It might be a bit strong to say lenders have come out fighting in the face of the barrage of criticism being leveled at them by intermediaries, but there were attempts to re-state their commitment to brokers last week.
It is no exaggeration to say that advisers have been instrumental in helping lenders to grow so strongly in the past decade, accounting as they do for about 70% of all business placed.
Well, at least they did – at the moment, this figure is likely to be much lower. Products continue to be be pulled and re-priced on a daily basis, and the differential between prices available in branches and those through brokers is widening by the week. But lenders have called for understanding, arguing that it is the dramatic collapse in market confidence which forces them to change the way they operate.
While I would stop short of defending lenders’ actions, it is clear from the number of lenders who have already been forced to pull out of new lending – and all the redundancies that are being made by others – that these are desperate times. Lenders need to carefully manage their cashflows, and find it easier to turn the tap on and off through branches.
However, they need to communicate this better and not leave brokers out of the loop altogether.
The irony is, those lenders making and considering rights issues are now asking their shareholders to step up and help them out. And who are likely to be the major shareholders in big lenders? All those investors who have been involved in the securitisation deals in the past few years, that’s who.
Because share prices are frequently more volatile than securitisations – from UK lenders at least – these investors might decide to re-enter these markets sooner rather than later, seeing it as the safer option.
Nevertheless, this does not help the intermediary market in the short term. Brokers have long memories and when the markets come back, those lenders who are left will have a lot of work to do if they are to regain brokers’ trust.
A lot of capital was made out of the partnership element between lenders and brokers during the boom years, but it is not an equal partnership. Brokers are justified in now feeling like the junior partner in this relationship. n
