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Strategic thinking - Is this time for a new look at how we work as a business?

Richard Howes

Richard Howes

7 February 2024
5 key points for our member firms to consider
 
Navigating through a challenging environment
I believe inflation, market volatility and interest rate movements are still by far the biggest concerns for customers over the next 12 to 24 months. Inflation data over the last few months has on the whole been better than expected, which has encouraged financial analysts and economists to revise down their expectations for UK interest rates. The market expectations appears to be for the base rate to be down by 100bps in 2024 and to continue this downward trajectory in 2025 and 2026.

Talking to, reading and listening to what economists have to say indicates that they are not clear on what the recovery path is likely to be for the market. The old adage ask ‘10 economists for a view and you will get 11 different answers’ seems to hold true; will any recovery be like Table Mountain that is flat, or the Matterhorn, that is up and down?

Whilst January has seen a high degree of confidence return to the market, we need to be careful February does not have the ‘cappuccino’ effect, where it was all froth and little substance. The economy is still sluggish at best, and it seems the slightest hint of perceived bad news or bad results could throw us off course quickly.

That said we know there is “pent” up demand, house prices remain resilient, and lenders want to lend and are prepared to forsake margin currently to help stimulate confidence and demand. As we know many lenders had very ‘skinny’ pipelines going into 2024, and so this flurry of activity from them clearly helps them but also advisers and their clients.

What is great news is that advisers appear to be sharing this positivity; c.83% of advisers said they were confident in the outlook for the mortgage market in Q4 2023, an improvement from 65% in the same period last year, according to IMLA. What’s even more positive is that IMLA predict that intermediaries will account for 89% of all mortgage business written this year.  

Prior to the global financial crisis we were accustomed to official interest rates of 4% to 5%. So even if interest rates do start to drop back a little in late 2024 or 2025, it would be unrealistic to expect a restoration of the near-zero rates that we experienced from 2009 to 2021.

The most likely scenario is that we will be returning to this 4% to 5% level of interest rates once the surge in inflation has subsided. However, we cannot rule out further upward price shocks, particularly from the global economy, which would keep inflation and interest rates higher for longer.

Paradigm have working relationships with investment managers, economists, and financial commentators which you can ‘tap into’ to be aware of and understand the wider economics that can affect your business strategy and inform your clients as to how markets and their mortgage may be affected. 

Working with Paradigm can help you identify and build focus on your unique selling point (USP) as a business. For those areas outside your key USPs, you could bring in the expertise through collaboration with other firms, for example, utilising Paradigm’s referral process for Large Loans, Equity Release or Protection, or working with Paradigm to help identify future partners.
 
Getting closer to your customers
Never before has it been so important to have an on-going relationship with your client base to help them work through their options in finance and protection. Where is the next generation of your customers going to come from? How will you be able to get access to this generation?

You will need to “Go where your customers go”. You should find out where they congregate, how they like to communicate and how they want to be dealt with.

Paradigm can help you with improving your data on existing customers, looking at your online and digital capabilities so you can offer a seamless multi-channel capability, as well as helping you create and go into new markets with training and market knowledge.
 
Embracing experimentation and change
According to a recent survey conducted by PwC, nearly 90% of advisers believe that the use of disruptive technologies (including big data, AI and blockchain) will lead to better outcomes and returns for their business. But despite widespread investment and deployment of these technologies, this is the area of investor expectation that advisers can find the most challenging.

We are already seeing the impact of digital-first models and direct mortgage platforms appealing to and catering to a younger demographic, and whilst these have not yet have a major impact on the market, they are not going away and will get stronger with more traction.

It could be that you outsource your mid or back office arrangements, perhaps you can broaden the business presence through AI and a limited robo-advice scenario for the right clients. 

Paradigm can help you navigate this change and work with you to ensure the change models you might adopt are fit for purpose and relevant to your business now and more importantly in the future. Using our relationships and strategic partnerships, we can align partners which can help your business grow in new areas at the right cost, at the right time, for the right results.  
 
Delivering at scale amid cost and competitive pressures
As industry concentration picks up, is this a time to consider a more holistic approach to financial wellness with clients through increased use of lifestyle planning, cashflow analysis via acquisitions, joint ventures or alliances?

It is clear there is no appetite from Lenders to look at proc fees in an upward direction, so how does a business grow through profits? Innovative alliances, and small scale focused deals can provide transformational results. Paradigm can collaborate with you in these areas to ensure business success.
 
Standing up to intensifying scrutiny
Firms will also need to stand up to more scrutiny which we are seeing through the FCA and via the new Consumer Duty, as well as principles for a firm around environmental, social and governance (ESG) expertise. 

Paradigm have been at the forefront of Consumer Duty preparation support, providing practical examples of the impact on business and how you can navigate you, your colleagues and ultimately your business through this legislation.

We have a dedicated Consumer Duty page giving information, detail and help and guidance to ensure you work within its principles as well as a highly qualified team to work with you on all aspects of the Duty now that we are in the ‘reporting phase’ to ensure you get the right results for you and your clients.

In essence, all of the team at Paradigm are here to support you through the many challenges that you are facing. We try to think outside of the box and offer a level of support that you may not receive from our competitors. We genuinely want to help and support, so please do pick up the phone or drop us an email, and explain where we may be able to assist or add value to you. Feel free to email me on [email protected] or you can arrange a call back from your dedicated Relationship Manager by completing the short form here.

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Office address: 1310 Solihull Parkway, Birmingham Business Park, Birmingham B37 7YB
Registered in England and Wales. Company No: OC323403. Registered Office: Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND
Paradigm Mortgage Services LLP is a Limited Liability Partnership.

Paradigm Protect is a trading name of Paradigm Mortgage Services LLP
Office address: 1310 Solihull Parkway, Birmingham Business Park, Birmingham B37 7YB
Paradigm Mortgage Services LLP is registered in England and Wales. Company No: OC323403. Registered Office: Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND
Paradigm Mortgage Services LLP is a Limited Liability Partnership.