Events such as the forced sale of HBoS to Lloyds TSB, and the effective nationalisation of the US banking system would have been unthinkable just a few months ago, but now it seems nothing is certain. It is difficult to know what will happen next and it is the not knowing that worries us the most.
If the events of the past year or so have taught us anything, it is the intricate interdependence of all financial sectors.
Amid the global anxiety, there is much to be concerned about as a practicing intermediary in this market. Those who are currently appointed representatives (ARs) might be questioning the stability and strength of their principal. The question might be asked: If someone as large as HBoS can be pushed to the brink, then what of those whom I rely on for my business?
I am not in the business of being disparaging about networks – after all I have a fundamental belief in aggregation models – however there will be a number of principals out there who do not have sufficient capital to continue for much longer and clearly ARs will be impacted by this.
Market conditions can change landscapes quickly, and it seems to be the case that many ARs are now having to think the unthinkable. This inevitably raises the question of whether an AR will receive all commissions due if the host network folds. Historically, we have seen networks moving their ARs to a competitor if this is on the horizon, however there is nothing to stop a network going bust in double-quick time, leaving ARs in the lurch and severely out of pocket. For those with this worry, it might be time to perhaps consider their options, even looking for a safer, well capitalised partner with whom to weather the storm.
In terms of maintaining business as usual amid these unprecedented events, intermediaries might be rightly worried about generating new customers in a cost-effective way. Simple marketing or advertising tactics of the past, such as placing an advert in the Yellow Pages or spending the time ensuring estate agents and house builder referral relationships are strong will also be challenging. Those who have only partially relied on the referrals generated from professional contacts will be faced with a real concern given the lack of transactions/building work that currently exists. Similarly, the paid-for lead generation approach will perhaps be viewed with much greater caution because of the speculative cost involved and lack of convertibility.
Many brokers have also raised concerns regarding the regulatory scrutiny they are under. Of course, the rules must be abided by and it is encouraging to see the FSA taking action against those firms who are deliberately dishonest.
The worry for many brokers – particularly the smaller, one and two-man bands that have had little personal to regulatory compliance and never had the protection of a dedicated compliance function – is that they will somehow inadvertently be non-compliant.
The illiquidity and resultant contraction of supply by mortgage lenders means it is not nearly as easy for customers to self-select their mortgage deal. There is a substantial demand for quality mortgage advice – even those consumers we might deem ‘savvy’ are finding the market confusing. Mortgage intermediation is in demand and as a service it is probably more attractive now than at any other time in the past five years.
Unfortunately, many broker firms lack capital and strategic direction and it is regrettable but likely that more firms will fold as a consequence. Some will have the foresight to seek out a partner who can bring capital strength, strategic direction – and even business generation. Those firms which manage their overheads and hold their nerve – especially when events can make it seem like the market is spinning out of control – will prove that a career in this market can still be hugely rewarding for years to come. n
Rob Clifford is chief executive of Mortgage Force
