Many mortgage brokers continue to write off lead generation as a reliable source of new business. Seven or eight years ago the sector was held to be the preserve of charlatans and confidence tricksters. The pages of Mortgage Strategy were frequently filled with stories of brokers who had been ripped off, having handed over hundreds of pounds upfront for leads that never materialised or failed to deliver what they promised.
Fast forward to the present day and the market is dotted with established firms that have carved out a reputation for delivering what they say they will.
So some brokers are understandably still wary of parting with their hard-earned cash. But for a growing number it has become an established way of bringing in new business.
And it’s against this backdrop that earlier this year two lead providers merged. In May Add Momentum Holdings joined forces with All About Group, a move that led to the merger of the firms’ respective lead generation divisions – Leadbay and All About Leads – to become Leadbay Media Group. Combined, the group claims it will supply advisers with more than 60,000 leads a month.
The move also brings together two industry stalwarts – Rob Ridge, founder of All About Group, is now director of Leadbay Media Group while Grant Stevens remains managing director of Leadbay.
Leadbay was more established and better known in the intermediary sector than All About Group. Add Momentum started in 2003 as a website generating customer enquiries for brokers while Leadbay was created in 2005 to solve the problem that Add Momentum encountered – finding a way of distributing the leads it was generating. And that’s where its lead bidding model was created.
Stevens has been managing director of Leadbay since 2007, joining from Sawfish Software where he was operations director.
All About Leads was set up last year. Ridge established his first lead generation company, JER Marketing, in 2004. This was subsequently sold to loan brokerage The Help Group where he became managing director.
He left The Help Group in May 2008 and set up All About Group, of which All About Leads formed a part, in 2009.
The main difference between the firms is that Leadbay has a variable bidding model whereby brokers decide how much they will pay and the lead goes to the highest bidder. In contrast, All About Leads operates a fixed-price bidding model.
“We’ll take a fixed order of, say, 1,000 remortgage leads at a certain price for a brokerage or bank and deliver that within a week or whenever required,” says Ridge.
All About Leads also provides other products such as debt management leads and some general insurance products. Leadbay began by primarily generating mortgage leads and has grown into other areas.
So although the firms have different systems and operate in slightly different arenas Ridge argues that the merger makes sense.
“I’ve known about Leadbay since its inception,” he says. “When I was running The Help Group in Manchester I think we were the first firm to buy loan leads from Leadbay, so I’ve been familiar with it for some time.”
It was just before Christmas last year that Ridge began talking to Leadbay about the possibility of working together, either in a joint venture capacity or by merging the firms.
“It was decided that the best way forward would be to merge All About Leads and Leadbay,” says Ridge. “We had similar introducing partners and some overlap in terms of who we were selling our leads to. Leadbay was strong in the IFA and network sectors and we were strong in the loan, debt and some GI markets.”
So All About Group acquired the Add Momentum group, taking over all the company’s businesses including Add Momentum Innovations, The Money Hospital, Leadbay and Buy Your Car.
“Buy Your Car didn’t fit our group strategy,” says Ridge. “It was a car sales website similar to Autotrader, so we sold it straight on to its shareholders.”
In current market conditions one can’t help but ask whether the takeover was required because one or both of the companies were struggling to keep afloat.
But Ridge and Stevens are quick to point out that the move was just a case of good business sense.
“We were competing with each other,” says Stevens. “We were going after similar partners and brokers which meant we were inadvertently driving up the price we were paying to get leads into our bidding models. It became obvious it couldn’t go on like that.”
Despite All About Group being the one to buy Add Momentum, it is the latter’s lead generation firm that will survive in terms of its brand.
“All About Leads has been merged with Leadbay and it will be Leadbay that will carry on,” says Ridge.
“All About Leads hadn’t got its name around the market much compared with the amount of PR that Leadbay had done. It made sense to carry on with the Leadbay name because of its reputation in the market – it’s simply more recognised by advisers.”
We can offer the bidding model for brokers who want flexibility and fixed prices for firms that want a regular supply of leads
While just one brand name will survive, both systems the firms operated – the bidding and fixed-price model – will exist in parallel, something Stevens believes will give users choice and flexibility.
“One of the factors we have identified is that the bidding model is popular among certain types of advisers while the fixed price model is more liked by others, so in bringing them together we believe we are offering brokers the best of both worlds,” he says.
“We can offer bidding for brokers who want flexibility, and fixed prices for bigger companies that just want a regular supply of leads. The models work together well.”
Obviously, with any merger comes the possibility of redun-dancies and staff changes. Ridge says the management team and shareholders have seen some changes, with him heading Leadbay Media Group and Stevens remaining at the helm of the Leadbay arm. There has also been the addition of Ashley Cartman as finance director. Cartman was previously a financial consultant working with Add Momentum.
In terms of job cuts the merger has seen the operations manager and head of sales at Leadbay leave the company, with Ridge explaining that
“we replaced certain capacities like for like”.
Surprisingly, the new company is recruiting.
“We’re about eight members of staff short at the moment,” says Ridge. “We need people in sales support and IT, and we’re also investing heavily in and recruiting for The Money Hospital.”
The Leadbay offices in Bristol will remain, as will the call centre near Preston and the All About offices in south Manchester.
Both Ridge and Stevens are optimistic following the merger.
“We want to be the biggest and best lead generator in the business,” says Stevens. “I’m pretty confident we’re the biggest now.”
As part of this objective, Ridge says the company is investing heavily in technology.
“We need to get the systems merged,” he says. “It’s like having two brains – the IT department is busy coding away to get them onto a single platform and we expect them to be fully integrated by the end of this month.”
Ridge adds that Leadbay Media Group will also be looking at how to liaise with customers and brokers.
“At the moment 95% of lead generation is done via the internet and real-time leads,” he says. “Over the years Leadbay and All About Leads have collected a lot of information about customers and we will be looking at ways of liaising efficiently.”
Another method the firm is looking to employ involves what it calls ’hot key transfers’. The idea, currently in development, is that when a customer speaks to someone at the Leadbay call centre a mini-enquiry about their profile is undertaken. The customer is then asked if they would like to be passed directly to a named broker. If they agree, they are diverted mid-call.
Expansion plans also include the deal Leadbay has recently signed with price comparison site MoneyExpert.com.
“At the moment we get around 65,000 enquiries a month,” says Ridge. “And along with the MoneyExpert.com deal we are also speaking to two of the other top price comparison sites about setting up similar relationships.
“We believe that by the beginning of 2011 we will be running at a rate of between 80,000 and 100,000 leads a month.”
But it’s not just the numbers Leadbay is working on improving.
“The important thing for us is that some of the relationships we’re building and reinforcing are helping us get the quality of leads we want,” says Stevens.
“We’re ensuring we have quality partners and leads where there is a high chance that the customer will want to speak to an adviser, and that the adviser involved will be able to help them. This is what brokers want.”
One of the biggest issues in the lead generation market is that of express consent – customers agreeing to be contacted by a broker.
“With a lot of leads, customers fill in a form to find out how much it would cost to get, say, a £200,000 mortgage and then click ’quote me now’ whereupon they get a message saying their details have been have passed to a broker,” says Ridge.
“But if they go to MoneyExpert.com they are asked to input their details and before these are submitted the system informs them that details will be passed to a qualified adviser who will phone them to give a competitive quote to suit their financial requirements. That’s proper express consent.”
Stevens says many of Leadbay’s competitors believe that as long as they tell customers about what will happen to their details afterwards it’s OK.
“That’s not our view, and it’s certainly not the view of any compliance people we’ve spoken to,” he says.
The reason there is some disparity on the issue of express consent is that the leads sector is not regulated by the Financial Services Authority. But Stevens says the company has voluntarily signed up to FSA regulation so it undertakes the same checks and maintains the same standards that regulated bodies have to adhere to.
“We speak to the FSA a lot,” says Stevens. “We fall between two regulated activities – financial promotions and financial advice – and in the future I can see there will be some regulation that covers us. Leadbay alone has already introduced more than two million people, and that translates to around £180bn of borrowing.”
Both Stevens and Ridge say they would welcome regulation of the sector.
“Regulation would stop bad practice in the sector,” says Ridge.
And Stevens believes it’s important that consumers get some form of advice.
“It’s essential we don’t commoditise these products in the way we’ve seen in the car insurance market where consumers don’t necessarily understand what they are buying online,” he says. “That’s a dangerous way to go with a significant financial commitment such as a mortgage.”
The company has between 3,000 and 5,000 buyers at the moment and Ridge believes this is down by over half since the start of the credit crunch.
“But if you look at the figures from the Association of Mortgage Intermediaries, which we have joined, there were something like 30,000 registered brokers in the UK before and now there are just 12,000 or 15,000, so it makes sense,” he adds.
And some brokers are returning to Leadbay.
“We have a few accounts that haven’t been used recently, which is not necessarily because the broker isn’t there anymore but could be because they’re feeding their business in different ways or cutting their costs,” says Stevens.
“But we’ve also seen people we’ve not heard from for ages coming back to us. And we have long-standing customers who are adding advisers to their firms in anticipation of the market improving.”
Sole brokers and small firms make up a high proportion of Leadbay’s client base, something Ridge believes gives it an edge over its competitors.
“Most of our rivals are not interested in the needs of Bob the broker in the North-East,” he says. “Naturally, we welcome big players buying leads from us but we also pay as much attention to one-man bands. A lot of our competitors don’t want the headache of dealing with one person buying a few leads. But I prefer to have 3,000 brokers buying five leads a month from us rather than 10 big accounts, because if you lose two accounts it has huge ramifications for your business model.
“You can afford to lose two or three sole brokers on a monthly basis as long as you replace them.”
At present Leadbay is getting between six and 10 new enquiries a day from brokers.
“Some are brokers we’ve never heard of because they are newly qualified,” says Stevens. “The feedback we’re starting to get is that the industry has not turned the corner yet but it’s starting to. There is some confidence in lead buying and from what we’ve seen, advisers now just need the products.”
The most popular leads via Leadbay include remortgages at 80% LTV or lower, life insurance and equity release.
“On the non-financial services side we are probably oversubscribed on a three-to-one basis on debt leads, where consumers are looking to get some advice on managing their debt,” says Ridge.
“Demand for this gone through the roof. It’s one of the main product lines we’re excited about. Leadbay didn’t operate much in the debt management space before.”
Ridge also says that based on feedback from brokers, Leadbay has discovered a need to generate leads from consumers seeking to draw up wills.
“There are more than 20 million people in the UK who have not got a will but who should have one,” says Ridge. “All About Group has a business called All About Wills and we’ve had a lot of success in the past 18 months driving people who are seeking wills to its website to fill in forms.
He adds that there’s a different way of speaking to customers when it’s about a will.
“You have to speak about estate planning and pensions, while looking at what insurances customers have in place – it’s a different way of getting consumers through the door.”
The provision of lead generation for wills is due to go live by the second week of September.
With the expansion into product areas such as wills Ridge and Stevens believe their firms are in a stronger position combined than apart. And with the market storm showing no sign of abating it seems the arrangement will stand them in good stead. n