One of Australia’s leading non-bank lenders has urged brokers to diversify their offering as some of the banks start to dial down their third-party flows in favour of proprietary channels.
Speaking to The Adviser ahead of the Pepper Insights Roadshow later this month, the group’s managing director of mortgages and personal loans, Mario Rehayem, explained why brokers need to look beyond the big banks in today’s market.
“Your business model, and the whole value of your business as a broker, hinges on the diversity of your back book,” Mr Rehayem said. “If you want to build a business, an asset that you can one day sell as a going concern, the buyers will be looking at the diversity of your back book, the runoff rate and your arrears,” he said.
"Imagine if more than one major bank changed their distribution strategy overnight. What’s going to happen to the broker market? How will brokers react to that? If you’re going to be pigeonholed to one bank and tomorrow that bank decides that their belly is full of third-party business, what are you going to do?”
Mr Rehayem said that brokers shouldn’t be “cherry picking” clients but instead position themselves to satisfy every type of consumer. He added that brokers are being forced to radically change their business models as banks change their appetites.
“There are some top tier brokers today who specialise in property investment and have been working with their clients for over 10 years. Their whole model was around spreading their business with the banks,” he said.
“Regulatory changes and risk appetites of those banks have seen them pull back. Now these brokers have spent the last 10 years promoting one brand and one brand only. Now they have to go back to all those customers and explain to them why they need to take them from a major bank to the likes of Pepper. Their whole business model has to change.”
Pepper is now working with these brokers, educating them about the alternative solutions available for their clients who may be credit impaired, self-employed or affected by serviceability changes.
“These brokers are starting to realise that they should have cottoned on to alternative lenders much earlier. Previously, it had all been a volume game to build status with a particular bank to get preferential treatment,” Mr Rehayem said.
In addition to educating brokers about specialist lending, Pepper’s 2017 Insights Roadshow will provide attendees with a comprehensive overview of the big issues currently impacting the third-party channel and the broader lending market.
• Dates and Venues:
o Melbourne: Leonda By The Yarra – Wednesday, 31 May, 9.00am - 12.00pm
o Brisbane: Moda Events – Friday, 2 June, 10.00am - 1.00pm
o Perth: Crown Complex – Tuesday, 6 June, 9.00am - 12.00pm
o Adelaide: Convention Centre – Wednesday, 7 June, 9.00am - 12.00pm
o Sydney: Waterview in Bicentennial Park – Tuesday, 20 June, 9.00am - 12.00pm
• To register: pepper.com.au/broker/insights
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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