Five of the UK’s broking giants have formed a consortium called Concordia to use their combined volume to negotiate better deals with lenders.
The high-net-worth venture has attracted considerable attention, with most commentators giving it a positive welcome, but a few notes of caution have been sounded.
There are concerns that smaller lenders may be ostracised by the group and some have pointed out that independent leadership is vital. However, Concordia insists that customers will get an improved deal if better-value exclusives can be negotiated.
The five brokers forming Concordia are Alexander Hall, Chase de Vere Mortgage Management, Cobalt Capital, Hamptons International Mortgages and Savills Private Finance. As well as better mortgage deals, they hope to negotiate higher proc fees and better service from lenders including better use of systems and technology.
Concordia, which is chaired by Alexander Hall chief operating officer Andy Pratt, plans to introduce branded lending in the first quarter of 2007 but it stresses that it first wants to gauge as many opinions as possible from lenders. It says this will help it formulate its model as many facets of its structure have yet to be determined and it is open to changes further down the line.
It has planned a series of meetings over the next few weeks with its main lending partners to enlist support.
HBOS was the first provider to be approached by Concordia and intermediary mortgages managing director Nigel Stockton says: “There are parts of the proposition that simplify things, such as only having to deal with one account.”
Alliance & Leicester head of intermediary mortgages Mehrdad Yousefi has given his backing to Concordia and says: “The idea is a good one and it makes sense for prominent intermediaries to pool resources to negotiate better terms for remuneration.
“Just because there is a union does not mean they will get a better deal on products and remuneration but if we sit down with them and we can see they add value to a lender then we might have to look at our terms of business with them.”
Kent Reliance deputy chief executive Rob Proctor is concerned about the future of smaller lenders. He says: “I am keen to ensure that all five firms will continue to recommend products from the whole of the market and that they do not and will not limit introductions to a restricted panel of lenders.”
Concordia could have had six rather than five members but London & Country declined an opportunity to join. Head of communications David Hollingworth says: “Bundling together volume should in theory give them better terms. The theory is sound but you have got to build relationships with lenders as well.”
L&C has not ruled out applying to be part of Concordia in future, with the collaborative saying it will review whether to admit new members in six to 12 months.
One firm unlikely to join is John Charcol, which has given the initiative a frosty welcome. Head of communications Drew Wotherspoon says: “It seems that some brokers are unhappy with proc fees, exclusives and service they are currently obtaining. As none of these has ever been a problem for Charcol, it was not surprising we were not approached. We have always believed that personal relationship building with lenders is the key to success and we will continue to do this.”
If new members are admitted, Personal Touch Financial Services director of mortgage distribution Dev Malle thinks it could pose a problem for lenders.
He says: “Ultimately, these are directly authorised brokers and there may be confusion among lenders as to how to position Concordia as a club or a network and lenders may have to break their models. If more members are admitted, then lenders will have to be careful what fees they pay as it will complicate things.”
Concordia says its volume will make it one of the UK’s top five distributors of mortgages although it will still not be on the scale of the bigger clubs, such as Premier Mortgage Service or networks such as Personal Touch.
It stresses that it is not a club or network but rather a collaborative and points to packager groups such the Professional Mortgage Packagers’ Alliance as a better comparison, where packagers have used their volume as a group to negotiate better deals.
PMPA operations director Jon O’Brien says: “The power of distribution is paramount but it is important to be run independently rather than by the heads of one of the firms, in case there are squabbles.”
Concordia insists its members are committed to sharing ideas rather than fighting against each other, partly because the five are only competing on 5 per cent of their respective books.
O’Brien says: “The PMPA has been successful and other groups have sprung up as a result so I wonder if more Concordia-type groups will appear.”
Concordia says it is keeping its eye on four or five other brokers with a view to signing them up in future but admits there is no reason why they could not form their own group.
What is clear is that lender support is crucial and there is still work to do on that front as many only heard of the venture for the first time last week. It is not a bad start to have already enlisted HBOS, which represents over a fifth of the market, but only time will tell whether Concordia manages to fly high.