148 | Mortgage Advice Market | CeMAP TV

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  • Michael Nicholls, Relationship Director, The London Institute of Banking & Finance
  • Andy Philo, Director of Strategic Partnerships and Employed Distribution, Vitality
  • Andrew Montlake, Director, Coreco

Learning outcomes:

  1. How the mortgage market has developed in 2019
  2. How the mortgage protection market stands today
  3. When mortgage advisers should hand over the role of adviser


PRESENTER: Hello and welcome. You’re watching CeMAP TV with me Jenny Ellis, and this is the second in the series on the mortgage advice market. And today we’re going to be giving you an overview of what’s been happening since the start of 2019. And joining me today to discuss I have three experts. They are Michael Nicholls, Relationship Director at the London Institute of Banking and finance; Andy Philo, Director of Strategic Partnerships and Employed Distribution, Vitality; and joining us down the line is Andrew Montlake, Brand Director at Coreco. Now there are three key learning outcomes: how the mortgage market has developed in 2019; how the mortgage protection market stands today; and when mortgage advisers should hand over the role of adviser. But first let’s go over to Andrew to get an overview of the market. So Andrew what’s been happening since the start of 2019? ANDREW MONTLAKE: Well I think actually the year started off OK. January was very, there was lots of activity in January. We’ve really seen first time buyers starting to come back into the market. They’re buoyed by the fact that interest rates are very low, the cost of renting is still pretty high, and actually they’ve worked out that they can pay less on a mortgage in a lot of cases than they can on renting. And also the jobs market is pretty good where they’re concerned. So we’ve seen first time buyer activity come back, re-mortgages are still very strong, and actually what we’re starting to see, despite a dip in February, we’re starting to see a little bit of release of pent-up demand that has been there in the background for some time. Everyone’s been worrying about Brexit, everyone’s been putting their lives on hold, and the fundamentals of why people move are starting to boil over. So people still want to move out of home, they still want to build a family, so they need a family home. They’re still sadly getting divorced, so they need property that way. And if they do have a family they still want to move into a school catchment area. So that type of demand is starting to bubble over again. PRESENTER: So tell me more about who’s taking out mortgages, and also the expectations of different generations, how do they change things? ANDREW MONTLAKE: There’s a little bit of the mantra it’s the same as it ever was. We still see that fundamentally people want to own their own home. It’s just that they’re starting later because of deposit issues. We’re starting to see a lot of first time buyers team up with friends or family to try and get onto the housing ladder, because that increases their capacity. And some people are missing out a stage altogether. So they’re going straight from renting, because they’re renting longer and later, to actually going straight into the family home and missing out that first stage of the process. PRESENTER: Looking at later in life lending and mortgages, what issues do advisers face here? ANDREW MONTLAKE: I think the main issue for advisers for consistency of advice. You have some advisers who just advise on the mainstream market, and maybe that takes into account retirement interest only mortgages, which are the new breed of mortgages coming in. And some that just advise on equity release. And what we need actually is consistency of approach there. It needs to be a joint effort. People need to take into account all sides of the situation. They need to be advised on both sides of that. And then also they need a more holistic approach to take into account pension provision and inheritance tax etc. So that’s a real, the real danger in this market is inconsistency of advice between advisers. PRESENTER: And when it comes to mortgage protection, what are you seeing, and what would you say are the barriers? ANDREW MONTLAKE: Mortgage protection has always been really difficult, especially in certain areas. It does vary from region to region. In London especially the challenges are around cost. It is around a lot of people think ah do you know what, I’m OK, I’m covered at work, so I don’t need any more benefits. For me I think the industry has to make a fundamental change here. I think the very nature of the products need to change. Some providers are starting down that route, so there’s some really good product offerings coming into play. But I think cost, marketing, the products themselves, the way they’re sold, all of this needs to change really to try and engage with a whole new generation of people who actually just don’t think it’s important. PRESENTER: Moving onto equity release, and what’s the size of the market, and what’s driving it in 2019? ANDREW MONTLAKE: The biggest driver is just really the ageing population, and a lot more advisers are getting involved in this area of the market, because they’re getting demand for it. If I look at my own client bag now, I started 25 years ago, my clients are starting to get to that level where they’re thinking do you know what, I am going to continue working, I don’t want to sell my property, and I want to stay in it for longer, and I want to look at other options. So equity release I think is still a really big piece of the market. It’s going to continue to grow. We just have to make sure that the right people are giving the right advice around it. PRESENTER: And let’s move onto buy to let, what’s new here? ANDREW MONTLAKE: Buy to let has seen a fundamental change. We’ve really seen the tax changes brought in a while ago have a massive effect. So the amateur landlords are now, who maybe had one or two properties, they’re now stopping or they’re leaving the market, and really it’s a playground of the professionals now. People who are getting proper tax advice, who are maybe purchasing new properties in a limited company name, they’re the ones making money. And also a lot of them now are either relocating from London and looking up North, maybe university towns, or they’re going into more commercially minded type options. Maybe HMOs or even some kind of commercial developments, because that’s where they feel the market is. PRESENTER: Well finally looking to the future and anything to be aware of on the horizon. ANDREW MONTLAKE: I actually think the mortgage market is in a good place. I think lenders are willing to lend, they want to lend, they have to lend. The big issue for me is potentially around some kind of regulation that comes into play. The FCA are looking at their Competition Review, we’re not sure how that’s going to land, and what we don’t need now is any more unnecessary regulation, and I think that’s the biggest threat for 2019. PRESENTER: Andrew, thank you. Well now let’s turn to Andy and Michael to get their thoughts. And Andrew, I want to start with the mortgage protection market, so looking at some stats we’ve got recent figures show that there were 11.1 mortgages arranged in the UK, around three million households have no life insurance protection cover in place. So how much more needs to be done to highlight the importance of protection? ANDY PHILO: Well I think first of all if you look at the size of the protection market, it’s in the region of £700-750 million worth of business in premium income terms. If you take out the single, the direct business, it’s probably in the region of around £500 million, which is the intermediary sector, which is the sector we’re particularly interested in. There’s been moderate growth across that business, across that market for the last few years, probably in the region of 3 to 7% in terms of premium income. But there has been an increase in the number of protection sales overall of around about 11 or 12%. But the stat you mention is a relatively poor one, with around about 27% of mortgages having no protection policy. It’s really quite a weak performance by the industry, and it’s something we do need to address. PRESENTER: Well one of the things we heard Andrew discussing earlier is the fact that people could be put off by mortgage protection (a) because of the cost, and also (b) because they think they’re covered at work in terms of income protection, that sort of thing. So in reality how does it work when it comes to cost and accessibility? ANDY PHILO: So the cost is something that comes up as a perception quite often from clients, when in reality the cost of protection is relatively small for the value which you can actually potentially get or receive, whether it’s through life insurance, whether it’s through critical illness or income protection. So cost is not generally a barrier when it’s explained at the right point and with the right rationale by an adviser. PRESENTER: And I imagine when it comes to people thinking they’re already covered at work, people tend to forget that they might lose their jobs, that maybe their terms of employment might change, so do you think if somebody is already covered at work they already have income protection, many people in the city probably do. Do you think then they still do need to think about mortgage protection, or do you think they are covered? ANDY PHILO: Absolutely, again it’s a misconception that many people have adequate cover through their employer. I was looking at a few stats just recently, and only 14% of us will have sick pay that goes for longer than six months, which is clearly not that adequate cover. And only 3% will have cover that goes beyond a year. So it really is important, and it’s important for the adviser to talk about income protection and life cover at the earlier opportunity. That is often difficult if they’re going through a house buying process, because we all know that’s a long and arduous process, and can take two or three hours, even longer than that. So it takes quite a brave adviser to tack on the end of that a protection discussion, particularly when it can be perceived as quite a negative discussion. MICHAEL NICHOLLS: I think one of the key roles of particularly mortgage advisers is proving affordability for a mortgage. And part of that process in the fact find stage is actually to work out someone’s budget. Now obviously protection should form part of that discussion as well. So I think as Andy said it’s very much about where you position that discussion. If you position the discussion when they’re just about the complete, or they’ve already completed, it’s going to be kind of put to one side, or it’s going to be easier to raise objections. So I think it’s very much about if you can actually show affordability in the initial stages both of the mortgage and for any necessary protection, I think it’s all about where it can be positioned. PRESENTER: And how much onus do you think is on the mortgage adviser to really push mortgage protection? Because I suppose a lot of people think well this is something maybe I can take out in six months’ time, a year when I’m settled in the house and I’ve done my renovations and that sort of thing. They don’t think it’s as pressing perhaps as perhaps it is. ANDY PHILO: No, I do understand that. I think the adviser has a professional and a moral responsibility to make sure that that client is protected. I mean quite obviously it’s quite often the largest asset they’re going to be buying. It’s their home. It’s where they’re going to live. It’s where they’re going to spend the next X number of years. So it’s critically important that the client maintains that house in the event of illness or disability or sickness, or if in the event of death that the loan is repaid and the house can be gifted to the estate. It’s critically important. But it is down to the adviser to do that, and it’s important for us as protection providers to give them the tools to be able to do that. So there’s a lot of things we can do. I mean one of the things we talked about today is just a few stats, and I think I’m a bit old school in that stats are important quite obviously, but I tend to try and paint pictures. I was at a conference not too long ago, it was an industry conference. I’m sitting there, and there’s a chap on the stage talking about the importance of protection. And he was talking about how we all insure our assets or our car, our house, our watches, our phones, cameras etc., but we don’t insure ourselves. And the analogy he gave, quite a simple one, and it is a bit old school but it really resonated, was that if you had a machine in the corner of your room at home, and every year it pumped out £30,000, which is equivalent to your salary for example, would you insure it? And of course you would. But inevitably most people would say well I don’t want to talk about that, and they won’t insure it. But the reality is you are that machine, you are that asset, you are that individual that’s going to be paying that mortgage. So whatever your income is you’d insure that machine. And I was sitting there, I was sitting next to a guy who’s, I’d call him an industry leader actually, and he started writing this down. And I gave him a nudge and said have you never heard that before? And he’s actually just forgotten it. It’s an old idea but very simple. So I think if advisers, and we as protection providers can help advisers to paint stories like that, positive stories, but use that rather than scaring them with facts and stats that are going to be quite daunting for them to understand, at a time when they’re really excited about getting a property. PRESENTER: Well, looking at, not to scare viewers but looking at why it’s needed, what happens if they don’t have mortgage protection and they can’t pay, how long does it take for them to lose the house? Because in effect that’s what will happen if they can’t work, they can’t pay the mortgage. ANDY PHILO: I mean it does depend from lender to lender. And I’m probably not best placed to answer how long it would take for somebody to have their property repossessed. I mean my job and my role at Vitality is to make sure as many customers and clients and families are protected so that they don’t experience that. But the reality is houses do get repossessed, families do lose their homes because clients have not been adequately covered. PRESENTER: So, Michael, moving onto you, and in the first session we touched on later in life lending mortgages, what is the latest on this, the latest issues? MICHAEL NICHOLLS: I think not surprisingly the later life lending market has grown, continued to grow this year. There are certainly more variety of products out there. We’ve seen the FCA encouraging lenders to offer what we call retirement interest only mortgages. And we also know that with an ageing population there will be thousands of people every year whose interest only mortgage will mature, for which they have no repayment vehicle. So that whole market is continuing to expand as we’ve seen an increase in people becoming qualified and giving equity release advice. PRESENTER: Andrew Montlake said earlier that consistency of advice is actually an issue, is this something you’re seeing? MICHAEL NICHOLLS: I think it’s interesting that whilst we’ve seen an increase in people becoming qualified in giving particularly equity release advice, that there’s also the issue of later life advice. And that could just be around the mortgage, but there may be other issues around retirement and later life living, whether it be long-term care, pensions, investment advice as well. So I think the number of mortgage advisers who’ve diversified into equity release advice specifically is actually quite low. I think the actual figures out there are probably not more than a couple of thousand, which when you think of the growth of the industry is a bit of a contradiction. And I think what we’ve seen is consolidation of major later life equity release providers in the market. There’s been new ones joining, but we’ve seen the big players in the market grow and start to dominate I think. ANDY PHILO: Jenny, can I just come in there, because I think this is really a developing sector that later life lending and protection. We all know that we are living longer thankfully, but we are living sicker for longer. And that’s certainly an issue for society as lifestyle changes mean that we’re actually developing later life conditions that we’re living with longer. And on the protection side we’re specifically looking and have released a range of products aimed at that later life category. So things like dementia, frail care cover, looking at things that cover activities of daily living, it’s really key for us. And actually it’s really key, I think Michael mentioned the Rio mortgages, which have been declassified by the regulator now. So what we are seeing, we’re working with a number of large distributors who are actually taking that area very seriously in making sure that their advisers are properly and appropriately qualified. But the importance of protection for that later life lending is critical, because we’re seeing more and more mortgages going beyond what we would class as original or normal retirement ages, and people then having to afford those. So they do need cover throughout that period, and that’s something we’re taking very seriously. PRESENTER: That was going to be my next question. Because I imagine a lot of people when they think of mortgage protection, they’ll probably think it’s difficult to get in when it comes to later in life protection, later in life lending, because they might have more health concerns, therefore it might make it more expensive, or they might not have as long. So how does it work when it comes to later in life? ANDY PHILO: Well it is true the longer you leave it to buy the policy, the more expensive it can become, and future health will make a difference to the premiums, which is why we always encourage individuals to buy the policy as early as possible. We know that the market offers a range of different premium types to make it affordable. One area of the market that has seen quite a boost over the years is the over-50s market, which certainly serves a place in the market. If you look at whole of life sales, the vast majority of those are effectively guaranteed benefits. They’re funeral plans that we call them in the industry. And they certainly do have a value. But we and a number of other insurers, we at Vitality believe it’s worth getting underwritten, because for the price of being underwritten you can get maybe up to four times the amount of cover that a funeral plan can give. So I think it’s important to see an adviser. I think again this is why advisers are really critical in this. If somebody’s looking to buy a protection policy, it’s really important that they see a qualified adviser to get the appropriate amount of cover. There’s a range and a raft of policies out there that cater for later life and it’s just important that they see an adviser. MICHAEL NICHOLLS: I was going to say from an education provider point of view, I think it’s interesting that there isn’t a qualification requirement to sell protection, which is interesting given the protection gap that’s out there. And we are often asked by networks and providers whether it’s feasible to develop that. So I think that’s something that we are looking at in the future. Whether that will increase sales, we’re not quite sure whether that will happen. If somebody has more knowledge and is qualified in that particular subject, does it actually mean they can sell more of it? In theory it should do, but I think everyone in the industry knows that a mortgage is a need. The life aspect or the life cover aspect to it is more of something that has to be sold. And I think that’s where mortgage advisers will tend to find it easier to move onto the next mortgage, rather than try to actually address that need. ANDY PHILO: So if I can just echo Michael’s point, the need for education is across the market. And at Vitality we’ve got a distribution team of around about 200 business consultants that work across the UK, and locally with businesses, IFAs, restricted advisers across the market to help them to understand our product range and across the markets offering. So that’s something that we’re seeing a real benefit for, it’s the largest distribution team in the UK, specifically there to support advisers and act as business consultants. So helping them to enter into other markets, become aware of market conditions, the opportunities etc. So we’re doing some really good stuff in that place. PRESENTER: And Michael, are you finding, as Andy said, misunderstanding of products an issue for advisers? MICHAEL NICHOLLS: Yes, I think there is. I mean when we started this discussion we were talking about protecting income, particularly income protection I’m sure as Andy knows is massively undersold. And often advisers will not recommend it purely because they may not understand how it works, when actually things like family income benefit for example are very cost effective ways of protecting family against death or illness. And it’s all about education, and actually presenting those solutions to the client I think early in the advice process, but also being quite inventive with it as well. For instance mortgage protection doesn’t just have to cover the mortgage. If you have life cover, why not have life cover which is going to pay you more than the mortgage? Family income benefit will pay an annual amount to those left after the death of a loved one. So people can sometimes be fixated with a lump sum payment, as opposed to actually it would be more useful to create an income and protect that income as well. ANDY PHILO: The default product of choice is generally a level or a decreasing term insurance. It’s the quick simple offering. But you’re right the income protection sector is vastly undersold. It accounts for less than 10% of the market, and last year it grew. We’re just waiting for some new ABI data, but it grew in the region or around about 3% previous year. So it’s vastly undersold, where there is a real need for income protection. And there’s a couple of other points probably to add on that. I think it’s incumbent on advisers to talk about the full product range they have within their armoury, and the consequences of not doing that can be quite serious. We’ve had a couple of incidents just recently across the market, where one client has come back and challenged the advice 25 years later. So we’re in a very litigious society, and it’s important that everybody does absolutely the right thing of course. But if you don’t, and we’re talking about protection providers, I’m talking financial advisers, if we don’t cover off all advice possibilities we are leaving ourselves exposed. There’s another example of a client that took an adviser to FOS, the Financial Ombudsman Scheme, and basically challenged the fact that she wasn’t offered protection. And as part of the fact find I think the adviser reasonably assumed that based on her health conditions she wouldn’t get cover, so didn’t offer life cover or even give a quote. And FOS found in her favour, because she didn’t get offered a policy, wasn’t given the opportunity to even decline it. Those are two quite varying, and I’m not trying to be dramatic, but I’m trying to paint the picture that actually it’s important that we do a proper job for want of a better expression, and do that moral piece as well as that professional piece to make sure that the client’s covered. And we’re seeing it, some of the big distributors again that we’re working with are mandating the protection discussion. So giving the client the opportunity to categorically say I don’t want that cover, which is absolutely the right thing to do, and we certainly welcome that. MICHAEL NICHOLLS: And there are other countries perhaps from a different culture who we know look upon life insurance in the same way as car insurance. It is something that is mandatory, and it automatically is something they would take out when they do their mortgage. We know from some networks who specialise in areas where overseas nationals live here and buy property, and there is a different mindset about that kind of protection. And it’s interesting that they have that different outlook to us as a country. PRESENTER: So let’s move on to some other trends we’re seeing in the mortgage market at the moment, and I want to, we’ve talked about later in life lending, so let’s go to the opposite demographic, millennials, because we are seeing that first time buyers are picking up, although statistically speaking a first time buyer is in their 40s now, which isn’t classed as a millennial but hey ho. So how, Michael, are you seeing the demands of millennials differ from earlier generations? MICHAEL NICHOLLS: Well we see the age of people taking out a mortgage qualification, a large percentage are actually in the 21 to 30 age group. So that probably tells you something about the interest in property and financial services and buying property as something that young people are interested in. I think the research, Andy’s probably got some research on it, there’s lots of research out there that tell us that generally millennials are less likely than ever to follow their parents’ advice in terms of finding out where to get a mortgage from. Historically you’d go to where your parents recommended you to go, whether it be building society or to a bank. They’re more likely to be attracted to brands, more likely to be attracted to online offerings. But they have less loyalty as their parents perhaps did years ago to one particular provider. However, having said that, I think the demand for mortgage advice is as strong as ever. And again I think the research tends to say that although millennials will make use of online and digitalisation of the process. They still like that contact with a human, in terms of hand holding and explaining the more difficult concepts. So I think there’s room for all the different developments that are happening in the industry around robo advice and digitalisation, open banking, and I think millennials are a specific market that are quite happy to utilise whatever works for them. PRESENTER: And are you finding it more difficult to engage millennials than earlier generations? ANDY PHILO: I don’t think it’s more difficult, it’s just different. I’ve got two daughters that are millennials so I know first-hand just the immediacy of everything that they want on their phone. It’s they want to find out information now. They’re better educated than we were. Everything’s on the go to coin a phrase really. Talking to a broker not too long ago that 64% of his business comes from clients that are buying on a tablet or a phone. So they’re not sitting even in front of a laptop or a desktop computer, which it didn’t seem so long ago that a lot of policies were bought through that medium. We’re also seeing that they actually want to see an adviser, so they’re getting better educated. They’re then going maybe to see an adviser to check an understanding. You’re right they are very transient. I think that they’re not probably as loyal; however, they do expect loyalty from the big brands. So they’re also looking for associated benefits that they get through policies. And it’s something at Vitality we’re really keen on, is we don’t want to just provide them with a contract that says we’ll pay out a benefit in the event of an unfortunate incident or a critical issue; we actually want to try and give them some kind of reward, some kind of benefit to encourage them to engage in our proposition. So this I think is really important. So I wouldn’t see it as more difficult, I just see it as different, and we’ve got to have a different approach to it, and I think advisers choose to do the same as well. MICHAEL NICHOLLS: I think it’s interesting as well we’re seeing that for a lot of established firms they’re going down what we call the intergenerational route, whereby the initial adviser is perhaps getting advanced in years, and brings in younger members of the family, whether it’s second generation, to actually service the younger clients coming through, simply because they’re on the wavelength, they understand that kind of demographic really. So I think that’s another reason why our CeMAP population is a young group of people, which is encouraging. PRESENTER: Well something interesting that Andrew Montlake brought to my attention is the way that millennials are starting to buy houses is changing. We’re seeing that sometimes one or two can’t afford to buy a house themselves, they’re buying in groups of friends. So you have the four person mortgages that are starting to develop. When it comes to protection, does that muddy the waters at all? ANDY PHILO: I don’t think so. I think it’s, it is a developing area this: grouping individuals together to buy a property. It is still quite rare, I think, but from a protection point of view there’s quite a few pitfalls. I mean you mentioned that average home, first time buyers are now going into their 40s. The average first time buyer is around 32 I think. I saw some research recently, so that’s risen probably by about two in the last 10 years. So they are getting older. And part of that is because the deposits are getting harder to find. The average deposit is now something in the region of £30-32,000; in London just here it’s £110,000. It’s a hell of a lot of money to get together. So it makes sense for people to group together. But then this does bring some issues in terms of protection, because it might make the mortgage affordable, but then what happens if one of the individuals, the tenants actually passes away? What happens to the rest of the tenants, how do they afford to keep that mortgage? Do they have to find another individual to buy into it? Does the estate, the parents of the individual have to deal with the resolution of that? And then we would say look at things like income protection. Some of the stats I talked about earlier on around the propensity to suffer a serious illness. You’re six times more likely to suffer a serious illness before the age of 65 than you are to die. Still it’s overlooked as a product. So those products are really key I think for those groups of individuals that are buying homes together, to make sure that you’re protected. So in the event of a long-term illness or disability, you can still meet your contribution of the mortgage. PRESENTER: And is this something CeMAP is looking into, different ways of buying houses, different mortgages? MICHAEL NICHOLLS: Yes, I mean particularly for our level 4 qualification, which is available for anyone who’s got our CeMAP qualification, that very much focuses on different methods of buying, so modern methods of buying through internet auctions. It also looks at different construction types for properties. So yes we’re updating the syllabus constantly to reflect what the market looks like. PRESENTER: Well just going back to equity release, just looking at some stats, the size of the market. Equity release market has grown more than 50% in the last year alone according to Money Facts, so it’s grown significantly. So look at equity release and repayment vehicles for interest only, how have products developed, how have you seen that develop? MICHAEL NICHOLLS: Well it’s interesting because we were talking about millennials and the difficulty in getting a first time buyer onto the property ladder. And I think that in turn has fuelled the growth in later life lending, because parents and grandparents are refinancing via later life lending often to provide children and grandchildren the deposits to get onto the… PRESENTER: Bank of mum and dad. MICHAEL NICHOLLS: Classic bank of mum and dad, which I think is now the sixth biggest mortgage lender in the UK. So if it was a mortgage lender it would be number six in the charts: bank of mum and dad. So that in itself has led to a knock on effect for the later life lending market. But yes it’s developing quite quickly. The retirement interest only mortgage is an interesting scenario, because the FCA allows mortgage advisers who are not qualified in equity release to actually advise on those products. And that means that I think mortgage advisers in that area have to be very careful. And I think that probably explains why some mortgage advisers keep their distance from that. But ones who are active in that area have to offer quite a holistic approach. So when we talk about later life lending that can actually be just a small part of the overall later life advice process. So we’re working with both UK finance as well as the Society of Later Life Advisers, who offer an accreditation scheme for financial advisers and mortgage advisers who want to be able to show that they are specialists in that areas. But I think as the market grows there will be things that crop up which are of concern, specifically as you mentioned about how to calculate affordability based on someone’s retirement income, and how you actually calculate that. PRESENTER: Well, we heard Andrew Montlake say that it’s important that the important people are giving the right advice. I think this raises an important point that I think you were alluding to. For a mortgage adviser who are talking about equity release, they might start getting questions, pension advice questions almost, so when do they know when to pass over that advice to somebody who’s more qualified in the pension sphere? MICHAEL NICHOLLS: Yes, we’ve done quite a lot of research in this area, because I think it’s something that we are discussing with lots of people to find out how that sits. I think what we’ve found is that for the larger equity release provider adviser firms that are out there, the ones that advertise on the television now, they do have quite slick handover processes to actually address that. So they will have financial advisers, pension advisers, investment advisers that the equity release adviser can actually hand off to when that actually happens. I think our concern would be more for smaller firms where perhaps there is only one or two advisers who are predominantly mortgage orientated. I think that’s always been a concern in the equity release market of people dabbling in it. So mortgage advisers who maybe don’t do that many cases each year actually keeping up to date with all the knowledge that’s out there, keeping up to date with products, which means are they actually giving the best advice they can, whether it includes those elements of later life planning holistically. PRESENTER: Because I imagine they have to be quite careful, because they don’t want to be giving advice out that they’re not qualified for and then have some kind of comeback if it doesn’t go well. MICHAEL NICHOLLS: Absolutely yes. And, as Andy mentioned, I think the Financial Ombudsman Service has, there have been cases that have been referred to them where it has happened. But I don’t think there’s any avalanche of cases arriving, but it’s one of those things where with an ageing population it may actually be a delayed reaction, or delayed effect. ANDY PHILO: Because of our product spread we’re talking to quite a lot of advisers that are selling, composite advisers effectively are selling life, health and investments. So that’s fine I think. But to your point about some of the smaller advisers, I think it’s critically important that they don’t blur that line in terms of where they’re giving advice or factual information. So there’s a number of big large networks that are available to join that offer that range of advice or referral processes. So I would urge an adviser to look at that as an outlet. Again I think it’s a professional job. If you are offering across the broad spectrum of products, it’s important that you do that obviously compliantly, but what they can do is join one of the networks. As I say there’s a number of them that have got the full spread of investment permissions so that they can actually offer an outlet for those clients. So your client is getting access to the full range of advice, but not necessarily through that individual adviser, it gets referred onto somebody else. There’s some really good examples of that. PRESENTER: OK. So let’s move on to another big issue in the mortgage market, buy to let, and this brings me onto the rental sector. Now how does it work in terms of mortgage protection, the rental sector, because I think this is a part of the market that’s often quite overlooked when it comes to mortgage protection? ANDY PHILO: It is generally overlooked. A lot of time advisers say that they just don’t see a need for it, because it’s the landlord where he or she has got the value of the asset of the property. So in the event of death there’s an asset there. The reality is there that something that’s quite often overlooked is quite often the mortgage for those properties. So again if the landlord passes away, and he or she doesn’t have any cover or sufficient cover, then it’s incumbent on the estate or their beneficiaries to resolve that, to sort that out. I mean life cover I think is absolutely a no brainer in that environment. And then looking at the tenants, I think most definitely they should be looking at income protection for the reasons we’ve mentioned earlier on. If they want to be able to stay in that property, if they’re off long-term sick they still need to meet the repayments on that, the rentals. And the landlord will remove them very swiftly if they’re not meeting those repayments, which is absolutely right. So for a simple small premium relatively to the rent they’re paying, it’s really worth looking at income protection. And there’s a range of different tools out there in the market. At Vitality we’ve got a risk reality tool that basically you can just plug in some basic details about your income, and it’ll work out exactly, and your outgoings, and it’ll work out exactly the benefit that you need, and it is a relatively small cost. And I’d almost say to anybody getting a mortgage, if you can’t afford the protection, then in my mind it’s quite a big statement but you can’t really afford the mortgage. You’re maybe talking about an average premium of around about £30 when you’re talking about 10/20 times that as minimum on an interest payment. PRESENTER: OK. Looking to the future now, anything on the horizon in the mortgage market you think we should be aware of Michael? MICHAEL NICHOLLS: So I think the Mortgage Market Study will have an important bearing on the market this year. We’ve seen snippets of information coming out of what will be in it. I think the most interesting ones are around creating registers for advisers. We’ve had a register for mortgage advisers for some years, but now we incorporate that with our CeMAP Professional. I think the housing market is of concern at the moment, although again there’s conflicting stats coming out. I think it’s been fairly flat for several months, although I think last month there was an increase. And obviously in the mortgage market if the housing market is depressed that will have knock-on effects for advisers. So I think they’re the two things for me: what’s going to happen with the housing market generally and the implications of the Mortgage Market Study from the FCA. PRESENTER: And the same question to you Andy. ANDY PHILO: I think from a protection point of view what we do see is the intermediary is very resilient. So if the mortgage market is depressed, and there seems to be some mixed messages out there at the moment. First time buyers are at a three-year high. We’re seeing some 100% loans, so there’s people lending. But there’s also a lot of suppression through Brexit uncertainty etc. So what we do actually see is advisers tend to then sell protection, which is good for product providers. I mean my request would be that you as an adviser make yourself fully familiar with the products that you have available to you. Use the product providers and their knowledge and their tools to help you to make sure that you’re protecting your clients, and keep them in as we say what is going to be their biggest in their life. And for a small cost, payment, and other benefits that you can get, you’re leaving yourself massively exposed if you don’t take the time. And I know it’s difficult, because at the end of a two/three hour long interview to get the mortgage it’s very difficult, but it really is critically important that we do that. PRESENTER: Well, we are almost out of time, so I’m just going to ask for your key takeaways from this session, what you’d like the viewers to take away. So Michael, what would you say? MICHAEL NICHOLLS: I think protection is an area that we’re looking at particularly around whether there is a need in the market for a qualification and whether a qualification is going to actually improve sales. And we’ll probably have a final view on that later in the year. Also around CeMAP Professional, there will be CPD included in that, which will be around protection products. We’ve mentioned income protection. I think a lot of advisers don’t actually realise that income protection can complement critical illness. They’re not mutually exclusive, in that if you are ill, even if you’re critically ill, an income protection will still pay out and cover your income. So there are things that people still need to learn that are in that industry, so I think our job is to provide that through CPD or possibly a qualification later in the year. PRESENTER: And, Andy, what are your final thoughts? ANDY PHILO: I think there’s lots of opportunity. I think as I’ve said earlier the intermediary population is really important to the market. There’s a big opportunity in terms of clients that are under-protected. It’s important, really important for advisers to speak to product providers, speak to us about what opportunities they’ve got, what products we can help to fill their gaps. As I said earlier on we’ve got a range of tools on our website that they can refer to to help them make that journey as seamless and as easy as possible for clients. But it’s important as I’ve said numerous times, to make sure that client’s protected, and to cover your own future I think is really important. PRESENTER: Andy, Michael, thank you. BOTH: Thank you. PRESENTER: By the end of this session, you’ll be able to understand and describe how the mortgage market has developed in 2019; how the mortgage protection market stands today; and when mortgage advisers should hand over the role of adviser.