Cashback should put conveyancing into the advice conversation

One of the more interesting findings from our latest quarterly statistics was the position of Nationwide Building Society, which accounted for 25% of all cases using our All-Inclusive Remortgage (AIR) product during Q3, making it comfortably the biggest lender for AIR business during the last quarter.

There is a likely reason for this. Nationwide has been offering remortgage borrowers the choice between free standard legals or £500 cashback, and that cashback provides advisers with an opportunity to have a very different conversation with their clients about conveyancing.

Rather than the legal work simply being allocated through the lender’s arrangements, the client can take the cashback and use it towards a conveyancing service which their adviser can discuss and recommend.

This goes to the heart of something we have been saying for a long time at conveybuddy, because conveyancing should be part of the advice conversation rather than something which happens elsewhere once the mortgage recommendation has been made.

The availability of cashback can undoubtedly help advisers make that conversation a positive one from the outset, particularly when it gives the client the means to cover, or go a long way towards covering, the cost of their chosen conveyancing service.

DON’T LET ‘FREE’ END THE CONVERSATION

Nationwide is certainly not alone in offering this type of choice, with a number of lenders including NatWest, HSBC, Santander and Halifax offering cashback on at least some remortgage products, although the amounts, availability and terms differ between lenders and products.

This matters because ‘free’ or ‘fee-assisted’ legals can remove the opportunity for advisers to discuss conveyancing in much the same way that product transfers can reduce the natural opportunity to discuss other products and services.

Protection is perhaps the most obvious example in the PT market, but conveyancing can also disappear from the conversation if the client believes the legal work has already been dealt with as part of their mortgage.

We should not blame clients for thinking in those terms because, if someone believes a service they require is being provided at no cost or very little cost, we should hardly be surprised when they want to proceed with it.

The responsibility therefore falls on advisers to make conveyancing a positive part of the wider client conversation and explain why the apparent cost should not be the only consideration.

UNDERSTANDING WHAT THE CLIENT IS GETTING

The use of terms such as ‘free’ or ‘fee-assisted’ legals can also hide some important distinctions, because lender-arranged services generally cover defined standard legal work and this does not necessarily mean every cost associated with the remortgage will be covered.

Nationwide, for example, states that under its free standard legal service the client must pay the fee required to transfer funds to repay their existing mortgage, while its documentation also sets out a range of circumstances in which additional charges can apply.

There is also the question of choice, because with lender-arranged ‘free’ or ‘fee-assisted’ legals the adviser and client are not selecting the conveyancing firm themselves.

The legal provider is appointed through the lender’s arrangements and, while that may work perfectly well for many borrowers, it should not automatically prevent the adviser from explaining the alternatives and allowing the client to make an informed decision.

CASHBACK CHANGES THE CONVERSATION

This is where cashback can be particularly useful, because rather than effectively closing down the conveyancing conversation, it gives the adviser a clear reason to start one.

Nationwide’s £500 cashback provides a very straightforward example because the adviser can recommend this money is used to secure their own conveyancing/legal representation.

Our All Inclusive Remortgage product costs £499, so it is not difficult to see why an adviser might discuss using the lender cashback to secure a conveyancing service through conveybuddy rather than suggesting the client accept the lender-arranged legal option.

That gives the client greater choice over the route they take and allows the adviser to explain what the service includes, how the process will work and why they are recommending it.

Given that other lenders also provide cashback alternatives on certain remortgage products, this is not a conversation which should be restricted to Nationwide customers, and advisers should understand the legal options attached to a mortgage product alongside the rate, fee and other incentives.

A BETTER OUTCOME CAN ALSO MEAN BETTER BUSINESS

There is also a commercial point here for advisory firms and, providing the recommendation is right for the client, there is nothing wrong with recognising it.

As mentioned, our £499 All Inclusive Remortgage service pays the adviser a £200 referral fee, which means the firm can provide advice and make a recommendation around a service the client requires while also generating additional income from the mortgage business it is already handling.

For too long, conveyancing has often been treated as something sitting outside the advice process, and ‘free’ or ‘fee-assisted’ lender legals can reinforce that if advisers allow the conversation to end as soon as the client sees the apparent benefit.

Cashback provides an opportunity to approach things differently, because it gives advisers a natural opening to discuss the client’s conveyancing needs, explain the available options and recommend an appropriate service.

The question therefore should not simply be whether a mortgage comes with ‘free’ or ‘fee-assisted’ legals, but whether that route provides the right outcome for the individual client and whether there is a better alternative available, especially given these lender offerings are legal services for them not the client.

Making that conversation a standard part of the remortgage process can provide greater choice and clarity for the client, while helping advisory firms retain more of the value from the business they are already generating.