There is no denying that mortgage networks have had a tough time over the past few years.
However, in truth, some were more immune than others to the market downturn. As a result, there has been a raft of closures, consolidations and plenty of concerns from appointed representatives (ARs) when looking for a home.
So, who would think about launching a new mortgage and insurance network in such troubled times? Well, Stonebridge for one.
Although the UK had officially come out of recession when we launched in November 2010, new launches across all markets were still relatively uncommon and warning signs outnumbered the positive.
The timing of such a launch can sometimes be tainted with a degree of caution, despite being seen as a positive for the market. Recession and its aftermath are often viewed, quite rightly in many cases, as a dour time for businesses of all shapes and sizes.
However, it’s also true that any downturn can provide great opportunities. Scare stories of businesses in trouble and battling for survival may initially inhibit people from starting up a new business, but many are born from a mixture of necessity and opportunity.
There is an argument that the type of business set up in a recession tends to be different from those launched under favourable economic circumstances, but this doesn’t mean that the timing of a new proposition is wrong. Valuable lessons may have been learned, resulting in a suitable mix of caution, innovation and cost effective measures.
Of course, any launch has to be carefully planned and it’s imperative to know the respective market.
Changing our regulatory status was the next step. The actual transition to a network was a relatively simple one, with the whole process taking three months after lodging the application with the FSA in July 2011. The regulator didn’t ask for anything outlandish and the whole process was fairly straightforward.
As part of the process, we decided to become MMR compliant and help our advisers pass the Approved Persons test. However, the FSA’s decision to delay extending the scheme is disappointing, as it only adds another layer of ambiguity to the recruitment process for us and many other firms. Brokers need to know what procedures and processes they must have in place and this has been made tougher with the potential implementation of Approved Persons coinciding with the RDR.
However, being a network in the modern mortgage market should not solely revolve around being a compliance umbrella. The AR numbers game was evident in the days preceding ‘Mortgage Day’. Those networks that simply looked to rack up AR numbers, with insufficient controls or financial backing, have inevitably fallen by the way.
Most networks now realise it’s the quality of the ARs, not the quantity, that is important and many networks pledge extra support in areas such as marketing, recruitment and IT among others.
Yet, when researching the market, we noted a large degree of dissatisfaction in the practical delivery of these services. As such, we keep a ratio of no more than 35 brokers to each sales manager and have a monthly sales meeting with firms to discuss issues such as retraining to products.
We realise there is a danger that this could result in advisers feeling over managed, but firms can take as much or as little help as they want with no compulsion – other than FSA-related compulsion – from us.
We believe that one of the main areas in which intermediaries need extra support is marketing. In our experience, it is those smaller businesses that have pursued active marketing strategies, or at least kept them steady, which have tended to do well. Effective networking has also proved to be an important activity in promoting and protecting the business.
It is also vital to look after core clientele and communicate with them to ensure they are getting what they need in order to maintain business levels. Inevitably, some people will stop using intermediaries for whatever reason, but it is a huge mistake to neglect existing customers by focusing too much on establishing new ones.
During a market downturn, it is all about ensuring firms maintain a happy medium. This philosophy also goes for building a network.
IT and system support can prove an integral component in a successful offering, helping broker partners to maximise growth and ensure business efficiency.
Of course, financial stability is another element that is, understandably, high on an intermediary’s agenda and network charging structures must be transparent. Swift payment is a fundamental aspect of maintaining any successful partnership, particularly in a tough economic environment when sustaining cash flow is paramount to survival.
Launching a new network may not have been an obvious step in the current marketplace, but the move has allowed Stonebridge to streamline the paperwork and compliance process for our broker partners. It is also easier to define what we are and what we do, helping with recruitment and building our brand.
We operate in a competitive space, one which will continue to be the only viable choice for a growing number of intermediary firms.
Brokers looking to join a network should choose one that is able to demonstrate added value, product diversification, progressive change, sensible charging, sound financials and, perhaps most importantly, new but complementary income streams.
If the network in question can’t demonstrate these qualities, then it’s vital for their future that intermediaries don’t settle for second best and find the right partner to match their ambitions.