New entrants must have new ideas

A number of high street lenders have recently publicised their intention to muscle in on the specialist and intermediary markets, launching product ranges and specialist divisions for this purpose.

This is a welcome development that will bring added competition and choice to brokers and clients. But the broker and specialist sectors are tough battlegrounds. While there is room for new entrants, there is also a need for those turning up at the party to bring something fresh.

A bottle of Aussie plonk won’t do the trick as there are already enough lenders offering mid-range products backed by mid-range service. Indeed, competition is such that relying on brand alone is not going to be enough to deliver volume. Propositions will have to be carefully designed to cope with the leaner margins on offer.

No lender is going to decide on a whim to go after the intermediary and specialist markets and anyone doing so must believe in their offering. But the question is whether brokers will also believe in them and feel they offer more than what is already available.

The reality is that high street lenders see the intermediary and specialist markets as feeder grounds for their mainstream businesses. They will never be their main focus so the resources they commit to such ventures will only be sideshows.

There is also the threat that intermediaries introducing their clients to these lenders will see them snapped up and lost to the direct sales channels they operate.

None of the high street players that have courted specialist and intermediary business have brought anything that has improved what was already being offered. It makes better commercial sense for brokers to deal with dedicated experts rather than with lenders seeking to be all things to all borrowers.

Specialist and broker-only lenders have invested time, resources and all their efforts in designing their product and service propositions to suit the needs of brokers and their clients.

They are looking to create long-term relationships that ensure borrowers always get what’s best for them and that once their credit has been repaired they have the entire market to pick from.

One must question whether this is the intention of high street players, and also who benefits as they use subsidiaries to funnel borrowers into their mainstream operations.