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Changing aggregators is not without its risks. The Adviser has identified six pivotal points all brokers should consider before deciding to move
There are plenty of reasons for which brokers switch aggregators – better commissions, better service, and the security of their trail book are all high on the list.
Sure, they’re givens, but it’s often the bigger picture that gets overlooked in the chase for more business. Another prime motivator for change could be the need for cultural fit and to know your aggregator will be with you for the long haul.
Contemplating a move? It’s hard to know where to start; plus, you need to ensure existing problems with your business aren’t merely transferred from one aggregator to the next.
If you’ve had enough of your incumbent or feel your business is stagnating with your existing aggregator, then you’ve no doubt considered changing. And with almost 40 per cent of brokers saying that a switch is on the cards in 2014, here are six essential questions or issues that could influence your decision to stay or go.
Can your existing relationship be fixed?
The core of any good relationship is communication and if you and your aggregator have stopped talking, maybe it’s time for a ‘chat’ that might just resolve things.
However, if your aggregator has simply lost interest, it’s definitely time to look further afield, says Mark De Martino, director of sales at Loan Market.
“When an aggregator stops caring, the relationship is terminal,” he says. “It’s important to ask that question but also to ask yourself, ‘Have I actually asked for help?’
“As far as changing goes, unless you’re going to write more business or have a better lifestyle, then why leave?”
Weigh up the costs
The costs involved in moving aggregators are primarily two fold: financial (commissions and the like) and the cost in time. However, John Kolenda, managing director at Finsure Finance and Insurance, says the idea that any move will always be a painful one is an industry myth.
“Costs are minimal in moving, and the transition is a lot simpler than brokers think,” Mr Kolenda says.
“Brokers need to read any contract well and understand what they’re getting themselves into. If you don’t own the customer, you don’t own the upfront and you don’t own the trail, then my advice is don’t get into the relationship.”
Are you just shifting problems?
A new aggregator probably won’t be the road to riches that it might claim initially to be. So, how do you know you aren’t simply moving problems from one aggregator to another?
“That’s simple,” according to Mr De Martino. “Every broker should ask for the complete broker list and be able to call any broker in that business to get a feel for the aggregator. If the aggregator won’t provide this then I’d be asking what have they got to hide.”
Ask plenty of questions
Knowledge, as they say, is power. And when it comes to switching aggregators, you need all the knowledge you can get. Are there more opportunities? Will you write more business? Will they help with the back-end work? What is their culture and reputation within the industry?
“A broker also needs to be asking about the financials of the aggregator’s business,” says Choice CEO Stephen Moore. “You want to know your aggregator is there for the long-term and that you can protect your most important asset – your trail income.”
Know the exit strategy
This is arguably the most important question to ask. Read the fine print of any contract because a broker may not be able to take trail or their database with them if they choose to leave their new partner.
Mr Kolenda stresses this is about brokers making sure they own the assets they produce. “I’ve seen quite unconscionable contracts being executed on brokers and you just have to stay away from them as far as possible,” he says. “Either you can’t get out or, if you do, you lose everything. You have no value, you can’t sell anything because you don’t own it – the aggregator does.
“If the broker walks away they end up losing everything.”
Talk to brokers who’ve switched to your potential new aggregator
Or even better, talk to brokers who recently left the aggregator you’re considering.
According to Mr Kolenda, choosing an aggregator is about more than just looking at the obvious things such as BDM support, commission structures and the like; rather, it’s about partnering with an aggregator that you can work well with into the future.
“All brokers are in different lifecycles,” he says. “A single operator will want lead generation, training and access to BDMs. But as a business matures, they’ll want things like SEO and SEM expertise, strong compliance and marketing support.
“It’s about asking, what do they offer? What are my needs? What are their solutions to meeting my needs? Don’t just jump in; do your research and then you’ll be in a far better position to make an informed decision.”
