As the final firm to leave the network received its directly authorised (DA) status, Mortgage Solutions sat down with Stephen Smith, director of housing partnerships, to talk about the network’s last few months which have been tinged with a mixture of sadness and relief, but also excitement for the next chapter.
It’s been a project two years in the making which Smith has led for the final six months. Ex-network members are now either DA firms working under the L&G Mortgage Club umbrella, appointed representatives (AR) for Stonebridge or Mortgage Advice Bureau, also members of L&G’s Club, or in the case of just two firms, have left completely. “And now it’s done,” he says. “From October 2004 to June 2016, that was the network that was.”
Smith says he, along with the team, feels a real sense of accomplishment. But without a manual to follow, the process of switching ARs to new firms or helping DAs start up, came with their own sets of challenges.
“For our ARs, it was lining up the lenders so we didn’t have Armageddon with procuration fees plummeting. We were seeking to maintain the level of payment that our appointed reps had been used to on the basis that these lenders have known the firms for many years. We didn’t quite end up there but we did OK by the firms.”
For DAs, the challenges were twofold; picking the right point-of-sale system and showing them how to negotiate and arrange their own professional indemnity insurance.
On Smith’s watch, the network has come full circle. “Having been on the project to build it in the first place, it’s strange to be on the project dismantling it.
“I was there back in the early 2000s when mortgage regulation came over the horizon, analysing the Financial Services Authority consultation papers and making recommendations as to how we ought to respond. The main recommendation was, we ought to form a network,” Smith says.
The network started life with 1,200 individual advisers in October 2004, but fell to 700 by the time the network had begun to wind down following the inevitable loss of advisers during the financial crisis. Without hundreds of advisers to support, there was no longer the need to keep on hundreds of L&G internal support staff and redundancies were an unfortunate part of the process.
“It was sad, we’d been together for a long time,” says Smith. “I’m glad that a number of people have gone straight into new jobs and we’re more generous than the statutory minimum redundancy terms.”
Being the first to tackle the closure, or as Smith prefers, the evolution of a network, means there is no blueprint to follow. Looking back, he says the greatest difficulty was the lack of clarity over when DAs would be granted their permissions. “At the start of this year we still didn’t know if firms would get through the process in the time we had allotted for the project’s schedule. Trying to tie this in with the redundancy programme was tough going.”
With just a few loose ends to tie up, the project is essentially complete, putting Smith in an ideal position to offer other networks considering such an operation advice on what to expect.
“Don’t underestimate the historic book you’ve got,” he advises. “We’ve arranged £65bn of mortgages through this network and we’ll be responsible until they run off. You won’t wipe out your costs [by closing a network]. You may reduce them but you’ll still need professional indemnity and infrastructure. It’s certainly not a cost-shredding exercise.”
So does he see himself offering his services to other networks looking for a project leader to help them dismantle their operations? “I’d say no, thank you, that’s quite enough,” he laughs. “We knew what had gone into the network at the start, the odd contracts, special deals, parts of the book you’d rather people didn’t see. I knew what the skeletons in the closet were. I wouldn’t know that with any other network.”