The NACFB’s annual survey results aren’t in yet but there is one prediction I feel I can safely make.
The total business written is set to exceed £19 billion, putting our Association more or less back where it was in 2006. The difference is, of course, that those loans have been spread around the books of twice as many lenders. (Another difference is that we’re listening to slightly less Lily Allen).
The spreading of the same business volume among twice as many lenders explains why the newest alternative funders haven’t exploded in size. They are competing for a resource which is a) finite and b) growing more slowly than the lenders are growing, at least in numbers. It’s harder to pin down the value of money available through our lenders, than for us to simply count the lenders (144 now, since you asked). But what we can see clearly, before we even turn up at our meetings with these newer lenders, is that the average alternative funder has less money to lend, and so we need more of them.
Easier said than done; it’s a much more tightly regulated environment now, and interest rates are unrecognisable. Back in 2006 the Bank of England was paying between 4% and 5% and a two year fixed 75% loan was only a little above the BoE rate. One rate fell fast, but the other didn’t.
If the volume of business being written by our members has bounced back to pre-crash levels, that doesn’t mean that each broker is doing equivalently well – after all, we’ve got quite a few more brokers now than then. Anecdotally, though, both values and numbers of deals are going up. That ought to be revealed in the results.
Patrons have also told us they are hearing brokers revealing that they have gone elsewhere for a product not because it is a more suitable product for the client, but because the commission paid to the broker is more generous (not our members, as far as we’re aware…). You can imagine explaining that thought process to the FCA. There has to be a better focus on the outcome for the consumer. And that’s not some kind of sea change post-2014; it was good long-termist business sense long before then, and it’s what the FCA continues to look for.
Remind brokers that they need to focused on the outcome for the borrower, and they will sometimes argue that it’s not clear how much detail of how many conversations they should be writing down or recording in some way. Advising clients in directions that research shows us they don’t feel to be in their own interests, even when it actually might be, can be difficult.
In extreme cases it can even put a client/broker relationship at risk. The client may wish to take a repayment option that’s good in the short term but worse in the long term (for example, smaller monthly payments, but more of them).
But if the broker is following a documented process, at least, then the exact nature of the conversations and the disagreements) needn’t be recorded. Just check that the processes put the consumer’s needs foremost.
*Adam Tyler is CEO of the NACFB