As the countdown to the implementation of Mortgage Credit Directive reaches its final weeks we’re set to see a last minute panic from those firms who left things a little late in terms of preparation. Enterprise Finance, says CEO Danny Waters, will not be one of them.
Not only did Enterprise receive it’s FCA permissions over five months ago, the firm has actually been regulated since 2004, despite operating in areas that have historically been unregulated.
“We varied our permissions to give us advising permissions but the business and the group is heavily regulated in different areas,” explains Waters. “It was always clear to us that the direction of travel would be that seconds would be regulated in the same way firsts are.”
It’s perhaps unsurprising then that while some firms may be apprehensive about 2016 and the onset of FCA – and European – regulation for the second charge market, Waters and his team are feeling optimistic.
“We’re bullish about it,” says Waters. “Coming from a regulated background means we’re really aware as to what the responsibilities are and, operationally, how to work within a regulated world. I think it’s a good thing for the market. Second mortgages will grow, particularly the intermediary channel. I think this channel will grow faster than the direct to consumer channel and that plays to our strengths. We’re well positioned to take advantage of that. This is a net positive for the market place.”
Waters knows how to take advantage of an opportunity. Joining Enterprise in 2002 at 18 years old after completing his A Levels, his original plan was to work for six months, save enough money to go travelling before returning to his studies. However, he noted that at the time the UK market was becoming “a fast-paced, dynamic place to be” and, having made an impression at Enterprise, decided to stay. It was a wise move. He quickly rose through the ranks to become managing director.
“I was welcomed to the board of the company which was predicated on the fact I was a young, ambitious, probably overly ambitious, hungry 18 year old who joined a company which was medium sized but fast growing,” he says. “I managed to become a stand out person within the business. Thankfully I had people around me who thought if you were good enough you were old enough.”
Waters was also able to see the opportunity that arose from the collapse of Enterprise Finance’s parent company Enterprise Group at the height of the financial crisis in 2009. The group, headed up by Michael Clapper, was placed into administration along with its subsidiaries packager Enterprise Broker Services and technology system Edge V2. Waters lead a management buy out of Enterprise Finance and is now majority shareholder along with sales director Harry Landy.
“That was one of my career-defining moments,” he says. “In the business it was hugely important. Enterprise Finance managed to trade profitably throughout the entire financial crisis – and I would imagine we were the only secured loan and bridging distributor who can hand on hard claim that. The profits we were generating were being invested in other parts of the group and once we’d led the management buy out we could invest our profits into our business.”
Waters is now CEO of both Enterprise Finance and its parent company ENRA Group, home to Aura Finance and bridging lender West One which the group acquired in 2014.
“We’ve managed to establish ourselves as a dominant player within the master broker/distribution world,” he says. “The growth [we’ve experienced] is attributed to doing many of the basics right. We’re probably more financially robust than most of our peer group which is important at different points within the cycle. I also think we have a bit of a first mover advantage in certain fields. We were probably the first to have long term contracts of distribution with the mortgage networks.
“The real thing that has allowed us to grow at a different rate to our peer group is we’re not frightened to think big, be bold and be innovative. We ultimately run our business for our shareholders and I think they’ve done remarkably well over the last ten years.”
Looking ahead, while Waters is confident that Enterprise will capitalise on the opportunities the regulatory changes will present, he admits there will be challenges in the market and as a result we may see consolidation of the smaller firms.
“There’s always going to be winners and losers,” he says. “There will be firms who struggle with the increased levels of regulation. I think the profile of most distributers is relatively small and fragmented at the moment, with increasing levels of regulation you will probably see some consolidation. We’re potentially looking at some mergers and acquisitions activity as a consequence to the smaller fragmented players finding it challenging within a regulated environment.”
What we won’t see, says Waters, is too much impact on the role of masterbrokers. With mortgage brokers now having to offer second charge mortgages or lose their independent status questions have been raised as to where the master broker will fit into the process.
“There’s definitely an argument that the role could change in five years time,” says Waters. “But initially I just think it will be business as usual. The market will have lots to contend with over the next few months and therefore people will just want some continuity in terms of their roles and the function they perform. “Over the course of time that may change. I’ve always believed that master brokers have to add value. I was probably asked this question 10 years ago and 10 years on we’re still in the same place, adding value and finding ways to make mortgage brokers and IFAs lives easier.”
One area that will be impacted more than people may believe, according to Waters, is bridging.
“I think people have underestimated the impact MCD will have on bridging,” he says, “I think people have just thought business as normal for the unregulated sectors and it was more a second charge issue. “Wearing my other hat, our West One loans business ran a couple of compliance workshops for masterbrokers and I’ve got to say the feedback I got was a little bit worrying. People are leaving this late and haven’t fully understood the consequences.
“For those who are ready and prepared there is no downside but for those who haven’t been thinking about how to adjust their business model over the last couple of years that’s rather concerning. It will not have an impact on the overall size of the market but will on individual businesses that have failed in their readiness plan.”
For Enterprise and the ENRA Group Waters says this year will be one of continued growth with plans for further diversification. Indeed, that ability to seize an opportunity that saw Waters rise through the ranks as an 18 year old shows no sign of abating.
“We’re excited about 2016,” he says. “We think the regulated changes to some of the market we operate in are going to be a positive for our group. We also think we can capture more of the value chain by moving into adjacent products soon so I think that will be something we do in the near future. We will continue to be ambitious.”