Day 55 – Bob Hope walks into the office and turns on his PC. He spends the day watching the appointed representatives (ARs) going about their daily lives.
Day 56 – Bob Hope walks into the office and turns on his PC. He spends the day watching the ARs going about their daily life.
Day 57 – Bob Hope walks into the office and turns on his PC. He spends the day watching the ARs going about their daily life.
Well not quite – I can’t spend the day lolling around watching the antics of housemates, discussing nonsense (some would disagree) and setting tasks. Indeed, trying to run a network under such a regime would prove to be as fruitless as the damn programme itself and I’d imagine we would lose our members quicker than eviction night.
The latest network chart and relevant statistics show a continuation of the steady growth – around 6 per cent a quarter – seen over the last 18 months. So much for John Goodfellow, chief executive and director of Skipton Building Society’s memorable prediction in May 2005, that ‘there will be no mortgage networks in 12 months’. The growth is fairly evenly split across most of the networks, which may account for the lack of consolidation that many pundits had predicted – although, with my cynical head on, I could say that comments like this may have had an ulterior motive.
Could the reason for this situation be that the contenders left in the running are finding that after months of hard work, their particular formula is actually bearing fruition for their members and therefore they are looking for more lateral expansion into new areas of opportunity to carry them forward?
Not just a framework
Speaking from experience, it has taken months not just to establish the framework of our network but also to work with the individual ARs and find out from them what support they want to develop and progress; and we complement this with the necessary business controls required from being a network. I have always thought a network should be just what it says, an avenue to network and grow and not simply a prescriptive and often prohibitive framework, and this might be why 100 per cent of our members are satisfied with what BDS has to offer and 85 per cent of these are exceptionally so.
We implement control in the form of support services, for example we have a network manager (me) who is tasked with growth and development and 95 per cent of our ARs find this invaluable. Offering business and marketing support ensures that business is retained and more importantly increased – so again, control via consensus.
In a radical move, we are allowing ARs to actually have some control over their network by launching our ‘Business Forum’, where representatives will resolve issues, develop strategy and discuss how to shape the network to meet changing business needs. This reiterates my earlier comments in that support and development can prove infinitely more fruitful. I have found that our members on the whole are good networkers, they are aware of what is going on around them and are willing to pass on information. They certainly conform to the adage, ‘it’s not what you know, it’s who you know,’ and ARs are happy to introduce business to others. For example, lifetime mortgages may not be one of their specialist areas, so they refer. BDS actively encourages this and this is also seen in a positive light by the FSA.
Imposing control from the top
There are of course areas where controls have to be imposed from the top, such as compliance, and these will no doubt become more stringent as time progresses. Speaking as a mortgage broker (I am one of those too) this is an area where unless you can provide dedicated resource, involving both time and money, smaller firms benefit from being part of a network. Checks, visits, support, monitoring, technology and reading and implementing the almost weekly bulletins and suggestions that have come from the FSA all come as standard with a network and although sometimes the amount of control can seem onerous, a directly authorised (DA) firm has to undertake the same checks on itself. 60 per cent of our ARs actually found compliance visits useful to their business.
Compliance comes in a variety of guises, from the supportive and mentoring to the check-list-based, ‘you can't do that there, because the compliance department says so,’ quasi-internal audit-type function. However, within a successful network, compliance has to be seen to be one with sales and development as a risk management function, rather than a business barrier.
Compliance is not a separate and esoteric discipline; it is the risk management role within the firms’ general management structure. If compliance can interpret the FSA rulebook (not forgetting ‘Treating Customers Fairly’ (TCF) of course), in a way that establishes boundaries rather than coming up with a list of things an adviser can’t do and work with advisers to agree what ‘compliant’ business looks like. Our experience is that advisers will discover new business opportunities and confidence in the quality of business they submit. Compliance is also a winner because the adviser will act as a co-operative colleague rather than someone who feels they need to do battle with the compliance adversary on every case they want to submit. This approach certainly works for BDS and our colleagues in the network; it also means the network has access to a dedicated but supportive resource that can take an independent and dispassionate view of the compliance risks and requirements, leaving the adviser to do what they do best – service clients.
Network benefits
Of course some could argue third party compliance is too controlling and hence would prefer to be DA, but speaking as a broker who has looked into both, Martin Bonin, director at Ivolve Ltd comments: “I spent three years DA by the FSA, and with all the hurdles it puts in the way, it makes sense to me to come on board with BDS Mortgages. I initially looked at both routes of becoming an AR and going direct and thought being DA was going to be better. But now, I cannot see the advantages. I do not mind giving up a percentage of my business, as I can see the benefits from the support it provides.”
While it seems that I can only see good in networks, there is a flip side of these restrictions on business, mainly how their ARs are controlled via selective lender distribution, nominated panel for associated sales and usually personal indemnity (PI) insurance. For the broker this may cause issue as ‘whole of market’ is not always an option but if the lenders available offer in-house underwriting and processing then the benefits are too numerous to list.
Some larger networks overcome the panel issue by opening it up to packagers panel that in turn can access alternative lenders and products. The flip side is that this volume drives competition and packager can negotiate to everyone’s advantage. I did canvass some opinions on whether ARs found control was detrimental to business and Peter Gunton of Audrey Dyson Mortgage & Financial Services, based in Newcastle’s response says it all, “I definitely don’t feel the network is too controlling in the services it provides, knowing it can negotiate for us better deals and professional business partners. The day-to-day support I get is certainly not restricting our business – in fact we believe it has enhanced it.”
If what we are seeing is that ARs do not necessarily find networks too controlling and certainly are not fleeing to become DA or jump ship to competitors, then how, going forward, can networks progress from their current position? The answer must lie in strategic consolidation, merging to share resource and development rather than just for financial gains; and control tailored to individual requirements and limited to necessary rather than overbearing. Controls don’t have to mean Big Brother because, let’s face it, no one wants to be watched 24 hours a day.
