In a full-year trading update, LSL confirmed that as a result the total number of financial advisers in the group has risen by three per cent, to around 2,380.
Within LSL’s financial services division, revenue growth stood at one per cent for the year when excluding its estate agency work. However, when that was included its revenues fell over the year by two per cent, which the firm said was the result of the planned closure of the Your Move and Reeds Rains branches.
Things were more positive in the surveying division, which saw revenues jump by 24 per cent over the year. This included a “material contribution” from the successful start of the firm’s surveying and valuation services tie-up with Lloyds Bank.
Overall, LSL noted that its group revenues for the year had fallen by four per cent, though when excluding the impact of the planned closure of the Your Move and Reeds Rains branches, its group revenues rose four per cent.
It added that its underlying operating profit for the year “will be slightly ahead of the board’s prior expectations and slightly ahead of last year” which it described as a “resilient performance” in challenging conditions.
The network reported a rise in gross mortgage lending, including product transfers, of six per cent to £6.9bn compared to H1 2018. Gross mortgage lending arranged with new lenders was up by 7 per cent to £6.3bn.
However, the adviser reported that “uncertainty resulting from the extended Brexit negotiations,” had impacted current trading for estate agency-based appointed representatives (ARs), saying that it “continues to be muted and similar to our experience towards the end of 2018 and H1 2019.
“Following a slower than expected start to the year in Q1 2019 in written and banked business, and despite productivity being in line with expectations for Q2 2019, we expect overall revenue per adviser for the year to be slightly below that of 2018.”
The underlying revenue per adviser fell by four per cent in H1 2019, owing to “lower banked productivity,” the company said.
Meanwhile, adviser numbers grew by seven per cent to 1,293 as of June 2019 and stood at 1,242, up 13 per cent, on average during the six-month period.
First Mortgage Direct
The figures exclude 90 advisers that were added through the acquisition of First Mortgage Direct as the transaction completed after 30 June.
Adviser numbers had reached 1,433 as of 20 September 2019.
MAB paid an initial cash consideration of £16.5m for 80 per cent of First Mortgage, valuing the acquired business at £20.6m. The transaction completed on 2 July.
The company said it expected the deal “to be significantly earnings accretive in the first full year following completion and thereafter”.
New business platform
MAB reported gross profits up nine per cent to £14.2m in H1 2019. Gross margin strengthened to 23.3 per cent, up from 22.5 per cent in H1 2018. Revenue grew five per cent to £60.9m and by nine per cent on an underlying basis.
The interim dividend climbed to 11.1p from 10.6p in 2018.
Peter Brodnicki, chief executive at MAB, said: “In addition to strong growth achieved in H1 and into H2 2019, adviser numbers have further increased through the acquisition of one of the very best performing and highly respected UK brokers, First Mortgage.
“This has been a tremendous addition to MAB Group, adding to the growing number of exceptional firms choosing to partner with us, and will play a major role in our plans to grow our market share through increasing adviser numbers and productivity.
“Against this backdrop, I remain confident of delivering further growth in line with our strategic plans.
“We’re pleased to have completed the first development phase of our new business platform, which we’re testing with a number of our business partners before rolling out to all our firms during the course of 2019 and into 2020.
“We are focused on delivering sustainable long-term growth by providing the best solutions and outcomes for customers, largely driven by our significant focus on technology.
“We plan to continue growing our market share and mortgage completions while leading the evolutions of intermediary distribution,” Brodnicki added.
In an interview with Mortgage Solutions, Tracie Pearce talked about the crucial first years of entering the intermediary sector and the unforgivable scenario of arriving with a fanfare and failing to deliver.
“You get one shot to enter this market properly and we wanted to make sure it was a really positive experience for everybody. Us, the brokers and the customer,” she said.
Following a pilot programme with Countrywide which launched in October 2014, the bank officially launched in August the following year with the addition of London and Country to its panel. At the start of May, IFA and mortgage network In Partnership was the 19th firm to be invited on to the panel, which is predominately made up of AR firms.
“We are not avoiding small DA firms,” said Pearce. “The intermediary distribution roll out has been slow and controlled with a focus on larger networks first, because of the ease of dealing with one compliance department which covers many advisers.”
Once the AR roll out is complete, the bank will develop the next phase.
Deliberate expansion
Pearce added: “We have been deliberate and cautious in the speed at which we have entered each of our partnerships, to make sure we can support them. So far it has worked, we haven’t let anyone down.
“That for me was more important than getting right to the end of the on-boarding process as quickly as possible. We want to do this properly, do it justice and without upsetting people.
“I didn’t want to go into this market and cause a fuss and a storm by giving people poor service. I have seen it happen before too many times in this industry. It wasn’t going to happen under my watch.”
Watch out for the full interview with Tracie Pearce on Mortgage Solutions this week.
The team will be headed up by Carl Parker, ex-national financial services director for Countrywide, and will be offered to brokers from 6 March.
Brokers will be appointed representatives of Openwork, as will Just Mortgages’ employed brokers once the transition from Legal and General has completed.
Self-employed intermediaries will receive leads, training and compliance support and procuration fee deals. Parker’s team will show brokers how to set up their own businesses and build relationships with introducers, estate agents and solicitors.
Just Mortgages’ objective is to have more than 100 broker firms signed up with the division in the first two years.
John Phillips, group operations director of Spicerhaart and Just Mortgages, said: “Often when someone has worked as an employed mortgage broker for some time it is natural that they look for new opportunities and this new division provides them with the opportunity to move on without the need to leave the Spicer Haart group.”
Borrowers who want a refinancing option must be told that, as well as the traditional remortgage route, a second charge loan may be suitable. Straightforward so far, or is it?
The second charge sector is a different environment to the one which many mortgage brokers are used to. Firms known as master brokers sit firmly in between the introducing adviser and the lender, extra processing steps need to be taken to obtain consent from the mortgage provider and lender risk appetites are varied and in some cases more flexible.
There’s no escaping the march of the second charge and mortgage firms, networks, clubs, directly authorised brokers and appointed representatives need to evolve either advice or business models to make way for the new regime.
This week, our panel of first charge specialists explain what changes they have made to get ready for second charge business.
Liz Syms, director of specialist mortgage network, Connect for Intermediaries, talks about her preparations to obtain the status of master broker to put her firm firmly in the second charge distribution chain for its members.
Simon Collins, product technical manager, John Charcol, explains how a recent business acquisition will now allow the intermediary firm to keep second charge business in-house.
Dominik Lipnicki, director of Your Mortgage Decisions, says the low volume of cases where a second charge loan is the preferred finance option has influenced his decision to outsource, for the time being at least.
Liz Syms is the director of Connect for Intermediaries
Connect started to become involved with second charges when Castle Trust launched its buy-to-let equity second charge product. We found this was a very popular product with our clients and brokers, but occasionally we felt there was a need to consider a more traditional second charge offering.
Aware of the pending regulation changes, we stepped into this market by taking three master broker agencies with some of the key second charge providers in the market.
An agency is the agreement a firm enters into with a lender to transact and advise on that lender’s products. For some it is a simple agency contract, for others, such as Castle Trust and the other secured lenders we had to undergo training and accreditation first before being granted the agency.
The way we work with Castle Trust is very much aligned with a first charge mainstream lender, in that it controls the paperwork and valuation process. As a master broker with the other second charge providers, we were in control of the processing and valuation instructions.
These processing requirements are quite different from a mainstream application and include things like issuing credit agreements and completing credit and Land Registry checks. This is the main reason why many mortgage advisers choose instead to refer to a master broker which specialises in this market.
It is also one of the main reasons we chose to take on just three key agencies initially, so we could ensure we were very familiar with their requirements. I am adopting a ‘wait and see’ approach to consider the offerings that may be available from lenders post-MCD. Many lenders are considering offering a choice of agency to advisers. This would be either as a master broker who completes all the processing, or a simple agency where the adviser can work in a simpler and more familiar way as they would do with a first charge lender. It will be interesting see the offerings as this market develops.
Simon Collins is product technical manager at John Charcol
For the past few years now we have already been treating second charge enquiries in the same vein as first charge ones. Our consultants follow the same advice process, by completing a fact find, and first discounting the viability of a further advance with their existing lender. Then we would compare the benefits of a full remortgage, against the value of a second charge loan. If we deemed a second charge the right option for the client, then we would refer them to an external company who would deal with the advice process. The company that we refer clients to is one that we’ve dealt with for many years and have excellent relationship with, which really negated any concerns regarding our ongoing relationship with the client.
While we’d had no complaints about the service referred clients received, with the acquisition of Simply Finance we will now be able to do these in-house. We don’t envisage the way in which we approach second charge loans to change, and will still expect consultants to follow the standard advice process to ensure that second charges are recommended only where most appropriate to the client’s needs.
The MCD and second charges are something that had been on our radar for some time and while it wasn’t necessarily the prime driver behind the acquisition of Simply Finance it has certainly been very beneficial.
Dominik Lipnicki is director of Your Mortgage Decisions
Like most, I believe that the upcoming changes in regards to offering a second charge option at the same time as the mortgage are largely unnecessary for the UK market.
We have once again had a ‘one size fits all’ regulatory change which will do little more than add to the intermediary’s administrative burden. I fear that this will all too often end up as a box-ticking exercise and will not further protect the consumer or expand their choices.
Nonetheless the changes are here and we have decided to refer these to external secured loan brokers, as in our view, an actual need for a second charge application will be very rare.
Having looked at all of our remortgage cases for the last twelve months, unless a client needed to raise funds while having a prohibitively expensive tie-in on their mortgage, second charge lending would have been too expensive when compared with a remortgage or further advance.
I really do not see this changing going forward and consider second charge lending as a go-to solution when the case is not placeable for a remortgage.
Clearly we will monitor the situation and if our chosen mortgage sourcing software allows a reliable and instant comparison, we may well reconsider.
Brokers at the network completed almost 3,500 protection cases and almost the same number of mortgage cases to total more than half a billion pounds worth of lending.
First Complete said this defied expectations for lending in a month where sales volumes would traditionally dip.
The announcement follows figures published in May that saw completions at the network increase 22% in the first quarter, compared to the same period in 2014.
Toni Smith, sales operations director for First Complete (pictured), said, “The results achieved this August are outstanding and full credit goes to all of our ARs who continue to outperform the rest of the market month after month.
“While the CML [Council of Mortgage Lenders] figures demonstrate that we are in a growing mortgage market, First Complete brokers have taken this to a whole new level, demonstrating the calibre of the firms that we have in our network and what can be achieved with a combination of the right support in the right culture.”
The network wrote to its appointed representatives telling them their fees would increase from 1 October.
Carrington (pictured), sales and marketing director for Personal Touch Financial Services (PTFS), said he had raised his concerns about the levy to the Financial Conduct Authority (FCA) and believed that cost to firms was being applied ‘indiscriminately’.
He said: “I feel particularly frustrated by having to pass on these charges to our members as we were able to reduce our own fees for the vast majority of our members earlier in the year when we introduced our quality-based pricing approach.”
PTFS, along with other firms, received a double blow from the FSCS when it charged firms retrospectively for an additional levy from last year and this year in one swoop. Carrington said the increase stemmed from the life and pension portion of the fee which covers protection, the reason mortgage advisers are liable to pay the charge.
In its note to members, PTFS said: “We believe strongly that the current method of allocation of FSCS levy is flawed and we have raised our concerns directly with the FCA on a number of occasions recently. In addition we continue to support the active lobbying campaigns of AMI [Association of Mortgage Intermediaries] and APFA [Association of Professional Financial Advisers].”
It continued: “The levy is indiscriminate and applies to all firms, irrespective of the type of business written. It’s important to note that Personal Touch receives no monetary gain from your regulatory fees as we simply pass on the charges imposed by the regulator.”
PTFS said an increase in the cost of its Professional Indemnity (PI) cover had also had an effect on the increase in member fees but said that its 12% insurance increase was well below the industry average rise of 25%.
The referral-only service will allow introducer appointed representatives to refer commercial loans, non-regulated buy-to-let and bridging deals and second charge loans to TFC.
Introducers who are either not regulated, have more business than they can handle or whose consumer credit permissions have lapsed will be able to refer cases using the service.
The process will require introducers to refer a few basic client details to TFC, which will handle the whole case, and pay 50% of the commission after costs on completion.
Managing director, Nigel Payne, (pictured) said: “This is no brainer for those introducers who have business they can’t deal with, either because they are too busy, it’s outside of their knowledge base, or they don’t have the relevant authorisation.
“We know there is a demand for this service. Many brokers are aware that they need to consider second charge lending from 16 March 2016 but don’t feel confident about arranging these deals. Others just want to focus on straightforward cases. We can help following a simple referral.”
The life of a DA broker can be quite isolating if the broker does not take adequate steps to avoid this – attending road shows for example – and this isolation is often most acutely felt when it comes to new regulation and rules.
While the debate of directly authorised versus appointed representative may have solid arguments on both sides, when it comes to compliance I believe ARs may be reaping the benefits.
Networks are big on compliance and, in order to ensure they can offer their members the best assistance in adhering to the Financial Conduct Authority’s standards, it is essential that they are up to speed with any developments. Understandably then networks are pretty clued up on FCA regulation.
This will be particularly beneficial for brokers in the case of regulation of the consumer credit/second charge industry. Since the FCA took control of the sector back in April 2014 brokers have been given a lot of mixed messages and confusing advice about what they should do.
Information has not been forthcoming, at least not in the early days and for those sole traders without the support of a network to help them make sense of the rules, there is a risk of falling foul of the regulator.
My worry is that, because DAs are not used to selling secured loans as part of their core offering, they may be unaware of how they should be comparing and referring such products. They may not fully understand where their responsibility begins and ends and the importance of the documentation process in supporting this. As a result they leave themselves open to complaints and perhaps even mortgage misselling claims.
I fully understand the appeal of being directly authorised. The freedom it affords brokers is certainly attractive. However, if you choose to take this route it is imperative that you ensure you take responsibility for your own compliance. Make use of the information that is available, try the regulator’s website as a starting point. Partner with a secured loan master broker that can help you get to grips with the market and has your interests at the heart of its offering. You should be able to see and feel a more compliant process than existed in the past with clear communication of responsibilities to you and your client, detailed research records and guidance to help you stay on track.
Both now and next March, when the Mortgage Credit Directive comes into play choose your loan partner wisely. Make use of their systems – the technology is there to help you. You should be able to lean on your master broker for compliance support. I recommend you lean hard and see if they fall over. It’s better to know now.
The FCA will not allow for mistakes on the basis of being uneducated. It is your duty to educate yourself and have appropriate controls in place. None of this is difficult for a DA so don’t leave it too late. As we all know, when it comes to breaking the rules, ignorance is no defence.
1. Barclays to drop Woolwich brand – exclusive
Barclays will scrap the Woolwich brand from its intermediary mortgage lending business and rebrand to Barclays Mortgages.
2. Court reverses Northern Rock Together mortgage compensation decision
The Court of Appeal reversed a decision that would have led to compensation being paid to 41,000 Together mortgage borrowers with the former bank Northern Rock.
3. More lender affordability changes are on the way
A telling remark emerged recently from the Council for Mortgage Lenders’ monthly market commentary when economist Mohammad Jamei talked about lending affordability requirements holding back market growth, says Andy Gray.
4. RBS/Natwest has big budget and exciting plans for mortgage business – Higginson
George Higginson, ex-CEO of Sesame Bankhall Group, says RBS/Natwest has a big budget and exciting plans to improve processes across the broker and direct mortgage channels.
5. Property Ombudsman bans letting agent
A lettings and estate agent has been expelled by the Property Ombudsman for a minimum of two years.
And you may also have missed:
6. FOS receives mortgage complaints over rigid MMR policies
Lenders have been criticised for applying rules brought about by the Mortgage Market Review (MMR) too rigidly leading to the unfair treatment of borrowers, said the Financial Ombudsman Service.
7. Barclays plans to cut 30,000 jobs over two years
Barclays is planning to cut 30,000 jobs over the next two years in a bid which is intended to help the bank cut costs, following the departure of CEO Antony Jenkins.
8. Brightstar sells minority stake to private investment firm
Brightstar has a sold a minority stake in its company to private investment firm, Omni Equity Partners, and will appoint a member of Omni to its senior ranks as a non-executive director.
9. Case study: Integrating a mortgage sourcing system
Personal Touch integrated Twenty7Tec’s mortgage sourcing system into its own back office technology at the end of 2014. David Carrington, sales and marketing director, recounts the journey and how it has benefited advisers and the network.
10. Are networks letting down their ARs? Marketwatch
In the Financial Conduct Authority’s (FCA) MMR thematic review, Appointed Representatives (AR) of many large networks were criticised for giving advice which had little or no structure. This week’s Marketwatch asks the industry the tough question.
Have a great weekend all from the Mortgage Solutions team.
