We can now consider ourselves well and truly stopped in our tracks. The harsh realities of the future mean there will be (indeed already are) fewer lenders with less money for borrowers, a declining number of distributors and a sharp reduction in desirable customers. We will be waving goodbye to the packager phenomenon.
It is an interesting to reflect that while the financial services industry of 20 years ago is usually remembered as something akin to the Wild West, manufacturers and distributors were happy to pay a bonus for the volume of quality business written by the intermediary. And back then, a good client was someone who paid their premiums and payments every month.
When and why did this focus on quality of business become surplus to requirements? What did we know in the 1980s that we do not know today?
As our industry giants cautiously begin to re-establish their market position, it falls on mortgage intermediaries – responsible for 70 per cent of sales – to rebuild confidence in our market. But the rest of us specialists and suppliers have to support their efforts with a concerted focus on quality instead of quantity.
Regulators, lenders, distributors and customers will all be in pursuit of this common denominator, although the question remains: have too many firms cut corners for too long to rebuild their processes and business strategy on the right foundations?
While the regulator and quangos that supervise our industry had been giving out warnings for some time about inappropriate behaviour, as seen by the number of individual and corporate fines doled out in the name of TCF, it strikes me that the crunch may be doing a better job than the regulator ever could to clean up the industry.
Sadly, there will be some collateral damage – good people who get caught up in the aftershocks. Today’s challenge is for those committed mortgage professionals to rebuild our mortgage supply chain without the inherent flaws that have been evident in our economic system.
Forget the retail distribution review. It is already increasingly apparent that lenders will focus their limited resources on those distributors with strong systems and controls in place, and will be monitoring quality of business using attrition and NPW rates to cherrypick the networks and intermediaries they want to work with. If your network or club is not already employing highly visible robust systems and controls around the sales process, you may want to start to look around for a business partner that will still be around in six months time.
The distribution model of the future will be the phoenix that rises from the ashes of this current carnage, offering tighter systems and controls, distribution with clear plans and responsibilities, introduction of quotas and kitemarking, an acceptance of liability for advice is the customer’s right prior to accepting any transaction, accepting liability for advice from the adviser and fewer but longer-term relationships with customers being in evidence.
Working together, we can restore consumer confidence by placing high quality advice at the forefront of everything we do, thereby providing better quality of business for lenders while maintaining our optimism and enthusiasm for addressing clients’ needs.
Gerry O’Brien is chief executive of Home of Choice