In September, Paradigm Mortgage Services celebrated 15 years in business and five years since going public.
Bob Hunt and Christine Newell have been with the company since its inception and have seen it overcome many challenges. In fact, it was founded in 2007, in the midst of the credit crisis.
In 2017, Hunt, Newell and retired mortgage manager John Coffield met Mortgage strategy to review the previous decade and the company’s plans after the IPO.
Five years later, Paradigm has increased the number of directly authorized firms it represents from 1,034 to 1,674, comprised of more than 3,000 advisors – and it continues to thrive.
The market is so resilient – it’s built on solid blocks
Managing Director Hunt attributes the distributor’s continued success to three key factors: organic growth, acquisition and partnership.
“Shortly after our launch, we put in place a three-year plan,” explains Hunt. “We wanted to grow by acquisition but we also set up strategic partnerships; some are with our biggest competitors.
“The first was with Tenet; as a group we sell our DFM [discretionary fund manager] services in them.
“And last year we entered into an agreement with Fintel, formerly SimplyBiz, again to provide support for their DFM model, and they are comfortable with us talking to their member companies who are also targets for we.
We are not criticized because we care about the companies we work with
“If you’ve been around for a while and people trust you, you can build relationships with competitors that are mutually beneficial. They are not experts in certain areas where we are, and vice versa, so it’s good for everyone.
The year after the float, Paradigm launched The CPD Academy to help advisors achieve and maintain their CPD (continuing professional development) hours under the new Insurance Distribution Directive (IDD) rules.
“We launched the service in response to the IDD, saying, ‘We’re going to talk to vendors to see if they have any intellectual safeguards to put on a base system.’ And the brokers in that market who had to prove their IDD requirements were going ahead and recording what they had done,” says Hunt.
“It has increased because compliance and regulatory requirements have increased.
I would like this to continue as a family oriented partnership company where relationships matter and employees love coming to work
“We now have all of our mortgage relationship provider proposals engaged with the academy and two years ago we developed ‘the test area’.”
The latter helps advisors meet their annual CPD and training requirements, and helps companies certify advisors as “fit and suitable” to fulfill their role.
Newell, the company’s technical director of mortgages, says Paradigm is doing a lot of work for businesses on regulations and compliance, as smaller businesses struggle to stay on top.
“The regulator has completely changed its mind about looking at data-driven initiatives. It’s much more about things like occasional newspapers, live financial polls; pulling together what they think regulation should look like,” she says.
We have so much expertise in our group and relationship managers to help all businesses, this is where we add value
In terms of financial growth, Tatton Group, of which Paradigm is a division, increased its operating profit from £4.5 million in March 2017 to £14.5 million in March this year. The group’s funds under management were £3.9bn five years ago and are now £11.3bn, while gross lending has fallen from £4.8bn to 13, £15 billion.
According to Hunt, the heart of Paradigm’s success lies in its relationships.
“It’s really a partnership between our member firms, ourselves and the suppliers,” he says.
“Of course, our members pay us fees and get services, but it’s not about that.
“We very rarely see our members leave unless it’s through consolidation or retirement. And I think it’s because people like Christine [Newell] We’ve been in the business for so long and really add value and try to understand the ambitions of the members, rather than what we can gain financially.
I would love to see the young people in the company step up and take my and Bob’s positions
After launching Paradigm in the “eye of the storm” – the financial crisis – Hunt says the company stood out for being the first to offer discounts.
“Others have copied but we are still the only ones who do not have conditionality on this. You don’t need to buy our IT system or put X revenue into our pipelines. Everyone gets the same deal,” Hunt explains.
It’s not the same with other distributors; not everyone gets the refund.
“When we launched, we shared our equity, so 50% of the equity value of the business was in a discretionary trust, and when we launched, we paid for that – we gave that equity to these companies,” adds Hunt.
Having overcome many challenges as a business, the Paradigm duo are unfazed by the current turmoil and Newell believes brokers will once again weather the turbulence.
“The market is so resilient. It rests on solid blocks and we learn from everything that happens to us,” she says.
“Our brokers have never been busier; in the mortgage and product transfer market in particular. This will be a bigger sector next year than the buying market.
Market disruption creates opportunities, adds Hunt.
“The intermediaries are remarkable; they shift their attention if necessary. I’ve been saying consistently for years that now is a great time to be a counsellor,” he says. “The market changes all the time; our way of working has changed after the pandemic. You have to adapt.
It’s really a partnership between our member firms, ourselves and the providers.
“We’ve seen the demise of the direct-to-lender market share and, with something like 70-80% of the market, fixed rate mortgages [83.1%, according to Bank of England figures for July] these products will all ripen at some point. This means Advisors have a form of recurring income that will keep them going.
The company is a great example of how to overcome adversity, and Hunt and Newell say it’s come full circle from the start.
“At the time there was virtually no capital in the mortgage market and when the crisis hit we suddenly saw a £350 billion market drop in a short time to £140 billion. pound sterling. And some lenders used capital to fuel their own branch network and no longer wanted distributors. It was nearly impossible to break down the door,” says Hunt.
“But these acorns [adviser firms] that we have taken are now real oak trees. The likes of Hawke Financial and LDN – these are the pillars of the future.
You don’t need to buy our IT system or put X revenue into our pipelines. Everybody got the same deal
“Since the show, some big companies have asked to work with us and some have approached our members. But they’re loyal to us now, so we’ve come full circle.
And Hunt says they’ve always been selective about who they work with.
“Quality must be at the heart of what they do. It comes down to what Consumer Duty is: what is at the heart of a company and its culture.
“The test we looked at 15 years ago – ‘Would you recommend this adviser to your grandmother?’ – this is the kind of question that Consumer Duty brings back to the fore.
As for the most frequently asked questions from member brokers, Newell says there is a lot going on around exiting the market.
“Particularly after Covid, we are often asked: ‘How can I prepare my business to leave the sector?’ and ‘Is my business worth anything?’
If you’ve been around for a while and people trust you, you can build relationships with competitors that are mutually beneficial.
“They might retire or have had an epiphany during Covid about what they’re doing with their lives,” she says.
“There are questions from companies that want to merge or grow through acquisition, so we can facilitate those discussions. We also help them get started in other areas of the market, such as equity release and the lifetime market, and new construction. Members want to know how they can work with developers.
“We have so much expertise in our group and relationship managers to help all businesses, that’s where we add value.”
So where would Paradigm like to be in five years?
“I would love to see the young people in the company come in and fill our positions and Bob’s because we have such great capabilities within the team,” says Newell.
“It’s about their development, and coming in and taking the positions of the old guard and taking it to the next level.”
Hunt says, “In many ways, our growth is mechanistic. We take on new business at a steady rate – say, 12-14 mortgage companies per month and 9-11 protection companies per month.
Those acorns we took are now real oak trees – like Hawke Financial and LDN
“I would like to keep this position because we have a really professional team. It sounds a little cutesy, but I’m proud of the reputation we’ve earned. We are not criticized because we care about the companies we work with.
“I would like it to continue to be a family-oriented partnership company, where relationships matter and employees love coming to work.
“Because I do and, until I get to the point where I don’t, I will keep coming to work.”