Many aspects of the mortgage market have changed over the years and a key area is the mortgage club.
In my first dealings with mortgage clubs in the mid-1990s, most were little more than “sticker clubs”, where advisers could attract enhanced proc fees for doing nothing more than sticking a club’s logo on the mortgage application. Understandably, nowadays, advisers, lenders and the “clubs” want much more out of their relationships.
The focus is shifting from quantity to quality – lenders are not simply focused on securing volume through the clubs for the sake of volume, they want that introduced business to be of the highest quality. Lenders want the clubs they work with to fully understand their membership, the business they write, the standards they operate to and the scope for growing the relationship.
The modern iteration of a club is not an “open house” for anyone and everyone, which is why many club-like operations avoid reference to being clubs and prefer to be known as a distributor or aggregator.
Bob Hunt, chief executive of Paradigm, a business that has been at the forefront of morphing clubs into distributors, believes the change was inevitable post-credit crunch. He says: “In the pre-2007 years, where we had a market running at £300bn-plus lending volumes, it was easy to see why use of mortgage clubs was a volume game. However, we recognised pretty early on that this would change, from both a regulatory and business perspective.
“Lenders need to know the brokers they use and therefore they need the distributors they use to know their firms. This is why we focused on bringing on board quality advisers, writing quality business so that we could prove our value and that of our members to the lenders. With lending levels dropping significantly, lenders did not need to chase volume, instead they wanted quality (value too) and this is the area we positioned ourselves in.”
I could not agree more.
It has also become clear in the past few years that advisers want more out of their clubs to boot; they expect them to be true distributors, not just offering enhanced commission terms but new product and sector opportunities, compliance support, assistance with lead generation and all manner of support features.
One club’s incentive was to make sure that in addition to matching the commission rates and commercial terms of others, the more business placed with that club, the bigger stake the member had in the business. Another makes annual bonus payments to its members based on their business levels, which has helped generate loyalty from member firms.
The evolution of the mortgage club into more of a professional and value-adding distribution mechanism continues apace.
Rob Clifford is group director at Shepherd Direct