Together reflects on the past year.

Recently Marc Goldberg and Pete Ball featured in the December issue of Bridging and Commercial where they discussed the challenges of the past year at Together, the technological investment and changes, with a look at what 2021 holds.

In March, Together—one of the largest non-bank lenders in the UK, with a staggering £4.2bn loan book—made headlines after temporarily halting new loan applications across its product range in response to the Covid-19 crisis. The 46-year-old business, which has now been through an eye-watering four recessions, has since re-entered the specialist lending market, albeit cautiously.

Together’s growth trajectory over the past five years fruited an over £200m-a-month lending business, pre-Covid. The concern that this mammoth force in the specialist lending market may not return to its former footing is a natural one for brokers. To get a better understanding of the lender’s near future outlook and appetite, I quizzed its commercial and personal finance CEOs, Marc Goldberg and Pete Ball, to find out what ‘Together 2.0’ will look like.

Why did Together take the decisions made in March?

The day after Boris Johnson announced the lockdown on 23rd March, Together managed to get 730 people working from home, which was no simple task. While the lender was still continuing to fund transactions with binding offers, after listening to government plans for mortgage payment holidays and the furlough scheme, Together realised it needed to revert back to the basics. Its number one priority was (and remains) its thousands of existing customers—people who don’t know what is going to happen with furlough, their jobs, or payment holidays—and its potential ones. “One of the questions I think a lot of people [have] is why we took the decision we did on the pipeline business,” Marc states. “Six, seven execs [were] sat around the table, with a group of highly experienced non-execs, saying, ‘This is such an unpredictable market. We needed to protect our customers and then speak with our funders after analysing the market, and find out if we’re going to get any redemptions or payments. We think we should pause lending,’” he explains.

Together—which, at the time, had hundreds of millions of pounds worth of business in its pipeline across commercial and personal finance—then started working with a dramatically reduced cap of £20m a month to lend. “That’s a big decision to make, and it’s never happened in my history, ever,” Marc says. “All our salespeople were saying, ‘Brokers want to know what we’re going to be doing with the rest of the pipeline,’” he discloses. “We would have loved to have said, ‘Look, we want to put everything on hold for three months, and we’ll assess the situation.’ But we weren’t in a position to do that, because we didn’t have a crystal ball and couldn’t say everything will be rosy in three months.”

Will Together have a more focused offering in the future, or will it get back to the product set it previously had?

Pre-Covid, Together had close to 300 product variants as part of its commercial and personal finance businesses. These mainly derived from the last recession, when it had to put numerous different property types and LTV bandings, among other considerations, into its criteria. Marc admits that due to layers upon layers of complex transactions which had built up over the years, from moving to a heavy adverse to a near-prime lender, the product set had become complex. While Together plans to retain a diverse range of products, and is set to launch new ones in December and January, its “reset” or “cleanse”—as Pete describes it—means that its offering has been completely stripped back. The personal finance division, for example, now has just 10 products, which it will gradually increase. Pete explains that this is important, not just internally in terms of having more straightforward systems and processes, but it will also be simpler for its brokers and customers to understand. For bridging, the offering will mainly be in the unregulated, residential space, such as for BTL purchases at auctions, in addition to some regulated and commercial bridging. “Bridging is the market we know and understand,” Marc notes. Pete divulges that, around 18 months ago, Together started using the term ‘the new norm’ based on how it was seeing the market evolving around people being self-employed, working zero-hours contracts, and the changes among portfolio landlords. “In fact, in some ways, we’ve never really liked the term specialist lender,” Pete admits. “‘New norm’ was something that resonated and it really worked, and now you hear it all over the place, albeit in a slightly different context.” He points out that people’s circumstances and ways of living have changed even more rapidly this year, and thinks that Together’s 46 years of knowledge and experience of adapting to changing requirements is a great reason for the business to be optimistic. “And if there are more [lenders] out there who understand people’s new circumstances, it’s better for customers as well.”

However, what brokers are likely to see is that Together will be concentrating on service first and products second. “If we’re trying to be all things to all people, it can sometimes take time to process,” Marc says. He emphasises that the lender’s approach is not about volume. “It’s about being the best in the product ranges that we offer.”

Since re-entering the lending market, Together has been working with limited distribution. When will it be available to the wider broker market?

Pete tells me that there isn’t a prescriptive plan, but that distribution will be managed on a weekly basis, all the while maintaining levels of service. “We need to touch base again with our partners who we’ve known for years,” he says. “What have they gone through? What do they want? What do they want to see? And then, gradually, build that up.” Getting its underwriters to think in a different way and test its new systems and processes will take some time, and Together aims to release these new products when they are tested and ready for the market. “Everything we’re doing at the moment is considered,” Marc adds. “Now, it is not about growth in lending—it’s about quality and getting quality submissions. When we have a greater lending appetite, we’ll expand our distribution channels.” In other words, we should wait and see.

Is it in Together’s plans to return to pre-Covid levels of lending in the future?

“Definitely,” Marc responds—although he doesn’t see it happening in the near future. “We can’t put a time on it,” Pete adds. “We are nervous about Q1 and Q2 next year,” admits Marc. “Nobody can predict what’s happening with house prices or what’s going to happen in the commercial market.” The duo confirm that Together is currently lending approximately £50m per month across commercial and personal finance, still a way off from what it was delivering pre-Covid. Pete explains that it wants to provide a “gold standard” of service, but did not want to set that perception and then attract too much business. This is the thinking behind its gradual, prudent return. “We [are expected] to get back and beyond where we were,” Pete says. “We have a single shareholder with high expectations of all of us, so that’s where we’ll get to.” However, the lender won’t be able to put a date or time on it. Marc predicts that, in the next three to nine months, there will be many opportunities in a depressed market. “There are people sitting on a lot of money who will come to the market and see property as the best place to put it,” he believes. “That will mean moving extremely quickly, and dealing with a lender that understands what they’re doing.” However, he is conscious that we are currently in a bubble, and has his eye on unemployment levels. “We are very wary of what 2021 may bring,” he admits. As Marc points out the metaphoric scars he has from previous recessions, he explains that the current environment is completely different—no one can say that they have lived through this before. But having been through these painful scenarios is still important. “When you’ve got the knowledge and experience we have, now is not the time to put your head above the parapet and say, ‘We’re doing 80% LTV’ or, ‘We’re chasing volume,’ it’s about protecting the back book,” he states.

“We’ve got good funding lines. We are profitable. We will be able to ride out what next year’s going to bring,” he says, positively, adding: “Our primary focus is customers, customer outcomes, and protecting that back book.”

How has its significant investment in tech really changed the way Together operates?

A key objective for the lender has been its technological transformation. The number of changes that Pete and Marc tell me about is vast, and I have no doubt that they will be felt by brokers going forward. During the down time, Together was able to utilise its staff who were no longer doing their day-to-day work to test new tech processes, and so accelerate progress. As a result, a lot of the tech projects it had planned over the next two to three years are already being concluded. The lender has a new head of innovation, Matt Mawdesley, and a working group focused solely on transformation, automation and innovation—something that Marc believes has got them through the past six months, by giving them a glimpse of what the new world will look like. Marc explains that trying to test and launch new systems while underwriting hundreds of transactions was “nigh on impossible” before. Being able to invest the time this year in technology, such as e-file, means it is now completely paperless. Together is also using low-code programming (a software development approach that requires little to no coding to build processes), which enables it to control much more internally. “This technology journey that we’ve been on has probably moved us forward 24 months in the space of six,” Marc points out.

With a smaller workforce, has Together’s capability changed?

Back in July, Together announced a consultation process on proposals to reduce the number of people employed. Some 175 jobs were cut. I ask whether its ability to increase lending volumes later on will be aided by the enhanced tech. To avoid manual validations, the lender has been using Open Banking, robotics and AI to gather customer information at the start of a loan application. This means that Together will be automating 80% of its personal finance, BTL and straightforward bridging cases, which will allow more time to focus on the remaining 20% which it calls the “exceptions”— those that require looking at the “whole circumstance” of a particular application. “We’ve always prided ourselves on manual underwriting: real people making decisions,” says Marc. However, he points out that one thing to consider is the cost of acquisition and having to process these applications. “Where it needs a real person looking at the transactions, speaking to the customer, finding out more information— we’ll keep our USP as being the common sense lender,” he adds. “But you don’t want to have a thousand people sitting in an office going through files and manually underwriting, because that’s not sustainable.” Together will also be using Open Banking to proactively work with new and existing customers. “We’re able to say to customers, ‘We feel you may be under some stress right now. Feel free to talk to us. We can help you.’ And we see a fantastic response from that,” highlights Pete.

How will Together further strengthen its funding lines, and has its funding model changed?

Over the past 10 years, the lender’s funding model has evolved into different asset classes. While Together has a “considerable amount” of its own money in the business, the structure of its funding lines is complex: we’re talking investors, bonds and securitisations. While funding diversity has been a buzzword in recent years, especially since the EU referendum, it’s not without its challenges. Pete explains that, in the short term, every institution has been looking at covenants and the threats and issues around them. Together had to renegotiate with its banks to get them to agree the facilities and provide all the information required, while also navigating payment holidays with around 7,500 of its customers across the group. “In a Covid world, to have the different funding structures that we’ve had, I think, has probably added many layers of complexity,” Marc admits. “And, as Pete said, everyone’s got different questions, and datasets and information that they want. So when the government came out and said, ‘We’re going to give a three-month payment holiday to all the homeowners that have been affected by Covid,’ that prompted an immediate call for action.” Having to navigate a “huge” pipeline of business at the same time was no easy task. So how did Together survive other recessions? If you look at the last one in 2008, the business consisted of only around 150 people, with a loan book below £1bn— and just two or three banks to consult with. Interestingly, the pandemic has pushed Together to think about what the future of its funding will look like and it is continually reviewing its options for growth. “When you’ve got a business that’s been successful as long as we have, with the data and prudent LTVs we’ve got, we think we’re an exciting proposition for anyone to invest in,” Marc declares. Behind the scenes, Together managed to raise a hefty £531m during Covid to look after its back book and support new business in the future. While it has been cautiously optimistic on the general performance of its loans so far, it is watchful of other moving parts beyond its control, such as furlough, payment holidays and CBILS. “Forbearance is critical to look after those customers who need more time,” Marc says. “And our view is that, for customers who want to be helped, we want to be in a position to do that.”

What is your honest outlook of the specialist lending market?

Marc thinks that, over the past nine months, many people in the market will have questioned how their respective companies do business, why, and the cost of doing so. “One of the big things that we’ve been focused on over the last two years is the cost attached to our ability to transact,” he says. “I recently mentioned to somebody, ‘I’ve never heard the office as quiet…’ and one of our underwriters said to me, ‘This is the new way of us working. We’re not running around anymore.’” Efficiency seems to have been the biggest lesson of 2020. “I’ve spoken to a few brokers who have said they’ve never been busier,” Marc adds. “Some of them are saying they’ve never been more profitable, because they’ve cut down on some of their costs. They’re focusing more on quality and conversion. Everybody’s working differently.” He believes it’s a great opportunity for Together to rethink what a modern business should look like. “We see the specialist lending market as something that we know and understand,” Marc tells me. “And if we can modernise our business and transform the way we do things . . . the opportunities for lenders like ourselves are really positive.”

Article featured in the December issue of Bridging and Commercial https://issuu.com/bandcmagazine/docs/lr-bandc_mag_issue_12-v4-singles.