Amid the constant rumours, redundancies and market turmoil it appears that mortgage clubs are busily going about their business in the efficient and sometimes understated way in which they always have.
There is no doubt that 2008 will be a challenging year for all concerned in the mortgage industry and as we come to the end of the first quarter we are perhaps not seeing the chinks of light at the end of the tunnel that some thought we might.
It is no great news that this is due, in the main, to the deep-rooted uncertainty caused by the global effects of the credit market issues.
However, in this time of uncertainty it is imperative that mortgage clubs work even harder on relationships in order to offer intermediaries a wide choice of products and bring fast, clear communication in regards to key product information, exclusive products and sales ideas.
Adding value to any broker’s proposition should be paramount in any mortgage club’s offering.
With lenders reducing the levels of procuration fees it is becoming increasingly important for brokers to maximise earnings from each and every client and this can be helped by having access to a range of top quality ancillary mortgage-related products. There is now not only a demand for ‘traditional’ specialist areas.
Increasingly, intermediaries are expanding and advising clients in sectors such as commercial mortgages, bridging finance, general insurance and secured loans. Mortgage clubs which have identified these as important niches for their members and are able to offer competitive and ground-breaking deals in these areas will certainly be attractive propositions.
Taking a step back
So while this is the state of the current market, it is important to realise how mortgage clubs came about and how they have evolved in time. While I am no historian, the concept of the club began during the mid 1980s when the mortgage market was starting to go through the first stages of a major revolution.
The market during this era was dominated by building societies who distributed and administered mortgages through traditional branch networks.
However, building societies had lending quotas and were not able to satisfy the demand for mortgages and banks seized upon this opportunity by diversifying their lending and risk. This resulted in a raft of new products and providers in the market.
Brokers were far from the force they now are but this acceleration increased as specialist lenders also entered and fragmented the mortgage market leading to a flood of ‘new money’, which led to the opening of doors for intermediaries to distribute these mortgages.
This proportion was still relatively small, however, and products were becoming more complicated which gave rise to the emergence of the packager and club who widened this channel by negotiating with lenders for exclusive products and procuration fees on the broker’s behalf with some clubs set up as a result of offering these mortgage placement services.
The rest, as they say, is history. Distributors grew rapidly over the course of the next decade, only to face the challenge of regulation in 2004.
Regulation was a defining moment for many such organisations, as they had to decide what they wanted to be in the future: regulated networks servicing the needs of appointed representatives and all the regulatory responsibility that goes with that, or ‘pure’ mortgage clubs primarily looking after directly authorised brokers. Some organisations launched a multi-brand strategy and others quickly followed suit.
A world away
Today’s market is a world away from how it was when the mortgage club was first developing and intense competition means there is very little scope for non-essential products and services. If organisations cannot demonstrate their ability to add value, then they are more than likely to disappear.
With margins on mortgages constantly being squeezed, everyone in the food chain has to be able to demonstrate their worth in order to survive.
The phrase ‘adding value’ is indicative of society as a whole it seems. How many supermarkets, for example, have coined that, or the equivalent, phrase to attract customers to its shelves.
Today’s society means that as individuals we tend to naturally expect more than the bare minimum, in terms of the services we choose or the products we purchase. The people or firms that go that ‘extra mile’ by over delivering are the ones that stay long in the memory and will attract repeat business as well as a glowing recommendation somewhere along the line.
This is how I believe mortgage clubs should see themselves. While clubs in the past may have been little more than a useful way of upping the commission on a mortgage, they have evolved – at least the better ones have – to a situation where the services on offer span the wide range of wants and needs of today’s mortgage broker.
Building strong relationships
Communication is an integral component in being in a position to not only provide these services but to also make sure they are the correct ones. It is vital to listen to customers and if possible implement services that you are being asked to provide.
Building strong relationships is vital moving forward. The better mortgage clubs in the market continually work on their lender/provider/packager partnerships in order to provide club members access to a wide range of lenders and providers who provide quality products and services that satisfy the broker’s needs across whatever the sector.
We must also not forget that mortgage intermediaries need to be paid and clubs can leverage their bulk to ensure members receive the most generous commissions available.
Mortgage clubs must also ensure their commitment to prompt payment of those procuration fees never wavers. It is understandable that intermediaries will soon leave a club which does not undertake to pay the member as quickly as possible.
Understandably, any mortgage club worth its salt, will be able to offer members an information service on the available products and current offers. .
Of course, we must also not forget that we all now conduct business in a regulated environment. While appointed representative firms will have their principal partners to handle their compliance, directly authorised firms will either be taking on the responsibility themselves or looking for compliance partners.
A mortgage club can often help in this area providing a link to a specialist that can provide the necessary compliance services at a cost-effective price. The general workload of intermediaries and the demands of regulatory requirements coupled with working within a ‘Treating Customers Fairly’ environment means that choosing the right partners is a key area of importance.
It is also important to choose your business partners wisely and brokers should be looking to align themselves with strong businesses in terms of structure, stability and size along with sound financial backing that are capable of weathering the storms currently facing the UK market.
Being a member of a club should result in a sense of belonging and a real feeling of partnership between the intermediary, the club and the provider partners. It should offer a real sense of added value and in these uncertain times this reassurance and confidence could prove the difference between survival and success.
