Franchise advice network The Money Group (TMG) is on a growth drive to consolidate what it deems to be a highly fragmented industry.
With around half of UK mortgage brokers still one-man bands that the company says ultimately sell their businesses for “peanuts”, Dave Corbett - TMG’s recruitment and brand development director - believes there is an opportunity to better harness this talent.
Founded in 2015 with just two firms under its name, TMG has since expanded its broker count to five directly authorised firms and five appointed representatives.
But rather than recruiting anybody and everybody, Corbett said at a recent briefing: “We don’t want to be a huge behemoth of a network. We get dozens of inquiries each week, and we turn away plenty.”
Having set itself the aim of generating £2.5m in annual revenue from its branded partners, the minimum entry level for new firms and advisers to join TMG is £250,000 in annual revenue. Eventually, the network wants to house some 50 branded partners.
But TMG hopes to at least double these firms’ turnovers through its network-wide support and mentoring in the years to come.
As well as bringing on directly authorised firms, Corbett and his team are looking for skilled individuals via the network’s ‘TMG Direct’ arm, which grows brokerage businesses from scratch.
In the long-run, Martin Stewart - another of TMG’s directors - said the group’s growth project “is about creating a legacy”.
“We want to be able to leave something behind which lasts for 100 years. There are really good business people in this industry, but they’re stuck being business writers. If we remove these barriers, multi-adviser businesses will scale much quicker.”
He continued: “The supply chain is comet shaped. All the density is at one end with the networks and nationals. Then it peters out to loads of small, disparate one-man bands. The comet tail either needs chopping off or to be pushed to consolidate.
"That’s where we come in. With our offering, we give scalability and visibility - things the smaller broker firms struggle with.”
Low-cost, low risk
TMG is taking a “low-cost, low risk” approach, according to its directors.
Revenue is spread across four streams. One is a 10 per cent franchise fee, which Stewart said was competitive compared to the industry network average of 14-15 per cent.
Then TMG has its appointed representatives model, through which it can earn anywhere between a 10 to 25 per cent retention fee. Stewart and Corbett consider this “passive income”.
Its third revenue stream originates from TMG Direct, the arm which employs individual advisers, trains them up, and then releases them to manage their own businesses under a DA model. When these individuals are ready to exit their businesses, TMG will buy them back.
And finally, there’s TMG’s mortgage club - or ‘TMG Club’, which is set to deal with specialist lending options, such as bridging and commercial finance.