Distribution Working in partnership
Not getting what you want from a business partner? Tough times call for tough decisions and you shouldn’t be scared to jettison one in favour of another
by
Bob Hunt, chief
executive, Paradigm Mortgage Services
The provision of mortgage advice is one profession where relationships are not just key but fundamental to the delivery of the service. Without supporting lender or provider relationships the adviser has no products to offer clients and therefore at the very outset advisory firms must become comfortable with collaboration and forging links with a variety of stakeholders that can help; for example, distributors who help maximise income or introduce leads and open new doors to commercial terms or other services which would otherwise remain closed. Even with this fundamental need to build relationships and partnerships many advisory firms are still not getting the most out of these ties. Understandably, when a link is in place and seems to work fairly well it is tempting for a business to sit back and not look for other partners or alternatives that may well be able to offer even more.
The beauty of the mortgage market has been its competition and while this has obviously suffered due to the effects of the credit crunch and recession, it is still the case that advisers have significant choice when it comes to products, lenders and distributors.
Many firms however choose to stick with what they know, after all inertia has been a key driver of financial services for many years. Advisory firms who might believe in ‘better the devil you know’ are actually missing out on some heavenly
40 mortgage introducer JULY 2010
propositions elsewhere. It still staggers me when advisers explain to clients about their skills in ‘shopping around and considering the whole of market’ for the most competitive proposition when many have not wanted to do the same for their own business relationships. As the old phrase goes, ‘an electrician’s house is rarely wired properly’. The credit crunch has had a massive impact on all of this. The firms that now remain should realise that tough decisions are needed and if they are not getting real value from a specific partnership then they should be jettisoned in favour of one which provides what they need. While the realisation that mortgages are not the only fruit is becoming ‘old hat’ in this marketplace where there are slim pickings in terms of the amount of mortgage business available, mortgage advisers need to not only differentiate and expand their service offering, they should look to those distributors who are able to provide immediate access to a variety of product sectors and quality of support which they perhaps would not normally have looked for.
Because today’s advisory market is not just a mortgage advice sector, it is vitally important that broker firms actively consider and analyse the distributors they are using; in essence which distributor is best placed to assist them in getting to their stated ambitions and goals. The end-game could be to exit the industry or to build and develop different areas of the business (as mentioned before) and increase profitability. In this sense the distributor relationship which is chosen could mean the difference between shuffling along with the status
quo and providing the business with a platform to make the next big leap forward.
Advisers who get the most out of their distributor relationships acknowledge it is not just about gaining a slightly higher procuration fee on their mortgage business. Indeed, it has to be about more than that or we are all on very shaky ground. There now has to be an open-mindedness from the broker about the holistic benefits available in using distributor A over distributor B. Most lenders have now moved to a policy which recognises the role of the distributor and importantly they are looking for operations which are not just focused on the number of members they can access but those who are able to actively control and influence their membership, alongside other considerations such as their capacity for lending. We are increasingly seeing the importance of this with the new lenders coming to market who are all using distributors in order to control their lending which is under capacity constraints.
Those advisers wishing to access this ‘new lending’ will need to be part of a key distributor plus this is doubly important because if they are not they are likely to be losing out financially - typically only picking up circa-60% of the procuration fee.
In addition, lender-broker exclusives
are often limited to key distributors, so again, a broker’s choice of distributor partner is critical.
While the advisory firm may already
have relationships in place it is never too late to look at the wider market and the other propositions available. n
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