Boss of the week: Eamonn Rice

By Ian Fraser

Sunday Herald

December 10th, 2006

Top accountant is counting on web mortgages to make his fortune
Former Ernst & Young partner launches mform, a one-stop internet home loan company

EAMONN Rice, is not your typical Big Four accountant. Nor indeed is he your typical financial services entrepreneur.

Whereas most of Rice’s former colleagues adhered strictly to the traditional uniform of business suits and ties, the Northern Irishman favoured rather more modish dress. He was rarely, if ever, seen with any form of neckwear and became a habitue of the Hallion Club on Edinburgh’s Picardy Place, a venue not normally frequented by Big Four partners.

Neither is Rice your typical entrepreneur driven by a desire for material wealth. He spent 20 years with Andersen and Ernst & Young, where partners’ annual pay and bonuses typically reaches some £600,000.

Yet exactly a year ago, 43-year-old Rice tendered his resignation as a partner in Ernst & Young, where he led the Edinburgh-based financial services team, to pursue his dream of starting his own business.

In January of this year, Rice started his new online mortage service, mform. The business was formally launched last October, along with the support from a group of semi-retired financial services heavyweights (including former client Mike Ross, a former chief executive of Scottish Widows) and £5 million of backing from fund manager Artemis.

Rice believes he can build this into a major UK financial services brand.

In doing so Rice has gone head-to-head with financial services entrepreneur Jim Spowart (founder of peopleschampion. com) in the web-based battle for home loans business.

Rice insists that mform has the upper hand, partly because he claims his venture does more to demystify the process of choosing a mortgage. He also insists it will do more to benefit consumers because it permits them to bypass intermediaries – such as independent financial advisers and brokers — by linking them direct to their lenders of choice. Peopleschampion, on the other hand, has the advantage of being majority owned by SMG, and so has access to “free” advertising on the likes of Virgin Radio, Grampian TV and STV.

Rice for his part says he will spend up to £2m a year on advertising — mainly on the web — to achieve his goals. He has already acquired UK Mortgages Online, which is referring about 2000 potential borrowers per day to mform’s website.

Rice first hit on the idea for mform when still with Ernst & Young in 2004. Some research into the UK mortgage market revealed that around one million Britons were Googling the word “mortgages” each month, but very few were able to take out an online home loan.

“The existing price comparison websites took you to a broker, which means people were doing their own research on the web, but still ending up having to pay a broker a fee. The lenders themselves didn’t have a very developed online application process,” he says.

Rice spent a year or so figuring out, in his evenings and weekends, whether his idea for an execution-only mortgage business that would directly link borrowers with lenders could work. Once convinced it could, he stepped down from E&Y and within weeks he announced that a team of well-known financial figures were giving him their backing.

These included Bill Main, the former chief executive of Scottish Widows Investment Partnership, Mike Ross, who had been deputy chairman of Lloyds TSB in addition to his Widows role, and the current Resolution Asset Management deputy chairman Danny O’Neil, all of whom are now non-executives on mform’s board.

Rice also hired Francis Ghiloni, former sales and marketing director at Britannic Asset Management, as an executive director. The quartet is each understood to have invested some £200,000 of their own money in the new venture, in exchange for equity stakes estimated to be 13 per cent to 14 per cent.

Rice is not without ambition. He confidently predicts that mform, which employs just 17 people in a redeveloped mews house in Edinburgh’s New Town, will carry out some £3 billion of business in its first year of operation.

“We’re setting out to revolutionise the market by, where appropriate, taking out the intermediary.”

He has already struck direct deals with lenders including HBOS, Abbey, Lloyds TSB, Northern Rock, Alliance & Leicester, Dunfermline and Chelsea, who together account for more than 60 per cent of the UK mortgage market. Rice says: “We expect to have signed up the rest of the market within the next few months.”

Mform will charge these partners a commission of 0.175 per cent of loan value, roughly half of the commission charged by traditional mortgage brokers and IFAs. He says he can do this because mform leaves credit and affordability checking, as well as identity verification, to the lenders themselves.

Even though he believes it will be handling more than 1 per cent of the UK market within a year — which implies estimated first-year revenues of £5.2m — Rice does not believe the new venture will need more than 20 staff. This is because non-core activities are being outsourced. Branding and creative work is being handled by Edinburgh design agency Tsuko; the website is being handled by RDF in both Livingston and Brighton, while RDF call centres are fielding telephone inquiries.

As he trawls through the website in the plush surrounds of the Hallion, Rice says: “The basic model is simple: there’s some educational content about mortgages, and a very simple process for searching the whole of the market. We don’t work off a panel, we don’t differentiate between lenders who’ve signed a contract with us and those that haven’t. It’s only mortgages, there’s no advertising anywhere; we don’t want to confuse the consumer.”

HE also stresses that consumers searching for home loans on his website can remain anonymous for most of the process (no personal data will be sold to third parties) and that mform users will be told the “true” cost of their mortgages, rather than just relying on annualised percentage rates (APRs), which Rice says provide a misleading picture as they take no account of additional charges.

“We’re trying to get past the situation where lenders have a cheap headline rate, but then hit you with upfront fees, exit fees etc. One of the principles behind what we’re doing is to make the mortgage market more transparent.”

After studying at Queen’s University Belfast, Rice joined the Belfast office of global accountancy giant Arthur Andersen, even though his father and three brothers had opted to work for the family firm E Rice & Co. “I became the black sheep over that,” he says. “I was blissfully unaware of the eventful years to come.”

The move turned out to be a poisoned chalice for Rice, as within weeks of his arrival at Andersen, the De Lorean car scandal broke. Andersen, the De Lorean auditor, decided to axe its Belfast operation, leaving Rice to finish his training with the Dublin branch.

Soon afterwards Rice took a job with rival firm Price Waterhouse in Los Angeles, where he became involved in salvaging the collapsed US health insurer Maxicare. “I learned a lot about the financial services industry and, in particular, regulation, risk management and business strategy,” Rice admits.

These skills were in short supply at PWC’s Edinburgh office, which had won the audit contract for Scottish Widows.

Rice was lured back in 1990. A decade later he rejoined Andersen, but within 18 months it had collapsed following its involvement in the Enron scandal.

This made for a traumatic time for Rice. “At one time there was a risk the UK partners would be pursued by Enron’s US creditors. It was a fraught time, with a lot of pressure and no knowledge of what the future would hold.” But Rice landed on his feet, and took his financial services team of 16 people to the Scottish offices of Ernst & Young.

Given his Andersen experience, he says he was also relieved that E&Y had converted itself into a limited liability partnership —  meaning that its partners could not be financially cleaned out in the event of its collapse.

The mortgage market, which has been described as a “viper’s nest” by RBS chairman of retail banking Gordon Pell, can be a ruthless place. But it’s nowhere near as bloody as where Rice grew up — Belfast in the 1970s and 1980s.

While he was studying for his bachelor’s degree in business administration at Queen’s, Rice even witnessed the assassination of a law lecturer outside the library. “There were regular bombings, and there was almost a surreal quality to living in Belfast at that time,” he says. “However, it was only when you moved away that you realised it was any different from anywhere else.”

Now that he has left the world of accountancy for the more cut-throat world of mortgages, Rice’s supporters in the Scottish financial services community will be hoping that his newly chosen universe is a far safer prospect in terms of profitablity.

NEED TO KNOW

CAREER: Eamonn Rice, 43, is founder and CEO of mform. He grew up in Belfast, studying at Queen’s University before qualifying as an accountant with Arthur Andersen in 1987. He then joined Price Waterhouse (for which he worked in Los Angeles and Edinburgh, becoming the firm’s youngest partner at 31). He rejoined Andersen as a partner in 2000, but within a year the firm collapsed and he joined Ernst & Young as head of financial services for Scotland and Northern Ireland in 2002. He resigned from E&Y in November 2005.

PASTIMES: Reading US crime fiction, collecting contemporary Irish art and supporting Celtic.

DRIVES: Maserati Quattroporte

FAMILY: Partner Lucy Penton, and three sons (one from a previous marriage).

READING: The Night Gardener by George Pelecanos

FAVOURITE FILM: Local Hero

MENTOR: Bill Main

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