Joanne Davis has joined global legal firm Locke Lord as partner and head of its UK asset finance, leasing and consumer finance division. Brian Cantwell talks to Davis about strategy, UK market developments, and her plans for the future

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This month Locke Lord publicised the arrival of its new head of UK asset finance, leasing and consumer finance, Joanne Davis.

Davis is well known in the UK leasing market, starting her career at the Royal Bank of Scotland as an in-house litigation manager for RBS subsidiary the RoyScot Trust, then taking a stint at BPE solicitors, after which she was selected to become head of Shoosmiths asset finance and regulatory team for nearly four years.

Davis then moved across to UK legal firm DWF as partner for asset and consumer finance, until she was seconded to Volkswagen Financial Services (VWFS) as interim head of legal in February last year.

"It was an interesting time and a great place to work", says Davis. "I was mostly focusing on the FCA project, getting all of VWFS’s application and businesses ready.

"Effectively the task at VWFS was to lead the legal and compliance workstream of the regulatory project plan, and work with the business to ensure that all of the requirements of the FCA were implemented, and to make sure that when VWFS applied for full permission to the FCA, that the application was fit and proper.

"It was a hugely successful project, as the business planned early enough and I was working with a team of experts across the business areas, from sales and marketing to operations," says Davis.

"Before my departure, I also supported them in the appointment of a permanent head of legal, and to give the legal and compliance team leadership and support as I knew I wanted to go back to private practice as I missed working with my other clients, although I was sad to leave as it was such a great place to work."

Locke Lord

The VWFS posting was great experience for Davis, as part of her position at Locke Lord will be to work closely with businesses in the UK dealing with the challenge of the never-ending regulatory changes.

Davis’s recruitment was triggered by the retirement of predecessor Steve Finch; Davis also brought some clients across from DWF, as well as two of Davis’s colleagues from DWF who moved to help support the new-look team.

"We had a supportive client base, and a couple of members of my team have come across from DWF with me. They joined eight months ago, while I was doing my stint at Volkswagen, and will be based with me in London," she adds.

Davis admits that the changes will add up to a strategic change in the market share the law firm has in the UK.

"I have my UK client following; it’s nice to build on that, but it’s also nice to also work for clients of the firm, particularly the US banks that we are supporting, with their UK finance arms.

"Some of the banking and finance team that were already here are ex-Salans asset and consumer finance practice, so we already have a strong consumer finance and asset finance practice here that they have asked me to lead in the consumer and asset finance division for the UK.

"I’ve always been in a UK-centric business, but to have the international reach of Locke Lord is a great resource.

"To be able to focus on the UK, but to have partners internationally to work with who are my counterparts and are heading different international offices is exciting, and we can fully support our clients with our full service offering in both the UK and internationally."

Davis says Locke Lord, courtesy of the appointments, is in a strong position to grow its ‘one-stop shop’ offering.

"We work with asset finance clients, motor finance clients and consumer finance clients, and it’s really a full-service offering here, where we have all of the services that our clients need as a business with some exciting growth plans to strengthen our offering.

"From here we can support the industry’s growth and development and look after those three core industries.

"We work for a lot of the motor captives, motor independents, as well as working for the asset finance captives and independents, and a lot of the work we do is supporting their business growth to make their businesses stronger.

Certainly the changes have been heightened by the growth in the UK’s market focus on SMEs, says Davis.

"We help existing businesses and new entrants with new set-ups in the market; we support them through that process and make sure they have everything they need, which has been especially in demand over the last year or so from a wide range of different disciplines – bank-owned businesses, equity funding house-owned businesses, and independents.

"The market has changed as it has diversified, with a lot of entrants looking to access the SME market, plus we’ve seen the growth in challenger banks and funders, and a change in the broker market to include the consolidation and merging of brokers.

"I’m really enjoying supporting our established business clients, as well as the newcomers to the market. It’s rewarding to be able to provide advice to a market that’s well known to me, but is new to them.

"The broker market has also reached out to us for support and we support the NACFB as well, as they are doing a really good job at supporting the broker community and so are the funders, which impresses me greatly as we need to support our broker market as well so that we don’t lose our broker channel, which is important to the finance marketplace, in the UK especially.

"We will no doubt see further regulatory impact on our brokers if full fee disclosure hits the market, and this perhaps might result in more brokers doing their own books, as well as lenders looking to review the structure of the broker arrangement to include more agency arrangements. All of this comes with the need for legal advice."

2016: a year of consolidation in the UK market?

Already in 2016 the UK market has witnessed two acquisitions: Highbridge Principal Strategies acquired CIT Vendor Finance UK for an undisclosed amount, with the promise that it would buy more businesses. And Star Capital Partners (which had already acquired Kennet Leasing, Ignition Credit and AH Financial for its Star Asset Financial platform) acquired Capital Finance Partners for an undisclosed amount.

Motor Finance understands there are more deals yet to be announced, which is backed by Davis’s opinion that 2016 will be a year of mergers and acquisitions for the leasing market.

"I think there’s going to be another year of acquisitions and new entrants, and I think there’s going to be lots of consolidation in the small or medium-ticket space, with new entrants as well."

"Now that we have more of an appetite for external investors coming into the market, coming from all different disciplines like private equity houses and sources of alternative funding, there are the independents that need advice.

"We have our challenger banks; not all of them have got an asset finance arm, so there’s appetite there.

"We have also got banks that used to have asset finance arms that are bringing that back, or banks that let go of their broker division that decided to bring broker divisions back. So there’s a lot of change."

Davis thinks that the flow of external money into the market has created good opportunities for Locke Lord, as new entrants seek to gather the working knowledge they need through legal advice.

"With the captives it’s very easy to be sure that you have all the right add-on products, because you do that within your own umbrella of services.

"I think the independents would also like to ensure that they’re not just offering leases but making sure they have good maintenance plans and service plans, and ensuring that the customer’s got all the additional add-ons.

"Who might they need to work with to facilitate that? If you’re not a captive you don’t automatically have that there.

"It’s a big discussion if you’ve got leasing products. We need to have the right service products around that, and so we’re doing a lot of work around building products and platforms, which we can evidence to the client to say those extras are of beneficial value."

The push and pull on the UK broker market

The UK broker market’s size and status has been challenged by the regulation brought in by the FCA.

The beginning of regulation is a good opportunity for UK funders with broker relationships to start a dialogue over quality standards as a commercial understanding between brokers and funders, says Davis. Funders can then be assured about the consistency of service between provider and end-user of the lease, she explains.

"I’ve been commissioned to work on the minimum set of standards for brokers – on monitoring and supervision, and I’m helping the National Association of Commercial Finance Brokers on the working group with a number of funders.

"The brokers are doing a lot of work on the implementation and we are concerned that if they have numerous funders all demanding different things for auditing and supervision requirements, it will get very confusing.

"So we are trying to develop a uniform market response as an industry, with the banks included, working on a minimum set of regulatory and reporting standards that funders will expect from their brokers."

"The clarity on what a good-quality service looks like is important when you come to monitor and supervise your brokers, and brokers can be a risk to funders, but at the same time they are very important integral parts of your business if you have a broker channel.
"A lot of the brokers are small businesses themselves and we want to support them."

Appointed representatives model

"I think at the moment banks and funders realise that to take on any brokers under the FCA’s appointed representative regime is giving a big indemnity to the brokers, and it’s a big risk," says Davis.

"But if you look at the insurance market or anybody that had to come under the FCA umbrella, eventually you do need to embrace it in some shape or form.

"There are two models: the introducer model, and the fully authorised model. The former carries less risk than the latter; funders are looking for advice on that.

"I think we will see a shift change in attitudes from funders, because they want to support brokers, as they are a big part of the business, so we’ll see funders approaching this strategically, and looking at the risk. Self-employed brokers on an agency arrangement might be a growth area".

But while the FCA plays the role of headmaster, the UK leasing market needs to produce its own response to teach market participants what is the best course of action.

"It’s the educational function too," says Davis. "Once you’re educated about what the appointed representative scheme does and how it functions, in my view some of the areas of risk that funders see are not necessarily realistic."

Davis speaks highly of the UK broker market’s resilience so far in the face of ongoing change. "I’m really impressed with the brokers that I’ve worked with, from the large to the small. I’ve seen them embrace the changes in regulation, and appreciating that it’s integral to their business, to embrace it and to work with it, and to do what’s necessary to comply.

"There will be some that are ready to retire because of oncoming regulatory change, but generally I’m very positive about the brokers that have embraced it.

"We have given a lot of advice and they’ve been very good about putting in the right levels of compliance and structures.

"Some of the smaller brokers will probably join up, in mergers, to present a stronger, more solid platform, with some of the larger brokers holding some of the smaller brokers as appointed representatives, or businesses setting up to hold brokers and some of the funders holding them as well.

"You can look at some of the self-employed broker models as well, through the agency regime under the FCA, which sometimes is something that seems to get missed.

"If you have exclusive brokers to you, you can set them up as self-employed agents. There are lots of different models and we’ve been giving a lot of advice on that."

It looks like that the UK’s legal advisors will be as busy as the market it provides for in 2016.