Spotlight - A Wizard buy

The sale of Wizard to NAB seemed like a done deal when the bank released a statement to the ASX on 17 December 2008.

But NAB was pipped at the post when John Symond approached Wizard’s former parent GE Money and ultimately acquired the Wizard Home Loans brand and distribution network.

Aussie Home Loans CEO Stephen Porges says to understand the reason behind the takeover is to understand the drive of buyers and sellers.

“We understood the motivation of the seller better than NAB did. We didn’t take any ego into the deal, we just came in wanting to do a deal and were able to wrap it up and do it very quickly,” he says.

An understanding of the business, knowing what was needed and where to look for it, and being ahead in their ability to do due diligence left Aussie well positioned.

Aussie had approximately 400 business writers and Wizard stood at 150-200 at the time of the sale. Aussie was writing almost $5 million per month per store while Wizard franchisees were struggling to write $1 million in loans each month.

The $30 million sale included about 120 of the 168 Wizard branded retail outlets.

GETTING IT TOGETHER

Two years on and 90 per cent of the original businesses are now with Aussie.

Many sole operated franchises merged in after the sale, adding to the now 800 business writers under the Aussie banner.

The addition of retail-based business has complimented what was primarily a company of mobile brokers.

Stephen Porges was attracted by what he believed were solid franchise operators.

“We thought we had a great brand that was being underutilised. A lot of the people working in Wizard outlets were good but they were operating in a tough environment,” he says.

Much of the reason for Wizard’s poor management structure has been put down to GE Money, who arguably became disillusioned with the company. In addition, Wizard loan writers had been selling Wizard products without promoting the option of using other lenders.

Struggling to come across as a broker and unable to write their own proprietary product, the Wizard name had been sufficiently tarnished for Aussie to feel the need to rebrand.

“The brand had been damaged by the decisions of management, not by the decisions of the Wizard franchisees. From a customer perspective there was no brand loyalty. Clients felt they had been paying over the odds for a significant period of time,” Mr Porges says.

The Wizard brokers, however, were not as easily persuaded.

Loyalty to a brand that was at loggerheads with Aussie for almost 10 years was not a simple swap.

“It was like putting black and white knights together because the two businesses were such fierce competitors for such a long time,” Mr Porges says.

“Getting people who bleed Wizard orange to bleed Aussie purple was a challenge, but when they understood that we were, first and foremost, focused on making this really good for their clients it came together quite well. If you look across our network now you really struggle to see who are old Wizard and who are Aussie,” he says.

Aussie’s heavy and supportive management structure meant a reorganisation of the old Wizard stores.

Often the difficulties that arise in a franchise setup involve getting people to manage effectively.

Without being dictatorial Aussie established what it describes as an “open, honest relationship” with its new franchise operators so that they could run a good business.

The company sees their franchisees as consultants more than small business managers.

RAISING THE PLATFORM

So, how did Wizard brokers ultimately adapt to Aussie’s platforms?

“That was a real challenge. People are not natural technologists and in this industry you have to become more of a technologist,” Mr Porges says.

Aussie’s sophisticated ‘Mortgage Explorer’ software is central to their success. Used by all brokers, the technology is responsible for generating the best deal for every customer.

Aussie quickly realised the software platform needed to be changed from a laptop-based system to a web-based one.

Extensive training and re-education was a major part of the acquisition and the company is still working through the new platforms, to be launched in the coming months.

With a reputation for nurturing quality writers, Aussie is often considered the training ground of the industry by brokers.

“That bugs me, because I don’t understand why people come and train here and then go somewhere else,” Mr Porges says.

“There is a view that they can earn a bit more commission somewhere else but they don’t get the support, the software or the branding.

“Extraordinarily large numbers of them come back. Most people realise that the intangibles are important,” he says.

THE AGE OF TECHNOLOGY

The two years that have passed since the acquisition have been ones of change and development for Aussie.

The processes involved and the challenges they have presented have allowed Mr Porges to obtain some valuable insight into the future of the business.

Over the coming years he believes we can expect a change in the way brokers access information and deal with clients.

“There is a belief that business has to be done face to face. I don’t believe it does. Financial services are confusing, but you just need someone to hold your hand. You don’t need someone to sit across the table from you,” he says.

One area that Aussie has been exploring is social media. The company makes up more than 50 per cent of all mentions of financial services in social media and has a dedicated team who specialise in new media channels.

“I think one of the biggest changes over the next couple of years is going to be a service change, and predominantly a technology service change.

There has almost been a generational lack of investment in technology,” Mr Porges says.

“That’s not a human generation, that’s a technology generation.”