Brian Cantwell talks to Jon Maycock, managing director of asset finance at Hampshire Trust Bank, about the business’s priorities in focusing itself in the market as a key alternative specialist funder.
Leasing Life: In the next year and a half, how do you want your business to grow?
Jon Maycock: Critically, the industry is still about people; we have got good people with the right knowledge base, and having a passion for putting the customers first is key.
Historically, the asset finance market had a smaller number of larger players who invested heavily on training programmes, including graduate training.
People coming through the asset finance industry at that stage knew their products very well and were well grounded in the technical basics. As an industry we have relied on that legacy, which is why we have an issue now, despite the talent pool being available.
We want to invest in our knowledge base, so we are running a training programme for the junior members of our team. This is the right thing to do in terms of career development and it also makes us credible. It means that when a broker rings, they have access to expertise and a wealth of knowledge.
We need to make sure our people have the required level of knowledge so they can support our brokers.
LL: What do brokers currently say to you, in terms of what they need support on? Is it things to do with regulation, or to do with speed of service?
JM: We’re supporting brokers in a twofold manner: helping them to operate in a more complex environment, and providing a quality and consistent service that is absolutely reliable.
On the first point, the way in which distribution in the market is developed is polarised around the scale of operational brokers. There are those with sizeable teams of people who are originating £100m, £200m and in some case £300m of asset finance a year. These larger businesses are more sophisticated, and other than being lenders in their own right, they’ve got a full suite of control frameworks and compliance expertise as required.
At the other end there are smaller groups of individuals, where their principal job should be to originate from their customer base and be supported by the lender. We want to make sure that we are covering that spectrum.
We also want to take advice from the larger brokerages in terms of what they need, how they operate, where their areas of expertise are and how we can learn from them, but also making sure that we are not forgetting what is core to us, which is smaller operators in the broker market.
Brokers are important to us, therefore we need to understand how we can help them. How do we make it hard for them to get it wrong? By providing clear guidance.
We recently ran a GDPR seminar here, which was an intimate event and the feedback we received from the brokers was that it was exactly what they needed. That’s the type of thing we think can help that sector of the broker community.
LL: Do you think that the broker market will grow or shrink? Will there be a merging of businesses as people feared?
JM: We’ve seen private equity and external investment come into the UK market and create bigger organisations with economies of scale.
Certain banks have effectively tried to lock in their finance distribution chain through vertical integration. This can change the competitive dynamic from an independent broker’s perspective. Are these lenders and funders in this marketplace here to support the broker market, or is it purely a distribution channel for them to access assets?
As regards broker numbers, we’ve done brokers a disservice in assuming that they will retire because they have got to certain age and think regulation is hard – assuming that brokers are going to give up. There are very hard-working individuals within that marketplace. They, more than anybody, are absolutely committed to the customer service that they deliver. They live and die by it, as that is their business. They are quite resilient; they won’t give up on their customer base.
Brokers actually understand business better than a lot of people – even maybe to some extent more than people who are working at very large banks.
LL: Has the term funding scheme’s closure made a change to the market? Is it a bad thing that they have decided not to renew it?
JM: It’s enabled a suppression of pricing in the market, which ultimately would have provided the SME with a better deal.
From the Bank of England’s perspective, it’s a good policy to help drive the economy, but its closure has created a delay to the reality of where price for risk should be, given where we potentially are in the economy.
We’ve started to see a very small uptick in arrears in the marketplace nothing that material, it is still very benign. There’s a level of uncertainty around Brexit and the economy that is probably no more uncertain than a year ago, but because it is nearer, people are starting to question what it means. The real impact will be when banks need to go back to the market to raise more deposits.
Most lenders in the asset finance market are still very keen to grow portfolios and balance sheets. That reflects the position of a much more stable competitive environment.
Before ING’s exit [in 2012] there were the clearing banks, and there were the guys focusing on the vendor market. ING had significant penetration into the broker market and did a great job.
The market has become more disparate and more competitive, and with yields where they have been and with a benign economic environment – losses being historically low – that has also been attractive to other forms of capital investment.
I think there are signs, overall, that the asset finance market is perhaps slowing. That said, the broker market is still growing – not quite double-digit, but I think at the end of February it was up 9%. That’s just volumes originated in the broker market.
LL: With the market saturated in terms of liquidity and funding options, the real question is how do you differentiate what you offer? How do you make sure that if someone has a certain kind of business, they come to you?
JM: All asset finance providers offer hire purchase and finance leases. There has been no material innovation in the product for decades.
We want to be able to carve out our position in the market place and what it is that we can do that is different and is better than our competition.
We recognise that our route to market is through our introducers. We need to support them, so the customers recieve great service, trust them and come back to them for their financial needs.
Brokers can only offer what we can offer. We need to ensure that we can provide them with everything that they need to be able to deliver that service to the customer.
It is all about the service that we provide, and that speed of decision, consistency of decision and speed of payout.
Our USP is that we can deliver that service to them in a way in which they will want to interact with us, that is more engaging and provides them with the tools that they need in order to get on and do their business.
That will mean different things to different people; it will mean different things to our different types of introducer.
We need to make sure we have a broad offering for that broker. We also want to be known for our expertise around key sectors and key assets.
Technology is changing rapidly; people’s adaptation to technology may not keep up with what we are capable of delivering. So we very much want to position ourselves as a high-tech, high-touch business.