The demise of Mortgage Times just before Christmas has left appointed representatives in limbo and many mortgage brokers questioning whether their future is best served under a network or by becoming directly authorised.
Last week, it emerged that HM Revenue & Customs had served Mortgage Times Group with a winding-up petition and, on December 21, ARs received an email from Mortgage Times management informing them the firm had ceased trading and had withdrawn its permission to carry out regulated business, leaving brokers unable to trade.
After the earlier collapse of Network Data, Premier Network Group and Prestbury, some believe this latest setback for mortgage networks
might lead to brokers increas-ingly deciding to become directly authorised advisers rather than be part of a network.
Telos Solutions director Richard Farr says: “Certainly over the last couple of months, I have had some direct experience of some current ARs, looking to go directly authorised themselves.”
Farr adds that going solo is a matter of personal preference and possibly not for everyone. He says: “It is a difficult one to balance. It is right for some, and not others. It is very much horses for courses.”
First Action Finance head of communications Jonathan Cornell believes that brokers stung by the demise of Mortgage Times Group will now be nervous about choosing a new network.
He says: “All those individuals who were with Mortgage Times now looking for other networks will be wary of which networks they go to. They will be asking some fairly strict financial questions.
“I think with the bigger networks, their brokers were quite happy and content and, understandably, feel secure but, for the smaller networks, brokers will feel increasingly nervous.”
Mortgage Times Group’s decision to cease trading caused some aggrieved advisers to question whether the FSA is doing enough to make sure that networks are financially stable.
However, Bill Warren Compliance managing director Bill Warren believes the FSA is not to blame. He says: “The FSA do look at everything closely, from past experience. They are pretty thorough. The difficulty for them is they rely so much on six-monthly returns. We all know that the world could have changed dramatically in the last six months in the current environment.”
Warren says the new Financial Services Bill, which will provide the regulator with greater policing powers, will allow the FSA to respond quicker.
He says: “I am sure the FSA, at times, must feel between a rock and a hard place. Everybody expects them to do everything but they are not allowed to, not as quickly as they might like to.”
Which Network? director Gary Watts believes the demise of Mortgage Times did not come as a surprise to some in the industry and trust between networks and although some brokers may be damaged, most brokers in networks are happy.
He says: “I think, across the industry, people were not surprised about Mortgage Times. Overall, I think that most people that are with networks are quite happy. It is never going to be perfect but it is a good system and it does seem to work.”
Watts stresses the need to research a network before joining to avoid suffering a similar fate of those ARs affected by the closure of Mortgage Times.
He says: “It is necessary to check out a lot of networks to find the one that suits your business, because all networks are structured differently.”
Mortgageforce managing director Kevin Duffy believes some networks went too far to attract new people, giving rise to “league table vanity”.
He says: “You would see these league tables, showing who has got the most ARs but there were few that centred on profitability.”
Duffy believes the ending of the stamp duty concession last month will have a big effect on some networks, causing further damage to cashflow.
He says: “As the stamp duty concession ended in December, a lot of transactions would have occurred that month. That will create a slightly inaccurate or misleading spike, which means that the transactions scheduled to complete in January, February and March may be lower than many pundits are forecasting.”
Duffy says anyone considering joining a network should look not so much at the commercial terms that are on offer and pay more attention to the capital adequacy of the network.
He adds: “Right now, it is better to be driving 30mph in a Volvo than 50mph in what has been sold to you as a Lamborghini.”