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New bank minimum volume quotas and changes to broker accreditation requirements have hit the broking industry hard. But the fall-out is far wider.
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The aggregation industry is also facing challenging times as brokers – confronted with losing their accreditation – question the benefits of aligning themselves with an aggregator. And aggregators, meanwhile, are questioning their very value proposition, says Loan Market Group executive director John Kolenda.
“Now more than ever, it is vital that aggregators demonstrate [they are capable] of providing the best structure to support their brokers in being able to operate their business without having to deal with some of the confusion arising out of the measures being introduced by lenders,” says Mr Kolenda, who points out that such measures are in fact positive for the aggregation industry.
“Individually, lenders cannot deliver a holistic solution as the broker’s key proposition to customers is choice through multiple lenders,” says Mr Kolenda. “Lenders are hoping aggregators will invest more in quality systems, training and resources to ultimately increase the support to their members.”
Connective principal Mark Haron says brokers questioning whether they should continue their association with an aggregator need to consider the possible fall-out if they do not.
“My answer is: How will you maintain [your] lender accreditations without an aggregator?” Mr Haron says, adding that aggregators have a valuable role to play in assisting brokers who might lose their accreditation with a particular lender.
“If you are a good quality broker your aggregator should be able to present your credentials to the lender and assist with reaccreditation in most cases,” he says.
PLAN Australia CEO Ray Hair says the value of aggregators lies beyond their ability to supply brokers with a panel of lenders.
“A good aggregator provides a full service including access to software programs and other broker tools [such as] training courses and mentoring programs,” says Mr Hair, who adds that the changes to minimum volume requirements are aimed at lifting standards.
“No-one has unlimited capacity at the moment. As such, the majors want to pick and choose their brokers and the best way to do that is by implementing minimum volume quotas,” Mr Hair says.
And although the banks’ dominance of the mortgage market means that brokers and aggregators may feel they are caught between a rock and a hard place, lending policies will change when competition returns.
“The tide will change, it is a just a matter of when,” Mr Hair says. “To remain competitive they [the banks] will have to readjust their lender policies and adapt to the changing environment just as aggregators have done.”
Brendan O’Donnell, the CEO of Choice Aggregations Services, says one good thing to come out of the recent changes is that they have forced the aggregation sector to evolve into a more professional industry. And while they may have altered the way brokers view aggregators, the changes will ultimately lead to a closer relationship.
“I believe a lot of lenders will be using this opportunity to drive market share with brokers and strengthen their third-party operations rather than restricting the brokers they do business with through volume requirements,” he says.
Mr O’Donnell says he believes aggregators will also be at the forefront of change management – for example, continuing to invest in software platforms and broker support to help brokers truly embrace electronic lodgement.
“Change is the precursor to evolution and I think the aggregation sector is currently re-defining its value proposition,” he says. “Considering the current flight to quality and pending legislation, aggregators will prove a strong force in ensuring brokers have the required skill sets and resources to maintain growth in their businesses. Aggregators will also play a key role in helping brokers adapt to the changing market by way of diversification, helping brokers make the transition from mortgage brokers to finance brokers,” he says.
Mr O’Donnell says aggregators are currently working hard to support their brokers in finding a workable and mutually acceptable approach to the new minimum volume quota requirements – thereby playing another valuable role.
“Our role is to support and represent our brokers’ interests with lenders. Our members can rest assured of not only our disappointment and objection to the introduction of volume quotas but that we are also actively working with the lenders in question to work through the issue.”
