Industry leaders believe the cost pressures facing aggregators will drive consolidation in the broking industry, potentially leading to the creation of aggregator ‘super groups’.
“Aggregators are experiencing the pain of some of their lenders – some of the banks,” said Kathy Cummings, a former executive general manager at CBA until January this year, who headed up the major bank’s mobile and third-party banking channels.
“Not to the same degree, but they are understanding the distribution costs, running sales teams and the huge investment in technology that’s required to stay relevant.”
Vow Financial’s CEO, Tim Brown, agrees that cost pressures are a concern for aggregation groups.
“Margins are squeezed and I don’t think they can be squeezed much more, not without someone actually getting to a point where they are going to struggle to maintain profitability,” he said.
While aggregation groups continue to seek cost efficiencies across their networks and encourage brokers to diversify their service offerings in order to boost earnings, one likely result of this squeezing is increased consolidation of the sector.
“We believe that what we’ll begin to see in the near future is the formation of some super groups, where scale is actually very important,” said Matt Lawler, CEO of Yellow Brick Road.
“But I wouldn’t say that’s going to be like that forever. In other markets, this has happened and eventually they start to fragment and break up again. It’s all part of a cycle.”
[Related: Aggregator announces new partnership]