Switching aggregators: The winds of change

Customers are becoming savvier and are demanding more choice and flexibility from brokers in regards to the products and services they offer. Just offering home loans is not enough anymore – loan writers have been forced to diversify their offering, with many now marketing themselves as one-stop shops that cater for borrowers’ every need.

Comparison websites and online lenders are not making it any easier for loan writers either. Their growing acceptance and popularity among consumers is reflective of them wanting greater control of the borrowing experience – they decide at what point they need help from an expert.

Loan Market’s chief operating officer, Steve Scahill, says today’s borrowers are far better researched and prepared when they approach a broker.

“Customers may choose to do much of their research prior to speaking with anyone,” he tells The Adviser. “They may get to the point of product selection or even beyond without any engagement from a broker.”

“However, the data tells us that at some point in the process they will want either the reassurance or guidance of an expert.”

Mr Scahill says Loan Market is constantly looking at ways of enabling its brokers to support their customer no matter what stage the loan process is at.

“We must equip brokers with a broader range of tools and also determine what tools their customers require, so that our brokers can continue to meet – and exceed – their customers’ needs and expectations,” he says. “Technology is critical.”

Finsure managing director John Kolenda says the role of an aggregator has changed dramatically over the years.

“To stay ahead of the competition, aggregators can no longer just provide a CRM platform, commission processing and a monthly newsletter,” he explains. “Rapid changes in technology and a vastly different regulatory landscape have resulted in brokers requiring their aggregator to specialise in more and more areas.”

Mr Kolenda says Finsure was created with the changing needs of brokers in mind – a complete business-to-business solution that would help them stay ahead of the game.

“The principal reason brokers are switching to Finsure is our ability to provide a comprehensive business solution capability as brokers’ businesses mature and need more diverse and complex solutions,” he says.

“Every division within the group understands its role is to help our brokers with their business, and any solution they need we will be there to assist them.”

Mr Kolenda says the aggregator’s services include, but are not limited to, annual business planning, website configuration, marketing and branding, sourcing, generating and qualifying leads, legal and compliance services, and recruitment.

“Our brokers can rely on us to get all of their business needs met via our range of in-house services in conjunction with our trusted network of service partners,” he says.

The amount of options on an aggregator’s lending panel is another key value proposition for brokers. And as more alternative finance providers express their interest in the third-party channel, aggregators are looking to partner with these groups to enhance the offering of loan writers.

AFG is one aggregator that has done exactly that. It agreed to a partnership with listed marketplace lender DirectMoney to help grow its distribution of personal loan products via brokers.

Speaking at the time of the deal’s announcement, AFG general manager of sales and operations, Mark Hewitt, said DirectMoney is a great fit for the aggregator’s lending panel and further demonstrates its commitment to helping brokers grow their businesses.

“The addition of the DirectMoney platform for personal loans will now provide our brokers and their customers with a great user experience and access to the latest products available in the marketplace,” he said.

AFG added Prospa’s unsecured small business loan to its panel in August, citing market demand for faster and simpler ways of funding SMEs.

“We’re looking for growth in business lending,” Mr Hewitt said at the time. “With our listing on the ASX, we are in a strong position to build on the strengths of our core mortgage broking business and to expand our product offering.”

A competitive playing field

Brokers have captured more than a 50 per cent share of the mortgage market, and this figure will continue to grow to 60 per cent and beyond in the next 12 to 18 months, according to Blake Buchanan, general manager of boutique aggregator eChoice.

“Whilst broker market share increases, we will see brokers competing more often with each other,” he says. “We will also see drives from the larger banks and lenders to increase their own retail market share and hence become a larger – albeit modest – threat to broker competition.”

Mr Buchanan says it is eChoice’s responsibility to read the market and help brokers stay ahead of the curve.

“By being dynamic, we are able to adapt quickly to a changing market, but more importantly work on ways to educate our brokers about changes so that they can capitalise, where able, on these changes,” he explains.

“We have already integrated many ancillary product offerings to make the broker offering even more competitive, whilst catering to more needs and providing solutions for some of the more mundane tasks a consumer has to complete when refinancing or purchasing a property.

“Brokers have been the most innovative part of the Australian lending industry’s history, and to maintain this growth momentum, we need to – and will continue to – innovate and diversify so that we can cater to more of our client’s ever-growing financial needs.”

Connective director Mark Haron believes the biggest threat to brokers is themselves, and in order for the third-party channel to continue its growth path, brokers need to remain a trusted adviser to customers.

“Every time a broker doesn’t complete their compliance obligations properly, puts a customer into a product because of an inducement that is not disclosed or blatantly does something fraudulent, we decrease the trust of the community,” he tells The Adviser.

Mr Haron says Connective has recently launched a compliance service for Australian Credit Licence holders that enables the aggregator to provide compliance in a similar way to how it does for its credit representatives.

“This service enables business owners to spend more time focusing on their business knowing they are getting significant compliance support for them and their loan writers,” he says.

“As an industry, I think we can be very proud of what we do, and we need to keep an eye out for each other. If you feel one of your colleagues is not doing the right thing, speak to them or your aggregator or industry body.”

In this Broker’s Guide to Switching Aggregators we’ll delve into the main issues surrounding brokers and their aggregators in 2016, as well as the opportunities and challenges associated with switching groups.