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The market has been left with few big players so strategic relationship building is now more important than ever
There's no room for inertia with key relationships
FRANCIS MOGG, DIRECTOR, PROMECO
I recently asked a senior lender relationship manager what the main challenges facing lenders in today’s market are.
He replied that as his company is one of the few remaining significant players, he no longer feels under the same pressure to actively manage key relationships as the main parties now have little choice but to work together.
Well, that’s all sorted then. Or is it? Although accessibility may be easier as there are fewer players to engage with, the challenges for relationship partnership success are becoming more intense.
Those players with well integrated and high performing key stronger position to outpace less switched on, complacent rivals.
They are also better equipped to deal with tendering pressures, an increasingly familiar challenge for mortgage-related businesses.
It’s comforting at one level to think that a shortage of key players leads to less pressure and more fruitful partnerships, but closer business-to-business relationships don’t automatically mean increased profits or reduced risk.
Key relationships in the mortgage market are becoming increasingly complex and risky. For instance, as announced recently, one hybrid mortgage distributor alone accounts for 27% of intermediary mortgage volume.
A single falling out could limit a lender’s intermediary distribution potential to just three-quarters of the available market.
Conversely, risks have intensified from the intermediary perspective, with figures from the Council of Mortgage Lenders showing that in 2009 the five largest lenders accounted for 82% of all lending.
For lenders and brokers each key relationship is an asset with potential to significantly affect business profitability. Such relationships are by nature usually medium to long term.
It is dangerous to take a relaxed attitude to key relationships or to rely on the rarity of major players
No matter how many such partnerships a business has, it is essential to identify the risks and profitability of each.
Key relationship managers require empowerment to take decisions and resolve issues quickly, having due regard to wider, long-term organisational needs.
Such responsibilities work well alongside but may not fit comfortably into the sales function where short-term performance targeting and bonus systems are often not congruent with the responsibilities of relationship development.
Large complex relationships require a wider range of stakeholder involvement, putting more pressure on coordination, information management and lines of communication.
It has been suggested that it costs up to five times as much to win a new customer as it does to retain one.
Preservation of existing relationships demands vigorous management which brings challenges for both parties.
Key relationships, as a group, require careful coordination to ensure optimal performance and generate best possible returns from relationship investment.
So strategic relationship building is more important than ever and inertia is not an option.
There are dangers in taking a relaxed attitude to key relationships at any level or in relying on the relative rarity of key players - that control so much of the market and its distribution - to take care of things.
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