Jeremy Hall of broker WestWon asks if it’s time for brokers to be more collaborative on business
In nearly all our lessor trading agreements there is a term that states "the broker is not allowed to introduce business from another broker".
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A few recent events have got me thinking about this. First, ING exiting the market has had a devastating effect on a number of brokers who used it as their main funding line, and some of these individuals are turning to companies like ours.
Secondly, I attended a leasing professionals’ jamboree in London last December and witnessed how so many competitors in the world of UK broking are actually good friends. And lastly, we are starting to see the emergence of a couple of larger brokers whose model is to recruit proactively smaller brokers as a source of business.
So I wondered, is this historic view of broker-to-broker business out of touch with today’s reality?
Going back a step, we have to look at why lessors have this policy in place, and the answer is very simple. These banks analyse acceptance and activation rates, but their love affair with statistics doesn’t stop there. It’s the deals that go wrong they spend more time on, working out why they’ve incurred a loss and using this information to tweak acceptance criteria at the front end.
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By GlobalDataThis careful review of bad deals revealed some of them are due to broker-to-broker-introduced business. Looking deeper, the reasons for these losses are due to the end-user customer being fully exposed with other funders or having a poor credit history. The fact the finance company is so far removed from the sale at this point doesn’t help, and they find themselves making a decision on third or fourth-hand information. In summary, their rationale for not accepting broker-to-broker business seems fair.
Brokers are an interesting breed, however. At a basic level we are in competition, battling it out in a tough environment but on another level, we all get on well together and hold a mutual respect, and some of us have good friends in the sector. So what’s wrong with doing business with friends you respect and trust? Isn’t it normal to help fiends out when they need some assistance, like undertaking a lease for a long-established customer or supplier that cannot be cleared elsewhere?
The reality is lessors hold all the trump cards and the risk of losing a funding line is now even more important than a few years ago. The facts are also that our funders have to respect and trust us – and that means being straight with them.
Over time the broker market will evolve and rather than brokers undertaking "banned" broker-to-broker business, I can see brokers working in collaboration with each other with the approval of their funding partners.
Jeremy Hall is chief executive of WestWon
