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Widows banks on IFAs

Scottish Widows Bank, which is celebrating its seventh anniversary, prides itself on steadily building up a profitable mortgage business without the deeply discounted up-front rates and expensive consumer ads used by rivals.

Distancing itself from young technology banks such as Intelligent Finance and Egg, Widows Bank is keen to emphasise its relatively low set-up cost of £1.2m in May 1995 when it was launched as the “first of the new breed of assurabank”.

Deputy managing director Graeme Hartop says: “When the idea for the bank was discussed, we recognised a gap in Scot-tish Widows&#39 product range outside longer-term life and pensions. It was set up as a low-cost operation with four functions in mind.”

The first function was to offer a service to key IFA customers providing a safe haven for clients&#39 funds.

The second function was to fill a product gap to provide a short-term deposit-taking facility. The third was to operate a treasury operation for the group and fourth to administer lending portfolios. The bank, which is based in the Edinburgh office of its life office parent, offers deposit accounts, a range of specialist mortgages, secured loans and credit cards.

It has always gone for sustainable growth rather than offering loss-leading products to pull in business.

Hartop says: “Crucial factors in our growth are getting service right and consistency of pricing. IFAs who deal with us say they are pleased with our products in the long term rather than just giving large discounts up front.”

The bank had 18 employees when it started and there are now 200. Operating profits are around £13.5m to date.

Last year, the bank&#39s total mortgage business was £1.6bn compared with £935m in 2000 and total assets were £1.9bn from £1.7bn in 2000.

Without a branch network, 75 per cent of its business is generated through IFAs and the rest by phone and internet.

The bank tends to shy away from very high-profile ad campaigns and focuses on building personal relationships.

It started with two business development managers and now has 10 on the road meeting intermediaries. This is backed up with trade and limited consumer press ads.

But perhaps it is time for the bank to try to make a bigger splash with its brand as many do not seem to know what it does.

Broker club Mortgage Intelligence managing dir-ector Sally Laker says: “I do not know much about them. I know when we originally put them on our panel we did not do a lot of business but that may not be indicative of their market. I think their products may appeal to large IFAs involved in full financial advice.”

SW Bank has been ext-ending its niche mortgage range since it first moved into the market in 1997, with its flexible and selfemployed mortgage.

In 1998, it launched 110 per cent mortgages for professionals such as accountants, dentists, doctors and solicitors, which it claims was a first in the mortgage market. Hartop says: “These professionals have a natural fit with the Scottish Widows brand.”

Last year, the bank added its 50/50 mortgage, which lets people borrow 50 per cent of their loan and the other 50 per cent on a base rate tracker option at 1.19 per cent above base rate, and an equity-release product.

Hartop concedes: “Quite a number of competitors offer similar types of mortgages, such as Standard Life, and there are new players such as Egg and Intelligent Finance in our marketplace.”

But he is adamant that the prudent approach of SW Bank will continue to work, helped by the fact that it has been part of the Lloyds TSB group since 2000 which lets it tap into a big infrastructure.

The bank is aiming to help advisers achieve the minimum qualifications they need to meet the MCCB&#39s standards by the end of the year. As well as running Cemap training workshops for brokers, it is encouraging its own staff to study.

Hartop says: “Qualifications are very important, not just in the IFA sector but also for our staff.

“We encourage our staff to go through training and our mortgage underwriting team has passed Cemap or will be taking the exams.”

Although he recognises that it is a time of change, with increasing competition, regulation and training, Hartop is positive about the future for the bank although he is unwilling to expand on what plans might be in store.

He says: “We continually look at the market and work through concepts and ideas.

“The key thing from our perspective is successful balance sheets and the great support we get from the IFA sector.”


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