Cover
Choosing a network by
Sally Laker, managing director, Mortgage Intelligence
What is important to a broker joining a network? In my opinion, it is about the proc fees and the protection commission rates, but more important is the exclusive mortgage products to give the broker an edge. Pricing is of course key, but as they say “you get what you pay for” and in my opinion that is always the case. Right now I think it is about the support you give, it is not enough to be offering good rates and good fees, networks need to be offering marketing support and sales ideas to boost the business levels for the broker. They should also know the team they are dealing
T10663 Lime Mortgage Introducer Strip Ads_Layout 1 02/10/2012 16:04 Page 3 there is talk that PTFS’s fee hike has
brave enough to charge what needs to be charged,” says Peter Brodnicki, chief executive of Mortgage Advice Bureau. “That could be because they believe historically brokers have moved on the financials. If you’re a one man band doing £30,000 to £40,000 a year and you have no interest in growing particularly then you might as well go to the cheapest network if it gives you the product range. But if you want to grow and diversify and you need help that costs money. But I do think some networks have been frightened of putting up charges because brokers will go somewhere else.” Brodnicki is not wrong on this. Indeed
with, who to ring when they need something and know that they will deliver quickly. Look at the management team, do you know who they are, do they know and understand the business? That is easy to find out when joining so go and meet the people you are going into this business partnership with. Networks are there to support the broker, and therefore the people are a key aspect of the partnership but that is not the case in all networks. No-one wants to be treated as a number, brokers want to feel that their network knows them, and is there at the end of a phone to help, guide, and actually offer new opportunities. Do I think the model is broken? No I don’t, I think that in this climate of MMR and mortgage fraud, brokers and lenders both need networks, and actually we do our best to protect both.
caused hundreds to look at where else they can go. But he warns against this type of knee-jerk reaction. “Some people might view what PTFS has done as commercial suicide because they could lose half their distribution in a matter of months,” acknowledges Brodnicki. “But then the counter argument is that it’s better to have 500 brokers and run a profitable business they can invest in rather than 1,300 advisers and never make any money. They’re covering too much risk. What’s the point of being a network if you don’t make a profit?” It’s a pertinent point and one that
won’t be lost on many who run networks. There is no way to compare
the profits of each network because too many do not publish separate accounts from their parent companies. Those that do publish numbers often combine mortgage distribution business figures with numbers from other parts of the business. But it’s fair to say it’s nigh on impossible to make much money at all by running mortgage distribution when you’re carrying the regulatory risk for ARs.
THE NUMBERS Sesame Bankhall Group – the market’s largest adviser network with 1,287 advisers - reported a £1m trading profit for the first half of 2012 and a profit of £2.2m for the whole of 2011 on a turnover within the network business of £170.3m. Openwork’s 2011 accounts reveal its network made an overall loss of £0.3m. Intrinsic meanwhile posted a £2.5m loss for 2011 on a turnover of £97m in 2011 encompassing its investment business as well as the network. And in 2011 Personal Touch recorded a profit after tax of £1.6m on a £56.1m turnover – down 6% on 2010. Legal & General network doesn’t
report its profits separately from the larger L&G group and its network managing director Duncan Crocker will only say the network is “comfortably profitable” when asked directly. However, its group interim results revealed L&G Network increased share of the intermediated mortgage market to a 25% share in H1 2012 up from 19% the year before. It also revealed it accounted for £9bn of intermediated lending in the first half of the year. In February this year Tenet reported a £1.3m operating profit, before taking into account £1.5m of restructuring and Retail Distribution Review costs - something nearly every network blames for poor profitability. This resulted Tenet
...nor is it because of our vast array of added value services…
32 MORTGAGE INTRODUCER OCTOBER 2012
www.mortgageintroducer.com
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