What will happen to
lender-broker relationships following Lombard and Hitachi Cap’s
decisions to axe broker relationships? Fred Crawley reports.
In any other month of any other
year, the withdrawal of Hitachi Capital from all of its
non-agricultural broker relationships would have been headline news
to British lease introducers.
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But this month, the severance was just a
footnote to the market exit of Lombard a week earlier, including
its vehicle finance unit, Lombard Vehicle Management (LVM).
Lombard Business Finance had been teetering on
a depleted broker panel for most of the year so far, and with
pressure from RBS to consolidate and wipe out non-conservative
lending, the demise of its introduced business desk was a question
of “when” rather than “if”.
But LVM, one of the nation’s busiest suppliers
of contract hire business, came as more of a shock – especially to
the 85 members of staff impacted by the decision.
Andy Bell, the NACFB’s director for vehicle
finance, expressed sympathy for LVM’s employees, but gave the
funder a less than glowing eulogy.
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By GlobalDataHe said: “Speaking to several brokers opinions
varied as to the effect that LVM’s demise will have. The consensus
seems to be that LVM was not the most efficient funder, with
processing times being far slower than average. Indeed, in some
cases brokers reported working with dealers who simply refused to
supply if LVM was funding the deal.
“But, in many cases their rates were
considerably lower than average, and their commissions considerably
higher. In a marketplace as competitive as vehicle leasing, if your
competition was using LVM, you had to use them too.”
‘An excellent thing’
Martin Brown, managing director of Fleet
Alliance, one of the country’s top five fleet brokers, went one
step further, calling the change “an excellent thing” for the fleet
market.
In his opinion, the “price-led, volume-driven”
business model behind LVM had taken fleet brokers’ focus away from
customer service – an area which he felt was key to making
introduced business good value for money.
But the fleet broker culture has had other
business sources to rely on, such as Lease-Plan’s broker division
Network, Arval, BNP Paribas, and the gathering edifice of Lex
Autolease.
As Brown readily admits, the ground is looking
a lot more sparse for general asset finance brokers.
He speaks from experience – Fleet Alliance
made an abortive entry into general asset finance in 2008, a time
which he calls “the worst possible moment” for his firm to have
done so.
Now, with Lombard gone entirely and Hitachi
moving – in the words of business finance head Robert Munn – to
“more profitable, less risky and more sustainable” business, the
situation seems to have worsened further.
John Barter, MD of Oak Leasing, probably put
it most succinctly, commenting simply that UK brokers were “having
a really, incredibly crap time of it”.
Opportunity for ING
There is good news though, in the
form of ING Lease – virtually the only volume player left on the
tier one landscape. The Dutch-owned lessor seems ready to take on
more broker relationships, having circulated information to that
effect among NACFB members shortly after last month’s
withdrawals.
UK head Chris Stamper commented on recent
events: “We’ve certainly thought about what this means, and we’re
still very comfortable with broker business, remaining totally
committed to that market.”
“My only concern is that we will encounter
admin problems if the market gets as busy as it was 18 months ago
and we retain the same market share – we will have to ramp- up the
scale of our operation considerably.”
He continued to explain that ING would not
necessarily soak up all broker business left stranded by the
others’ withdrawal from the market, and would maintain its
standards for the required quality of introduced business.
On the other hand, Stamper said, margins would
likely remain unchanged, too.
“I want to give brokers the tools to compete
with direct sales forces, and that means not letting brokered asset
finance become a premium priced product. If brokers can compete
with direct sales in terms of price, the service advantages will be
more readily apparent,” he said.
Stamper also noted that more and more brokers
had increased the level of funding drawn from smaller or more
specialised lenders, commenting that the amount of business placed
with smaller finance houses across the UK combined to make up a
“highly significant” total.
Other funders used by UK brokers
include relative asset finance newcomer HSBC Equipment Finance,
which has been happy to include introduced business in its growth
plans, and operations owned by private banks such as Arkle Finance
and Aldermore.
Independent lessors too, such as Grenke
Leasing, CHG Meridian, 1pm and Private & Commercial Finance
(PCF), have all maintained interest in the UK broker community.
Although few of these smaller players are looking to actively
recruit brokers at present, they are largely enthusiastic to
maintain current relationships.
Robert Murray, head of PCF, spoke strongly in
favour of the broker model – his business draws in around 75
percent of its volume from a group of 20 broker firms, and has
around 100 active introducers altogether.
‘A different view’
“We take a different view from some of the
funders that have ‘culled’ brokers in the last year – our brokers
give us a nationwide presence, regional, asset and industry
expertise that we couldn’t achieve alone and a scalable sales model
that allows us to adapt to different levels of business without
having to hire or lose permanent staff,” he said.
“We’re not taking on new brokers right now,
but we’ll certainly maintain our current panel, many of whom we
have enjoyed a good relationship with for at least 10 years.”
Certainly, the UK broker market is receiving
nourishment from somewhere. Although not yet accounting for
September’s changes, latest statistics from the NACFB’s annual
member survey have revealed that the UK’s asset finance brokers are
faring better than almost all other commercial finance
introducers.
While NACFB members’ leasing business was down
10.3 percent year on year to a figure of £997 million (€1.1
billion) at 2009’s midpoint, the drop was mild compared to that
seen by brokers selling buy-to-let mortgages, a sector that plunged
88 percent from £3.9 billion to just £476 million.
Despite more volume funders remaining open to
brokers in the motor finance world, those NACFB members classifying
themselves as vehicle finance brokers reported business down 30
percent to just £759 million.
In fact, the only introducers to report a
year-on-year upsurge in business were those working with invoice
discounting products – ID saw a 21 percent rise from last year’s
figure of £688 million to reach £831 million.
As far as is known, no major funders are
pulling back their links in this area – in fact, Hitachi Capital
was at pains to point out that despite the asset finance
withdrawal, they would be looking to grow their ID business line
over the next year.
Perhaps now would be a very good time for
leasing brokers to look into teaching their staff to sell some new
products.
