Lies, damned lies and statistics

Disraeli said the above and the old clich石till rings true today when considering the claimed numbers of advisers and firms registered as members of mortgage networks, says Richard Griffiths

On the subject of statistics and mortgage networks, Richard Coulson of Home of Choice has raised a few eyebrows in the industry with his recent claim that HoC has attracted applications from 500 ARs and 600 directly authorised advisers.

Depending on which article you read, by the middle of 2006 HoC will have become either the first or second largest mortgage network in the UK market. Jolly good.

Let us dispense with the DA red herring first. Last time I spoke to Nick Baxter of Mortgage Promotions he had 1,700 DA brokers signed up. The Tenet Group lays claim to 5,000 or so DA brokers signed up as does Sesame, while Bankhall could justifiably claim even higher numbers.

In reality, each DA broker is signed up to more mortgage networks and clubs than the average number of credit/debit/store cards carried around by a member of the fair sex – and that is quite a high number.

The 600 DA figure is totally meaningless. All that a mortgage network or club can expect is a share of the DA’s business. That share will depend on a subtle mix of influencing factors such as historical relationship, the competitiveness of the proc fees on offer, trust, and which business development manager last walked into the DA broker’s office.

There is no loyalty factor involved here, and the mortgage distributor offering the extra 50 proc fee on a Halifax case will get the Halifax mortgages cases this month.

The acid test for a distributor is the overall volumes of business originated by the DA brokers and this is only remotely related to the numbers signed up.

I think it is rather sad to see eminent IFA networks such as Sesame and Tenet resorting to this cheap tactic of including DAs in their quoted membership numbers. Unless I am very much mistaken, this is a ploy to deflect attention away from the dwindling numbers of ARs within their ranks.

Turning our attention to the question of ARs, this is a far more clearly defined picture as the number of ARs does indeed directly relate to volumes of business placed through a network. For HoC, as of September 30 there were 50 AR firms shown on the Financial Services Authority web register. Due to an oversight on my part, HoC was not included in the league table of mortgage networks shown in the October 17 issue of Mortgage Strategy and should have slotted in as the 17th largest network. Apologies, it will be included in future.

Using the rule of thumb of 1.3 advisers per firm, this would mean 65 active AR advisers in HoC which is 13% of the 500 number in the pipeline.

Compare this with Network Data as an example, a firm about which I can speak with some authority. Throughout 2005 the number of AR applications in the pipeline has generally run at around 13% of the number of active ARs within Network Data. A flip position to HoC.

The number of HoC AR firms showing on the FSA web register on November 1 had increased to 61. Looking in detail at their dates of appointment over the months of June, July, August, September and October the number of firms appointed in each month were two,13,19,16 and 11 respectively.

Steady numbers but hardly a ringing endorsement of the number of AR applications claimed to be in the pipeline. Taken at face value the numbers peaked in September and are now in decline.

When any high profile personality jumps from one company to another we all know that personal loyalty can play a powerful role in persuading members to also move across to the new company.

The initial sales are always the easy ones, insofar as any sales are easy.

After that life gets harder, a lot harder, and the apparent decline in AR appointments may already be reflecting this fact. But then Coulson also claims that few of the AR applications to HoC have come from ex-Zurich/Openwork members. He is on record saying that the number of such applications is just 12. I beg to differ.

A closer inspection of the 61 HoC AR firms shows 13 of them were previously listed as ARs of Zurich Advice Network. Examples are Aspect Mortgage Search and Clark Hannah Financial Services. They even retain the same FSA registration numbers that they had under the ZAN; the numbers have transferred across with the firms.

Many of the other 61 firms have people who were advisers under ZAN but now operate under a different firm’s name. John Rice Financial was listed under ZAN, while Bernard John Rice is now under HoC – same address of course.

Clark Hillyer was listed under ZAN, while Aston James is now under HoC – same address and same advisers, Robert George Ellice and Kingsley Derek Wilson.

And this analysis only relates to the 61 AR firms currently showing on the FSA web register. Coulson claims that the 12 firms apply across the board, including the 500 ARs supposedly in the HoC pipeline.

People I have spoken to in the past week are, unsurprisingly, sceptical of the figures being bandied about. What do I think? I would refer you to my headline, the part before the word ‘statistics’.

As for Coulson, I wish him well later this month as the defendant in the court case brought against him by Zurich/Openwork. When he swears on oath to “tell the truth, the whole truth, and nothing but the truth” I hope it doesn’t prove too much of a challenge for him.