I suggest that for the majority of consumers, the first thing that tends to spring to mind when it comes to the term ‘outsourcing’ is from the experience gained by communications with overseas call centres. Strictly speaking this is actually called offshore outsourcing but it is often easier to brand everything under the same stamp when it comes to the outsourcing process.
Outsourcing is now an accepted and widely used business resource. There may be firms out there who may still perceive elements of outsourcing as possessing an element of risk but his can be quickly mitigated by a good provider. The cost of outsourcing is bound to play a part in any decision, but service should be the main driver and enhancing the customer/client experience relies on robust service backed up with strong guarantees.
Competent partner
Firms are naturally looking at internal structures, overheads and staffing requirements and evaluating the cost effectiveness in the outsourcing of certain resources. When looking at such options, as a general rule of thumb, the best outsourcing specialists organise their processes to suit their clients' needs rather that their own, and can deliver an equivalent cultural, trading and operational environment. The bottom line is that brokers are putting their brand and their reputation in the hands of other firms. They must be certain that the partners they chose are more than competent. Of course, a good record offers reassurance, but it is equally important to ensure your partner is receptive to change.
A strategic partnership is not a million miles away from outsourcing but the word ‘partnership’ essentially means that such a relationship will work to benefit both parties and should be undertaken exactly as its title suggests. That great resource Wikipedia defines a strategy as a plan of action designed to achieve a particular goal. It adds that ‘The word strategy has military connotations, because it derives from the Greek word for army. Strategy is different from tactics. In military terms, tactics is concerned with the conduct of an engagement while strategy is concerned with how different engagements are linked. In other words, how a battle is fought is a matter of tactics: whether it should be fought at all is a matter of strategy’.
Basically, for all intents and purpose, a strategic partnership should be a well thought out planned relationship and certainly not one to be entered into without sufficient thought or research. Many firms have been guilty of either not having the time or resource to conduct sufficient due diligence checks on potential affiliations or they have simply entered into them lightly and often lived to regret it.
It is important to highlight the time, resource and expertise element here. Firms need to form an extensive checklist before entering into an agreement. Relatively simple elements such as references, regulatory status, financial structure, website content, reputational risk, TCF implications are just a few elements in a comprehensive list that must to be made. Many firms fall into the trap of looking to form a local partnership on a ‘you scratch my back and I’ll scratch yours’ basis and while these can prove advantageous, they also have the potential to go downhill fast as soon as the agreement turns a little one-sided and one of the parties reneges on the deal.
Mortgage clubs
However, there is no need to fear as there are a number of resources out there that can do all the hard work on behalf of a firm. Of course I’m referring to the benefits that can be offered by mortgage clubs. Clubs and networks form a rudimentary aggregator model by building a range of products and services from a number of sectors and even competing sources. The strength of such an organisation lies in its ability to create an environment or indeed club to allow members access to this range of services. By being in a position to supply this range of goods the club – because of the potential volumes it can offer to the provider of the services – can more often than not negotiate a better deal for their members than an individual firm may be able to access. There are also potential benefits from enhanced service level agreement negotiations that the club can reach an agreement upon.
Focusing still on time and resources, when looking at a club’s strategic partners intermediaries can be assured that a good, well run organisation will have carried out strict due diligence across its range of suppliers. Support and training are also key elements to the advantages of strong partnerships. Amidst tough operating conditions there can be great benefits gained through using a club’s wide range of offerings. This could be through simple training sessions in areas of the market that a smaller broker may not have access to otherwise, through to negotiating technology links which may result in savings that brokers may also have not been able to negotiate for themselves.
Research and chasing up proc fees/missed payments can take up a significant amount of any broker’s time. Working with an organisation that has done all the leg work on a brokers behalf in terms of keeping them informed about new products and services or ensuring some form of payment guarantees are in place, not only helps with peace of mind but also allows broker to do what they do best and that is to sell.
A good mortgage club will enable members to concentrate as much of their time as possible on the sales process and, as illustrated, help with sales training and processes regarding how a range of products and services can fit in with existing systems and procedures. Opening up a number of strategic partnerships with organisations across a range of sectors will inevitably enable member’s access to a greater array of selling opportunities across a range of products and services. Areas such as mortgages, secured loans, debt management, life products, general insurance, lead generation, conveyancing, private surveys, self build/renovation, commercial, bridging/private banking, compliance sourcing and client management systems should all be firmly on the agenda of a forward thinking intermediary.
Challenges
Brokers continue to be at the cutting edge of the market. But, as if the challenges of the current economic climate weren’t bad enough, the past month or so has seen them at the forefront of a bout of furious gesticulation from the Financial Services Authority and the Council of Mortgage Lenders pointing the finger at brokers for the current market woes.
This also comes on the back of recent FSA figures on the numbers of intermediary firms leaving the industry in the first three months of 2009. Its latest mortgage intermediary figures show the number of DA firms who primarily deal with mortgages fell from 6,725 in December 2008 to just 6,422 in March 2009. In December 2007, there were 7,174 directly authorised mortgage intermediary firms operating in the market.
The figures also show that 119 appointed representative mortgage intermediary firms left the industry in the first quarter of this year, down from 4,818 to 4,699. IFA numbers also fell during the first quarter of the year; the number of directly authorised IFA firms fell by 74, down to 5,501 from 5,575. Also, 15 AR IFAs left the industry over the period, down from 9,392 to 9,377.
However, it’s important to keep things in perspective as whilst most of the headlines from these figures focused on DA numbers exiting the market, when taking into account the total numbers of DA’s and AR’s operating in the market it actually works out that only 4.5% of DA’s have left the market compared to 2.5% of AR’s. This is hardly the greatest of headline grabbing differentials especially when you take into account the number who may simply have naturally come close to retirement age.
This illustrates that the whole of the intermediary market continues to face a number of challenges and these are certainly not just those facing DAs. The whole market continues to endure a torrid time and this is why it is important that the government, lenders, mortgage clubs and networks continue to support intermediaries from all corners of the sector.
Outsourcing and strategic partnerships can also play an important role in this process but intermediary firms must remember to maintain that the quality of their partners is consistent along with ensuring robust agreement procedures are in place. Failing that why not choose a mortgage club you can trust to make sure these checklists are firmly in place in order to access a range of products and services without the risks or potential time and cost implications. Of course by the same ethos this means that you should choose any club you deal with wisely and by choosing wisely this could prove a very effective over the long term and add real value to a firm’s proposition.
