Strategy
Technology is central and integral to our business model, it is developed in-house, and directly benefits MAB advisers and customers. We are investing in a number of transformational technology developments, and are excited about the impact that this could bring to MAB in the shape of increased productivity and efficiency of existing advisers, as well as our ability to attract new advisers and lead sources due to the stand-out benefits our technology will be delivering.
In our industry as a whole technological transformation has been slow and there has been no major process change in the mortgage and home-moving process. In no small part this is due to the importance, complexity and sheer enormity of buying a home. However, the industry will inevitably see meaningful change in the medium term and MAB intends to continue to be right at the forefront of any innovation, leading as opposed to following. Put simply, we want MAB advisers to have the best and most straightforward technology tools to enable them to procure and help more customers, offer a wider range of products and services, and, most importantly, we want to use technology to design innovative new processes and provide an overall experience for customers that is second to none. A key part of this is delivering digital tools that can be used to support a customer’s research process and help them to apply for a mortgage.
We remain advocates of the importance of customers receiving full advice and this will continue to be our primary and most important focus. However, we will explore how some customers can get the mortgage they want through more expedient means, as they increasingly seek to research in a more remote and digital way.
MAB has made (and continues to develop) several key strategic investments, funded through its cashflow to date, and will continue to consider new opportunities that arise, as and when they are deemed to clearly support, enhance and accelerate our agenda of increasing our market share and profitability. Whilst our investments to date have been relatively modest in size, we also consider and appraise larger investments to help accelerate the development of our customer and adviser proposition, lead generation, and distribution.
We have started testing overseas markets through our joint venture in Australia to ascertain the feasibility of scaled cross border expansion. The signs are encouraging against a market backdrop that in many ways is similar to that of how the UK mortgage market was over a decade ago. Our technology developments will allow us to enter new markets far more easily, and accelerate growth in those markets.
MAB is also exploring home-moving as a process in its entirety, from start to finish. Currently MAB is involved in mortgages, protection, household insurance, surveys and conveyancing. In the medium term, we intend to expand our involvement beyond the mortgage transaction, through vertical integration with the ultimate aim of using technology to assist in the whole home moving process for a customer and increasing the footprint of our ancillary services that are capable of being provided digitally to ease that process and add further customer value. Longer term, our goal is to help and guide our customers in their property journey throughout their lives, which include pre-purchase, rental, and later life lending. This will increase our target market considerably, as well as widen the range of products and services delivered by MAB face to face, over the phone, or for more simplistic offerings, on a self-serve basis for those who are comfortable transacting in this way.
In summary, our strategy remains focused on securing further growth through technology, lead generation and specialisation which will increase our market share and the number of mortgage completions in all market conditions, enabling us to continue to deliver strong returns to our investors.
Adviser growth
Adviser growth continues to be a major focus for the Group, boosted by the need to service new lead flow whilst using technology to help maximise opportunities from existing customers and lead sources.
In H1 2022, adviser numbers grew by 8% to 2,034 during the period. Every year, MAB helps its ARs replace 300+ advisers, and overall growth in adviser numbers is derived from organic growth in these existing firms and also new ARs being onboarded with their existing advisers. Over the summer months, MAB saw a significant fall in the number of new advisers onboarded with a far higher than usual summer holiday slowdown experienced. This is an unfortunate break in strong momentum in adviser growth this year, which has now resumed and is expected to remain strong for the remainder of the year. As a result, adviser numbers were 2,160 as at 23 September 2022, including 156 Fluent advisers.
We have a strong pipeline of new advisers and ARs and, combined with Fluent’s rapidly growing adviser base in the Mortgage division, we expect to continue to deliver further adviser growth.
As trading conditions are likely to become more challenging, some existing firms will take a more cautious view on organic growth whilst others, including newly onboarded growth-focussed firms, expect to continue with their plans for adviser and market share growth.
With increasing expectations and even higher standards expected from the regulator, more directly authorised firms are seeking greater support from a strategic partner like MAB. We expect the recruitment of growth-driven firms to remain strong, supported by the continued development of our technology platform.
Investment strategy
The acquisition of Fluent, which completed in July 2022, has further strengthened our portfolio of invested-in businesses. These businesses are integral to the future success of the Group as we pursue a greater level of adviser productivity, primarily based on a clear and strong lead generation strategy.
The average productivity of advisers in our invested-in businesses is circa 25% greater than our other ARs’ advisers, and recent investments have increased that differential further. This includes the acquisition of Fluent, which is a leader in the provision of centralised telephone-based mortgage advice and is delivering high levels of adviser performance by combining strong and reliable lead flow with streamlined technology-driven processes.
Fluent has formed relationships with leading third-party brands including aggregators and other national lead sources. Fluent helps customers to access Mortgages, Secured Personal Loans, Later Life Lending and Bridging Finance, and broadens the Group’s revenue mix and customer proposition. Since the acquisition, Fluent has experienced strong growth in lead flow and adviser numbers in its fast-growing mortgage division, providing a rapid scale-up of the Group’s adviser base and fulfilment capability.
Separately, MAB has also targeted the fast-growing national lead source sector and has already formed a number of strong relationships. Combined, MAB and Fluent can grow this new market share opportunity quickly and effectively, complementing the local/regional strategy delivered by the rest of the Group's growing distribution.
If activity in the housing market was to fall from current levels, this lead supply would further support revenue and profit growth despite more challenging trading conditions.
Although the contribution from some of our smaller early-stage investments has taken time to build, these are now starting to mature. Our investment strategy in the last few years has increasingly focused on established and profitable firms, strengthening our new build proposition and market share, in addition to ensuring we have the expertise and scale to establish a market leading position in the national lead source sector.
We expect the additional lead flow that MAB can generate for its invested-in businesses, combined with their existing growth trajectory, strong protection success, and growing productivity per adviser, will contribute significant profit growth over the next five years.
Vita Financial Ltd (“Vita”) has performed exceptionally well in supporting MAB’s AR firms who wish to outsource some of their protection or general insurance leads. As part of MAB’s wider protection strategy, we intend to extend Vita's proposition into a wider addressable market to fully leverage its expertise. Accordingly, we have acquired a further 26% stake in Vita, increasing our overall stake to 75%
Customer lead generation
In our sector, securing a quality and reliable lead flow underpins both the growth and stability of every firm, and gives more predictability and control over trading. This is why MAB has focused technology developments and prioritised investments in this area.
MAB is already a leader in local lead generation through estate agencies and builders, and new technology developments will help us optimise lead flow in these two key sectors. The addition of Fluent, which has rapidly achieved a dominant position with national lead sources, has given the enlarged Group a market leading proposition in the three largest lead source sectors. Driven by this acquisition and the fulfilment capacity of the Group, we are now in an even stronger position to secure additional national lead generation partners to support further productivity and adviser growth in 2023 and beyond.
Significant upside can also be achieved through improved customer retention. This has been a major strategic focus for the Group and we will be launching new initiatives and technology in Q4 2022 to help optimise these opportunities at a time when consumers are highly focused on managing their expenditure.
In addition, capturing and nurturing customers who are in the early research stages of their home buying journey is also a new and integral part of the Group’s strategy. This gives us access to a new and wider group of lead sources.
Summary
MAB’s market share model has delivered year-on-year growth in all market conditions and is better positioned than ever to keep doing so.
Our management team has strengthened further this year, and MAB’s technology investments and lead generation strategy have progressed very well. We continue to onboard recent investments following FCA approval, and our invested-in businesses are set to perform strongly, benefitting from lead generation and streamlined processes.
Our acquisition of Fluent will bring significant earnings enhancement to the Group, derived in part from the delivery of commercial synergies. We will also help Fluent to accelerate growth through sharing best practice, primarily in customer retention and the provision of protection and general insurance.
2022 has proved to be a difficult year for advisers, due to a constant withdrawal and re-pricing of mortgage rates at short notice. Combined with a significant fall in, and delays to housing transactions and completions compared to H1 2021, productivity has understandably been affected.
The longer-term fundamentals for the property and mortgage markets look very strong, and there is also scope for further growth through setting higher standards and helping firms with the important new regulatory requirements being introduced by the FCA.
Our strategy underpins our confidence in the outlook for 2023 and beyond.