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The major aggregator will move to acquire non-controlling equity stakes across its network of mortgage broking businesses.
ASX-listed aggregator Australian Finance Group Limited (AFG) has revealed that it will now have the ability to acquire non-controlling equity stakes across its network of mortgage broking businesses and has hired a new leader to spearhead its investments.
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The group has launched the new offering after finding strong appetite from brokers looking for investment (particularly those succession planning), and it revealed that “active discussions” have already started with interested groups.
AFG CEO David Bailey said the company’s strong balance sheet meant it had access to funding that could be used to take equity positions in “well-run, growth-minded broker businesses across Australia”.
He said: “AFG’s founders pioneered the mortgage broking industry 30 years ago. Since then, the industry has gone from strength to strength, with customers recognising the many benefits of using a broker, and brokers now responsible for around 74 per cent of all mortgages written.
“It’s only natural – given how established the industry now is – that demographics are changing, and through AFG investing in its brokers’ businesses, we are helping to facilitate succession planning for some and expansion for others.”
AFG has now appointed Viknesh (Vik) Sukumaran – the former general manager for operations and acquisitions at ASX 100-listed insurance intermediary Steadfast Group Limited – as its new head of broker investments.
In his new position, Sukumaran will lead a team specifically responsible for delivering and managing these investments.
Bailey said: “We believe in backing our brokers. AFG has heard from its brokers that they are seeking assistance to expand their operations and support their growth.
“Every day, AFG staff work with our broker network to help them build their businesses. As small business operators, access to funding for business expansion or forward planning for an eventual retirement can prove challenging.
“We have listened to these requests, and it has led us to offer a solution whereby AFG would invest in the business, taking a non-controlling equity position, providing that surety of funding, along with additional expertise to support the growth of their businesses.”
Bailey said there was no obligation for brokers to participate, and AFG’s value proposition would remain the same for all brokers, irrespective of whether AFG was a shareholder.
“Our unwavering commitment to brokers and high-quality offering of products and services will remain consistent for all member brokers,” he said.
The move by AFG to take stakes in broking businesses comes as more brokerages look to acquire successful broking businesses as the first generation of mortgage brokers retires.
Earlier this year, it was revealed that financial services group (and AFG brokerage) Empower Wealth had hired industry stalwart Sam Boer to lead its own mergers and acquisitions function.
In his new position, he will be tasked with identifying, assessing, and working collaboratively with established brokers and businesses looking to transfer the custodianship of their client base to Empower Wealth Mortgage Advisory.
Speaking to The Adviser in June, Empower Wealth founder and managing director Ben Kingsley said: “As a maturing industry, we need to prepare for the next stage, which will see unprecedented change largely driven by digital technologies, industry consolidation plus ongoing scrutiny and challenge.”
Other large brokerages, such as Entourage Finance, have been acquiring a number of broking businesses in recent years. Entourage Finance last month acquired Hawthorn-based mortgage brokerage Clover Financial, headed up by Phoebe Blamey, the third purchase it had undertaken in the past 18 months.
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