“I was a special person at school,” PMS’ executive chairman John Malone recalls of his Grammar school days at Finchley Catholic Grammar.
“My birthday is 8 December which is the Feast of the Immaculate Conception – the holy day of obligation. This meant that because I was taught a lot by priests, they saw me as a special child.”
With some 50 years in the UK financial services industry, that certainly continued on into his working life, and now in his 68th year Malone sits in a privileged position within the market.
Many former and current lenders praise his skills as a tough commercial negotiator at PMS.
But over the last couple of years his role has expanded from being chairman of the mortgage club he set up 16 years ago to also being the Association of Mortgage Intermediaries’ representative on the National Fraud Authority’s mortgage fraud forum.
While he’s well past retiremen and has won Mortgage Strategy’s lifetime achievement award twice, he’s a long way off resting on his laurels.
“My existing contract is up next year when I’ll be 70, but I’ve got no desire to call it a day,” is his unsurprising response to a question whether he will renew his contract with the mortgage club’s parent group Sesame Bankhall.
Unsurprising in the sense that just a couple of hours in his company gives an insight into what makes the man tick – he’s a people person.
And his chief skill is that, in an industry famously based on relationships, Malone is clearly a master at building them.
Walking with him through the foyer of the Mayfair Hotel, the London hotel he stays at during the week, the hotel’s concierge all keenly shake his hand and the hotel owner greets him with a wave.
And when we eat at the Langans Brasserie round the corner from the hotel, the restaurant owner Richard Shepherd comes up to our table to say hello to him.
As he admits, while he has hobbies like supporting the football teams Celtic and Spurs, his true passion is work.
So with PMS celebrating its 16th year Mortgage Strategy thought it would be a good opportunity to catch up with the so-called Godfather of the mortgage industry about the legacy he leaves in the market and where he sees both PMS’ and his own future in the next couple of years.
From the bottom up
Interestingly, if things had worked out differently he may have ended up working in the electrical industry.
Feted by the priests at Finchley Grammar School, he left school at the age of 17 in 1960 to join Martins Bank working out of its Lombard Street branch in the City.
It was here also that he met David Johnson, who is now the well-known horse racing owner and managing director of Shawbrook Bank.
Then in 1964 Malone left the banking industry to work at his father’s electrical firm that was based in Barnes, which was primarily involved in installing and stripping out the electrical equipment for all the exhibitions at the Olympia Earls Court.
His father’s aim was that Malone would take over his business.
“My father had some big shows like the Motor Show, the Ideal Home Exhibition, the Boat Show,” he says.
“He wanted me to come into the firm and work from the bottom up. But after two years it didn’t work out and I went back into the city at Citibank in Moorgate.”
In 1966 at Citibank he worked as a teller for a year before moving on to work for secondary mortgage bank Cedar Holdings, working alongside Johnson once again. He worked at the firm’s head office in Pall Mall working in its mortgage underwriting department.
Then in 1969 the directors of Cedar Holdings asked him to run its Scottish operation out of Glasgow and that was when he first relocated north of the border, and has lived there ever since.
Once again the holy day of obligation was a significant omen.
“I actually arrived in Glasgow on my birthday obligation 8 December 1969,” he says. “From there I’ve lived in Glasgow with a variety of different positions.”
He ran the Scottish operation at Cedar Holdings until 1974 when the mortgage market crashed.
Looking to life insurance
After a brief stint working for a firm called Slater Walker Finance, in 1974 he started working in the life insurance industry for Foreman and Staff Insurance, otherwise known as FS Insurance.
“During that time at FS Insurance I created a number of innovative domestic mortgage propositions that in some ways are still be utilised in the industry today,” he says.
“Examples would be, the first mortgage product to purchase price in the new build sector and I also had an exclusive arrangement with Bank of Scotland to bring its lending into the intermediary market.”
In the 1980s he says there was the formation of estate agency businesses that realised financial services could be a major part of their businesses.
One major estate agency throughout Scotland at that time was Slater Hogg and Howison.
Malone had used the estate agency brand to develop his mortgage proposition at FS Insurance throughout central Scotland.
“During the early 1980s it was fashionable for insurance sales people to work out of estate agency branches selling the endowments,” he says. “But the commission would ultimately go to the estate agents.”
He built a reputation for both himself and FS Insurance as the leading player in the mortgage market.
Via estate agency brand Slater Hogg and Howison he was able to use it as a way to develop FS Insurance’s mortgage proposition throughout central Scotland.
Through the early 1980s over a six to eight year period he went from being a branch manager, development manager and then sales manager for the whole company.
In 1989 after FS Insurance demutualised as a life company and merged into Britannia Life, he joined Slater Hogg & Howeson as financial services director.
Slater Hogg & Howeson had been purchased by TSB Scotland in 1988.
He developed the estate agents proposition by reducing the work force, opting to go for quality over quantity.
His influence within the company grew and by 1992 he had become managing director of the holding company Mortgage Shops under which Slater Hogg Mortgage and Financial Services sat, and was also a main board director of TSB Property Services which included by then some 16 different estate agency businesses based in England.
“TSB Property Services had approximately 90 financial services and mortgage advisers as far north as Perth to as far south as Plymouth,” he says.
“But by 1995, at the end of a pretty severe recessionary period TSB Retail decided it wanted to tie the financial services and mortgage businesses to TSB.
“From there I had a small contractual issue to resolve which took a year, but during that period I was working on a format which became Premier Mortgage Service for Scottish Amicable.”
Enter Premier Mortgage Services
The original idea for the PMS format was something that he had previously tried to introduce to legal firms within Scotland but at that time the directors of Glasgow Solicitors Property Centre Scotland felt that his idea was not marketable.
However, he was then contacted by his friend John Cowan who back then was the sales and marketing director at Scottish Amicable
“He asked me to review the mortgage proposition that Scottish Amicable had in place for its appointed representatives,” he says.
Malone had first got to know Cowan when he worked at FS Insurance and the pair had been rivals in the life insurance sector – and ironically Cowan is once again involved with PMS, having been appointed in 2009 as a non-executive director of the Sesame Bankhall Group.
But Malone pitched his idea for PMS and Cowan gave him three months from August 1996 to implement his plan. It officially launched on Guy Fawkes Night, 5 November 1996, at the time as Legal & General was also promoting its mortgage club that had recently been set up.
In 1999 Prudential purchased Scottish Amicable as in early 2000 one of the key drivers to be in the mortgage market was the sale of low cost endowments.
But as endowments became a mis-sold product the value of PMS and the benefit to the life company had to change significantly.
So in 2002 to 2003 PMS started to achieve marketing funding from a variety of lenders but the intermediary placing the mortgage direct with the lender received the full proc fee.
“In my original business plan that Scottish Amicable agreed from launch date I looked to achieve £1bn of lending from the outset to £5bn by 2001,” he says.
“What we actually achieved was at least three times that amount – our biggest year of lending was £43bn at the end of 2007.”
One of the keys he says behind the brand’s success has been the fact its personnel has stayed the same.
“I think what we’ve built is an element of loyalty and transparency between us and intermediary and a system that works in the most simplistic way,” he says.
“I’ve created the opportunity for each broker, whether a one or two man band or major organisations like London & Country with 150 advisers, to deal direct with the lender.
“My view has always been the broker gives the advice, is responsible for that and it is his job to select which product from the suitable lender.
“I’m a facilitator that’s created an opportunity by working with the product providers.”
Pass the parcel
Obviously like all other firms in the mortgage market PMS has had to adapt to a choppy economic environment over the last five years.
“I could see the wheels starting to really wobble in July 2007. HBOS at that time did pump quite a lot of money into the mortgage market to protect their investment,” he says.
“From there a number of us were starting to become concerned, especially the reliance on the securitisation market.”
He says he recalls being told by Bristol & West’s managing director Roland McCormack during 2006 that the mortgage market was like a game of parcel “and when the music stopped there was going to be one hell of a problem”.
But he says that PMS from 2000 to 2007 PMS was never reliant on the sub-prime specialist market.
“We didn’t have those sub-prime type lenders on our panel,” he says. “Many of those lenders were associated with packagers and we had no packagers on our panel either. We were conservative about the lenders that we wanted to work with and on that basis we were a prime proposition.”
The only bit of specialism he says would have been a bit of self-cert, some buy-to-let, but hardly any sub-prime.
He says once they saw the downturn was coming in 2008 and 2009 he and his team realised they could not survive just on mortgages.
To that end it changed the club’s name from Premier Mortgage Service to just PMS in February 2009, with the name now standing for protection, mortgages and savings.
“By using those letters we did not have an expensive rebrand we were just able to remarket it ourselves,” he says.
When you look at Malone’s entire 50 year career in its entirety, the focus solely on mortgages has been a small one, with his background in second charge, commercial, insurance sales, and only latterly mortgage distribution.
“I’ve done the full spectrum – I’m probably one of the only people in this industry who has actually run a major brokerage, who has actually sat in front of clients and sold as I did in all those years I was a life inspector in estate agent officer in places like Paisley. I’ve had quite a lot of consumer face to face selling and come through quite a few aspects of this industry.”
So the refocus of PMS has just been a natural adaptation to market changes, and he says that was no different to what he did during the 1970s when he worked at Cedar and in the 1980s at FS Insurance. “All I’ve tried to do is adapt,” he says.
To that end the firm is launching a general insurance proposition which the company has been working on for a while.
And in September it launched its own packaging proposition, in conjunction with Melton Mowbray, called Sesame Bankhall Specialist Lending Services to processes mortgage applications on behalf of lenders and helps advisers place more complex cases with specialist lenders.
It will also offer exclusive access to the major lenders occupying the near-prime to medium-adverse market as well as five bridging lenders.
“The net result of that will be we can develop our proposition in areas we’re not really noted for,” he says.
Another way he has expanded is in his own role. He’s had a long established relationship with several regulators and sat on a wide variety of trade bodies and is now Ami’s representative on the mortgage fraud authority.
Speaking of which, he says he’s seen a major improvement in both lenders’ systems at detecting fraud and brokers’ awareness of fraud and how serious an issue it was say three years ago.
He says at a recent seminar he attended Lloyds Banking Group revealed that it now believes mortgage fraud is less than £1bn.
“That’s quite ground breaking – it’s going the right way and I think intermediaries have become a lot more aware of fraudulent behaviour and activity,” he says.
But he warns there is no room for complacency and fraudsters have likewise become aware that the industry is now alert to documents that doesn’t quite add up.
Fake documents he says are still problem and brokers need to be much more mindful of them.
Returning to the future of PMS, since its inception in 2006 the club has had a dizzying number of different parents and owners.
In 2004, five years after buying Scottish Amicable, Prudential decided that it did not see any further synergy in owning a mortgage club and it was purchased by Simon Tayler and Paul Hogarth at Bankhall which at the time was owned by Skandia.
The rationale behind purchasing PMS was that Bankhall did not have a strong mortgage and protection proposition and the club was seen as a doorway into that market.
Nothing materially changed at the club as a result, with the exception that it moved its main offices for marketing and outbound call centre from Stirling to Birmingham when it integrated Norwich Union Mortgage Club.
Then in 2006 Skandia itself was bought by South African investment firm Old Mutual and then in 2009 Old Mutual sold it to the Friends Provident owned Sesame Group in 2009 to form Sesame Bankhall. Friends Provident was also bought by Resolution in 2009 to become Friends Life.
The important part to Friends Life it is a big player in protection so there was a natural synergy between PMS and Sesame having a major protection life company.
But with such a reputation in the marketplace, what is he actually like to manage? With difficulty is the answer.
“Since setting up PMS I’ve had a number of parents/masters,” he says, “I’m sure they will all say I’ve presented a challenge or two.”
“I think people would say I’m difficult to manage. But I bring an enormous amount of experience, knowledge and respect to the business.”
So in an era when people’s concept of retirement is becoming increasingly elastic he says that with his contract up for renewal in December next year – once again a key month for him – he doesn’t see necessarily an end in sight.
CV: John Malone
Born: 8 December 1943
Education: Finchley Catholic Grammar School
1960: Martins Bank
1964: Left to work for father’s electrical businesses
1966 – Citibank
1967 – Cedar Holdings
1969 – Asked to run Cedar Holdings’ Scottish operation in Glasgow
1974 – Foreman and Staff Insurance
1989 – Slater Hogg & Howeson
1992 – Managing director of mortgage shops looking after financial services within TSB Property
1995 – Launched PMS under Scottish Amicable
Attitude to management: I was known in FS and Slater Hogg and Howeson as empathy man by building strong relationships with staff and giving them opportunity to develop.
Hobbies: Spurs, Celtic, football and horse racing
Favourite film: A Man for all Seasons – the 1966 films about the English reformation with Paul Scofield as Thomas More and Orson Welles as Cardinal Wolsey.
Favourite book: I’m a big fan of Thomas Sharp’s comedies
Mortgage: I have no mortgage! I’m a saver and investor.