Much of the focus of the post-EU referendum fallout has focused on consumer confidence, or indeed a fall in consumer confidence, given the future for the UK seems quite uncertain at present. However behind all of this and perhaps setting the agenda for consumer confidence are the hundreds of thousands of businesses who will ultimately determine how the UK economy works through this period – and let’s not forget that we are probably talking about decades of change rather than a simple handover within a two-year period. I think we all anticipate that many years from now the UK’s extrication from the EU will still be dominating the news and economic agenda.
What makes this current situation even worse of course is that there is little knowledge or understanding about when Brexit will actually mean Brexit; when will Article 50 be invoked, what kind of relationship will the UK have with the EU, what will the trading arrangements be, what impact will this have on immigration, how might our economy adapt and/or change in light of all this? There are so many questions that if you stopped to think too hard about the situation you might tie yourself up in knots.
Certainly from a mortgage advisory perspective I have talked to many of our appointed representative (AR) firms since the referendum and there has been a common theme of understanding the uncertainty, trying to work through it and (at the same time) being incredibly supportive of the network and their place within it. It’s been said to me a number of times that having the security of the network in place, behind the scenes so to speak, provides considerable comfort and has given them a level of confidence in their ability to weather any potential storm that might be coming.
These comments are certainly welcome however it did get me thinking about the nature of the mortgage advisory profession at such a time. Of course, over the past year or so (perhaps even longer) the intermediary community has held a pivotal, market-dominating position in terms of mortgage distribution. The MMR firmly placed the ball in the intermediary’s court and, as lenders have retreated from dealing direct with consumers, advisers have grown market share.
However, whilst recognising that this position might not last forever anyway, we have to look at the make-up of most firms with the advice sector. While there are a number of formidable larger players that operate, the vast majority of firms are one/two-man bands, which is no bad thing in itself, but it does mean that if there is a sizeable downturn – and I for one do not believe there will be – then how do they cope with it?
Now, we should also be aware that we’ve been here before and many firms who have survived and thrived post-2008/09 will have the business ‘muscle memory’ and the skills to work through this again. Firms and advisers who came through such a period will have all the nous and knowledge to do so again – and let’s reiterate that this is a far different scenario to back then when the credit markets dried up. So, in that sense, I have the confidence in the mortgage advisory community to be able to cut its cloth accordingly (if need be), and to sense the opportunities that also exist in such a period – I’m thinking particularly of the potential that exists in the remortgage and protection sectors.
However, with the greatest will in the world, being a ‘lone crusader’ can be difficult and perhaps this is why our AR firms have been quick to recognise the benefits of the support that comes from being part of something bigger than themselves. That said, many DA firms will have no intention of walking down the AR route, and I completely respect that. But this doesn’t mean that DAs shouldn’t review their current situation and their existing relationships – being part of a specific mortgage club might be helpful in some areas but is it really providing an umbrella should the rain fall harder? Is it truly a partner that is going to spend time and energy supporting you should market conditions begin to worsen? I would suggest not.
The DA sector might seem well supported in terms of service support, particularly in the compliance area, but are there distribution businesses out there offering more of a network-esque commitment to them. At the moment, I’m not so sure, and given this I can fully understand why smaller firms might feel more vulnerable at present than their larger brethren or even their AR cousins. There are uncertain times and, given we may be entering something of a traditional summer lull, firms should perhaps take the time to look at what they have in place to move through this period and perhaps seek out a bigger entity that can provide the support, resource and opportunities they wouldn’t necessarily get on their own.
Richard Adams is managing director of Stonebridge Group