Brokers urged to ‘add value’ to survive crunch

Mortgage advisers need to refocus their business in order to survive the tough mortgage market, according to Positive Solutions. Paul Rignall, mortgage manager at Positive Solutions, says firms need to increase the value of their business by offering complimentary services and advice.

“Over the last few years advisers may have been focusing purely on the mortgage deal, but they now need to look at the wider issues that surround it,” says Rignall.

“We know that the population generally is underinsured, so advisers need to get back to basics, making sure that the public is aware of why insurance such as life cover is necessary not just to safeguard the mortgage, but to cover the family as well.”

Positive Solutions says brokers must consider all available options for additional revenue, including conveyance, HIPs, bridging loans and a variety of insurance products.

Rignall also suggests equity release as a potential growth business through referrals or direct advice, depending on qualifications.

UCC claims large rise in intermediary applications

The Unsecured Credit Company (UCC) has claimed a 25% increase in applications from intermediaries since the beginning of the year.

The company believes that the credit crunch has meant that client requirements are forcing advisers to look further afield for funding solutions and that more advisers are recognising the importance of unsecured loans.

According to managing director, Bill Clinton, unsecured loans are going to be on many more intermediaries’ shopping lists moving forward.

He said: “The volume of enquiries to UCC from the intermediary market has been rising exponentially from adviser firms of all sizes. I think it is a testament to the tenacity of intermediaries that they are prepared to go the extra mile to fulfil clients’ wishes for finance and at the same time many have found just how important a role unsecured loans can play in their advice process.”

UCC did not disclose the actual numbers of applications from intermediaries.

Lenders look to title insurance as crunch bites

London & European is predicting a surge in the uptake of title insurance policies by prime lenders, and in particular building societies.

Christian Bearman, director at London & European said: “We’ve experienced a 116% increase over the past year in inquiries from this community as its focus has shifted from growth or market share to risk. Since the credit crisis began just over a year ago, it has become clear that the prime market has recognised the value that title insurance can deliver in adding an extra layer of security to their mortgage portfolios. What has been an accepted risk management tool amongst non-standard lenders for several years is now fast gaining equal status amongst building societies and other prime lenders.”

Bearman said the prime lending community faces three major risk categories which are rising exponentially in the current climate: repossessions, mortgage fraud, and solicitor negligence.

Repossessions continue to rise and with 25% of all UK property transactions having a title defect which could make a property unsalable, Bearman believes the risk to a building society or high street lender of not being able to recoup its investment in full is significant.

A recent survey by Nationwide stated that mortgage fraud has become endemic and the Solicitors Regulation Authority, the legal regulator in England and Wales, is investigating as many as 60 lawyers for alleged mortgage fraud after complaints more than tripled in three years.

Bearman added: “Building societies and high street lenders are in unparalleled territory in terms of risk and liquidity challenges. Title insurance offers an increasingly attractive proposition in helping them manage their risk exposure more effectively both now and in the future.”

Clive Briault given more than £500,000 in compensation after leaving FSA

Ex-FSA retail markets managing director Clive Briault received £528,952 in compensation for loss of office after he stepped down from his role following the Northern Rock debacle.

It was reported that Briault, who left the regulator by “mutual consent” in April, would receive a £380,000 payout. But the FSA’s Annual Report, released today, shows that figure to be much higher.

As part of his total salary, Briault received a performance related bonus of £30,000.

Outgoing chairman Callum McCarthy’s salary for 2008 has risen about 10 per cent to £480,553, from £433,565 in 2007. As usual, McCarthy declined to take up his bonuses.

Hector Sants’ total pay packet increased to £661,948 this year following his promotion to chief executive. He received a bonus of £114,000.

Sants earned £482,829 in 2007 as managing director of wholesale and institutional markets.

In his chairman’s statement McCarthy says: “The last year has presented great difficulties for the financial services industry, its customers and for the FSA. A long overdue and much-needed adjustment of the pricing of risk materialised abruptly, with severe and continuing consequences.

“We should all draw lessons from what has been a sobering experience. Banks need to improve their risk management, stress testing and disclosure practices. Investors need to recognise that buying assets whose risk they do not understand on the basis of a credit rating is profoundly unwise. Rating agencies themselves, which perform an essential task, need to change their practices to bring back confidence in ratings. And those responsible for financial regulation and central banks around the world need to examine their own policies and practices – something to which the FSA has demonstrated its commitment.”

FSA chief executive Hector Sants adds: “I am determined that the FSA will not be defined by the Northern Rock incident, but rather by our response to it. We have demonstrated our willingness to examine ourselves critically and to learn lessons from our mistakes – a quality we believe is central to giving the financial services industry and consumers confidence in the FSA.”

John Charcol to lose 69 staff

John Charcol is set to lose 69 staff and will close offices in Birmingham, Guildford and Manchester, after finishing a strategic review.

The company will be making 39 people redundant across various locations, accounting for 14% of the workforce.

A further 30 staff will leave the company as a result of a programme of performance management in the sales divisions over the last month.

The review has also seen the departure of some members of the previous management team, including chief executive Ian Kennedy.

The conclusion of the company’s restructure follows a substantial but undisclosed amount of investment from founders John Garfield and Charles Wishart as well as Jon Moulton, who is a significant shareholder.

Garfield, who has now rejoined the executive management team, says: “The turbulent and tough times that the UK economy is now facing, and the impact on the housing market in particular, will undoubtedly provide opportunities for companies that take the right actions now – and in the future – to ensure both survival and profitability.

“John Charcol will continue to take whatever actions are necessary to meet these objectives.”

Fear driving pension savings according to Widows report

Fear is one of the main factors prompting people to increase their pension savings, according to the Scottish Widows Pensions Report 2008. The Report uses two key measures to monitor pensions savings behaviour in the UK: the Scottish Widows Pensions Index and the Scottish Widows Average Savings Ratio. They are based on those who could and should be preparing financially for retirement, those aged 30 or over (and not retired) and earning at least £10,000 a year.

The 2008 Pensions Index, which measures the percentage of those currently making adequate provision, was 51% compared to 49% last year. People are treated as preparing adequately if they expect their main income in retirement to come from a DB pension scheme or if they are saving over 12% of their earnings specifically for their retirement (including any employer contribution).

Meanwhile, the Scottish Widows Average Savings Ratio, which tracks the percentage of income being saved for retirement by UK workers not expecting to get their main retirement income from a DB scheme, rose from 7.9% to 8.7%. This is the highest level recorded since the yearly survey started in 2005.

However, the report found that although the Index and Ratio have risen in the last year, savings levels are still falling short. Scottish Widows says while figures are slightly up on previous years, this is mainly due to an increase in non-pension savings, with consumers saving more for the short term. This gain is being cencelled out by withdrawals the provider warns.

Scottish Widows says the fear factor is definitely starting to kick in with 37% of people worried about having nothing in retirement (up from 34% in 2007).

Ian Naismith, head of pensions market development at Scottish Widows comments: “While pensions savings are slowly starting to rise, there is still the real worry that in the current economic environment the nation is not doing enough to prepare for retirement.

“While the savings message that we have been campaigning on for several years is getting through, with people scared that they will not have enough to live on in retirement, this hasn’t necessarily translated into pensions savings.

“Traditionally in times of economic uncertainty, long terms savings have increased but people need to ensure that they are saving into the right vehicle; the best investments for those seeking security in retirement are pensions.”

The report reveals that while the credit crunch may have influenced some people to put some money aside for a rainy day, consumer confidence is still low. Over four out of ten people (41%) felt better off five years ago compared to 39% in 2007.

The report also found males are more likely to be saving adequately for retirement. However, the gap is narrowing with 22% of women categorized as non-savers in 2008 (15% of men) compared to 31% in 2007 (19% of men).

Research was carried out by YouGov, which interviewed a total of 6,381 people over the age of 18 between 6 and 12 March 2008.

This article was first published by IFAonline, part of the Incisive Media group.

LV= launches flexible lifetime mortgage

LV= has launched a flexible lifetime mortgage product that will allow customers to draw down funds from their property. The LV= Flexible Lifetime Mortgage is available to those aged 60 to 95 with a minimum drawdown of £10,000.

The mortgage offers homeowners a 15-year guarantee on how much can be drawn down, which is not affected by interest rates or house prices.

Homeowners can take an initial amount of at least £10,000, followed by additional withdrawals of £2,000 or more.

Vanessa Owen, head of equity release at LV=, says: “What is fundamentally important for us as a mutual organisation is that it offers homeowners a choice of retirement solutions – they can withdraw the funds they need when they need them – rather than large sums of money at the start, which might not always be necessary or appropriate.”

The lifetime mortgage is priced at 6.95% with a £695 application fee and includes a total of three property valuations throughout the duration of the loan. As LV= is a SHIP member the loan offers a no negative equity guarantee.

Mortgage approvals sink to new low

The number of new mortgage approvals for house purchase has fallen to a record low, according to the Bank of England. Last week, statistics from the British Bankers Association (BBA) revealed mortgage approvals by banks had fallen 20% during May to less than 30,000.

The Bank of England’s figures, which include lending by all types of lenders, have fallen to just 42,000 loans for house purchase in May, down 28% since April.

The number of approvals has fallen by 64% since May 2008 as lenders have become increasingly nervous of mortgage customers.

The number of loans for remortgaging purposes fell 10% to 90,000.

The figures are the lowest since the Bank of England began recording mortgage approvals in 1993.

Fifth of firms will fail December TCF deadline

The FSA says it anticipates 20% of larger firms will fail to meet its December deadline for demonstrating they are treating customers fairly (TCF). In its latest progress update, the regulator says only 80% of relationship-managed firms are “still capable” of meeting the deadline after examining the management information (MI) progress at 96 firms.

However, it says this hints at great progress after pointing out only 13% of the 96 firms met its March TCF deadline.

The FSA, which says it will not be publishing small firms’ progress until later in the year as it has “not yet assessed a representative sample of this group”, is now urging all companies to step up their TCF efforts.

Sarah Wilson, FSA TCF director, says: “Having appropriate MI or other measures in place puts firms in a position where they can measure the quality of the outcomes they are delivering for consumers.

“These results show that adequate MI is not yet fully in place in the firms assessed – it does not mean that they are treating their customers unfairly.

“However, we now expect all firms to maintain their momentum and to undertake a significant amount of further work to meet the December deadline of demonstrating that they are consistently treating their customers fairly.”

The FSA says for firms that failed to meet the March deadline on time and where it “thinks it unlikely the firm is capable” of meeting the December deadline, it will intervene.

It says it expects to publish the results against the December deadline in September 2009, adding thereafter it will cease to have a bespoke TCF initiative.

Instead, it says, the assessment of how firms treat their customers “will become a part of business-as-usual”.

As part of the update, the FSA has published further examples of good and poor practice for firms regarding TCF.

Study shows that life insurers hit hardest by credit crunch

The life insurance sector is suffering the biggest fallout from the credit crunch, Confederation of British Industry (CBI) research suggests. According to the study, carried out with PricewaterhouseCoopers (PWC), business volumes, income and profitability have all fallen steeply while operating costs have also taken a hit.

PWC says UK financial services as a whole, with the possible exception of the fund management industry, has worsened in the last four months, with banks, building societies, securities trading and general insurance all struggling.

Andrew Kail, UK insurance leader at PWC, says: “Life insurers have reported their steepest decline yet for profitability.

“New business is expected to continue to fall, investment business is under threat from perceived market volatility and demand for protection products is being affected by the slowdown in the housing market.

“The slowdown is putting pressure on the sector’s own investment and capital plans. Life insurers intend to commit less capital to IT projects and look likely to reduce headcount.”

The survey, conducted between 21 May and 4 June and with 87 respondents, suggests the impact of the credit crunch remains far-reaching despite reports it had started to wind down.

The CBI says although the credit crunch has already been underway for ten months, nine out of ten firms (91%) think it will take more than six months for market conditions to return to normal.

The only bright spark, PWC says, was the fund management arena. According to the study and, contrary to CBI expectations, business volumes in fund management rose sharply for a third successive quarter.

In addition, fee & commission income was up, although profitability was lower.

Robert Mellor, UK financial services tax leader at PWC, says: “Despite a successful quarter of asset gathering, predominantly with foreign customers, and healthy activity over the past three months, fund managers’ profitability is under pressure.

“However, the sector remains upbeat in its plans for increased headcount and higher marketing expenditure.”

Across the industry as a whole, the survey found 20% of firms said business volumes had risen, while 55% said they had decreased. Profitability dived sharply, the report found, with a balance of 44% reporting a fall, compared with 18% in March.

The CBI says this is the fastest rate of decline in profitability since the survey began in 1989, and says another heavy fall is anticipated over the next quarter.

The survey also presented bad news for business volumes, operating costs and job losses.

Ian McCafferty, CBI chief economic adviser, says: “The impact of the credit crunch on financial services has deepened over the last three months, and conditions look set to remain difficult for some time yet.”