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Survival of the fittest is no bad thing

Poor old Michael! Reading the last few issues of Mortgage Strategy, you could be forgiven for thinking that it was the Glorious Twelfth every Monday, with Michael Bolton on the receiving end of both barrels.

I do not recall such pointed remarks made about one individual since George W made that infamous speech about Saddam Hussein at the United Nations. But I have to admit, I am not surprised by the reaction. I have received numerous letters, phone calls and emails during the past couple of weeks, all of which refer to Bolton&#39s less-than-tactful advertising and PR campaign that has been designed (allegedly) to demonise packagers.

Well, as surprising as this may sound, I think the time has come for packagers to put Bolton and BMS behind them. No, I&#39m not suggesting for one second that packagers forgive BMS its sins, but I am suggesting that we now look beyond the personality and focus on the real issues.

So what are the issues? Ironically, the BMS advertising campaign identifies the issues very clearly – what it doesn&#39t do is address them terribly well. So let me summarise. In a nutshell, BMS believes that the majority of packagers are an unnecessary evil, charging too much and providing a shoddy service. In BMS&#39 view, brokers would be better off sidestepping packagers altogether and submitting business direct to lenders. You have to hand it to BMS, it leaves no room for misunderstanding.

Its view is, of course, utter rubbish. It treats all packagers as a homogeneous mass, assuming they are all the same, but nothing could be further from the truth.

Like BMS&#39 service, packagers vary dramatically. Some do provide a sub-standard service and have jumped on the packaging bandwagon as a short-term means of boosting income. They will not survive. Lenders will become intolerant of sub-standard service levels, because they simply won&#39t be able to pay outsourcing fees for a job that is not completed properly.

However, there is a large group (a lot more than the now-14 BMS-approved packagers) who do provide a good service. What&#39s more, the quality of service provided by these packagers is not a direct reflection of their size. Small and medium-sized packagers are just as capable of providing as high-quality a service as the big boys.

As I have said before, we all work in a very competitive mortgage market and competition will ensure that only those committed to providing a high-quality service will survive.

The real issue for packagers is developing a long-term strategy, not only to ensure survival, but also to enable them to prosper. Mortgages PLC will be running a series of workshops throughout the country in the New Year when we will be helping packagers to start the process of strategy development and we will follow these up with information packs and guides.

In overview, however, there are a number of key issues we will be addressing, which packagers may want to start considering beforehand. They are service, regulation, structure, technology, marketing and pricing and profitability.

If you are a packager and all of this is starting to sound daunting, don&#39t panic. Help is at hand and we will be providing a lot of information and practical help to enable you to put an action plan in place during the coming months.

In the meantime, don&#39t let old Birmingham Midshires Solutions annoy you. If it doesn&#39t want to do business with you, simply turn to those lenders who will – there are plenty out there.

Things packagers should consider in the upcoming fight for survival


Packagers have three types of customers – brokers, lenders and borrowers. They all need to receive a consistently high-quality service and packagers need to put a plan in place to ensure they can deliver. The plan needs to address staffing, training, technology, workflow management, quality-checking and audit procedures.


Packagers need to consider the most appropriate structure for their business in the future. Will they provide a purely packaging service or will they also provide a broking service (which will be regulated)? And if they provide both, will this be done from a single business or via two separate business entities?


Packaging is inevitably going to be a business in which technology will become increasingly dominant both in terms of product-sourcing systems and case submission and tracking software. Packagers need to consider what is on offer and what investments they need to make in this area.


Life is going to become more competitive for everyone in the mortgage market and packagers need to consider how they market their services to prospective members. In a regulated market, many mortgage brokers will be attracted by large networks that can offer a full training, compliance, sourcing and packaging service. A key word in packagers&#39 marketing plans should, therefore, be &#39differentiation&#39.

Pricing and profitability

Packagers need to develop profitability models for the future. Costs will inevitably increase as a result of greater investment in people, training and technology, but income could fall as a result of reduced numbers of mortgage brokers. Packagers need to understand the precise dynamics of their business&#39 profitability and identify key performance indicators.


Packagers should consider the type of brokers they deal with and if they will change as a result of the qualifications requirements that come into force on December 31 this year and as a result of regulation in 2004. The issue isn&#39t simply about reduced numbers of packagers, but also the status of those who remain. If packagers believe that a large number of their members will be able to give &#39information only&#39 rather than &#39advice&#39, they need to consider what this means for their own business. Should they, for example, consider employing a CeMAP-qualified individual who can provide advice?


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