Dale Knight is director of mortgages at Berkeley Berry Birch
There won’t be a massive reduction but the number of networks will diminish to a certain extent.This decrease will either be focussed on the smaller players that simply didn’t achieve their target number of appointed representative after Mortgage Day or due to firms merging or forming partnerships. We have already seen a good example of this when Genesis Home Loans and Guaranteed Home Loans – two of the strongest firms in the industry – joined forces to become even stronger. Quality networks – and note my use of the word quality – will prosper and see the number of their mortgage ARs increase. Networks should target those firms that have been directly authorised for the first year as they have seen what is involved in regulation and have had to deal with the responsibility. A firm choosing direct authorisation has to invest heavily in the structure and ethos of self-regulation. This makes them excellent prospects to become ARs of networks. Ironically, the IFA market seems to be going in the other direction, with firms signing up to a variety of cheap, direct offerings. But the reality in the IFA world is that once additional services are requested to keep pace with regulation, the DA route will prove to be as expensive as being an AR, or even more so. DA businesses lack protection and once this becomes clear to them, it is likely they will turn full circle and head back into the welcoming arms of a network host once again. However, for this to happen IFA networks will have to evolve their offerings to entice their audience back. Mortgage networks should take heed and use this as an opportunity to learn from IFA evolution. It might hold the key to them not losing their ARs in the first place.
Dev Malle is sales director at Pink Home Loans
There are two questions that should be addressed here. Will the number of mortgage networks reduce over the next 12 months? Yes. Will the number of appointed representatives in the mortgage market come down? No. In fact I think ARs will increase in number.At Mortgage Day there were about 65 new mortgage networks. Today just 24 remain so consolidation is already happening apace. Over the next 12 months I expect this number to halve again, and there are a number of reasons for this. Some networks have unsustainable pricing models and these will come under further pressure as Financial Services Authority enforcement pressures will mean networks have to make continuing investment in controls. Indeed, enforcement itself could drive some networks into failure. And, apart from this, the flight to quality has already started. You only have to look at Richard Griffiths’ statistical analyses of the evolving market to see which networks are growing. To survive, networks will have to achieve critical mass and also exploit the economies of scale. It is becoming clear some just won’t achieve this, and this will mean more mergers or sales. This lack of mass will not only affect AR recruitment but networks will also haemorrhage ARs as they are unable to deliver the services or support their ARs were promised or expected. Then there is the question of expertise. It is becoming apparent that mortgage intermediaries want to belong to mortgage networks. MGM, for example, was not a network that had mortgage expertise. Finally, it is clear that for long-term survival, networks must have strong financial backing. The reasons for this are obvious.