FR: You recently joined Vertex with a varied history in the industry – what do you hope to bring to the company?
Vertex is in the business of providing systems and business process outsourcing to lenders. I’ve been in the market at a senior level since 1986 and involved with different businesses operating in this sector in every way. I’ve managed mortgage and unsecured lenders, intermediary distributors as well as providers of systems, audit and compliance and administration services. I’m also a recognised market expert on outsourcing, having managed three BPO companies and sat as an Independent Non-Executive Director on another. At one of my most recent appointments, I saw the market from a different perspective as the company was a major customer of outsourcing providers which included Vertex. So I am to bring experience, knowledge, contacts and commerciality.
FR: What plans does Vertex have for the coming months?
In the next six months our focus is on two very important and exciting things. Firstly, allowing for Christmas, it is less than 120 working days until 26 April next year and the go-live date for the MMR. Our absolute focus is on ensuring that we will be ready to deliver a great service to our existing clients and their customers, as well as to deliver this expertise and solution to new clients whose own MMR “project” is perhaps not so advanced as ours. Our programme is ‘green’; we’ve finished our system build and are into the testing and training phase. Secondly, a number of our customers have committed to join the Help to Buy scheme and we are working with them to help them do so on time.
Post-MMR we expect a lot more activity in the broker space and again we are planning what this means with our clients – so that’s the next 12 months.
We are seeing existing lenders, particularly in the building societies space, wanting to expand their distribution. We are also now seeing activity with potential new lenders – so over 18 months I’d expect us to be helping existing lenders to evolve or to change their operating model, as well as bringing new lenders to market.
FR: What challenges do you feel are most affecting brokers in the current market?
The main challenges centre on consumer confidence, sustainability of mortgage supply and the advent of the MMR next year. However, things are beginning to look far more positive. Product volume and lender appetite are both increasing and as the new expanded Help to Buy scheme starts to become established, we’re now starting to see confidence return in relation to future house values, accessibility of mortgage finance and affordability.
In addition, the MMR requirement that all customers must receive “advice” clearly plays more directly into the intermediary sector. As lender competition increases, both in terms of the volume ambitions of existing players and the new lenders emerging, the challenges that will always be there are now tempered by a more optimistic outlook.
One of the key issues affecting brokers as a result of the changes falling out of the introduction of MMR in the next few years will be the whole debate around procuration fees. We are already seeing fee structures being increasingly linked to quality of business and this is now being increasingly aligned to the emerging trend for differential fees between appointed representatives and directly authorised brokers. Lenders will be under pressure to ensure and prove that the appropriate advice has been given, that they are satisfied with TCF as well as the quality of the broker operation, their qualifications and the overall compliance oversight. Just how are lenders going to effectively do that on an ongoing and continuously updated basis?
With appointed representatives the answer is easy, i.e. the controlling principal does that job for them and they can share with the lender their overall systems of compliance and control across their whole network. With Directly Authorised firms, lenders will need to do that job themselves or in some way sub-contract the oversight, although one could argue that the FCA should be giving the market that reassurance. So the economics of supply will change between both sets of distributors. The control dynamic will change and so will the confidence in the relationship between the broker and lender. As a result, I believe we will see an increase in differential fees based on quality, compliance, service and measures such as competence. I am not saying that this is a good thing as I am a big supporter of both ARs and Das. However, in my view that is the way the wind is blowing and I fear this differentiation will only increase over time.
FR: What do you predict for the market over the next year with the introduction of the MMR?
There will hopefully be a far better balance between rate and product offering for the consumer, with the obvious advantage that all products will be sold linked to the advice given, whether by direct or intermediary sales. I think the MMR might create a short term hiccup for lenders as they get to grips with new system and administrative requirements, which may manifest itself in lower volume ambitions. However, overall I cannot see any long term consumer disadvantage to the MMR. Indeed its purpose is the exact opposite.
As lenders, service providers and brokers we’ve dealt over the years with many major upheavals. For example, the changes and eventual abolition of MIRAS, the emergence and crash of the sub-prime sector, centralised lenders, consolidation, rampant house price inflation and then contraction. However customers still want to buy their own home, want choice of mortgage products, want advice and above all want a fair and efficient service. This industry at all levels always has and still delivers against all those needs.
FR: If you weren’t in financial services, what would you be doing?
Playing electric guitar in a rock and blues band, touring the world in a private jet and enjoying some of the side benefits of that lifestyle. Whatever they may be!
