Magazine article Mortgage Banking

"Elective Affinities": Mortgage Lenders, One-Stop Shopping and Partnership

Magazine article Mortgage Banking

"Elective Affinities": Mortgage Lenders, One-Stop Shopping and Partnership

Article excerpt

"Just as each thing has an adherence to itself, so it must also have a relationship to other things."


Elective Affinities

IN THE 18TH CENTURY, GOETHE TELLS US, chemists developed the theory of "elective affinities": Elements adhere not only to themselves, but have a natural adherence to other elements.

I've chosen this as a metaphor for the strategic partnerships, alliances, affiliations, joint ventures and linkages that increasingly characterize today's business world. As inhabitants of that world, we are working harder every minute to add value to customer relationships while spreading our capital investment, risk management, operational expenses and infrastructure in ways that benefit all of the "elements" concerned.

Elective affinities are clearly key to survival and growth. In an environment of rising rates, consolidation, market volatility and radically changing consumer behavior patterns, we must establish symbiotic relationships with businesses that can offer bundles of value to our customers at the point of sale.

For lenders, there are two bundling models. First is the monolith, in which a provider absorbs companies offering ancillary services into one vertically organized entity. Second is the "big tent" model, in which a lender--Chase, for example-- aligns its brand, data and operational resources with independent businesses to increase profits and share costs.

As I see it, we need a big tent. Until quite recently, business has continued to be very, very good for many lenders, Realtors and real estate service providers. But we are now finding ourselves in what may be a different business cycle-- a period of rising rates and wavering consumer confidence. Adding to the pressure are consumers who define financial services as shopping goods. The only way to reach and keep these customers is to make their mortgage shopping experience not just quick, easy, appropriately priced and informative, but absolutely delightful. In days to come, such differentiation through superb service and customized convenience will determine any lender's credibility and foothold in the marketplace.

So how do we do it? By joining with Realtors, insurers, title companies and other home-financing business partners to delight our customers. Whether in the traditional retail environment or in direct-to-consumer markets, partners with synergistic, branded products and services are finding that they can share customer acquisition profitably. Joint ventures and affiliated business arrangements mutually expand business opportunities and provide for participation in profits and further penetration of key segments and territories. When properly positioned, they also increase the power of each partner's brand.

The wisdom of the elective affinities approach is borne out by numbers. Fifteen years ago, strategic alliances accounted for just 1 percent of all revenue generated by the top 1,000 U.S. firms. The projection for next year is 20 percent. Why? Because alliances are proving more profitable, on average, than a business' regular operations. The average return on investment (ROI) for alliances is 17 percent, compared with 11.5 percent for U.S. companies overall, according to a book by Cyrus Friedheim, entitled The Trillion Dollar Enterprise: How the Alliance Revolution Will Transform Global Business. …

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