ig is a word often associated Bwith The Mortgage Times Group. It has always aimed to be the biggest packager in the UK and is now the largest mortgage network too.
To Mortgage Times, big has always been beautiful. So it comes as no surprise that the distributor has big plans for 2008.
When Mortgage Times changed the name of its network proposition to Vision Network at the start of the year, it did so with typical fanfare.
It pointed out that its network now has 555 appointed representative firms – more than any competitor and a notable achievement considering it was only launched on Mortgage Day.
Most in the industry probably assumed the rebrand was tied into the launch of its software platform, also called Vision. This is understandable given that most packagers have launched their own sourcing, compliance or other back office systems in the past 12 months.
But this assumption depends on thinking that Mortgage Times is only a packager.
Such views will have to change, says Chris May, director of Mortgage Times. He says the group should now be seen as the umbrella company for a financial services distributor.
Mortgage Times will continue to operate as normal but the network is about to take centre stage, developing from a mortgage network into an IFA one. If it gets permission the change will happen in mid-March with around 100 IFA ARs onboard. The plan is to have 2,000 ARs by 2009. May admits it’s ambitious.
“We want to build the biggest network and support services company in the UK,” he says. “Over the next five years we want to be bigger than the likes of Tenet and Sesame – it’s as simple as that.
“I know it’s a bold statement and I have a lot of respect for Sesame and Tenet, but everyone needs ambitions.”
Making Vision into an IFA network is a plan the company has been working on for the past 18 months, says May, so it’s not a case of reacting to the current state of the market.
But the move also provides a good indication of where Mortgage Times believes the financial services market is heading. There is a sense that May believes the mortgage market party is over.
“Brokers need to be looking at mortgages, life insurance, pensions, investments and other income streams,” says May.
“But there’s a gap in the market as well. There are lots of networks that have been around for years that I think are stagnating and there are few new companies that have entered the market in the past five years.
“We think there are big opportunities to offer better support services to brokers,” he adds.
What Vision is saying is that not only is it time for brokers to expand their offerings but also that it can offer a better service than many existing IFA networks.
May says the market is going to get tougher and for many networks that have been operating in the same way for years, the 35% to 40% of turnover they charge is going to start to pinch many ARs.
“If you look at the pricing structure of networks, a lot of them are over-pricing and they don’t even offer ancillary services such as software or professional indemnity insurance,” says May.
“So there’s a massive opportunity to target brokers who think they are in a network but have to pay for their own PII and don’t realise the network will not help them if they have to deal with complaints.
“They might as well be directly authorised with no support functions for what they are getting, so there is a network opportunity there,” he adds.
May says that now’s a good time to launch an IFA network. Strategically, Vision is fortunate in that it hasn’t been around for as long as many of the bigger IFA networks.
He points out that they were hit with pension, endowment, Financial Services Authority and split cap reviews. As a result they incurred extra costs to make themselves compliant.
Also, May says brokers tend to hone in on one particular area of business, so when they are completing fact-finds they often fail to ask about existing pension arrangements or what sort of investments clients have.
This is where the software platform Mortgage Times has developed will be a boon, he says.
“The technology we are developing can pull that information together for brokers so they can start selling across multiple product areas,” he says.
“IFAs already do this but brokers don’t. So we are going to bring them in line with IFAs.”
Vision’s software takes existing and new technology and brings it together on one platform. It includes a point-of-sale system that will act as a hub and will offer a sub-prime mortgage sourcing platform developed by Mortgage Times, which it claims is similar to the Edge V2 and Evaluate platforms.
The sourcing system will also include buy-to-let and self-cert products. The platform is integrated with Mortgage Brain and Trigold plus life and pensions portal Assureweb. It will include a general insurance portal too.
May says the platform will be a one-stop shop for brokers and IFAs and will encourage them to make more sales.
He argues that mortgage brokers haven’t sold enough protection or GI products in the past, possibly because of the need to re-key clients’ details into their systems.
Where Vision’s software differs is that its point-of-sale system will encourage users to quote across every area of the sales process by providing information on ancillary products.
It is then up to clients whether they purchase products. As a result, the system will drive sales.
But May suggests another big part of the crea-tion of Vision is education. He says the network has 80 workshops planned for this year to inform brokers about why they should sell ancillary products and the profits they can make by doing so.
He adds that this is another way in which Vision will add value for brokers and IFAs.
“When we speak to brokers who belong to other networks, the key thing they say is that they’re paying network fees but are not getting added value,” says May.
“We are almost having to go back to the 1980s when networks had the time, resources and money to train people up.”
Over the past five years, networks have cut costs so brokers aren’t getting the training they used to, he adds.
“Few networks can afford to take on somebody and train them, which is why we are beginning to see a shortage of well-qualified brokers in the market,” says May.
“So we are doing workshops for those who want to upgrade their skills from mortgages alone and we are putting up the investment to start training them again.”
Despite the strong focus on the network, May says the other strands of group are continuing to grow impressively but there have been some changes too.
Mortgage Times’ packager now only has 30 satellite agreements, down from a peak of 60 last year. But May says it’s likely that this figure will fall to 15 by the end of 2008.
“Some packagers that have no ARs nor distribution see satellites as building close distribution,” he says. “They give out satellite agencies without any proof of volume.
“We are probably going to look at the satellites we have and will cull the ones that are not producing enough volume.”
May says the group is not against satellite packagers if they are of the right quality, but these are few and far between.
“The idea with our satellites is that we want to create mini Mortgage Times – businesses that are going to explore the market and attract DA business. But many satellites only look at their own brokerages so they are not true packagers.
“I see packagers as firms that go into the open market and attract DA brokers to introduce business they can then package.”
But there is also a sense that the reason the distributor is cutting back its satellite packaging has more to do with prevailing market conditions than anything else.
May says packagers in particular should expect lenders to cut back on the number of packaging agreements they have.
In this light, satellite packagers that are not giving their parent companies satisfactory volumes are unnecessary luxuries right now.
“Some lenders will be hurting,” says May. “Some networks will too, but there will certainly be packagers that are struggling because they are trying to evolve with the market.
“But they are being reactive rather than proactive and should have acted a year or two ago.
“Technology is great but no-one’s systems are there yet. It will happen eventually but I think those that are simply changing their panels have acted too late,” he adds.
Add to this the fact that most lenders think it could be anywhere between April this year and the second half of 2009 before the mortgage market recovers from the liquidity crisis and it’s clear that the next 12 months could be dire for many firms, if not their undoing.
May points to Mortgage Times’ volumes as an indicator of how far the market has fallen since the crisis began last August.
“Last year, we got to a point where we were averaging 120 cases a day. This has fallen to about 90,” he says.
“So if we’ve had a 30% drop in business and we don’t even do a lot of mid to heavy adverse deals, what’s everybody else doing? They must be crumbling.”