A mortgage is one of the most significant financial products that people purchase. And with 2018 seeing the highest number of first-time buyers since 2006, this means there is plenty of opportunity for mortgage brokers. Use of a broker is common, with estimates suggesting that over 70% of mortgages are arranged through a broker, as borrowers often struggle to understand the process, lack confidence to find the best product or do not wish to spend the time arranging the mortgage themselves.
However, brokers are also facing challenges. Particularly the smaller firms where internal processes and systems could be improved while changes to the wider market landscape bring additional pressures. IFF’s recent qualitative research with mortgage brokers from firms with less than 10 employees has highlighted some of these challenges and identified how lenders could better support them in increasing their business.
Dealing with a reduction in buy-to-let
Many brokers depend heavily on the buy-to-let market which has recently seen changes that have resulted in reduced business. Since September 2017 any landlord with four or more properties is classed as a ‘portfolio investor’ where further lending is subject to tougher criteria involving a detailed financial review of the entire portfolio. This not only means that it is harder to get mortgages for additional properties approved, but it has also increased the time brokers have to spend dealing with lenders to get the checks completed, with three months lead time recommended. The increase in stamp duty for buy-to-let properties introduced in 2016 has also had an impact on the market.
– “Buy-to-let is tough now. It used to be a main part of our business – 40% of business – now it is 20%.”
Focusing on other products may be the solution for some brokers, with areas such as equity release being a potential way to help with the downturn in buy-to-let, and lifetime mortgages in particular becoming increasingly popular. However, being able to advise on these products requires an additional qualification, so it is not always a simple solution. Any support lenders can offer to help brokers expand their product offering and deal with the challenges within the buy-to-let market would be welcomed.
Supporting new business generation
Despite challenges in maintaining income levels and generating a reliable stream of new business, among the brokers we spoke to there were rarely defined processes for customer acquisition in place. There is a heavy reliance on word-of-mouth and recommendations from existing customers, as well as the prospect of repeat business as customers return to them when a mortgage deal comes to an end. This may be working well for those experienced and well-established brokers but those new to the industry are also relying on this approach to grow their business, meaning building up business is a slow process. Business generation is an area where lenders could provide additional support to brokers, particularly those looking to get established in the industry.
– “Most people I’ve done the business for have referred me on to someone else. One, two or three times. I’ve had a referral off of the referral off of the referral… Once you’ve got a client it’s great because you have all the repeat business. But yes, getting new business is quite hard.”
Maintaining the customer relationship
There is certainly the expectation that lenders will support brokers by sign-posting customers back to their broker when a mortgage deal comes to an end, which helps the broker secure repeat business. Lenders do this in most cases (but not all) although the amount of detail provided on the rate and product options varies and there is still possibility that the customer goes direct to the lender and makes the decision themselves.
An issue which is hard to overcome is that the broker relationship with the customer is very remote once the mortgage is set up and, as a mortgage deal is typically two or more years, there is unlikely to be any need for the broker to keep in touch with the customer until the deal comes to an end. Therefore, even when the lender suggests returning to the broker, the customer may not feel they actually have a relationship with them. While lenders should ensure they encourage the customer to return to their broker, brokers themselves could maintain contact with the customer during the mortgage term, if only through informal updates or newsletters to maintain the relationship.
Keeping brokers up-to-date
Our research emphasised that the presence of BDMs, so brokers can develop strong relationships with lenders, may increase the likelihood of business being placed with them. Having a BDM helps brokers understand their lending criteria and having someone specific they can turn to for advice and support is a real benefit.
Typically, when brokers are creating a shortlist of possible lenders, they do not solely rely on what is generated by the online sourcing systems (Trigold and MortgageBrain being the main ones used). These tools may be the starting point, but lenders are often rejected because of expectations around lending criteria, so existing knowledge – or perceptions – can impact whether a lender remains on the shortlist.
Brokers recognise that the systems are not perfect, but if they choose to proceed with a particular lender, they may phone them up only to discover that the mortgage is not appropriate due to specific lending criteria. It is important that lenders work to ensure brokers remain up-to-date on their mortgage offering so the selection is made on reliable information and the lender does not miss out on any opportunities.
Helping to manage client expectations
When brokers meet with new clients they often have a challenge managing expectations while ensuring they are positioned to find them the best and most appropriate mortgage deal. Consumer marketing and communications from lenders can support brokers through helping potential customers understand the following so they do not develop a negative impression of the broker:
- Customers often undertake their own online searches so come armed with a view of what interest rate they should be able to get, which is unlikely to reflect what is suitable for that individual
- The different lending criteria and the impact this has can be hard for customers to understand, so brokers have to spend time explaining this
- Making an appropriate mortgage recommendation relies on the customer being open and honest about their full financial situation, so when customers hold back information it can prevent the application process running smoothly and reflects badly on the broker
Is robo-advice a threat to mortgage brokers?
Robo-advice has been evolving over recent years in the investment space with brands such as Nutmeg, Moneyfarm and Wealthify providing investment portfolios tailored to the individual. There have also been robo-advice brands developing in the mortgage space as well, including Mortgagegym, Trussle and Habito. However, only a few of the brokers we spoke to had heard of the term ‘robo-advice’ and those that had come across the existing brands did not necessarily associate them as offering this. When prompted, brokers acknowledged that it may become a threat in the future but there was limited concern on the basis that customers will always prefer personal contact when taking out something as significant as a mortgage. With this is mind, robo-advice in this market may be viewed simply as a lead generation tool, where the process can begin online but then the customer has to engage with a broker to complete, particularly considering the broker generally handles all the paperwork, as well as finding the most suitable product.
– “I see robo-advice as a lead generation business, where you can get someone who gets so far down the line but they’re going to need to speak to someone to get it finalised.”
Further research opportunities
This research has enabled us to identify potential areas for further research which will be beneficial for lenders and help them enhance their broker relationships.
Brand perceptions and consideration – quantitative survey to build a robust understanding of what impacts brokers’ views of lenders and how usage can be increased
Deep dive into business challenges – focus groups to explore detailed challenges and support needs, undertaken in our viewing facility so representatives from mortgage lenders can experience feedback first hand
Ethnographic interviews – shadowing brokers as they go through the selection process to understand the detailed process and the pain-points so lenders can address specific issues to improve the broker experience
If you are interested in undertaking further research with mortgage brokers or learning more about IFF’s research offering and financial services experience, please contact:
Alistair Kuechel, Director, Alistair.Kuechel@iffresearch.com
Georgina Clarke, Director, Georgina.Clarke@iffresearch.com
This is a phrase that is used across so many organisations these days but what does it really mean? Financial services providers, including both established players and start-up organisations, frequently claim that this is their business’s main priority. However, surely “putting customers at the heart of the business” is really a ‘hygiene factor’ that every successful business should be focusing on?
As researchers, we hear this phrase so often when talking to insight teams and their stakeholders, plus we never seem to attend a conference or research seminar without it being the topic of a paper. It feels like it is now a claim made so often that it lacks real meaning and impact.
So, what does it really mean for financial services companies and what do they need to do to truly be “putting customers at the heart of the business”? We’ve considered some of the approaches that financial services providers are adopting and we also asked members of our Fintech Beacon community what it means to them.
A ‘bottom-up’ rather than ‘top-down’ approach to product development
Development of successful products and services must come from looking at needs, behaviours and the lifestyle of customers, filling the gaps and finding ways to make their life easier. Those that are created ‘from the top’ with a heavily commercial focus rarely succeed as customers recognise if the product is missing a real benefit for them or of there is nothing to differentiate it from what is already available. Many financial organisations now hold regular ‘customer immersion’ or ‘customer closeness’ research workshops, where the focus is simply on understanding customers, and are the first step in any new product development.
“Making tangible efforts to understand the customers; their circumstances, their preferences; what they want from the business, their expectations of the service, what works for them – say, via careful data collection and research – and design products and services around that.”
Employee engagement and empowerment
Many organisations are now very focused on engaging their frontline staff in the needs of the customers and empowering them more to support their individual requirements with flexibility and genuine care. This is achieved through training often involving staff in workshops with customers and other market research activity, which helps them to feel close to customers and demonstrates an appreciation of the important role they have.
“It needs to be backed up by excellent customer service so if you do have a problem they handle it well and treat you like you truly matter to them, not leave you tearing your hair out trying to communicate with someone who just parrots the company manual at you and has no interest in solving your problem.” (Age 30-39)
Talk to customers – and act on the feedback
Undertaking customer research is one thing, but is it always clear to the customers that their views are heard and considered? Many successful digital financial start-ups frequently encourage customers to provide feedback on their products and services, then communicate directly with them, via their app or email, to let them know when changes have been made as a result. In fact, when changes have to be made that aren’t as positive for the customer, these new players often communicate in this way and explain the reasons for the change, turning a potentially negative situation into a positive, as customers appreciate the honesty and transparency.
“Take customer feedback seriously and take actions that are visible to them. Currently, all companies ask for customer feedback, but I don’t see them taking any visible action on feedback.” (Female, age 30-39)
Show you are genuinely trying to help them
The financial services industry, especially the banks, have a particularly poor reputation since the financial crisis. Consumers understand that they are commercial organisations that need to make money, but they, of course, do not what to feel they are being sold to. Some financial providers are now focused on demonstrating a genuine interest in customers gaining access to the best products for them and making the most of the money, acknowledging that it may not actually result in them purchasing their products. Access to partners through their financial ‘marketplace’ and tools that show money that could be saved through switching accounts – or other services such as utilities – are just some of the ways this is being done.
“Banks are too large and too focused on profit rather than service. When you go in a bank all they want to do is sell you a product.” (Female, 50-59)
So, what next? How can financial providers differentiate themselves?
The real challenge is changing the mindset of consumers, so they realise that financial providers are on their side and want to help them. This is something that the new digital start-ups organisations are understandably excelling at, while the traditional banks are still struggling.
While customer focused product development and excellent service are vital for organisations to show that they are “putting customers at the heart of the business” we believe the best way to demonstrate this is to consider – and measure – the impact they are having on their customers’ financial capability, which is defined by the Money Advice Service and the UK Financial Capability Strategy as ‘the ability to manage money well – both day-to-day and through significant life events’.
Given the well-publicised issues around the poor financial capability of the UK population, and the close link between financial wellbeing and mental health, all financial services providers have a responsibility to support the focus on improvement. They should be demonstrating that the financial capability of their customers is high on their agenda and, more importantly, providing evidence that their products and services are having a positive impact on this – which it appears is the ‘missing link’ for many providers.
Going forward we propose that the aspiration for financial services organisations should be “putting customers’ financial wellbeing at the heart of the business” and this is where they can really differentiate themselves and build a positive reputation among customers.
If you would like to hear more about our work in this area or discuss how we could help you measure financial capability among your customers, please contact me:
Georgina Clarke, Director
Tel: 020 7250 3035
Is your tracker just a tick box exercise for the organisation or is it adding real value and delivering genuine insight to your business?
We know organisations spend a lot of time, effort and resource to establish tracking surveys, but sometimes it’s worth stepping back and looking at the real needs of the business and whether your tracker is generating reliable insight and reflecting the evolving dynamics of your market. The financial services sector in particular is becoming increasingly competitive, with the arrival of fintech players who are taking share from traditional providers. Ensuring your tracker accommodates the diversity of your customer needs and expectations is now more important than ever.
We have considered the TRUTH about what you need to ensure your tracking survey is effective and avoids the common pitfalls.
It goes without saying that you need to give yourself sufficient time to engage the business, assess the priorities, design an approach and define the content that will meet your business needs. Plan each stage up to the survey launch, allowing time for input and review by all stakeholders, which will help ongoing engagement with the survey.
The approach to design and development should be rigorous. Draw on existing research, speak to frontline staff, review internal MI and ideally conduct a phase of initial qualitative research to define the measures that are relevant to your customers (or target customers), ensure the language used is relevant to them and that you really understand the meaning behind the measures from a customer perspective.
It is important that you really understand what all your various stakeholders want and expect from the survey. A tracker needs internal buy-in from the outset to ensure it meets business requirements, as well as an ongoing engagement plan to drive actions and maintain internal interest. Ensuring stakeholders are engaged will help avoid the common challenges that affect tracking programmes over time. We always recommend a dedicated phase of stakeholder engagement at the outset, however, a plan for ongoing re-engagement, refreshing the insights and driving action is key to longer term success.
To embed tracking survey within the business the results need to be trustworthy. This not only relies on an effective overall methodology, but particular attention should be made to who is included and how they are questioned. If the target is a niche audience (rather than broad customer / market study) stakeholders will need reassurance that sufficient screening is in place to ensure you have surveyed the relevant people. The questionnaire should use approaches to aid accurate recall, such as linking to events and tailoring by incorporating sample information.
Trackers should not only measure how the business is performing but will deliver greater business value and are more compelling to internal teams when they can actually help identify what should be done next. First as series of relevant and meaningful service or brand attributes need to be developed, through an initial phase of qualitative research with customers and ideally stakeholder interviews. Using these attributes Key Driver Analysis can be completed to understand the attributes which will have the greatest impact on KPIs (e.g. NPS, overall satisfaction, brand consideration). A typical output is an Excel tool that can be used to test the impact of specific improvements.
Interpreting Results in a Financial Context
A suitable agency not only needs to be an expert in survey research but also an expert in your sector.
Many of the considerations above are relevant for all tracking surveys, whatever the industry or subject matter. However, what is at the core of effective tracking is understanding the broader context of the relevant sector, so results can be interpreted appropriately and used to define relevant business actions. This is also vital in maintaining stakeholder engagement and confidence in the findings.
IFF’s experienced financial services team understand the market and design the most effective research solutions, generate actionable findings and deliver credible recommendations which engage even the most senior stakeholders. Our grasp of the regulatory and commercial requirements facing your businesses brings real value and our focus is always on optimising the business benefits from your research.
If you would like to discuss tracking research in more detail or learn more about IFF’s research offering and financial services experience, please contact me:
Tel: 020 7250 3035
On October 17th IFF Research’s Associate Director, Chris O’Brien, was invited to present at the Financial Services Forum’s morning event, focussed on providing insight into consumer engagement with the new challenger banking brands. As well as sharing exclusive findings from IFF’s Fintech Beacon community of digital bank users, other presenters were able to provide insights from a large-scale quantitative exploration of the wider banking market (Andy Dexter, Senior Adviser, MESH Experience), as well as the internal perspective from one of the top challenger banking brands (Lisa Wood, CMO, Atom Bank).
Prospects for future growth
All three presentations painted a positive picture for the prospects of the challenger banking brands. While at an overall level these brands hold a relatively small share of the banking market, expectations are that the sector is likely to grow a great deal over the next few years. At the moment awareness of these new brands remains low, although this has been growing slowly over the last two years. In keeping with this, consideration for using these brands has been growing. Of particular interest was that new customers of the challenger banks are not coming from one demographic or attitudinal segment of the population, but instead appealed to a wide range of different customer types. As the challenger brands become more established and able to communicate about their stability as a business, all three panellists felt they are more likely to attract a greater share of the market over the next few years.
Higher expectations for customer experience and product value
Those that are currently customers of the challenger banking brands are vocal promoters of both the level of service they are receiving and the quality and value of the products they are being offered. These customers believe that the new challengers are innovating and developing new products and services that really meet their needs, addressing common pain-points that customer experience when interacting with financial companies. In one example from Atom Bank, Lisa Wood flagged that the quickest mortgage approval that they have managed so far only took 15 seconds from application to approval. The challenger brands are currently reliant on promotion by word of mouth, and of their customers being vocal promoters of their services. As things currently stand this is what is happening, and the current levels of service being provided are raising expectations of what banks should be providing to their customers.
The target is to disrupt the market
During the Q&A section of the event a member of the audience raised the question of how the challenger brands are differentiating from each other in a crowded market. The response from the panel was that at this stage in the progress of these new brands, the focus is not on competing with each other, but rather on disrupting the market for the more established banks and showing consumers that they do not have to put up with poor service and products. If the challenger brands do continue to gain market share due we should expect the established banks to come under competing pressure to improve their offer. In light of new the Open Banking legislation we can expect many new niche services to spring up to address customer pain-points, and the established banks need to be fast followers to develop their own version of these services unless they want to be left behind or increasingly be seen providing basic lower-value services for customers.
The future is bright
The panel all saw the future as bright for the new challenger brands, as they increase their focus on providing an exceptional digital and customer experience. If they are able to continue to innovate and provide customers with the services they need, and continue to position themselves as a trusted financial partner, we would expect these new challengers to gain further market share over the next few years.
Increasingly, our financial services clients stress the need for their research partners to be able to deliver deep insight in an agile manner, needing to obtain feedback in both a quick and flexible way. To meet this need IFF has developed a best practice approach to agile design and delivery of insight programmes.
There are a wealth of research methodologies available that allow us to work in the iterative and rapid manner required by product and service development teams. These range from utilising research communities such as our Fintech Beacon, or fast turn-around qualitative user-testing and overnight quantitative research. These methodologies are increasingly popular for digital service development work, and we have designed agile insight programmes for pensions companies, loans companies and Government departments.
However, no matter what methodologies are used to provide deep insight in an agile manner, there are a number of fundamentals that remain constant in our approach.
Putting customers first
Fundamental to any agile insight programme of iterative development, is to appreciate that financial services business can no longer afford to work in internal ‘silos’, but instead must put the customer at the centre of what they do across all teams. By ensuring that the customer is at the heart of the research design, we can ensure findings will bring the customer to life across the business and in a meaningful way for all departments.
Speed and iterative delivery
We can deliver insight in hours and days, not months. Our research teams provide ongoing support and feedback throughout the project. Through ongoing analysis and with highly experienced staff, we ensure the lines of questioning can be adapted and adjusted as research progresses. Each aspect of the research builds on the ‘lessons learned’ to continuously improve and refine insights.
It is the nature of an agile programme that there will be changes and adjustments to research materials and approaches. We break things down to allow faster insight delivery, and by separating out sub-objectives we can adjust the research process to match client needs. There must be an ongoing dialogue and discussion of fieldwork findings and emerging insights to enable research methods to be altered and refocused if necessary.
Deep understanding of our client’s business and stakeholders
Ultimately, to develop a product or service successfully our clients require an agency that works in partnership and close collaboration with their teams, going beyond the traditional client/supplier relationship. We work as an extension of a client’s internal team, being available to join key meetings and discussion to ensure we can respond quickly and effectively to requests. This is not a once-a-week telephone call update, but rather a dedicated research team focussed on a research ‘sprint’ to your specific insight needs.
Opportunities for stakeholders to hear directly from customers’
Our viewing facility in our central London offices provides an ideal resource for agile working, as well as bringing the potential to reserve at short notice (our facility is currently only available for IFF Research projects and not marketed externally). We can recruit participants to attend depth interviews, user testing activities and focus groups, while client research teams and stakeholders can hear feedback and opinions first hand – this is a major advantage when working quickly and in an iterative process.
We do not believe there is a “one size fits all” approach to agile development. When developing the client relationship, transparent and open discussions over the how our client expects the relationship to work are critical.
Ultimately, we offer clients a flexible, pragmatic partnership – tailored to meet their vision of how the relationship should work.
IFF’s Financial Services team have launched a new central insight portal hosting exclusive, downloadable research papers, webinars and blogs informed by work that has been carried out through IFF’s Fintech Beacon and our own research across the broader financial sector. Having shared these findings at conferences and seminars throughout the summer, the team are now giving banks, fintechs, investment companies and other financial service organisations access to papers covering the following areas:
- A new normal: Customer experience in financial services
- Building and maintaining trust in financial services
- Digital consumers shine a light on future pension needs
- The opportunity for banks to engage with the new millennial business decision makers
- Understanding the new impact saver and investor
- The role of robo-advice in the investment market
- Understanding the changing world of a financial adviser
The ‘Bright Ideas’ portal also hosts a 20-minute webinar with the latest insight from our Fintech Beacon community. To learn more about Fintech Beacon click here
Access IFF’s ‘Bright Ideas’
Follow the link here to access IFF’s ‘Bight Ideas’ portal and subscribe to our mailing list for monthly updates with news, opinions and exclusive insights.
IFF’s Financial Services department remains open for business over the August holiday period and would be delighted to discuss any of the above in more detail.
Email Georgina Clarke for details email@example.com
Last week’s Customer Experience Financial Services conference raised some interesting conflicts around the need for human interaction versus the capabilities of remote or automated servicing within the sector. At IFF Research, this is a topic that we have been considering from many different angles, through our own research with financial consumers, businesses and financial advisers.
Key speakers on the topic of human interaction in Financial Services
Ben Chisell – Product Director – Starling Bank
In a fascinating discussion Ben Chisell, Product Director at Starling Bank shared insight into the strategy that has led to the success of this digital bank, as well as how they have created a joint account that can be set up without any human interaction – although the customers wanting to set up the account together need to be physically close to do so! This process compares very favourably to the experience Ben himself had when setting up a joint account with a traditional bank, which involved juggling the need for face-to-face branch appointments around work commitments.
Sarah Leach – Senior UX Designer – Hitachi Capital
Later in the morning, Sarah Leach, Senior UX Designer from Hitachi Capital cited psychology theories around the need for human interaction when making significant financial decisions, as emotion plays an important role when making these decisions. This suggested that digital experiences should encourage people to engage their ‘slow brain’ so they make more successful choices, rather than encouraging more spontaneous actions. You ideally need human interaction to enable this.
Neil Dodd – Associate Director – Comparethemarket.com
Meanwhile, we heard from Neil Dodd, Associate Director at Comparethemarket.com, about how his company has successfully developed an online experience which pre-empts the questions that might have previously been posed in person via a customer helpdesk, in a very clear and intuitive way. This has improved the user experience, helping customers to review options and make decisions around which financial products to select, more effectively.
Reassurance that ‘a person’ can be reached
IFF Research has explored these topics with our Fintech Beacon community, where, despite all members being active users of digital-only banking or investment services, the need for having the option of human interaction still exists.
While these customers may be attracted to digital providers due to the innovative features, appealing monetary incentives or favourable brand identities (factors engaging the ‘fast brain’) knowing they can access some kind of personal interaction if things go wrong is essential.
However, this interaction could be facilitated via online chat rather than in person or by phone – the important issue is how well the issue is resolved. This is where the new digital-only providers seem to be excelling, complemented by automated features that delight on a day-to-day basis and – over time – help build trust. These issues are covered in our recent research papers, A New Normal: Customer Experience in Financial Services and Building and Maintaining Trust in Financial Services.
Still a place for personal relationships
There are some areas where the reliance on more traditional approaches to meeting financial needs still dominates and human relationships remain at the heart of the service. The take up of digital banks and remote servicing among businesses is slow compared to the consumer market. In fact, in research conducted via our regular Business Spotlight omnibus, we found there is very low usage of the new digital banks, and even those decision makers defined as ‘millennials’ are generally not active in seeking out these new digital services. Further analysis is included within our research paper on The Opportunity for Banks to Engage with New Millennial Business Decision Makers.
Despite the development of robo-advice, there is still a question as to whether this can fully replace the benefits of engaging with a professional financial adviser in person and receiving advice that is truly tailored to your individual circumstances. However, some members of our Fintech Beacon community recognise that robo-advice removes the potential for human bias and also removes the social barriers that may exist when considering engaging a financial adviser. Some financial advisers are looking at ways to efficiently service ‘lower-value’ clients and a hybrid robo-advice based offer is a potential solution. Financial advisers themselves are typically now serviced remotely by product and platform providers, so maybe it’s only a matter of time before they move to servicing their clients in this way too?
An ongoing issue – but what does the future hold?
This brings us back to whether big and important financial decisions can and should be made without any human interaction. There is certainly increased engagement with digital-only financial services and, so far, most are delivering a very positive customer experience. However, will these providers ever totally take the place of financial relationships that are routed in human contact? This is one of the ongoing issues that we are researching with our Fintech Beacon community.
If you would like to read any of our research papers, please click here to see the full list and download any that are of interest. Alternatively, if want to know how you can conduct your own cost effective research with our Fintech Beacon community or draw on our broader financial services expertise, please contact us:
Tel: 020 7250 3035
Georgina Clarke, Director
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