In this light, brokers should examine their business models to ensure they’re sustainable and there are three crucial factors they should bear in mind.
First, regulation. The Financial Services Authority has made it clear that firms can’t slip under its radar so businesses of all sizes must ensure they have compliant sales processes in place.
Some commentators have suggested that directly authorised brokers were given a false impression on Mortgage Day that the regulator wouldn’t be interested in small firms. The FSA has emphasised that this is not the case.
Second, costs. While all businesses should constantly review their expenditure, when times are good firms tend to get into bad habits and allow fat to build up on their structures. In today’s harsh market conditions they have to watch their weight.
Towards the end of 2007 and into this year we’ve seen a number of big brokerages cutting costs. Of course, it’s more difficult for one or two-man band firms to slash their expenditure without trading unsafely.
Under these circumstances, small businesses can join up with other local firms to benefit from economies of scale or consider the network model.
Networks will pay for small firms’ professional indemnity insurance, offer higher proc fees and reduce their administrative burden and regulatory costs.
This often provides a double benefit, not only reducing expenditure but allowing brokers to do what they do best – writing business. And finally, support. It was becoming clear last year that both appointed representative and DA brokers were looking for support as well as the financial protection offered by mortgage clubs and networks.
This can come in many forms, including client management and back office technology, remote access training, seminars on business generation and marketing, plus compliance and help desk support.
Clearly there are other considerations but I believe brokers scrutinising their business models should put these factors at the top of their checklists.