Here’s how the debate rolled out among our London broker guests, sponsored by our kind hosts Platform.
The discussion began with Mortgage Solutions group editor and discussion chair Victoria Hartley, touching on a topic that has generated a lot of interest; online estate agents.
Hartley asked: “Let’s start off with Purplebricks – well, online estate agents. They’ve been playing fast and loose with the truth as we gathered recently. Watchdog savaged its CEO for deferred fee arrangements, which turned out to be a loan from Close Brothers, overstating sales and a local agent who actually lived 30 miles away. The story got more hits than any other in September at over 4,000.
“How effective are online estate agents?”
In reply, one attendee pointed out: “A challenge for these guys is that their referral structure is quite expensive. The referral piece is a very big part of their revenue generation. So they need to maximise that bit, and I think the conversion rate for Purplebricks is pretty low.”
Another noted: “They’re saying cheap, cheap, cheap. And you just get referred to a somebody, a faceless person you don’t know, you have no connection with that person. So your ability to transact business with them – I think you lose that person-to-person relationship.”
Interestingly, one participant revealed that he’d met a broker who’d sold his own property via Purplebricks. “He saved £2,500 on the fees, and it was a nightmare because basically there was an issue with his valuation report and the client was ringing him constantly about it. And that’s the problem, there’s no intermediate. It just goes straight to the vendor. And he said he wouldn’t do it again; the saving of £2,500 wasn’t worth the hassle. And the mortgage had to be arranged by someone in his office; can you believe the vendor office actually arranged the mortgage? I don’t know how legal that is but it was done.”
The general consensus seemed to be that in terms of service, you get what you pay for, as one attendee noted: “If you take estate agents as a beast, they have a bad reputation, but a lot of times they’re holding sales together.”
The punchline was supplied by another colleague: “A good estate agent is the difference. That’s the same in the broker world, you get what you pay for in life and that’s just it. It’s hard to complain when you’re trying to cut down on fees.”
The chair then asked for views on criteria search software platforms such as KnowledgeBank and Criteria Hub.
One attendee made the point that it can be a useful research tool, given the plethora of daily product changes, saving time otherwise spent going through websites. “Just having that tool that is updated daily by the lenders, so they say, is something that can be really powerful, rather than wasting time going to the website.”
However, the less straightforward cases might not be covered by such a tool as one broker observed that many lenders had an exceptions process.
This leads the mainstream market to become a fragmented market with specialist niches, what one attendee typified as the “London” market. Given the speed of London transactions some doubted whether any electronic tool could replace specialist knowledge in the “art of the possible.
As one experienced attendee explained: “Lenders might update it every day but they’re still coming back to ‘oh, it’s a grey area, we might do it on a case-by-case basis. It will depend on whether the underwriter has eaten a good breakfast or not’.”
The chair then asked the gathering. “MortgageGym hasn’t launched yet, but will offer qualified, credit checked leads via Experian, and use of their digital software. So, basically as a broker, you will gain web chat, online fact find, but what you’ll give up is 25% of your profit to use that digital advice. Now I wondered what everybody’s view is on the value of that proposition?”
Like marmite, opinions diverged sharply on its value. One attendee clearly wasn’t impressed. “I don’t really understand their proposition to be honest. You sign up, you have to give away a slice of procuration fee and you can’t channel the client fee and then actually the clients are their clients, not your clients. So what’s the point?”
Whereas another participant was much more positive. “They’re outsourcing the advice, 75% of the proc fee you would get but you haven’t got to go to the market or find the clients. So effectively you have no marketing costs, you have no issues around getting any introducer approved through – actually they become your introducer, they become your introducer for 25% but they’re generating your client list.” As well as credit checking those leads.
Another attendee was more impressed with the longer term prospects potential for Habito. “Their business plan is not for what they’re doing today. Their business plan is 12 months time when open banking is there, and actually this customer goes onto that website and actually gives them permission to go into Barclays, gives them permission to go to Experian….you’ve nearly got a full mortgage process, end to end”.
The march of technology
Eventually, the discussion moved on to how brokers cope with the pace of technological change. One attendee made the point that: “The tech side of things isn’t about advice; it’s about submission, ease of contact, speed, everything else.”
Another explained: “As a broker, you have to be available to deal with the client whenever and however they want to be dealt with.”
On the question of data use, one attendee pointed out a potential threat: “If Amazon or Google got a banking licence tomorrow, the amount of data they’ve got and the amount of technology they’ve got they could make their lending decisions on people’s purchasing.”
Yet, the consensus was that even in this scenario there would still be a role for specialist broker advice. Indeed, another participant predicted: “Make no mistake, there will be fewer brokers in five to seven years’ time than there are now, but those brokers, instead of doing five deals a week, will be able to do 50 deals a week.”
Jonathan Dickinson Mayfair Independent London
Andrew Montlake Coreco
Ron Walton John Charcol
Neil Stephens The Penny Group
Richard Bragg Keystone Wealth Management
Jamie Beer Mayfair Mortgages
Neil Hoare Home Loan Partnership Network
Richard Merrett Alexander Hall Associates
Paul Isaacs Platform
Neil Wyatt Platform
Chris Smith Platform
Richard Daibell Platform
Vicky Hartley Mortgage Solutions
Danielle Dennis Mortgage Solutions
Lisa Jayne Frankel Mortgage Solutions
With thanks to our hosts Platform Homeloans