High hopes

Intelligent Finance last week celebrated its fifth anniversary and the specialist lender continues to go from strength to strength.

When it launched on November 30 2000 IF was one of the only offsetters in the market. Indeed IF was the first offsetter to build its systems from scratch rather than adapting new products to existing systems and remains the only lender to allow customers to offset their ISA funds.

Five years ago offset was still regarded as a niche concept and with only a few providers, it was easy to see why. Since that time lenders have done much to dispel the perception that offset is only suitable for the minority, and have driven down the costs of their deals using economies of scale.

Although more lenders have since launched offset propositions, it remains a relatively untapped sector despite IF’s reckoning that up to one in four people could benefit from switching to offset deals. IF’s positioning at time of launch meant it was an exciting prospect. And it remains so in the eyes of managing director Nick Robinson.

Robinson joined Intelligent Finance just before the Financial Services Authority assumed control of regulating the mortgage industry in October 2004. Although the allure of IF’s offering attracted Robinson to work for the bank, it also meant he became responsible for continuing its success.

As well as adopting a strong position in the market, IF had become the 12th largest mortgage lender in the UK in just four years. “Since its inception in 2000, Intelligent Finance had set records left, right and centre,” recalls Robinson. “On inheriting the business in 2004 it was important to not only retain the excitement and dynamism that surrounds IF, but also to continue to put processes in place to sustain the progress it had made.”

Robinson joined IF from within HBOS, where he had been head of retail savings since 2002. But although he has carved out a niche for himself as MD of one of the market’s most prominent lenders, things could have been rather different had it not been for a change in career direction.

Although Robinson graduated from Cambridge with a brace of engineering degrees, his first job came at AT Kearney which later became the Mitchell Madison Group. He worked as a business analyst and an associate for the global management consultancy firm before joining McKinsey & Company in 1998 for a four-year stint as engagement manager after completing a business administration degree at Harvard.

Robinson’s spell at McKinsey – also a consultancy firm – saw him operate as a member of the financial institutions practice with a focus on the banking and securities sector.

It was his time developing strategies for international banks that made him realise his future lay in the financial services industry. As he concedes, with the qualifications he had on leaving university he could have easily found himself building rockets for the Ministry of Defence, but through a slightly unconventional route, he found himself at HBOS.

Robinson spent seven years in total working for consultancy firms but says his move into the financial services sector was as much the result of luck as judgement. “Having liased with many banks in my consultancy roles, I saw the move to a full-time role at HBOS as more of a proper job,” he says. “I also found that I enjoyed working with people from the financial sector more than I did those from other areas.”

As he had already developed strategies for working at banks, he came in to the arena with more knowledge than someone entering blind. Although Robinson says he still had a lot to learn, he reasons that many core principles remain the same within many management and operational roles.

More than 30 lenders now offer an offset option and Robinson says many have followed IF’s lead. “We are still the only lender to allow customers to offset all forms of cash savings,” he says. “And as for other lenders trying to replicate our model, imitation is the sincerest form of flattery as far as we are concerned.” The IF managing director adds that the offset market has still to reach its full potential and will continue to grow as customers become more sophisticated.

For now though, the offset sector exists largely through intermediaries and IF obtains more than 70% of its business via financial advisers.

“Customers are becoming more clued up, but if they genuinely want the best products possible then intermediaries are going to be the most effective way of tracking down the best product for them,” says Robinson.

As well as indicating that a quarter of people could benefit from offset deals, Intelligent Finance recently carried out the one of the most comprehensive offset surveys to date.

The findings suggest that the households that could benefit from switching to an offset mortgage could save up to 370 in the first year, and that more than two million households could be better off. The survey, which used the financial records of more than 4,000 households, reasons that those with higher incomes will be more likely to benefit from offsets, and says 45% of households with a savings balance equal to three times their monthly income would be better off with an offset mortgage.

Another statistic arising from the findings is that 60% of people with a building society savings account could benefit from switching to offset.

But perhaps the biggest myth debunked by the research is the belief that households must have savings worth 30% of their mortgage balance to make offset a viable proposition. IF claims that people with savings worth only 8% of their mortgage balance can take advantage of offsetting.

Intelligent Finance has also highlighted how offsets could help particular groups of borrowers. The survey shows that a couple in their late 30s who are higher-rate taxpayers have a 32% probability of making a saving, possibly up to 568. A third of lower rate taxpayers aged over 50 could benefit too, as could a quarter of young couples looking for their first homes.

Looking ahead, Robinson says his main challenge is to maintain the excitement around the IF brand. “The company is still growing healthily and featuring heavily in best buy tables,” he says. The specialist lender recently launched an offset mortgage fixed at 4.99% for two years and the product has ben popular with intermediaries.

As IF passes its fifth birthday, another element of its reputation it is proud of is its staff retention levels. Robinson says around a third of the company’s present staff worked at IF when it was inaugurated in 2000. He reckons this figure is remarkable compared with competitors and makes the five-year landmark celebrations all the more special.

“It’s easy for a company to be exciting in its formative period,” he suggests, “but the fact we have retained so many staff shows Intelligent Finance continues to be a dynamic and interesting place to work.”

Outlining the plans for Intelligent Finance, Robinson says simply that he hopes the next five years can be as profitable for the lender as the past five.

Considering that it took IF only four years to become the 12th largest lender in the country, it would seem that there is potential for expansion. This, coupled with the fact that understanding of offset seems to be rising, indicates a bright future for Intelligent Finance. In a recent ICM poll, 60% of the country’s home owners claimed to be aware of offset mortgages and 44% of adults who say they are planning to take out a new mortgage or remortgage in the next year or two are planning to take up – or at least considering taking up – an offset mortgage.

Away from the mortgage industry, Robinson is a keen runner as well as enjoying biking and mountaineering. He finished the New York Marathon in 2000 and has completed mountain and fell races. His athletics career is on hold due to a nagging hip injury but his marathon personal best of under three hours would put many of his mortgage contemporaries to shame. Always seeking a challenge, Robinson has also turned his attention to triathlons.

Although the offset market will inevitably become more competitive as customer awareness of the sector increases, Intelligent Finance can rest assured that its margins should not come under too much pressure as it reaps the rewards of being one of the first offsetters to come to the table at the turn of the century, and it can use the experience it has garnered in the past five years to its advantage.

If Robinson can run up mountains in his spare time, overcoming a few obstacles posed by new competitors in the offset market shouldn’t be too much of a problem.