Generation next?

Mortgage lead providers have not always enjoyed the best of reputations and, for many brokers, they epitomise a hard sell approach that they neither wish to adopt nor be forced to rely on. To others, leads have been responsible for large volumes of business and generated ongoing referrals and revenues which they have been very happy to earn. Either way there will always be those who are loath to pay for leads, but times are changing, the firms supplying leads are evolving and those brokers ignoring what the lead-generation market has to offer may be cutting off their nose to spite their face - especially if the mortgage market tightens in the coming months and years.

One of the big influences on the lead-generation market has been Financial Services Authority (FSA) regulation. Even though the lead generators sit outside the FSA's remit, their business has nonetheless been affected like so many of the mortgage market's other peripheral firms. Brokers are no longer allowed to cold call potential clients and, even where a relationship exists with a client, it has to be maintained to a reasonable standard to enable the broker to make approaches about further products. This is without doubt the way the market should operate and anyone who has spent evenings fielding calls from glazing, telephone and conservatory salesmen will wish the legislation extended beyond the confines of the financial services market.

Expansion plans

However, for many brokers who augmented their business by calling up clients who had shuffled off the page of their contacts book, or through lists they had bought in from outside, the game is up and lead generators are providing the contacts they need to expand their business.

But while lead generators sit outside the parameters of regulation it seems this is an oversight by the FSA and many in the market would now like to see these firms brought under some control. At the moment, the problem remains that those generating the leads can say more or less what they like to gain the interest of the client. Whether these firms have offered the impossible or disguised the fact a follow-up call will be made, they can sell the interested party's details on to the broker and walk away unsanctioned despite selling on the mortgage lead equivalent of a red herring. There is no room for this kind of activity in the market and in time it will peter out as brokers realise which firms do not supply bona fide leads and offer them good value for money. These firms can fool their clients only once and, for firms that rely on repeat business to be successful, this is not a sustainable way of operating.

Indeed in the last 12 or 18 months there have been a number of firms who have gone out of business as competition and standards in the market have increased. Since regulation, firms that are serious about providing a service to brokers have realised there is a demand and that they can compete with the bigger players if they differentiate themselves on the quality of lead they supply, the speed and skill with which they communicate with the broker, the charging structure they have in place, the consistency of the leads they sell and the way they handle complaints. As any broker needs to do all of the above well, so does any leads supplier if they are to be successful and get repeat business from brokers.

Reported problems

It used to be the case that brokers were charged upfront for the leads they bought. This was littered with problems and there have been numerous situations reported in the trade press over unhappy brokers being left out of pocket for leads they felt had no worth. Where brokers have been duped into buying worthless leads there can be no excuse. However, where brokers have been slow to work the leads or not done their research into what they were buying, then they cannot expect much sympathy.

However, as the market matures there is likely to be a further move towards a model that charges brokers in arrears. This allows brokers to run an account as they would with many of the other service providers they deal with and begin to generate income from the leads before they have paid for them.

Although it is unlikely the FSA will take the lead-generation market under its wing, the market can do a lot to regulate itself and stamp out some of the worst practices. Changing how the industry charges for its leads is just one example of this. There have been a number of murmurings in the market and some firms have expressed their opinion that a trade body of some description could do much to create standards and consistency and further boost the reputation of lead-generation firms. This would help to create a market where it was easier to compare what firms were offering and so allow brokers to really see what value for money each was offering. In the past this has been notoriously difficult and it has really been a case of buying and trying a number of leads before making a decision on the basis of how they turn out.

This is unsatisfactory and while it should not be the case that brokers are given free 'testers' before they buy into a firm's offering, there is no reason why market standards cannot be created that give brokers confidence in what they are buying and let the lead providers be clear about what they are selling.

Where the leads turn out to be misrepresented then there should also be a clear process laid out to resolve the matter to both parties' satisfaction. Certainly, where arguments hit the pages of the press because firms are unable to resolve their problems sensibly then lead providers who are slowly winning the battle to turn their reputation around will suffer unfairly as they will be tarred with the same brush.

Adding value

Where lead firms can really add value is in how they operate after the lead has been sold. Clearly there are complaints, but it is not all about bad news stories. There is also a lot firms can do in giving advice about how the leads should be worked, when they should be contacted and how the firm can market itself better for the future.

One lead-generator is even providing a free website template for brokers to help them generate a presence on the internet. The idea is that rather than simply selling a lead to a broker and taking the money, lead firms need to be able to establish themselves as third-party service providers to their broker clients. Not only are they looking to help generate business for them through the leads they offer, but also through the marketing, sales and promotional expertise they can bringto the equation.

Lead-generation firms will need broker feedback to improve their offering, make their businesses more robust and, ultimately, more useful for advisers. One lead-generation firm has included a forum on its website to gain such feedback and an online forum like this could, in time, offer the beginnings of a general consensus as to how lead-generation firms could go about their business and the sort of standards and consistencies that need to be adopted into the market.

Lead-generators will never be the complete solution to the broking market, but they can play an important role in creating steady levels of business and growing the existing client book. It is an exciting time in this market and as technology and communication evolve and firms become more sophisticated in generating, categorising and communicating their leads, brokers can only benefit.

As the market matures we shall see the demise of some of its worst practices, while some of its best can at last begin to shine through.

key points

A lead-generation trade body could help create a market where it was easier to compare what firms are offering.

Some firms allow brokers to pay in arrears - as the market matures there could be a move towards this model.

Most lead-generation firms offer good quality leads, but the best firms add value after the lead has been sold.