Robo-advice, AI flagged as major threats to broker proposition

Deloitte asked 10 industry executives for their take on emerging issues in the home loan space, including what they would consider the ‘major disruptive forces’ to the broker channel over the next three years.

According to the Deloitte, 40 per cent of respondents — which included representatives from lenders, mortgage aggregators and fintechs — flagged robo-advice and artificial intelligence (AI) as a major challenge to the broker proposition.

However, Mortgage Choice CEO Susan Mitchell, who participated in Deloitte’s roundtable, said robo-advice and AI would complement, rather than threaten the broker offering.

“I actually consider robo-advice as a tool to be used by a broker rather than competing against brokers,” she said.

“It may be a different kind of broker than we see today, but I don’t believe a robo-advice structure necessarily means there is no broker involved.

“I think there is a big opportunity in the future for a robo-advice structure where a simpler transaction flows straight through the broking process to a lender and on through to settlement. Whereas a more complex transaction, or one where the customer requires more information, may kick out the process and require a face-to-face meeting to complete.”

Ms Mitchell added: “The reality is that consumers are becoming more complicated.”

Other factors identified by respondents as potential challenges to the broker proposition included scrutiny over broker remuneration (20 per cent), a generational shift in the industry (20 per cent), digital broking platforms (10 per cent), and customer preferences for face-to-face engagement (10 per cent).

However, Loan Market’s executive chairman, Sam White — also part of the roundtable — flagged another potential challenge to the broker proposition in 2020, citing customer service complacency.

“One of the things that’s not on the list of disruptive forces is that the broker starts to take his or her position of trust with the consumer for granted,” he said. “I think that’s the real danger.”

Mr White warned that white-labelling among aggregators could undermine the traditional strengths of the broker proposition.

“I think there’s a danger in aggregators thinking they can flog their own product through this channel without thinking,” he said.

“This will dilute the fundamental value that brokers bring of ‘putting my customer first’.

“If brokers lose that, or it goes away and gets replaced by something more efficient that delivers better value to customers, then that is the demise of the broker.”

However, the Loan Market head noted that the newly legislated best interests duty would help ensure that brokers continue delivering good outcomes for consumers.  

Despite acknowledging challenges to the broker proposition, David Harrys, head of product, partnerships and bank experience at RACQ, said brokers would play an increasingly critical role in the mortgage market as established lenders roll-back their branch networks.  

“All the major banks are retreating from their direct distribution models because they realise they can’t compete with brokers,” he said.

“If they believed they could compete with them, they’d be investing in those channels.

“For most people that run a distribution model, the biggest argument they have with their lender is how many applications they can take this week. How many interviews? That’s business development.”

He concluded: “If you run your own business as brokers do, they have to have those conversations, because if they don’t, they don’t exist. They have to service their customer base.”

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[Related: Best interest duty won’t be ‘shock to system’]