As an affiliate, a smaller network can continue to manage a network of brokers, whilst receiving regulatory support from Genesis.
The affiliate network scheme has been designed to appeal to small networks, many of whom offer excellent packaging and mortgage club services but do not have the financial resources or compliance infrastructure to support ARs after M Day. Genesis can provide such networks with compliance, training and administration services, enabling them to continue focussing on generating revenue.
When many networks developed their business plans this time last year, they assumed larger numbers of brokers would sign-up as ARs. The delay in some brokers applying for network membership, means that some networks will struggle to finance the development of a compliance infrastructure required under FSA regulation.
John Lee, head of sales and marketing at Genesis, says: “The landscape for mortgage networks will change dramatically over the next 12-18 months. Whilst over fifty companies have applied for principal status it is expected that, with market consolidation, the number of networks will rapidly shrink to less than 20, with a further reduction over the next year or so.
“The difficulties facing both mortgage and IFA networks has being highlighted in recent weeks with the demise of Lifeboat, and others are likely to follow. Networks may have a strong proposition and the loyal support of introducers, but without strong financial backing they are likely to struggle to meet the demands of regulation. The Genesis affiliated network proposition has been specifically designed to enable these networks to build on their strengths, whilst working with Genesis which can provide the compliance infrastructure needed to operate in a regulated market.”
The affiliate network proposition is also expected to be of interest to organisations which have not yet received an MTA letter and, as a result, are reluctant to make the financial commitment required to develop their infrastructure. To compound the problem, some brokers are holding-off submitting AR applications until they receive confirmation that the FSA has issued the network with an MTA letter, which causes a further shortfall in income.