Britain’s second largest estate agency has outlined radical new plans to shift direction, making financial services and not sales or rentals its future primary activity.
LSL Property Services’ well known agency brands are Your Move and Reeds Rains across the country and the London-focussed Marsh & Parsons. But these are no longer going to be the primary activity of the company.
Instead, in what it calls a “strategic update” delivered to its shareholders, the company says “financial services is at the heart of LSL’s strategy”.
The agency side of the business will be modified to bolster the financial services offer, with the statement saying: “The group will continue to grow its surveying and valuation and estate agency divisions and implement a new target operating model, including a specific focus on leveraging their capabilities to grow the Financial Services Division.”
The company already operates some of the most successful financial services businesses in the UK, providing £32.6 billion of mortgage completions in 2020, equating to just over nine per cent of the total purchase and remortgage markets. LSL is also a specialist in providing mortgage and protection advice to estate agency customers and owns two of the UK's largest new homes mortgage advice businesses, and a number of related FinTech platforms in Toolbox, Mortgage Gym, and Direct Life & Pension Services.
The company says its target now is to remain the leading mortgage network in the UK, further growing market share, while also implementing a buy and build strategy through its new Pivotal Growth joint venture.
Pivotal Growth was announced last week - it’s a mortgage brokerage which aims to grow in size through acquisitions, thus bolstering LSL’s position in the financial services sector. It’s to be led by LSL's Simon Embley, who steps down as non-executive chair of the LSL board tomorrow.
On Tuesday of this week LSL announced it was linking some of its mortgage and other financial services activities with rival agency operation The Property Franchise Group. This agreement means that LSL will be providing digital and face-to-face mortgage and protection advice to the customers of TPFG and TPFG's franchisees - they sell some 23,000 properties annually, so have plenty of scope for mortgage sales too.
In its latest statement outlining its future strategy, LSL says it believes that the financial services market will remain extremely attractive, due to continued significant customer demand for mortgages and similar services, its resilient performance through different housing market cycles, the synergies with the group’s agency activities, and an opportunity to forge new strategic partnerships such as that with TPFG.
Some analysts say this is a canny move by LSL.
Anthony Codling, now a PropTech entrepreneur running Twindig and previously an industry analyst, says: “LSL, the UK’s second-largest estate agent announced today that its future will be focused more on financing homes than the buying and selling of them.
“New CEO David Stewart (a former chief executive of Coventry Building Society) has indicated that financial services is expected to be the biggest profit centre of the Group by 2023.
“This is a smart move, the way we buy and sell homes is changing as is the frequency of how often we transact, but whether buying selling or staying put, most purchases are financed by a mortgage. Add in the related insurance and protection policies and the lifetime fee pool is larger and less volatile than the sometimes messy business of buying and selling houses.”
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Is this code for saying they’re going to target their negs even more strongly for mortgage leads??
Not a good idea look what happened when the banks and building societies did the same back in the early 1990’s
Makes good business sense, average mortgage fee charge to client £400 average fee from lender £1000. Plus solicitor fee plus life insurance commission. Why worry about selling a house for £995 like PB do.
The quality of presentation and marketing from both Reeds Rains and Your Move in my area has shown a disregard to wanting to actually sell houses for years!
As every agency looking to make profit trades on the premise that the resi income covers all costs and produces some profit, and financial services can generate as much as 40% gross profit pre-tax, why is it news that there will be a focus on financial services - as it would be a core concept with LSL anyway? Is it the case that the new CEO does not understand the fiscal foundations and golden ratios that govern a real estate business. And the comment by Graham above - is 100% on the money - estate agency businesses are strange creatures - and financial services businesses are different, as countless money houses found to their cost - LLoyds bank - (Black Horse Agencies) Halifax, Prudential etc.
I agree FS, will quickly become their biggest profit centre as EA income is disappearing fast coindentally since the last Estate Agent to run the EA division left and they started shrinking the EA operation. Revenues in EA have dropped by 46% from £237m to £128m in 2020, revenue from selling houses down by 48% from £93m to £48m last year, even lettings has gone backwards by 10% in spite of the acquisitions. It is soon going to be have done though other agents activities though as with TPFG, as if you aren't selling houses or don't have any landlords you need to find your borrowers from another source.
Is it all about just making profit these days? what about service? being of help to Buyers and Sellers. Do this professionally and a good (if not excessive) income will be produced.
This has always worked on paper and there is great logic behind the idea. The reality is that most estate agents love what they do but on the whole are pretty rubbish at being told to sell something in which they have very little interest.
I agree with Welsh Cynic (above) - concentrate on being great estate agents and great profits will follow.
If I was working for LSL right now I might feel that my talents were being regarded as second rate. And leave!
Diversification is fine, but sale boards offer name awareness. The key is first class service and improving market share, regardless of the economy. Launching a new or additional platform will not be profitable if the service, background and cross selling is not maximised.
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