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Mortgage broking is in a state of flux as home loans become more automated, but that does not have to spell doom, a brokerage head has said.
Provident Lending & Business Solutions director and co-founder of Accendo Financial, Trent Carter, told The Adviser ahead of his session at the free SME Broker Bootcamp that the mortgage industry is undergoing a tectonic shift, “whether people recognise it at this stage or not”.
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Indeed, the industry is facing digital disruption as more lenders use online platforms to speed up mortgage approval times.
Many lenders are advertising turnaround times of as little as 24 hours, while some direct lenders can reportedly now offer approval times in as little as 10 minutes (albeit for more vanilla, low loan-to-value ratio loans).
“Banking is transforming due to things like open banking and [digital] data collection,” Mr Carter said.
“The lenders ultimately own that data, which allows them to read into their clients. So, getting a standard home loan for a PAYG borrower should become faster and move into the domain of lenders over time.”
This poses a threat to mortgage brokers, but it does not mean “doomsday bells” are ringing, Mr Carter reassured.
Instead, it opens doors for diversification into small- to medium-sized enterprise (SME) lending because an SME client’s requirements are more complex, which necessitates more hand-holding from brokers, he suggested.
“SME clients who have a robust relationship with their broker won’t even approach a lender directly. They will approach their broker,” Mr Carter asserted.
“Algorithm-based assessments are not going to suit every SME client because the data points don’t line up.”
There is potential for most mortgage brokers to diversify into SME lending as a large proportion of their existing client base is already self-employed, but a lack of confidence prevents them from taking the plunge, Mr Carter said.
“It’s not a quantum leap to get into this space,” he said.
“Brokers just have to think about it in a different way and arm themselves with better skills.”
Mr Carter transitioned to a fully diversified brokerage around eight years ago, which offers commercial, property and business loans, home and investment loans, car and personal loans, equipment and asset finance, and cash flow advisory services.
To do this successfully, he connected with mentors and accountants to build his technical skills and understand a business’ financials, cash flow requirements, and profit and loss statements.
“Brokers who want to diversify should know that they’re not going to know everything overnight. It’s a patience game, and repetition is the key to learning,” Mr Carter said.
“Make sure you get exposure and analyse business financials time and time again, because that’s really where the learning beds down. It’s less cookie cutter than home loans because no two businesses are alike.
“If you’re doing one business deal every six months, it’s always going to be a struggle.”
A key challenge for SME brokers, Mr Carter highlighted, is to understand their clients and lenders and bridge the gap between them.
“You need to speak in both their languages and become a translator between the two. Quite often, the solution that the client can get is not the solution that they want,” he said.
Mr Carter concluded by pushing brokers to embark on the pathway to diversification by seizing opportunities.
“If they’re doing a home loan for a self-employed client, they’ve got access to those financials. Even if they’re not doing a business transaction, why not look at it with an SME lending lens and practice doing the key ratio analysis?” he asked.
“By doing that sort of analysis, you can have another conversation with your client, and look for opportunities.”
At The Adviser’s SME Broker Bootcamp, Trent Carter will present a session on why a fully diversified brokerage is key to success, and provide tools to revamp your brokerage and offer a holistic range of services.
The bootcamp will take place in the following locations:
Thursday, 17 November: Waters Edge, Portside Wharf, Brisbane
Tuesday, 22 November: Parkroyal Parramatta, Sydney
Thursday, 24 November: Crown Promenade, Southbank, Melbourne
Places are limited for this free conference so book your place now by registering here.
For more information about the conference, including agenda and speakers, click here.
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