The former chief executive of the Stargate Group and a leading fintech consultant has said that despite technology becoming more prevalent in the mortgage space, “brokers aren’t going anywhere” and are on their way to writing 80 per cent of home loans.
Speaking to The Adviser, Brett Spencer, the former CEO of the Stargate Group and executive director of TICH Consulting Group, said that he thinks anyone who believes the broking industry is being replaced by technology is talking “absolute rubbish”.
Mr Spencer said that the fact an abundance of “fintech” solutions are coming to the market is exactly the main driver behind brokers remaining relevant and increasingly relied upon by consumers.
He explained: “The reason brokers are here and will continue to be here, and market share will grow... is that the sheer proliferation of the number of mortgage products in the market today is in the thousands.
“You talk to any one lender and they might say they have three products, but there are probably 30 variations on those products. Joe Consumer just doesn’t understand it.
“No matter how good an online platform you have, no matter how good a technology solution you have — Joe Consumer still wants to talk to a broker who is the expertise. And so, brokers will be here to stay. There is no question about it.”
Mr Spencer went on to say that he thought brokers will still be writing loans in 50 years’ time, at which point they will be doing the “bulk of the loans”.
“We're at 55-60 per cent today, I think they'll be at 75-80 per cent then. I don’t think they’re going anywhere.”
Instead of usurping what brokers do, Mr Spencer said that technology does have a place in the mortgage broking industry in terms, but mainly around making the application process more seamless.
“As regulation kicks in more around things such as responsible lending and the Sedgwick report and remuneration report, technology will be relied more heavily on. So, fintechs will have to start focusing on those sorts of aspects to help a broker write a better loan and give a consumer the right solution products... they will have to provide the true comparison of the best product. Technology will assist that, but brokers are not going anywhere.”
However, Mr Spencer said that even brokers who do not currently embrace technology will “have a place” in the market, however this will not be the case for long.
He explained: “What a lot of people fail to recognise is that the borrowing community, Joe Consumer, ranges from 19-59. And the 59-year-old consumer who still has a mortgage and is still working because they have to, isn’t technologically driven, wants to talk to somebody who is generally an older person, so there is always a market for the manual processor who knows exactly what they are doing and the old-fashioned customer service.”
Mr Spencer continued: “[But], as the consumer market gets older, technology [will be] the key. The under-40s today want the technology; they sit at home, they use their phones, they gather a certain degree of information that they want and use that information as part of their process.
“Those guys who don’t use technology, those guys who do it the old-fashioned way, come out with a piece of paper and a paper application form, they can’t necessarily provide the breadth of advice that the consumer wants. The consumer has looked online and seen 40 different products and gotten confused and gone: ' I’m going to call my broker'… [if the broker] comes out and tells you two products, because they are the two products that that person knows… those guys will die out of the system.”
For those brokers looking at technology, Mr Spencer suggests that brokers look at aggregator platforms that offer diversification.
He clarified: “When assessing which systems or aggregators to look for, the key — when it comes to technology — is to look at what alternative services are provided through that aggregator's platform. Does that aggregator have the ability to integrate with financial planning (because our industry is converging between mortgages and wealth) or cross-sell insurances?
“Any broker that doesn’t sell at least one or two insurances with every single mortgage is a fool. Because every mortgage needs house and contents insurance, every consumer should be asked the question about life and TPD [total and permanent disability] and mortgage protection. If you are not asking those questions then you are really not doing your job right and providing responsible lending to them because you are prepared to give them a mortgage of half million dollars but you aren’t prepared to provide them with insurance to protect them in the event of loss, or divorce or any of those sorts of things,” he said.
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