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Next in line

Mortgage Next managing director Martin Maynard is laying down a challenge to other companies.

He says: “Over the last few months, a number of companies have said they will take principal status under mortgage regulation next year. I am interested to see which of these will actually have the infrastructure in place come M-Day to support an appointed representative network.”

Maynard predicts that in October 2004 there will be no more than half a dozen principals with over 500 members, excluding the life companies.

Mortgage Next intends to take principal status and Maynard accepts that this will be a challenge. He describes Mortgage Next as a distribution company better known as a club and says at the moment it has a database of 5,500 members. It completed over £2bn in mortgages last year. The business plan is to recruit 500 firms, typically two-man bands, which would result in around 1,000 registered individuals.

“Taking on more than 500 firms would be completely unrealistic. We are working hard on our infrastructure and have recently appointed two more people to our board. I am just not convinced that some of those who say they are taking principal status fully comprehend what they are taking on and have the substance to back up their proposition,” says Maynard.

Mortgage Next is developing a three-channel proposition for intermediaries. Those who want to become appointed representatives under regulation will be able to do so and there will also be an option for intermediaries who want to multi-tie. If an IFA wants direct authorisation, Mortgage Next will offer all the same services it does today through its mortgage club along with an additional range of compliance services.

The distributor also hopes to develop and broaden its role with corporate clients such as Axa and Wesleyan.

Maynard says: “We are also talking to two or three others of a similar size to Axa. I really think this development is part and parcel of the way the market is changing. Life and insurance companies are looking to link to companies like Mortgage Next to provide all their mortgage support.”

He says if this aspect of its development is successful, it will bring in significant volumes of business and add weight to Mortgage Next&#39s position in the market.

“If we do develop a bigger relationship with companies like Halifax and Abbey National, there will be a knock-on effect as we will then be able to offer better terms on products and enhanced procuration fees,” he says.

Research undertaken by Mortgage Next shows that intermediaries are looking for three key criteria from a principal. The first – and most obvious – is the cost of joining followed by the product choice provided by the principal.

Maynard says: “Intermediaries will not just want to be provided with mortgage products from their principal. They will also be looking for options such as general insurance products, personal secured and unsecured loans and term insurance. They need to see that a principal can provide a number of choices and so the size of the organisation providing principal status is important in order to get big-name partners on side.”

To this end, Mortgage Next recently teamed up with Heath Lambert Insurance Services and Marketing & Management Services to offer buildings and contents and ASU cover for the first time.

The third aspect that intermediaries will be looking for in a principal is reputation, according to Maynard. “This is a bit of a grey area but intermediaries will definitely be looking for companies which have made a name for themselves in the market. They would be unlikely to tie to someone who has only been around for three months,” he says.

Maynard believes that those half a dozen principals he sees being in place once regulation is finalised will be in a position to compete with life companies for appointed representatives. He says: “There are not many life companies with 45 experienced mortgage specialists like we have, so I think we will really be able to compete with them to attract appointed representatives.”

But he is sure that once the final rules and costs of regulation are known, there will be enough intermediaries looking for appointed representative status to satisfy the needs of those principals still around.

Maynard says Mortgage Next&#39s business structure is not dissimilar to that of Network Data, Mortgage Intelligence and Pink Home Loans. While the companies enjoy friendly competition, he says: “There will be room after regulation for a number of mortgage organisations to offer a good service.”

Maynard is looking forward to regulation and says it will bring benefits to the broker community as well as to consumers by providing greater parity in the market.

He says: “We will all have to adhere to the same rules so there will be a level playing field. With the right support system in place, people have no need to fear regulation.”

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