You may have seen coverage recently of some research we carried out at Brightstar amongst a group of more than 1,000 brokers. We asked how many of them mentioned to their clients that they offered second charge mortgages at the time they were working on their purchase or remortgage, or indeed at any point during the term of their product.
The result was that 74% admitted they didn’t talk about second charge mortgages at any stage.
This is particularly startling given that it’s now more than four years since second charge mortgage lending came under FCA regulation alongside the first charge market and brokers have been required to consider second charges alongside other options for capital raising.
A second charge mortgage will not be the right option for everyone, but it will be the right option for some, and if it is not being discussed, there will be some clients who end up with a product that isn’t the most suitable solution for their needs. And, of course, brokers who don’t talk to their clients about second charges are missing the opportunity to expand their repertoire and potentially grow their business.
So, why are more brokers not making the most of this opportunity? In recent years, even before second charge lending came under the remit of the FCA, the trade press has been full of articles and comments about how it can provide a flexible, and sometimes more economical, method of capital raising. However, with just a quarter of brokers talking to their clients about second charges, it’s clear that it’s not yet made it onto the agenda for many intermediaries. Maybe it’s time to think about things a little differently – and this is where GI Joe comes in.
Professors at Yale University have come up with a theory they have called the GI Joe Fallacy, based on the 1980s American cartoon, GI Joe. At the end of each episode, there would be a public service announcement aimed at educating the children who were watching, with information about things like crossing the road safely. At the end of this section, the child in the cartoon would say “Thank you GI Joe. Now I know”, to which GI Joe would reply “Knowing is half the battle.”
According to the professors, this is the GI Joe Fallacy, because the claim isn’t true. Merely knowing something is not enough to put into practice and it’s not enough to actually change your behaviour.
One way of demonstrating this is by thinking about optical illusions that you have probably seen many times before. The first is the Muller-Lyer illusion, which includes two lines of the same length, but where the top line looks longer. You know that the lines are the same length, but your brain will still tell you that the top line is longer, and you can’t change the way you see it.
Or how about the Shephard’s Tables illusion, with two very different looking tables that are, in reality, exactly the same size and shape.
Shephard’s Tables Illusion
In both of these examples, even if you know the answer, your immediate instinct to see the illusions differently to how they are in reality. So, the idea that knowing is half the battle is not true. Learning something does not necessarily make you do it and, in order to change behaviour, we have to change habits.
So, how can GI Joe help grow your business?
By taking on board the idea behind the GI Joe Fallacy, it’s clear engaging in more questions about second charge lending will take more than just education. Simply reading articles in the trade press about the opportunities, or case studies on a website, will not change habits and you will tend to continue doing things the same way you always have.
So, think about taking steps to introduce new habits. Actively look for ways to update your advice process or look at introducing prominent prompts around the office to remind you to have an alternative conversation with your clients.
The opportunity in second charge mortgages is huge. But knowing about the opportunity isn’t half the battle – you need to take action to change old habits and give yourself a better chance of growing your business.
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Source: Mortgage Introducer