Can advisers juggle mortgages and insurance?

The processes are complementary, specialists say

Can advisers juggle mortgages and insurance?

While some mortgage advisers opt to stay in their lane, advisers specialising in mortgages and insurance say that they are complementary and that clients being able to see just the one person for both areas saves them time.

Penguin Finance director and mortgage and insurance adviser Udita Sood (pictured above left) told NZ Adviser that as financial information required for a mortgage application was captured as part of an insurance fact find, “half of the research is already done”.

“In terms of someone who is advising on mortgages, it just makes it easier for them to advise on insurance as well,” Sood said. “I think [mortgages and insurance] are very complementary to each other.”

Sood, who has worked in the mortgages area since 2013, and started her own business with her husband in 2016, sells insurance (life, health and disability insurance) at the same time as providing mortgage advice.

As a mortgage adviser, Sood acknowledged that she formed a clear financial picture of each client.  When talking with clients about their mortgage needs and putting together an application, Sood said that the insurance conversation was a natural progression, recommending insurance product/s to suit their requirements and current position.

Insurance compliance and compensation

Under the financial advice regime, Sood noted that compliance around the insurance advice process had increased, requiring advisers to meet a number of obligations, involving increased documentation and time.

However, the increased compliance is a by-product of selling insurance, and the remuneration generally reflects this, she said. Unlike all mortgage advice, insurance advice generates a trail commission for advisers on an ongoing basis.

“Not all banks [provide] a trail income, whereas in insurance, as long as the client keeps renewing and the adviser is servicing them, they continue to receive a trail,” Sood said.

“While the increase in compliance is a challenge, if you have the right processes in place, it becomes easier.”

Sood said that the opportunity to earn a trail income provided a greater incentive to advisers to service their clients on an ongoing basis, acknowledging that this had made her more aware of her clients’ needs.

Single conversation saves time for clients

For clients, there was a time saving in having one conversation about changes in their lifestyle, as opposed to separate conversations with different people.

“If we know what’s going on with their lifestyle and their health, it’s easier for us to also keep that in mind when we’re advising them about their mortgage,” Sood said.

Sood also acknowledged that selling both products side-by-side made clients stickier, reducing the risk that they would go elsewhere.

“If you’re seeing the client on both these respects, the client is more likely to stick to you as you’re advising them across both sets of needs,” she said.

AML Financial Services Ltd director Kundan Singh (pictured above right) is currently studying towards his insurance qualification as part of the New Zealand Certificate in Financial Services (Level 5).

Singh, who has been a mortgage adviser for six years, has prior experience selling insurance and is completing the insurance strand as part of the recent requirements under the financial advice regime.

Acknowledging that advisers were held accountable for the advice they provided, Singh said that mortgage advisers were aware of the borrowing limits available to their clients and what their repayments would be, whereas insurance needs were subject to change.

“For me, it’s important to understand a client’s insurance needs so they’re not under-insured but also, they’re not over insured,” Singh said.

With that in mind, it was important that clients had a plan for the future of their insurance.

Noting that the average mortgage amount had increased over time, Singh said that selling insurance provided a holistic service to clients, allowing them to protect themselves from risk.

A mortgage adviser automatically knew what coverage the client needed, how long they’d need it for, and could provide advice to clients as their needs changed.

“Insurance is not a luxury item … the only time they’re going to claim it is when something really unfortunate happens,” Singh said.

What is your view on providing advice to clients on both mortgages and insurance? Share your thoughts in the comments section below.