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HoC bolsters Q4 network growth

The number of AR firms in mortgage networks is growing but expansion among smaller networks is slow which might provoke a strategic rethink over time, says Richard Griffiths

The table below shows that there were 2,933 appointed representative firms in the mortgage networks as of December 31 2006. These figures, which are extracted from the Financial Services Authority web register, only include networks regulated for mortgage and insurance activities.

The growth rate in mortgage AR firms in Q4 compared with Q3 (Mortgage Strategy October 9) is 5.2% which is just short of the average long-term quarterly growth rate of 6%. The unceremonious dumping of 99 AR firms by IFA network St James’s Place last year could help explain this growth although it is impossible to say how many firms transferred from St James’s Place to other mortgage networks without analysing the FSA data in greater detail.

But what is clear at a glance is that overall mortgage AR growth is largely down to the increase in AR numbers at Home of Choice. A rise of 75 in the three months to December 31 enabled it to nudge into second place. Conversely, Mortgage Next has seen a decline during the same period.

Meanwhile, Prestbury has dropped out of the top 10 for the first time in two years which is something of a blow for a company which proclaimed plans to grow its number of ARs last year. In a statement released on December 18 the company announced the placing of five million new shares pledging that the 1m raised provided the company with the capital to accelerate the recruitment of ARs.

Prestbury chief executive Lee Birkett is reported to have said that the company aims to have over 200 AR firms by the end of 2007 as it strives to become the biggest.

This is fantasy. Everyone in the industry knows that Home of Choice will become the biggest. Indeed, the indications are HoC already believes this to be the case. Please ignore the numbers in the table – what does the FSA know anyway?

But a fight for the top network positions in this year’s table looks to be in prospect as new players enter the race such as Premier Network Partnership. Trading as PNP Group, the network has seven AR firms including three firms which are ex-Genesis Home Loans/Genesis members – the result of a possible mutiny when they jumped ship and joined PNP on the same day last July.

It is interesting to note that one of the network’s ARs, 1st Call Mortgage Choices, is also shown as an AR of Pink Home Loans. But no doubt those involved will have relished setting up the multi-principal agreement required under the FSA’s rules – you do have one, don’t you?

On a more serious note, in an interview last year PNP compliance manager Paul Fisher insisted he saw no problem in running a small network profitably. This seems to be a view held by many smaller networks – hence no headlong rush into consolidation.

It is interesting to ponder how long this independence may be enjoyed given smaller networks’ potential for growth. Growth over the past two years has been slow and laborious for many which may mean that sooner or later business strategies will have to be reviewed. But with the number of networks remaining strong at 25 last year, this rethink is likely to be a long way from management thinking for some time to come.

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