What are the opportunities and threats for the broker channel?

Both the Connective MD and the MFAA CEO said that the broker channel continues to grow in popularity – with around 74 per cent of home loan customers in Australia using the third-party channel to secure a mortgage – suggesting that this percentage would likely continue to grow as borrowers seek personalised help that is tailored to their best interests.

Pannek said: “Let’s look forward to where the economy is going. At some point the RBA will move on rates. Are brokers ready to have those conversations? And which clients will you be reaching out to/what’s the best use of your time in communicating with those clients?”

The MFAA CEO said it was important brokers were preparing now for what happens next when rates come down, as they will likely be in high demand when they do.

Specialisation growing in importance

Haron said that broker value was particularly evident given the growing proportion of ‘out of the box’ lending being written. This included more loans being written by brokers for borrowers with self-employed income that might not service at mainstream lenders, those seeking credit advice around how to borrow through self-managed super funds, and specialised commercial lending (for example, agribusiness finance).

According to Ian Rakhit, the general manager, third party at Bankwest, the lender was seeing “a lot of self-employed borrowers becoming investors” and using the equity they have to purchase investment properties in other areas.

Bridging loans and guarantor loans were also identified as areas of growing opportunity as affordability issues bite, with more borrowers also looking to hedge by splitting their home loans with variable and fixed rates (particularly as fixed rates have been falling recently).

Macquarie’s head of broker distribution Wendy Brown also said that brokers are finding more opportunities by becoming specialists in a particular field and scaling their businesses to target that specific market, for example, first home buyers or investors.

She said: “Brokers are really focusing on what they do really well, and actually choosing to ‘divorce’ customers or ‘break up with them’ because it actually doesn’t fit their value propositions, or their operating model, or the type of customers that aligns with their brand.

“This makes them true specialists in their field and attracts more customers of that type.”

Similarly, Baber Zaka, the executive manager, third-party banking strategy and partnership management at the Commonwealth Bank of Australia (CBA), said that borrowers are becoming more discerning about which brokers to use.

“So you have to be taking your business out there and making sure you’re actually in a sufficient number of [online] channels because people want choice, they want to make sure they’re getting the best skilled broker. It’s not just about choosing brokers anymore, it’s about which one,” he said.

Embracing technology, but being vigilant

Technology was also identified by lenders as a big opportunity in market, with open banking, artificial intelligence (AI), and automation freeing up broker time that they can reinvest in relationship building and customer service.

Rakhit said that artificial intelligence (AI) is a growing opportunity for brokers, as it helps them write loans faster and free up time for them to do the customer-facing work.

As an example, Rakhit said that Bankwest is working on an AI chatbot tool that answers broker questions and highlighted that other tools, such as Co-Pilot, can help reduce broker administration by reducing repetitive actions through AI-based automation.

Brown agreed: “Relationships is where brokers are going to win … how are you going to really embed that long-term relationship with customers? I still think there is a gap there. So if you can spend more time with your customers face to face, that’s where borrowers will see value.”

What are the threats?

However, while AI and open banking were both touted as opportunities for brokers, Natalie Smith, the general manager, retail broker at ANZ, said one of the challenges with growing adoption and sophistication of technology was that brokers are going to have to be more vigilant about the veracity of the documentation they receive.

“There is just a higher degree of sophistication out there ... we’re seeing, at the moment increasing fraudulent documents coming through – and it’s only going to get better … So, I think having that in-person authentication is going to be key. I think part of the values proposition that [brokers] all bring is that human connection,” she said.

Cyber security was also a growing factor, particularly as a cyber attack or data breach could destroy a small business.

CBA’s Zaka said: “Cyber threats are also incrementally getting better, more and more sophisticated. We all have to work together in having the right training and education and the right systems built up at every single layer in the ecosystem to start preventing these threats … Because it’s only as strong as the weakest link in the chain.”

He said that brokers need to be preparing now to differentiate their business, identify opportunity, and utilise technology so they can get close to their customers and ensure they are “embedding” their relationships, particularly as consumers are looking to combine all their financial and credit advice in one place.

“Customers want a trusted adviser but they don’t necessarily want five different trusted advisers,” he said. “So there’s a threat of all that coming and you’re not the one they pick … I think it’s going to be larger brokerages who have a more diversified financial business who take market share.”

Connective’s Haron concluded: “If you want to keep growing market share one of the key things we’re going to have to focus on is our existing clients.

“You’ve got to make sure you’re doing things to keep your existing clients – because the majority of a broker’s business grows by repeat and referred business. And you’ve got to be communicating to existing clients, and making sure that anything they need done, that you’re the one doing it for them. Don’t have them go into a branch to ask question – make them go through you first,” the Connective MD said.