With broker market share tipped to reach 60 per cent this year, the head of one aggregation group says banks have no choice but to adopt third-party distribution strategies.
Gerald Foley, managing director of nMB, told The Adviser that the broker proposition has become so “solid” that the banks now have “little option” than to work with the third-party channel.
“At the end of the day it’s just such a solid consumer proposition that a bank has no choice but to play in it now,” Mr Foley added.
“If you’re a bank and said ‘we’re not going to deal with the broker market’ you’d be taking yourselves out of one of two home buyers who would go to a broker.
“It’s not a choice they can decide to be in it or not be in it – they’ve got to be in it.”
However, despite the significance of third-party distribution, Mr Foley said there still needs to be more recognition of the broker channel within the banks.
“I’ve got no doubt that some lenders wish that brokers didn’t exist, because ideally if I was a bank I would much rather all the customers came directly to me but, as I keep saying, brokers don’t exist for the benefit of brokers,” he said.
“Brokers exist for the benefit of consumers. Banks exist for the benefit of brokers as well but the consumers much prefer to go through a broker to get there.
“The banks are best at gathering deposits, developing loans, creating products and features because that’s what they’re good at. Brokers are far better at sales because they have a broader proposition and consumers understand that.”
Mr Foley’s comments come after Loan Market chairman Sam White told The Adviser that this year’s shifting regulatory environment will see broker market share get 60 per cent of all new business.
[Related: Heritage heavily dependent on brokers]
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