Will 'consolidation' be the buzzword of 2018?

There will of course be many reasons for this, not least the fact that the mortgage intermediary market is changing. If we were looking for the industry’s buzzword(s) for 2017 then it’s likely to be ‘robo advice’ and, regardless of the levels of business being written via such models, there’s no doubting such propositions are firmly on the radar, fuelled no doubt by some good old-fashioned self-publicity, and a belief that all things ‘tech’ are where the future is at.

Now, there may be some degree of truth in that, and we firmly believe that a ‘robo advice’ string to the bow can do you no harm at all, but the question does remain: how many consumers are securing their advice through this channel, and how many will do so in the future? Indeed, recent industry announcements appear to show that a ‘pure robo advice’ model – and nothing else – is not going to secure your future as much as, what we might call, a ‘hybrid model’ that covers all bases, be it face-to-face, telephone, online/robo, etc.

In that sense, it was interesting to read about the deal Experian has done to purchase a quarter of London & Country – a strong brand name of course in the mortgage market, and one that has traditionally at least tended to focus on telephone-based advice. Now, with the data-gathering might of Experian behind it, will it look to deliver much more of a ‘hybrid model’ and could it be the first of, what we might describe as, a ‘mega broker’ with Experian able to introduce a much more end-to-end-focused approach that covers all potential channels that consumers want to secure their mortgage advice via?

It is an interesting development in the context of the ‘robo advice’ debate and might actually set the industry on a rather different train. After all, I think most stakeholders anticipated the big moves in the mortgage advice space to be made by those firms who are currently not active in it – for example, a Google or an Amazon. But, with this stake-taking from Experian, perhaps that move will come from industry ‘insiders’ utilising experience from different, but related, sectors? In this case a brokerage working together with a credit reference agency.

It is perhaps also a signal of a further change within the mortgage market, and one that might become a greater theme as 2018 progresses – namely, consolidation. In the IFA space we’ve seen a lot of this in recent years, indeed there have been vehicles set up purely with the aim of purchasing advisory practices; might we see a similar movement in the mortgage advice space? I’m aware of a major network just about to sign a deal to purchase three DA mortgage firms bringing them under their umbrella, and this sort of trend could continue meaning far fewer mortgage advice players as the months and years pass.

This type of ‘progress’ away from a cottage industry where we have many thousands of firms to smaller numbers of medium-larger firms has not yet begun with any significant pace, but the shape of our market is changing. If you’re a one/two-person DA band then you might already be worried about your access to a ‘whole of market’ lender choice, given that some already have limited distribution and are only wanting to work with ‘bigger players’.

But, what are your choices here? You probably don’t wish to move to a network to get this access because of the control you might feel you are ceding. However, it’s only going to be through a ‘banding together’ approach that such access might be granted. In that case, might we see mortgage broking co-operatives forming between smaller firms in order to be able to offer those product options to clients? Lenders might well be open to this if the co-operative can supply the right quality-focused metrics and performance to make it worth their while.

However firms approach the next 12 months and beyond, it seems certain that a more inclusive and collaborative approach will be needed. Splendid isolation might have worked well for you but being part of a larger group could well be the answer, especially if the trend for fewer firms does move on apace.