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Automation in the broking industry is inevitable and brokers should start to plan for its eventuality now.
This is the view of ING Direct's executive director, distribution, Lisa Claes, who says automated processes – where complex algorithms dispense advice – already exist in managing investment portfolios, and it's only a matter of time before they take root amongst mortgage brokers too.
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"The client provides key data like risk tolerance, personal goals and so on, and the algorithm takes care of the rest, automatically rebalancing portfolios in line with the parameters provided. Needless to say it's a far cheaper option for consumers than face-to-face advice," Ms Claes says of the technologies that already exist for investors.
Ms Claes argues that younger Australians who "represent the next wave of homebuyers, upgraders, investors and wealth builders" are not only adept at these new technologies, they will expect it.
Although she says automation is inevitable, it's by no means the end of the humble mortgage broker.
"The key is to prepare for it now," Ms Claes says. "What can you [the broker] do that an algorithm can't? The answer is 'plenty'.
"As a broker, you have the capacity to take on the role of coach and partner to your clients. A home loan is a key product in our lives, and it makes sense to promote your expertise by encouraging annual mortgage health checks and supporting the decisions your customers make.
"Gaining an intimate understanding of your client base is something an algorithm can never achieve. Segmenting your market base in a linear, chronological way can help to determine who your future customers will be – probably the current 18-25 year olds – then build your business around meeting their needs," she said.
Ms Claes said brokers needed to understand different customers would have different needs. Some won't be tech-savvy at all, while others will be far more comfortable with the DIY approach.
"That's where you come in," she said of brokers. "Figure out how you can offer each of your customers value for money. For instance, could you give back some of your commission to those who are doing a large chunk of the work themselves?
"Or, if a customer tells you what they want to do but seeks your opinion on their planned strategy, it may pay to move to a fee-for-service model rather than full commission.
"Customers who don't see value for money may opt for the risk of taking an entirely DIY approach rather than accepting – and paying for – advice they don't fully need. Get this wrong in the early stages and you've potentially lost a customer for life."
Ultimately, says Ms Claes, algorithms provide answers and automated responses, they do not "build relationships, inspire, act as mentors, and they don't anticipate future needs".
Brokers – unlike machines – can also provide a customer with an ongoing financial health check that will benefit them year after year.
"This builds the foundations of an enduring relationship with your customers and sets the foundations for you to grow a sustainable business in the longer term," Ms Claes concluded.
[Related: New mortgage tech forecast to make Australia a world leader]
