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Towergate says it saved Charcol being thrown on to the FSCS

Some liabilities have been left behind with the administrator

Darby: ‘Good deal for sector’
Darby: ‘Good deal for sector’

Towergate Financial has hit out at critics of its buyout of John Charcol from administrators, saying the deal has saved the Financial Services Compensation Scheme being landed with liabilities.

Towergate chief executive Ian Darby says: “Towergate has made arrangements so that John Charcol customers are protected by professional indemnity insurance and has made provision to cover policy excesses.

“These arrangements are above the commitment you would usually expect a purchaser to make. Some liabilities are staying in the hands of the administrator but these remain confidential.”

Darby spent 16 years at Charcol before joining Bradford & Bingley in 2000. He returned to Charcol in 2005 after the buyout from B&B in 2004 before joining Towergate in 2008.

He says Charcol is planning to take on 20 advisers over the next three to four months. He says: “Charcol’s original plan was to recruit quite substantially in 2010 because they had the demand, and we will continue to support that.”

Darby has left the door open to another tie-up with HSBC for whole of market advice after a pilot scheme between Charcol and HSBC ended in December 2009. He says: “We need to re-engage with HSBC. It was not to do with Charcol’s trading. I think it was a commercial agreement
between both sides, which may or may not get reviewed.”

Darby says he is aiming for organic growth at Charcol rather than expansion through acquisition.

He says: “This is not a story about cutting multiple layers of cost. There were some cost opportunities and then an organic, internal growth story focused on revenue. We are not looking at a mortgage consolidation play.”

The takeover will allow Towergate to offer IFA advice to John Charcol’s customers and Darby says there is an opportunity to grow the general insurance business of the brokerage.

Darby suggests that Charcol’s single tie deal with Legal & General on protection will not last much longer as it does not fit with Towergate’s model.

He says: “Towergate is whole of market so single-tie does not fit. The Charcol team have found the single-tie really useful. We can now refer Charcol customers to the Towergate Financial private client world if their circumstances need reviewing beyond their immediate mortgage
req uirements.”

Charcol had piloted a fee-free model but reverted to fee-charging and Darby says waiving fees is unsustainable.

He says: “I do not believe that in the world we are moving into that it is sustainable not to be charging fees. To make the economics work for broking, I think you need to change fees. You need to be competitive but you need to charge fees.” Darby does not believe a phone-only advice model would work for Charcol, although it still remains an important channel of business for the firm. He says: “Charcol do a lot of phone-only mortgage advice, so they will continue to do so but it is critical to have a face-to-face element. As the markets become more difficult from a credit and placement of mortgage business perspective, the demand for faceto-face advice has gone up.”

Responding to critics of the pre-packed administration deal, Darby says they lack understanding of the business.

He says: “Most of them have no understanding of what they are talking about.This deal has saved 100-plus jobs and maintained a fantastic consumer business that does a great job for its customers.

“It left no customer detriment at all behind. It is not a phoenix – this transaction did not do that. This was a good deal for customers, staff and for the sector.”


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