Welcome to the newsletter from HomeLoan Partnership, designed to keep you up to date with topical market news, sales ideas for your business and developments in the HomeLoan Partnership proposition.

Yesterday the Chancellor delivered what is bound to become one of the most important Pre Budget Reports of recent times, designed to help soften the fall in the economy and stimulate recovery at a faster pace whilst recovering some of this expenditure in the future.

Key points for financial advisers would be as follows:-

• More working capital guarantees available to Small Business Enterprises (SME’s)
• Trading loss carry back of up to £50,000 temporarily extended from 1 year to 3 years
• Assistance for businesses in temporary financial difficulty in spreading tax payments due
• Higher rate tax rises to 45% for those earning in excess of £150,000 from 2011/2012 tax year
• An additional increase in the personal allowance of £130 from April 2009
• A 0.5% increase in NIC for employees and employers from 2011
• A five year freeze on lifetime and annual pension allowances from April 2011
• VAT reduced to 15% for 13 months from 1^st December 2008
• Alcohol and fuel duties increase to offset this reduction but apply permanently

What is missing is any extra help to the housing market, for example, a temporary reduction in stamp duty had been called for. There was a positive effect on the stock market and three month Libor fell to 3.98% with overnight rates stable at 3%, having fallen from 5.38% a month ago.

The Bank of England cut base rate to 3.0% on 6^th November and a public (shame) campaign pressured many lenders to reduce their rates. The Sun newspaper was characteristically blunt with their headline “Now pass it on, you Bankers!”

This has most recently reflected in fixed deals at around 4.69%. The booking fees are not the issue with the product, it is the 60% loan to value that still limits the scope of sales, just how low risk do lenders need to remain?

The problem is that most mortgage brokers have a list of prospects ready to fix but needing products at 80%+ to satisfy inevitable down valuations. The news from Rightmove is not so hot either, registrations for home sales are running at 20,000 per month, down from an average of 35,000.

Property asking prices dipped around 2.9% on the month, down 7.1% over a year but offers are being accepted at some 20% lower than 12 months ago.

This suggests that sellers are procrastinating before making a decision to sell, still unrealistic when they market the property, and those that do have false expectations.

How do we sum up the state of the market at the moment? Perhaps that the raw ingredients are there to allow lenders to provide products that brokers desperately need.

Alas, all the time that they can fill their lending targets with 60% LTV products with high fees, what motivation is there for them to do it?

The chancellor has suggested that he will apply pressure to lenders to make funds available to those that need them and now is the time to do this!

Network Data announced the takeover of Mortgage Broking Services Ltd (MBSL) to form a combined group of some 700 firms and 900 advisers. However this is a little ill timed as it comes after much publicised problems with payments of commissions at NDL culminating in a member firm creating a forum to allow other members to vent anger about the situation.

The forum seems to have galvanised opinion and currently has over 230 registrants and 1250 posts and one member has already warned all MBSL brokers about the problems they experience. NDL has also announced the sale of it's head office building, designed to bring cash back into the business.

The merger will be confirmed at an EGM in early December but it could be the resulting group will not be as large as imagined, having lost brokers from both networks.

This also highlights the fact that it is not size that matters, it's what you do with it!

HomeLoan Partnership respects the fact that every member firm contributes to the success of the network, we provide ever improving products and services, make fair charges for them and pay commissions on time, every time!

We also offer network mover discounts to all members of NDL or MBSL that want to feel that they are valued as more than just an asset of the business!

Feedback from brokers recently has suggested that the ability to command decent fees may have been restricted by the reduction in selling opportunities. Whilst many have had to charge fees to recover lost income, others have dropped their fees altogether in competition with other brokers.

Should you continue to charge fees? We think that the issue revolves around confidence in the service that you provide and the presentation that you give to prospects in first instance. You have to demonstrate clearly to the prospects that they are likely to receive better service or will benefit from your experience.

As a compromise, some brokers also use a fee waiver agreement where the client acknowledges that you have waived a fee in lieu of the income that you will earn from a related term assurance. This fee agreement gives you the right to recover the fee if the term assurance does not reach the end of the earnings periods.

This provides valuable protection for you against clawback but you have to recognise that this should not become a conditional term sale (the client still needs to respect the value of the cover). You also can't build a business reputation based on recovering fees, the intention should be genuinely to reach an agreement with the client that suits both parties.

So, have confidence in your ability as a broker, differentiate your service offering from the competition and live up to expectations and your fee income should be secure.

Take a look at the lucrative corporate protection market.

There is a world beyond mortgage and family protection, and this is in the corporate marketplace, selling non-investment protection products to businesses.

Why would you want to be involved in this?

The main reasons that this is worth your time and effort are:-

• Sales are not linked to the mortgage market and therefore provide income opportunities when your key sales are depressed.
• Prospects exist in your client banks now amongst directors, small businesses and referrals from employees.
• Premiums can be larger and commissions higher.
• The company pays these premiums and treat them as a business expense rather than a personal expense making decisions easier.

What are the opportunities for sales?

These revolve around protecting the business against the death or disability of key employees and arranging wider staff 'group' benefits. The main areas would be:-

Keyman Insurance (lump sum and Permanent Health Insurance)

Many small businesses in particular will recognise that there are key staff whose death would impact greatly on the ability of the business to continue and prosper. This might be the owner of the business, directors or even specialist staff. Keyman insurance provides capital to the business to allow it to repay loans, replace a staff member or compensate directly for lost profits until a suitable replacement can be made.

A business needs to face up to the risks of this happening, for example, 15.9% of 45 year old male executives die before age 65 (Standard mortality tables AM80), one in 6 males aged 30 will have had a heart attack before age 65 (ERC Frankona 1997). When you consider the low cost of premiums against the expenses of running the business, you can see why such action is prudent.

It is important to recognise that insurable interest must be determined and this will involve financial underwriting as well as medical underwriting of the case. Most insurers will offer clear guidelines as to how to determine the level of cover that is permissible. This could include more straightforward cover against debts which may even be a condition of the loan but may have been sold on uncompetitive terms by the lender.

Share Purchase

Another purpose of life assurance within a business environment is to facilitate the purchase of shares from the deceased's widow or estate. This eliminates the issue of (say) a 50% owner of the business being faced with having to support a shareholder's widow that expects 50% of the profit but that cannot contribute to the work.

Executive Permanent Health Insurance

In this instance, the purpose of the policy is to compensate a business for the cost of maintaining income to an individual that is unable to work for an extended period. This effectively allows for the individual to be replaced without a loss of profits and can help to ensure that essential staff are well protected and return to the business after their illness.

Staff benefits

Companies provide benefits to staff to help to retain them, reward good service and protect them and their families. Group schemes usually revolve around death in service, PHI and private medical insurance and these can be underwritten without the need for medical evidence.

Are there any pitfalls?

Business assurance involves advice about key business risks and therefore you need to ensure that you conduct a proper business fact find and recommend appropriate policies. The premiums and proceeds of this cover are often tax deductable as a business expense but you need to understand the basic rules and ensure that you involve the company accountant (another prospect for you!).

Like all business areas you will need to acquire some confidence in what you are doing and this means learning about the subject and the products. Many of the insurers run one day training courses that you can attend free of charge, these are currently available (to HomeLoan members) from Zurich, BUPA and Friends Provident (click here for their podcast site as an easy starter option).

And if it is all too complicated!

If you feel that you are not ready to provide advice in this area right now then there is nothing wrong with having a basic understanding of the risks and solutions. This will allow you to prospect for opportunities, generate interest from your clients and pass these on to another broker for commission share. Following these sales through will build your confidence for the future.

Recent communications by the FSA have indicated that they will change the way in which TCF is embedded into regulatory supervision in the future. Over the past 18 months there has been a high focus on firms meeting the TCF outcomes in their dealings with consumers. A TCF 'hit squad' was recruited to deliver this at individual firm level.

Now that TCF has been championed for some time the view seems to have changed, perhaps in line with budgets, that it will be part of normal supervisory inspection.

Jon Pain, managing director of retail markets, said “the regulator intended to continue challenging firms and taking action where necessary. Companies will still be expected to meet the December 2008 deadline, which will be assessed using the FSA's current 'Arrow' criteria.”

Does this mean that TCF will no longer present a threat to a smaller business struggling to understand the requirements and evaluate results?

Not so if you listen to more of the narrative - “The standard against which firms will be judged remains high, and the penalties for not complying remain tough”, the regulator said.

HomeLoan Partnership provides clear training for member firms on embedding TCF into normal good business practice together with business analysis tools to assess if there are any issues.

November sees two new improvements to the HomeLoan proposition, both extending the choice and value for existing members.

We have appointed The Business Mortgage Company (TBMC) to the packager panel, specifically to improve access to specialist products and assist member firms to place BTL business in a very difficult market. TBMC bring with them some great experience and good sourcing software that complements Trigold when selecting lenders.

One of the benefits of being a growing network is that we can regularly seek to improve the terms offered by our business partners. We have just announced substantial increases in term commissions across our panel, the largest of which at 28% of API - another £120 commission on an average case. We will also be extended our panel to give yet more choice and we now match some of the very largest networks in the market.

To see what a difference this could make to your business give us a call.