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The major brokerage’s executive chairman has provided details about what options the deal would provide for brokers, and what is driving aggregator consolidation.
National Australia Bank (NAB) recently entered into an agreement to sell 100 per cent of its broker aggregation businesses – PLAN Australia, Choice and FAST – to Loan Market Group.
Under the agreement, the major brokerage will acquire 100 per cent of NAB’s three broker aggregation, the corporate credit licence holder and compliance services provider BLSSA, associated broker aggregation technology, including the technology platform Podium, and commissions systems and related sales and operation services.
However, the four businesses – Loan Market, PLAN Australia, Choice and FAST – would continue to run independently of one another, Loan Market Group said. They will continue to have their own respective aggregation agreements, leadership, and corporate sales and marketing teams.
Commenting on the purchase at the time of the announcement, Loan Market executive chairman Sam White had said: “The acquisition means we can offer more options to our members. It will empower our business owners to decide which value proposition and support structure they need to thrive.”
Mr White has now provided more details around these options, and the business models brokers could adopt after the completion of the acquisition and the three NAB aggregation businesses begin operating under the Loan Market umbrella.
Speaking to The Adviser, the Loan Market chairman said the acquisition would enable Loan Market to provide brokers with choices around the commercial model they would like to incorporate into their businesses.
“For a broker to join a group, they could either join under a branded model or they could join under a flat fee model or a wholesale model,” Mr White said.
“We wanted to be able to give brokers different choices for what sort of service they were going to get and what they would pay. It’s a different value proposition to the aggregation service and that was something that was important to us too.”
Mr White explained that Loan Market works under a percentage model, while FAST charges a fee per transaction, which focuses predominantly on commercial transactions, but also provides residential property services. Choice offers a flat fee model for brokers.
“PLAN Australia has more of a sub-aggregation flavour where they’re working with bigger businesses,” the aggregator head added.
According to Mr White, the prospect of being able to provide brokers with choices around the business models they would like to adopt attracted the major brokerage to this purchase deal.
“Brokers can choose what type and level of service they want, what they want included, and what they don’t want included,” he said.
“I think that means that the more choices brokers have, I think the better for them.
Explaining further, Mr White said: “They may start with one business and say, ‘you know what, that doesn’t quite suit me, I want to go to a different type of model’.
“Our vision is [for brokers] to be able to do that without [them] having to change aggregators or change accreditation.”
According to Loan Market, the major brokerage is aiming to embed this new framework and structure by the end of 2021.
Completion of the purchase deal is expected to occur in early calendar year 2021.
The deal would result in a total of about 5,000 brokers in Australia and about 1,500 brokers in New Zealand, according to Mr White.
What’s driving aggregator consolidation?
The Loan Market NAB owned aggregator purchase agreement is not the only deal that is on the horizon in 2021. There are also other mergers in store next year.
The process is under way to create the largest merged aggregation entity in broking via the proposed $120-million merger between AFG and Connective, despite some delays.
The completion of this merger is expected to occur early next year, which would also bring together around 5,000 brokers in Australia under the umbrella, and around 1,500 brokers working in New Zealand.
Speaking of this trend of aggregator consolidation, the Loan Market chairman said technology was a key driver, which he said has remained an expensive investment.
He said Loan Market required scale to continue investing in technology and services for brokers, while maintaining its current culture.
“For all of us to be able to invest more in technology going forward there are two ways of doing it,” Mr White said.
“One is, we get our existing brokers to pay more or we have more brokers paying less. We think it’s better to have more brokers paying less because it gives them a better return on their businesses.”
He added that the major brokerage was concerned about how it would have been able to invest in technology if it continued to operate under its existing model.
“We were concerned going forward that if we were just Loan Market, for the things we wanted to do, we’d have to charge our brokers a lot more for technology in the future,” Mr White said.
“What we see now is, this gives us the chance to really invest more without having to charge brokers more.”
The future of aggregation
In conclusion, Mr White emphasised that the trend of consolidation of aggregators would not reduce competition among them.
“I think for brokers, we’ll probably see a little bit more consolidation, but there still will be a lot of choices available to brokers moving forward, because even if groups do consolidate, I think they will still have different channels to market and different options for brokers,” he said.
He also said that the level of aggregator choice for brokers would not reduce, adding that while aggregators may share technology, they will operate under different business models.
“Even with our merger, we’re not changing any choices with brokers. We’re just trying to keep very distinct business models – it’s underneath one roof and we’ll get some scale for investing in technology, but the choices that brokers have won’t change,” Mr White concluded.
[Related: 2021: The year of aggregation consolidation?]
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