When John Cupis was Wgrowing up he wanted to be an astronaut. He can’t remember this – he was only three when he made the declaration – but says he’s reliably informed it was once his dream to go where no-one has gone before.
He might not have made it as the next Buzz Aldrin but Cupis has certainly explored unknown territory.
How else can you describe the unprecedented situation the mortgage market finds itself in following the advent of the liquidity crisis last summer?
It was around then that Cupis became head of mortgages and general insurance at Sesame. As a result he found himself leading more than 2,500 appointed representatives during the most turbulent time the industry has seen for decades.
Cupis learnt his mortgage trade at NatWest Home Loans. He started work in 1994 and was in charge of product development.
“It was fantastic training for the mortgage market,” he says. “At the time the banks were stealing the building societies’ thunder because the mutuals traditionally were customers’ first port of call for mortgages.
“Major banks had huge customer bases from their current account business, through which they could offer good value rates. It was during the mid to late 1980s that banks bolstered their mortgage lending expertise.”
At the time, NatWest did 75% of its business direct-to-consumer and 25% through brokers. Unsurprisingly, during his time at the bank he didn’t work closely with brokers.
It was not until he was made director of marketing at Legal & General Bank in 1999 that he got the chance to explore intermediary distribution.
“L&G Bank was a pioneer of flexible mortgages,” says Cupis. “NatWest didn’t offer flexible products or distribute much through brokers, so L&G completed my mortgage training by bridging the gap with different types of product and distributor.”
L&G was eventually sold to Northern Rock, so what does Cupis make of the government’s decision to temporarily nationalise NR?
“It’s a tremendous shame that any company would need to be taken into national ownership and NR is no different,” says Cupis. “Whether civil servants can run the bank better than a private enterprise remains to be seen. I believe NR would have been better off run privately.”
After NR absorbed L&G Bank, Cupis was appointed marketing director of L&G Mortgage Club. During his tenure it nearly trebled its business from £7bn to £20bn.
Following this success, Cupis moved to Sesame in May 2007. He found himself in a familiar position as Friends Provident was buying the company. He’s well aware of the benefits a strong plc parent can bring.
“It’s a big factor when brokers are looking to join a network,” he says. “We are not owned by a one-man entrepreneur. We have the backing of a financially strong, supportive parent and we’re core to its strategy.”
Sesame has a network proposition, the Sesame Mortgage Network, plus a directly authorised one called Sesame Direct Mortgage Service. As testament to its growing business, Cupis was recently promoted to become managing director of mortgages and general insurance, leading a larger team and sitting on Sesame’s executive committee.
As head of Sesame’s mortgage club and network, Cupis says the benefits both can offer to brokers are clear, especially in today’s market.
“If you talk to major lenders, most say about 90% of their monetary volume comes from 20 or 30 big distributors,” he says.
“From their point of view, they can already see distribution consolidating. And in a market that’s such a significant part of many lenders’ balance sheets, they are increasingly looking at the value they get from larger distributors.”
And it’s not just lenders that are favouring larger distributors. In the thematic reviews the Financial Services Authority carried out in 2007, the regulator highlighted several deficiencies in the way small firms conduct business, particularly record-keeping.
“All the indicators the FSA has given us in regard to Treating Customers Fairly point to the fact that small firms are going to need more help in the future,” Cupis says. “Networks and clubs will have a big part to play in this.”
Regulation aside, one of the main benefits networks and clubs offer brokers is the support they provide in relation to proc fees, he says. In this area, networks have the potential to drive greater value.
“Proc fees in the AR world are generally higher than for DA firms because many lenders appreciate the regulatory protection networks deliver,” says Cupis.
“As a top three network with more than £20bn of lending, we’re in a good position to leverage the best deals for brokers. This involves a lot of work behind the scenes with lenders to streamline the process. We have made it easier for brokers to interact with lenders to get proc fees.
“We’ve also helped brokers to process their business through the network, with significant improvements to proc fee payments. This investment in our service emphasises our commitment to being a serious mortgage player for brokers and lenders,” he adds.
But improving the way brokers are remunerated is not the only change Cupis has made at Sesame since taking over the reins.
He says the network’s profile in the industry and the propositions it offers are key priorities too.
“In 2007 we delivered over £20bn worth of lending so we are already a top three distributor,” he says. “We have more than 2,500 brokers in the network and over 4,000 DA ones. We need to do more to promote how well we’re doing, so raising our profile has been a big part of my work.”
On the proposition side, Cupis says his priority has been to simplify the way Sesame does business.
“We’ve been making it easier for brokers to deal with lenders and increasing proc fees on the network side so they get more value from us, leveraging the scale we already have,” he says.
“On the DA side, our aim is to build a competitive proposition with better proc fees and simpler, clearer presentation for brokers.”
The priority for 2008 is growth in both the AR and DA markets, says Cupis.
“If you look at the indicators for the recruitment platform we’ve got for ARs already, the new proposition is already starting to become effective in terms of recruits and we’ll be pushing this harder in 2008,” he says.
The recruitment platform has appointed Helen O’Donovan, formerly of UCB Home Loans, as head of mort- gage products.
Further appointments are planned for later this year.
Cupis says the appointments will enable Sesame to drive greater value for brokers and support its growth aspirations in the market.
Technology is a key focus too, with a new sales system already in place. In January, Sesame announced its partnership with The Key, a point-of-sale system developed by Mortgage Brain.
“We will be funding the costs for our network members to give them free access,” says Cupis. “The Key is a system built by brokers for brokers.
“It features a complete end-to-end process from fact-finds to sourcing through to integrated insurance applications and back office client management services.
“It will help brokers to enhance their efficiency and the service they offer customers,” he adds.
As with all firms in the sector, TCF and the FSA will play a major role in 2008.
Cupis says Sesame will recruit field compliance officers to help its member firms meet the regulator’s March and December TCF deadlines.
“We’ve invested over £1m to help our network members meet TCF,” he says.
“As well as developing an online TCF business planning tool, we have also bolstered our account management team by 25%.
“This has enabled Sesame to introduce a programme of one-to-one visits that are geared to helping brokers understand and meet their TCF requirements. But this isn’t just about meeting the regulatory deadlines. We believe TCF makes good business sense too,” he adds.
In terms of the general market, Cupis thinks the consolidation predictions that have long been aired will finally come true in 2008.
“This year firms can significantly cut costs by consolidating,” he says. “They can do this in several ways, one of which is to reap economies of scale via mergers. Some may exit the market. Lenders will be able to focus their propositions on distributors that understand how their members deal with customers on a day-to-day basis.
“In turn, we will provide the support brokers need to improve their business efficiency and tailor their services to suit clients.
“Consolidation will provide an opportunity to standardise the processes between lenders and distributors, which will also help brokers in a regulatory environment to continually demonstrate they are treating customers fairly,” he adds.
Despite working in distribution, Cupis says it was his experience working with lenders that cemented his career in the industry.
“As a lender you have the ability to construct products and propositions, then offer them to the market, seeing the benefits almost overnight,” he says. “When I was running products and pricing for a balance sheet lender, it sealed my future.”
Now he says it is the constant change and innovation seen in the market that excites him.
“What’s interesting about the market is that you might think a mortgage loan is a mature product and there’s no innovation left,” he says.
“But if you look at how the market has changed from 13 years ago when there were no online offers nor advanced point-of-sale technologies, the innovation is obvious. Distribution has changed beyond recognition and there’s more innovation to come.”
Cupis is as aware as anyone of the long-term changes the liquidity crisis has brought to the market but remains philosophical.
“The way the market pans out in 2008 will define its shape over the next five years,” he says.
“We won’t have the luxury of double digit mortgage growth so it will be hard work. But brokers have faced major challenges in the past and thrived.
“The market is an entrepreneurial place and brokers are an entrepreneurial breed. Our challenge as a distributor is to move with them,” he adds.