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Eye on the future

Andrew Jones, chief executive of HML, never rests on his laurels. As a former management consultant, he is using his skills and drive to propel
the third-party outsourcer forward on issues from IT to interest-only

In 2007, two months after joining HML, Andrew Jones, now chief executive of the company, remembers dining with six of the firm’s directors and realising that after him, the person with the least amount of time at the firm had still been there for seven years.

“Everyone else had been there for about 17 years so it was a stable company,” he says. “Just two years later, I was the one who had been there the longest – an amazing change in a short period of time.”

That’s an understatement. Superficially, HML remains in 2012 as it was in 2007 – Europe’s biggest third party outsourcer with a massive £44bn worth of assets under management.

But internally HML has had to contend with major upheaval from the financial downturn, both from a business and regulatory perspective. It has gone from making profits of £20m at the peak of the market to £100,000 in 2010 to a net loss of £3.1m in 2011 as a result of restructuring costs.

And it has also had the internal pressure of attempting to reinvent itself for a modern mortgage market and fending off rivals that are openly nipping at its heels.

That said, as a former management consultant, it is clear that it is this type of change that Jones, who has occupied the top job at HML for the past nine months, thrives on.

Raised in Macclesfield in Cheshire, he gained a first in computer science and maths from Manchester University in the mid-1980s and, after a brief stint working for a computer firm, did a two-year MBA course at the Manchester Business School. Despite graduating in the grip of the early 1990s recession, he quickly found work at courier firm DHL, working out of its global headquarters in Brussels.

After two years, the charms of the Belgian capital had worn off and he returned to the UK for a long stint at management consultancy Anderson Consulting – rebranded Accenture in 2001.

In his early years at Anderson, he worked at Rover, Ford and Mitsubishi before helping – in the heat of the dotcom boom of the late 1990s – to set up a website that sourced cars from Europe and sold them in the UK. It wasn’t until 2001 that he first worked for a financial services firm, with a year at National Australia Bank. It was after this that he finally he decided to leave Accenture.

“I decided it was time to do something different,” he says. “I had a relationship with NAB and it was embarking on a process to outsource its insurance businesses.”

He helped NAB outsource its motor and home insurance business, but after five years he was restless again and it was at this time that he was approached by HML. The third-party outsourcer sounded like an interesting company to work for, but equally important for Jones at that time was geographical stability.

“From when I did the MBA, I’d had a base in Chester,” he explains. “So throughout the MBA I was always away from home. At Accenture I was always away from home, and working at NAB I was in either Glasgow or London. I’d had around 18 years working away from home, we had just had a couple of kids and it seemed like a good time to be at home more so I could see the children.”


So he joined HML as business transformation director in 2007. He describes the systems and processes at HML as ripe for automation, and that is where much of his focus has been.

“We have done simple things like taking payments using an automated phone system and have launched a website to allow customers to interact with us via the web, rather than just talking to a person at the end of the phone,” says Jones.

“HML had grown rapidly and we hadn’t looked at how we did stuff – we were just focused on supporting growth,” he says. “And then, as we were getting to 2007 and 2008, people started to think about how could we do things more efficiently. How could we put more control in place – that was the focus behind what we did.”

As the market took a turn for the worse, it forced HML to look at its improvement process even more aggressively. It rationalised the number of sites it worked from. When Jones started in 2007, there were 10 offices, four of them in Skipton, where HML has been based since its inception in the late 1980s. Now it has three modern, fit-for-purpose buildings in Skipton, Derry and Glasgow.

The Skipton office is atop a grassy bank just outside town. On the day Mortgage Strategy interviewed Jones there, the week before the Queen’s Jubilee, it was a scorching day and the view from the glass-fronted building was straight out of the British artist David Hockney’s paintings of the Yorkshire Dales – a patchwork of hills and fields as far as the eye could see.

“Before, we had 640 people crammed in a branch off Skipton high street,” he says. “We had the IT and sales people in other offices, so the benefits of bringing everyone together have been tremendous and it’s a nice place to work.”

He has taken a similar strategy towards staff – for example, all calls between staff and mort gage customers are sampled and reviewed by the quality team, and 10 calls a month are then reviewed with a quality coach.

“That’s both from a point of view of ensuring that we are adhering to the Treating Customers Fairly guidelines and also making sure that we are having the right sort of conversation with the customer,” he says.

The mention of the Financial Services Authority’s TCF guidelines is a reminder that the other issue HML has had to deal with over the past year has been the million-pound fines the regulator has imposed upon some of its best known clients.

First, GMAC-RFC was fined £2.8m in October 2009 for failings surrounding the way it dealt with arrears and repossessions, paying a further £7.7m in customer redress.

Then in April 2010, the regulator fined Kensington £1.2m for the same issue, with customer redress of around 1.1m.

There was also a further fine £630,000 for another client, Redstone Mortgages, in July 2010.

Then there were rumours that HML itself was under investigation by the FSA, which was confirmed in Skipton’s 2010 accounts, which Mortgage Strategy reported on in September 2011.

“The company is in correspondence with the FSA following a thematic review,” the results stated. “Investigations have been ongoing for some time and the issues involved are complex, particularly with regard to the application of the existing regulatory framework. It is possible that a liability may crystallise, whether from a fine, redress or both. The likelihood or quantum of any contingent liability is impossible to determine.”

Clearly there was an issue. But when Mortgage Strategy asked for clarification on the above comments for a news story in September 2011, a spokeswoman for HML told us the investigation had concluded and the matter had been resolved.

So it’s an obvious question whether this focus on ensuring the quality of calls made by staff is high and that they comply with TCF was the result of the FSA’s investigation into its practices.

“No – that almost came to some extent after the investigation as we were working a lot on quality ourselves anyway,” says Jones.

“It was a process that has now concluded and we have a clean bill of health from the FSA.”

And as to whether the FSA investigation was the result of the client fines, he says it was part of the regulator’s thematic review.

“It was looking at everyone in the industry at that point in time,” he says. “But we are in a great position in terms of the relationship we have with the FSA. We have put all that behind us.”


In terms of its assets under management, Jones says there has been comparatively little change, although there were some significant exits. over the past five years, assets under management peaked at £50bn and are currently at the £44bn mark.

In December 2010, GMAC-RFC brought its £3.6bn mortgage book, which was serviced by HML, in-house and in January 2011 it was revealed that Nationwide had decided to administer its own £2bn combined mortgage book.

Jones argues that there has not been much change in its overall asset position, but the type of work it is now doing has changed a lot. “When I started in 2007, we had a couple of hundred people in origination, but then the focus switched to arrears management,” he says.

“We are now seeing the arrears position trending down month-on-month and the focus of the business is changing again.”

In other words, the good news for the mortgage market is that originations are back but the challenge is obviously the one thing that it cannot control – whether new entrants can actually launch.

HML has retained business from lenders such as Mortgages PLC and Bank of Ireland. But it has also won new contracts, such as Northern Rock Asset Management and Home & Savings Bank, and it has even won back clients that had previously left, such as Nationwide, which ended up using its services again as a result of the Bank of Ireland deal.

But HML also worked with Portillion, the lender in waiting set up in 2007 by Stephen Knight, former chairman of GMAC-RFC. In May this year, Portillion announced it was finally pulling the plug on its long-held aspirations to be a lender.

“We had worked with Portillion and it was obviously disappointing news,” says Jones. “It’s still a difficult environment in terms of getting to the point of launching.”

HML is talking to three potential new entrants that are working through the process to launch. As Portillion demonstrated, failure to launch is obviously a key problem, so is the strategy to go after everyone and hope for the best?

“Yes – if you look at Home & Savings, we have been working with it for the better part of 18 months, we’ve developed close relationships there and done a lot to get to the point we are at,” he says.


Interestingly, Jones says HML is already dealing with its former chief executive, Brian Brodie, in his new role as customer and distribution director at Virgin Money.

In October 2011 it was announced that both Brodie and HML’s former chief commercial and finance officer, Neil Warman, would be leaving with immediate effect. Not surprisingly the industry rumour mill went into overdrive on the real reason for their departure. But Jones is keen to point out that HML already has a relationship with both men in their new roles.

“I’m not sure what we can say about it – probably not a great deal. We have already won one piece of work with Virgin and Brodie is keen to work with us as well,” says Jones.

“Warman is chief financial officer of The Nostrum Group and we are in the market with Nostrum trying to win unsecured business together. Both of them are working with us as and when – Brian is a client and Neil is a partner at the moment.”

The other rumour that has dogged the firm for years is that it has been up for sale, with parent group Skipton looking to offload its noncore businesses. At the start of this year, talks between Vertex and Skipton over the potential sale of HML were understood to have broken down and Skipton was said to have taken it off the market.

But was Jones concerned about whether Skipton wanted to grow the business organically, or whether it was just looking to sell?

“It was made clear to me from day one that Skipton’s desire was to develop and grow this business,” he says. “No-one would say no from a sale point of view because if someone came along with an amazing offer, you would have to look at it. But Skipton was clear from day one that it is looking to grow the business. We all see lots of opportunities to do that – we have got a strong sales pipeline at the moment, which we are working on.”

As well as going after unsecured loans books via its partnership with Nostrum, these opportunities include going after savings books. But its bread-and-butter business is still servicing its existing loan books. HML’s clients take different levels of service – in some cases its clients define the strategy and it will do the execution.

But Jones says that in more cases, it is now providing the strategy. So, for example, if a lender came to it with a book of interest-only borrowers, it would come up with a strategy.

“Then we’ll execute it – always under their direction, but effectively we are much more involved in defining strategies than we were before,” he says. “It might be that on the early arrears it’s more telephone based, while with the later arrears it’s more about home visits, or it might be around more case management.

“We deploy different techniques depending on the stage of arrears and how much contact we have had with them.”


Speaking of interest-only, Jones explains that HML is working on some interesting ideas about how to deal with borrowers who have failed to switch to a repayment mortgage.

“We have been working with an industry consultant called Neil Forrest and one of the things he is looking at is using lifetime mortgages to address the challenge,” he says. “Realistically, you want to keep people in their homes as they move towards retirement if they are on interest-only.

“One of the ideas Forrest has got is if you’re nearing retirement and your income falls then potentially you could roll up some of the interest as well as the capital. So long as the customer is still making some repayment and there is equity left in it, at the end of some – body’s life, you have kept them in their home. They have made some contribution as and when they could and from the lender’s point of view, there’s some equity left in the property, which is not that bad an outcome.”

But Jones is keen to point out that at the moment it is just an idea that is being discussed.

“I would say most of our clients are at the point of having those discussions about those products and working out how to resolve the problem,” he says. “I don’t think there are any quick fixes and it is a problem that will need to be resolved over several years, I suspect, so that’s how we’re approaching it.”


An obvious question, especially for a man with such a long career as a management consultant, is if he was assessing the business, where could it improve?

One area, he argues, is on pricing, with a need to move from a transactional pricing approach to a performance pricing approach.

“We’ve now got four clients on performance-based pricing and in essence we are rewarded on the arrears performance or the administration performance of the loan books,” he says.

The FSA has worked hard on reducing the fees that lenders and third party outsourcers can charge to service borrowers in arrears, but Jones says this measure has not come from any regulatory stimulus.

“Our driver is creating value for us and our clients – if we are confident in our ability to do that, which we are, why wouldn’t we put performance based pricing in place?” he says.

“It’s better for the client, because clearly they are collecting more cash and they reduce the provisioning, so it works both ways. A lot of the work we are doing with existing clients is around a more performance-based pricing model.”

HML is also looking to ramp up its IT, on which it spends around £8m a year. There has been some criticism that its core mortgage ac – counting system, Jade, is now old fashioned, but this has primarily come from its competitors.

Jones admits that Jade doesn’t look modern so HML has built a wrapper of new technologies that sit around the older core system based on IBM and Microsoft technology.

It was made clear from day one that Skipton wanted to grow the business and we see lots of opportunities to do just that

HML staff spend around 75% of their time on the newer computer system. But Jones says that one of the problems has been that clients still spend most of their time on the old system.

“One of the things we are trying to address is that most of our clients are on the core system,” he says. “We haven’t given them the modern workflow – bit of an oversight, you could say. So they may be saying ‘you might be spending 75% of your time on it but we’re spending 100% of ours’.

“So we are now rolling out this modern workflow solution to them as well, and as they are taking that on, we are getting some positive feedback and starting to change perceptions.”

Finally, as someone who, judging by his career history, has clearly yearned for the next challenge, how long does Jones think he will stay at HML?

“I’m happy where I am and there is a lot to do here from the point of growing the business,” he says. “I think we are in a good position to grow it – we’ve got a lot of committed people working for us.”

What with developing the company’s client base, and getting into new markets such as savings and unsecured, and as befits his roots as a management consultant, Jones is keen to drive up efficiency.

“We know we have to be more cost-effective every year – other – wise, as an outsourcer, you lose out,” he says.

“We’ve got a lot to do in terms of developing the people who work for us so from that point of view, there’s plenty to go at for the next four or five years at least. Then I’ll take stock of where I am, I suspect.”


Andrew Jones CV

BORN: 1966, raised in Cheshire
1985-1989: Computer science and mathematics, Manchester University
1990-1992: MBA, Manchester Business School
1984-1990: Holdene Group
1992-1994: DHL
1994-2002: Anderson Consulting, renamed Accenture in 2001
2002-2007: Director of strategic change at National Australia Bank
2007-present: Joined HML with responsibility for change delivery, with role expanded to include IT, operations and sales. Appointed interim chief executive officer in October
2011, made permanent in February 2012.
HOBBIES: Gardening and looking after my children – with two of them, you never get a chance to do anything else.
MORTGAGE: An offset.


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