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Acknowledgments Editor-in-chief Beth Fisher Creative direction Beth Fisher Caron Schreuder Senior reporters Simon Thompson Theo Osborn Editorial assistant Sam Monk Sub editor Geoff St Louis Sales and marketing Caron Schreuder Contributing photographer Alexander Chai Special thanks Sarah Robinson, Rhizome Media Ani O’Neill, Rostrum PR Cordelia Jacob, Lansons Emily Cullen, The Smithfield Group Monique Subasic and Chris Oatway, LDNfinance Gareth Lewis, MT Finance Simon Allen, Searchlight Finance Wayne Reid, Commercial Finance Network Colette Lowe, Chew PR Gary Ellis, Positive Commercial Finance Gary Bailey, Hope Capital Philip Dabbs, Fiduciam Printing The Magazine Printing Company Design and image editing Russ Thirkettle, Carbide Finger Ltd Bridging & Commercial Magazine is published by Medianett Ltd Managing director Caron Schreuder 3rd Floor, 71 Gloucester Place London W1U 8JW 0203 818 0160 Follow us @BandCNews


nowing this industry well, I can imagine that after briefly eyeing the words on our front cover, you flicked straight to this issue’s central story [p34] to find out whether we are hosting a sensational end-of-summer bash. Definitely our style but, unfortunately, not the case. The bar we are referring to currently has no location, no guest list and the party has no set date. But we do need you to RSVP with your preferred minimum entry requirements. “At the moment, any lender can register a charge and start lending,” asserts one professional in this issue’s cover story, which explores the full impact of having a low barrier to entry in the bridging market. We look at a range of ways we can help create and raise this invisible bar in order to uphold the reputation and standards of the industry, which have been carefully built over the past decade, and whether tighter self-governance or full-blown regulation is inevitable. Something else which we, as a sector, need to collaborate on is the supposed default interest fee problem. While there has been industry outrage about purported extortionate fees being charged, our research [p28] uncovered a somewhat different picture. However, an improvement in the standardisation of how these default interest fees are presented, charged and labelled, to brokers and their clients, could help to stamp out the lenders’ practices which are causing the commotion on LinkedIn. Although actually naming them would get this moving a bit quicker… In lighter news, this issue brings together Liz Syms of Connect Mortgages and Chris Whitney of Enness to converse on how to grow the market in a sustainable fashion, where responsibility lies for brokers and at what stage the wider financial services market is with regard to being fully aware of our specialist space. We also spent a day at Project Etopia’s new modular housing construction site in Corby, Northamptonshire, where we climbed scaffolding and trudged through the wind and rain to examine the interesting differences between these developments and traditional housing, all in the pursuit of how this emerging sector can benefit you. As your industry’s voice, we are here to promote the progress of professionalism in the market (in addition to talent diversity [p70] and competitive and long-term funding strategies [p24]) to ensure it continues to be an sector that benefits all, not the few. Something I am hoping our own government will lead with when it comes to 31st October.

Beth Fisher Editor-in-chief

3 Sept/Oct 2019

When the property market suffers a reverse, the money piling in fast will be the same money withdrawing with equal speed p34 4 Bridging & Commercial

6 12 14 24 28 34 46 54 66 74 76

The cut Products Exclusive View Zeitgeist Cover story One day Interview People Limelight Backstory

Commercial is still a high street market

Out of the frying pan

The default position

Grab a drink, we have a lot to discuss

High hopes in a high vis

Liz & Chris

Tips that advance people first, businesses second/You can sit with us

Caroline Ong

6 Bridging & Commercial

The cut

What impact will the abolition of Section 21 have on the BTL market? The government recently revealed that it was consulting on plans to do away with Section 21 evictions. It claimed that this would bring an end to no-fault evictions with just eight weeks’ notice after their fixed-term contract has finished. We spoke to industry figures to find out the impact it will have on landlords and the buy-to-let market

7 Sept/Oct 2019

The cut

Gareth Tucker Mortgage adviser at Pure Commercial Finance

Francesca Carlesi

Co-founder and CEO at Molo Finance It’s a waiting game to know its eventual impact. It’s right that the tenant-landlord relationship should be mutually beneficial— with the former being a good income earner for landlords and the latter providing tenants with a stable, quality and safe home. Protecting tenants’ rights is good for long-term economic health, especially as ‘generation rent’ expands. Lenders also benefit from this as, ultimately, money backing buy-to-let mortgages originates from renters. That said, many landlords are wary, particularly smaller players who’ve really felt the impact of the last few years of change. If supply of quality rental accommodation falls due to red tape, then rents could increase—not a good outcome for prospective tenants either. It will boil down to the government’s ability to reassure both landlords and lenders that strengthening the grounds within Section 8 and improving efficiency of court processes will cover landlords’ right to repossess their property in recognised instances of need.

While the new guidelines are not yet known, the government’s proposal to remove assured shorthold tenancies (ASTs) means that it’s likely that assured tenancies will soon be the only option available to landlords. The potential impact includes possible court cases relating to reasons for evictions, longer eviction notice periods and extended late rent payment deadlines. It’s safe to say that lenders will surely be watching this particular scenario with interest, and some may even decide that the buy-to-let market is no longer something they wish to get involved in; it will almost certainly make landlords more nervous about letting their property out to low-income tenants or those who rely on government support to pay their rent. The abolition of Section 21 is clearly designed to offer more security for renters, but will almost certainly make landlords less confident when looking for a new tenant. This may result in higher bonds and increased rents, making it harder for the more vulnerable to obtain a decent rental property. Only time will tell who will benefit most from the new proposals.

8 Bridging & Commercial

David Cox

Chief executive officer at ARLA Propertymark [It] could be devastating for the private rented sector and landlords operating within it. The effects of the tenant fees’ ban are just starting to be felt, and the government suggests introducing more new legislation which could deter landlords from operating in the market. Although in the majority of cases there is no need for Section 21 to be used, there are times when a landlord has no choice but to take action and evict tenants from a property. Until we have greater clarity on the changes planned for Section 8, the abolition of Section 21 will only increase pressure on the sector and discourage new landlords from investing in buy-tolet properties. This comes at a time when demand is dramatically outpacing supply and rent costs are rising.

The cut

David Miller

Account manager at Spicerhaart Corporate Sales [It] is often made out to be a way for landlords to evict for ‘no good reason’ but, in our experience, there’s always a reason, so it is misleading to suggest otherwise. Section 21 is used for a wide variety of reasons, such as arrears, mistreatment of the property or other issues in relation to the conduct of the tenant. More so we are seeing landlords use Section 21 as they need to sell the property for their own financial reasons, sometimes when they themselves face financial difficulty. If tenants are evicted because of their landlords’ circumstances and not their own, it must be very upsetting for them. However, if landlords are having financial problems, scrapping Section 21 could leave them trapped and pushing them into arrears and financial difficulty. A longer period of time before they can obtain vacant possession to market and sell the property could have a drastic impact on their financial circumstances. There’s a housing shortage in the UK, so the private rental sector is more important than ever, and while I understand why there are calls for Section 21 to be [thrown out], it is actually more likely to compound the problem.

Matt Burton

Managing director of mortgages at Hodge Bank When the government announced it was considering abolishing Section 21, it was hailed as a much-needed change to the law to protect tenants. However, for the majority of landlords who wouldn’t evict a tenant without good cause, is this a step too far? The removal of Section 21 alone would slow a landlord’s ability to evict tenants, potentially impacting on their rental income, which in turn would lead to a higher risk for lenders. A clear view on changes to Section 8 is also needed, hopefully stating it will be strengthened to allow the removal of tenants in certain circumstances. The government needs to be offering more reassurance to landlords that it has thought these changes through and looked at dedicated hearing courts and changes to Section 8 to ensure the process is fair for both the tenant and landlord. Changes aimed at the few shouldn’t impact the many and make an already difficult segment of the housing market even more restrictive.

Ruth Ehrlich Policy officer at Shelter

The abolition of Section 21 ‘no-fault’ evictions will redress the power imbalance between tenants and landlords by giving renters the security they desperately need. Currently, private tenants can be evicted with just eight weeks’ notice—for no reason—regardless of whether they have paid their rent on time, taken good care of the property or been model tenants. If legislation to end Section 21 passes, landlords will still have the legal power to evict tenants who break the rules of their contract, or if they genuinely need the property to sell or to live in themselves. Private renters in Scotland have benefited from similar protections since 2017 [and] although it’s too soon to fully evaluate the impact of the changes, if there were going to be negative effects as a result, we would expect to have seen them already. So far, there has been no surge in rent prices and no real change in the size of the Scottish rental market. 9 Sept/Oct 2019

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‘There’s huge opportunity in the commercial space’ In a year that has revolved around the residential property market to a large degree—yes, we know growth is at a low ebb—it feels as if the commercial property sector has been relegated to the sidelines. But this could all be about to change. Nick Christofi, the man behind award-winning specialist finance brokerage Sirius Property Finance, highlights why brokers are vital in supporting the transformation and innovation which is so needed—and that they hold the key to injecting life into the underserved parts of this space

Words by



Alexander chai

15 Sept/Oct 2019



ick, co-founder at Sirius, was 21 when he first got into the broking business. His first boss, friend and mentor to this day, James Antoniou, hired him at James Antoniou Associates after Nick persistently called him for a job. Nick then moved on to a company called Robert Sterling Financial Solutions where he set up its commercial division. At 9am on a drizzly Wednesday morning in Baker Street, Nick’s upbeat energy and enthusiasm is out of kilter for someone who has recently returned to work after a relaxing vacation in Cyprus. Over a couple of coffees, I ask him how Sirius was born. “Rob Jupp [chief executive at Brightstar Financial] and I had been friends for a while and it was actually at the B&C Awards, six years ago, where I bumped into him and said, ‘Rob, I think it’s time we had that chat.’” Laughing, Nick says that they were both p****d and moved somewhere more private after dinner. “We sat there for 30 minutes, had a chat [and did] a deal over the table.” They signed all the contracts a few weeks later, with Nick moving to Brightstar with the view to set up Sirius, a sister company to Brightstar, later down the line. The B2C brand started three-and-a-half years ago with Nick—whose background is working directly with the borrower—in a small, two-man office in Liverpool Street. Its Manchester office launched 18 months later. Real estate-driven, with a focus on development, commercial and bigger-ticket investments, the brokerage was recently crowned Development Broker of the Year at the 2019 B&C Awards. “Did I ever think we would grow to where we are? Probably not,” says Nick, adding, “when you start doing good things, people want to join.” And it also seems that people want to stay—since launching, Sirius has not seen a single staff member leave. The business recently moved its headquarters to a new 2,500 sq ft London office, where it has room to expand to 24, from the existing team of 16. Nick tells me that they have two brokers coming on board soon—one in October, the other in November—who will be helping the company expand its commercial offering. He explains that the market is in a bit of a “tricky situation” where sales aren’t going through. “Developers are coming off their schemes and they’re having to refinance and hold.” Understanding this, Sirius is keen to build a team that can cater for all different types of term finance. “Our big focus in the next year is that we want to really start moving into hotels and care homes, and two of the people that we’ve got coming in are specialists in those arenas.” Nick asserts that Sirius will have some “serious people” within its commercial offering by next year. When I ask what else is happening in the commercial market, he says that, because of the current sales cycle, people will look to stabilise their assets over the next few years. “Sales aren’t going through … taking [on] development exit products are fantastic, but what happens if you still don’t sell enough units to repay the debt? You need term finance.” As a result, Sirius is working with lenders to improve this. While some will offer two- and three-year money, Nick states that, after negotiating with one lender for a while, it has come up with a product which will offer a seamless transition from a development exit into a five-year term product. This is set to be announced this month. I question him further on what other gaps he sees in the commercial space. “My issue with commercial lending, at the minute, is that I don’t believe enough of the challenger banks understand commercial mortgages the way the high street [does],” adding that mainstream banks will always be “number one” for commercial term finance, mainly because they have the right people there. He claims that the challenger banks that do commercial still underwrite from a BTL perspective and do not take into consideration the stability of the tenant. “Commercial’s all about the strength of your covenant,” he tells me, adding that the physical property is just one element. “If you’ve got a 20-year lease on an asset, you want to make sure that the tenant in there isn’t the sort that is going to go bust after three or four years … my biggest issue is that when challenger banks go and value an asset, they value it simply on the bricks and mortar, they don’t take into consideration the tenant that’s 16

Bridging & Commercial


in there as well.” To help bolster some of the underserved areas in the commercial market, it seems that lenders will need to bring in more people from retail banks that have the necessary experience. For example, Nick believes that there should be more demand for offices as a result of PD office-to-resi conversions, but wonders why there is no development finance lender that is specialising in serviced offices. “Resi development lenders are scared of the commercial market because it’s more speculative,” he argues. “But surely there’s got to be an argument to say, well, if we’re running out of office space because everything is being converted into PD … people need somewhere to go—especially in the regions.” At the moment, he claims that you have to go to two or three different lenders to facilitate this sort of deal. Therefore, there is an opportunity for a lender to offer the development finance and the term funding. Nick considers the biggest issue which brokers have faced in the past 10 years has been the need to educate the borrower that the retail banks are no longer the route to take for residential development finance. “That was the hardest thing … we were banging the drum … I can’t remember the last time we [did] a development deal through a residential lender for a residential developer with the high street banks. Everything has gone challenger on that side of it. So, surely, there has got to be opportunity there for the same to happen in the commercial space.” He also explains that there’s too much of a disparity between retail banks and commercial term lenders with regard to pricing. “I think the commercial pricing has got to come down from a challenger perspective.” He adds that there is also an imbalance between the risk the non-bank lenders will look at compared with the challenger banks, but there are still many deals in between that don’t fit either. Nick also believes that care homes, hotels and B&Bs are not well covered. With care homes, this is mainly as a result of the added reputational risk. “No one wants to go and be associated with somebody that hasn’t got good CQC (care quality control) of their care home, where effectively they could get sued,” he says. “Again, [there are] good quality people that understand that asset class, [so] why should it be any different to any other type of lending?” I ask why hotels are underserved. He replies that it is because they are, in the main, bigger-ticket deals. “Are these challenger banks well capitalised enough to go and put a big slug of debt out the door on an asset class that they haven’t got a huge understanding of?” Apparently, a safer bet is spreading their risk against a range of residential assets. I probe Nick on whether the commercial market has got riskier, and whether this could be a reason as to why it is not becoming more competitive, but he doesn’t think this is the case. “If anything, it’s more stable, because you’re looking at the strength of a lease.” He explains that you could get a residential AST and that tenant could default tomorrow on their rent. “At least with the commercial [sector], you’re taking every single measure upfront to have a look at who your tenant is.” So, when can we expect to see changes in the commercial market? Nick says soon, with some taking place already. One example he highlights is Aldermore changing its infrastructure by putting commercial and development together. “That has absolutely flown,” he states. He mentions that other lenders need to follow suit with regard to their structures and the experienced people leading them. “There’s a huge opportunity in the commercial space.” While Sirius has access to up to 40 commercial lenders, it probably only deals with 10. The lenders it has good relationships with ask him where the gaps are in the market. “There needs to be more innovation,” he says, but adds that it has to come from brokers. “We are the ones who are on the front lines. Lenders are only seeing what we are presenting to them … so, we can’t blame them for not coming out with these products if we’re not doing our job.” Growing the number of commercial brokers could also help the push for more funding options. I ask Nick what advice he would give to those wanting to enter the commercial market. “The first thing I would do is start introducing deals to one of the distributors,” he asserts. He says that, this way, they will know how to ask the right questions and reiterates that it’s a process which they’re not going to learn overnight. “It’s a skill set. If you imagine a residential mortgage broker, how long has it taken them to be an expert in their space? It’s taken them years. It’s exactly the same as commercial.” He adds that you must look at the best service for your client, especially in the commercial market where it’s a lot more complex. “Don’t try to blag your way through it, because you will come unstuck straight away.” 20 Bridging & Commercial

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Has the funding benefit of retail deposits been watered down?

Words by

simon thompson 24 Bridging & Commercial


Competitive rates and quality of service are the seminal levers lenders use to distinguish themselves within the specialist finance space. Brand prestige and the promise of cheaper, more reliable funding associated with having a retail banking licence has, over the years, led a number of lenders down this route. However, increasing competition in the retail savings sector and widespread inertia among account customers suggests it may not be the gold-paved road it was once considered 25 Sept/Oct 2019



ccording to our funding research back in January, the retail deposit model—a funding source that is regarded as one of the cheapest and most resilient—accounts for just 18% of the bridging market, offering the banks an advantage over the majority. Yet, how much more cost effective, competitive and profitable, in today’s market, can retail deposit funding make a lender? Jon Hall, managing director at Masthaven, explains that becoming a bank enabled the lender to offer more attractive bridging rates. “We are able to price competitively on the savings side, still deliver strong returns in lending and provide a more cost-effective solution in bridging.” In a quest for similar results, Castle Trust and Recognise Financial Services are currently in the process of becoming banks. Jason Oakley, CEO at Recognise, expects its move from wholesale to deposit funding to increase its profit margins. “We want to optimise how much it costs us to bring money [in] to ultimately lend out.” Jason confirms that, once licenced, he anticipates that its deposits will facilitate the overwhelming majority of its funding thereafter. Jonathan Thompson, founder and CEO at B-North—which is striving to become a bank from scratch and aims to offer bridging—claims that retail deposits will allow it to “compete across most aspects of the market”. However, aggressive interest rate competition in the savings account market suggests that it could be becoming more difficult for smaller and lesser-known challenger/specialist banking brands to attract customers and their deposits. Even with challengers offering higher savings rates than their established rivals, a Flagstone study shows that they are struggling to break the big five’s (Barclays, HSBC, Lloyds, RBS and Santander) hold over the retail deposits market—which, in total, is worth around £1.5 trillion. For example, Shawbrook Bank, at the time of writing, offered an attractive easy access savings rate of 1.48% AER, while Barclays offered just 0.25% AER. However, the latest reports show that the former has £5bn worth of customer deposits, compared with the latter’s £197.3bn. Easy access savings account Marcus by Goldman Sachs launched in September 2018 and posted late last year that customers were signing up at a rate of one every 35 seconds. With an offering of 1.50% AER (including a bonus rate of 0.15% fixed for the first 12 months), Marcus has already attracted £8bn of customer deposits, proving that savers will move to other banks for better rates, but perhaps not as fast without a widely recognisable brand behind it. Charles McDowell, managing director at Hampshire Trust Bank (HTB), adds that increasing competition in the savings market may have watered down the funding benefits of retail deposits. “Historically, the financial benefit was always there. It is not there anymore, at the moment.” Jon emphasises that the cost and reliability of deposit funding may be one reason to go through the bank licencing process, but it is not a good enough reason on its own. He believes that lenders looking to become banks need to have something of value to add to the market and offer to customers in order to succeed. Jason acknowledges the increasing competition for savings and that the brunt of the challenge and increasing

expense will be felt by new entrants still establishing their brand, such as Recognise. While retail deposits may be seen as the holy grail, many depositfunded businesses, such as Masthaven, are diversifying their funding. Masthaven holds £377m in retail deposits and, earlier this year, boosted its coffers with a £60m equity investment from Värde Partners. The bank told me that diversification was required for its plans to scale and grow further into other markets, and a way of managing or reducing risk and increasing optionality. Hodge Bank, which is almost completely deposit funded, is also diversifying. David Landen, finance director at Hodge Bank, claims that increasing competition in the retail deposit space has led it to look at wholesale markets, too. HOW CAN BANKS ATTRACT DEPOSIT SAVINGS? A number of the banks I spoke to assert that having their ranking in the upper echelons of the best-buy tables is a key strategy for attracting savers. The further up the rate table you move, the more money you are likely to get. Not unlike the bridging market, the rest comes down to quality of service, targeting niches and innovative products. Hampden & Co, a private bank which offers bridging, obtains its retail deposits by providing a high-end service exclusively for HNW individuals. “We attract client deposits by offering a personal, tailored banking service that many HNW individuals are seeking, so our primary investment is in the people we recruit,” explains Graeme Hartop, CEO at Hampden & Co. Clients get a dedicated private banker who looks after their needs and those of their family and business interests. The bank hasn’t standardised its savings rates, instead leaving room for them to be negotiated with customers on the basis of each term and the size of their deposits. Hodge Bank claims that it has had “great success” offering niche products targeted towards older clients. David explains that it has found them to be more loyal and less swayed by shiny, new or tech-based offerings from new entrants. He adds that most of its products aren’t going head to head with banks. “We look at areas where we can add value through our product offering.” According to Jason, Recognise is set to serve a gap in the market: SME savers. He says that there is a lack of personalised service in this space. Compared with the retail market, he claims there hasn’t been much in the way of innovation and that is what Recognise is looking to achieve. Savings rates in the SME market are much less competitive compared with the retail space, which could be an area for bridging-lenders-come-banks to target. In fact, 62% of British SMEs are not earning any interest on their business savings at all, according to a study by Aldermore.

“When you have a bank, you have scalable infrastructure, you have got a resilient business model. Those four letters carry a lot of trust”

IS NON-BANK FUNDING GETTING CHEAPER? One example of a bank’s blended cost of funds we looked at was as low as 1.62%. “It has got to move an awful long way before you see the wholesale market being a more competitive source of funding than retail and SME deposits,” Jason states. Despite this, Alex Maddox, capital markets director at Kensington Mortgages,

26 Bridging & Commercial


explains that its reputation as a regular issuer in the residential mortgage-backed securitisation (RMBS) market has allowed it to secure “fantastic rates” in the wholesale market. “Those rates translate into keen pricing for the consumers that we want to target. We are proving that you do not need to be competing for deposits to be a competitive lender.” Charles agrees, suggesting that securitisations are coming in at a similar level to retail deposit funding. Together, Pepper Money and LendInvest have completed securitisations, boosting their funding without needing to go through the onerous bank licencing process. Christian Faes, CEO at LendInvest, claims that its recent securitisation has given it funding that is cheaper than if it was a small deposit-taking bank. It is worth noting that these three securitisations were for regulated loan portfolios. EVEN IF YOU CAN ATTRACT SAVINGS DEPOSITS, IS IT STILL WORTH IT? Specialist lending is about more than just the cost of funds. It’s about quality of service, innovation and relationships built over long periods of time. In a space defined by fast-paced and bespoke offerings, a number of lenders I spoke to feel the associated PRA/ FCA regulations make a banking licence more of a hindrance than a help. “A banking licence can cause a bridging lender to lose sight of its core fundamentals, such as flexibility and entrepreneurial spirit,” says Gareth Lewis, commercial director at MT Finance. Colin Sanders, CEO at Tuscan Capital, believes that price has less importance in the bridging world. “Certainty of funding and the speed and consistency of decision making hold the upper hand.” Alan Margolis, director of credit and operations at Masthaven, admits that the higher regulatory standards and additional internal controls can make a lender less nimble. “No one can say that running a bank Roma_BC_205x140mm_HalfPageAd_Aug19_AW.pdf



is the same as running a three-person lender which is completely unregulated, sticking to a very small niche of the market. Those are completely different businesses; you can’t expect them to be the same.” PRA/FCA bank authorisation can also be a significant financial burden and take as long as two years, according to Jason. Jon confirms that the process took Masthaven a similar amount of time and resulted in the hiring of an additional 60–70 employees to get the policies, process and technology in place before launching as a bank. Jon stresses that there is no lowering of standards by the regulators for new and smaller entrants. BANKING ISN’T JUST ABOUT CHEAPER FUNDING There are good reasons to become a bank that have nothing to do with securing cheaper funding. Reliability is one of them. Jon tells me that the falling away of funding lines during the credit crunch was the genesis for Masthaven going through the process to become a bank. Securitisations may be cheap and close to retail deposit funding rates now, but Charles maintains that the retail banking market is a far more resilient one. “If you look at the Bank of England, there [are many] years of evidence of the retail deposit market always being there and people being able to raise money through it.” Jason highlights that becoming a bank will distinguish Recognise from other lenders and is also conducive to its ambitions for scale and building a brand. Charles says that there’s significant franchise value. “When you have a bank, you have scalable infrastructure, you have got a resilient business model. Those four letters carry a lot of trust.”


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DEFAULT what’s the 28

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here is currently a heated discussion taking place within the bridging finance industry regarding concerns that lenders with “excessive” default interest rates are harming the reputation of the sector. But how prevalent is this issue and how often are lenders actually enforcing these disproportionate rates? To cut through the hot air, we gauged opinion among the industry to see whether calls for self-regulation are justified or even possible. Mark Posniak, managing director at Octane Capital, ignited the industry-wide debate. He claims that he has seen them as much as 10 times the initial loan rate and asserts that even twice the initial rate is questionable. “Doubling or even trebling the interest rate you charge will rarely, if ever, be justified—whatever the increase in costs and risk.” His concerns spilled out on to social media via a LinkedIn post back in July, which garnered 183 interactions and 68 comments by industry stakeholders weighing in on the topic. Dozens shared their stories, experiences and concerns. Paul McGonigle, CEO at Positive Lending, has seen default interest rates as high as 5% per month. Another broker, who wishes to remain anonymous, knows of a lender charging 36% per annum. Other brokers were less concerned about the figures and more about when and how lenders are choosing to enforce default rates. Some are enforcing it as soon as the borrower goes over term. “As soon as they do, the lenders often change their whole attitude, not listening to the reasoning behind the need to repay late etc,” claims the anonymous broker. When the borrower has done all the right things and is going over term due to unforeseen circumstances, brokers expect leniency from lenders, or at least room to negotiate a less heavy-handed outcome. “Despite the funding being short term, the lenders need to think about the long-term consequences of their actions,” says James Chisnall, director at City Finance Brokers. Few in the bridging market would deny the effectiveness of the threat of default interest rates. Andrew Gage, director at Y3S, was the only broker I spoke to who suggested that there shouldn’t be default interest rates at all—the lender already prices according to risk. Sam Le Pard, asset financial adviser at Arc & Co, believes that they can be a useful tool for motivating borrowers to do what they’ve agreed to do: sell properties at realistic market prices and, above all, pay back on time. The default rate also allows lenders to price for the increased risk, extra management time and added operational costs associated with having a loan in default. “I completely understand the need for a lender to have a stick to motivate their borrowers with,” adds Sam. For banks, Alex Searle, sales director of specialist mortgages at Hampshire Trust Bank (HTB), explains that additional provisions have


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to be held against loans officially in default. Even when taking this into account, there are claims that some lenders have default rates that aren’t commensurate with the additional risk and associated expense. It is not just a simple case of buyer beware. The effect of excessive and callously enforced default interest rates has the potential to undermine the whole industry’s credibility. “If just a few lenders do it, then we’re all tarred by the same brush, which simply isn’t fair,” Mark explains. Following concerns from Financial Intermediary & Broker Association (FIBA) members and lender partners, Adam Tyler, executive chairman at FIBA, announced that it would begin publishing lenders’ default rates and terms in its lender directory. “It is all about transparency, to make sure the customers will come back to that broker again.” To further understand how prevalent the issue is, an anonymous B&C poll asked 100 brokers how often their clients have paid default interest rates over 3% per month. Some 43% responded ‘never’, 35% answered ‘sometimes’, while 22% claimed ‘often’. A few brokers and lenders suggest that the industry could move further forward with an industry cap on the amount of default charged. “I think this is fair for both borrower and lender,” says Paul, who adds that lenders with excessive default rates are not on Positive Lending’s panel. Mark suggests 2–3% per annum above the standard interest rate as the ceiling for any reputable lender. Out of 20 brokers we surveyed, eight thought that there should be a cap of twice the initial loan interest. I also asked the same sample about the defaults they had seen over the last 12 months. Out of those, there were just 11 cases where default interest was actually charged. However, it’s worth noting the contentious nature of the topic and that the proportion of defaulting borrowers being charged default rates could be much higher among brokers that did not take part in our survey. To put this into context, of the approximately 60 brokers we contacted, only 20 were willing to comment. A number of brokers claimed that they were usually able to negotiate alternative arrangements. Dale Jannels, managing director at Impact Specialist Finance, highlights that in one scenario in the past 12 months it managed to secure a grace period with a lender, which allowed the client time to come to a workable solution with minimal fees. Stephen Burns at Adapt Finance believes that this sort of arrangement should come with no additional cost. Paul adds that some of the lenders he works with don’t have default

rates at all, just extension fees with the rate remaining the same. Colin Sanders, CEO at Tuscan Capital, explains the mitigating factors lenders take into consideration when default rates are on the cards. “This is where there is a grey area, where we are coming away from our contractual rights and really just looking at a pragmatic solution.” For it to work, he affirms that “all parties need to be on the same page to be able to apply that compassion”. Tuscan Capital sometimes conditions an extension on the proviso of having some involvement in the marketing of the property or being able to meet with the marketing property agent. When lenders aren’t so lenient, many brokers cite the spread of refinancing products available from other lenders. “We will contact clients three months prior to [the end of the term] to ensure they are on the right track and, if they are not, we will look to see if we can help [with] the refinance,” adds Andrew. Adele Turton, director at Sirius Property Finance, shares this outlook regarding clients, but notes that bridging is usually used by “commercial people” (apart from regulated bridging) who have the requisite level of professional understanding. “As long as those fees are disclosed at the outset, then it becomes their decision.” Lenders with a long-term view don’t want borrowers to be charged default rates any more than brokers do. Colin explains that having a high number of borrower defaults breaches its covenants’ agreements with its private equity and institutional partners. “Our funding is not set up [to] have lots of loans in default. Our objective is to have a very low percentage of our portfolio to be in default.” Little standardisation in the market with regard to lender default fees could be one reason causing the issue. But even so, guiding and advising borrowers through the complexity of a loan is the role of a broker, and therefore brokers need to be asking lenders for clarity. Why is there a problem? Paul says that it is likely to be the result of bad practices by a few smaller, unregulated brokers. Michael Primrose, managing director at the Property Finance Guy, suggests that there is a “huge amount” of naivety from some brokers when discussing terms with customers. In addition, Ian Broadbent, director at Holme Finance Bridging Solutions, adds that there are cases where clients are overly optimistic about their exit strategies. Scott Marshall, managing director at Roma Finance, believes that brokers should be aware of lenders’ reputations for handling matters if a project does suffer delays, including their repossession statistics. There is a worry that inexperienced introducers 30

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won’t ask these sorts of questions. Colin believes it is often the result of brokers’ eagerness. “I have seen scenarios where brokers are keen to focus on the speed on the front-end pricing rather than the full terms of the contract.” But Adele claims that it is not always easy for brokers to comprehensively relay information, especially if lenders hide them in the small print. While industry discussion indicates that some lenders are operating with confusing default rates and policy, Adam speculates that many lenders will be clarifying their default policies in the lead up to the publication in FIBA’s lender directory. Mark suggests lenders will go further by lowering their default rates before FIBA publishes them. “There’s nowhere for these lenders to hide,” he believes, “so it will be interesting to see if their terms change … I’d like to think that the game is up.” Ian is concerned that lenders will simply transfer excessive charges on to ‘extension fees’ instead. I found that extension fees range anywhere from a £400 flat fee to £5,000 per month. Laura Kendall, marketing director at Funding 365, states that if the bridging industry is to fully shake off any lingering “shady” associations, it’s imperative that transparency to borrowers is made a priority by lenders. Among the lenders in the bridging space, there are a slew of different fees: arrangement fees, administration fees, title set-up fees, exit fees, early repayment charges, just to name a few. “At Funding 365, we make sure that all of our terms, rates and fees are made clear upfront in just two pages on our heads of terms,” Laura explains. “If individual lenders don’t work to best practice and, as an industry, we don’t somehow selfregulate, then we are much more likely to have regulation forced upon us, and I don’t believe that anyone in the industry really wants that.” While there may be a need for more standardisation when it comes to producing heads of terms, it’s unlikely that all lenders, particularly in a bespoke and innovative space, will all come to a formal agreement— especially if there’s potential for lenders to gain a sales advantage by not following suit and making their deals look more attractive. As Adam highlights, a sizeable proportion of bridging lenders are still not covered by FIBA. As long as the demand for borrowing is strong, unscrupulous lenders who are given business by, arguably, unscrupulous brokers will be able to make money. It is imperative that brokers ensure that they are aware of all fees the lenders they work with charge, how they are enforced, and clearly convey these to their clients—but isn’t that what commission is for?


t he

at me Meet













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is well k n o w n that the majority of the bridging market is unregulated, which means very few barriers to entry. According to the latest EY UK Bridging Market Study, 83% of lender respondents reported that their proportion of regulated vs unregulated bridging loans was at least 1:2. Some 26% of lenders had a ratio of 1:5. As a result of this, it is much easier for lenders to enter the space as soon as they want to if they intend to only offer unregulated bridging finance, as there are no strict rules and requirements to secure lending permissions from the FCA or any other trade body in order to operate. According to Adam Tyler, executive chairman at the Financial Intermediary & Broker Association (FIBA), there has been no real change in the unregulated space to limit new lenders entering the bridging market. HOW EASY IS IT TO SET UP A BRIDGING LENDER?

Words by


HNW individuals and family offices—which back 40% of the bridging market, according to our research in January—are currently seeing low returns on money held in traditional savings accounts and are looking to the property market as an area which is still seen as a healthy and safe place to make good income on capital, due to the highyield, asset-backed nature of transactions. Investors looking for alternatives can move into the sector with ease. I am told that anyone with money and access to solicitors can essentially set up their own bridging company. “At the moment, any lender can register a charge and start lending,” says Paresh Raja, CEO at Market Financial Solutions. “Although I am sure there is more to it, from our point of view, it appears all you need [is] a funding line, a LinkedIn account and a BDM and you are good to go,” adds Sam Norris, senior property finance broker at Bond Finance Ltd.

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Richard Tugwell, group intermediary relationship director at Together, feels that with the current funding options and regulatory model, bridging is often seen as an “entry-level” product for new lenders. “Some move from this into more complex unregulated bridging and further into the regulated bridging space.” Considering the bridging market is usually branded as intricate and specialist, it’s ironic how simplistic it is to stroll in and lend. Some natural barriers to entry include hiring experienced staff in key positions in an already-stretched talent pool and achieving critical mass with market share. While the greatest initial challenge is said to be around raising capital, the combination of investors having been starved of yield for a long time and the attractive rates on offer in bridging is making this less of a constraint. “Lenders in the bridging market can find fairly cheap and easy money to lend out, making it easier to enter the market,” says Phil Derbyshire, managing director at Goldentree Financial Services. Zuhair Mirza, principal at Avamore Capital, adds that the bridging finance business model has a very scalable cost base and, as a result, it is easier to enter the market because there aren’t any huge upfront fixed costs. “In addition, [bridging] lending is a collaborative process and it gets a great deal of support from professional services. Newer entrants and lenders can benefit from learning and growing from other service providers in the deal chain, which will help them get up to speed if they are new to the market.” As long as the market is so hospitable, it’s unlikely that the influx of new entrants will be stemmed. WHAT IMPACT IS THIS HAVING ON THE BRIDGING MARKET? The higher level of competition has meant that there is more awareness of this type of product in the wider broker community and borrowers are now benefiting from a fairer market with a range of product options suited to their specific needs, and lower costs. This also includes more accessible finance in niche areas of the sector. Some of the new players can in fact be credited with bringing up the professional standards in the industry. “While a lot has been said about new entrants

driving the rates down, it also keeps lenders on their toes about their service levels, use of technology and many other factors,” says Claire Newman, head of lending operations at Relendex. Gavin Diamond, commercial

“You would think the longer a lender stays in the market, the better their standards get— but this will not always be the case” director—bridging at United Trust Bank, explains that if the market consists of the same incumbents, there will naturally be some competition between them, but a new entrant coming in and shaking things up encourages the pace of change. However, new lenders which want to stick around will need to spend enough time, effort, money and resource to ensure their offering is sustainable. Brokers are much more likely to work with lenders which they know, or believe, are in it for the long haul. “Although it might be easy for new lenders to launch, you have to consider how viable they can be in the long term without the right funding at the right price, the right staff and new products,” says Lorraine Hart, head of underwriting at Roma Finance. The main cause for concern with having such low barriers to entry is the possibility of attracting opportunistic lenders who don’t fully understand the market and want to make a quick buck. One worry, I am told, is that new entrants could have onerous terms, such as high default rates and other fees in order to bolster profitability. “Some of them act like used cars salesmen and have little understanding of the actual market and are just desperate to get indicative terms out within 15 minutes of an enquiry,” claims Peter Black, managing director at brokerage Snowball Alternative Finance. “I would rather wait a day and have a set of terms where the lender has bothered to take the time to read and understand the proposal we have sent them.” Colin Anderson, executive director at LDNfinance, says that his main apprehension revolves around the lenders who enter the market without having the right processes in place. “[For example], inexperienced underwriters who have only underwritten traditional banking finance.” I am told that new lenders could lack the

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necessary experience, not have a proper KYC procedure in place or not know how to address complex situations. Richard highlights that new lenders do not necessarily have to adhere to standards that more established lenders are known for and this can “cause some confusion within the market and lead to concerns about the sector as a whole”.

“With the outlook for Brexit being generally negative and with on-demand facilities that can be withdrawn at any time, this is a dangerous prospect both for borrowers and any brokers seeking long-term relationships” Alice Williams, head of property finance at Pilot Fish, says that it deals with a high number of bridging requirements daily and, therefore, understands the difference between those lenders that deliver, and those that provide empty promises. “It is not as easy for the clients to recognise this and we do lose [some] who then return to us with an even more urgent requirement as a result of being let down by an unscrupulous alternative they had found offering better [headline rates] than those we had put forward. This, ultimately, costs the client valuable time and expense, and gives the bridging market as a whole a far more negative reputation.” Ben Boateng, senior director at ExWorks Capital, tells me that low barriers to entry will result in certain lenders being allowed to participate without having undergone checks to ensure that “competitive, compliant and rational transactions take place”. He adds that this can—and does—lead to losses on both sides of the transaction. A lack of entry requirements could also easily create a race to the bottom, rather than push standards up. “When new lenders enter an already crowded market, it could lead to business practices that aren’t compatible with a long-term business model in order to gain a foothold in the market,” says Andy Reid, director—intermediary and network at Oblix Capital. Tracey North, head of business development at Hope Capital, explains that it could also mean that some lenders do not necessarily have the standards required by a professional market, ie loans aren’t underwritten properly which can lead to more repossessions, while charges may be “hidden” and lending practices may be “less than ethical”. “This can damage the reputation of the industry, negatively affecting perceptions of bridging, leading to fewer people looking at [it] as an option,” she says.

Matthew Tooth, chief commercial officer at LendInvest, says it could also cause a decline in lending standards, which then affects brokers and borrowers. “That said, brokers know to factor in lenders’ track records and reputations into their recommendations. So, a well-educated broker should serve as protection against this risk,” he adds. “The market is undoubtedly crowded, and I see no sign of that slowing. However, what we could see is that a number of those establishing themselves now, and a few [already] established lenders, not standing the test of time and dropping off in the next property downturn, with only those who have proven their model, and built a diverse and robust funding structure, remaining.” D’mitri Zaprzala, head of sales at Octopus Real Estate, believes that this makes the role of the broker community more important than ever. “Not only must brokers help decide on the best product/solution for a borrower, but they must also carry out due diligence on which lender they are choosing. Never before has there been so much importance based upon using lenders who have a proven track record and diversified funding.” While more lenders mean more competition, there is some danger of an oversaturated market impacting service levels and suitable products. Zuhair explains that this could mean that customer experience varies dramatically from lender to lender. Jo Breeden, managing director at Crystal Specialist Finance, believes that a low barrier to entry can mean lenders launching with “very risky” propositions, which could jeopardise the professionalism of the industry. “Alternatively, lenders launch with a homogenous product and see it as a way of making money, which doesn’t really help anyone.” Jack Coombs, director at Aspen Bridging, explains that money is seeking any return in the current economic environment and the bar is falling for the yields that investors across the risk spectrum are expecting. “The only drawback to this is that when the property market suffers a reverse, the money piling in fast will be the same money withdrawing with equal speed. With the outlook for Brexit being generally negative and with on-demand facilities that can be withdrawn at any time, this is a dangerous prospect both for borrowers and any brokers seeking long-term relationships.” It seems that while few barriers to entry could cause a surge of ‘dabbling’ lender entrants with limited knowledge of the market, the growth of new financiers with aggressive expansion plans and institutional backing—based on the

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current hunt for yield that’s occurring in the asset management, hedge fund and banking sectors—could have more detrimental effects. “At this stage, many bridging lenders sell their loans almost immediately upon completion,” explains Mike Strange, managing director at Funding 365. So, while it is extremely easy to launch a lender, he believes that companies are susceptible to overnight collapse if their institutional backer has a change of view on the business or overall sector. Just one bridging lender losing their funding and having to withdraw from the market, either temporarily or for good, could impact swathes of brokers and their clients and cause strain on the parts of the market which are operating responsibly. If funders are able to drop and leave the market just as quickly as they enter, this could be even more problematic for the industry. IF BARRIERS TO ENTRY STAY THE SAME, WHAT WILL THE FUTURE OF THE BRIDGING MARKET LOOK LIKE? With an increase in lending businesses operating in the market, we will naturally see more people attracted to working in it. Zuhair tells me that, in the long term, this will mean that the number of experienced professionals will grow and that the overall quality of skilled professionals in the industry will improve. However, as we are unsure how long it will take to build up our sector’s workforce, there could come a point where there is simply no more business available for new lenders—a stage which Sam believes we are perhaps already getting close to. “Hopefully, you would think the longer a lender stays in the market, the better their [standards get]—but this will not always be the case. And with more competition at the low end, you’d also like to think this would cause an [uplift] in overall standards [there], but I’m not seeing this enough at the moment unfortunately.” When I ask what he considers as “low standards”, Sam says these include not sticking to the terms laid out at the beginning of a deal and changing the goalposts before completion. “Essentially, a lack of integrity,” he argues. “Some lenders will go back to credit after the client has paid a lot of money out based on credit-backed terms already issued. This is by far the worst thing a lender can do.” Other lender practices which are considered negative in the market include poor risk assessments, unrealistically high risk appetites and LTVs, additional fees, lack of transparency regarding process

and terms, and unsustainably low interest rates. “In a market where competition for business is already high, such practices can create unrealistic expectations from brokers and borrowers,” says Andy. Tracey explains that the availability of experienced underwriters will get smaller through demand as more lenders will find they are fishing in a smaller and smaller pond. “Most big banks consolidated their teams some time ago and got rid of many underwriting staff so there is now a smaller pool of qualified underwriters. This means all bridging lenders need to invest more in internal training and development or else they will discover the consequences of their loans not being underwritten correctly.” Phil adds that clients and brokers remain loyal to the lenders that always deliver and are trustworthy. “Those lenders that don’t do this won’t have longevity.” Clare admits that the bridging and development industry still has a bad reputation among those who know little about it. “New lenders entering who may only be interested in making high returns with little thought for the people they are lending to only exacerbate this.” Roxana Mohammadian-Molina, CSO at Blend Network, adds that the danger is seeing inexperienced lenders taking high risks at the wrong price and potentially going into administration. The problem is, how many clients will be affected by less professional players before they disappear? WHAT COULD BE INTRODUCED TO HELP RAISE THE BAR, AND IS IT EVEN ACHIEVABLE? While the industry has grown massively in recent years, it has barely changed in terms of formal standardisation and selfregulation. “Right now, it’s not so much a case of raising the bar as finding [it]— because there isn’t one,” states Mark Posniak, managing director at Octane Capital. However, this doesn’t mean that the industry hasn’t tried. As far back as 2014, I wrote an article for B&C about an IFSbacked bridging qualification. The majority of attendees at an Association of Bridging Professionals (AOBP, now FIBA) forum had approved the concept of an accredited training programme for professionals in the short-term lending industry. The idea was to increase the knowledge and awareness of bridging and its appropriateness as a form of self-regulating the sector. Unfortunately, the exam never got off the ground. One issue at the time was that there were only a limited

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customer at the heart of all of their lending decisions and not being driven or influenced by profitability or a drive to maximise lending. “The FCA requires these standards of the firms it supervises, and it may be that in the future all lending will have a degree of FCA oversight, regardless of whether lenders

number of brokers and lenders who were part of the AOBP and, therefore, if members insisted on only working with ‘qualified’ partners, it could create a black market— it was, and still is, unlikely that all lenders would turn away business from brokers who have not taken such a qualification. It seems that the only way for something like this to work is if the industry collectively agrees to some form of self-regulation which improves market standards and brings to light the outliers who choose not to adhere to it. This means brokers ensuring they are only working with ‘approved’ lenders and, ultimately, not giving less reputable providers their business. “Borrowers should undertake any necessary due diligence on the lender, who should be able to demonstrate they understand the practical application of bridging and it’s not just something they learned in a textbook,” says Tony Gilbertson, CEO at Signature Private Finance. While self-regulation would need to be relevant and useful to all parties, the market would also need to find out the best way for something like this to be implemented and who would manage it. Crucially, is there a sufficient number who want it? From a sample of over 20 bridging experts (including brokers and lenders) that I spoke to, asking what solutions the industry could implement, 59% want some form of self-regulation, 18% want the market to be regulated and 14% think market forces alone will fix the problem. Some of the suggestions on ways to selfregulate the market include introducing an enforceable bridging code of conduct that needs to be followed by all unregulated lenders; trade bodies being stricter on lenders meeting set standards and showing teeth if they don’t; and a lender ‘tiering’ system. “I do believe there should be minimum requirements that new firms have to meet in relation to transparency and treating customers fairly,” says Claire. “This would ensure that those that are serious about not only establishing a successful business, but being in it for the long haul and providing a good service to their customers are able to, and those that don’t would be deterred.” Vishal Dixit, head of business development at Pivot, tells me that the minimum requirement to launch a bridging lender is, simply, experience. “Experience in assessing risk, understanding credit and the dynamics of the short-term market [and] working in a professional environment,” he divulges. Jade Esterkin, director at Affirmative adds that other minimum requirements should include lenders striving to conduct themselves with the “highest levels of integrity”, putting the

“An official system of attainment could force the lower end of the market to increase its overall standards and provide something to reach for, in a similar way to how restaurants display their hygiene levels on the front door now” conduct exclusively unregulated business, in a bid to drive up standards across the board,” she adds. “Until that time, all lenders should strive to meet these standards as a minimum.” Zuhair adds that the more lenders that enter the market, the stricter associations such as the ASTL will need to become on due diligence and the regular monitoring of its lenders. “The consequence of not being part of the association should be made clearer and taken seriously should a lender not meet the set criteria.” Tracey adds that it would be ideal to have some sort of charter mark, such as the RICS which indicates trusted valuers. Sam believes that lender tiering could help distinguish providers from one another and is something he already does ad hoc. “An official system of attainment could force the lower end of the market to increase its overall standards and provide something to reach for, in a similar way to how restaurants display their hygiene levels on the front door now. This should be a great incentive … and perhaps also a deterrent to new lenders who may not want to enter the market with a ‘level one’ next [to] their name.” However, some industry experts believe that it would be difficult for the industry to self-regulate without formal conditions for both new entrants and existing lenders. “Unfortunately, self-regulation of most industries always seems to end up with the questionable players still getting through the process and being able to prosper,” explains Peter. David Grant, operations director at Greenfield Mortgages, says that if lenders were to voluntarily subscribe to an agreed code of practice, the real challenge would be getting all bridging lenders to embrace it. “… Such self-implementation is always going to struggle in a competitive bridging market.” Danny Robinson, director of commercial at Grey Matters Specialist Lending, says that

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a compromise in the industry is required and, in a market that strives to compete for every deal, it is hard to see how this mindset could change. “The idea of selfgovernance is not as bold as it sounds as the broker community already has it in the form of networks and membership subscriptions that govern how and why advisory firms and brokers can operate … the biggest problem with any form of self-regulation, however, is [that] there will always be those that feel they do not need to follow the same rules and, without a rule book (regulation) to wave at them, that point cannot be argued.” He adds that it shouldn’t just be focused on new entrants, as existing lenders would also need to be “willing to change” to pioneer a new age of lending standards and conduct. It’s an important point: if all existing bridging lenders’ standards are not at the level we expect new providers to reach, then how can we expect to raise the bar for entrants? For example, lenders marketing headline rates and products that cater for higher LTVs in a bid to gain more market share could be causing problems. “The issue with this is that regardless of the criteria that needs to be met, the clients’ expectations have been set and they will chase these rates, however possible—even if it means going down the route of the more unscrupulous lenders,” says Alice. “This will, however, become a deadlock among the lenders as to who markets their average interest rate/leverage first, as it will automatically make them appear less attractive than their counterparts still advertising their best offering, and would likely have to be sorted via an intramarket agreement to stick to the same standards from a certain period onwards.” If it is too difficult for the market to self-regulate, then perhaps FCA regulation is the answer. Roxana tells me that she has worked in banking for a long time and “sadly, no one likes to self-regulate”. As a result, she feels that regulation would be a “positive” thing. Niall Brown at Auxilium Real Estate agrees that regulation wouldn’t necessarily be bad news, if the regulator had a very clear message about how it was being managed. “However, at present, there is extremely poor information on how regulation/self-regulation should work.” Does the need for higher industry standards outweigh the potential stifling effect of regulation? It could well dampen business prospects. In March 2016, the FCA introduced new rules for second charge mortgage lenders as part of the Mortgage Credit Directive (MCD). The impact of regulation on this market can be shown

in the value of annual new second charge mortgage business. The FLA tells us that the value of new business increased by 35.7% in 2015 compared with 2014. However, in the year that MCD was implemented, the value of new business only grew by 3.9% year-on-year. The concern is that we could see something similar in the bridging market if regulation was introduced. Andy claims that regulation of the rest of the bridging market would “significantly” increase operational costs across the industry and, while this would act as a barrier to entry for new lenders, it would also negatively impact the operational costs of longstanding, reputable lenders. “One option is to consider a middle ground: the regulator could oversee an independent trade body, which is charged with upholding the reputation and standards of the industry without having regulatory powers,” he adds. “Controls could include the requirement for regular, public reporting of the risk profile of the loan book, default experience and the typical interest rates being charged.” However, Mike highlights that regulation doesn’t necessarily do what it is designed for. “Regulatory barriers to entry haven’t helped, for example, the investors [in] Lendy...” Is the bridging market next on the FCA’s agenda to regulate? Considering at the end of Q2 2019 it was said to be worth £4.62bn, this is merely a speck on the regulated residential mortgage sector, which is worth at least £1 trillion. So, put in perspective, and given the regulator’s historical understanding of the bridging market, it seems unlikely to be on its immediate radar for outright regulation. In the meantime, though, it’s clear that we need to do something. Maybe the industry should stop wasting its time asking for the bar, and actually get on with creating it.

43 Sept/Oct 2019

Are You Switched On?

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One Day


At a modular housing construction site One of the most complex issues facing the property market is the lack of affordable and accessible housing. The sector will have to increase the annual volume of new home construction by around 36% to the meet the government’s pledge of building 300,000 new homes per year by the mid-2020s. Large-scale modular housing company Project Etopia claims to have a solution that is environmentally friendly and more cost effective than traditionally built houses. To understand this better, I spent a day on site at it’s commuter village in Corby, Northamptonshire, which is currently under construction, to see what the future of British housing development could look like and assess what kind of investment and funding opportunities the modular housing market attracts

Words by

simon thompson

One Day

One Day

Pictures courtesy of Project Etopia


fter a 90-minute East Midlands train journey, I arrive in Corby. I’m met by Mark Lewis, COO at Project Etopia, who is waiting to take me to its commuter village. We get in his late-model Tesla and take a 15-minute drive through the drizzle and green fields towards the development site. Mark starts up the kind of forward-thinking and dynamic visionary conversation I’d expect from a Tesla driver. Lofty ideas of sustainable housing, carbon neutral environmentalism,

quality living for all—which seems as noble as it does unattainable. “For us, we want to be the Tesla of the building world,” explains Mark. “We want to help [the] government to do what they should be doing anyway, which is legislating to push low carbon within the construction sector. We are doing it because we think it is the right thing to do.” As we cruise through hills and about a dozen conventional housing developments, I curiously scan the distance for the Brutalist, blocky prefab houses that I associate with 48

Bridging & Commercial

modular schemes. Instead, we pull up to a row of four modern, three-storey brick facade houses, chic and preened, which—apart from being showrooms—are indistinguishable from any of the other developments we passed on the way here. And that’s intentional, Mark says. Modular housing is fighting a reputation for being poorly built and cramped. “The perception of modular homes with individual buyers is still not great, so we are not labouring the point with people that this a modular home.” He explains that the dream is to push modular housing’s reputation to the point to where people are actively seeking to buy them. A tour of one of the properties proves them to be spacious, flooded with light (even on such a dreary day) and, most importantly, homely. Less than 100 miles from London, and at a price of between £295,000 and £350,000, I could see it being a perfect abode for a young professional couple and their family. Just as it is externally, it’s hard to find anything about the house from the inside that makes it noticeably ‘modular’. Mark jumps up and down on the kitchen floor. “It feels the same as any other house. The only people that will know it is modular are the people that have been told it is.”

One Day

He adds that the only way you can tell the difference is by the material of the exterior walls, which are built with Project Etopia’s manufactured board. We go outside where a clenched fist and a good bang return more of a hollow ‘conk’ and echo than the dead slap I’d expect from a brick structure. Mark walks me to the construction site and introduces me to one of their project managers. As I don a high-vis jacket and a hard hat, David Fayers takes me over to a pile of boards which are ready to be used in the other 43 homes at the location. Aside from the foundation work, Project Etopia homes are built completely out of its patented boards. The magnesium oxide materials are manufactured with a steel frame filled and insulated with

49 Sept/Oct 2019

One Day

polyurethane foam, making them airtight and giving them an insulation level of 0.13 u-value, superior to the 0.16 u-value typical for a well-insulated wall in a new bricks and mortar property, according to Mark. The 2.4m x 1m boards only weigh around 90kg. They are lightweight so that they can be used to build structures up to six-storeys high without the requirement of additional framework, and up to fourstoreys high without a crane. David demonstrates how the boards are locked together. “It’s a very simple, large jigsaw.” Manufactured at its factory in Ellesmere Port, Cheshire, the panel system is calculated by Project Etopia to emit 45% less CO2 from cradle to gate, compared with using bricks and mortar. This is on top of the reduced energy use and heating costs from people actually living in the house. Adding to the carbon saving is solar PV panels along the roof, which charge an energy bank battery that powers the home. While environmental benefits of carbon neutrality, cheaper bills and quality of housing are impressive, I ask Mark if developers are really concerned about the environment. “I would say that there are not a lot of housing developers at the moment that do have sustainability at

the forefront of what they are trying to achieve.” In addition, David maintains that while the labour demands are the same, less skill is required. “It is not difficult to learn,” he explains. “You can de-skill [the process] to a degree and you don’t necessarily need to have a fully qualified carpenter erecting the building.” He adds that this is helpful at a time when Brexit is causing skilled workers to leave the UK. As the wind starts to die down, we start climbing up the scaffolding of a modular 50

Bridging & Commercial

house which looks about halfway complete. Inside is Billy Roberts, a plumber doing studwork. He says he is using a lot of the same traditional techniques he does on traditional house builds. “It’s much easier,” he confirms. “The equipment is similar, too.” He adds that the heating structure is probably the trickiest part as it’s a new system. I am told that staff do need to be trained in ‘Etopia techniques’ and be overseen by a fully qualified lead. At around 2pm, the rain starts to hammer

One Day

down. I take cover inside one of the site’s shipping container offices. Kevin Bott, one of Project Etopia’s quantity surveyors, is sat crunching numbers on a laptop, getting a handle on the costs. He says that with the building techniques, processes and materials continually being streamlined, there is a potential to be quicker and have increased financial rewards when compared with conventional developments. “I should imagine [modular homes are] going to be 15–20% more profitable than [traditional] houses.” By the time construction is completed, the Corby commuter village will be more significant to Project Etopia than simply 47 modular houses to sell. The site is a pilot serving as a proof of concept to quantify

the virtues of modular housing to investors, the government, housing associations and developers. “Now we have finished [some houses] we are expecting things to really take off moving forward,” Mark says. He explains that, at this stage, it won’t be allowing other developers to use its modular materials without oversight from Project Etopia. “What we don’t want is them to cherry pick certain elements of it, and then not deliver.” Even if Project Etopia is offering a turnkey option for developers, Mark claims that it is still difficult to secure mortgages for modular housing. “The only way you can persuade banks is for them to actually see houses being built, to see houses sold.” He predicts that, depending on the bank, it will

be two to five years before the reliability and value of Project Etopia’s modular housing—compared with bricks and mortar builds—can be quantified. He notes that banks are risk adverse and wary of what is new and doesn’t have a track record of lasting for 50 to 60 years. For this reason, Project Etopia’s next projects will be with housing associations that have funding from the government. He says it is in talks with eight housing associations. I ask Mark what kind of opportunity the modular industry could present for specialist lenders. He cites the number of houses it is projected to build: some 1,000 homes next year, 5,000 the year after and 10,000 the year after that. Funding wise, Mark notes that the development finance money is going to have to come from somewhere. “There is a huge opportunity here to be investing hundreds of millions, if not billions, of pounds into modern methods of construction [and] helping to solve the housing problem.” It seems that lenders who enter the space soon are likely to be the real winners, for both sustainable living and drawing in more business and funding opportunities.

Jake Ripley-Duggan, assistant site manager

51 Sept/Oct 2019

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in conversation


Words by

caron schreuder Photography

alexANDER chai


uch of our editorial has—as is the case in an industry bursting with vigour—centred on ways in which we can sustain and support its upward trajectory. As the conversation shifts more pointedly to the role brokers, lenders and other members of the specialist finance community should be adopting, we enlisted the help of two true veterans in working through these critical ideas. Liz Syms, founder and CEO at Connect Mortgages, began her career at 19 and has most recently backed the sector’s growth agenda wholeheartedly with the advent of the Connect Academy—the network’s first-of-its-kind adviser course that sees mortgage brokers complete practicable requirements which will usher them into and help them succeed in specialist product areas. Vocal and forthright, Liz’s myriad longstanding relationships with lenders and significant profile in the industry positions her perfectly to talk about what we need to know now. On the other hand, Chris Whitney, head of specialist lending at Enness, provides a sense of balance to Liz’s ambitions for the market. Practically a born specialist broker—a rarity as the industry increasingly recruits people with diverse professional backgrounds—his 30-odd years in the market means he has one eye on lessons we seem (not) to have learned, while the other is focused on the duty he feels to urge brokers and lenders to band together, more so now than ever. Chris’s unwavering love of broking and deal-making makes him protective of the skill, and his frank approach to where we really are in terms of a need for growth is an interesting one.


Liz Syms: I got started in the market having had a background with a large, corporate company, and my partner at the time decided to set up his own estate agency, so I jumped into self-employment as the mortgage adviser in there. It quickly became more of a letting than estate agency [and] 20-odd years ago, [that was] the first grounding in working with landlords and property investors—which is still 75% of our business. [A] couple of lucky breaks with a few contacts from people building up portfolios and, now, here we are. Chris Whitney: I’ll be 48 this year and I still don’t actually know what I want to do for a living. (laughter) I was coming [to] the end of my A-levels with no idea what I wanted to do [and] a local National Westminster Bank, as it was back then, had an open day for students. Some of my mates were going and, as I wasn’t doing anything else on that day, I went with them … I ended up having an interview [and being] offered a place on [its] management development programme, which I took, in Northamptonshire, where I’m from originally. I did a number of years with National Westminster Bank, did my ACIB (Associateship of the Chartered Institute of Bankers) exams and then [eventually] got itchy feet and an opportunity to move to London [to] work for John Garfield at John Charcol, as it was then. Really, it was just to do ordinary residential mortgages, but most of the guys there were more [from an] insurance or mortgage background, and I was sort of the black sheep of the family as I hadn’t really done mortgages before, more business banking. It got to the stage where, if anything came in that was commercial or specialist, [they’d] say, ‘Well, what do we do with these?’ and someone would say, ‘Give it to Whitney, he used to work in a bank.’ And it developed from there. I started to take these opportunities on, started broking on the business banking and commercial side of things, and that’s where I was pigeonholed and where I am today. Caron Schreuder: So, you’ve essentially been a specialist since day one? CW: Yeah, pretty much. CS: That’s quite unusual, isn’t it? Most people make a transition from something broader, don’t they? CW: I guess I was a specialist before it became a thing. (laughter)

LS: People accidentally fall into this industry. They don’t make a choice while they’re at school to become a mortgage or specialist adviser … a lucky break happens—somebody you meet, somebody you speak to—and it goes from there. [Connect] grew off fax marketing. I got a fax from an accountant saying, ‘If you’ve got anybody who would like an emergency reference for your mortgages, get in touch.’ So, I faxed him back saying, ‘Yeah, no problem. If you’ve got clients who need a BTL specialist, get in touch.’ He picked the phone up straightaway because that was his business and I helped him build a portfolio personally of 150 properties, and then, obviously, he did the same for the same sort of number of clients that we then helped. That came off the back of a fax. CW: It’s interesting in that it’s not for everyone. We both know people who are very competent ... but they’re perhaps a banker going into broking, they’re not there for many months and then they’re back into banking again. Same with BDMs: we get a lot of BDMs for lenders suddenly announcing they’re setting up their own brokerage or working with a brokerage and then a few months later you get the call, or you see on LinkedIn, that they’re back BDM-ing with a lender. It doesn’t suit everyone. LS: There’s also a difference [going from] a corporate culture to a small business. That can be quite a challenge for some people. CW: There is nowhere to hide in what we do, is there? LS: No. CS: What shifts have you seen over the last five to ten years that have impacted your roles directly? CW: For me, the biggest one is where we actually get our money from . . . when I first started, it was pretty much all banks or subsidiaries of building societies or building societies directly. The bridging or specialist market back then was probably three or four [lenders] and, frankly, seen to be a bit of a dark industry. Some would say, probably, a bit dodgy. It really was lender of last resort. Even back then, the lenders used to try to sell the more expensive money on timescales, but you could get RBS to turn a deal around in the same amount of time as someone who wanted to charge 14-16% interest rates. It was almost a market that just wasn’t

needed. Only if you didn’t have the right contacts and you were unlucky enough to have a situation where you needed that type of money would you go to that type of lender. LS: When I started at Prudential, we had three lenders and we weren’t paid proc fees. So, you didn’t do mortgages then in the way that we do them now because you’d only do a mortgage if you were doing the endowment at the same time. There are so many lenders to choose from now. Even before the credit crunch, we had lots of lenders, but now we’ve got lots of specialist lenders in the market, trying to get a small market share. That creates a massive amount of choice for advisers and clients, which is fantastic, but it also creates challenges for [brokers] in navigating the specialist market ... [They may have a] scenario, this particular set of things [their] client needs—how are [they] going to match that up with 150 lenders out there? And that’s not including 150 specialist bridging lenders; you’ve got such a lot of saturation in that market. CW: I thought that the other day: there are hundreds of lenders. And I thought, well, actually, could there be thousands? There are so many and a lot of them aren’t necessarily branded names. [It] doesn’t need to be small sums of money; some of the amounts that family offices lend can be quite substantial, but they are relatively off-radar. When you read in the press about the size of the industry, I don’t think anyone has a got a real handle on [it] at all. LS: And, also, [there are] lenders who come into the market with maybe a little bit of money to lend, but they think they’ll get a better rate than if they put their money in the bank or building society. They’re not really the sorts of mainstream lenders that, in my view, brokers should be using... CS: What sort of due diligence do you operate when looking to work with a new lender? LS: The most important thing in this moment in time is to understand how they’re funded. Have they got more than one source of funding? We’ve seen scenarios where lenders have suddenly pulled out of the market, and what people don’t necessarily see is the knock-on effect that it has because of the time it’s taken to get to that point. If they were just about to exchange contracts, for example, and that funding has been pulled, it’s not necessarily the fact that

57 Sept/Oct 2019


“Fee-taking is a problem. While no one is necessarily hiding it, whether we like it or not, based on my experience, both borrowers and less wary brokers are very headline rate driven”

they’ve lost a survey fee or that it might be refunded to them, it’s that they might have lost six to eight weeks’ worth of underwriting getting to that point. The strength, flexibility and range of funding options, for me, is quite important. Also, particularly in the bridging market, what do they do in situations of default? How flexible are they, what extra fees and costs will they apply, will they extend? I have seen circumstances where clients have fallen into trouble through no fault of their own … it’s understanding what that bridger is likely to do in those scenarios and what options that client will have. CW: I think the market tends to be quite incestuous anyway, so anyone new coming in, if they haven’t made a big fanfare about it in the press (which most do), the first thing you do is check them out. Who owns the company? Who’s working there [and] where were they before? It almost rings alarm bells, if [no one seems to know], after making a few calls to other brokers … The industry is quite close knit. LS: I agree, but there are also lots of pockets of private, bridge-type funding, where people have got a few million pounds and they’re going to do some bridging. We get approached every week by somebody with some funds who wants to be able to access our distribution and lend. When you dig a bit deeper, [they] don’t want you to market it to the whole of the network because actually [they] can’t cope … You’ve got to be wary of [this] if you’re new in the market because a lot of those [lenders] will be trying to tempt brokers, potentially with high commissions etc. CW: Sometimes it can work in the broker’s favour, though. Quite often, you’ll get someone come into the market and they’ll approach you and say, ‘Look, we’re not lenders per se, this is the background to the family or company and we do manufacturing or something like that, but because of our background, we have a very good insight into, say, commercial warehousing or light industrial, and actually...we’d like to lend money secured against an asset class which we understand.’ I don’t think there’s anything wrong with that and it can be quite useful. LS: We’d approach [unbranded lenders] with caution because generally if they have a limited pot of funds, I have seen them be more aggressive when it comes to situations like default. 58

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CW: It all comes down to value-add: what value are you giving me and my client, the borrower, over and above any other options in the industry? LS: Service, usually, they say... CW (pauses): Yeah... (laughter) CS: Liz, on funding and default fees, do you think these are the kinds of things that every broker, as standard, should understand? LS: I think it’s something the industry should look to try to standardise because when you are dealing with a BTL or residential mortgage, you get a set of terms that (using the KFI, for example) tell you all the things you need to be aware of in a standardised format—but we don’t have that in the bridging market. Therefore, it’s difficult without a broker a) understanding what the terminology is and b) then asking the right questions. [For example], is interest being rolled up? Is there the possibility it could be serviced? Is it an interest rate that’s been discounted and if you go into default, are you going up to the standard rate? Or is there a default rate that’s been added? Those sorts of things are the questions that I feel advisers should be asking before they make a recommendation. It might be that they’ll still make that recommendation, but it’s about letting the client be aware of what’s going to happen in the worst circumstances. CW: I think it’s essential for us to do that; we charge fees for our services— that is what the borrower is paying for: your advice, your knowledge of the marketplace... At the end of the day, what any broker wants is to protect the lender and the client as well; nobody wants to have an unhappy lender or client. CS: Has the lack of transparency around default fees increased with the number of lenders in the market, or has it always been an issue? LS: With the number of lenders in the marketplace and the increasing amount of loans, it’s just more at the forefront of people’s awareness … they’re having to ask those questions and understand it a bit more. CS: Would you venture to say that with so many lenders in the market, that margins are compressed and fee-made profits are going up?


LS: …There are going to be certain bridging lenders … In my view, you’ve got your very prime bridging lenders that are also lending across other parts of the market, they’re large, corporate names; then you’ve got a second tier that are maybe very strong, they’ve got a good reputation, but they’re lending maybe just in the bridging market; and then you’ve got this other pocket of lenders. I’ve come across some crazy things … [some of these lenders will] take a telephone number from a broker, contact the client and do it all, and give the broker 2%. CS: And advertise it on LinkedIn... (laughter) LS: There’s no advice given to that client whatsoever, but the broker is still pocketing the same amount of commission as they would do if they were doing the right job for that client.

“I’ve come across some crazy things … [some of these lenders will] take a telephone number from a broker, contact the client and do it all, and give the broker 2%.”

CW: Fee-taking is a problem. While no one is necessarily hiding it, whether we like it or not, based on my experience, both borrowers and less wary brokers are very headline rate driven. A great example of this is one lender, not so many years ago, said, ‘Right. This fees thing is a nonsense. What we’re going to do is come out with a headline interest rate, there’ll be no arrangement fees, no exit fees, we’ll pay our own legal fees, we will pay the valuation fee.’. . . we think that’s a really fair and great way to do it and innovative in the industry. So, they put it out there. Obviously, the headline rate has to be higher than everyone else’s because there’s no fees. Try as they might, it did not work at all. They had that concept for literally weeks, a couple of months at most … people just didn’t buy into it.

LS: Disclosing the amount of commission? I mean, I think disclosure is important because transparency is important, so if the broker is saying, ‘I don’t want the client to know what I’m getting,’ I would be concerned about that. You have to [include that information] in other markets, so why would you not in bridging? CW: The majority [of lenders] do, but there are many that don’t. Speaking to the ones who don’t, [they] feel they would like to do it, but feedback from some of their brokers is, actually, we wouldn’t give you the same level of business if you disclose these fees. CS: Ultimately, the borrower, in this instance, doesn’t know what their broker is making out of the deal (despite this cost being something represented in/factored into the overall cost to the client). CW: No. The broker is still free to disclose it, but they’re not under any obligation to do so. LS: Unless it’s a regulated mortgage, you’re in a completely unregulated market, which is where a very large proportion of bridging sits. CS: An educated borrower would surely want to see terms from a number of lenders? LS: Borrowers don’t generally get to see the research that the broker has done, but they get to see a final illustration … [compared with KFIs in the BTL market, for example] in the bridging market, they’ll get a two-page terms document, or a bit more when they get the formal offer from the lender.

LS: I think the same applies, though, to other markets, because lenders often have to have headline rates just to get to the top of the sourcing systems. If they’re not at the top, how are they getting known and recognised? Although, it’s different in the bridging market as you don’t have the same level of sourcing system[s]. But headline rates have always been the attraction. [We teach] our advisers to think mathematically about what is correct, so comparing the headline rate plus fees and spreading it over the likely term of the loan, or the product term rather, and then comparing that with others that may have low fees but a higher rate. And also understanding what your client wants: are they looking for the cheapest monthly payment, which could be the lowest rate, but not the lowest overall cost?

CS: Isn’t the fee a broker earns indicative of the reasons why they made that lender choice? So, as a borrower, am I not able to insist on knowing that information? LS: Brokers who are doing the right job by their clients, will [disclose the fees]. Because the market is not regulated, there isn’t a regulatory obligation to do so, other than when it’s a residential bridge. If you’re a broker in the regulated 60

Bridging & Commercial

Simon Thompson: During our research for the default article [Ed: also in this issue p28], a lender I spoke to reported having brokers ask for proc fees to be removed from the offer to the client—what are your thoughts on this sort of thing?


market, because you’re used to doing regulation, issuing terms of business, disclosing your fees and so on, generally speaking [you’ll] do the right job. It’s the fact that such a large part of this market is unregulated that you’ve got people who sit outside of that. CW: If you’ve got an unsophisticated borrower, a broker can quite easily say, ‘Right, this is really the only loan that suits you, this is the interest rate, 2% lender arrangement fee, obviously I don’t work for nothing so I’m going to charge you 1% as well.’ And the borrower has no idea that that broker is going to get paid 3% for that deal, which they may or may not think is value for money. CS: Chris, you mentioned the fact that you can ring up a peer or colleague in the market and ask them about a new lender. In general, what’s the relationship like between brokerages? Do you consider it to be quite a collaborative market? Or is it as competitive at broker level as it is between lenders? CW: People like to know what’s going on. Are you busy [or not]? Which lenders are you finding are giving the right service? But I guess it is a little bit cliquey... You’ll get people who you’ll see as offering similar levels of service to yourself, perhaps a similar level of experience. But I think there is a lot of collaboration between brokers. I spend a lot of time meeting up on a regular basis with lenders, but also lawyers, accountants, receivers, administrators—all people that have some sort of impact on our industry. Quite regularly, I’ll get the heads-up from a lawyer or accountancy firm [saying], ‘Look, we’ve got someone that’s going to be new into the lending market, we think it’s going to be interesting for you to meet them.’ That sort of communication is essential. That’s how we learn; that’s our professional development. Everyone talks about it, but there are no industry qualifications, there is no go-to [for] how to be successful in the specialist finance market—you have to go out there and find it yourself. CS: Would you say that the broker market has grown at the same pace as the lender market? LS: This would be purely perception, but probably not. The lender market has exploded and most of the brokers I know are very busy and everybody’s trying to recruit more brokers. For me, getting that fresh blood into the

industry is very important at this moment in time to cope with the increasing volumes that are available. CW: I think it has grown—and I think it has grown in pace with the increase in the number of lenders. Partly because lenders are a lot more visible in the public domain: you’ve got the P2P lenders advertising, ‘You can borrow with us, you can lend with us, this is how you do it, it’s dead straightforward.’ You’ve got companies taking out adverts on TV, radio . . . I’m not sure it’s growing in a good way, necessarily. I think you’ve got a lot of people out there trying to be brokers because they’ve seen an advert … we then get them saying, ‘We’ve told this particular client we could get [them] X amount of money within a certain period of time, this lender’s the only lender we know, they said they can’t do it, can you help us out?’ They’re probably people who shouldn’t have taken the deal on in the first place. CS: This is the crux of the conversation: the right type of growth. How do we do it properly? What roles do you play as incumbent brokers? What should the lending community be doing to ensure standards are kept up? LS: I have a few views on this. [For] actual brokers coming into the industry, who are the right sort of quality, there is a limited route in terms of how they become a mortgage adviser. The traditional route is to get a mortgage qualification, such as CeMap, to work within a company, build up their competent adviser status [doing] general residential mortgages and, at some point, maybe a few years down the line, they’ll start to look at more specialist areas. That is quite a slow burner. Then you’ve got those who perhaps have actually got knowledge already of the industry, maybe they are surveyors or accountants [who’ve] been exposed to this [market] and they want to help people in the specialist market. Now, you don’t need a CeMap or mortgage qualification to do that, so it can be off-putting to some of these people to become mortgage advisers because their thought process is, ‘Right, I’ve got to get my CeMap qualification, then I’ve got to go through a competent adviser status before I can see the other side where the specialist [space] might be.’ We try to turn that around and do it a bit differently. We’ve already spoken about the fact that a large percentage of the specialist market doesn’t actually get regulated by the FCA. You’ve got your business BTLs, your commercials

to limited companies … areas like bridging and second charge business loans … areas that are not regulated. Then you’ve got the other risk … people [saying], ‘Ok, it’s not regulated, I don’t need to be FCA-authorised, I don’t need to have a qualification, so let’s just dive in, get a few clients and phone [someone] like Chris and say, “Right, can you help me with this deal?”’ It’s a combination of getting the right knowledge and training, being in a regulated environment and having certain practices that you follow as if you were regulated without actually having to go through a qualification which, maybe controversial, for most people, they [won’t] use the qualification part of it afterwards. Because that’s not what the job is: [it’s] the knowledge, researching the market, the analytics, understanding your client and which lender is going to help. CW: I agree with all of that. It’s not some sort of dark art that you can’t learn. Enness, over the last few years, have had a policy of taking people from outside the industry, mainly graduates or people they feel have got the right attributes and want to learn. ST: What are those attributes? CW: It’s more about the desire to be able to do it, rather than the ability. If you’ve got the desire, I think the rest will follow. LS: There does need to be a certain level of academic [ability] in there; it’s quite a mathematical/analytical industry. If you’re not good at some of those things, you will struggle with some of the others. ST: Structuring deals, is that the mathematical aspect? LS: Yeah, it’s the analytical bit. [Gathering] information about [a] client: who are they? What are they looking to do? Where do they live? What are their ages? How much do they earn? What are they trying to buy? What does that property look like? Are there any quirks? [Out of] 150 lenders, because of this quirk, only 50 of them are going to lend to this client. And now, looking at the property, because of that quirk, only 20 of those are going to lend on this particular property. Now, I go into the next phase of analytics. Out of those 20, which is going to be the most cost-effective solution, taking into account their longer-term gains, as well. CW: The elements, when you’re broking a deal, are just so many. Once you’ve done

61 Sept/Oct 2019



“Why should we try to grow the market? It’s a supply-anddemand thing. You know, if there’s more demand from borrowers than there are brokers, there will be more brokers”

the number crunching and the analytics about asset and type, you’re then on to: who are their lawyers? Which valuers are they going to use? CS: (to Liz) So, speaking from the point of view of running the Connect Academy in which you are seeing people go through the practical, workable knowledge and also graduates and people outside the industry come in, what would you say is the biggest stumbling block or the hardest part of this transition into specialist finance that you’ve witnessed? Is it the structuring or is there more to it? LS: Yes, partly because there is such a lot of choice [when it comes to] lenders. There’s a large amount of criteria. We give our academy attendees access to things such as Twenty7Tec, Knowledge Bank and so on, but when you start to talk to them about how they research some of the real detail around bridging and commercial... It’s about teaching them … how to build relationships, get to know lenders, understand their product offering— because none of those lenders actually have a very black-and-white product [set] and that’s the problem with the systems. You’ve got to get all of those ducks in a row. It’s about encouraging them to spend as much time as possible—we get lenders that come on the course and talk about those things—post-course [making] contact with those lenders, [getting to know them], [and] to have them come in regularly into their offices so that they can continue that learning curve. CW: All of the things that Liz has just said...You’ve not just got to be able to do them, you’ve got to enjoy doing them. LS: Yeah, I agree. CW: ... I think that’s where we see some very competent bankers come in as brokers and then after a few months just decide, ‘You know what? I’m just not enjoying this. I’m outside my comfort space. I’m going back to what I know.’ You’ve got to enjoy going out talking to people; you’ve got to have fun broking a deal, which is why I choose to work with Enness and not my own brokerage or on my own—it’s fun broking the deals. I am not someone that enjoys running a business per se; I enjoy broking. CS: Would you both agree that we need to grow the broker side of the market for distribution purposes, given that there’s so much liquidity out there?

LS: I absolutely do believe, from my own business perspective, that there is demand for more and more specialist brokers. Our business model is 75% specialist, 25% mainstream. For other businesses that I talk to—not yourself obviously, Chris—it’s the other way around. But I’ve seen other brokers [and] networks say, ‘Hang on a minute, where’s the market going to be in the next five, 10 years for your traditional residential remortgage? It’s probably going to be a much more electronic process because that can happen with some of those more basic products. But when you look at the specialist market and all the complications we’ve just been talking about—not complications, but the analytical part, the understanding of the lenders’ products, the relationships and so on—that’s not very easy to replicate in a system. Therefore, that creates an opportunity for advisers who are currently very competent [in] the mainstream market to actually give longevity to their businesses by also becoming more and more involved in the specialist markets. CW: I think I probably agree slightly on that, only because we do slightly different things. LS: We do, yeah. CW: From my perspective, why should we try to grow the market? It’s a supplyand-demand thing. You know, if there’s more demand from borrowers than there are brokers, there will be more brokers. I don’t necessarily feel we need to just go to someone and say, ‘Look, 80% of your business is regulated mainstream, you’re doing it with the high street names, but actually we can help you to go into that specialist space.’ Which is what Connect does and is very good at. But from my, I guess, selfish perspective, that’s not something I particularly want to happen. LS: He doesn’t want me taking on more advisers that are more competition, basically. (laughter) CS: Who’s responsible, ultimately, for an overheated market? Because some of the practices that we’re seeing from lenders, let’s say, could be as a result of them not being able to get money out of the door fast enough, [a case of] not having enough advisers out there to help borrowers, especially because it’s such an intermediated product. So, there might be borrowers out there, but there aren’t enough advisers for them [and] that is having an effect on practices, from a

63 Sept/Oct 2019


“We’d approach [unbranded lenders] with caution because generally if they have a limited pot of funds, I have seen them be more aggressive when it comes to situations like default”

lending point of view, that are a little bit on the sketchy side because they need to get the funds out no matter what. Does that change your view on it slightly, Chris? CW: Yeah, I think there are some worries out there. I remember in the last banking crisis having a discussion with another broker and we [discussed] what lessons have been learned from that. We both said at the time, ‘I don’t think we’ll see these mistakes being made again in our lifetime.’ And we are already seeing some of [them] being made again, which has been quite shocking, really, because it was not that long ago. LS: One particular example is, prior to the credit crunch, with BTL mortgages, for example, somebody could buy with a bridge on day one and then remortgage on to a BTL on day two. So, if they had been able to negotiate a below market value deal—maybe because it was less regulated in terms of distressed sellers and things like that—you’d get bridge companies coming in and lending on day one, so they could buy it and then remortgage it for market value [on] day two. So, what happened is, the market following the credit crunch reacted to that and brought in initiatives such as the six-month rule, [meaning] you cannot remortgage until you’ve owned the property for six months, which kind of put a block on that. Then, there were other schemes that came about which were back-to-back. So, I’d buy it and I’d sell it to you the day after and that got around it. Then they brought in [other rules]. So, you couldn’t buy the property unless the owner had had it for six months. That blocked that out [but] I’m seeing it happening now in the bridge market that doesn’t have those same regulations … the bridge lenders are now the ones that are getting exposed to those issues because they haven’t been through [the challenges] that the BTL lenders did. That’s why I feel we need to increase the transparency and knowledge and, dare I say it, regulation—even if it’s some form of self-regulation... CW: There’s not just one big problem that we can all point at … this is lots of little things. Go back [over] 10 years, [in] the commercial market dual representation was commonplace and then [after] your subsequent crashes, everyone found out that dual representation had some real problems with it. Banks lost a lot of money over dual representation and it was stopped virtually overnight. Now we’re getting lenders saying, ‘Oh, we offer dual representation’ … we decided a long time 64

Bridging & Commercial

ago that it wasn’t a good idea. LS: But there is a lot of demand in the market for dual representation. So when they’re trying to get their market share, it’s an angle they can go for. But have they learned the lesson in terms of controlling that dual representation? I think it is more controlled because that dual representation is often ‘we’ll allow you to do it, but you’ve got to pick from one of the three or five people that we’ll allow you to do dual representation with’. So, they’ve vetted those as opposed to allowing them to have dual rep with any solicitor they choose in the market. It is slightly different from that perspective. CS: If we are already seeing some worrying trends or history repeating itself, something like reintroducing dual rep at a time like this when there’s so much pressure on lenders sounds, to me, like a disaster waiting to happen. It doesn’t matter to me whether the solicitor firms have been carefully selected or not. That’s going to come back to bite lenders, don’t you think? Especially the ones that [don’t] have the experience of 10 years ago because they’re only five or six years old. CW: It’s the old saying: past performance is no indication of future performance... however, it’s a pretty good indicator. (laughter) So, I would agree. LS: I think the problem is that the absence of dual rep in both commercial and bridging probably [creates] the most problems in terms of the conveyancing part of the process, because you’ve got two solicitors talking to each other, one acting for the lender, one acting for the client and both of them kind of clash. You don’t always get that smooth ride. Particularly if the client’s solicitor is not very familiar with bridging in the first place, which quite often happens. You get quite a lot of demand coming from consumers and brokers saying, ‘Can we have just one solicitor who can get on with it and not have all this back and forth?’ Which is why it’s actually quite popular. But it’s how it’s controlled [which] is the important thing. CS: What sort of responsibility do you feel as longstanding members of the broker community to ensure that the reputation of the market keeps improving? CW: I would like to do more and should do more, but feel that I’m perhaps held back a little bit. Is it right for me to go on LinkedIn and say, ‘I’ve had this awful


experience with this lender,’ or ‘This lender has taken a fee from my client and now [refuses] to refund it, even though it’s them that are walking away from the transaction and not the borrower’? I feel like I ought to put that out there and I do, informally, to perhaps brokers that I’m close to, people like Liz...But I’m nervous about putting information like that out into the public domain; I don’t want to be seen as telling tales outside of school. It’s quite current, actually; I’ve got this sort of dilemma going on: how much do I put out in the public domain? I don’t want lenders to think, ‘If I put a step wrong with Chris Whitney, he’s going to have it plastered all over LinkedIn.’ LS: You don’t necessarily have to name the lender to get an educational piece out there by advising brokers on things to watch out for based on that experience that you’ve had. You can actually say, ‘I had this experience with a lender who will remain unnamed. If I had to do it all over again, I would ask this question [or do] this.’ You can get the educational bit of it out there. CW: Yeah, I have tried that approach, but that leads to responses [like], ‘Who is it? Name and shame!’ Should we name and shame? LS: Depends on the relationship you want to keep or not, doesn’t it? (laughter) CS: And should you be keeping a relationship with someone who you’re one step away from naming on LinkedIn? LS: Look, every broker, every lender, every solicitor—they all make mistakes. None of us are perfect. But I think if it’s a continual thing then, yes, name and shame and don’t deal with them again. CS: But are there other ways of us doing this than on LinkedIn, which is coming up a lot recently. Then there is a lot of anecdotal chat about things–how helpful is that? So, to your point, Chris, is that the way one should be going about it? Are there other ways to raise standards that don’t involve LinkedIn? There must be something else that we can do. CW: If you go back perhaps three years ago, there was a lot of focus on trade bodies. The ASTL [Association of Short Term Lenders] was having quite big conferences, was quite a big name... But interest in trade bodies seems to have waned recently. I don’t really know why—I think it should be going in the

opposite direction, if anything. I think we should have more dealings with trade bodies, and not necessarily trade bodies, but [one] trade body for the industry. LS: As you probably know, I sit on the board with FIBA [Financial Intermediary & Broker Association] and it comes up a lot, [topics such as] whether there should be some form of qualification in the bridging market, for example. How do we get more education out there, more knowledge? What is the best structure? Because what you do find is a lot of the time the people that you see at events are the same people at the next event run by somebody else, and [so on]. There’s a whole market of people that we’re maybe not reaching and getting some detailed knowledge and understanding to who could maybe do a great job in this market if they have the tools to do so. But I think webinars and things like that are becoming more and more popular … giving people the choice [regarding] how they learn to help raise those standards. Because it’s the knowledge that raises the standards as much as anything.

question, but in this utopian sort of situation—where brokers band together, creating a set of self-regulatory principles—that would have to rely on all lenders buying into it. Otherwise, you’re going to create an underground market where you’re going to have lenders still doing business with those who don’t necessarily do the right thing. Do you think that the forces are strong enough in the broker world to drag the lenders kicking and screaming into this? LS: The bigger lenders, those A- and B-tier lenders, will happily do it. It’s the C-tier lenders that [are] just trying to get business from wherever they can get [it]. CW: The lenders, in isolation, could do it and say, ‘We’re just not accepting your business unless you’re part of this.’ Also, brokers could do it by [giving] the bulk of their business to lenders who are part of this organisation. But it makes total sense for both sides to do it—we’re just two different sides of the same [coin]. We can’t have one without the other.

CW: I think there’s enough of us in this industry now where we should try to push for some sort of voluntary self-regulation. ST: What would this look like? CW: If you go back to the FCA thing, it’s treating customers fairly—that’s what it comes down to. LS: It’s that disclosure at the beginning about what you’re earning, what you’ve researched [and] why you’ve recommended that particular product. CW: We recently had a lender who took an application fee at a stage where they weren’t actually internally ready to, decided not to proceed and are now trying to keep that application fee. Now, obviously, you know we’re doing something about that. It would be nice if they were part of a trade body and we were part of a trade body [and] we could actually go to that body and say, ‘We suspect there’s been some dishonest behaviour here. We would like to report it and we would like it to be investigated.’ But we don’t really have that at the moment. LS: I think lenders do have to be part of this journey. CS: At this point, who controls the market? I know it’s a pretty pointed 65 Sept/Oct 2019



Almost of specialist finance appointments come from

Words by

simon thompson 66 Bridging & Commercial


Specialist finance companies are increasingly strengthening their teams with hires from outside of our nuclear space.


outside the sector

29% 13%

35% 67 Sept/Oct 2019

Of the 93 appointments in the specialist finance market covered by Bridging & Commercial, Development Finance Today and Specialist Banking between 1st May and 31st July 2019, 43 hires, or 46% of the total, were sourced from businesses outside the specialist finance sector. Fourteen of these appointments were from high street banks: four originated from Metro Bank, three from Barclays, three from Lloyds, two from Santander, and one each from RBS and Virgin Money. Six of the hires joined from technology companies in a variety of support, operations and lending roles. As explored in issue three, there is not enough talent in the specialist sector to go around, which has led to a bidding war between companies. James Warburton, director at J2 recruitment, says he is seeing more lenders looking at the bigger picture when it comes to employment backgrounds. “There are some real gems out there [in the market] that are able to relatively quickly learn new criteria and a number of our clients that have ‘widened the net’ have enjoyed some real success stories by taking [this] approach.” James asserts that bringing in outsiders is essential to fuelling the growing specialist market. Regional hires—which we have defined as anywhere outside of London and the South East—made up more than a third of all hires. Of all these regions, the North saw the most appointments. In terms of roles, BDM and sales positions made up the largest contingent of recruitment over the period, accounting for 29% of the total hires. While there was notable recruitment in sales teams, there were only four appointments dedicated to underwriting roles. Some 13% of all positions were made at the C-suite level. Our recruitment data shows that not one woman was appointed in any of these C-suite roles. This is despite the fact that over 350 organisations in the sector have now signed up to the Women in Finance Charter, with most of these companies committing to having at least 30% women in senior roles by December 2021. Overall, a total of 33 women and 60 men were hired during the period, putting female representation among the recruits at 35%. In January, they made up 33%, showing a slight uptick.

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health and wellbeing supports our culture and enables colleagues with a

sources of support available. “The work we’ve undertaken around mental

challenges while at work. First aiders also provide signposting to other

guidance for other colleagues who may be experiencing mental health

environment, mental health first aiders are trained to provide support and

In the same way that a physical first aider might function in a workplace

Mental health first-aiders programme

fresh talent joining our organisation at all levels, from graduate up.”

of individuals on leave. The policy is regularly cited as a key draw by

given fresh opportunities as they step up to support a greater mix

unforeseen positives. “We have seen teams galvanised and individuals

to an Aviva Investors spokesperson, the policy has driven many

no minimum length of service or qualifying earning threshold. According

a parent. The entitlement is offered to all full- and part-time staff, with

regardless of gender, sexual orientation or how the employee became

and unpaid parental leave and flexible working options upon returning,

business’s paternity leave programme offers equal amounts of paid

equal importance regardless of gender, the global asset management

as when they become parents. Acknowledging that parenting is of

is inevitable in any system that treats men and women differently, such

Aviva Investors believes that unconscious hiring and promotional bias

Equalised parental leave

progress in the firm.”

seem daunting. It has given me ideas about how to accelerate the pace of

to engage more openly and routinely with issues that need airing, but can

stupid questions and give candid reactions. It has given me the confidence

nervous in this area, reverse mentoring gave me a safe environment to ask

reverse mentoring. As a middle-aged white man who is well-meaning but

a senior mentee in the programme. “I’ve been blown away by the force of

area leader for litigation and dispute resolution at Clifford Chance, has been

that the programme is an eye opener. Matthew Newick, global practice

to partner in May this year. Many participating senior colleagues have said

complex issues in a safe and relaxed environment.” Jennifer got promoted

us to explore a wide range of issues from day-to-day challenges to more

than we might have expected helped bridge the ‘seniority gap’, allowing

with my mentee on a human level. Learning that we had more in common

about the programme for me is that it provided the opportunity to connect

firm’s most senior partners when she was a senior associate. “The best thing

setting. Jennifer Mbaluto, partner at Clifford Chance, mentored one of the

conversations and share their views about the workplace in a confidential

mentees meet four to six times each year, and are encouraged to have frank

people to hear and learn from junior colleagues. Paired mentors and

experienced, senior staff. The initiative is about creating a forum for senior

experienced black and minority ethnic (BAME) colleagues to mentor more

Inverting the typical mentoring relationship, this programme sets up less

BAME reverse mentoring


lives. “Children starting primary school is an important milestone for any

programme enables them to be present for key moments in their children’s

a-half additional paid days off work during a child’s first school term, the

benefit to support employees with children. Providing up to eight-and-

Financial technology company IRESS introduced the starting school leave

Starting school leave benefit

matches the criteria.

cultural fit is often more important than getting an applicant whose CV best

all criteria and should feel encouraged to apply.” Clare says finding the right

also be worth adding a footer that states applicants do not need to meet

advert through the online tool that analyses the linguistic coding, it may

the process it goes through before posting a role. “As well as running the

Clare Jupp, director of people development at the Brightstar Group, explains

interpersonal, co-operative, collaborative, inclusive, loyalty and supportive.

more feminine language inclined to draw more gender diverse talent are:

decisive and ambitious can bias the response to an advert. Examples of

for roles. The use of so-called masculine coded words, such as competitive,

The way a recruitment advert is worded can put some women off applying

Job post wording

around this time is critical in helping people settle back into their role.”

work after a period of time away can be daunting for employees and support

self-reflection journal being particularly welcome. We know that returning to

early days, the initiative has been well received, with the mentor support and

for a mentor to support employees in those vital first weeks. Although it’s

into the workplace. It offers support, guidance, flexibility and an opportunity

programme provides practical support to help employees transition back

Ageas, says that its scheme began in April of this year. “Our returnship

required skills, where relevant. Lyn Nicholls, human resources director at

support and given a structured development plan for participants to update

As workers transition back into their roles, they are guided by mentor

working as an opportunity to support an employee’s return to the workplace.

before, during and after the proposed leave period and offers flexible

career breaks. The staged programme facilitates support conversations

maternity and adoption leave, absences related to long-term illness, and

Returnships are designed to support employees returning to work after


by its female staff.

fact that 63% of Fiduciam’s revenues so far this year have been brought in

input to decisions. Johan adds that the strategy’s success is shown by the

job. Once in the firm, people of all nationalities, genders and levels deliver

influence its recruitment so that it always employs the best person for the

culture.” This intentionally helps to break any subconscious bias that may

best candidates emerge at the end of the process, irrespective of gender or

employees of both genders and of different backgrounds. This ensures the

Groothaert, CEO at Fiduciam. “Those applicants are then interviewed by

difference and promoting an environment that brings cognitive differences

we tend to attract a more diverse [range] of applications,” explains Johan

and nationalities. “By positioning ourselves strongly as an equality employer,

balanced talent pool spread across candidates from several backgrounds

When interviewing potential employees, the lender draws from a gender-

retain the best talent, regardless of gender, race, sexuality or disability.

languages, Fiduciam says inclusive hiring has allowed it to attract and

With 45 employees from 15 different countries, speaking over 20 different

Culturally-inclusive hiring

determine your future.”

that levels the playing field. Where you have come from should not

agenda for many of our clients and we’re proud to support a programme

Ayre, managing director at BRUIN Financial. “Diversity is at the top of the

unfortunately this is especially pronounced in financial services,” says Emily

Foundation. “The UK has one of the poorest records for social mobility and

is one of many companies that mentors students through the Social Mobility

support and guidance and internships with top employers. BRUIN Financial

email, tailored skills sessions and career workshops, university application

to achieve their aspirations. Participants get mentoring from professionals via

people insight into top professions and provides them with the skills needed

opportunities—particularly jobs in the City. The programme gives young

to entry for talented young people who lack access to a range of career

the Aspiring Professionals Programme works to break down the barriers

society miss out on opportunities. Run by the Social Mobility Foundation,

connected friends and family, many of the best and brightest in British

With little or no vital ‘social capital’, such as access to opportunities through

simon thompson

Words by

colleagues as mental health ‘advocates’ by 2021.

also be struggling.” Lloyds Banking Group has committed to training 2,500

illness early, seek help when needed and look out for others who might

friends and family. We want to empower them to spot the signs of mental

knowledge to support and protect their mental health as well as that of their

Group. “We need to do all we can to equip our colleagues with the skills and

responsible business, inclusion and diversity director at Lloyds Banking

and customers with mental health conditions to thrive,” says Fiona Cannon,

have physical health, and with the right support we can help our colleagues

is to shift mindset to recognise that we all have mental health, just as we all

open conversation about mental health among colleagues. “Our ambition

thrive at work. The programme challenges perspectives and encourages

colleagues living with mental health conditions, so they all can succeed and

the skills and knowledge to take care of their mental health and support

focuses on the main issues affecting colleagues and equips them with

training them up to be mental health advocates. The advocates programme

Lloyds Bank is working to support staff with mental health challenges by

Advocates programme

applicants with disabilities to work at the Bank in the future.

understanding of how it may become more accessible and encourage more

to the fore.” In turn, the programme has allowed the BoE to gain a greater

Mark Carney, governor of the Bank of England. “That means embracing

and loyalty of employees. “Happy employees stay with you.”

Aspiring Professionals Programme

isn’t enough to reflect diversity; we also need to choose inclusion,” says

adds that flexible working has a positive impact on efficiency, productivity

Businesses that sign up to the Women in Finance Charter and other inclusive initiatives are signalling their intent to improve diversity levels in financial services—but are unlikely to experience immediate results. While research by global management consulting firm BCG shows that most companies, worldwide, have diversity programmes in place, only about a quarter of employees in diverse groups report any personal benefit. In light of this, we looked at some of the most ambitious and interesting schemes and how they aim to truly advance all staff members

and encourage other companies to see this example and do the same. “It

working to change misconceptions attached to disabilities in the workforce

challenges. At this stage, the positions are not permanent. The project is

(BoE) offers work placements for people with sight loss or learning

As part of a collaboration with UK charity SeeAbility, the Bank of England

Disability work placements

25 employees are currently taking part in the programme.

because IRESS is supporting me both at work and at home.” Approximately

fantastic. It made me feel like I’m giving him the best start to his education

conversations about his classroom, teacher and new friends was absolutely

school, as well as having the time and space for those special first-week

there for my son when he started school. Being able to take him to and from

benefit, adds: “It meant a lot to know that IRESS was supporting me to be

a senior technology delivery leader at IRESS, who took advantage of the

that little bit easier and helps employees stay happy and productive.” Jenny

that could help boost your company’s diversity work,” says Debra Knott, communications manager at IRESS. Cindy Blay,

family and we wanted to make the transition easier for the parents that

early for a weekend away to avoid the traffic. We find that it helps make life

to attend a special assembly or school play, for appointments or to escape

attract and retain talent, especially as they enter parenthood. “It could be

Commercial Services, says its work options have helped the company

gives members flexibility for personal time. Jenny Oldfield, CEO at Veritas

As part of a remote working programme, Veritas Commercial Services

Remote working

businesses in the sector.

become mental health first aiders, with the goal of rolling it out to other

internally and has begun training individuals at other building societies to

to look out for signs of deterioration in others. The scheme was developed

also encourages colleagues to maintain their own mental wellbeing, but also

success of our progress.” She adds that the mental health first-aider training

Society. “Having a well-articulated wellbeing strategy has been vital to the

without barriers,” explains Becky Hewitt, director of people at Leeds Building

diverse range of skills, experiences, backgrounds and opinions to flourish


Join us on air at the FP Show on 6th November—the mic is yours. To register for the expo, find out about our collaboration with TAB and more, scan the QR code below.

Want to become a specialist mortgage advisor? What are the benefits of the Connect Academy? You’ll receive training for the more specialist sectors of the mortgage market, including Buy to Let, Commercial, Bridging and Development Finance and Business Loans Regulated to trade with full compliance support; We offer training on how to generate mortgage enquiries and market yourself; You’ll have access to tools like OMS and Knowledge Bank; Case Placement and full case management support; One of the largest network panels with over 130 lenders; In-house packaging team; Low cost network fees; Excellent procuration fees;

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We are revolutionising the entry of broker's into the world of specialist finance and mortgages. Don’t miss out on your chance to attend, book today: 01708 676 135


CONNECT academy

Call us on 01708 676 135 or visit Connect for Intermediaries and Connect Academy are trading styles of Connect IFA Ltd which is authorised and regulated by The Financial Conduct Authority 441505. The Financial Conduct Authority do not regulate all of the products and services that we offer.




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Limelight a glimpse into our ever-busy schedule

1 Who: Medianett Where: Busaba Eathai, Oxford Circus What: Celebrating Sam and Simon’s birthdays, who can eat the spiciest Thai food and where/what is Chertsey? 2 Who: Blackfinch Property Where: Delamina Marylebone What: Growth mode in the development market, the beauty of Clissold Park and how small was that portion?! 3 Who: Enra Group Where: Ascot Racecourse What: Congratulating Andrew Ferguson on his new role at West One, failing miserably at betting and whoever gets an Aperol Spritz first, wins 4 Who: Hampshire Trust Bank Where: 55 Bishopsgate, City What: Its new marketing campaign, vetting broker partners and Charles McDowell singing the full version of Bohemian Rhapsody on a coach—twice 5 Who: Masthaven Bank Where: 90 Long Acre, Covent Garden What: Celebrating its office move with a tour, courtyard cocktail party and being that journalist during question time 6 Who: Castle Trust Where: Alto by San Carlo, Selfridges What: Relaunching its development arm, party planning at an aquarium and sweating on the hottest roof bar 7 Who: Arc & Co Where: Berners Tavern, Fitzrovia What: The surge and drop in liquidity in the market, a new podcast: two drags, one stick and ‘brown bread, Andrew’s dead’. We drank a lot 8 Who: Aurius Where: Bombay Bustle, Oxford Circus What: How technology can dramatically improve the development process, travelling hotspots and why Hamilton is the best live show, ever 9 Who: Yellow Stone Finance Where: Côte Brasserie, Fulham Road What: Deliberating a groundbreaking packaging model and meeting the most adorable Labrador puppy


10 Who: MT Finance Where: St Paul’s Sky Bar, City What: The launch of MT Finance’s brand refresh at a fabulous rooftop summer party, and Millie finally being able to go on holiday



‘NED appointments are critical for bridging lenders’ Glenhawk’s new non-executive director (NED) discusses building loan books in the regulated and non-regulated space, why there should not be short cuts on valuations, and how NEDs can bring fresh eyes to a business Caroline’s vibrant career has seen her working in director roles at Sydney-based Allco Finance Group, Bear Stearns International, Mòrgij Analytics and, most recently, as chief operating officer and NED at Pamplona Capital Management and Octane Capital, respectively. She decided to join nascent bridging lender Glenhawk in June this year. In her new post, she will provide strategic operational and governance counsel to Guy Harrington (CEO) and his team, and will be available as a sounding board in order for them to excel. What has been your biggest achievement to date while working in the specialist finance market? I have not been in the specialist finance market for all my career, but I learnt very quickly what a fast-moving and dynamic industry it is. I would have to say that moving into the boardroom as an independent director in an industry I am incredibly passionate about is my biggest achievement. I think it takes a unique skill set, which I have managed to acquire. How were you approached for the role at Glenhawk? Guy contacted me soon after I stepped down as COO at Pamplona Capital, and as good timing would have it, I had recently resigned as non-exec director of Octane. I had heard a bit about Glenhawk in the market, so was intrigued to meet with him.What they had achieved at that point and the people behind Glenhawk was very impressive. He went through its future plans for product expansion and funding, and I was really impressed by everyone I met. Why are NED appointments important to bridging lenders, and do you expect this type of role to become more prevalent in the bridging market in the near future? NED appointments are critical for bridging lenders as well as many other sectors.They bring fresh eyes to the business and because many of the participants in bridging are entrepreneurial by nature, they can be run by imbalanced boards that are too focused on the day-to-day performance, losing sight of the culture-building and ethics. NEDs can rebalance that by focusing on how the company functions and not just what it does. Not many young companies have the foresight to appoint NEDs who have an unbiased and honest external view. Glenhawk deserves credit for identifying this early with two NEDs on the board. How does having over 20 years of commercial and residential real estate experience help you in your new role? My experiences have provided me with the opportunity to work across a diverse landscape. I have worked internationally, for start-ups and

established institutions, with multiple cultures with different personalities. I can now detect industry weaknesses, such as prying open gaps in regulation, as well as recognise strengths such as ingenuity, credibility and reputation. All of these come into play at some point in the boardroom, where you can quickly identify issues and problematic scenarios, but equally recognise talent, good strategy and, most importantly, honesty. Glenhawk is targeting further loan book growth, product launches into the regulated and longterm space and additional funding sources. How will your support help to scale up the business? I will provide guidance and ideas management to executives. I have had quite a bit of experience in building loan books in the regulated and nonregulated space and been on the funding side for more years than I care to admit, so that experience coupled with knowledge of orchestrating governance to support lending volumes, should allow me to be able to give Guy and his team honest feedback, and challenge their ideas so that the business growth is controlled, valuable and sustainable. Above all, ensuring his expansion plan is legitimate and achievable with the team in place, and able to create true enterprise value. What one thing does the industry not know about Glenhawk? The company at one point was going to be called Vention. Also, the average age of the whole company is 35. As a lender which is trying to increase gender representation at board level, what needs to be done industry wide to encourage others to follow this initiative? All credit goes to Guy; he recognised long before I joined that embracing diversity, especially at senior level, will trickle down and influence the culture of the organisation. In the wider market, I have seen that there has been a shift where senior managers are at least opening the conversation about gender diversity at board level. I think the industry needs to embrace the regulatory changes that support diversity, and think ahead and start building an effective succession plan.The bridging industry has attracted younger entrants, more recently, who are naturally more open to a balanced board, so it shouldn’t take too long before it becomes more widespread. If you could change one thing about the bridging industry, what would it be? Reckless lending and short cuts. Also, no short cuts on valuations. It happens increasingly more often because of pressure to win the deal. 76

Bridging & Commercial

How did you spend your very first pay cheque? I am Australian and I remember starting work in the Australian winter months and all I could think of was a shiny new pair of skis, so I think I bundled the first three pay cheques together to put towards some new ones. Most memorable moment from your time in the industry? My first job was in Sydney and my first business trip to Paris—how could I forget that? What is your favourite venue for meetings? For brunch it would be Lantana in Charlotte Place—they do good, old-fashioned healthy Aussie breakfasts. Drinks would definitely be Dukes Bar. For a business lunch or dinner, Le Boudin Blanc in Mayfair. Favourite industry event? The Global ABS conference in Barcelona. It is amazing how it has survived through more than one financial crisis. If you didn’t work in finance, what would you be doing? A tough one. I had a one-track mind when I finished university to work in finance, but if it hadn’t been possible, then I think I would work in sports hospitality. I love hosting and making people feel special.

Paul understands

Paul Delmonte understands that you are looking to work with an approachable, adaptable and dependable partner who will look for reasons to say 'Yes' to your proposals. That’s why in uncertain times our book stays open. • Responsive decisions at attractive rates • Flexible funding tailored to individual needs • Loans from the everyday to the extraordinary Paul is one of UTB's Business Development Managers just one of our growing team of Bridging specialists working closely with broker partners across the UK to help them deliver flexible short term loans. T: 020 3862 1002 E:

we understand specialist banking

Profile for B&C Magazine

Bridging & Commercial Magazine - The Standards Issue  

The first boundary-pushing intermediary-focused magazine in specialist finance. In our fifth issue, we explore the role each stakeholder has...

Bridging & Commercial Magazine - The Standards Issue  

The first boundary-pushing intermediary-focused magazine in specialist finance. In our fifth issue, we explore the role each stakeholder has...