Even in today’s bureaucratic society, the red tape of regulation has failed to strangle the entrepreneurial spirit of the mortgage industry and success stories still sprout from humble seeds. Whether the seeds of Knightsbridge-based Cobalt Capital were humble is debatable, but there is little argument about the success the brokerage has enjoyed in recent years.
Although the Cobalt Capital brand has only been around since 2002, the firm was originally set up as eu Loans in 2000 by Julian Ingall and Andrew Drummond, who met when they joined John Charcol’s Knightsbridge office in 1993. Sitting in the bright Cobalt office, Ingall and his business partner Andrew Montlake exude a relaxed quality that belies the ambition of the company as they explain the significance of their Charcol roots.
“We have been pretty cautious over who we have recruited and a lot of staff have tended to be ex-John Charcol,” says Montlake. “You look at the people in the industry now, particularly among Hamptons and Savills, Square Mile – now an AR of Cobalt, Kingsway and ourselves – they were all our peers at Charcol.”
“John Garfield taught us a lot,” adds Ingall. “I have got a lot of time and respect for the management there. It is mooted that a few directors are going back and good luck to them. It is a different era and you have to move with the times and one thing we have tried to do as a company is concentrate on things that we are good at.”
So what is Cobalt good at? “70% of our business is buy to let, so it is a huge market for us,” continues Ingall. “They also tend to be short leases and have slightly unusual terms, so there is a need for advice. There are all sorts of markets we are considering going into, but the SIPP market is a big one because it overlaps with what we already do.”
Great expectations
“We are going to have our own Cobalt branded SIPP,” says Montlake. “It is basically already there but it is just the wrap around it, which obviously we cannot finalise in terms of how it is going to work until the final guidelines are published.”
Nevertheless, Ingall admits that the SIPP market may not live up to the hype. He says: “We are not quite sure how big the SIPP thing is going to be from an investment perspective. We tend to agree that that there are a lot of professional investors who do not have enough assets within their pension because they have stripped it all out and put it in property.”
And despite the relatively depressed nature of the property market this year people are continuing to put their money in bricks and mortar. Ingall explains why: “What we have seen with investors in the last six months is that the calculations on buy to let have changed massively, which has revolutionised the industry. With regulation there was basically six months out of the last year where lenders did not know what was happening and were not proactive in terms of being progressive with rates. But this year there have been some exciting rates and aggressive rental calculations thanks to increased competition and products with a larger upfront fee. The whole idea was to take the fee upfront and the client does not really mind as long as they get a better leverage, so they can go and buy a better property, or get a better rate.”
“A stable base rate has also helped the market,” adds Montlake. “I think passing responsibility to the Bank of England was one of the best things that Labour has done. We have seen other economies in Europe really struggle and, while the UK economy has not really grown, we have not slipped over the proverbial ravine yet.”
Size matters
Cobalt Capital has 15 advisers and an IFA who deals specifically with tax structure and investment advice. “We have taken the stance that big is beautiful,” says Ingall. “We are not saying we are huge but you need a certain volume. And that drives a number of things. First of all it drives service. Take BM Solutions, for example. Because we do a certain amount of business with them we can use its Premier unit. The other thing is the ability to package. We come from a Charcol background and traditionally Charcol took a view that it controlled the finance, which is especially important to our introducers. If they have someone wanting to buy a million-pound house in just two weeks we can send a surveyor round in a few hours, get the report back and the finances secured in a few days. For us, we needed to be big and the recent mergers have definitely helped. There is space out there that we need to fill – but we will do it in our own time.”
“We have seen other companies throw money at recruiting people,” says Montlake. “And they are starting to struggle now as the market changes a bit. We have never wanted to go down the route of a crazy recruitment drive.”
Ingall continues: “We have a very high volume of business per consultant. A lot of our competitors have brought consultants in and offered them higher payment. The trouble is, if you have got no business to give them then what is the point of having a higher percentage of nothing? A lot of people need managing and there is a huge benefit to working in a team. We have teams of four or five and the bonus structure is applied to the whole team.”
“The idea is that one team takes ownership of a number of different introducers so that when the enquiries come in no-one is very stressed, no-one is struggling and it really is working together,” adds Montlake.
The core of Cobalt’s new business comes from links with estate agents, accountants and solicitors, although its biggest introducer is website Prime Location.
Ingall says: “Half of all property in the UK by value goes through Prime Location. We get a thousand enquiries a week through it. They are of various quality so we have a telemarketing team that goes through the leads and qualifies them.”
When a lead is converted Cobalt will charge a fee, but just what sort of fee is up to the adviser involved. “The requirement for a fee is normally driven on what their requirements are with regards to timescale, difficulty of transaction, how many man hours and loan size,” says Ingall. Montlake continues: “It is not as if we have a fee schedule of what consultants should charge. Everyone here is professional enough to know how to judge a client and their requirements. If someone comes to us with a 10-day exchange deadline and they want to do an offshore loan in Japanese yen through a trust then obviously we are going to charge a big fee.”
And being flexible about fees is not the only way that Cobalt exercises its entrepreneurial muscle. “One of the things that we do is entertain a lot,” says Ingall. “We do a lot of rugby corporate events, a lot of functions, and took some guys skiing this year and it really helps. It is a huge way of building relationships. It is scary how many people actually went to school together. It is all about those personal relationships.”
