With the new year nearly upon us what better time to look ahead to what the next 12 months are going to bring, especially if you decided to take appointed representative status under the new regime. The run-up to regulation saw networks offering a plethora of attractive deals with some promising that they could deliver even more in the future.
Whether the majority of networks have delivered what they set out to achieve is still somewhat debatable, with some falling on their false promises at the first hurdle. So what will the next 12 months bring to those ARs that decide to remain committed to their chosen network? Will the network still be around in 12 months’ time? Is consolidation on the cards or does it come down to being more about quality than quantity? All these questions and more deserve some serious thought.
So, Mortgage Strategy asks: What are the main predictions for 2005 regarding mortgage networks?
Richard Griffiths, Network Data
Closures, mergers, and acquisitions in the first half of 2005. I see a growing migration of directly regulated brokers to the comfort zone of a network as the harsh realities of direct FSA regulation set in, mimicking the long-term growth of the IFA networks. This will come too late to save many of the smaller networks that will struggle to maintain a viable service to their sub-critical mass of ARs.
Bill Warren, The Complete Network
Not as gloomy as some of the larger networks would have us believe. Larger networks will be hoping for smaller ones to disappear so that they can pick up more AR numbers. However, it’s the quality of a network that matters, not the size. Those with high quality controls and arrangements for their ARs should survive and prosper.
Chris May, The Mortgage Times
I believe there will be fewer networks around next year as profit and turnover fall for firms because of the regulatory regime and not having the number of ARs that they predicted. We might also see a lot of mergers going forward with networks sharing compliance and ancillary services
Martin Cave, Home Loan Partnership
With so many networks, consolidation is bound to occur. There is an obsession with how many members networks have recruited, whereas the focus should be on productivity per member and measured in terms of earnings per sale. The losers are likely to be networks offering a narrow range of mainstream lenders, no choice of well-known packagers offering exclusive products, and restricted to tied (and sometimes expensive) insurance products.
Frank Thurlby, Genesis
There will certainly be fewer networks mainly caused by consolidation. There may be new entrants to the market who have waited to see the dust settle. Many directly authorised firms may be renewing their interest in a network solution having fully come up to speed with the demands of the new regulatory environment.
Richard Verdin, Enable
Consolidation and continued recruitment. I see a move into networks taking place over the next 18 months from those that have, and will, come to realise that statutory regulation is a whole lot different to a code of conduct. The landscape has not yet ceased to shift.
Sally Laker, Mortgage Intelligence
Over 70 mortgage networks were authorised by the FSA from October 31. It is a certainty that there will be significantly fewer networks at the end of 2005. So my prediction is that there will be a large number of appointed representative firms that, unless they have seen their networks failure coming, will suddenly find that they will not be able to trade for a few weeks because they quickly have to join another network.
Stephen Atkins, Freedom Finance
There will be fewer networks but it is their approach to business that will be of real interest. While most larger networks are simply networks the smaller ones are trying to operate through both ARs and directly authorised firms. ARs could become frustrated if they do not perceive an advantage in their commission levels by sending all their business through one source. The network/club may well have to decide where their main support will lie.
Chris French, The Mortgage Marketing Centre
I predict that at the end of 2005 there will be fewer networks than at the beginning. The FSA will effect the closing down of more than one network as they fail to keep ARs under control.
Shaun Godfrey, Bankhall
So many mortgage brokers will be saying why did I join a network when I should have become directly authorised by the FSA? IFAs said it in their thousands so why should mortgage brokers be any different? They will be constantly asking why? And then realising the problems they face to get out.
Ian McIver, Whitechurch Mortgage Network
I think mortgage networks will have it tough. There are so many stories of so many networks with so few ARs that they just won’t be able to survive. They will either merge to form bigger units or go out of business. The roles of mortgage clubs will be interesting as lenders recognise that networks themselves start to act in a similar capacity.
Andy Young, Sesame
There are certainly going to be fewer networks in December 2005 than there are in December 2004. A lot of them will cease to exist, others will merge because they do not have enough appointed representatives, and some might even go back into being a mortgage club or a packager. If you take a look at the AR numbers, there are only going to be about five main players in the market.