Many people will be having their two-penneth worth on the topic of HSBC finally choosing to use the intermediary distribution channel, and as a network and distributor myself, I don’t see any reason why I shouldn’t also ‘say our piece’.
Firstly, like almost everyone I’ve spoken to or seen quoted in the press, I welcome the news that the major direct-only lender is to offer its products through intermediaries. Some might say it’s been a long time coming, and they’d probably be right, but (to our mind) the right decision has been made and we will look forward to a time when our AR firms and advisers will be able to deal with HSBC and offer our clients access to its product range.
The slight disappointment that I do have is that HSBC has initially chosen only a single broker, Countrywide, to work with rather than open up its offering to a broader range of quality distributors. I fully expect that systems need to be trialled and there will be steep learning curve for HSBC to handle, in terms of its dealings with intermediaries, however part of me can’t help but feeling there was an opportunity to go wider, sooner. That said, all the positive noises coming out of HSBC suggest it intends to bring more intermediaries/distributors on board quickly and we look forward to this next step.
For those of us who have been working in the mortgage market for some time, this decision – or u-turn as some have coined it – might appear to have come a little late in the day. Indeed, given the perception HSBC has given over the years – i.e. there was little chance of it changing its distribution strategy to favour brokers – one has to ask the question, why now?
I suspect there will be a number of PR-friendly reasons given out but to my mind it seems obvious that the regulatory changes brought about by the MMR have, to a very large extent, forced HSBC’s arm. As someone wrote on Twitter on the day of the announcement, in the ‘fight’ between the FCA’s MMR and HSBC, the regulator and new rules can be deemed to have inflicted a very quick knock-out. Indeed, HSBC has acknowledged itself that the changing mortgage market environment and, one suspects, the far greater responsibilities placed upon it by the new rules have pushed it into the arms of intermediaries.
We’re all aware that the workload involved in individual cases has gone up considerably, and the time that, for example, in-house advisers have to spend with individual clients has also increased. This means HSBC will probably have been struggling to hit its lending targets with a pure direct-only approach to lending. Perhaps the writing was on the wall as soon as last year’s lending figures were released – down 11.5% year-on-year with its market share falling from 11.3% to 8.2%. One suspects this slide could not be allowed to continue and thus a reappraisal of strategy was always likely to happen.
So, what will it mean for the intermediary community? Well, it is clearly a positive, especially as the lender has promised not to dual price, but I’m not certain it’s the market-changing news Countrywide believe it to be. After all the mortgage intermediary community (and their clients) have managed quite well without having access to HSBC’s product range – however I will freely admit it provides real impetus for adviser distribution.
Having lenders who will not deal with you is never a positive for our market but especially so when it is one of the top five. But the positives here are all for intermediaries – the strength of our community, the predominant position we found ourselves, the growth in the number of customers choosing to opt for independent advice, has effectively done for HSBC’s previous strategy. HSBC has not been able to ignore the way the market has moved and this bodes extremely well for the future of intermediated business across the whole piece.
The news should be greeted warmly and I suspect many advisers will have allowed themselves a wry smile across their faces when the announcement was made. Now all the focus is on HSBC – it has to prove itself to brokers in what is a highly competitive marketplace. There are major questions to be answered in terms of service levels, accessibility, engagement, product development, etc, and the onus will be on the lender to get them right and right quickly.
These are certainly interesting times not least because we also await the reaction from other lenders in the marketplace. How will they respond? No doubt we shall find out quickly. The market just got even more interesting.
Richard Adams is managing director of Stonebridge Group