Turbulence in global stockmarkets is evoking uncomfortable comparisons with events three years ago. Back then, it was the matter of which banks were too big to fail. Today, it is which countries are.
My own hunch is that the present traumas will not be as destructive as those of 2008. But this does serve as a useful point to revisit some of the forecasts made by alleged industry experts three years ago – specifically those regarding lender distribution and intermediary consolidation amid the three key protagonists, networks, clubs and directly authorised businesses.
Networks’ fortunes have possibly seen the most flawed forecasting. All we heard in 2008 was that there would a) be notable intra-sector cannibalism and b) the authorised representative channel would become a safe haven for vulnerable small DA brokerages that lenders would apparently allow to drown on the rocks of the wreck that was occurring. Neither of these outcomes really occurred.
Yes, businesses such as Home of Choice and Citri morphed into others but these were not always into other networks and, as a proportion of the total broker population today, networks’ increase has not really moved the dial.
Second, the reported likely death of mortgage clubs was also grossly exaggerated by certain doom-mongers of the time (mainly within networks). These sages had decreed that lenders’ increasing diligence on broker supervision and compliance would lead them to prefer the network model over others and the nauseating and popular cliché of the time featured the expression “a flight to quality”.
Finally, when we look at the DA sector we can see that more 2008 forecasts proved accurate here than anywhere else. MBOs and acquisition activity has been prevalent and this has occurred even outside of Countrywide and LSL. Some of the deals executed by these two have raised eyebrows but I have no doubt all these deals will pay for themselves within 12 months. This will be thanks to the commercial uplifts which will apply in areas such as procuration fees and Lautro commission, to say nothing of the value added benefits in cross-sales of conveyancing and panel management.
Some of the smaller deals should not have surprised any of us. Many DA businesses had grown obese cost bases in the upturn and were ripe for re-engineering even before the downturn, especially those where middle and senior management were contributing little fee income to the business. Even those at the very top were fairweather generals who, once the going got tough, retreated into bunkers.
What all this teaches us is that forecasting of any kind is not easy and, much like a company’s business plan three years after its commencement, accomplishing even 50 per cent of the original objectives can be an achievement in itself. In this light, predictions about national and world economies should always be taken at face value and the same applies to the mortgage market, where keeping calm and carrying on is often the most measured response to spectacular short-term events.
Kevin Duffy is managing director of Mortgageforce