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Small firms have the edge in the crunch

Last week two major brokerages announced that they had called in administrators.

Some commentators will undoubtedly interpret this as a signal that the intermediary market is doomed, but I do not share this opinion.

In fact, I take the opposite view, believing it shows that big is not necessarily beautiful in the mortgage market.

The bottom line is that mortgage advice is a cottage industry. I don’t mean that as a criticism – it’s just a fact of life.

I don’t have the relevant Financial Services Authority statistics at my fingertips but of the 12,500 firms registered under the old Mortgage Code Compliance Board, around 11,200 had fewer than three salespeople.

Around 7,500 mortgage firms were sole traders, many working from home offices and seeing clients in their homes.

There’s nothing wrong with this situation. In fact, in today’s world I believe small traders have the advantage.

They don’t have massive overheads so can easily cut their costs to a bare minimum to ride out the downturn and meanwhile, they can do what they have always done best – provide consumers with excellent, personal and impartial advice.

Small brokers must be concerned about how long the economic downturn will last – as we all are – but in the present market they are in the driving seat.

If they stay close to their customers, their customers will stay close to them.

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