Spanish touch

31 October 2011 | By Robert Thickett

“When you take an organisation that is already successful, things are easier,” is how Miguel Sard, managing director of Abbey for Intermediaries since May, describes taking the reins at Santander UK’s intermediary arm.

Hardly surprising when you consider that a year and a half ago, Abbey achieved what all companies that have been hit by bad press aspire to - it transformed its reputation.

After the storm that met the departure of Abbey’s former managing director Ricky Okey in March 2010, there was initial scepticism when Alan Mathewson was selected as his replacement. With Mathewson’s background in direct distribution, some in the industry questioned whether a man with no experience of the UK intermediary market would truly be able to understand it.

Within six months Mathewson had silenced his critics. He improved the brand’s service and elicited that rare thing - kind words from mortgage brokers.

But when Santander UK’s former chief executive, Antonio Horta-Osorio, convinced Alison Brittain, Santander UK’s executive director for retail distribution and intermediaries, to join him at Lloyds Banking Group in March this year, Mathewson took over Brittain’s role on a temporary basis. Two months later, Sard was appointed managing director of Abbey.

But as Sard admits, while Mathewson had done the hard bit in terms of improving Abbey’s service and there was a successful strategy in place, he still had to get the industry on-side. So who is Miguel Sard?

The real Miguel Sard

He was born in Majorca in February 1965 and grew up there before moving to Barcelona to study economics and actuarial science in 1983. After graduating, he moved to Madrid, where he stayed until he came to the UK in 2007.

Sard’s background is steeped in working with intermediaries of one shape or form. He was an account manager at insurance brokerage Unión y el Fenix, which offered finance, insurance, investments and employee benefits.

He joined Santander-owned Banesto Pensiones in 1992 for six years as head of sales and marketing before going to ING Nationale-Nederlanden Spain in 1998. After three years he took over all of ING’s intermediary distribution for investment products in Spain.

In 2004 he rejoined Santander’s insurance division, managing all business related to employee benefits and pensions, with the majority of the division’s business coming via brokers.

He was then made head of insurance in Europe as part of a unit charged with finding synergies and exporting best practice across the group.

The unit was turned into a global division in 2006 and Sard effectively did the same role across Santander’s four regions of the UK, Spain, the rest of Europe and Latin America, with projects in the UK, Germany and Brazil.

“It was a nice time because we were flying around, being in different organisations, trying to understand customers, how we distribute products, where the best practices were in different countries and how we could exchange those ideas,” he says.

In 2007, he opted to relocate to the UK to become chief executive of Santander Insurance UK. In 2009 Santander also put Sard in charge of its New England-based operation, Sovereign, which he managed from the UK.

“I was interested to come here - although you think you know a country and how a specific business works, it’s only when you get to a place that you realise the day-to-day stuff is different.

“The first thing you realise is that you don’t speak English,” he says, laughing. “The second thing I realised was that while you may have read a lot about a place, or a market, you need to live in a nation’s skin to understand why with some products a customer chooses a branch, but for others they choose an intermediary.”

The lesson he learnt from this was that with some products, a quick and easy direct approach is key. In other areas, the customer chooses to go through someone else who gives the right advice and makes things easier for them.

“So it’s a mix that customers like,” he says.

And from his conversations with brokers, his view is that they are now looking to have a broader relationship with clients, providing them with a greater variety of products.

“The intermediary sector has had a huge evolution,” he says. “I’m not only thinking of how it has gone from 30,000 advisers in 2007 to 10,000 right now - the model from an intermediary perspective is changing a lot.

“Brokers are looking at customers not from a product proposition, as in they have a product to sell to one customer - they want a more customer-centric relationship, providing support, advice and solutions to clients in many different areas.”

It’s to that end that Sard recently announced that Abbey was looking into the possibility of offering its core range of products, from current accounts to credit cards, via brokers. He says it’s too early to say what the final scheme would look like but the aim is to build up something that is easy for brokers and clients to use.

“We are working hard on this right now to find a complete range of products that brokers can choose,” he says.

As to how brokers would be remunerated in this process, Sard says this will depend on what it comes up with.

“Clearly there will be remuneration for brokers,” he says. “I can’t say if that is going to be a percentage or total figure, but we want to build up a pack that can be distributed by intermediaries.”

Pleased to meet you

Greeting the great and the good of the intermediary world has been a priority since Sard joined and he says the response has been open and supportive of Abbey.

Again, he says it was comparatively easy because as a result of the strides Mathewson made in terms of improving its service - it’s currently down to 9.3 days to offer - brokers have been positive towards the brand.

“The message I was receiving was that I had taken on a great organisation,” he says.

“The other one, which was better, was don’t be complacent - if you think arriving here is going to be enough, you are wrong. It is a dynamic market and every day there are different things in the market. We’ve been working on different areas - one is improving our product proposition and being more competitive. One example is the seven-day specials that were successful in June and July.”

With Abbey picking up awards for its service, Sard says the challenge for his team is to remain number one forever.

“We know other lenders will improve too, so we need to improve more than them,” he says.

To that end, Abbey is looking to further upgrade its IT systems. In June it upgraded its Mortgage Application Trading System so that brokers could directly upload documentation and Sard says the next step is end-to-end case tracking.

At the moment MATS only provides case tracking as far as informing brokers that an application has entered Abbey’s administration process.

“We learned that brokers wanted to be kept up-to-date on every step of the process - from the application to valuation, to the offer and then completion,” he says.

“When it comes to service, we can always find things to do better. It’s not about launching a big system that takes four years to complete - it’s about getting better every day and developing things that intermediaries are asking for.”

Testing times

While the market reception to Sard has been warm, Santander UK’s H1 results for gross lending showed that the lender, like other providers, has had a tough time in 2011.

Gross mortgage lending was down 21% at £9.7bn compared with £12.4bn over the same period in 2010.

But its Q3 results, which were published last week, show it is fighting back as it slashed the difference between 2011 and 2010.

The deficit in gross lending for 2011 compared with 2010 fell from 21% in H1 to 13% at the end of Q3 with £16.8bn in gross mortgage lending so far compared with £19.2bn over the same period in 2010.

In Q2 2011 the bank did £5.5bn in gross lending, but in Q3 it did £7.1bn - a whopping 29% rise on the previous quarter.

This is hardly surprising, though, when you consider the types of products Abbey was offering over the summer.

Starting in June it launched seven-week deals over eight successive weeks and Sard says there has continued to be high demand for its current range of fixed rates and offset flexi deals.

Mortgage Strategy estimated in March 2011 that Santander UK’s gross mortgage lending via brokers for 2010 was £17.7bn, just edging out Lloyds Banking Group, which saw £17.1bn distributed via brokers over the year. Will Abbey maintain its top spot when the final gross lending figures for 2011 are in?

“Well, you have to make the estimate as we don’t have the numbers for that,” he laughs. “We want to be the lender of choice, the number one not only because we have the biggest gross lending, but in many areas - including service, recognition, our sales force and how we work with brokers.”

With regard to the 21% fall in first-half lending this year, he concedes that the market has been smaller.

“We don’t expect the housing or mortgage markets to be growing in the next 12 months.”

Such a prediction is hardly surprising, especially when you consider the static interest rate environment and rising inflation that we have seen in the UK in 2011.

But Abbey has reacted aggressively and sought to stimulate the market with its seven-day deals.

“The best thing about those was the appreciation we received from brokers,” says Sard. “We were told that not only did we have excellent products but also our service was good.”

Don’t mention buy-to-let

One area of the UK mortgage market that has been growing organically is buy-to-let.

And despite much fanfare over the last year this is one area of the market that Abbey has still not launched into.

Sard’s predecessor, Mathewson, told Mortgage Strategy in November 2010 that it was looking at entering the sector. There have since been countless rumours that a launch is imminent, but a buy-to-let product has not been forthcoming

At Pink Home Loans’ recent conference, Bill Gray, deputy chief credit officer at Santander, told delegates that the lender had learnt from its past mistakes in buy-to-let and would not re-enter until it could provide good service.

“It has taken us three years to get our service back to the standard it is today and we don’t want to go into buy-to-let until we have a credible proposition,” he told delegates.

“We won’t make the same mistakes again - we will be in the market as soon as we can.”

Sard concurs with what Gray said but adds that there has been no delay with the launch.

“We want to do it right,” he says. “We have been working to develop the right systems and processes, in line with those we have on our residential range right now. So we prefer to prepare and once we are ready, we will launch. We will not wait forever - right now we are closer than last week but we don’t have a date. The day we have a date I will be more than happy to communicate it to everyone.”

There are various predictions that buy-to-let will account for between 15% and 20% of the market. Sard says it is clear that demand for the product will remain and Abbey now has the will and desire to be in that market.

With regard to how big a chunk of the buy-to-let market it is targeting, he has no figures, but is clearly bullish.

“We want to be a player - we are not there to take 1% of the market,” he says.

Remember the first time?

The other area Abbey is looking to innovate in is first-time buyers. While it already has products that go through brokers up to 90% LTV, Sard says Abbey is working to develop a proposition that makes it easier for first-timers.

While the project sounds intriguing, he admits it’s less a mystery product than one still at the conceptual stage. But Sard says it’s an area where lenders as an industry need to support the market.

“It is in the early stages and I cannot go into detail but we are working to find out ways to make an easy entrance for first-time buyers,” he says.

“This is an area that we as an industry need to work harder at and that’s what we are doing.”

Another area that has come up repeatedly in some round table discussions that Mortgage Strategy has done in conjunction with Santander has been trail commission.

Larger distributors, such as Countrywide and Personal Touch Financial Services, have suggested that for those with more sophisticated systems it could be a good option.

While Sard says there are no plans to change its policy on trail commission, Abbey continues to work towards improving its retention process, although this also doesn’t include introducing a retention fee.

However, innovation is central to Sard’s plan of action for keeping Abbey firmly at the top for both products and service.

“When you are big in the market, you need to keep innovating, providing a better experience for intermediaries and, for us, service is a key element,” he says.

“We believe service will be the differentiating element between lenders. Intermediaries appreciate the difference between levels of service and that is why we are not stopping and want to put new things into the market.”

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