"Given the slowdown in residential mortgage activity last year, intermediaries are increasingly realising that it’s no longer feasible to focus solely on the residential market."
FR: Beneficial’s AR numbers grew by over 30% last year, why do you think this was?
Our own rise in appointed representative (AR) figures mirrors the trend in the broader network market, which also experienced an increase in ARs last year.
If we look back at 2023, it was a year marked by a decline in gross lending, potentially prompting brokers to join a network for a sense of security and additional support.
It was also a time when many brokers were considering how to boost their income, whether through diversifying into new areas such as bridging and commercial mortgages or by expanding the protection and general insurance side of their business. As former mortgage brokers ourselves, we understand firsthand how crucial the backing and support of a network can be in achieving these goals.
Sometimes I think directly authorised (DA) brokers hesitate to make the switch due to potential confusion over network costs and we also attribute a significant portion of our growth last year to our flat fee structure.
We understand that one of the most significant factors for any broker firm when choosing a network is the cost.
Often, these financial arrangements can be quite complicated. The network may charge a fee based on a percentage of the broker’s income for example, along with additional fees for other services like support or tech systems.
This can sometimes make it challenging for brokers to accurately determine the total costs involved, serving as a barrier to growth as fees can escalate substantially as the broker expands.
When brokers experience a drop in income, as many did in 2023, earned commissions becomes even more important. By implementing a clear-cut fee structure with a single fee, we believe this transparent approach fosters an environment conducive to growth.
FR: Where do you see growth areas for brokers, are there still some segments of the market that are untapped?
Not necessarily untapped, but there are plenty of potential growth areas still out there for brokers.
The sale of mortgages and protection and general insurance (GI) products go hand in hand. However, I believe brokers could do more to boost their sales in these areas.
Selling insurance isn’t always easy or comfortable for brokers, especially when borrowers’ incomes are stretched and many are having to budget just in order to pay their mortgage. It requires a special approach to sell insurance, and this is another area where networks can help by giving brokers the confidence they need.
We organise regular events and workshops for our members, offering both group and one-on-one training sessions to equip brokers with the necessary tools. We’ve also established a comprehensive panel of providers, ensuring our members always have suitable protection options for their clients, regardless of their circumstances.
FR: Aside from protection, which areas are you currently seeing your members diversifying into?
Given the slowdown in residential mortgage activity last year, intermediaries are increasingly realising that it’s no longer feasible to focus solely on the residential market. As such, we have helped our members diversify into other business areas, such as bridging and commercial mortgages.
Bridging and commercial mortgages were areas of particular growth last year. They say there are opportunities in every difficult market and we saw this with property investors last year, as they seized the slower market to acquire property bargains or expand their portfolios.
We anticipate this trend to continue, which is why we have been working to establish a wide-ranging bridging and commercial panel for our members, as well as regular training sessions to ensure brokers who are new to these areas feel confident in supporting such clients.
FR: How can brokers be better supported?
I think there’s still a lot more to explore when it comes to technology. In many ways, the industry is still in the early stages in terms of what can be achieved through technology, both for brokers and lenders.
Technology can significantly help brokers with the day-to-day running of their business through the automation of various tasks. I believe there is definitely more to come, especially through the use of Open Banking and other Fintech.
However, while these advancements have been great, what we can sometimes see is that the more choice there is, the more overwhelming it can be for brokers when choosing which system they use.
The technology on offer can also vary from one network to the next and it’s important for brokers to understand the technology proposition when choosing a new network. Brokers must have confidence that the systems provided by their network will actively support them in serving their clients and that the broker understands the costs involved.
FR: Do you think the market will see a further increase in AR numbers in 2024?
Across the industry, I believe we will continue to see growth in AR numbers. This, I think, will be due to several factors. First, I think it will come from the ongoing need for brokers to stay on top of their compliance and the help networks can provide in this regard. I also anticipate that brokers will continue to explore new market areas, not just bridging and commercial, but also the specialist market. This year, we expect to see growing demand for specialist products as borrowers’ finances continue to be squeezed, potentially leading to missed credit repayments.
While I do anticipate an increase in AR numbers, I also recognise that the network model may not suit everyone. Similarly, each network is different, and a one-size-fits-all approach does not apply. While larger networks may be suitable for some, smaller ones like ours may be better for others.
For brokers, understanding the type of support they need from a network before choosing the right one is vital. Choosing the right network is a significant decision for any broker’s business, so brokers need to take their time and ensure they’re comfortable with everything the network has to offer.
