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‘Big’ lenders could eventually ditch direct sales – Legal and General

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  • 06/11/2015
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‘Big’ lenders could eventually ditch direct sales – Legal and General
The relative cost of giving advice in-branch compared to going through intermediaries could cause a number of lenders to cease direct sales altogether, Legal and General’s Stephen Smith said.

Speaking on a podcast broadcast by Coreco, L&G’s director of housing partnerships said that lenders had struggled with recruiting in-branch advisers following the Mortgage Market Review.

He said: “Lenders had to staff-up in a relatively short space of time and I think they’ve struggled. So I think lenders will look at the relative costs of distribution between their branch and direct compared with intermediaries, and the argument has got to come down in the favour of intermediaries.

“I can actually see it [intermediary market share] increasing, quite possibly to 80-85% over the next two to three years. I can even see some fairly big lenders taking the plunge and saying ‘we’re not even going to bother servicing customers, if a customer comes in then we’ll send them off to an independent broker’.”

Responding to a question on whether this would mean higher procuration fees for brokers, Smith agreed adding that intermediaries were committed to reinvesting any increased fees back into their business.

“If lenders pay us enough we will invest in our businesses and we’ll invest in systems, people and training and they will then have quality distribution. If they starve us of procuration fees and start penny-pinching then we won’t,” he added.

In June, Dudley Building Society reported its lending increased by 68% year-on-year to £52.2m after it decided to distribute exclusively through the intermediary channel.

Chief executive Jeremy Wood said at the time that the intermediary-only strategy had ‘borne fruit’ to produce a ‘massive increase’ in lending for the firm.

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