Mortgage brokers will soon be under significant pressure to stand out from the crowd as the growth of the third-party channel creates strong competition between loan writers, according to the head of a national branded broker group.
Loan Market chairman Sam White told The Adviser that as broker market share grows above 50 per cent, competition will be with other mortgage brokers more than it will be with lenders.
“That is one of the issues with going above 50 per cent. We are going to bump into each other a lot more than we used to,” he said.
“Those who provide a better service to their customer and have a better customer relationship moving forward will beat those brokers who don’t.”
A broker’s value proposition to the customer used to be choice of lender. However, as competition within the channel increases, brokers will need to identify and market what else they offer customers other than giving them access to a choice of lender, Mr White said.
“If that’s all you’ve got then it’s an offering that is going to be trumped by those brokers investing in their businesses to provide all sorts of other offerings.
“Which parts are more relevant and how will people specialise? A number of different models will emerge and there will be brokers from many different markets looking to take advantage of this,” he said.
Mr White said that while increased competition among brokers creates challenges, it also creates huge opportunities for innovation. “It is an incredibly exciting time for the industry right now,” he said.
Craig West, CEO and founder of Succession Plus and executive chairman of the SME Association of Australia, said brokers should bundle products and partner with other financial services professionals to add value.
“If you look at accounting practices, they’ve now got accounting and financial planning, some of them have got mortgage brokers, some of them have got business coaches, and some have other services packaged around them,” Mr West told The Adviser.
Business owners are time-poor, which means that if they can go to one place for three different solutions it will be far more valuable than visiting a broker for a single solution, he said.
“If a broker can align themselves with an accountant or a lawyer so that a client can come to you and get their tax return done at the end of the year, get their loan reviewed and the debt and equity position of all their properties reviewed, get their financial planning and their super updated all at the same time, then that’s going to be far more popular.”
The accounting industry has already recognised the value of providing additional services, including mortgage broking, to its clients.
In July accounting body CPA Australia confirmed its members have the option of moving into the mortgage broking space as it seeks to apply for an Australian Credit Licence (ACL).