Q&A between Adrian Moloney, group sales director at OneSavings Bank and Greg Cunnington, director of lending relationships and new homes, Alexander Hall
Adrian: Professional networks are becoming an increasingly important part of the puzzle for brokers. Have you noticed a demand for this from your own clients?
Greg: Recent tax and regulation changes within the buy-to-let landscape increased the need for landlords to receive holistic guidance that covers all elements of the mortgage or re-mortgage process. The impact of COVID-19 has made it even more vital that landlords are receiving guidance on all their finances; not just their property investments.
We can offer expert advice on the mortgage side of things and it is important to us to be able to recommend a tax adviser or solicitor to give advice on the other.
Adrian: With the number of buy-to-let mortgage products on the market, all with different criteria, it can be a minefield to navigate – so consumers can really benefit from professional advice. We work very closely with our intermediary partners to ensure they are kept up to date with any of product changes or announcements. This in turn can really benefit the end-client.
Do you think that the market conditions in recent years have placed a significant emphasis on the value of professional advice?
Greg: Certainly, if you take into consideration that before COVID-19 there were almost 2,500 buy-to-let mortgage products currently available in the UK, which is an increase of more than 20% in the last 12 months. While lending appetite took a hit at the start of the pandemic, many lenders like Kent Reliance for Intermediaries and Precise have now launched new product ranges for this market. It can be incredibly difficult to look into the detail of all the available products without help. When you take in account that every landlord has different personal and income circumstances, and each property will be different – then it really is a minefield.
In addition, a raft of regulatory changes has impacted buy to let mortgage options with top slicing and lower rate assessed rental income requirements becoming key parts of the market. While, there is a need to look at both personal name and limited company options. It’s very clear why the need for professional advice from landlords is at the highest it’s ever been.
Adrian: We’ve seen an increase in demand for limited company products due to the changes in landlords’ tax liability. The BDRC BVA’s data showed that, on average, one-in-five landlords plan to re-mortgage within a limited company structure. What do landlords and their brokers need to be aware of if they are thinking about incorporating?
Greg: All landlords need good tax and legal advice before any new purchase, and with the regulation changes of the last few years, it’s important to get this guidance before any re-mortgage application too. Brokers, like us, can help steer them to good firms to help if they don’t already have somebody they trust in place. Then we can advise on the mortgage options in both personal and limited company names which the client can use to help the tax advisers work out the most beneficial option. Advice from both professionals is key to making the decision as to whether to incorporate or not.
Adrian: You will have specific advisers within your own network that you trust and recommend to your clients. How did you build up your network? Was there a process?
Greg: We met several firms. We wanted to understand where they could fit into the typical client journey, how specialist they were for property tax advice, what scale they could cope with and how they typically engage with clients. We met several very good firms, and in the end concluded on two that we recommend.
Adrian: In a typical case, how does the relationship work? At what point do you suggest the client gets in touch with your recommended advisers.
Greg: From a practical perspective at any part of the client journey we can recommend tax advisers or a solicitor, and if the client wishes to speak to them we can either arrange for them to contact the client directly or pass their contact details to the client.
We see the relationship more as a partnership, and the tax advisers will visit our own advisers to upskill them on current trends and what’s important to look out for. It is critical for us that the boundaries are crystal clear so that we do not ever go into tax advice, and any queries on these matters must be referred to the clients’ tax adviser. However, the sharing of market updates and some base knowledge is important so that all parties work strongly together and can offer clients the best guidance throughout the process.
We have also done presentations to groups of landlords alongside estate agent partners and tax advisers, so that landlords can get updates from different experts in one meeting. These have been a huge success. Landlords often say how hard it is to find the information they need – so to have all that expertise in one room is particularly useful to them.
Adrian: How do you communicate with the client to ensure they are aware of the need to seek advice?
Greg: We will reiterate, in writing, to our buy to let mortgage application clients that we recommend that they receive tax advice, and that we can refer them to our preferred firms if needed. We also confirm in writing that there are personal name and limited company options available, and that they should ensure they discuss this with their tax adviser because we can give guidance on mortgages for both options.
No client should purchase a buy to let without having received tax advice, and so it’s important to us that we can show our understanding and knowledge of the buy to let market by having processes in place to assist with this.
Adrian: For any broker thinking about setting up a professional advice network- what is the one thing they need to consider?
Greg: Ensure you go through a thorough process when looking at firms to partner with, as you need to be able to trust they are a good cultural fit and most importantly will offer great advice to your clients.
Adrian: Lastly, we’ve discussed how important it is that brokers stay up to date with the tax changes and to help specifically with this we created a guide called “Changes to UK Tax Relief on Finance Costs” which can be downloaded from the Kent Reliance for Intermediaries website. What else can brokers do to stay on top of any updates to the current legislation?
Greg: The guide is a great place to start as it lays out all the changes in a clear format for brokers and includes some useful examples. Keeping in regular contact with the advisers in their network will also help brokers stay abreast of any changes that occur in the sector and what affect that will have on their clients.