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The strong property market is driving growth for mortgage brokers right across the industry. To continue this positive momentum, Macquarie Bank’s Frank Ganis says brokers should look for new opportunities in the changing market.
In the current competitive and changing market landscape, with changes to investor lending and interest-only loans, home loan repricing and new capital requirements, there are strong prospects for businesses willing to see the opportunity in change and build on their strengths to meet the transforming needs of clients.
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In particular, there continues to be significant scope for brokers willing to extend and diversify their service offerings to respond to changing demands from clients.
More Australian consumers are looking to their brokers to offer more than just a mortgage, expecting additional products and services as well as financial literacy and educational tools.
Diversification can help firms achieve higher revenue growth by making the most of this opportunity to serve more clients with a wider range of products and services. It can also support more sustainable business performance during future market cycles.
Macquarie’s 2015 Mortgage Broking Benchmarking Report shows that over the last three years, diversification has increased across the industry, with the average proportion of broker revenue attributable to home loans falling from 85 per cent in 2011 to 79 per cent in 2014. This suggests that opportunities exist for brokers to create a more diversified and sustainable revenue stream by offering a wider range of services across a wider client base.
Our research revealed that brokers relying on home loans for half or less of their gross revenue typically have higher average gross revenues, profit growth and a larger client base. By establishing a broader and more varied revenue stream, these firms are protecting themselves against any future market fluctuations. It also showed the continued shift towards diversified revenue, with commercial lending, insurance and financial planning revenue all growing. Commercial lending in particular is undergoing a shift with an increased number of lenders offering commercial loans in the third-party space.
When Macquarie launches its new core banking and digital platforms, brokers will be able to distribute or assist with – and the customer will benefit from – a broad financial services offering that will incorporate a mortgage, transactional savings account and credit card.
Working together to support continued success
Strong businesses are built around mutual respect, integrity and trust, and strategic arrangements with trusted and well-respected brands. This will help mortgage brokers across Australia compete in the current marketplace, as well as support continued growth. But it’s important to pick your partners well.
Brokers need to identify and choose industry participants that are focused on supporting their business needs and add to each broker’s value proposition with new ideas, resources and expertise.
This is an approach Macquarie embraces, and many years of working with brokers to help them provide a customer-centric approach and become more resilient during environments of structural change has resulted in real business success. Macquarie’s approach includes providing support and additional information on changes in the industry, such as a bi-annual mortgage benchmarking report. This report enables brokers to benchmark themselves against peers and reflect on the trends and growth opportunities for continued success.
Macquarie is continuing this approach by providing brokers with continually enhanced information and functionality, products and support needed for the expansion and continued growth of their businesses.
Adapt to changing market conditions to continue momentum and growth
Central to any strong mortgage broking business of the future will be the ability to adapt to changing market conditions while remaining focused on clients' needs. Investing in strong industry partnerships that look together for future diversification opportunities will be a key to success.
Frank Ganis is the head of personal banking intermediaries at Macquarie Bank.
