This time last year I was writing about why brokers should consider loans for clients. It is a testament to how far that acceptance has come that I am now being asked more and more about how brokers can actively market loans.
The principles of effective marketing are of course the same for loans as they are for any product. But marketing has always been about adapting the guiding principles to the individual idiosyncrasies of the target market and nothing could be more important when it comes to the marketing of loans.
One of the fallacies about the loan industry is that it is not regulated. In fact without a proper understanding of the rules governing promotion, which also differ from those on mortgage products, it would be easy to make costly mistakes.
Compliance
There are many things that need to be taken into account when promoting this type of lending and introducers must make sure they are compliant. The main area of concern for the regulators is the typical rate displayed and the prominence of certain information. If you are introducing secured loans business to a master broker you must ensure you have the correct information relating to typical rate and minimum and maximum rates available. It is not as simple as advertising the lowest rate to which you have access as this is not considered to be a fair example of what you could expect as a consumer.
Firstly, the rate displayed as the best or lowest rate should be the rate that 10 per cent or more of borrowers complete on and the maximum rate that loans are expected to complete on must also be displayed. The main area of misunderstanding is the typical rate displayed, as this is meant to give the consumer a realistic idea of the APR they can expect to be offered. What most introducers overlook is the fact that different master brokers/loan packagers have different typical rates because they are often involved in different types of market. Some have little or no involvement with full-status prime lending and as a result could have a higher typical rate than a broker that has a more varied type of borrower. The situation can arise where an introducer advertises a typical rate that is misleading because the case may never be submitted to that particular master broker/packager and could end up somewhere else.
Full panel
The point that I am making is that introducers should make sure that the master broker to which they pass this type of lending has a full panel of lenders that offer all types of rates and products. In an ideal world, introducers would have access to compliant promotional material from the master broker/packager with which they work. In reality it is unusual for a master broker to make compliant promotional material with the correct information available to all introducers. To be sure about compliant advertising an introducer needs to work exclusively with the master broker in question. This is the only way to ensure that he is not misleading any borrower who responds to this kind of promotional material due to typical rate.
Debt consolidation
Another area where brokers need to take care with advertising is that of debt consolidation. It is important to point out that although monthly repayments may be lower due to a new loan being taken, the overall amount of interest repaid may be greater due to a longer term being taken. Broker fees, otherwise known as arrangement fees, are also an area of concern, as many advertisers do not bother to draw attention to likely fees charged. Consumer expectations need to be managed correctly in this area and a typical or average fee charged must be displayed in some cases.
We have many introducers who have seen how actively marketing loans can be good business as well as good advice. Our marketing toolbox, which includes all the marketing material they are likely to need, is a direct result of requests for this type of assistance. Whichever master broker/packager is chosen it is vital that introducing brokers choose one that will not only provide them with a fulfilment service for their cases but help them with getting the promotion correct.
According to Datamonitor, the loans market is due to be worth £50 billion by 2008 and brokers who want to be part of that growth need to work with a loans master broker/packager which can give them the practical help in terms of compliant advertising material to realise their aspirations without fear of falling foul of the advertising rules.
My advice to any introducer who wants to market his own loans business effectively is to develop an exclusive working relationship with a master broker that offers a proper trading agreement, with a water tight no-cross-selling agreement, a strong lender panel which ensures loan rates for all circumstances and access to no-cost compliant marketing material.
Andy Moody is managing director of loan options
