‘Days of the monolined broker are over’, SME lenders warn

The LendEd “Whole of Wallet” webinar was hosted by the chief executive of the SME lending platform Lend, Bill Baker, and heard from business lenders Judo Bank, Pepper Money, Prospa, and ScotPac, as they discussed how can brokers be more proactive about providing a “whole of wallet” solution and how this can benefit both brokers and their SME clients.

One of the key themes emerging from the discussion was that offering complementary products, or “compounding products”, was becoming increasingly popular.

Indeed, speaking to The Adviser following the webinar, the lenders suggested that brokers who do not offer a wide range of commercial services would find themselves being left behind.

Mal Withers, the head of commercial at non-bank lender Pepper Money, stated: “The days of a mono broker... the mono-solution provider are dying, they’re going. 

“When I look back at the history of the industry, we had three distinct brokers and they usually stayed their patch: the asset finance broker; the commercial broker; and the home loan broker. What’s happened [recently] is that they converged. So you now have the broker that offers, residential, commercial, and asset finance.

“I think the brokers of tomorrow will have to evolve to providing those solutions – or at least the gateway to those solutions in using platforms like Lend – to enable them to bring those solutions to the customer. They might not want to specialise in it, and that’s fine, but their customers are calling out for it more and more.”

Mr Withers suggested that “monolined home loan brokers” will therefore need to embrace commercial lending, if they haven’t already, or risk losing their clients to their competitors.

He said: “It’s [now about] building a broker’s capability, confidence, comfort to tackle commercial loans, but if the broker doesn’t start on the journey of learning it, that will hurt them... They have to add in this commercial space lending because more and more customers want one solution. They want to tell the story once, not multiple times. And they want to tell it to the one person who can get the outcome, the person who can harness the story. 

“And whether it’s ‘link up’, ‘outsource’, or ‘do’ the solution, that’s what will form a big part of the future of the broker business going forward.”

Jon Sutton, CEO of business lender ScotPac, agreed with this sentiment, telling The Adviser: “We’ve seen tremendous change across financial services over the last 25 years and we’ve seen the rise and rise of brokers. There are a lot of brokers in the market and I think technology will change what they do. But clients are going to be looking for that trusted adviser... Normally what you find is, sometimes that trusted adviser is split between a broker and an accountant or business adviser.   But I think the days of being one a monolined distributor of one type of product is probably going to change pretty rapidly over the course of time, and we’re starting to see that already now.”

Mr Sutton added that the shifting expectation of a broker’s service offering could be seen in the trend of aggregation groups increasingly adding commercial and asset finance solutions to their businesses.

He said: “There’s been a lot of aggregators who were just looking at being a mortgage aggregator, and now they’re moving much more into the commercial space as well. 

“So I think there’s great opportunity for the broker community to be able to add additional strings to their bow and those that don’t, probably, will ultimately be forced to do so.”

Mr Baker concurred, stating: “The commercial lending space is growing, it’s getting bigger, and far more complex, and customers actually want a one stop shop. So if someone can provide a one stop shop, they’ll stick with them.”

The Lend CEO added that this would also benefit brokers, stating: “If you want to create stickiness with the customer, brokers will need to get across all the products out in the marketplace and all the lenders out in the marketplace and offer those as a responsibility to the customers. They need to actually offer what’s out there as opposed to what they know and understand, because that might not be the best fit solution for them.”

The co-founder and chief revenue officer of Prospa, Beau Bertoli, continued by highlighting that now was an opportune time for brokers to be diversifying their businesses into business finance, as NSW and Victoria prepare for the easing of COVID-19 restrictions and businesses across the country ramp up for the festive period.

Mr Bertoli said: “We're seeing this as ‘The Great Reopening’, and in many regards, business owners are going to require capital to do a whole bunch of things like restock, and in many cases, rehire staff and get ready to really renew their business and open those doors. So itopportune s really about getting the right capital in place quickly.”

He added that non-bank lenders, such as Prospa, would be ready to help these businesses and will be “looking through the data” to understand whether a shuttered businesses may still be a viable and profitable business that can be lent to and “not let the impact of longevity affect their ability to access capital”.

The Prospa co-founder concluded: “We need that early stage of the product experience to be as positive as possible. So things like deferrals on their start dates, and pushing back the first repayments, or getting them the right kind of products – for example revolving lines of credit products – and those that have a lower servicing requirements or where business owners don’t have to make it as larger repayment while they bring their business back up to speed. 

“It’s really focused on making sure we can get capital to the business owner, and then supporting them, and enabling brokers to support them, in that early stage while they’re reopening getting their business back up to come pre lockdown revenues.”

[Related: SME lending likely to be regulated, suggest lenders]