When the hugely popular TV quiz, ‘Who wants to be a millionaire?’, first aired in December 1998, less than 1.7% of the UK population actually was a millionaire.
At the last count, almost 5% — more than 2.5 million adults — fell into this gilded category, according to the Credit Suisse Global Wealth Report (June 2021).
The number of ‘high net worth’ (HNW) individuals is harder to pin down because there is no official benchmark in this country, but some estimates put the figure at around four million people.
Lenders need to offer HNWs a more personalised, bespoke service
The rise in numbers of such wealthy people has been helped in no small part by the well-documented stratospheric trajectory of property values over the past decade, assets that are included in the Global Wealth Report figures.
Admittedly, some of this house-price growth was boosted by people reassessing their housing needs during the pandemic and taking advantage of historic low interest rates, turbocharged by the stamp duty holiday. However, even if property values remain flat for the next few years, that could still mean a large number of wealthy homeowners — and even more landlords — will be in need of advice on their borrowing.
The high-street banks’ tickbox approach may not, in fact, tick the right boxes
According to Savills, in February this year 689,189 residential properties in the UK were worth more than £1m, up 22% or 125,928 since the end of 2020. And, when it comes to buy-to-let, many landlords have grown their property portfolios past the £1m mark and far beyond, either by buying more property or through the significant house-price inflation we have seen in recent years, or a combination of the two.
Challenges
This is all great news for landlords, homeowners and our industry in general, particularly when set against the seemingly endless dripfeed of economic uncertainty and doom and gloom created by the pandemic and other ongoing world events. But it brings with it challenges for advisers and lenders alike.
Lenders can enhance their offering through reviews with advisers and their clients
Millionaires may not be the unicorns they once were but they are hardly ten a penny, and HNW individuals are just that — individuals.
They may be regarded as privileged but they are not necessarily at an advantage when it comes to arranging their borrowing and structuring their portfolios in the most efficient way.
Ironically, sometimes the more money you have or the larger your property portfolio, the harder it may be to access the best advice and most appropriate funding for your needs.
Mainstream lenders may not have the expertise to meet the nuanced requirements of HNW individuals, whose income streams can be complex and varied. The high-street banks’ tickbox approach may not, in fact, tick the right boxes.
We should take a leaf out of mortgage advisers’ book when it comes to borrowers with larger and more complex cases
What’s more, the private banks that offer to service HNW individuals’ borrowing needs may not be experts in property finance, focusing as they do on the broader definition of wealth. Indeed, a major concern and frustration for mortgage advisers could be the private banks’ tendency to muscle in on their existing relationship with their client.
Private banks
Understandably, HNW customers are the target market for private banks, which seek to manage as many of their assets as possible, from property to equities to pensions. But, when they set out to displace the mortgage adviser, they risk doing a disservice to both that adviser and their client.
That’s why I believe that a better solution for HNW borrowers, whether they be portfolio buy-to-let landlords or owner-occupiers, is one of collaboration between themselves, their trusted mortgage adviser and a specialist lender with plenty of experience and expertise in the market.
HNW individuals are not necessarily at an advantage when it comes to arranging their borrowing
Lenders need to offer HNWs a more personalised, bespoke service.
In fact, we should take a leaf out of mortgage advisers’ book when it comes to borrowers with larger and more complex cases.
Just as advisers hold regular reviews with their portfolio landlords and HNW clients, so lenders can enhance their offering through reviews with advisers and their clients, and bring in our risk and relationship teams where appropriate.
Then all parties can work together to plan and find the most suitable long-term solutions for the borrower — while never looking to replace the core adviser/client relationship.
Simon Cockerill is head of intermediary sales development, OSB Group
This article featured in the May edition of MS.
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