The Association of Mortgage Intermediaries (AMI) is still in its infancy, but its newly appointed director, Chris Cummings, faces a stern test in ensuring that it avoids the mistakes made by its predecessor, the National Association of Mortgage Brokers and Advisers (NAMBA), and leading it out of the shadow cast by its parent organisation, the Association of Independent Financial Advisers (AIFA).
Cummings is an affable individual and no stranger to the mortgage market, having spent four years as the marketing director of specialist lender Sun Bank. Switching from the corporate to association sector, Cummings accepts there are differences but feels the underlying drivers are closer than many would think. AMI’s work is all about looking after members and their priorities, as well as remembering the money funding the operation is theirs and that they must be kept in the loop as to what is happening and where the association is heading. And Cummings argues this is no different to making sure shareholders know what is happening to their investment and what the management has planned for the company. Cummings is also keen to point out that being small, AMI should be fleet of foot and able to react a lot faster than many would expect of a trade organisation.
Officially launched in April, AMI’s initial worry was securing sufficient funding to ensure it could get itself up and running. Helped by loans of £50,000 from both the Council of Mortgage Lenders (CML) and the Intermediary Mortgage Lenders Association (IMLA), Cummings has been delighted by the response of the industry as a whole. He says: ‘We have good links with the CML and IMLA. Both of them provided us with an interest free loan to start things off. It is a rolling agreement so we have it for a period and then we will negotiate as to when it has to be paid back.
‘We have not touched it yet as the financial support from the industry has meant we have been able to cover our costs from day one. Which is a good position to be in, although I do not think we would have been in that position without the loans.’ He continues: ‘We have had some great support from HBOS which has joined as a group, and Portman BS joined as both Portman and Sun Bank, and we have also just signed up Mortgages plc. I am hoping to announce more shortly. The industry has been quite happy to put its hand in its pocket, although I thought that would be one of my main challenges ‘ turning the positive goodwill into hard cash.’
Although Cummings is aware of the large-scale support AMI needs from the mortgage sector if it is to be a success, he is also acutely aware of the problems that befell NAMBA and is keen to avoid them. He says: ‘We have good links [with other organisations] but AMI has to find its own personality and establish itself in the market place and we will not do that if we are too close to any of the trade bodies, mortgage lenders, intermediaries, packagers or publications. We prize above all else our independence to represent our membership.’ Credibility is everything and Cummings believes the commercial backdrop that many perceived NAMBA to have was one of the reasons it never managed to assert itself. As he says: ‘The issues that NAMBA had I think date back to when it was started. People were a little distrustful of its commercial activities and the biggest lesson I have learnt is to make sure that this organisation cannot be accused of commercial deals.’
In its dealings with the Financial Services Authority (FSA), Cummings also sees it as imperative that AMI is viewed as independent to avoid diluting any of the goodwill that has been earned by AIFA over recent years. He explains: ‘For a long time, mortgage intermediaries have been the biggest group in the market place but have never had a voice. It is fine for it [the FSA] to talk to individual firms, but there has always been a commercial backdrop to that. AMI hopes to be able to talk to the FSA at the highest level and for the FSA to understand that it has no commercial axe to grind. What we are trying to do is represent the members’ views and that carries an awful lot of influence. The success of AIFA has shown what you can do when you have a level of trust with FSA.’
Currently, the AMI board is nominated, although Cummings says the intention is to eventually have an elected board, which will also help bolster its independence. He says: ‘They [the board] came together as a group because they recognised that what NAMBA had been would never work. They wanted to get it into a shape so it could become a creditable organisation that they could move on, and the long term idea is that we will have elections. The AIFA council is elected and it represents the different constituents of the market and the intention of AMI is that the board will become elected to represent the different strands of the mortgage market.’
AMI clearly has very close links to AIFA, being an operational division of the trade association and reporting in to the AIFA council. However, Cummings is quick to dispel any notion that it is a junior partner in the relationship. He says while the relationship with AIFA has helped it get started he does not look at AMI as a junior partner. He says:’It is not dissimilar to Accord for example. If Accord was a new lender it would take a long time to get established and promote its brand. It would also take time to see what type of products it would offer and what sort of credibility it had. But because it is from Yorkshire Building Society then I think it comes with the halo effect of a long-standing financial services business with big pockets and a good reputation. That has given it a fine start and I see our association with AIFA allowing AMI to benefit from the real influence it has had with the FSA, and the intellectual standards of the arguments it has been able to out forward to the regulator, the Government and also to Europe.’
In the coming months the focus is very much on regulation, and Cummings sees his role as a conduit between the regulator and the intermediary market. He has to collect and collate the views of the market, which can then be presented to the FSA, as well as digest and translate the consultation papers for AMI members. No mean feat when the published words on mortgage regulation by the FSA runs to almost 900,000 words ‘ about 100,000 words more than the complete works of Shakespeare and, as Cummings points out, with plenty more to come.
Information, analysis and influence are the bywords that Cummings wants AMI to be associated with. Analysing and informing members of regulatory, and market environment changes is important, but Cummings is also aware that AMI has to be seen to have the teeth to change what is not right for mortgage intermediaries, and create the best possible operating environment for them. He highlights the disposal of suitability or recommendation letters under the new regulatory proposals as an area of possible influence and comments: ‘Researchers have looked at this and found that the one thing that customers read is the recommendation letter which explains why they are recommending the product to you. It has their name written at the top and it is about them. But this is the one thing the FSA has decided to drop.
‘Our view very clearly is that we would hope to influence the FSA to think again and if we cannot do that then it would be a terrible shame and our advice would be to carry on doing it anyway, simply for their own protection more than anything else. If the worst should happen and a customer makes a mistake then they have got all the reasons why that product was selected in black and white and the customer has signed it saying he understands these reasons.’
AMI will have to succeed on such issues to help entice intermediaries to join, and demonstrate that it has the wherewithal to affect changes in the intermediaries’ working environment. The membership drive has started well according to Cummings who says between 20 and 30 applications are already being received a day. However, there is a long way still to go: ‘There are 14,000 intermediaries in the market and it would be wonderful to get 75% and I think we need to be heading for a simple majority of over 50%.’
There is certainly no dispute over the need for a mortgage intermediary trade body or the work it has in front of it as regulation approaches. Indeed the initial take up of membership has caught Cummings a little off guard and he comments: ‘We are having to do things a little bit on the hoof so some things are not quite as slick as I would like them to be but we are getting there.’ It is unlikely things are going to get any easier for him, but if Cummings can keep AMI within the perimeters he has staked out, it seems set to go from strength to strength.