It’s ironic that this is Mortgage Strategy’s first in-depth interview with Grenville Turner, chief executive of Countrywide, since he joined the estate agency business in 2006 – after all, we were instrumental in his appointment to the position.
When he left his role as head of intermediary business at HBOS in February 2006, it was not to join any specific firm but to travel for six months.
It was in Dubai that he received a call from Mortgage Strategy asking for his comment on rumours that he was going to be the new chairman of Rightmove.
His response was that as far as he knew, Rightmove still had a chairman so the answer was no. He was then asked whether that meant he was going for the chief executive role at Countrywide, to which he says his response was that “if all you are doing is fishing, the answer is no comment”.
He continued on his travels to New Zealand, Australia and Singa-pore and thought nothing more of the conversation. But when he returned to the UK a number of people sent him a press cutting which said – ’Grenville Turner, former head of intermediary business at HBOS, has told Mortgage Strategy he is not in the running to be the new chairman of Rightmove, but refused to comment on whether a job at Countrywide was in the offing’.
“So when I got back one of the first things I did was to pick up the phone to Countrywide’s then chief executive Harry Hill and apologise and explain the circumstances in which the call had taken place,” he says.
Hill appeased Turner’s worries saying that he never read the press anyway, but then asked him what he was doing work-wise and whether he fancied coming in for a chat. At the time he says he was in discussions with a major US bank but when he spoke to Hill, he says it just felt right.
A year after he took on the Countrywide role in August 2006 the economy and housing market walked into a downturn it has yet to pull itself out of. But Turner’s view of the recession is that it has presented opportunities.
I met Turner at the beginning of August – some six weeks after Countrywide had taken over rival estate agency brand Hamptons International – at its former plush headquarters opposite the US embassy in London’s Grosvenor Square. In short the downturn has afforded him the opportunity to bag Countrywide some prime London real estate. And he’s similarly looking to expand the estate agency’s mortgage intermediary operation. He says at 755 advisers, the firm is now the largest mortgage brokerage in the market.
It’s the sheer breadth of the operation at Countrywide that shocked some in the industry earlier this year, when Turner made headlines within Mortgage Strategy again, this time for comments he made at the Building Societies Association’s annual conference.
“We’ve seen a change in direct mortgages and I think that’s a good thing so lenders shouldn’t be held hostage by intermediaries,” he said at the time. “There should be a balanced market where consumers are able to get advice and equally where lenders don’t become overly dependent on that source of business.”
Brokers have been quick to anger about one specific topic over the last three years – dual pricing. Many have felt that when the market turned, lenders that relied on brokers for distribution were quick to abandon them once the good times were over and instead offered better products via their branches.
So for anyone who has sought to put across the other side of the argument, it’s been akin to kicking a hornet’s nest. The reaction from some brokers to Turner’s comments was disappointment that a key member of the intermediary community should question the role that they played and their intrinsic value when it came to distributing mortgages. But prior to working at Countrywide Turner was at HBOS.
“I’ve had the benefit of sitting in both camps for quite some time so I feel I can be as objective as anyone can in terms of those relationships,” he says.
So why does he feel comfortable about dual pricing when it could potentially impact negatively on hundreds of his own brokers?
“I’ve said this in the past and it’s not always had universal appeal but appears to be becoming more mainstream in terms of a view – that a sensible balance between lenders having their own channels and a good relationship with the intermediary channel is a good place to be long term,” he says.
“Lenders wholly dependent on the broker channel is not necessarily the most comfortable position to be in.”
He believes brokers provide better advice, more choice and better service to customers. Lenders, he says, are competing in terms of giving themselves some price advantage and the broader product relationship they might have with some customers. But what intermediaries offer goes beyond a price advantage, he argues.
To appear an attractive proposition to lenders brokers need to do more than just turn up and demand better products
“The advantages we have in choice, service and proposition for customers will always outweigh those offered by direct lenders,” he says. He argues that brokers and lenders should be up for the challenge that this new market dynamic will bring and that both parties will be all the better for it. But from an early point in his career he says he has been someone able to turn problem situations around and into a profit. After leaving school at 17 in 1975 he joined a Halifax branch in Chesterfield.
“The one thing that struck me was that it was a pretty staid environment in those days,” he says. “There were only a few products – one mortgage, one savings account, one regular savings account. So it was uncomplicated by today’s standards, but for someone like me who was keen to get on, it was growing enormously.
“So if you were interested and ambitious you could ride on the crest of the wave. And that’s exactly how I felt until 2006 when I left. I felt I’d ridden the crest of a particular growth wave.”
Quite early on he was given his own Halifax branch in Cam-bridge to manage as a challenge to turn it around. When he achieved this he was effectively told to name his next role. His choice was to go into its training department.
“It just looked like a great life,” he says. “I was single and it was one of those jobs where you got a car rela-tively early on. You lived in different cities almost every week and in nice hotels,” he says.
“So it just seemed like a great way to discover Britain while wor-king and doing things that interested me. When I was at school I had thought about going into teaching and this was almost like teaching in business and I loved it.”
He dealt with technical, super-visory and management training, and ended up as group training manager for Halifax, which included handling all the senior executive development. It was at this point in his 30s that he had a conversation with the company’s personnel director about his own career development.
“I remember reading a book that talked about people’s career progressions and I’d never had an ambition to be a managing director or chief executive in particular but I remember it said that chief executives didn’t come from personnel or from marketing because they’re not hard enough as professions,” he says.
This meant that if he wanted to get on he had to do something outside the HR route. At the same time he went to Cranfield Uni-versity to get an MBA where he specialised in mergers, acquisitions and disposals. This was particularly useful as at that stage Halifax was considering disposing off its surveying business Colleys.
Halifax made Turner managing director of Colleys but the real purpose of the appointment was to dispose of it. However, during the six-month period of effectively winding the company down he says business started to pick up.
“I went to the Halifax board and said that I understood its decision to get rid of Colleys but that I thought it was a good business and if properly run could be an integral part of the organisation and make a real difference,” he says.
“So I put an alternative plan to the board which was to keep it, make changes and turn it into a profitable business. I think when I took over it was making £3m profit and at its peak it made between £75m and £85m.”
From then on he had a reputation for doing strategic analysis on a business and then working out how it could be improved. So he was then given Halifax Estate Agents and charged with making it profitable or disposing of it. He downsized it from 600 offices to some 400 offices and it made a £20m profit. He then kept moving on to new challenges while keeping all those businesses within his portfolio.
“There was a sense of building a portfolio that had a lot of synergies between them,” he says.
So he’d take over a business, get it in working order and then ensure that all the firms within this growing portfolio worked together. He ended up with all five mortgage businesses of the Halifax – Intelligence Finance, Birmingham Midshires, The Mortgage Business, Halifax and Bank of Scotland, as well as Colleys.
He was also in charge of the partnership businesses with Sainsbury’s Bank and AA Personal Finance and Clerical Medical, to name but a few. In the end the portfolio included some 15 businesses that collectively made an annual profit of £1.2bn and employed around 6,000 staff.
“But it also got so big that the company started to say we probably now need to start to break it up,” he says. “That was the right thing to do for the business but it didn’t feel like the right thing for me because when you’ve built something, it is odd to be part of dismantling it. So at that stage I fancied doing something different and decided to leave HBOS.”
This brings us to his appointment at Countrywide. When Turner first spoke to Hill about taking over Countrywide, Hill had been in charge of the estate agency for some 18 years and had built it up into a large organisation via acquisitions.
Countrywide was born out of the merger of Bairstow Eves and Mann Co, the first two stock market-listed estate agency firms in 1986 following their acquisition by Hambros. The new company was called Hambros Countrywide.
Over the last 24 years growth has mainly come from multiple acquisitions and it has absorbed the estate agency arms of both Bradford &Bingley and Friends Provident.
So when Turner arrived at Countrywide in August 2006 it was already a successful business. Paradoxically the market downturn afforded him the freedom he was looking for.
“The important thing for me is that, strangely, all that has happened in the market has been supportive of the changes that we wanted to make at Countrywide,” he says. “When you have a business as successful as Countrywide, it’s difficult to bring about change in an environment when it’s all going swimmingly well.”
The market crash meant that all businesses had to take a hard look at their business models.
“We needed to reconfigure our surveying business and take a hard look at a number of our estate agency offices and the way they were structured,” he says. “We also needed to examine our costs.”
In 2007 Countrywide was bought by the private equity group Apollo Management, thereby taking it out of public ownership. A scheme of arrangement was implemented in May 2009 which restructured the group’s debt and following that the principal investors in the group are now Oaktree Capital Management, Apollo Management, Polygon Global Opportunities Master Fund and Alchemy Special Opportunities Fund.
On the personnel side, the company made some big hires from within the mortgage industry such as Guy Batchelor and Paul Hunt who both had senior roles at Lehman Brothers’ UK specialist lending unit before the collapse of the parent group in 2008. And that process continues today with the shock announcement last week that Nigel Stockton, currently sales director of mortgages at Lloyds Banking Group, will be joining his former boss at Countrywide on October 1 as the group’s financial services development director.
“While I wouldn’t wish on anyone the kind of market we’ve experienced over the last two to three years I look back on it as a period that helped us change the business in a way we wanted to,” he says. “Our belief now is that when the market comes back to anything close to normal we will be a different business.”
What exactly a normal housing market will look like though is a difficult question and everyone seems to have a different take on it. Turner says that if you look at the facts and figures the long run average is that the normal number of transactions in the UK is about 1.25 million per year.
“In 2008 we had 500,000, in 2009 we had 630,000 and this year looks pretty flat on 2009,” he says. “So we’re probably operating at half of what would have been the normal long run average.”
But he says that’s in the light of the collapse of specialist lending, the lack of funding in buy-to-let sector and strong growth in the rental sector.
“A new normal is probably more like one million to 1.1 million transactions rather than 1.25 million and I think 2006 was 1.4 million transactions.
So I think there is a structural shift but I don’t think it’s as much as some people would have you believe.”
A number of major changes are looming for the market, not least of which is the Mortgage Market Review. With the Financial Services Authority’s proposed scrapping of self-cert and fast-track, changes in the way affordability is calculated and even how brokers are regulated, many in the intermediary community are concerned this could have a profound impact on the market long term.
So the obvious question to ask is whether Turner’s prediction of what the new normal will be could be further impacted by the MMR?
“I am not sure whether most of those things – whether they be classified as responsible lending or something else – will dramatically change consumers’ ability to get a mortgage in a normal market. We’re in an abnormal market – there’s a shortage of supply of funding and understandably, there is reticence on the part of the banks to take risks as they’ve had their fingers burnt.
“But if you look at the proposed changes, they’re ones that over the short to medium term will encourage banks to come back in to the market because lending is likely to be more robust and the relationship with intermediaries will be closer and one in which everyone is aligned up in terms of what they’re trying to achieve.”
He says Countrywide has seen its market share grow 21 months running – no mean feat in a downturn. As a result, he says that while market share is a tricky thing to conclusively nail down, conver-sations with lenders indicate that Countrywide is taking over 5% of the total transactional market and a massive 10% of the interme-diary market – a figure that has doubled over the last two years.
In part he says this is down to the continued investment Country-wide is making in its intermediary division.
“We feel we’re doing the right things,” he says. “We continue to recruit, train and put staff into the field at a time when others are stepping back,” he says.
In part he attributes Countrywide’s success to the relationship it has with lenders. To be an attractive proposition to lenders, he says brokers need to do more than just demand better products.
“If you turn up at a lender and say you want the largest proc fee, the cheapest products and the simplest process, it’s not the most compelling proposition,” he says.
“It’s important that we talk about our process, the quality of business that we introduce and our own quality checks, but also about how we are able to provide consistent flows of business to lenders. Then you become a partner and on that basis we’re successful in terms of lenders helping us with exclusives and particularly product design, because they see the value in the consistent flow and right mix of quality business that we provide.”
But when it comes to the wider market, his view is that the mortgage industry is in a period of transition. He says there have been misunderstandings between all stakeholders, from the regu-lator, consumer bodies, banks, lenders and the intermediary sector.
“Our industry was more robust than many have given it credit for,” he says. “The issues that have become headline issues were much more prevalent in the US that they were in the UK and we have suffered by almost association with those.”
However, as an industry he says the intermediary market needs to become better at representing its views, especially when it comes to the regulator and the government.
He worries that the emotional voices one hears in the industry are counter-productive, especially when trying to ensure that lenders and the FSA are working together in the best possible way to safeguard consumers.
He argues that if everyone is working to ensure that consumers are borrowing in a way that they can repay, that it’s sensible and based on good advice then the entire market is successful.
“Nobody wins if a consumer buys something they can’t afford and it doesn’t work out as we all suffer by association again,” he says. “So I’d much rather change and accept that my market might be slightly different by having a better process in place.”
Not that that seems to be a problem at the moment. The size of its market share puts Countrywide in another league and Turner is unsurprisingly bullish about where the firm is going.
“We can’t do anything about the total market, what we can do something about is our market share,” he says. “We don’t describe ourselves as a tracker fund we describe ourselves as an active fund manager – our job is to outperform the market.”