TOP 25 BROKERAGES 2010

Compiling this year's Top 25 Brokerages report has brought home just how much the market improved last year while sending a chilling reminder of how bleak a year 2008 really was.

Growth in spite of challenge

By: Jim Hall
Publisher

The global financial crisis hit everyone hard in 2008.

Activity dipped across all sectors as sky high interest rates, stagnating property markets and a crippling lack of liquidity stifled volumes for most brokers.

But by December 2008 the foundations of a market recovery had been set when the RBA sheared the cash rate down to 4.25 per cent - eventually hitting a 50 year low of 3 per cent in April 2009.

Lowering the cash rate in conjunction with boosting first home buyer incentives served to reignite the housing market. Recovery then spread from first time buyers through to investors and other market segments as buyers capitalised on comparatively cheap mortgages.

Make no mistake: last year was not without its challenges. While there was a significant upswing in activity, the spectre of the global recession still loomed over Australia as our economy dipped dangerously close to negative growth.

There were fears that unemployment would hit 8.5 per cent last year as levels approached 6 per cent however forecasts turned out to be wildly pessimistic.

It is therefore interesting to analyse the performance of Australia's biggest brokerages to see what common trends have emerged and where the leading groups are focusing their efforts.

Understanding how market leaders earn their crust is valuable to any industry and mortgage broking is no different.

The willingness of the leading businesses to share valuable information as to how they generate revenue is invaluable in helping to map the changing face of our industry. It also helps to reveal the true impact of diversification.

On this note I'd like to thank all the brokerages that took the time and effort to participate in this year's ranking and I look forward to working with you in the future.

Partner's message:

New order emerges

Many would agree that the past year has been one of the most interesting for the Australian property industry: we witnessed a strong market recovery on the back of an extremely volatile and challenging early 2009.

By: Graham Mirabito
Chief executive officer
RP Data

We enter the new financial year cautiously optimistic, with arguably the world's most stable financial system, a resilient property market and a growing economy. There is still an element of caution though as the world economy is still fragile and our domestic growth presents its own challenges.

Given the fact that 70 per cent of Australians' wealth is in property, the role that mortgage brokers play in this market is critical. Considering the findings of The Adviser's 2010 Top 25 Brokerages ranking, the top performers continue to strengthen their client relationships, maintain pace with constant industry evolution, and the most successful ones have capitalised on the opportunities that this new order presents.

Continued recognition of Australia's top brokerages is important for our industry and RP Data is proud to partner The Adviser's ranking.

The 2010 results show that although the strong brands have performed well, the smaller groups also continue to shine. This gives the industry confidence that good quality brokers can succeed in the market should they maintain strong customer service and use the best tools that the industry provides.

RP Data welcomes the opportunity to work with the mortgage industry to lift profitability of all brokers (regardless of size) through the development of services that improve customer growth, operational efficiency and compliance.

We also welcome the increased market confidence that new industry regulation brings. Although it has its own set of challenges it also offers great rewards that embrace the spirit of change.

We look forward to the continued high performance from brokers to raise the bar.

Congratulations to this year's Top 25 Brokerages.

The nation's top performers

Size, brand, marketing and lead generation capabilities all influenced this year's Top 25 Brokerages ranking. However, those operations with a consistent customer service proposition were also able to secure a position.

Low interest rates and pepped up first home buyer demand made 2009 a much better year for brokers than 2008.

While Australia's economy was challenged by an overall economic slowdown - both domestic and globally - it managed to avert a recession, thanks in part to good governance as well as a robust banking sector.

The brokerages that focused on solid customer servicing matched with a zeal for innovation during 2009 are those at the top of this year's Top 25 Brokerages ranking.

While our nation's leading broking businesses no doubt have size and scale behind them, their client-centric approach, matched with a passion for continued improvement, should ensure their solid positioning moving forward.

But that doesn't discount the boutique operations in the market - those brokerages that operate within a particular geographic area or a certain market segment.

METHODOLOGY

In ranking Australia's Top 25 Brokerages, The Adviser applied a robust assessment process to ensure all participating brokerage groups were on a level footing.

To be eligible for consideration in the ranking, the brokerage had to have at least 5 brokers all operating under the same brand.

Brokerages were invited to complete an online survey, the data from which was compiled and then assessed against certain criteria, including loan book size, loan volumes, number of loans written, business growth and broker productivity.

Brokerages were then ranked from 1 to 25 based on a comparative assessment of these key indicators.

SIZE COUNTS

Size - whether volumes, loan book, loans written or broker numbers - was a key influencing factor in determining this year's leading brokerages.

Larger companies, no matter the industry sector, typically have a number of similar traits that have helped them achieve growth. Success can be measured in size, and this year's ranking rightly takes this aspect into account.

Aussie is by and large the number one brokerage in terms of broker numbers, with nearly 800 brokers on its books. While this factor reduced broker productivity - i.e. the sum written per broker as a reflection of the brokerage's total loan volumes - collectively these brokers were able to write a hefty $10.143 billion over 2009, the highest of any of the brokerages ranked.

Aussie's broker count was reinforced by the acquisition of the Wizard franchise business in the closing days of 2008. The addition of these franchised offices helped the business push its 2009 volumes over and above Mortgage Choice, but only just.

Mortgage Choice's 562 brokers wrote a collective $9.4 billion in mortgages over 2009. Along with its $37.9 billion loan book and broker productivity of $16.7 million it narrowly pipped Aussie to the coveted top spot.

With these performance figures in mind, it will be interesting to see how next year's ranking pans out, considering the narrowing gap between Aussie and Mortgage Choice.

Importantly, Aussie will need to increase its broker productivity in order to push itself up to the number one slot.

A BALANCED FIELD

The range of brokers that appear on the Top 25 Brokerages ranking bears testament to a diverse and robust industry.

The big name brands, such as Mortgage Choice and Aussie, have again reaffirmed their leading position however there's good representation from other camps.

The nation's large brokerages by broker size and volume are well represented at the top of the ranking, a product not only of the methodology engaged by The Adviser in undertaking the ranking, but also the maturity of these businesses.

These companies typically have large marketing budgets and were focused on broker acquisition - where loan book growth was achieved by having more active loan writers on the ground rather than solely driving increased business from existing brokers.

This is evident in Aussie's broker productivity, for example.

Interestingly, the smaller brokerage groups are those that typically have the better quality loan writers in terms of broker productivity.

Resolve Financial Solutions' brokers, for instance, wrote circa $25 million each compared to Mortgage Choice's $17 million.

Tiffen & Co and The Mortgage Detective brokers wrote over $33 million; Investloan brokers wrote over $46 million each over the course of 2009.

Good standing in the criteria of broker productivity helped propel some of the smaller boutique operations up into the top ten in some cases, helping them compete toe-to-toe at the top end of town.

Nevertheless, the leading brokerages' size and scale will ensure that unless these groups are able to boost their volumes over time, they'll struggle to shift into a top 5 ranking.

Collective loan book: $126,498,212,858

Average loan book: $5,059,928,514

Collective 2009 volumes: $37,458,023,535

Average 2009 volumes: $1,498,320,941

Collective broker count: 1,765

Average broker productivity: $21,222,676

Collective 2009 residential mortgage volumes: $36,315,615,864

Average residential mortgage loan size: $294,688

Sound fundamentals

This year's Top 25 Brokerages report has again highlighted that the nation's leading groups share a number of common traits that help ensure business success.

After a torrid 2008, last year was for the most part a good year for brokers.

Yes, there were significant challenges in the form of an economic downturn and threat of recession, yet many groups still managed to hit record volumes at various points during the year. This was driven in part by a first time buyer market seeking to capitalise on the increased first home owner grant, followed by solid investor business.

The Adviser's Top 25 Brokerages has identified the businesses that made the most of market opportunities and exceled despite the challenges.

In analysing the results of this year's ranking, it is clear that that nation's top brokerages share common traits that have ensured business success.

From the capability to generate a steady stream of leads to attracting and retaining top performing brokers, here's just a few of the key attributes of Australia's Top 25 Brokerages.

BRAND

All of the Top 25 Brokerages effectively highlight the benefits of having a strong brand, but perhaps none more so than Mortgage Choice.

Since opening its doors in 1992, Mortgage Choice has cemented its place in the hearts of everyday Australians.

From its television ads starring the adorable pooch, to the company's chief executive officer Michael Russell's strong presence in the Australian media, the brokerage has successfully created a recognisable brand that consumers associate with quality and reliability.

Senior corporate affairs manager Kristy Sheppard says the key to creating a strong and recognisable brand is consistency.

"Brokers should not run one strong ad campaign and then not back it up," she says.

"The key is to prove time and time again, through the various media outlets, exactly what the company offers in terms of service, experience and expertise."

Ms Sheppard says a brand is much more than a logo, symbol or slogan - it is a personality, a visual interpretation of the company's voice.

"Mortgage Choice closely monitors all of its external communication. We monitor the messages we send out to our consumers to ensure that they are clear, concise, but above all else, consistent."

While the brokerage has a strong advertising presence, the company also ensures it is just as visible in the media.

Ms Sheppard says it is important for every company to have a spokesperson that can stimulate discussion in the public domain, but always remain clear and consistent in its message.

CLIENT RETENTION

While a strong brand presence will ultimately help a brokerage attract new business, it can also be a powerful tool for retaining business and deepening client relationships.

Tiffen & Co and The Mortgage Detective understands the impact good Cdavid

lient relationships can have on a company's bottom line.

Last financial year the company settled almost $270 million, 80 per cent of which stemmed from the brokerage's referral database.

Tiffen & Co and The Mortgage Detective director of operations Alison Whittle says the trick to client retention is passion.

"If you are passionate about your customer service and passionate about putting your client into their dream home, you can't go wrong," Ms Whittle says.

"Passion is what pays dividends for brokers."

According to Ms Whittle, constant client interaction is essential to client retention.

To stay in touch with their clients, the brokerage sends personalised newsletters, birthday cards and Christmas cards.

It also hosts an annual movie night and wine tasting day for clients. In addition, the brokerage often hosts in house business lunches for its top clients and referral partners.

"These simple measures have helped us secure a significant amount of business over the years," Ms Whittle says.

"We don't advertise, because we don't have to."

Rather, the brokerage spends the time and money it saves from not advertising on supporting its clients, one result of which is continued referred business and ongoing generation of new leads.FIX

LEAD GENERATION

Smartline managing director Chris Acret says staying in touch with existing clients is an excellent way of generating new and promising leads.

"Without a lead, a broker will have no clients and no business," he says.

"We believe that a broker's best source of leads will come from its existing client database, so we provide them with the tools they need to stay in touch with that database."

Smartline provides its brokers with an automated CRM system that automatically sends clients electronic Christmas cards and birthday cards.

Mr Acret says the more a client feels as though they are being looked after, the more inclined they will be to refer their broker onto family, friends and colleagues.

Better yet, the lead is considered to be warm because the broker already has something in common with the referred party.

"Cold leads that are generated through advertising, branding and the internet have a lower conversion rate than warm leads suggested by existing clients," Mr Acret says.

But while Mr Acret prefers warm leads, he says it is impossible to ignore the fact that technology plays a significant role across the industry, in particular as a resource for generating client leads.

Smartline wrote approximately $2.8 billion in residential loans in 2009 - a figure that could not have been achieved without large scale lead generation strategies built around its internet presence.

Mr Acret says, in terms of lead generation techniques, the internet comes a close second to communicating with a broker's existing client database.

Not content with having a strong branded internet presence, the brokerage also provides each of its franchisees with their own sub-site - so they too can have their own individual internet presence.

"If a potential client types their address details into the computer, they will automatically be sent to the page of their local Smartline broker," he says.

"This is effective for two reasons. One, it helps the client feel comfortable with the broker before meeting them; two, it gives the broker an online presence that will help them generate leads."

TECHNOLOGY

Loan Market Group is another brokerage with a strong focus on lead generation via its online presence and this has been a major contributor to building a tidy loan book.

But it is not the only strategy that has helped it achieve success.

During the last financial year the brokerage settled around $5.5 billion in residential home loans, in part based on the significant investment it has placed in developing its technology platform.

Loan Market Group's chief operating officer Dean Rushton says technology is an essential component to the successful operation of the broker and their business.

"To date it has been key in terms of delivering current product information, qualifying a prospect, and as a dynamic CRM database," he says.

"Moving forward, technology will also be critical in delivering a streamlined compliance process for the brokerage inclusive of workflows and document storage."

PRODUCTIVITY

Technology and productivity are very closely linked in mortgage broking.

The greater the efficiency of a brokerage the more effective its service - and this can have a major impact on a business' bottom line.

By streamlining systems, application forms and other aspects of its operations, Auspak Financial Services can turn loans around faster and with greater ease.

But it is not just technology and systems support that enhances the productivity of a brokerage, as Auspak has displayed.

Each Auspak broker settles an impressive $26 million in loans each year on average.

So what is the secret to the brokerage's ongoing success?

Auspak's general manager Greg Mitchell says that the culture of the business has played a major role in boosting productivity in a brokerage that he says is more like a family operation than a multi-million dollar business.

The company's veteran brokers provide mentoring to their junior members, enabling the fastest possible start to newcomers and fostering a spirit of cooperation amongst the team.

"There is no competition between our brokers," Mr Mitchell says.

"If one broker has a record month in terms of volumes, the other brokers in the Auspak family are genuinely happy for them and only too eager to congratulate them."

Mr Mitchell believes that it is this culture that gives each Auspak office a high level of morale, which makes coming to work that little bit more enjoyable.

"Each of our offices boast a really calm and enjoyable working atmosphere.

"We have found that the nicer the working atmosphere, the more productive the brokers," he says.

MARKETING

While Auspak has maintained its boutique feel there is little doubt that Aussie has mastered the big business feel to its marketing.

One of Australia's most iconic mortgage brands, Aussie has excelled in its marketing over the years, leveraging off its founder John Symonds' considerable profile and the brokerage's significant marketing investment over the years.

Aussie has successfully used its sponsorship of sporting events, TV and radio advertising as well as its growing internet presence to firmly position it as one of the front running mortgage companies.

The company's head of marketing, Danielle Williams, says the objective of Aussie's marketing campaigns is to convert great consumer perceptions of the brand to market share.

"Our messages and offers need to be compelling and relevant, whether we're targeting first home buyers, repeat purchasers or investors," she says.

"We talk to over 10,000 potential customers every month. Sometimes consumers need to move very quickly to arrange home finance, others can be in the market for up to six months. The aim of our marketing is to connect potential customers with an Aussie broker or store as early as possible."

Aussie recognised from the outset that mortgage broking is a referral-based business. As such, the company focuses on finding the right balance between nationally coordinated marketing and local marketing conducted by its brokers to generate referrals from existing customers and build broker profiles.

"Marketing is critical not only for Aussie's mortgage broking business but also for driving awareness of the additional products and services we offer, like credit cards, insurance and personal loans," Ms Williams says.

The brokerage implements a range of techniques across different channels, from increasing awareness of its offering and supporting consumers' needs to research and generating leads for its sales teams.

"Our programs include a broad array of activities, including public relations, TV advertising, direct marketing, digital, existing customer marketing; we also have two major sports sponsorships (NSW Blues & Collingwood FC), local sponsorships and our Aussie brokers and franchisees do their own local area and in store marketing."

CONVERSION RATES

Bursting into the Top 25 Brokerages ranking for the first time this year is new entrant Zobel Finance.

The company's conversion rates helped it secure its position as one of Australia's elite brokerages.

Zobel Finance's managing director Andrew Zobel says that the high standard the business sets for its members is key to its considerable broker productivity.

"Our brokers are well informed and highly educated. As such, it is fair to say our conversion rates would be high."

"Training and education is critically important to the Zobel brand. The better versed a broker is on a customer's needs and the needs of the bank, the more likely the loan is to be approved... first time, every time."

Mr Zobel says the company's brokers will not even send a loan to the bank if they believe it won't be approved.

"That is just a time waster," he says.

"Many inexperienced brokers will try and put a loan with a lender that is not right. That is where we try to differentiate ourselves from other brokerages in the market - we boast a highly educated and experienced team of loan writers."

TRAINING AND EDUCATION

A key trait found across the nation's leading brokerage groups is an ongoing focus on training and education.

The Mortgage Gallery is one of the longest standing mortgage broking businesses in Australia and it has always focused on ensuring its franchisees are backed by the highest possible levels of training.

Managing director Ryan Dhue says The Mortgage Gallery's training begins at the broker's induction.

The Mortgage Gallery expects all new brokers to have completed their Certificate IV and be a member of the MFAA prior to their commencement.

In addition, The Mortgage Gallery hosts a mandatory five day induction program for all new starters, which covers the company's brand, image and standards, as well as the company's business systems, marketing techniques and CRM management.

"By the end of the course, induction attendees will be conversant with The Mortgage Gallery culture, values and the importance of our reputation," Mr Dhue says.

"Similarly, they will also be familiar with company structure, be accustomed to marketing, general finance and commercial finance divisions, understand broker tools, be aware of the requirements in submitting loans to lenders, and have visited one of the brokerage's offices to preview the fundamentals of a successful office."

But aside from the initial rigorous training course that The Mortgage Galley puts its brokers through, Mr Dhue says the delivery of ongoing training and education is essential in maintaining high standards across its franchisees.

"We hold regular professional development days which are compulsory for all to attend. There is a mix of lending sessions which are generally done in a ‘speed dating' format as well as an increasing emphasis on professional development," he says.

"Given their value to our business, we also have specific days aimed at PAs which again involve lender presentations and general professional development.

"Finally, we also host ‘next generation' days which are aimed at fast tracking the development of 15 to 20 brokers who we have identified as being part of the next wave of successful brokers within the group."

Mr Dhue says the Mortgage Gallery is fiercely protective of its brand, and as such, considerable resources are put in to developing those who join the company.

DIVERSIFICATION

As the industry matures and develops, diversification will become more commonplace, says LJ Hooker's Financial Services general manager Peter Bromley.

The brokerage, which is directly linked to the very successful LJ Hooker Real Estate brand, actively encourages its brokers to diversify their core offering beyond that of the humble home loan.

"We encourage our brokers to diversify, both internally and externally, through referral partnerships," he says.

"In order for a broker to obtain finance for their client, they have to learn all about them. So, why not capitalise on this knowledge and offer other products while you are at it?" he says.

Aside from the obvious referral partnership LJ Hooker Finance has with the real estate side of the business, Mr Bromley says many of their brokers are also starting to diversify into insurance as well as credit cards and general debt management.

"This is one area of the business we aim to ramp up over the next 12 months. Diversification is going to become increasingly important over the next few years, especially with the advent of licensing, and we want to be on top of that," he says.

According to Mr Bromley, licensing will improve the way brokers are perceived by the general public, which should improve their value proposition.