After two years of a market ‘red in
tooth and claw’, Fred Crawley examines the staffing strategies of
the brokers who have not only survived, but grown during the
recession.
Go deeper with GlobalData
Recent recruitment drives and growth
plans at UK brokerages have been an encouraging sign for the
intermediary sector, made more so by the number of senior leasing
executives showing up in new hires.
Cheltenham-based Associated Commercial Finance (ACF) was
the latest to take on new senior staff, hiring four industry
veterans at the end of last year. Joining the company were Mark
Banks, formerly of Bank of Scotland; ex-Lombard broker manager
Ranjit Jutley; and Norton Folgate’s Andy Moore; along with new
commercial director Richard Hirst, previously a director and
shareholder of Wyse Finance.
At the same time, the directors of Quartz
Finance were planning growth in sales-aid and corporate aviation,
hiring Ian Jackson, a former colleague at Dresdner Kleinwort, to
spearhead the latter.
Then broker WestWon Capital (WWC) announced
the hire of Kester Brookes, formerly of CIT, along with Michael
Gilhooly, at the start of the year.
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By GlobalDataMeanwhile, other intermediaries are actively
advertising for new staff. Premier Asset Finance (PAF), an
organisation built from the former sales machine of Bank of
Scotland’s asset finance arm, is actively looking to recruit six
new staff after taking on 12 since its foundation in July 2008.
At the same time, Capital Solutions Group
(CSG), an introducer specialising in IT and telecoms for the large
corporate and public sector markets, is looking for a new lease
administrator and marketing manager, as well as a number of field
sales personnel.
Last man standing
The growth of these firms speaks
well of the potential for some brokers to succeed, but in no way
reflects a wide-scale recovery of the trading environment. Whereas
rumours abound regarding the future appetites of banks, the
business of finding funding for clients remains as tough as it was
in 2009.
Other problems abound – many large brokerages
for example, especially those with their own lease books, are
sweating under the possibility of revenue streams such as PUT
options being lost, as they have come to rely on income beyond
commissions to support the overheads of large and relatively junior
sales forces.
Nevertheless, most agree that the “culling” of
the broker market has long passed its peak. Barring any major
shake-ups to the funding market, new business in 2010 will see
minor contraction at worst compared to 2009, before a recovery
early in 2011.
Confidence about this timescale is helping to
fuel growth. This is the case particularly among brokers which have
sufficient stability to make hires, such as those firms that have
specialised in particular regional or asset niches, often aided by
the withdrawal of competitors.
CSG is a prime example of this, having kept
almost all its major funders due to its expertise in leasing to the
public sector and large corporates.
“As most of our competitors have now withdrawn
from the marketplace we have become one of very few independent
companies to offer a finance solution to corporates, vendors,
education and the public sector,” said CSG director Bill
Tadden.
Changing needs
Of course, recruitment of sales
leaders from bank-owned lessors has been behind much of the broker
market’s historic growth. Jeremy Hall, CEO of WestWon Capital,
estimated that up to 50 percent of brokers working in the UK have
come from the funding world.
In the aftermath of the recession in the early
1990s, many bank-based salespeople with an entrepreneurial bent
decided to use their product knowledge, asset experience and
contact books to go independent and work free of a single
underwriting department, often taking colleagues with them.
But this trend has been on the wane in recent ‘boom’
years.
Richard Hirst, of Associated Commercial
Finance, said: “Over the past eight years, as underwriting criteria
eased, there was seen to be less need for such experienced staff
due to the increasing ease of converting deals. This gave rise to a
new raft of employees with more of a sales slant than technical
knowledge of leasing.”
In Hirst’s opinion, it is this abundance of
sales-focused, relatively inexperienced staff that has caused some
brokerages to be “found wanting” in the current climate, where much
more work, asset experience and customer service skill has been
required to get deals through to funders.
In this less transactional environment,
recruitment of veterans with real knowledge of the underwriting
policies of major funders has become highly desirable once
again.
Significant investments
For proof of this sort of
recruitment working, one need only look at Premier Asset Finance.
Founded by ex Bank of Scotland asset finance directors Mark Ripley
and Kevin Davidson in the turbulent July of 2008, PAF’s 13 staff
are all former BoS salespeople, with an average industry experience
of around 16 years.
According to Ripley, as well as the sales
contacts and industry knowledge imported to his brokerage through
its staff, PAF has succeeded on the back of its corporate culture,
which he describes as “just like working in a finance house, but
without the burdens of administration”.
This similarity to the sales division of a
major lessor extends to Ripley’s employment structure, which is
virtually unique among the UK’s growing introducers. He compares it
to the model of NWS Capital, which was well-known for its sales
division in the 1990s.
Ripley said: “All of our staff are on
full-time salaries, and have been since we took them on. We trust
our staff to write the best business, and know that this model
appeals to funders. To make this work we have made significant
systems investments. Staff are backed up by a disciplined contact
management system, good IT resources, and the infrastructure
necessary to proactively canvas for customers.”
Close controls
ACF’s expansion plan has taken a
different model. After expanding from its base in Cheltenham, the
firm has moved quickly, through hiring ‘associates’ based in
particular regions or asset markets where an opportunity has been
spotted.
While associates carry ACF’s card and adhere
to its brand, they are paid largely by commission, avoiding costly
overheads for ACF and reducing the impact on the business at large
should they underperform in sales.
This strategy can work very well for growing
firms, giving an excellent way to make use of the many talented
one- or two-man operations that have been forced out of the market
over the last two years after losing access to one or two crucial
funders.
However, Hirst is keen to stress that ACF’s
decision to hire in this way does not reflect an abdication of
responsibility for its associates’ lending quality.
“Any broker knows that a few bad proposals can
soon damage a funding relationship, but internal underwriting can
be extremely demanding in terms of overheads. With our model’s
abundance of associates and divisions you need a good set of
controls, and we have made sure we have these in place,” said
Hirst.
“We trust our staff to write the best
business, and know that this model appeals to funders. To make this
work we have made significant systems investments”
As an example, Hirst mentions Field Solutions’
Brokernet system, recently renamed Fieldnet, which was implemented
by ACF last year. He said the system has allowed ACF’s management
to keep a very close eye on business being proposed from all of the
firm’s divisions, allowing piece of mind for funders and sales
staff alike.
Culture shock
However, whether joining a growing
broker as an associate or as a salaried staff member, any
bank-based sales professional would do well to remember that
crossing the broker-funder line is not an effortless
transition.
Whereas Hirst said that many leasing veterans
have looked to enter the broker market over the last 18 months,
those that have been able to make the transition to what he calls
the “more accountable” intermediary environment are far fewer.
Hirst added: “We have only chosen to take
those who have the skills, desire and mind set necessary to make it
work in such a different environment. In the broker world, it is
survival of the fittest, with no room for ‘passengers’, at any
level.”
PAF, despite its resemblance to a bank-based
sales division, has taken the concept of broker accountability to
heart, perhaps more than any firm. This is evident in the panel of
large funders that PAF has retained, several of which are otherwise
entirely withdrawn from the broker market.
These lines would not have stayed open if the
banks in question had had any doubt about the quality of business
being fed through them. As a consequence, Ripley said the quality
of his staff is so important that finding six more employees has
been much tougher than expected.
The long game
What will be the long-term fate of
the brokers who have already started building staff prior to
economic recovery? Ripley’s comments about PAF’s working
resemblance to the front end of a finance house may be the key.
“Maybe not in the next 12 months, but
definitely in the next 24, we believe that banks will be looking at
opportunities to develop their sales through buying brokerages,”
said Hirst.
He should know. Before joining ACF, Hirst was
a director and shareholder at Wyse Finance, the broker that was
bought last year by German IT lessor CHG Meridian for exactly this
purpose.
Another Wyse man – founder Jeremy Hall – is
behind the growth of WestWon Capital, mentioned at the top of this
piece. Hall describes himself as a “serial entrepreneur”, and has
plenty of experience developing brokerages for profitable sale.
The appetite for broker acquisition is
growing, too. HSBC is known to be wanting to build up its front end
considerably, while new bank Aldermore, backed by Morgan Stanley,
definitely wants to ramp up its intake.
There is the ever-present possibility of a
Chinese entry to the market, and any number of other funders that
might consider acquisitive rather than organic growth as a way of
gaining ground in the rather underpopulated UK market.
One thing is for sure – whether you are a
lender with an eye for acquisitions, or a leasing executive looking
for a more customer-facing job, those brokers confident enough to
be making growth plans now are the ones to watch in the new
market.
