Advisers warn 'mortgage protection gap' exposes them to 'wild west'

Advisers warn 'mortgage protection gap' exposes them to 'wild west'

Protection advisers fear the 'mortgage protection gap' is exposing them to “a wild west” of unregulated parties.

There is a consensus among the industry that mortgage-focused advisers fear mentioning a complicated product like protection will scare away clients, hence protection-only advisers struggle to source direct referrals.

This means they have to rely on unregulated lead generators to reach customers.

“Mortgages are complicated, which is why protection often falls by the wayside,” protection adviser at The Finance Roome, Dan Jones, told FTAdviser.

Such sentiment echoes data published by the Association of Mortgage Intermediaries in November, which found just 36 per cent of consumers recalled a protection conversation with their mortgage adviser.

Some also believe the stamp duty has kept mortgage brokers and advisers too busy during the latter end of the pandemic to add protection into the mix of conversation. 


At the same time the pandemic caused a surge in protection interest from consumers, which is why there are "more unregulated third-party lead providers than ever", according to Charlotte Nixon, proposition director at adviser network Quilter Financial Planning.

"More people are Googling protection due to Covid-19, which means these firms are looking to sell leads at more expensive prices. Cost per lead is going up. There's a lot more competition in this space, which makes it quite an expensive space for advisers to be in.”

She continued: “It’s a bit of a wild west. There’s no real regulation. Clients’ data can be sold multiple times. It can be fraudulent, but advisers get charged for it anyway. Advisers are regulated, but lead generation firms aren’t.”

Jones agreed many leads sent to him by lead generation firms were “terrible quality”. “They rarely answer when you call and aren’t particularly forthcoming with information,” he added. “Protection is such a saturated industry, but there’s good money in it. Hence, why so many lead generation firms exist.”


Contact State, which claims to help companies buy "compliantly" from Europe's lead generation firms, is attempting to regulate the market itself. 

It has called for lead generation firms to become directly authorised, or authorised through a representative, with the Financial Conduct Authority.

The UK's financial watchdog closed a consultation back in October around changes to the rules regarding financial promotions, but it is yet to publish its conclusions.

"We should talk to each other a lot more than we do," Alan Knowles, managing director at Cura Financial Services, said. "We need to have enough trust in each of the departments."

At Quilter, Nixon recommends to her adviser network that they invest in their own marketing, which she said was “a more sustainable model”.

But Jones disagreed. “Your own marketing doesn’t reap too many rewards.” At The Finance Roome, Jones and his team are trying to get mortgage brokers in the same space to connect and build a referral-friendly community.