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Two broking groups have formed a new co-operative venture, the Co-Active Finance Group, to help groups and sub-aggregators benefit from economies of scale.
Purple Circle Financial Services and Mortgage Australia Group have announced the formation of a new co-operative venture, Co-Active Finance Group, which aims to provide services to mortgage brokerages and sub-aggregators.
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The co-operative – which has over 200 combined members – has been formed to help support smaller brokerages and sub-aggregators benefit from economies of scale and the financial benefits and operational efficiencies that come from sharing services such as compliance support, client relationship management (CRM) software, white-label loan products, loan processing, virtual assistants, parabroking, and mentoring.
Noting that several broking groups and aggregators have been merging and acquiring other parties to benefit from economies of scale recently, Purple Circle Financial Services director Frank Paratore commented: “Rather than doing it by way of one party buying the other, it’s just the two businesses coming together under the co-ooperative umbrella.”
The director of Mortgage Australia Group, David Ham, added: “When you compare the overheads required to run a successful finance broking group, you realise we all wrestle with the same duplicated costs. There is an ever-increasing time and financial burden on mortgage brokers, and by pooling our resources we can minimise these costs to our members whilst still improving their value proposition to all of their clients.”
While the co-operative brands will continue to operate as individual entities, it is hoped that by forming the co-active, the not-for-profit could eventually become an independent member-owned aggregator.
Mr Paratore stated: “Whilst initially the not-for-profit venture shares margins and cost reductions with [its] member groups, the strategy and vision is to build scale, profitability, independence and equity value for every stakeholder.
“The intention is that, longer term, there will be other larger brokerages or subgroups/sub-aggregators who also join the co-operative. We understand that the industry that we’re in, it’s very much about distribution and getting numbers, getting brokers for growth.
“Independently, there are greater barriers to driving growth, but as a collective and as a group, those barriers are watered down or removed, and people get to share in the margin on the way through… So you can continue to run your own businesses as it is now but the group services are where you can potentially gain operational efficiencies or financial benefit as a co-operative.”
Mr Paratore gave the example that while it may be difficult for a brokerage group with 40 brokers to access a white-label product, it is more feasible for a group of 200-plus brokers.
“We want to grow the co-operative in regards to distribution (from a numbers perspective), to provide fair and equitable value back to the members of the group,” the Purple Circle director continued.
“It’s really about giving brokerages and subgroups a platform with the intention that they’re going to get better margins, because they’re going to be sharing some of the financial benefits. So, if there’s something that we can bring to the table that’s better and we can get it cheaper because of our bulk-buying power, the benefits are going to go back to the members of this cooperative, as opposed to, historically, the aggregators that are retaining the margin.
“The longer-term play here, without mincing any words, is for us to be our own independent aggregator… It’s a strategic ownership in an aggregator. So let’s say it’s 10 businesses that come together, they will have ownership and control of what this aggregation business will look like in the future.”
Purple Circle Financial Services director Greg Pennells concluded: “Our mission is for Co-Active to become a lighthouse for every non-major broking group in Australia and for every member to experience supported independence, strategic ownership in a large venture, increased profitability and all the while offering their members an unrivalled range of support and services.”
It is expected that the co-operative will look to launch its own mentoring program for the members in the near future.
[Related: MoneyQuest acquires Buyers Choice]
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