only regulatory requirement for a mortgage adviser is to have passed a level 3 mortgage qualification. That has been refined recently. The Insurance Distribution Directive, which came in last year for insurance advice that may be given by mortgage advisers, has brought in the requirement for 15 hours of CPD a year – which again has dovetailed quite nicely with the launch of CeMAP Professional, because that will be some of the CPD that advisers will have access to. But I think it’s interesting that unlike financial advisers who are required to provide a statement of professional standing once a year, we now have two areas of the regulated industry which are now requiring some element of CPD, but mortgages have not fallen into that space. So, again, with CeMAP Professional in mind that may be something that will develop and certainly improve standards. PRESENTER: Why do you think it’s been left out of the regulatory requirements? Do you think this is going to change soon? SIMON BROADLEY: I think there’s a distinct possibility it will change. We as a group, we have an investment network as well as the TenetLime mortgage network. And you stand back from that, and you look at the scrutiny and the expectations that are placed on an investment pension adviser relative to that of a mortgage and protection adviser, and there is a gap emerging. I think the move by the regulator with IDD, the Insurance Distribution Directive, was a good one. And certainly my experience from speaking to our members is that that was very well received. They appreciate that infrastructure. There is a craving for them to develop their learning and understanding. It will be interesting to see over the next couple of years whether that then moves into the mortgage space, and that’s where again CeMAP Pro should hopefully have a part to play. MICHAEL NICHOLLS: I think also an interesting statistic is that 65% of mortgages arranged now in this country are actually arranged by an adviser or a broker. So that I’m sure will be picked up as time goes on looking at how to regulate and raise standards. Because, as Simon said, the onus or the emphasis is now on advisers to create, actually giving that advice; prior to that is was more of an even distribution channel. SIMON BROADLEY: And I don’t think we should underestimate the comfort that advisers take in that kind of infrastructure. They genuinely want to do the right thing by their customers. They’ve built a brand for themselves. So anything that goes towards securing the competence of that adviser, and maintaining that experience for the end customer and the quality of the advice, they’re really craving that. And that was the response that we got from our members from the Insurance Distribution Directive. PRESENTER: And I imagine as Michael said that mortgage advisers only need to reach level 3 you said. And they could have qualified decades ago, 20 years ago, so does that create issues? SIMON BROADLEY: Hugely. I mean whether you look over the last two years, last five years, last 10 years, the market has moved hugely: new product manufacturers, new product styles, new distribution channels, a new regulatory infrastructure; quite literally one year to the next there are some kind of fundamental changes to the environment that we work in. So I do have a lot of sympathy and understanding and empathy for those advisers that perhaps qualified 10/15 years ago, even immediately after the MCOB came in in October 2004, and the market that we work in now is a very different one. Consumers’ needs and expectations are different, and the needs and expectations of the regulator again are very different to what they were five years ago. PRESENTER: But certainly at the moment the onus is definitely on them for them to keep updating their skills, and again this is where CeMAP Pro comes in. So then what do you think is really required of the mortgage adviser today, what’s their role? SIMON BROADLEY: Their role is, I think back to what I said earlier about the time management skills, and customer service expectations placed on an adviser I don’t think can be overestimated. They are expected to be from, from a consumer’s perspective their one-to-one contact, the person that’s dealing with their home, their future, their investment. So they’re expected to be on-call literally 24/7, and almost assume that that’s the only case that they’re progressing. MICHAEL NICHOLLS: I think that’s not changed over, the one thing as far as from the consumer’s point of view that hasn’t changed, in that the adviser’s role is to help them through the biggest financial decision of their life. And as Simon said it’s from the beginning of that process to the end when they get the keys to the property, or whether it’s remortgaging to get a better deal, and actually cut through all the jargon and the different products that are out there. So I think that’s still the same. But, as you said, Simon, it’s a lot more intensive and difficult than it was before. SIMON BROADLEY: And those advisers are in the industry, in that role because they’re people people. They want to be spending time with those end customers. So what we need to do as an industry and as participants and as networks is try to create a framework that emphasises that, and creates the infrastructure and the support that they maximise their time with their customers. PRESENTER: So then for mortgage advisers who do go that extra mile and do CeMAP Pro, does that really put them at an advantage against their peers who maybe don’t do it? MICHAEL NICHOLLS: I think it can strike up a discussion with a client or with potential employers or peers within the industry as to why one person has got this designation and perhaps other people haven’t. It provokes the discussion around explaining well I’m actually doing CPD on a regular basis, you know, 15 hours is what we require to actually register for CeMAP Professional, which is an hour a month. So it’s not a hugely onerous commitment. But it does provoke that discussion about there isn’t a lot of mortgage-related CeMAP CPD material out there. So we’re hoping to generate more input from providers, from networks, from authors, from financial services industry journalists to actually provide more resource in that area, which we can then provide through CeMAP Professional. PRESENTER: And also doing CeMAP Professional means they’ll be put on the professional services register, just explain to me what exactly this is, what it entails? MICHAEL NICHOLLS: Yes. Simon alluded to it earlier in that the FCA likes registers. It recently, just a week or so announced that it is actually going to create a register next year for all types of advisers, whether it be financial advisers or mortgage advisers. And we’ve had our own register for some time, which is accessible through our website. It’s publicly searchable. Clients, employers and advisers can actually check that they’re on there. They can also demonstrate their qualifications on that site. And also it confirms that the people that are on it are committing to CPD each year. So we don’t know of any other professional bodies that actually have that facility. So we’re quite pleased that that’s actually out there and will be part of the CeMAP Professional brand. PRESENTER: So, Simon, let’s move on to professional indemnity insurance. So what’s the market like for that at the moment? SIMON BROADLEY: It’s definitely tightening. Again the regulatory scrutiny in this area, the focus on consumer outcomes is having a knock-on effect on PI insurance, and also the risk appetite of insurers. The investment market, naturally the focus on pension transfers over the last 12/18 months has really sharpened the pricing. There’s an ever decreasing pool of underwriters in that PI market, which does make it problematic. At the moment from a mortgage perspective it’s typically that the claims history and the product type, and the type of service that that firm provides that will be the overriding factors that determine the premiums. But it will be interesting in this context to see if CPD comes more to the fore, and professional qualifications come more to the fore in the mortgage and protection market, whether that then becomes an underwriting factor that is taken into account by the insurers. PRESENTER: Well, yes, because I was going to ask if you have more qualifications such as CeMAP Pro so that will impact your PI rating. SIMON BROADLEY: At the moment not overly so, but I think it will be something that underwriters would be willing and looking to take into account once the evidence is there that shows the outcomes, the level of risk associated with an adviser that has a particular qualification or accreditation, how that differs to somebody that doesn’t. PRESENTER: So let’s look at DR versus AR, what are the advantages of both would you say? SIMON BROADLEY: Interesting question. It really does come down to the adviser’s own risk appetite and where they want to put their focus. I could argue the case for an individual or a firm wanting to be directly authorised; I could argue the case for them wanting to be an appointed representative. It really does boil down to where they want to focus their time as a business person and as a leadership team. And it really does differ from firm to firm, from individual to individual. There are those that really want to take ownership for the risk infrastructure, the compliance infrastructure of their business. Others like the idea of essentially outsourcing that to somebody like a network, to allow them to spend their time building their business. But that is one area where more and more now what we’re seeing, what I’m seeing is if you’re an appointed representative of a network or a greater body or entity, there’s now a growing expectation that that network brings more to the table than just compliance support. It’s about helping them build their business, and working with them, and the economies of scale that we would have to create a plan for them to realise the potential within their business. It’s not just simply about providing an array of compliance services. PRESENTER: So, from a network point of view, what are the key factors or the key challenges facing brokers that you’re hearing about? SIMON BROADLEY: Again I would say the time factor. They’re all incredibly stretched in terms of their focus. They’re flipping from understanding regulatory changes and product changes, to working with consumers, to looking at systems, and understanding how the market’s evolving. So that I think for a little while will continue to be a real strain and challenge for brokers and advisers. I think as an industry and as participants we’ve got a role to play in simplifying that. And also from the brokers that I speak to there’s a real desire to build a five or a 10-year plan for themselves. They’ve invested time, effort, money into building their business, their reputation. They want support with understanding how that’s going to play out over the next five, 10 years. So I think that again will be an area of increased focus and expectation from brokers over the next few years. PRESENTER: And attract, oh sorry. MICHAEL NICHOLLS: I was going to say I think the choice between DA and AR, generally for a one man band firm AR would be more attractive, purely because of the, I guess it’s the safety in numbers, the support in terms of compliance, system support, business development. SIMON BROADLEY: Economies of scale. MICHAEL NICHOLLS: Yes, economies of scale. So our experience is generally, this is not a hard and fast rule because there are small firms that are directly authorised, but I think the biggest issue is generally the compliance issue is less of a worry if you have that comfort of being an appointed representative, because the firm takes the principal responsibility for your advice essentially. So that would be attractive for, because there is just so much to actually keep up to date with in the industry and for a small firm that can be difficult. PRESENTER: And just staying with the challenges, is another one seeing new talent coming into the industry, is that a problem that you’re seeing? SIMON BROADLEY: Definitely. And perhaps where historically into the mortgage market the new talent would in some instances come from what would be the historic bank assurance market, the banks and the building societies growing their own advisers for their own purposes, and then they spread their wings and look to go into the independent space, that has been quashed quite a bit in recent years because of the shift from lenders moving from a direct distribution model to an intermediated model. So it’s definitely a factor for networks. It’s definitely a factor and a concern for providers, but it’s also a factor for principals of businesses: how do they bring through the next wave of talent to build on the business that they’ve created for themselves? MICHAEL NICHOLLS: And it’s interesting, because our stats show that the average age of somebody taking our CeMAP qualification, something like 40% actually fall in the 21 to 30 age group. So it’s interesting that you think well where are these people, where are their career paths going? Is it in apprenticeships, is it joining existing firms? But for us that’s great, because it’s a young audience coming to us for the first time. But it’s interesting in that in the mortgage industry there are a lot of people from a younger age going into that. PRESENTER: So then what would you say are the other advantages that we haven’t covered for CeMAP Professional? MICHAEL NICHOLLS: So CeMAP Professional for us is recognising, as we said, advisers who are willing to do extra, to really just evidence the CPD that they carry out through the year. That’s not to say that they’re not already doing CPD, but similarly to financial advisers post the Retail Distribution Review, who probably were also doing CPD but weren’t necessarily recording it regularly or efficiently. Hopefully what we’re pushing forward in the mortgage industry is giving mortgage advisers the ability to raise that bar. And to actually do that before the regulator actually says it must be done. Similarly the advantage also of CeMAP Professional is that you can actually aspire to do a level 4 qualification. So there is a CeMAP diploma which you can actually take, which as Simon says now reflects what the mortgage market looks like now in terms of the new buy to let regulations, second homes, overseas properties, high net worth customers; all of those kind of things have changed the industry so much. PRESENTER: Later in life lending. MICHAEL NICHOLLS: Later life lending. I was going to say our equity release qualification has actually, we’ve had 68% more registrations in the last 12 months, so that tells you what’s happening in that industry particularly, but yes, and the CPD we offer will also incorporate later life material as well. PRESENTER: So you mentioned earlier that it takes, was it an hour a week, an hour a month, so I think what I’m trying to ask is how much of a commitment is doing CeMAP Professional? MICHAEL NICHOLLS: So it literally takes minutes to register online. You can put in your details, and we’ll tell you whether you’re eligible. So the only eligibility is that you commit to having carried out 15 hours CPD in the year that you register and that you will commit to do a further 15 years in the subsequent year. PRESENTER: And you can record that on your website. MICHAEL NICHOLLS: Yes. And we will provide the CPD resources, learning materials. They will also have access to CeMAP learning materials to refresh that knowledge that they may, as you said earlier, have done many years ago like me. And they, as well as being able to demonstrate the CeMAP Professional logo to evidence what they’re actually doing, they can log their CPD as they go through the year automatically as they log into things like CeMAP TV, which we’re here today for. And it will very much in an automated way for them. PRESENTER: Well unfortunately we are almost out of time, so I’m now going to ask for your final thoughts, what you’d like our viewers to take away from this session. So Michael why don’t you go first? MICHAEL NICHOLLS: Yes, so I think it’s still a great time to be a mortgage adviser in the industry. I think the profile of the industry is good, the reputation of mortgage advisers has probably never been as high as it is now. CeMAP Professional and CeMAP Advanced Professional for people who want to go forward and do a level 4 qualification, we see as being the way that mortgage advisers can demonstrate that they’re going above and beyond the minimum regulatory requirement, which is the level 3 qualification. PRESENTER: And Simon? SIMON BROADLEY: We’ve discussed the regulator may well look again at the professional standards and the CPD requirements of our industry. For me CeMAP Pro is an opportunity for brokers, advisers and firms to get ahead of the curve. And anything that goes to increase the pride, the professionalism and the reputation of brokers and advisers for me can only be a good thing. PRESENTER: Well we’re going to have programmes every quarter discussing the latest news on what’s happening in the mortgage market, so do keep an eye out on that on CeMAP TV. So Simon, Michael, thanks for joining us today. BOTH: Thank you. PRESENTER: By the end of this session you’ll be able to understand and describe how today’s mortgage market stands and what’s expected of mortgage advisers; why CeMAP Professional is needed in today’s mortgage market; and the advantages of additional voluntary qualifications for mortgage advisers.