In his address at the Stonebridge annual conference last February, Robert discussed how mortgage lenders were increasingly investing into fintech and automated systems which, in turn, could result in more direct borrowing.

He noted that while he believed lenders were “absolutely committed to the intermediary world”, some may have overseas backers that could question their strategy in a market whereby they are paying for 91% of business they receive.

While the numbers may indicate growing business for regulated mortgage brokers, Robert urged intermediaries not to become complacent and to continue to prove their worth to lenders.

B&C spoke to industry experts to find out whether this pressure from the mortgage market could impact the specialist finance sector.

“Brokers are the lifeblood of the specialist finance market and any attempts by lenders to bypass them will ultimately fail,” said Jonathan Samuels, CEO at Octane.

“The specialist finance broker model works precisely because they can spend money originating deal flow and have multiple options of where to place a deal.

“By contrast, a lender's investment in direct origination would result in a far lower conversion rate, as they are limited to their own products.”

Jonathan added that the attraction to pay out lower procurement fees would be short sighted: “Borrowers do not have the time or expertise to research the specialist finance market and develop an understanding of each lender's process.

“A good broker can add significant value in helping the borrower navigate the options and the process.

“Money is far better spent in educating the growing pool of brokers, including those mainstream brokers seeing the writing on the wall.”

Michael Street, founding partner at Word On The Street, also emphasised the importance of intermediaries to providers and suppliers, alongside SMEs, in all aspects of the industry.

“Consumers, with the best will in the world (for the majority), are simply not equipped with the knowledge and experience to be able to navigate the specialist lending market with confidence,” said Michael.

“The very definition of ‘specialist lending’ is that transactions are not straightforward.

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“For the concept of direct lending in our space to ever take off, process and portals would need algorithms that even the best AI technology could not yet fathom.

“I expect any lender that takes on this approach would spend more time explaining the reasons for declines than underwriting new business.

“True specialist brokers (intermediaries) like we deem ourselves to be at Word On The Street are not just order takers or administrators of applications; we are the immediate difference between a ‘yes’ or a ‘no’ from lenders.”

Stephen Burns, partner also at Word On The Street, believes the specialist finance market would simply be unable to support a decline in intermediaries in favour of direct business.

“The specialist industry is propped up by intermediaries and their infrastructure would fail if they had a sudden influx of business so, in the short term (no pun intended), this simply won’t happen.

“It will take any part of the industry, mainstream or specialist, a massive investment [and] commitment to significantly increasing their workforce and a long time to match what they are offered from intermediaries.

“Plus, with the onset of working from home, it would be an out and out disaster.

“I think I will be a broker welcomed by lenders for many years to come.”

For lenders to gain the market share from brokers, they would need to provide deal structures alongside lending products, according to Kelsey Philips, head of specialist lending at Arose Finance.

However, she noted it may not be in a lender’s interest to do so: “Is it more cost-effective to pay a broker a 1% procuration fee or manage the operational overhead of delivering an advisory service? So far, the answer has been the former.

“Lender advice is often limited to their specific lending capabilities. In contrast, borrowers can receive unbiased, whole-of-market structuring recommendations from third-party brokers who have direct visibility into the entire UK lending panel’s arsenal of lending solutions. Naturally, there are exceptions to every rule.

“As a result, I anticipate technological advancements in our industry will lead to a concentration of broker talent.

“Excellent brokers will not compete with direct lender advice; instead, their distribution of higher-quality advice will be facilitated by technology, allowing them to spend their time solving increasingly complex and difficult problem sets.”