In a ‘good cop bad cop’ scenario, Keith Heron would be the good cop, although he claims such tactics were not a part of his police work while on the Liverpool force. Heron is now the chief executive of the National Association of Commercial Finance Brokers (NACFB), based in Exeter and has been there since 1995, and in financial services since 1978. However, he started his professional life as a police constable in Merseyside.

Heron decided to move on from the police when juggling his professional and personal life became increasingly difficult, and he thought his family was beginning to lose out. He says: “As a policeman it is difficult to maintain a steady family life, especially when you have small children, and I decided that my family was more important than the police and I decided to move.”

He then went to Liverpool University as a mature student taking courses in both management and marketing. From there, he joined Western Trust Savings in Exeter, where he was a branch manager, and becoming head of business development by 1985. He then had stints at National Home Loans – now Paragon – and Exeter Bank, before taking over as chief executive of the NACFB in 1995.

Heron believes the role of the commercial finance intermediary has changed dramatically over the last 10 years. Previously he feels they were seen as a last resort for small and medium-sized enterprises (SME), but have managed to turn that around. Increased competition in commercial finance has meant the clearing banks are not the only source of funds, and the advent of niche players has meant many borrowers do not know who to turn to without professional help.

As Heron says: “Competition has brought benefits to so many consumers and we want to do the same for the SMEs. Brokers used to be the last resort when there was nowhere else to go. Now brokers are dealing with standard businesses and can help them choose from 50 or 60 lenders. In the past if you were a businessman and the bank turned you down you would have given up. But, if you go to a good broker then he is likely to provide you with five or six offers for the loan needed. As such, we are helping underpin and support SMEs.”

While the Financial Services Authority’s (FSA) regulation of the mortgage market is aimed at protecting the individual consumer and not the commercial borrower, Heron says his members are sadly mistaken if they think they will not be affected.

Looking at where regulation will affect the commercial sector, Heron says: “Any part-commercial property which is more than 40% owner-occupied is counted as a residential mortgage and as such will be regulated. Mortgages for shops, bed and breakfasts and other similar business properties will fall under statutory regulation, and this is a considerable part of what we call semi-commercial business. Some buy to let will also fall under the FSA remit. Where a close relation is to live in the property, the mortgage will be regulated, and then where a residential mortgage is used to support commercial borrowing the whole of the contract will be regulated.” In many small businesses Heron says finance has been raised through the remortgage of a residential property and so his members need to be aware of the FSA’s plans, and be prepared for them.

Even in areas not covered by the FSA’s regulation Heron says his members may still be affected by the actions of others. In the buy-to-let market for instance, he says both GMAC RFC and BM Solutions have declared they will not deal with a non-regulated business partner.

Some of Heron’s members are buy-to-let specialists, and would be put in a difficult situation without the use of two of the largest lenders in the market. Although Heron believes the two lenders will take business from some of the very biggest buy-to-let brokers, he says others may find it more difficult if they remain unregulated. He says: “I think they do not want to deal with small non-regulated brokers, but prefer the big producers, and that may be a sensible solution for them.”

However, for his smaller members, he believes the situation is unfair. He explains: “Some of my members may not be doing the same volume, but can handle these loans better than the residential brokers.” Although he understands the reasoning behind any decision not to act with these smaller scale specialists, he is disappointed they may be punished for lack of volume.

Although Heron believes some of his members like those specialising in large scale, purely commercial buy to let will remain unregulated, most others will need to find some sort of cover under the regulations. He believes many will look to become appointed representatives (ARs) and comments: “Most commercial finance brokers do deal in some regulated business, but not enough for most of them to make it cost effective to be principal firms – I feel most will take the AR or introducer route.”

However, Heron is worried that most of the network propositions are tailored to the residential market, and do not cater for his commercial members. To combat this, the NACFB has put its support behind a network designed to bridge the commercial and residential markets, being set up by Charles Gooding, chairman of the Association of Mortgage Intermediaries (AMI).

Although questions have been raised in some quarters of the market as to Gooding’s involvement in a commercial venture, given his position with AMI, Heron dismisses it. He explains: “I wrote to AMI pointing out what I felt were the problems with having practitioners as directors.

“They are bound to attract more attention from the press and have a higher profile, and they are going to be accused of having a conflict of interests, and of using their position to further their interests. But how can we stop that unless we have full time directors who are not practitioners? An association should be run by brokers for the brokers. You have to change the whole structure if you are not going to use practitioners as directors. I think for associations like AMI and NACFB the alternative is unacceptable. An association needs people at the sharp end to manage their affairs, and who know what is going on in the market place.

“If you get a full-time executive board they become distant from the market and you cannot help that. AMI has to stand up and say these are the reasons that our directors have commercial interests, but they are also running the association in the best way for our members and not abusing their position. All of the directors at NACFB have to take their commercial hat off when they walk into the boardroom and if we cannot trust people then the only solution is to have a full time board.”

In terms of trust, Heron says none of his directors have ever given him cause for concern in their roles with the NACFB, and in his dealings with Gooding over recent years, and in setting up the proposed network, he is adamant there has been no hint of impropriety or cause for concern.

NACFB’s investment will be through the association’s commercial division, NACFB Events, and Heron says any return from the investment in the new First 4 Brokers network will go back into NACFB coffers, and help develop it. Members will be under no obligation to join, but Heron says that establishing a principal that can bring residential and commercial intermediaries together will provide something otherwise missing in the market.

Looking forward, there are improving opportunities for brokers according to Heron. Regulation and professional qualifications have improved their profile and public perception.

Heron says the drive for competitive products and services points straight to the intermediary channel and explains: “One of the things the Government has been trying to do is create more competition and get consumers and businesses to look around at their banks and facilities and change what they are being offered.

“We believe there is a simpler way of doing it and that is to create a professional intermediary environment because they are the people that give the advice and offer the choice and it will not cost the Government a penny to do that.” In a nutshell, this is what the NACFB is aiming for, and Heron says he will be at the helm for the foreseeable future guiding it in this direction.