The initial impact of mortgage regulation that we had all prepared for is now largely over. But today the industry finds itself dealing with the secondary effects – the kind that seep in gradually over the ensuing months and years. One of the most noticeable of these is the increasingly evident recruitment drought of mortgage intermediaries, advisers and consultants.
Cranking up standards
Only five or six years ago you could legitimately sell cars during the week and mortgages at the weekend using the same briefcase. Living in some parallel world to the regulated professions of lawyers, surveyors and solicitors, mortgage advisers were back there with estate agents. No qualification or even experience was specified in many job advertisements for ‘mortgage adviser’ – all and sundry could apply.
And in many cases they did, says Tracey Mullins, spokesperson for the Association of Mortgage Intermediaries (AMI). “How can I put it?,” she says, “Too many mortgage intermediaries, even prior to 2004, were very ‘unsuitable’ for the job.”
The first signs of any official improvement in standards was around five years ago when the Mortgage Code Compliance Board (MCCB) introduced mandatory qualifications such as CeMAP – although some advisers still slipped through the net by claiming to give ‘information only’ as opposed to ‘advice’.
But when statutory regulation hit in 2004, the threshold level of competence was raised to a level which – even five years ago – would have been barely recognisable. Inevitably, but gradually, this has led to a drought of appropriate candidates for mortgage adviser roles, which impacts on brokers, to lenders, to recruitment firms.
“We are fishing from a very small pond these days and it seems to be getting smaller,” says Stacy Hillyer, consultant on the mortgage team at London recruitment agency, Hillman Saunders. “We are looking for a full CeMAP qualification and preferably a FPC (Financial Planning Certificate) as well. Candidates must have a solid and steady work history in the sector, which these days needs to be squeaky clean. Post-regulation, employers simply demand it – they are the ones who will feel the force if the wrong candidate is chosen.”
The financial services sector at recruitment firm, Select Appointments, is also feeling the pinch. “It used to be the case that we were fighting for mortgage advisory jobs but now we are fighting for candidates to fill them,” says Graeme Ludley, managing director of the Tunbridge Wells branch. “When anyone walks through our door with a CeMap qualification, we literally grab them.”
But paper passports to a mortgage advisory role, such as CeMAP and Personal Indemnity (PI) insurance, now only constitute the basics. Mortgage advisers must be more vigilant than ever. “Take the mortgage products themselves,” says Mullins, “Not only do they now change so quickly, but some – lifetime mortgages for example – are very complex. In addition, advisers have got to keep on top of regulatory reviews and developments – something that was not even thought of a few years ago.”
Staying put
Even when it comes to advisers that are equipped with right skills and experience to sit comfortably in the Financial Services Authority (FSA) regime, few are willing to move around. Not only does any employment transition require a great deal more effort – even registering at an agency entails a cross-examination that takes over an hour – firms’ pay packages are broadly similar, which in turn, leads to employment stability.
This is good news for broker firms. In true FSA style, they have spent the past three to five years investing time and money in training advisory staff and monitoring their continued professional development. And, with recruitment costs also pitched higher than ever, it stands to reason that firms are hanging onto their staff with white knuckles.
Greater incentives
But there comes a point at which advisers become sick of filling their employer’s Porsche with petrol and paying for their boss’s exotic holidays. They realise that – as talented advisers – going it alone could present a far more lucrative option. Some brokers, like John Charcol, are sitting up and taking notice.
“We set up our self-employed arm, John Charcol Associates, a year ago,” says the firm’s senior technical manager, Ray Boulger. “It gives appointed representatives (ARs) full access to the same information as employed advisers and sets universal standards, but they have independence and flexibility of earnings. It was one way of retaining good people.”
But enlightened and experienced mortgage consultants want more than just a broker firm’s payroll to ‘schedule D’. After all, offering self-employed posts is often just a way to reduce a company’s fixed costs and move the salesperson to a commission-only basis. The commission deal might be generous, but the real capital value of the underlying company usually resides with the mortgage brokerage and not the salesperson.
Franchising
By contrast, with a successful franchising model – such as that employed across our 130 outlets – it’s a different story. Franchisees benefit from complete equity ownership of the practice, flexibility of working hours and a completely uncapped earning capacity. In short, franchising presents the perfect hybrid of flexibility and security for the budding mortgage entrepreneur.
We believe it is for this reason that we have witnessed a total reverse of the industry’s reported shortages of competent mortgage advisers. In fact, between March and June this year, Mortgageforce appointed 31 new franchisees – a staggering 30 per cent increase from the end of February.
Wider industry figures reveal this is a pattern to be expected. According to the 2006 NatWest/BFA annual franchise survey, 92 per cent of franchisees in the UK are trading profitability, whereas two out of three small businesses outside of franchising, fail to survive. No wonder recruitment is less challenging in mortgage franchising.
One of the model’s success stories is Stuart Bryce, who became a franchisee based in Duffield, five years ago. “I worked at a broker for seven years as an employed adviser but there was a wall of lower management that did not want to move so there was little room for me to progress and my earnings were unexciting,” he says.
Bryce decided to take on a franchise as it allowed him to own a small business with the backing of a national and growing brand. “I am now in control of my time and earnings – which are considerably higher than they were,” he says. “In some ways I wonder why everybody doesn’t do it. If you fail to hit sales targets you don’t have the security you may think you have, by being employed. And if you can sell, you will be better off in your own business and safer still in a franchised environment. It's as simple as that.”
While the lending market battles with recruitment challenges largely created by candidate inertia, it seems that a refreshing alternative to employment can motivate successful mortgage advisers to take the plunge and better themselves.
