Brokers have always had to learn to live with the potential invasion of their market by estate agents and until now have ploughed their furrows in the normal way. The planned introduction of Home Information Packs (HIPs) may have been no Boston Tea Party but with HIPs set to go live in under 18 months time, the Association of Mortgage Intermediaries (AMI) has felt it necessary to proclaim ‘the estate agents are coming’. However, are intermediaries feeling compelled to take up arms and defend themselves from the empire apparently poised to consume all their business before them?
The majority answer seems to be no. Most brokers tend to agree HIPs are a good idea in principle but they do have some concerns, especially regarding the cost and the potential for them to be just another piece of bureaucracy. However, with the government’s consultation period on HIPs now over, AMI has voiced its opposition to what it calls the ‘unintended consequences’ HIPs will bring to the industry. High on its list of issues is the potential for estate agents to usurp the broker and use their advantage of initial contact to provide a complete package; from finding a property to supplying the mortgage.
“It will be easier for estate agents to offer an all-round, one-stop-shop package to clients,” says Nicholas Hanson, director of Hanson Financial Management. “Although many clients won’t be forced into accepting this from the estate agent, they will get first contact so that will draw some people away from brokers.”
No threat?
However, the majority of brokers seem to dismiss this threat to their business, and say this has always been the case. Kevin Morgan, managing director of Consilium Financial Planning, says: “There is the concern that estate agents will try and take some of the market but there is already a fair amount of competition out there. However, I know we have a good product and if we concentrate on maintaining a good level of service, that should be enough to see off any threat.”
There are some dissenting voices within the market though. Jim Gillespie, principal of Independent Financial Services, believes many brokers are ignoring the potential impact on their business. “I do think that estate agents will gain more control and maybe establish a monopoly over the HIPs market. I can see the impact on smaller brokers, who have no links with estate agents, being significant and they will see their business drop. Estate agents will take all the new business and they will be left to just do remortgages.”
Gillespie seems to be one of only a few brokers who are following AMI’s advice and preparing for the introduction of HIPs. He is training to become a home inspector and his business also includes an estate agency. However, he is just one of a handful who are following this option; something he feels highlights the naivety of brokers. He says: “I’m attending a course at Reading University to train as a home inspector and out of 163 people in my class, only four are brokers. The rest are estate agents, which shows that estate agents are getting ready but brokers aren’t. I’m trying to turn the threat into an opportunity but brokers who stick their heads in the sand are going to get caught out.”
No worries?
Many other brokers feel they don’t need to start worrying about HIPs just yet. Alexander Hall, which is part of the estate agency group Foxtons, feels HIPs still have a long way to go before they appear in their final format and is waiting to see how both HIPs and the market evolve in the next 12 months.
Andy Pratt, chief operations officer at Alexander Hall, says: “I think some will go for HIPs too early but most will hold back until the second quarter of 2007, before they become mandatory, to enter the market. Currently though, we are looking for the best system and the best partners to work with so we are ready when the time comes.”
Small firm impact
This approach may be okay for a brokerage the size of Alexander Hall but what about the smaller intermediary who cannot absorb a massive drop in business? Hanson feels he should be doing something: “I haven’t done anything yet but I should be accessing estate agents to see about introducing business to us because it is very hard to establish relationships with them.”
Despite this, many brokers are prepared to rely on superior service as a weapon against the estate agent. Thomas Dickson, a partner at Dickson Lishman Prince, is one of them. “I’m not concerned about estate agents because I know we do such a fantastic job that our clients will stay with us,” he said. “It just means we have to raise our game when HIPs do come in, which I’m sure we’re capable of doing.”
Daniel Clayden, director of Clayden Associates, is in agreement but stresses that brokers must make sure the public don’t just opt for the simple option. “The biggest thing we, as a community, need to do is get across to the public the importance of seeking independent advice. We must educate the consumer as they may think it more convenient to go to one place for everything, when it’s vital they get the best deal; something we’re in a unique position to offer.”
David French is a news reporter at Mortgage Introducer
