Swiss financial giant backs UK residential agents

Copyright: David Lawson - Property Week April 1999

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An overpowering sense of deja vue emerged late last year as news emerged that Spicer McColl had  paid 23m pounds for the loss-making Woolwich Property Services. It grew even stronger when Reeds Rains won the bidding for Britannia Building Society's agency chain.

  Bankrolling both deals was the Swiss-owned financial giant Winterthur Life, which has swiftly assembled the largest agency chain in the UK, with ties to more than 1000 branches. Grey heads shook with amazement. Surely this is what happened back in the flush of their youth 15 years ago, when banks and building societies fought to outspend each other establishing similar empires? It all ended in tears, with venerable institutions like the Abbey National and Prudential losing millions.

 This time things will be different, insists Winterthur Life UK chairman and chief executive officer John Finan. 'The main reason is that we will be encouraging entrepreneurial spirit rather than stifling it,' he said in his first interview about the group's plans.

  The big difference is that Winterthur does not own these chains. It provides the money - at commercial lending rates - in exchange for a 10-year agreement to sell the group's financial products. 'I learned a long time ago that you should stick to what you are good at,' he says. Agents are good at selling houses, so they do that. Winterthur handles the insurance and mortgages.

  This is nothing new. Finan had the chance back in the heady days of the Eighties to compete for agencies when he was with the Pearl. He not only refused but went volubly on the record with his reasons. 'We could not see how groups like the Prudential could make  money the way they were doing things. They were imposing a corporate image, bringing a life insurance industry culture to people selling homes. They were taking away their energy and freedom - the very things that are needed for success.'

 The secret is obvious when you notice  that not one of the group's partners has a Winterthur board splashed over its branches. A discreet sticker on the door is necessary to obey rules about tied agents but everything else is done behind the scenes.

 In the Eighties, big institutions boasted that their names would bring customers in by promoting a sturdy security. But if that had any success, it   did not outweigh the awkward change of culture, according to Winterthur sales and marketing director Robin Tinsley.   'Nor did the idea that financial agents would refer people back to the estate agency. In fact, the reverse happened,' he says.

   You have to get on your bike to find customers rather than rely on big names and referrals. Finan learned that when cycling around Ellesmere Port, near Chester,  when he started out with the Pearl 40 years ago. Climbing the ladder to general manager and main board director to run a large management team a stint in charge of  NEL Britannia before joining Winterthur seven  years ago did not dilute his convictions. House selling is a people business where control must be kept local.

  Each agent signed up by the group has complete freedom to use whichever name it wishes. Spicer McColl, for instance, invented the Haart name for part of the 167-strong Woolwich Property Services chain. But it also uses  the more up-market feel of Felicity J Lord in the most expensive part of central London.

  Finan's strategy is to attract ambitious, energetic firms that Winterthur can trust to expand by themselves, carrying the group's products to bigger and bigger markets for very little marketing cost. Spicer McColl was only set up in 1990 by father and son team Alick[CORRECT] and Paul Smith, after they had built and sold one chain. Yet they have gone from three branches in East Anglia to become the largest independent chain in the country.

 Winterthur's backing enabled them to take over part of the former Abbey National chain, Cornerstone, before moving on to consume the Woolwich, as well as acquiring smaller firms and opening new offices in between. Reeds Rains, a leading name in the north-west,  is another success story. Bought by the Prudential for 24m pounds in 1986, it was sold back to management for 3.4m pounds five years later. Last November  it won the bidding for the Britannia Building Society agency chain.

   Other names such as the Robb Agency in central Scotland and Darlows in the West Country are being drawn into the system as Winterthur's attraction spread by word of mouth. This stresses independence, says Tinsley. Each group is given business advice from Winterthur, which is  part of Credit Suisse, one of the world's top financial groups. Training and advice on financial products are also part of the package.

  Buyers are offered special deals with a panel of mortgage lenders, but can still use others if they wish. The supposed clash with the Woolwich, which retained the right to offer mortgages through its former branches, did not materialise as these do not clash with Winterthur's insurance products, says Tinsley.

   The group  sources about a tenth of  UK mortgages and has tied up about the same proportion of UK agents. Finan says there is no target but it is clear that he will not stray into Eighties-style bidding for the sake of size. That is why Spicer McColl lost out to Bradford & Bingley over the Black Horse sale. 'We put a ceiling on the value and were not willing to go above it,' he says.

  But there is plenty to do even if another big chain does not come along. Winterthur has launched PAN (Premier Agency Network) as a sort of half-way house for agents who lack financial skills but do not want to jump into a tied group with both feet. 

   'We are aiming at smaller to medium sized agencies often do not have the resources to compete with chains over advice on mortgages,' says Tinsley. These small operators also face problems satisfying tough financial services regulations. The group is offering to recruit and train advisers in return for financial services leads. 'It leaves agents to concentrate on their expertise, which is selling houses,' he says.

  The ultimate aim is not just size, however. Finan wants to help make agents more efficient. New technology is being introduced which connects online computers to leading mortgage lenders, simplifying and speeding homebuying. The target is a one-stop shop where the whole transaction can be processed with as little hassle as possible.

  That is reminiscent of the Eighties, when one-stop shopping was held up by banks and building societies as justification for pouring millions into agencies.  Perhaps this time it will work.