Kathryn:

Hi everyone. We have Martin Stewart with us today from the London Money Group. Hi Martin.

Martin:

Hi Kathryn.

Kathryn:

Hi. Today we’re gonna be talking about what’s going on in the mortgage world, why protection insurance is more important than ever. And of course the f c consumer duty. This is the Practical Protection Podcast. So I think it’s quite interesting today, Martin, because this is the first time that we’re actually, in a sense, properly meeting. It is over Zoom, but this is our proper first meet. I think most people know us from our Twitter spats, isn’t it? Pleasant, pleasant Twitter spats.

Martin:

Absolutely. Our, our first meeting and probably our last as well, Kathryn. So I think we should probably make, we should make the most of it,

Kathryn:

But we have to keep it to normal than an hour, ideally. So we just can’t keep going forever. So, <laugh> and lovely to have you with us, Roy. Hi there, how are you? Oh, good. Thank you. And well done on your, um, win at Health and Protection. It’s the first time I’ve had a proper chance to speak to you since you got your, your award there. Snap to you. Likewise. Thank you <laugh>, but focusing straight onto mortgages and what’s going on. So Martin, you are obviously very much in the mortgage space and me and Roy are not particularly sat there at all. Um, so what is happening in a sense in the mortgage role, but I think to start off with, what would be really nice is to know more about you and just get a bit of background on yourself, if that’s okay.

Martin:

Yeah, absolutely. So, I mean, I’ve been in the industry probably about 30 years. Um, I would say it probably took me about 15 years to work out what I was actually doing. Um, and at that point I kind of pivoted. I used to be an I ffa, uh, many years ago. Um, and then the standards were, uh, were increased significantly with R D R and, um, I could have applauded along doing that, but I needed to sort of stick to the, and to me that was always gonna be mortgage work. That’s something that I’ve done religiously from about a year in 1998 onwards. So I’ve seen the whole journey of intermediation in the mortgage world. Um, uh, and um, from the back of that, I kind of, the recession came along. The, you know, the credit crunch came along in 2008. That wasn’t a great time to be a mortgage broker.

Martin:

Um, and at that point I was pretty, pretty disillusioned with the industry, I think as a lot of people were. Um, and I probably had a, a career choice to make was to whether I kind of stick with that or, or maybe I’d pivot and do something completely different, but within the industry. So at that point, I kind of broke away from the, the National Advice Network, um, that I was operating under and then set up London money, um, just to basically run my own brokerage and maybe kind of replicate what I thought was the right way to approach clients and the consumer and how to give advice. Um, something you’ll always struggle to do if you’re part of a network or a national where you are told how to, uh, run, um, an advice process. So, um, in 2009 or 10, I said up, uh, London Money, um, uh, and we’ve been going strong now for about 10 or 12 years.

Martin:

Um, uh, 12 advisors, um, just purely in the mortgage protection space. That’s all we do. We’re also part of the wider money group, um, which is a, a nationwide, um, sort of collection of brands, uh, including network as well. Um, but, but, but, but directly authorized firms within that. Um, there’s probably about 150 headcount there. So we’re quite well positioned in terms of brand, brand recognition, uh, nationwide exposure, um, but we also operate, um, autonomously and we can do what we want at London Money. Um, but, um, yeah, so it’s an interesting market right now, which was your point at the very start. What, what, what is the mortgage market doing? Um, and the answer to that question is how long have you got? Now? I know you’re set aside an hour for the, this podcast, but you know, that would probably just cover the first week in October.

Martin:

Um, cuz it’s been a very, very fragmented market now for, for about two or three months. Um, uh, and in reality it’s probably been a bit of a fragmented market for, for two or three years post Covid. Um, I do feel like the industry’s been kind of going around and surfaced a little bit, darting off in different directions. We’ve had lots of government interference in the housing market, um, some positive, some negative. We didn’t need a stem duty holiday, um, which came out of, um, the pandemic in 2020 that’s just poured a load of petrol on the fire, uh, the repercussions of which we’re probably seeing even today. Um, so yeah, it’s a very, very interesting market. What it does do is highlights the importance of advice, and I don’t say that in terms of trying to talk my book, but some of the rubbish that we see coming across our desk is unbelievable. Um, uh, and this is from very educated consumers and the naivety within the consumer. And you probably see this as well, maybe in, in in your side. Um, Kathryn, um, uh, a lack of education, but stuff that we take as, you know, pretty basic and we assume that everyone should know that, uh, some of the questions that we get from the consumer. And this isn’t detrimental to the consumer, it’s our fault. They’re not education properly in the first place. It’s quite worrying. I would suggest,

Roy:

Martin, let’s just go back to 2008 that you, you’ve mentioned. Yeah, I mean, a lot of the mortgage brokers that, that I know said that one of the most important lessons that they learned from then is that sometimes diversifying your business model was a good idea in terms of, uh, you know, the pressure. Was he on, on your industry then? Do, do you think people have have taken that on board in terms of trying to widen their models since, since then?

Martin:

Uh, no. Um, and, and you’re absolutely right, it should have been totally diversified and have banged at the diversification drum quite hard over the years. Quite the reason we settle the money group was to, to encourage that diversification because, um, the reason why the industry or the mortgage, um, broker industry suffered in in 2008 was because everybody, um, just did mortgages. That was it. The assumption was that was, uh, a never-ending, um, uh, pot of gold that we could always dip into as a mum wanted. Uh, and there was an I E B T around the brokering, uh, community that that was always gonna be the case. Um, didn’t realize that housing is just, uh, a small cog within an economic wheel. Um, so when that wheel then, um, locks up as it did in 2008 and 2009, um, you know, the landscape changes and if all you’ve got is, is mortgages, then you know, there’s a significant drop in income for, for every brokerage plus the uk My personal income dropped by 50%, I think over over a, a two to three year period.

Martin:

Um, did we learn lessons from that? No, because the same thing happened as we entered the lockdowns in 2020. No one diversified the mortgage market was, was effectively shut overnight. Uh, had a number of brokers in tears on the phone to me asking if that’s the end of their career. And at the time it certainly did feel like that. And, and did you learn from the pandemic? No, because here we are now in, um, Q4 of 2022 and the mortgage market is locking up yet again. So, you know, I dunno how many more warnings we need as an industry that is very, very important to address this as, as a business, not just by process mortgages for a living.

Roy:

Yeah. Uh, uh, I guess I guess the other one I’ve heard on, on several occasions is MMR came along, uh, which you might wanna just briefly, uh, describe to our listeners, uh, and that created, um, extra work and I, and I guess people hid behind me. Well, I’m now filling out 57 page fact fines and forms, and therefore there isn’t time to talk about things like protection. Is that, is that a fair, uh, challenge? I

Martin:

Think, I think there’s always gonna be challenges, Roy. I mean, regulation is, is the price we pay to trade. So I don’t really, you know, I don’t beat the regulator up. Um, because without, without standards, we end up where we were when I joined the industry in, in 1991. And that was just, you know, a lot of rope. 21 year olds rode me the country with a, a briefcase trying to find someone to sell an endowment to. So, you know, e education is good and regulation is good, um, as long as we don’t overkill it and have it for regulation’s sake. So mortgage market review, I think was maybe 2014 looking back now. Um, um, and again, it was all address, it was all about it. It came outta the credit crunch. Most regulation always comes out of a disaster somewhere. How can we improve things by tweaking some of the areas that we didn’t address previously?

Martin:

And the idea was to, you know, improve the fact finding process, not just from a a broker point of view, but from a lender point of view and focus much more on affordability so that, you know, we can stress test the consumer today and at some point in the future, which also brings in the consumer duty that’s coming in, um, soon. Um, so, uh, mortgage market review was, was useful. Do, do we use it as an industry to hide behind? Sometimes we do. Um, uh, but again, I I think sometimes we also overthink it. I mean, you know, if you do the job right from day one, uh, and your moral compass is set through, you don’t actually need an awful lot of regulation. But as we, Kathryn and I, uh, have previously discussed, sometimes it’s only the 1% that caused the agony for the 99%.

Martin:

Um, so maybe our standards need to, uh, address the 1% a bit more and find a way that actually can we eradicate some of these people from the industry that are causing more problems, um, for the rest of us. So the, I mean, that’s a, that’s a, you know, that’s another 10 hour podcast we can talk about. But I think the, I think sometimes the problem with Mors broken, and this is, this is a, a granular level with the broker, direct with consumer, and, uh, a much bigger level with the, with the lenders. It’s a very, very inefficient process. Okay. And it doesn’t need to be, it can actually be a very smooth and easy process. Bizarrely, more mortgages were, were written prior to intermediation than since intermediation, which kind of, and also before regulation. So, you know, if we, if we were busier before intermediation and regulation came along, it tells me that we’re probably breaking something in that process. Um, so, um, yeah, I think, I think there are huge inefficiencies in, in, in, in, uh, mortgage advice. Um, huge.

Roy:

What is the percentage of the intermediated mortgages roughly now?

Martin:

Now? Um, well, it depends who you speak to. Um, and, and what vested interest you want to listen to. It does vary greatly. I mean, the general standard used to be around about sort of post sort of 2001, maybe 65 to 70% was intermediation. Um, when the credit crunch came along that probably dropped that down maybe to 55 to 60. We’ve kind of clawed our way back as the lenders kind of have changed the way that they have a branch network now in so much as they don’t really run a branch network, um, their ability to le they, they’ve lost contact with the consumer. That’s the problem the banks have got. They’ve moved themselves too far away from the consumer, which left a massive gap, which the brokers filled, uh, very quickly to the point whereby, I think around about 2020 during the, the lockdown of the pandemic, it was reported at 90% of the mortgages were intermediated.

Roy:

Wow.

Martin:

It’s, it’s a very, very dominant position. Um, from our point of view. Imagine to think that you’ve got a 300 billion pound, um, uh, industry with, with probably 10,000 gatekeepers.

Roy:

That’s, I mean, what, what, what staggering statistic that is. I mean, I guess the office question here is that means you guys dominate this, this marketplace. Um, does the lenders ever talk to you about the word protection?

Martin:

No. Uh, no, it’s not, you don’t need to, uh, Roy, that’s not, you know, that’s not their remit. You know, their remit is to talk to their, um, account holders and their, um, uh, mortgage advice advisors about protection. You know, are we, we we’re standalone. The reason why you pay as a population fee is that the risk then is all ours. That’s, that’s what they’re outsourcing to a degree risk and process. Um, so no one ever talks to us about, uh, about protection. Um, uh, and as a result, it’s a very, very poor, um, turnout from our point of view when it comes to mortgages, arranged protection underwritten, uh, there is a big gap between, and it’s very geographical as well. Uh, I think if you went, uh, further north towards Kathryn’s neck, nuclear woods, you’ll probably find that the conversion’s greater Kathryn, because Awesome. And the North. Awesome. Yeah. Aus in. So, so the word mouth, um, um, but the con the, the, the revenue per mortgage is significantly lower. You know, you move away from, from the southeast, uh, where the average mortgage might be 300,000 pounds and you end up in, in, is it fiy? You were in, uh, Kathryn, yes.

Roy:

I’m in

Martin:

Fi Average mortgage is probably 3000 pounds. They have to find another way. They have to find another. That’s why I’ve the

Roy:

Mansion and the,

Martin:

They have to find another way to generate income. And that will come from your solicitor referral that come from your general insurance. Um, it will come from protection and will writing. Um, uh, so the northern, uh, uh, advisor is, is much more efficient than the southern advisor because they have to be, so protection within, within the industry is also very, very fragmented Roy as a result. Yeah. Um, and I

Roy:

Just find it ex extraordinary that, uh, it, there’s such a vested interest for the lender to, to, I mean, they, they don’t want arrears, they don’t want debts that they’re, they’re chasing afterwards. And, uh, you know, I’m, I’m going back 20, 30 years and saying this as well, and I’ve asked other, other of your peers this, the fact that they distanced self away from protection. I get the, I get the, uh, compliance reason they distance themselves. But going back to your moral compass point, okay, it is massively in their interest for their customers to be covered in the event of long-term illness and sickness because it must be a horrendous pain in the neck for them to pursue people, but also morally not the right thing to do. It just doesn’t, it seems a, a huge paradox here.

Martin:

Well, I’m just about old enough to remember when, uh, in damage in life could mandatory, we took out the mortgage. Um, I can’t really remember when, when that ended or what the reason was for it ending, but it, it does feel like a step back to us that, you know, there isn’t some, uh, form of more control over that. I don’t, I dunno if this is a correct statistic. I’ve been quoting it for years, I must have picked it up from somewhere. But, um, uh, two out of every 10 repossessions are, are, are generally undertaken by, uh, cuz of, um, uh, death or inability to pay the mortgage through long-term illness. So that, that’s a, that’s a significant number of repossessions. Um, and that’s the number it could be fixed. I mean, I dunno how accurate it’s so don’t quote me, but I’ve been using it.

Martin:

Um, but you just quoted it. I dunno. Well, it’s a fact now then. So I mean, even if it was a one in 10, it’s still, it’s still, you know, 10% too many. So, um, there is a need for it. I mean, I dunno where the problem comes with the industry, whether it’s in the same way that mortgages have become overcomplicate over the years when they don’t need to be. And Kathryn can maybe be, correct me on this one, but is it true, Kathryn, that may protection become a little bit, uh, over complicated over the years as well?

Kathryn:

It’s interesting cause as we’re talking about all this, I’ve started to sort of like think I’m going into my compliance head as well as my advisor head. And I’m, I’m sort of thinking of something extra. Cause I know that, I mean, the thing is, is that protection can be incredibly simple. You know, it, it doesn’t have to be, you know, five or six different policies all intertwined and all this sort. There are times when it absolutely needs to be, you know, but in terms of, you know, at the very minimum, very minimum, you just would be doing something like either a, you know, potentially a joint life, uh, you know, decreasing mark, depending on obviously if it’s what type of market it is. And that in itself is, is the very minimum that you would do. And that in its generally is a policy is not gonna be difficult to sort.

Kathryn:

I think the complexity that we get is when we are talking about different situations and risks. Now, whether or not it’s a health risk or an occupation or anything like that, and then knowing the right way to go. But something that’s standing out for me in terms of the complexity is that I remember a couple of years ago that there was this thing about, there was this huge drive that we, we heard about in protection space, and everyone was just like, we’re gonna get mortgage advisors doing protection and we’re really encouraging them. And it was like, that’s brilliant. Where are you training them? And it was like, well, they’ve got a system to do the comparison on. It’s just like they’ve always had a system to do a comparison on how are you training them to make it right, in a sense. And, and there was not, it just seemed to be like a case of no, we’re just gonna it, we’re just gonna give them that extra responsibility to do it and tell them off if they don’t do it.

Kathryn:

But there wasn’t anything extra. And I think I, I don’t think that’s necessarily, it’s not comment on either in either space the marketers are, or protection. Because generally there just isn’t a lot of support in the protection space to do things. Obviously, as I’m sure we all know here, you can actually be a protection advisor. I would not advocate it, but you could just walk in, have half a day’s training and start selling protection, um, which is obviously quite worrying. But then you’re also seeing the complexity straight around thinking, well, how many mortgage advisors know what to do in terms of protection because it’s not their day in, day out stuff. But then I’m thinking, well, what about the, if we’re talking in protection, what about the building resilient households where we can assign kind of a sign in our compliance, in our recommendation? A certain amount of the income protection budget goes towards paying off the mortgage amount. Then hopefully if there is anything, state benefits ignore that amount so that the person’s toes. Anyway. Lots and lots of how many people know how to do that? How many people from the protection side know to do to put that in their reports? Um, so in, in answer to your question, it’s kind of like yes and no at the same time, it is incredibly complex if you do it right. Um, but it can be simple.

Martin:

I think your point there was, was, was valid, Kathryn is much like you could do a half day course. Um, and there isn’t a can’t if I’m wrong, there isn’t a minimum qualification.

Roy:

There is no exam, there’s not one section.

Kathryn:

There’s, there is, there is the, there is an exact a module. Um, it’s a, that

Roy:

You could do. It’s a module, Kathryn, there’s no exam. It’s, it is ridiculous. And, you know, we, we need to call this out again. How can you have an industry where we don’t have a dedicated exam for protection? Uh, you know, it’s, it’s, it’s beyond belief.

Kathryn:

It’s been tried. It’s been tried. Well, we do have. So, so, so there is one place where you can get a certificate in protection, but it is,

Roy:

Is that with your, is that alongside your swimming certificate for 15 yard breaststroke <laugh>? Honestly, it’s, oh, behave. This is, this is another podcast in itself. No, but it’s, I mean, I mean, to to become a mortgage advisor, you have to ha you have to have to go through a very dedicated compliance bit in, in order to start advising. Is that correct?

Martin:

Very much so. But I think your point is also valid there, Roy. And, uh, that it goes back to that 1% that we talked about. Um, it’s sometimes it’s too easy to trade in our industry. Yes. All right. We’ll know it’s, you can pass an exam that doesn’t make you very good. This means you can pass an exam. Yeah. Again, coming from an ex, I ffa, the reason why I didn’t carry on post 2012 when R D R came in is it just wasn’t good enough. And I recognized that in myself. I was not good enough to be an i a and looking at where the direction of travel was gonna be to that industry, which is very much Wars chartered certified and actually sitting alongside solicited and accountants. Well, what’s happened to our sector? What’s happened to protection? We’re still stuck in 1995 regulation.

Martin:

Mm-hmm. You know, cma, uh, you know, nothing on the protection side, but what, what we, we, we sort of become the poor relations of a professional industry there. And that gap between, you know, a mortgage broker and RFA used to be the same person. It was two sides to the same coin. And we’ve lost that now. And our, I FFA brethren of, of, you know, elevated themselves, um, um, much further up the food chain than we have. And we’re still sort of down in the ponds, you know, doing multiple guess exams or no exams as the case may be. And, and, and, and, and SW around saying that we’re professional. Well, that’s not the case. I think standards needs to rise across the board. Even on the mortgage side, same amount. Qualification is just a, an entry level, not even an A level. It might be possibly an a level equivalent, but don’t think that means too much when you are talking about an asset that might be worth a million pounds with half a million pound of debt that needs some protection alongside it. But I think that should be regulated from a, an exam point of view, uh, much, much harder than it’s currently.

Kathryn:

I think we can all, obviously, definitely, again, I mean, I, I’m very much an advocate for protection needing, you know, it, it should be just as stringent as any other area. And I mean, one example that I like to give is that, I think it was a couple of years ago, now you’re a bit of a random series of events. I won’t go too much into it, but I ended up sitting a, a module, um, an exam, um, that was in the general insurance space. Um, and as we all know, I don’t do general insurance. I do protection insurance. The exam was meant to last two hours. It was a multiple choice question. I sat it in 20 minutes and got a high pass. And that shouldn’t happen. You know, no matter, you know, I shouldn’t be able to walk into a different aspect of our industry and pass an exam in fraction of the time and be able to pass it quite, because, you know, ultimately that there’s just no, that was just learning a parrot fashion in a sense, you know, that there’s, there’s no application of that.

Kathryn:

Um, but no, you know, you are right. There is, there was definitely a clear issue. And that’s why I think obviously as well, you’ve got people, there’s myself, there’s, uh, Matthew Chapman who have developed training courses on how to apply protection knowledge in the actual real world because there’s just nothing, you know, that there’s, there’s nothing for you. You can sit, and yet anybody can sit in power, fashion and example, let anybody, but a lot of people can sit in parrot fashion and exam. And, um, one of the issues that we have as well in the protection space is that our exams aren’t just about protection. You get general insurance in there, you get pmi, you have to learn about, you know, a bit of builds and contents and things like that. And it’s just in case, well, hang on a minute, I’m just, I’m sitting this 11 chapter, 12 chapter exam and three or two or three chapters in it aren’t to do with protection. Um, so again, though, I’m sure we could go off on a very, very long, um, side shoot on these things, but, uh, but definitely the stuff that we need to be doing more in our, in up improving the standards in our industry.

Martin:

Well look, it, it is, it is opened up the debate and I’ve got, I’ve got three sort of objections that clients give to us just regarding, um, protection. And maybe you can tell me a good way to handle that. Okay. So one of the main ones, and this is sometimes comes from the broker as well, is it takes too long. Sometimes a protection, um, program or plan could take longer to put in place than the actual mortgage. Okay. And that takes long enough as it is. So there’s an issue here that, you know, having to chase doctors for, um, medical records, um, uh, not having complete medical, uh, history from the client or, you know, non-disclosure, all these things are objections that actually are probably more broker driven than consumer driven, but I think they’re probably relevant as to why protection’s not penetrated as much across the board.

Kathryn:

Oh,

Roy:

Absolutely. That, that one sounds like that problem sometimes is as much in the advisor’s head as it is consumer, which is stuff that we come across all the time, don’t we, Katherine?

Kathryn:

Absolutely. And I think as well in, in terms of speaking an advisor, my thing that I do at the moment, especially when I’m training, is just a case of along the lines of, well, my first thing is I wouldn’t wanna go up against the foz and say to them, well, I didn’t do it cause it was gonna take longer than the mortgage because, you know, I mean, that’s just not gonna stand up. You’re gonna get in a lot of trouble for not doing that. And in terms of the consumer, you know, in those conversations, for me, I always lead by the fact if there’s a trigger that somebody is chatting to us, you know, if they’ve come to an advisor for a mortgage, let’s say, you know, they’ve come to us because in a sense they need that support, they need the advice, they know that you are specialists and that you are gonna get them the best deal.

Kathryn:

And you are then positioning it in the right way to say to them, but there’s this r you know, basically it is nothing. There’s this risk, you know, we’re doing this, this is gonna put your family potentially significant financial hardship if you are no longer here or if you’re unable to work. And, and it’s just trying to make sure that we keep bringing that, that trigger point back home to say, you know, this isn’t just something that we put in place and then can just swan along as if there’s no issues with it. Obviously we wouldn’t use that terminology with the consumer. Um, but yeah, we need to think about the long-term financial things. And I think that does come a little bit down, more like a societal observation, isn’t it? That we’re all like, well, if it’s not right now, and it’s not like in the next two weeks, I’m not bothered. You

Martin:

Kind is there is, we have become very dis everything we do is very disposable. It’s swipe less, swipe right? It’s, it’s controlled or delete, it’s just, we don’t have detention. We’ve got 600 TV channels now. Um, so we don’t have that concentration level that we used to have. Um, and I think it is very interesting how that will, that will change our thinking going forward. Mm-hmm. And you’re right, it is very much a, uh, uh, it’s, it’s an inert problem within the broker that, oh, I don’t do protection. That’s not, I, you know, we don’t, we don’t offer that. Yeah. Or it’s too complicated, it’s too hard, um, takes too long. So there is, and again, that comes back down to inefficiency. What about, what about this objection? Which is very relevant right now. Um, and we hear this probably more than anything with the cost of living crisis. Mm-hmm. I just don’t have the budget to do that.

Kathryn:

I think I

Roy:

Would say I’ll be off. Alright, well, okay, so, uh, <laugh> again, we hear this all the time. I would say two, two things. Firstly, again, I think sometimes this is in the head of the advisor. Uh, we did a very interesting piece of research a few years back alongside a protection review where we asked advisors what the average price of income protection was. Okay? And this is from advisors, the price came back at over a hundred pounds a month. In reality, I’m sure you know this, Martin, it’s 30 pounds a month, pound a day. Okay? So I think sometimes we need to help educate to your, to your earlier point within our community that things may be, are not as expensive as you think. Secondly, it’s very easy to budget protection. Um, you know, with the multiple plans that you have now, what you can do is effectively you can build the protection around the customer’s budget.

Roy:

And I think, uh, sorry, I I, I know that when you are talking to, uh, mortgage customers, you need to talk to about budgeting constraints. Anyway, I think the key is to say, as part of your budget, part of that is gonna be protection. So position it right at the start, not here’s your mortgage owners not called protection afterwards. And I know quite a few mortgage brokers have actually changed the, literally changed the position of where protections asked within your fact find process. Because if it is asked at page 48, you know, subsection B, okay, it looks like an afterthought, well then it comes across as an afterthought. If we’re asking about it, you know, in the first few pages, then, you know, it’s importance goes up. So I think sometimes the budgeting is not as bad as it looks. And I think Kathryn and I will both argue have some cover album, none, even if you can’t afford, you know, the, the, you know, utopia is income protection followed by credit, followed by life assurance.

Roy:

And you know, in in, in a, in an ideal scenario, you’d have all three. What we can do is we can build backwards and we can have parts or some of those, and then we can have lower sum assures if needs to be, but something is better than nothing. And I think the key then is like, if anything in life you can build that protection over period of time, and many of us do. So you might have relatively basic vanilla type of, uh, protection to start off with. But as long as we build on it, as time goes by, um, uh, then, then, then I don’t see so much of a problem. So I would just ask, uh, mortgage Brooks in particular who have come to you with that sort of budgety, uh, you know, doubt to just maybe play around with the figures. It’s, it’s sometimes not as bad as you think and, and you can design a, a piece of protection, a you know, a around somebody.

Roy:

We had this when, when Covid came in, didn’t we? We had lots of, we had, we had an underwriting problem, Martin, when Covid first came in, and you probably know, um, yeah, where to be quite frank, getting someone shorts over a particular uh, level, generally 2 50, 300 k was pretty impossible to do because you just couldn’t talk to people’s doctors for obvious reasons. So what, you know, lots of us did is we did some assures of 250 and 300 K. Okay? So we did it below a point where you needed to go. What we certainly did at my firm is that we’re, therefore we diarized the fact that we needed to go back to all those people to then hopefully top it up to that, you know, to, to that level later on. So I’d, I’d say that one comes sort of back to us again.

Kathryn:

Yeah, absolutely. And I was gonna say as well, in terms of pricing from, from my point of view, um, I think, you know, every in protection space, advisor wise, we’re all very, very well on life insurance. I mean, if we ignore risks that can potentially increase, um, premiums, life insurance, pretty much the insurers out priced themselves, they’ve all gone so silly cheap in many ways with life insurance that, that it’s, it really isn’t, isn’t expon, it can be as listless five pam per month. I know that comes into age and smoke status and all the summer shows, but it can be incredibly, incredibly cheap to have life insurance. So at the very minimum, you should be at least looking at that side of things on the income protection side, you know, it’s something that I always say to people is I do, I will give them the Aus singing or dancing version and then we can work backwards if we need to.

Kathryn:

So likewise, I was saying, you know, you can potentially reduce the, some assured, um, if need be. I mean, I’m not a fan of doing short-term claim periods, I said like a two year or five year, if I can do to retirement, I’d much prefer to do something else than take away that from the retirement thing. But you could do a five year claim period, you could do two years, you could say to them, right, let’s do a three month deferred period, but make sure you put three months of savings somewhere that you are not gonna touch. And you know that you can live off that for three months as a just in case with, um, life and critical illness cover. Instead of doing like a full mortgage amount, do full life, do half kick, you know, or something. I’ll, I’ll take like a figure. If you’ve got like 450 on the life, take a hundred of kick off something and combine them. And that’s another thing that I come across is making sure that mortgage advisors know about the survivability clause of standalone kick. And

Roy:

That’s a, that’s a brilliant point Kathryn as well. Yeah, I think again, Martin, I’ve seen you, some of my mortgage, uh, colleague friends, they might do a 400 K mortgage. Okay? So they automatically go into the search engine and go, right, 400 life and kick and they go, oh my God, look at that figure. It’s absolutely outrageous. And sometimes it is. But we do exactly the same as Kathryn. I would say, look, maybe cover yourself a 400 of life. Take the kick down to a hundred or f or even 50 and just have some criticalness in there, okay? That really brings that premium down. You do need to review it. You shouldn’t just sit on your hands there. That needs to be something you need to go back to. But I think sometimes, you know, when you look at these uh, portals, you will have scary figures rather than just give up at that stage, play around with it a little bit or get, you know, get your para planners or see us to, to play around with a it. You can bring those premiums down.

Martin:

Good. Well, I’ll tell you what your two thirds of the writers are convincing me. So have this last one, have this last one. This is my favorite one. Okay.

Kathryn:

I that we’ve kinda got interviewed ourselves.

Roy:

That’s what this podcast is all about. I like this. I like, like

Martin:

It. Thank you for attending my podcast, right, <laugh>, um, uh, this is definitely, this is definitely coming from the consumer and it’s the, it won’t happen to me. Objection, right?

Roy:

Yeah. So the great, the gr the greatest objection ever. And I think, you know, those of us have been around a while are probably, I mean, I must, this must be, uh, tens of thousands of time. I think the important thing there is, is to realize two things. One, people do think they’re generally indestructible, and two, this is a subject that people don’t wanna think about. And I think part of the skill of the advisor is to, in a responsible way have a disturbance conversation. And that disturbance conversation is actually, there’s a very good chance that this might happen to you. Um, now strangely, things like covid have, I think have adjusted people’s faults. You know, that indestructibility we all had, let’s face it, nobody really has not been touched by covid in some way or or other. And I think the fact that now people can relate to, you know, long-term illnesses and stuff like that is, is, is a one way of talking about this.

Roy:

But we’ve also got beyond with stats, okay? And there are lots of great stats out there about the propensity of these things happening. Okay? I think when you pe when you actually show people the stats of the likelihood it’s happening, they are genuinely shocked from my experience. And I think you need to have those stats in your, in your proverbial satchel in order to roll out to people. Um, I also think you need to talk to them, particularly with mortgages about the attitude of lenders. Okay? And Martin, you’ll know better than than both of us that, you know, you’ll get a little bit of leniency of a lender. But basically if you are off long-term ill or you have a critical illness, um, of suddenly if you die off, there’s no one. But there’s not as much flexibility as you might think. And I think arm those stats and then the practical side of what would that do to your mortgage, I think in a responsible way.

Roy:

Um, and I, I don’t apologize for using the disturbance word. I think you, you, you can educate consumers. I, I also think, um, um, and I saw great, um, ft c uh, uh, model the other day about relating people to people that are like them in terms of their job, but their age. So there are some great stats on the amount of people who are fortunately have critical illnesses in their twenties. Okay? And yet I suspect there’s lots of people in their twenties go, oh, we know happens people like uss. You should have those things to hand, you know, you should have the stats about, you know, the, the number of people that are off long-term. Ill, you, you guys probably saw it the weekend. I mean, there’s a guesstimate there. There’s two and a half million people on long-term illness from this country, in this country, currently two and a half million amongst, you know, 20 million. You know, that’s a huge likelihood of happening. So gain, I think have these figures to hand and just make them real. And part of what, let’s face it, our job is we talk about their dreams and aspirations. That’s the mortgage, that’s the buy. Buying a house is one of your aspirations. That aspiration could be wiped out overnight if something that’s very likely to happen happens. We’ve got, we’ve gotta help in that delivery.

Kathryn:

I’ve, uh, I’ve actually helpfully got some stats to hand cause I do, it’s part of my training. So, um, just because obviously as well this might be helpful for advisors as well to start hit home why this is important. But as an example, Parkinson’s, every hour two people are diagnosed with Parkinson’s in the uk and I know from work that I’ve done with Parkinson’s UK that somebody with Parkinson’s is 16,000 pounds worse off every year because of their condition. That’s due to obviously loss of income and due to medical information. So it’s not just things like that as well. So I have more stats. So there are more than a hundred thousand strokes each year. In the uk there’s 150 people diagnosed with breast cancer every day in the UK there’s 130 people diagnosed with prostate cancer every day in the uk. And another one for me to throw in at the end is somebody is admitted to hospital every five minutes in the UK with a heart attack.

Kathryn:

So we’re not talking about things that are just, you know, it isn’t just happening out there and to other people. We’re at a point where statistically it’s now more than one in two people will have cancer at some point in their life. And in terms of like the income protection side of things, you know, you can do these, uh, thingies and everything. And I, part of my, again, the training idea, as I say to people, right, I’m 37, what’s the likelihood of me dying right now as you know, unexpected this age agent, it’s something like 5%. So then what’s the likelihood of me having a critical illness cover say critical illness? And that’s 14%. And you start think, well actually with all those stats that I’ve just given, you’d probably thought it was maybe higher because you know, that’s, you know, um, but the likelihood of me at 37 being unable to work for more than two months due to ill health is 50%.

Kathryn:

So we’re literally at a 50 50 with people when they are at work as to whether or not they’re gonna be off for what’s considered to be relatively, I’d say not long term, but probably to a time period where they’re gonna start to maybe struggle a little bit. And it’s quite surprising as well when I think, you know, when you hear people say, well, I’ve put the state benefits, and you’re just like, well, do you actually know how much that is? And you know, when you look at state benefits, statutory sick pay, that’s actually less than 3000 pounds that you would have to live off for six and a half months. And I, I think, you know, sometimes having information like that to hand can be really, really helpful to say, look, this isn’t just me trying to flog something at you and sell to you or something. I’m literally saying 3000 pounds for six and a half month. Can you, can you live on that? And if they can’t honestly say yes, then, then really it’s something they should try and hopefully be open to the conversation.

Martin:

I think if you, I mean they’re, they’re all great stats and sometimes I think the numbers could be too big. Kathryn a hundred thousand people list, you can’t relate to that number. But I suppose some of those stats there, if you break that down in the course of this podcast, if it’s an hour long, there’s probably been 20 people that have been diagnosed with something Yeah. Or had a heart attack or died when you break it down to that granular level Yeah. And realize that in this small conversation that we’re having, 20 people’s lives have changed or ended, it does bring it home a lot more. I think your point about the um, um, sort of, uh, long term sickness and can you afford, um, um, to live on, on this. I think what what what we’ve seen on the mortgage side is, and this is going back now 20, 25 years, is it’s a we did such an pre previously you must have it today. You deserve this live, live life in the moment. I totally you do understand that. Cause you dunno when your time’s up. But we’ve gone to the point now by I think the average is that people have got three weeks worth of money left over if something happened. Yeah. Is that right? Um, yeah,

Roy:

That’s spot on. Yeah. That came out over Covid. The average person in the UK had free week salary and savings.

Martin:

Yeah. Okay. So it, you know, that that’s the, that’s the, the downside to that lifestyle economy that we’ve created whereby the consumer must be protected at all costs and high Street must be protected at all costs. And um, you know, let’s just hope that you don’t become seriously ill as a result. So we played a very dangerous game of Russian roulette there whereby we’re living to the max and often beyond it. And if you see what we see sometimes that, you know, um, uh, people now in London in particular, a hundred grand a year is a pretty average salary for a lot of people. And people live up to that maximum. They have no discernible savings other than the equity in their property, which as we know will not pay your bills unless you sell it. So again, demographically and socially we’ve broken a lot I think in the last generation or so, and our attitude towards money and debt and protection has changed as a result as well.

Martin:

Um, and I think it’s fair to say, um, don’t quite know where we’re going from a, a political point of view in this country, but it’s looking like the n h s and the welfare state might be changing significantly in the future and not for the better. Um, how that will play out. I, I don’t know, but that safety net of the government will be there for you. Feels to me like that’s, that’s a, just a sound bite. Um, and the reality is that there probably won’t be a lot there for us. And if we don’t look after ourselves then it’s a fair assumption that probably nobody will.

Roy:

There’s a lot of people in our industry, Martin, who think that consumer duty is actually, uh, the breadth of proverbial fresh air for protection because it is going to make people talk about protection more than they’ve ever done before. Uh, for moral and ethical reasons. There’s nothing else but also practical reasons. What effects that will consumer duty, do you believe? We get the granular part of it, but what effect do you think it’ll have on the, on the mortgage industry?

Martin:

Well, I don’t think it’s gonna have a positive one. I mean, I would suggest that in, in on the mortgage side cuz it is very transactional and it might be a kind of a product that you might not see a consumer again for the five years. It’s not like the I FFA world to continually have to review and discuss, uh, ongoing, you know, macro and, uh, microeconomic, uh, issues that might affect their fund, et cetera, et cetera. So, you know, in that respect, it’s a bit of a blunt instrument from our point of view. Um, having said that, you’re right on the protection side, I think it will be quite crucial. You know, we have to not quite how this is gonna play out in the real world. We have to predict the client’s future. That’s sometimes what, you know, people are saying about consumer duty.

Martin:

We have to try and cover as many unknown unknowns to quote Donald Rumsfeld that may or may not happen to that consumer at some point in the future. Makes our job very interesting. We also very difficult at the same time, but we have to protect ourselves as a business. We have to protect ourselves. We can’t just write a line on the fact find that we, the client didn’t want to talk for arch protection, you know, that might have worked previously. Okay. Is that going to, as Kathryn said, is that gonna stand up in a court of law? And I think we do, you know, as a, as a regulated industry with, um, you know, the consumer as our clients that, you know, you have to, you have to treat the fact find like a police interview as well. You know, are we talking about the right things?

Martin:

Are we recording it adequately? Are we also covering ourselves that if that fact find and recommendation was questioned at a future dates, does it stand up to scrutiny? Okay. Now, in some respects we’ve been winging it and we have been for 20 years. I think society’s been winging it since we crawled out the, the sea. But, you know, from our point of view, consumer duty, um, has to be seen as, as as, uh, as a gift with strings in as much that look, you know, this actually will help our businesses. But there’s work involved and attached to it. And I think, again, as we said at the very start about regulation being a, a necessary evil, we have to embrace this. It’s not gonna co you know, the s d aren’t gonna wake up next week and go, do you know what, let’s forget about our consumer duty. So it’s here to stay. It will change, it will change our process, change our fact finding. Um, it will and it should create better results to the consumer and it should make our businesses more robust as a result as well.

Roy:

Yeah, I mean one of the opportunities that we very much see in consumer duty is, uh, you know, greater propensity for signposting. Um, and I think most of, most of the protection industry is sort of saying actually signposting has come along at the a very similar, you know, opportune time. Do you think, uh, um, and you know, but please be as honest as you can. I, we we’re quite obsessed by signpost, aren’t we, Kathryn? But do you think the mortgage industry gets the signpost message that that’s coming out? Protection? I mean, is it being heard at all or, um, a a a mortgage brokers a aware of what the protection industry are talking about?

Martin:

No. And this is, this is where I think, um, this is where we need a bit more vocal on this. In the same way that when RDR came along in 2012, uh, and it was, look, you’re either gonna do this and become an RFA or you’re gonna get out the industry now, okay, so I think we need a polarizing debate along the same sort of lines here. Shake up or ship out. Are you a mortgage and protection advisor or are you just a mortgage advisor? Okay, if it’s the former crack on, if it’s the latter, get qualified. If it’s somewhere in between, this is where you might be able to help, is work with a trusted partner. Okay? This is one thing that we do very well within London money and we do it, uh, uh, across the wider money group is if, if that’s not your area of expertise, give it away to someone that does it day in, day out.

Martin:

Okay? Don’t sit with that risk on your book. Don’t sit there and assume that you know, just enough to give the recommendation. So things like equity release, bridging second charges, uh, general insurance, it’s not our remit. We’re very good at mortgages with some of the best brokers around at mortgages. That’s what we do. When it comes to something else that’s a little bit off piece, find someone to work with. And the client, you know, the problem with the broker is that they’re still in that mentality from 1995, but we’re all scratching around for clients that the moment you found a client, you, you know, you followed them home and slept in the car outside just in case somebody else got in there the next day. And that mentality is still within our D N A. We don’t know how to let go. We have to think we, we, we, you know, with a jack of all trades and we can do everything that’s not, you know, your business will improve by realizing that you just, you’re very good in a very narrow channel. Stick to it. Anything else? Work with somebody else. So I think I’ve spoke to some of my guys about, to Kathryn before about protection stuff that is just, you know, we dunno what we’re doing. So we’re not gonna pretend we know what we’re doing. We’re not gonna have many waste hours and days speaking to providers and then still not know what we’re doing. We’ll just ring Kathryn.

Roy:

Yeah, I think also the o the the other, the other positive point for any mortgage brokers listening in is, uh, signposting is a two-way, uh, is a two-way arrow. Uh, there’ll be lots of protection advisors to, to that point who maybe dabbled in mortgages and just saying, this really isn’t, this really isn’t our thing. Who are probably looking for mortgage brokers to give their mortgage book to, and, and listen, reciprocation <laugh> is the most powerful, uh, you know, tool that there is. So if you can, if you, you know, gets, sorry,

Martin:

We, we spend, we spend an all spend, I dunno, much across the industry, but hundreds of millions of marketing. And, and the best relationship you will ever have in this industry is with a professional connection. All right? Someone that does a part of the job that you can’t do and you can do a part of the job that they can’t do. And then between you, you do a very good job for the consumer and the consumer doesn’t care. This is where the broker needs to understand, just let go. The consumer is not ready to you as an individual that you are some sort of, you know, one stop shop when you will look after everything. They will respect you more. If you say, I don’t know anything about this area, but I work with someone who knows this area inside out, any objection if I pass your details across to them, your client’s gonna go? No.

Roy:

Yeah. And Martin, I I, I, I’m a, I’m a great living example of that. I once did mortgages back in the early nineties, couldn’t stand and rubbish at them as well. So for the last 20 years, I’ve been giving all of my mortgages to, uh, to one of your, one of your peers. And it works perfectly. And not, not once, not once as a client of mine ever said, why are you bringing someone up to this table? Um, they, they want the fact that, you know, the person you bring to the table, that’s very important to them. But no one will ever question, you’re bringing someone else to the table. So that’s, that’s,

Martin:

Uh, they trust you enough that, uh, you know, your word is your bond. You wouldn’t refer them to someone that was gonna have a detrimental effect on their life. It’s the opposite. Um, so, and I refer my accountant, accountant refers to me, I refer to solicitors, solicit, refer to me, I affairs refer to me, I refer clients to ias. That’s how it should be done. That’s a very collaborative, positive industry. Um, that that’s consumer duty working, in my opinion. Yep.

Roy:

Yep. Couldn’t agree more.

Kathryn:

Absolutely. So, as we’re coming towards the end of the podcast, this has gone really fast actually. So Matt, what are your thoughts on what’s gonna be happening in the mortgage markets from what you’ve said, I was gonna say, over the next year, do you hope it’s obviously, I’m sure you hope it’s gonna settle down, but can we even look ahead even past Christmas at the moment? Is it, how is, how is it all shaping?

Martin:

I wouldn’t, I think, uh, I’ve made this point, um, on, uh, Twitter and got shot down in flames, so I might as well have to go at it. It’s a very difficult, this is almost an impossible market to give good advice in right now. Um, uh, cause it’s so fractured. Um, uh, we’ve always been able to have a rough idea in terms of the direction of travel, of interest rates, um, right now, particularly in September, October. That was just, it was ridiculous when, when rates were, were moving around all over the place at speed, you couldn’t, you couldn’t put a glass over it at any particular time. Um, that has now calmed down. Okay. So, you know, the the, the fiscal events, which caused so much disturbance in the market, um, has, has, has calmed down to a degree. But we are still in a, in a relatively high and straight environment compared to where we were this time last year.

Martin:

If you could think that, uh, this time last year we were fixing people at 1% for five years, well, that’s now 4%. So the knock on effect of where we are right now is, is quite significant for, for the overall economy. Um, we’re in a little, uh, uh, um, sort of tracker within our, in internal, um, business to see what the cost of, uh, financing now is for clients. And just in September and October alone, the, the, the clients that we dealt with, which I think was something like, uh, for remortgage, 83 clients, uh, collectively, they’re now 38,000 pounds a month worse off than it were previously. So, you know, you extrapolate that out, that’s half a million pounds across 80 people that will not be going into the economy anytime soon. And now the issue we’ve got as an industry is next year, starting in January when you’ve got a hundred thousand clients whose fixed rate is ending and they’re gonna be coming off those 1% rates from two years ago, or even 1.7 from five years ago.

Martin:

And they’re gonna be going into a climate whereby, you know, it, it, it’s gonna be starting with a high three or possibly a four. Uh, for some people it might even be a five or a six. And by to at the moment is in, in degree of trouble. And whereby none of the numbers really work. So in terms of projecting the future, I, I wouldn’t like to say, I would say though that it’s going to be a difficult year next year. It’s impossible. Cause what we’re not gonna do is we’re not gonna go back down to a base rate of North 0.1%, which is where it was in April, 2010. Okay, we’ve got help to buy ending. Um, is there a silver bullet? I don’t know. They might bring in a stamp duty holiday. I don’t know too much. Government interference is, is not a positive thing.

Martin:

I do not think because we’ve ended up with a, a market that actually is unsustainable. Uh, we’ve got issues now in the rental market whereby landlords are forcing the rent up because they’re, their mortgage has gone from 500 pound a month to 1500 pound a month, and they’re gonna pass that cost on somewhere. You’ve got house prices that are seven or eight times the median, um, uh, income. Well, that something has to change. It can’t carry on like that. Something we’ll have to give interest rates, asset price, access to capital, something will have to change. And it’ll be an interesting, it’s probably, I’m a bit more fearful of this market than it was in 2008, because in 2008, the problem was easier, easily identifiable. It was a credit issue within the banking sector. That’s, that’s quite easy to fix. Um, albeit very expensive this time around.

Martin:

It’s very, very, very different. You’ve got so many different problems moving at speed in different directions that it’s gonna be very, very hard to fix it. And then you’ve got, you know, we’ve got a budget on Thursday that looks like that’s gonna be expensive from a taxation point of view and maybe a, uh, a cussing of services point of view. So yeah, I think you, you know, you, you wanna approach life as a glass half full, but goes back to the really original point, Roy, is this will test, uh, businesses and how robust they are, how diverse they are, how well capitalized they are. And one of the main issues that I’ve had in this industry is that the reason why the broker panic when there’s a catastrophe for a dancing, because they spent all their money in the good times.

Roy:

Yeah, yeah.

Martin:

Less nothing in the bank. And I’m concerned that this time next year there will be businesses that are already on thin margins, um, uh, uh, and those margins could disappear. Now, the industry won’t die. You won’t give up because there’s, there’s a hundred thousand people that mortgage advice every single month from next, from January onwards, people will still move. The big, the big three d’s, death, debt, and divorce are always the big drivers. There’ll always be a requirement to move. So there will always be a market, but I think a lot of the low hanging fruit will, will have gone. Um, and then we’ll find out who the good brokerages are.

Roy:

And let’s be fair to your profession, you are a very resourceful guy. Bunch. Um, uh, you’ve, you’ve been here before in all different size, size, shapes, colors, et cetera. But yeah. But you are resourceful and, uh, I think the thing can be set of protection. So I think, you know, important, we, we end this on a, on, on a relative high, but uh, yeah, you’re right, there are some tough time. Yeah, we are, we’re,

Martin:

I’ve always likened this to the crocodile, you know, whereas all the dinosaurs get wiped out. And yet as a, you know, we’re still here 4 billion pound, uh, 4 billion years later doing, um, uh, water advice. So we will, we will be resilient without shadow of a doubt. And, and protection advisors will, there’ll be a tree shake. You know, there’ll be those, those brokerages or those protection firms and you know, who they are, probably who sit in call centers and churn and burn and, um, and, and a forever chasing identity commission. There’ll be a tree shake there. Yeah. Because it’s across the living crisis, you’re gonna see a huge amount of lapses come through for some businesses. And they won’t, they won’t be able to accommodate them. The, uh, the tree shake will be in those firms in the mortgage broken slide that have been quite relatively, quite young, come in recently to disturb it. They’ve overpaid for brokers to come in. They give them nice fat, um, salaries and assumption that there’ll always be business. Um, it’s gonna be harder to find business. Um, any tree shake in any sector though is quite good for those good businesses that will be left behind.

Kathryn:

Absolutely. Well, this has been really, really interesting. So thank you everybody for listening and thank you for your insights, Martin. Uh, next time I’m gonna be back and we’re gonna have an episode on value added benefits and I’m gonna Matt Ram back with me and we’re gonna be chatting to it from an advisor point of view, consumer underwriter claims kind of situation. If you’d like a reminder of the next episode, please drop me a message on social media or visit the website, practical he and protection dot code uk. And don’t forget that if you’ve listened to this as part of your work, you can claim a CPC CPD certificate even on the website too. Thanks to us sponsors, the Octa members. Thank you, Martin. Thank you, Roy.

Martin:

Yes, thanks Roy. Cheers guys.