It seems that everywhere I look these days people are trying to tell me big is beautiful. And who am I to disagree? But I think an important point to make here is that quality and size are attributes that should not be confused – I’m sure some of you were lucky enough to receive some big presents in small packages at Christmas.
Size is certainly a key attribute for Concordia, the London broker organisation that has come together to show strength in combined distribution and buying power. It has decided to share information, best practice and thinking to achieve a better result for each of its constituent businesses.
Concordia is in a sector of the market where its expertise is key and it operates in the right area – the idea probably wouldn’t work so well in Scunthorpe. It’s all about loan size, LTV and high net worth clients that need the private banking type service. This works well for each of the Concordia companies as it is their niche.
And it seems that this thinking that big is beautiful runs particularly rife on the network side. For my part, I wholeheartedly agree from a distribution channel perspective. Being a large volume producer of about 10bn in mortgages alone gives us an advantage that we can pass on to our brokers through the provision of sharp exclusive products.
But the ‘a network must have high numbers of appointed representatives or it is doomed to fail’ line simply doesn’t wash with me.
Either you are doing 10bn of mortgages or you are not, end of story. It doesn’t make any difference whether you have 600 AR brokers doing that level of business or a mixture of 8,000 directly authorised firms and AR brokers – it’s about the quality of the brokers a network works with and how much business they write.
I have no idea why this subject causes so much heartache for some people, although I’m certainly not the only one who thinks this way. Richard Griffiths of Network Data seems to agree. “There is an important point to be made about profitability,” he recently commented in the press. “Unless a network is run efficiently and makes a profit, increasing its size will only rack up losses faster, with the inevitable result that has befallen some networks this year.”
I guess the lenders’ perspective is similar, because it is no good having a fantastic service proposition with clever products but no buyers.
Ultimately, volume business is key for many lenders, not just for the bottom line but in terms of market share too. So they look to the distribution channels that can deliver volume to order, and those with a proven record in this regard will always win.
So I agree that big can be beautiful and that it is a numbers game to some extent. But not in the same way as some industry commentators who blindly believe that AR numbers are the be all and end all in the network debate. As far as I’m concerned it’s about profitability.
I hope you all had a quality Christmas and that you enjoy a profitable new year.