But in recent years this has started to change, in part because legitimate firms such as Leadbay have muscled out the crooks. Leadbay is part of technology firm Add Momentum, which was founded by chairman Maarten Westerduin in 2003. As the ‘bay’ part of its name suggests, the firm modelled itself on the internet auction system used by the world’s biggest online car boot sale, eBay.
For brokers that purchased leads from the old-school distributors, the differences between them and Leadbay’s auction-style system couldn’t be more stark. Brokers can stipulate the amount they want to spend and are essentially bidding against each other for leads, so if they pick a time when there are fewer competitors around they pay less.
The leads are sourced through the internet from customers who confirm they are actively seeking mortgages and wish to speak to advisers. Leadbay has also been reviewed by UK compliance firm Threesixty to ensure that it adheres to Financial Services Authority guidelines.
With its ease of use, the system has been a hit and celebrated its millionth lead last month. But brokers are notoriously difficult to please, especially when it comes to an emotive subject like leads.
There are so many variables, not least the fact that the leads are human beings who may decide that mortgages are the last thing they need. But if anyone can tackle the issues it’s Leadbay managing director Grant Stevens.
Stevens joined Add Momentum in January 2007 as general manager. He found out about a job going at the company via a recruiter who saw that he had the perfect background for the role – a combination of management skills and knowledge of the financial services sector. More crucially, he had major experience of using technology and the internet for sales.
Stevens has been a geek from the beginning of his career and it has stood him in good stead. Born in Stroud, Gloucestershire in 1968, his original plan after leaving school was to join the RAF. When that didn’t work out he joined Eagle Star’s accounts department in 1989 but realised that crunching numbers wasn’t for him.
“I hated it,” he says. “I was 21 and considering accountancy exams but I couldn’t see the point of working in a department that cost 20,000 to run and all it did was move cash around. It didn’t achieve anything, it didn’t make any money – I just couldn’t cope with that.”
His salvation came in the form of Sun Life Financial. The firm was expanding and in 1991 Stevens got a job there selling mortgages, pensions and investments. What marked him out was his knowledge of computers, which at that time was still a rarity in the financial services sector.
“Most of the staff in the life industry back then were a lot older than me and the fact that I was computer literate made me even more peculiar,” says Stevens.
As a result, in 1995 he was drafted into Sun Life of Canada’s head office in Basingstoke to help develop its point-of-sale system for brokers. From there he became an area training manager, then sales system training manager.
In 2000 he left to join Zurich’s IFA Relationships division. This was a service designed to help IFAs develop their skills and management techniques and it was here that Stevens first started to use neuro-linguistic programming.
Developed in the 1970s by Richard Bandler and John Grinder, NLP looks at individuals who have an effective way of doing something and mirrors them so that everyone else can meet their standards. These were the core elements that Stevens migrated to help IFAs sell products more effectively.
“We didn’t use the mumbo-jumbo parts of NLP but tried to take out the best bits,” he says. “It helped with management and sales skills and looked at things such as communication styles and how to spot buying signals.
“From a management point of view NLP helps to set goals for staff and motivate them. And individual advisers can use it to do the same for their clients, helping them to set their goals.”
At the same time he was helping an old colleague from his financial planning days who had gone to work for an internet car supermarket called Wonder Cars. The firm was getting lots of enquiries but struggled to turn them into sales.
Using the insights he’d gained from NLP and his computer skills, Stevens helped the firm develop technology for its website and create a system to turn internet enquiries into sales. The results were impressive.
“It’s humans you are talking to, not emails,” he says. “Using the system the firm’s sales conversion rate improved from one sale every 60 enquiries to one in eight.”
The technology was so successful that the firm got backing to turn it into a product in its own right. In 2001 Stevens left Zurich and joined what became E-Sales Consultants to develop it further.
“It was about harnessing the power of the internet,” says Stevens. “Consumers wanted advice so the whole thing was about managing the process, using NLP to show the best way for advisers to sell to clients and making sure others did the same.”
The firm rebranded as Sawfish Software in 2003, a title Stevens says he came up with. It stands for sales automation workflow and internet sales handling. But after four years at the firm Stevens decided he needed a change.
Based in York, Sawfish was a whopping 180-mile drive from where he lived and the weekly commute began to take its toll. At this point he received the recruiter’s call about a general manager position at Add Momentum.
At the end of 2007 he became managing director and took control of the company. And what a time to take the reins. With the market in the grip of the perfect economic storm, you would expect him to be downbeat about Leadbay’s prospects.
But Stevens is bullish about the future, chiefly because consumer demand for mortgage advice remains high. It’s only since the downturn started to hit brokers’ income levels that the firm has begun to feel the strain.
“We’ve started to see brokers struggle to take business because it’s much harder to place,” he says. “So we’ve seen them become more strict in the way they spend their money and much smarter in terms of bidding.”
Difficulties placing business have been reflected in prices and while consumer volumes have gone up, average lead prices have gone down.
But it’s not all bad news. Stevens points out that consumer demand went through the roof when the base rate was cut by 1.5% last month.
“Clients are bemused and confused by the marketplace,” he says. “They are desperate for advice. On the day of the rate change we saw double the number of enquiries compared with the day before, about 3,000 leads – it was phenomenal.”
The problem brokers have is that with product pricing still expensive and fewer deals available, it’s harder to place clients. Stevens says they are diversifying by selling protection products instead.
And following brokers’ lead, Leadbay is also looking to diversify. In recent months it has launched equity release and life insurance leads. The firm has worked with Stuart Wilson’s Equity Advice Group to ensure that the forms they provide for consumers capture the right information.
He adds that demand for equity release is growing among brokers and Leadbay has been working with the Association of Mortgage Intermediaries to help them target clients.
Stevens says a major advantage of equity release is that brokers often get two customers for the price of one – clients and their family members.
He adds that the appetite for equity release and life insurance leads is definitely growing in the intermediary sector, which is good news for the firm.
“We’ve got high levels of supply so new prices are keen,” he says. “We are expecting them to normalise at about 35 per lead but at the moment we have such good volumes that brokers are picking up LI leads at 15 to 20 for term leads and 8 to 12 for whole of life ones.”
The wider spread of lead types that the firm now offers reflects its ambitions. Just as many brokers are branching out, adopting different product types and moving closer to the IFA model, so is Leadbay.
“We are developing off-standard protection deals,” he says. “In the new year we will also look at more IFA products, pensions, life deals, investments and Inheritance Tax planning.”
Some of these products are part of a long-term strategy that Stevens says reflects brokers’ desire to offer more services.
“If you’ve done equity release for someone and have pension permissions, there is no better ‘in’ than saying we’ve done this for your parents, how about we do the same for you?” he adds.