Dubbed by some as the ‘silver fox’ of the mortgage industry, few characters are better known to UK brokers and lenders than John Malone, who has worked in the market for 40 years.
Malone heads up the Prudential’s Premier Mortgage Service (PMS), which is the biggest club in the UK, completing over £18bn worth of mortgages last year, and with plans to grow that to around £20bn this year. The club specialises in the mainstream mortgage market and intends to stay there, according to Malone. Last year it became part of Prudential when the insurance giant took over Scottish Amicable.
He prides himself on his time management and fits more into his diary than most. This is symptomatic of the way he conducts his business life, disliking few things more than dead time. He tells of a recent weekend trip to Spain that was cancelled following the closure of Gatwick airport, after a grenade was found in a passenger’s luggage. In retelling the story, it is the fact that he was left with time on his hands, and not the missed holiday that seems to grate. This exemplifies his business philosophy. ‘I have always tried to minimise the time wasted and maximise the sales opportunities available to me,’ he says.
Malone began his career with Martin’s Bank at the age of 17. Unsure as to whether it was the path for him, he then served an electrician’s apprenticeship with a company his father held a partnership in. It proved not to be what he was looking for, and he eschewed the world of wires and plugs and returned to the financial stage.
Time was then spent with Citibank before moving to Cedar Holdings, and in 1969 he travelled north of the border to head up Cedar’s Glasgow operation. He met his wife in his first week in the city which has served as his home ever since. Malone has a flexible outlook on business, and his beliefs are not cast in iron when it comes to how things should be done. He tries to be innovative in his approach and is proud of being involved in many industry changes, such as the establishment of the mortgage code introduced in the 1990s.
While working in Glasgow, Friday afternoons tended to be very much a run into the weekend for the city’s life inspectors, and not as productive as they might have been. Seizing on this opportunity, Malone decided to establish a Friday afternoon mortgage surgery to service brokers’ queries and get application forms and quotes out to them ready for the Saturday morning business.
At first Malone says brokers were sceptical as to how useful this would be. But when they were unable to get hold of anybody else on a Friday afternoon, he says: ‘We ended up scooping up virtually all of the business in the area, and I demonstrated to the sales force how an opportunity can be taken.’
After his time with Cedar, Malone worked at FS Assurance where he became national sales manager before leaving in 1989. He then headed up the financial services division of Scottish estate agent, Slater, Hogg and Howison, before taking on the running of parent company, TSB’s, mortgage operation. With estate agencies facing problems in the early 1990s, as the likes of negative equity took hold, and a change to the running its mortgage advisers as tied agents, Malone found himself out a job in 1995.
Malone spent almost a year considering his options before he accepted an offer from Scottish Amicable to revamp its mortgage operation. He was keen to look at things afresh and a desire to differentiate it from the existing clubs was key to his strategy. At the time Scottish Amicable was offering a small packaging service. Malone then, as he does now, did not think simple packaging was the way forward and that it would not stand the test of time.
As such he set about trying to give the brokers what he thought they wanted. Malone says his time working in mortgage operations on the estate agency side proved invaluable to him. Unlike many of his competitors he had not just come from a life company background, and so was better clued up to what the brokers needed and how he could deliver it to them. One strategy that helped PMS win favour with the broking community was having the lenders pay procuration fees direct.
Malone comments: ‘The way we set up the procuration fees was simple and we created a real relationship with the intermediaries and the lenders.’ He adds: ‘We were the first club to get the lenders to pay the intermediaries direct. This was a crucial factor in our success.’
Malone sees PMS as a facilitator, acting between brokers and lenders. He says: ‘We are a facilitator and provide the intermediary with the points of contact he needs to place his mortgage business.’
As such PMS tends to take a backrow seat and lets the brokers and lenders get on with doing their business. He comments: ‘With Bank of Scotland we showed them how to work the intermediary market. They had all the products and I had all the contacts and so it was a case of bringing the two together.’ It is not as he stresses about adding extra links in the chain.
In terms of providing for the club’s brokers, Malone says it is unlikely PMS will offer the likes of professional indemnity insurance schemes. Indeed he feels it is not a necessary service for mortgage brokers and that the majority of small operations should be able to get cover more cheaply on their own. Despite the recent problems over endowments he believes in the main the risks are relatively small compared to those presented by IFAs in the investment markets. And those intermediaries seeing rises in their insurance premiums are those that operate across the financial services sector and not just in the provision of mortgages. As such mortgage brokers joining IFA networks may end up finding insurance costs rising instead of falling and Malone says this is something they must be wary of.
Malone is proud of the contact that PMS has with its brokers. Essentially he is the intermediary-facing part of the club, and is continually on the road speaking to the intermediaries and keeping them up to date with PMS, its lenders, products and processes.
Commenting on the last four or five years, he says: ‘I have stood up in front in front of more mortgage intermediaries in the UK then anyone else except perhaps Richard Fox,’ [compliance director for the Mortgage Code Compliance Board.] The internal operations of PMS are held together by Morag Laird who was at Scottish Amicable when Malone joined. He is delighted with the business that the two of them have built in the last seven years, and says it would have been impossible without the trust and openess of their professional relationship. The only other support comes from three staff who service brokers’ calls and deal with administration and Prudential’s marketing department which helps with Mortgage Focus, PMS’ magazine for brokers. The magazine acts as a vehicle for lenders to showcase themselves in, and shows both lenders and brokers that PMS is an integral player in the market offering direct communication between the two parties.
Considering it creates so much business, the staffing of the operation is surprisingly small, but it reflects Malone’s philosophy of leaving the lenders and intermediaries to conduct their business once the right people have been put in touch with each other. He only gets involved, he says, when, for one reason or another relations between the two parties have broken down, or a problem needs ironing out.
The size of the operation seems to suit Malone ‘ both in the volumes of business that are generated and the staff involved. With regulation set to ring the changes over the coming months, Malone says: ‘Many lenders ask my views on the new regulatory world. I think it would be foolish at present to make predictions until the outcome of CP146 and other documents are arrived at in mid-April, bearing in mind the changes of heart that we saw 14 or 15 months ago. But PMS is a speedboat in its mobility and if there are some surprises which we have not seen, than we still have sufficient time to mange the way forward.’
With so much poised to affect the mortgage industry in the near future, it is not surprising Malone has been asked many times about his role at PMS and his imminent retirement. He is clearly keen to stay on and is not ready to hang up his boots just yet.
He explains: ‘I am an employee and so terms and conditions dictate I have to retire at the end of the year. I would anticipate I will be sitting down in front of certain people at Prudential to see if I can remain there for an additional five years. I want to ‘ I have to.’
Despite what his contract says it seems unlikely Malone will not be heading up PMS into 2004. With three children he may not be joking when he says he has to.