Sponsored briefing: It’s the little things that count

Emily Bernstein demonstrates how Investec can help to find personal banking solutions for clients in the legal industry

The legal partners I work with have unique careers and unique incomes to match.

Most will have a fixed annual draw received on a monthly basis, but that is just the tip of the iceberg. A lot of my clients only receive around 30-40% of their total income through the fixed element of their remuneration.

Below the waterline, things get more complex. They will be receiving profit distributions and bonuses – often paid in lumpy instalments in foreign currency – which means they can receive up to 60% of their income within a two-month period.

I saw this recently with a client. She is a senior partner in a leading US law firm, who has recently decided to make London home for her and her family. Working for a US firm, her income is received in dollars.

‘We take a look at their whole remuneration – considering their average annual income over the last few years as well as their projected earnings.’
Emily Bernstein, Investec

Now she needs a family home in London. It is a big move, as she has never invested in the UK property market previously.

Her ask is quite typical for someone with this earning profile, an interest-only mortgage at a very high loan-to-value (LTV), repaid with capital reductions every year when she receives large profit distributions and a bonus, and taking into account her USD earnings.

For our clients, receiving the bulk of their compensation in this way can throw a spanner in the works when they need to buy a home. That is because some lenders struggle to consider lumpy profit distributions and bonuses when looking at mortgage affordability.

Many will only consider base salary or will only look at a fraction of a client’s profit distribution or bonus. Others will only consider income paid in pounds, while some lenders will not look twice at a mortgage over 90% LTV. The algorithm cannot see the bigger picture.

For me, this sort of deal is my bread and butter when helping clients in the legal space. We take a look at their whole remuneration – considering their average USD income over the last few years as well as their projected earnings – when we look at affordability.

My experience in helping partners in law firms has shown me that it is the little things that count, especially given they are so time-poor. In this case, after an initial meeting and fact-finding exercise, we approved her mortgage in five working days and she was able to quickly purchase her dream family home. A simple solution for a client with a bespoke need.

This article was originally published by Investec.