There has been plenty of news this week and over the past month about the state of the market for lenders. Redundancies, restructures, refocusing of strategy, you name it and it’s being re-engineered to cope with tougher times ahead. So what of the distributor marketplace?
Well it is common knowledge that consolidation was on the cards with some of the networks out there, but a buoyant mortgage market perhaps put this on the back-burner.
Now we are playing a different ball game and those networks who have a very diverse service offering seem better equipped than those who have built their businesses on the back of just one income stream.
Those who work in the distribution world know this better than most – I’m a marketing guy who chose financial services over fast-moving consumer goods (FMCG), because promoting long-term products seemed a better proposition than trying to push cans of baked beans quickly off the shelf. I wonder whether we should put ourselves in the FMFS bracket – fast-moving financial services.
Fees to the fore
Fees have also come to the fore. Should packagers offer a guarantee of payment for cases they receive, should fees be split between brokers and distributors and paid direct from lenders; and with margins under some pressure, what is the fee going to be anyway? Networks are support organisations and that should extend from product development and research to business development and payment of fees.
Brokers who are worried by the financial solvency of everybody in the mortgage chain are usually very reassured when they are paid their fees within 24 hours of a legal completion. This service to brokers does not come cheap – resource and funding are key – but this does take the pressure off our customers and allows us to negotiate on their behalf if they have missed a lender’s payment run.
As lenders review the proc fees they pay, many brokers will need to start selling higher volumes of mortgages just to retain their current income, or look to cross-sell more protection, general insurance and conveyancing services to their customer base.
Quality customer base
The current marketplace also highlights the need to have a good quality customer base to revisit on a regular basis. With 70 per cent of new mortgage sales on fixed rate deals, and around 1.4 million deals coming off their introductory terms, there is plenty of opportunity to build a strong income stream next year and for years to come.
But the secret of success is having the admin support in place to take advantage, and a customer management system that proactively highlights who to call and when. Obviously this sort of activity, in the new ‘Treating Customer’s Fairly’ culture, is central to the relationship a broker has with their clients – continual reviews of fixed rates, interest only and protection needs will all play an important role in meeting the requirements of the principles-based regulation.
How can a network help the broker? Diversification in product lines, allowing multiple cross-sales in areas such as protection, conveyancing and Home Information Packs is important. Good quality support is vital – especially when times are changing, whether it is in product, niche or even a regulatory environment.
Networks can also help brokers to drive the business forward, increasing the number of customers they come into contact with and ensuring that a regular dialogue is continued with the client, encouraging more sales and looking at a lifetime value. Technology will play a bigger role for the broker in maintaining the client relationship and making the most of the current turbulent marketplace.
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