The LSL interview with Toni Smith and Jon Round from Primis
In February this year, Primis and Personal Touch Financial Services (PTFS), appointed representative networks of LSL Property Services, came together under the Primis brand.
Since LSL acquired PTFS and its 2,300 registered individuals (RIs), the firms have undergone significant alignment, including integrating sales, operational and proposition functions under a single executive team.
Primis COO Toni Smith said the brand is rolling out the Toolbox technology, the PTFS operating platform, to the rest of the network and completed 200 training events for 3,000 RIs, which ran over 14 weeks from May this year.
At the time of writing, Smith said there are 187 applications to join the network from RIs, with plenty of multiple broker firms in the mix.
The group’s annual mortgage completion figures, reported in March this year, jumped from £21bn to £29bn for 2018. This was a total market share of eight per cent, which has already risen in its H1 results.
LSL’s financial services brands include network Primis, formerly trading as First Complete, Pink Home Loans (Advance Mortgage Funding) and Personal Touch Financial Services, mortgage club The Mortgage Alliance (TMA) and Embrace Financial services, an appointed representative of First Complete. Other brands include Linear Financial Solutions, Mortgages First and RSC New Homes, First2Protect insurance services and Mortgage Gym.
LSL’s first-half results this year confirmed the group’s share of the UK mortgage market is at 8.5 per cent. It also secured a 10 per cent increase in the group’s protection completions in H1 and a seven per cent rise in general insurance completions.
UK Finance product transfer data for Q2 out last week showed 292,500 homeowners switched product with their existing provider, with 164,100 on an advised basis representing £41.4bn of mortgage completions.
Last year, almost 1.2m people took a product transfer with their existing lender worth £158.7bn of lending activity, around double the figure for remortgages.
LSL reported its product transfer business in H1 this year at £4.2bn, or 28 per cent of the group’s total mortgage completions which were £14.7bn. This represents an 8.5 per cent share of the UK mortgage market.
The network currently has 860 broker firms in its network and says: “We understand that Primis is the largest network by mortgage volume as confirmed by most of our lender partners.”
“We would always claim one of our unique selling points is the mutual benefit to the people joining us and the business. It’s a triangular effect – 184 events this year – the market, the proposition, what’s in your kitbag, challenging brokers to do a proper job every single time you sit down with a customer,” says Smith.
She adds that cascading product and technology knowledge and teaching businesses how to run a business are key strands of Primis’ purpose.
“Great brokers are not necessarily great business people,” adds Smith.
Primis CEO Jon Round (pictured) said: “We have historically worked with Twenty7Tec. I think that’s the software most of our brokers will be using moving forward. It’s the closest connection and the strongest software.”
He suggests that choices of sourcing system available in the market will narrow over time.
He adds: “You’ll probably have multiple solutions for a while. It will take time for lender systems to connect up [to distributors]. Lenders will want to try to connect with most of the larger distribution groups but they may not have the capability. They have the same issues many of the networks have that they will have to wait to be connected up by their software provider.”
Smith adds that the group will be ready to showcase its software in September and its initial Application Programming Interfaces (API).
In September last year, LSL entered a partnership with MortgageGym, which is an automated advice and artificial intelligence services firm, valued at £12m, which also only launched last year.
Regulated by the Financial Conduct Authority, MortgageGym offers a free 60-second mortgage-matcher and mortgage advice, which includes full integration with Experian credit files and mortgage lenders’ live scorecards.
Round says: “Our plans with Mortgage Gym further demonstrate our commitment to investing in technology for our members. Mortgage Gym will allow our brokers to place cases more quickly and easily, encompassing the whole point of technology in the mortgage market – to support the human aspect of the application process.
“We look forward to working with the team at Mortgage Gym to help more brokers embrace the technology that’s out there and produce the best possible outcomes for their clients.”
He adds: “If you go back three or four years, the discussion with the broker was all about what system or platform a network has and the technology was more the domain of the administrator. Now when you think about which network to join it’s all about tech offering and asking how it’s going to grow your business.
“If you can’t show the platform in place and how you’re going to keep pace, you can’t compete,” he adds.
I ask Round and Smith if the advisory market has peaked in terms of business volumes given the momentum being created by product transfers and execution-only regulation.
Round said: “Unless regulatory change drives it in another direction, I can’t think why people would look for less choice.
“The mortgage journey is never going to be simplified back to its unregulated status, to a few tick boxes. It’s always going to have rules and compliance and be complicated to an extent and so you’re really going to want to talk to someone about that.
“To go and just have a conversation with one lender, why would you do that? Some have fantastic digital propositions – but are they getting traction? No, they’re really not.”
Round suggests that the broker models that will work will be extremely well diversified, with a polished proposition aligned with better technology tools – the bionic broker model.
He continues that later life lending still needs plenty of product flexibility to create truly inter-generational products that can qualify a mortgage through the generations passing property title from one tier to another without a property sale and the advice to go with it.
“It’ll get there,” he adds.
Round says this market never sits still, which is why it remains exciting.
“That’s good because we’re competitive and you can be nimble and win but it does constantly mean you have to keep thinking. Its that sort of vibrancy. It’s a fascinating market.”
West Brom fans surge in influence over UK mortgage advice channel
With Kevin Roberts taking control of the Legal & General Mortgage Club next month, the powerbase of the West Midlands football club’s fans has grown noticeably in the UK mortgage market.
Mortgage Solutions understands that Roberts is a vocal fan of the club.
He joins fellow Baggies supporters, LSL group financial services director Jon Round and Simply Biz CEO Martin Reynolds at the top of the industry.
According to 2016 annual reports, the most recent data available, L&G Mortgage Club facilitated £53bn of mortgages in one year – around 21% of the market.
Meanwhile LSL Group, which includes networks First Complete and Pink, said it arranged total mortgage lending of £17.4bn in 2016, representing 7.1% of the overall market.
SimplyBiz did not supply figures at the time of publishing, but with only the L&G Mortgage Club and LSL included, this accounts for more than 28% of broker market completions.
This influence is set to grow with LSL announcing earlier this week that it had agreed the purchase of rival network Personal Touch Financial Services.
(Bit of Friday fun never hurt anyone – ed.)
Ex-Sesame’s Lisa Martin to join LSL
Martin (pictured) will bring over 30 years’ of experience in the mortgage and financial services industry to her appointment at LSL, where she will play a key role in supporting expansion plans for the firm’s Appointed Representative (AR) and Directly Authorised (DA) businesses.
Sesame announced yesterday that Martin would be leaving the group only three weeks since been appointed director of mortgages at the company, where she previously held the post of director of operations and sales.
Martin’s departure from the business followed just weeks after Sesame’s former managing director of mortgages, John Cupis, left the group to join Openwork as mortgage director.
Earlier this month, Sesame conducted a strategic review of its business, which saw it confirm the continuation of its mortgage club PMS and its AR network, but halt its AR proposition for its wealth arm.
Jon Round, LSL’s group financial services director, said ‘I am absolutely delighted to bring in someone of Lisa’s calibre to join what is already a really strong executive team. This new role has been created to support the significant expansion plans for our AR and DA businesses, and I’m sure that Lisa will make a major contribution to our continued successful growth.”
A checklist of the FCA’s fraud requirements
At its recent annual Financial Crime Conference, the FCA spelt out its expectations regarding financial crime. Attendees were left in no doubt that the FCA is looking to be more proactive than the FSA ever was.
The regulator confirmed that financial crime prevention is central to its agenda and is very much key to the objective ‘To protect and enhance the integrity of the UK financial system.’
To deliver this objective, the FCA is looking for firms to have sound systems and controls in place; in terms of financial crime specifically, this means firms must be able to identify financial crime risks. For example, the FCA expects firms to know who their clients are and where their money comes from; in addition we have all been aware of lenders putting tighter and tighter controls in place.
So how do you protect your business, deliver on ‘know your client’ and avoid the typical fraudulent application scenarios?
The reason that self certification mortgages were abolished was to help to get rid of the risk of borrowers over-stating their incomes. Despite this, some potential borrowers continue to attempt to inflate their income while others will claim fictitious employment or rates of income.
Let’s be clear, this is not just ‘pushing it a bit’ this is fraud and any broker found allowing this to happen, or worse still, endorsing it, runs the risk of losing their livelihoods.
Awareness and prevention comes from document collection and thorough checking, this means comparing payslips with bank statements. If the profile does not match, telephone the employer and use the internet to validate what the client is telling you
Undisclosed credit is another common fraud; this usually goes hand in hand with hidden addresses, which may also be linked to an undisclosed or hidden adverse credit history. Even though your client may not make you aware of these, it is for you to be confident that there are no such skeletons in the closet.
You can do this by obtaining a copy of the client’s credit file and by reviewing their address and voters roll history, as well as assessing their loan commitments and repayment record.
A third type of fraud is occupancy fraud or scheme manipulation; of course different mortgage types, such as buy-to-let, will attract different lending criteria and interest rates than a standard residential mortgage.
Manipulating the mortgage type to suit more favourable loan conditions and so circumvent the relevant credit score, LTV or lending policy is clearly unacceptable. Precise has rightly announced recently that brokers will be struck off for repeatedly placing what should be residential applications as buy-to-let cases.
Avoiding this type of fraud is simple: use your common sense, ask whether it is realistic for the client to be earning what they say they are, given the job they claim they are doing. Also investigate how they have accumulated their deposit, where they are buying and why and whether a property of this type, in this area, fits with their profile.
Finally, be very aware of who you are getting your business from. Market contacts can be a great source of business, but some introducers might also attempt to place fraudulent cases through your business. Tactics to catch you out can include the introducer contacting you out of the blue to place clients with you, accompanied by a reluctance to sign any paperwork.
All too often the parties involved wait to see how it goes and in time the need for such documentation is forgotten. Such contacts may look to deal with the client exclusively and may even attempt to influence the choice of product, lender, valuer or solicitor.
Keep your wits sharp with introduced business – always complete appropriate due diligence on the person introducing the business to you, especially if they have come to you unsolicited. Also complete an agreement and pay close attention to the clients passed to you, it could be that the first two or three cases are legitimate and then when your guard is lowered some more dubious cases will be passed to you to see if you notice.
Don’t be self-conscious about conducting the necessary checks. After all it is your business and your livelihood that will be lost if a fraudulent case slips through the net.
Finally remember the old adage: ‘if it seems too good to be true, it probably is’.
Fraud week on Mortgage Solutions
This week, Beaumont Legal will highlight the dangers of using the cheapest conveyancers while Ipswich Building Society looks at how smaller mutuals are fighting fraud.
xit2’s Mark Blackwell asks if the Help to Buy will hinder the battle against fraud and our Marketwatch column looks at whether the industry needs to pull its own socks up on this issue.
Jon Round of First Complete has signs brokers need to watch out for in their own business and credit agency Equifax have some top tips for mortgage brokers to pass onto clients.
Mortgage Solutions’ reporter Julia Rampen talks to Santander’s financial crime manager Tracey Carr to find out what steps the lender is taking behind the scenes and we round up the biggest frauds of the year in our Hall of Shame.
Stock market shocks show government must tread carefully
The announcement of this rocked stock markets across the world and maybe led to the Bank of England’s pre-emptive statement in its financial stability report, warning that mortgage borrowers face a major income shock when interest rates rise.
This brings home the importance of careful communication and orderly transitions from one initiative to another. Sudden starts and stops of different government initiatives cause a big shock to the market.
Stock markets are particularly prone to over-reacting as has been proven in the last couple of weeks, but our clients and the wider economy can also see sudden spikes or drops when something is suddenly introduced or stopped – just look at the effect of the end of Stamp Duty relief last year.
The warnings by the US Fed and the Bank of England are carefully crafted to help people and economies to prepare for what might happen when stimulus is withdrawn and interest rates rise, in order to help mitigate the effect of these actions.
With the Chancellor’s spending review announcing new initiatives for affordable housing and the introduction of the Help to Buy mortgage guarantee scheme in January, it is vital that any initiative has a phased approach.
If the MIG scheme is suddenly introduced in January and the market gets used to having all high LTV loans underwritten by the government and then this suddenly ends it is likely to cause more pain across the market than if it were never introduced.
The most important thing is confidence and so much of this is based on communication. The current activity in the mortgage market is much more down to renewed consumer confidence based on announcements that more lending is taking place than it is on any actual initiatives.
We all play a vital part in this process of communicating and maintaining confidence. So, it is key that we raise the prospect of what might happen in the future so clients are prepared. This way we can work to lessen any sudden shock when interest rates rise or an initiative suddenly stops.
Jon Round is financial services director at LSL Property Services
What the Bank of England needs to learn from Manchester United
Mark Carney has, perhaps shrewdly, been noticeably silent in the months since he was appointed. However, with just a few weeks to go, we are still waiting to find out what he thinks on any of the key subjects that will affect the British, or even the global, economy over the forthcoming months.
Almost all of the commentary was immediately after his appointment, which gave a bit of an insight on what he’s done in the past, but very little on what his judgements or opinions are on the future or the way he will approach his new role.
It seems odd that Mervyn King has been stepping up his press profile and expressing some strong opinions, over recent days, given that he will no longer be doing the job, yet we won’t know what the new governor will think until he is actually in position.
This uncertainty is made all the greater by the fact that he is a Canadian who has never lived in the UK. Carney looks to be a very different character to Mervyn King, but this long period of silence before the handover leaves a time of uncertainty which you would never have in other walks of life.
Take Manchester United for example. Within 48 hours of Sir Alex Ferguson saying that he was retiring the club had announced the new manager.
Manchester United’s handover period was only two matches eliminating any insecurity that may have destabilised the club.
Mervyn King has recently hit the headlines with less than positive views of Help to Buy. Whilst Mervyn’s views remain mildly interesting, what we all really want to know is what does Mark Carney think, but it looks as if we will still have to wait a while for this.
I hope that when the new governor finally does take the helm the transition will be as smooth as it appears to be on the football scene and he will help to guide the UK economy back to the Premier League.
Jon Round is financial services director at LSL Property Services Group
Talk is cheap. We need action George Osborne
Having missed many of the goals that he set himself and with the country’s loss of its AAA rating he may well be restricted in what he can do while sticking to his party’s chosen course of austerity.
While housing is obviously an issue that we would all like to see addressed on a number of fronts, it is unlikely to be the largest priority that the Chancellor has to deal with in this Budget.
What it would be good to see is some new actions, and some that don’t just rearrange the deckchairs. Talk is cheap and it’s is easy to announce new things but the Autumn Statement showed us that very little of it is new.
What we need is something new that really makes a difference, not a measure that replaces an existing one. The Funding for Lending Scheme has, so far, just replaced other sources of funding.
NewBuy and First Buy have replaced other new build incentives, yet house building and new lending figures have not actually increased by very much.
In fact it will be interesting to see what changes, if any, are made to the FLS scheme and whether any incentives or constraints will be put on the money to encourage banks to lend at higher LTVs and increase their lending to businesses – both of which we really need to see.
Rumours of an extension to the scheme into the middle of next year illustrate that the government thinks the scheme is working even if the initial figures have not terribly promising, but what we need are measures that will make it effective, that encourage lending in the areas that need it the most.
Finally, no doubt within the industry there will be the usual calls for Stamp Duty to be reduced or made fairer, but with the UK deficit getting larger rather than smaller and talks of a switch to tax rises rather than more spending cuts, reform of Stamp Duty is more unlikely than ever this year.
Jon Round is financial services director at LSL Property Services Group
Network league tables can be misleading
While everyone likes to have a look and see who has gone up and who has gone down it’s a very opaque measure so we need to view the numbers with caution.
The statistics reflect the number of AR ‘firms’ that are part of a network, not the individual number of advisers and so can mask the real number. What the statistics don’t give away is whether that company is a one man band, or whether it is the size of Your Move, a part of First Complete network, which has well over 100 advisers alone.
While it is always a positive sign if a network is growing in numbers, as it shows that the network has an attractive proposition that advisers want to be a part of, it is always worth investigating the figures a little more. Just taking them at face value amy not be helpful, as the figures also don’t reveal how successful or profitable those advisers are, so they don’t reveal how stable a network is.
If you are thinking of changing networks or going to work with one, a better measure would be to look at how financially secure a network is and how strong a company it is backed by, if it is indeed backed at all.
For advisers, what is more relevant is the amount of support that you will receive and how well what the network is offering fits with what you need for you and your business.
Of course if and when we ever have individual registration of mortgage advisers then a much truer picture would be revealed and we would finally get to see the real picture of exactly how many advisers there were in each network. Then the league tables would be a lot more revealing.
Jon Round is LSL Group financial services director
Client ownership, the MMR and the way ahead
Many advisers have dealt with their clients for many years, often they deal with the client, their extended family and their friends and the adviser’s business thrives on the referrals these clients bring. It is hugely frustrating therefore when a lender refuses to recognise this.
There is something fundamentally wrong in the fact that once the adviser has brought their client’s business to the lender, the lender treats the client as their own and will be reluctant to ever update the person who introduced them, often to the detriment of the client.
Under the initial MMR recommendations, if a client wanted to change the terms of their mortgage they would have had to receive advice, but final rules have dictated that they now don’t need to.
This can have major ramifications on the client, the level of advice they receive as well as affecting the question of who owns the client.
Under the final MMR rules at the end of a client’s two-year fixed rate for example, a lender can alter the product that the client is on, on an execution-only basis, without referring to the introducing adviser or offering the client advice.
This leaves the client completely unprotected; when an adviser offers advice then they stand by that and the client has a form of redress if they feel they have been misadvised.
If a client changes their mortgage under an execution only transaction then the lender takes no responsibility for them and the adviser can’t advise them as they won’t know about it.
This situation can’t be right either for the client of for the adviser who introduced them. In order for an adviser to continue to give high quality advice to their clients, it is essential that they know what other advice or information a client has been given.
Jon Round is chief executive at First Complete