On the one year anniversary of the credit crunch, with pundits suggesting that the worst has passed, it is time to look to the future rather than dwell on what has happened. So, what plans should brokers have in place to ensure that their business is ready for the market as and when it picks up?
In a tough market, it is obviously a natural measure to cut back on any unnecessary spending, but that is not enough in the current climate. It is high time for advisers to take a proactive stand and ensure that they are making the most of any income stream opportunities that come their way.
So what is the most effective way for intermediaries to earn their revenue in the current market? Obviously there are lots of options available, but one section of the market seems to have remained relatively untouched – Home Information Packs (HIPs). How has the HIPs market failed to be penetrated by advisers? But more to the point - why, given the high levels of income that the market generates?
Under the current market conditions, diversifying can be a very viable option for advisers, and one that has already been looked into by the majority who are trying to introduce and increase revenue streams. By offering a whole host of services, advisers will see their client base increase significantly or work to maximise their individual client revenue. This will help to provide a better service in terms of a ‘one stop shop’ by enabling them to cater for all of their clients’ financial needs under one roof.
However, it is strange to see that this need for diversification appears to have stopped at brokers offering foreign property, equity release and occasionally insurance. So why, at a time where revenue is extremely stretched, are brokers still failing to take advantage of the earning potential of HIPs?
Nobody is claiming that HIPs have had an easy ride onto the market, and this could be a significant reason behind the fact that advisers have chosen to steer clear, rather than fully immerse themselves in selling the packs.
Firstly, the details around the pack contents was being chopped and changed right up until the last minute, with the removal of the Home Condition Report (HCR). In addition, the initial introduction was not only delayed by two months from June to August, but they were also introduced with a phased roll out, starting with four or more bedroom properties and being fully rolled out to one bedroom properties by December of the same year.
As if the delays and tricky roll out dates weren’t enough, the packs were also being continually slammed by the Conservatives, The Royal Institute of Chartered Surveyors (RICS) and The National Association of Estate Agents (NAEA), issuing statements about how the Conservatives would scrap the packs if they were to win the next election – even though the packs are now a necessity by law.
For these many reasons some brokers were not fully up to date with what was happening with the packs – the different roll out dates and the changes to the pack contents, which made it much more difficult for advisers to want to sell them. In our experience, brokers with a sound understanding of HIPs are a lot more comfortable selling the packs and therefore, brokers without a full understanding found it easier to ignore the whole process. Even if this means that they are missing out on a valuable revenue stream.
Being a HIP provider, it is of course easy for us to say how beneficial the packs would be in terms of income. However, to highlight just how beneficial this move can be, each HIP can earn brokers £100 plus as a referral fee. By selling just four packs per week, an additional revenue stream of over £20,000 per year can be earned, which is a great way to cover fixed costs such as advertising, rent, printing or even training fees.
Although the cynical streak in all of us would shout ‘there’s no such thing as a free lunch’, the HIPs market really is that simple. Most good providers will do all of the legwork behind the HIP by being instructed either via the internet or on the phone. They will then take full responsibility for compiling the pack, as well as arranging the Energy Performace Certificate (EPC) and sending a copy on to the client. This means that the extra revenue really is just as a result of the lead, which is why it is hard to see how advisers have been missing out on this over the past year.
But the benefits for advisers who introduce these packs to clients are not only monetary. By offering these packs, brokers can hugely improve their service standards – as customers are being offered a more comprehensive service. If advisers ensure they choose a provider that subscribes to the HIP code they can be sure that the pack will meet all industry standards of accuracy.
This in turn will allow the clients transaction to move at a much quicker pace as the pack will be acceptable to all agents, solicitors and potential buyers as well as being more reliable for conveyancing purposes – which is after all the main aim of a HIP!
A HIP that has been commissioned by an estate agent, will most likely be tied to that particular agent. Meaning that if the customer chooses to move to another agent, they will have to instruct the HIP all over again, which can hold up the home buying process at a crucial stage. However, advisers also have the added bonus of being able to provide a completely portable product.
In the current market, brokers are also ideally placed to offer a HIPs service before other introducers, such as estate agents, are involved in the process. This is because many consumers at the moment who are looking to move house will go to their broker before even putting their house on the market. The liquidity shortage and media frenzy surrounding the fact that lenders are trying not to lend has meant that people want to make sure that they will be able to get funding for a house move before taking any steps to market their property.
By speaking to their client at this early stage, brokers can offer the HIP to their client and instruct the provider to get the pack under way at the earliest possible instance. By leaving it any later, the fee is likely to be taken by the estate agent.
In addition, by placing the HIP through the broker, it offers a great chance to offer a HIP and conveyancing combination – many providers such as ourselves will offer a reduced rate for a combination deal, whilst still offering a full referral fee.
Therefore, the income can be doubled with absolutely no extra work on behalf of the adviser, and selling both of these products allows the broker to retain complete control of the transaction - whilst at the same time, providing a better, more comprehensive service.
However, the packs do not only offer a great opportunity for improving service and diversifying, but can also be used as a means to promote the company. By diversifying into the HIPs market now, it offers a great opportunity to send an email or mail shot to the current client database. Not only will this hopefully bring in some new leads in terms of the HIPs market, but will also remind clients of their presence and hopefully put them to the forefront of their mind for any other work they could currently help with.
In addition, by ensuring to choose a provider who offers a white labelling service, the HIPs can be branded with the brokers details – which is a great chance for brand recognition and direct marketing.
Understandably the past year has seen many businesses reviewing their working practices to ensure that they are running a cost effective operation, as well as working to push the business forward. It is therefore surprising to see that there is a market with lucrative income streams remaining relatively untouched. Obviously the current obstacles in the property market will have some part to play in a lack of opportunity in the HIP market, but given that these packs do not rely on house sales but simply people marketing their property, there is still demand for the product.
In these difficult times it is important to make sure that all avenues are being explored, and so we hope to see brokers tapping into this market more in the coming months, as a way of providing some vital extra income.