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Aggregator roundtable: Specialist lending

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Aggregator roundtable: Specialist lending

Huntley Mitchell & Jay Garcia 7 minute read

Six of Australia’s leading mortgage aggregators share their thoughts on specialist lending and how it takes a broker’s business – as well as their own – to another level

Where do you see the opportunities in specialist lending?

David Smith, Aussie: We believe that growth opportunities remain in the traditional segment of credit-impaired borrowers and specialist security that may allow Aussie to grow this segment to five per cent of overall volume, with such growth being additional to system growth among mainstream lenders. This will come from a combination of continued focus on broker education and targeted product solutions, perhaps in high LVR lending, particularly for first home buyers.

Mark Haron, Connective: The big opportunity for brokers in specialist lending is being able to get loans done for their clients legitimately – where possibly in the past they may have disregarded them and had not been able to help their clients. Brokers should be looking to complete those transactions that fall slightly outside the standard loan format and help those customers out. Funders like Pepper can facilitate that – it’s just a matter of understanding the products and policies a bit more and learning how to explain them to customers.

Gerald Foley, National Mortgage Brokers (nMB): Brokers are the source for a wide range of clients’ borrowing needs. Specialist lenders offer a set of products that many potential borrowers would not be aware even existed without engaging a broker’s service.

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David White, Australian First Mortgage (AFM): There are plenty of opportunities in specialist lending. Because you can accommodate so many different types of borrowers, it allows you to look at all markets – real estate, accountants with customers who require specific help, financial planning and budgeting, to name a few areas.

Mark Hewitt, AFG: I think 2016 will be the year of maximising our opportunities and specialist lenders offer a viable alternative for borrowers who do not qualify with a mainstream lender. Futurists are predicting the gap in Australian society between the ‘haves’ and the ‘have nots’ will continue to grow, so being able to offer a solution that enables brokers’ clients to restore their credit history while achieving their property goals makes obvious business sense for brokers.

Tim Brown, Vow Financial: As the market tightens and ASIC continues to apply pressure, more clients will fall outside the traditional lenders’ guidelines. This is where the specialist lenders will shine and fill the gap left behind by the traditional lenders.

How have you educated your brokers about the specialist lending proposition?

Tim Brown: We have run a number of webinars, PD days and a call program focused just on specialist lending. We have seen a huge increase in specialist lending volumes through brokers over the past few months due to our focus on these products.

David White: In training sessions where we have no more than 15 brokers attend, we emphasise the specialist lending areas and talk about the benefit principle for each client.

Gerald Foley: Most brokers by now understand the specialist lender proposition. Our role is to ensure changes in product and opportunities are presented to our broker network in a changing market. The recent moves by banks to limit investment lending is a clear example of specialist lenders being available and ready to step up when other lender segments decide to opt out of a particular market segment.

Mark Haron: We’ve mainly engaged with the specialist lenders, especially Pepper, to conduct various events and webinars with brokers to help them learn a bit more about the opportunities that exist in their businesses for specialist lending.

David Smith: Aussie has engaged with our specialist lenders to provide targeted education sessions to our brokers about the opportunities available to increase overall lead-to-settlement conversion through an understanding of specialist lending niches, with a focus on ensuring that the broker is able to provide a solution to a customer’s needs in the widest range of circumstances. We have also actively encouraged our specialist lenders to engage with brokers on declined deals and look to ways in which the use of a specialist product and lender may allow an appropriate solution to be found for the customer and for them to be able to obtain a loan to allow them to meet their financial objectives.

Mark Hewitt: We run state and regional PD days in conjunction with our specialist partners, and regularly emphasise the benefits with our members.

How much has your business grown through specialist lending?

Mark Hewitt: That is difficult to quantify, but they form a valuable part of a lending panel that has helped AFG brokers grow volumes by $29 billion over the past 10 years.

David Smith: Specialist lending has accounted for between 2.5 per cent and four per cent of Aussie’s total lodgements over the past 12 months, and this figure has been slowly growing in response to the tightening of credit policy among mainstream lenders over the past six months.

Tim Brown: We have seen a 50 per cent increase in our volumes over the past 12 months.

What would the impact be to your customers and your business if you didn’t use specialist lenders?

David White: Our overall loan volumes would reduce. However, more importantly, our approval conversion rates would reduce because we use specialist lending to assist borrowers who didn’t meet the main criteria of prime lenders on application.

Gerald Foley: Many opportunities would be lost without having access to specialist lenders and the different approach to assessing credit they bring to the table.

Mark Hewitt: I would expect specialist lenders to account for up to five per cent of our volume in the next couple of years, so it would be significant.

Tim Brown: Basically, someone else would write it and it would be a lost opportunity to Vow Financial brokers.

Has specialist lending lifted your conversion rates over the past 12 months?

David Smith: It’s too difficult to tell specifically the level of improvement that would be attributable to specialist lending, but it certainly stands to reason that if more brokers were familiar with specialist lending, then they would be able to improve their conversion of customer enquiries. Aussie is focused on ensuring this is the case for all brokers and franchisees.

Mark Haron: Definitely. A number of brokers who have taken a proactive approach to specialist lending have experienced a significant increase in converting those leads and enquiries that have come to them.

Mark Hewitt: Again, difficult to precisely identify, but there is little doubt they would be lower if we did not have this string in our bow.

Tim Brown: Definitely. We believe we have seen a 20 per cent increase in our conversion rate since we began focusing on specialist lending. 

To increase conversion or profitability by 10 per cent, how many brokers would you need to bring on board?

Tim Brown: Just over 100!

David White: It’s not about the brokers that we need to add – it’s spending more time on training the brokers we currently have. You can have as many brokers as there are in the world, but if they’re not trained, conversion rates won’t increase.

Would you say specialist lending gives you/brokers a competitive advantage?

David White: It does, as not all lenders can provide finance to all their clients who come in the door. Specialist lending enables us to assist more clients. Specialist clients are not bad borrowers – they just don’t fit all the credit policies of the [mainstream] lenders. Having specialist lending available gives that edge to ‘round off’ our offering to brokers and clients.

Mark Hewitt: Maybe three or four years ago, but as this form of lending has become more and more widely accepted by brokers, it is more a case of it being a competitive disadvantage not to use a specialist lender.

David Smith: At the cornerstone of Aussie’s philosophy is providing a superior customer experience. The presence of specialist lenders on our panel increases the probability of our brokers being able to provide a real solution to a customer’s needs in more circumstances which is, after all, what the customer is engaging with the broker to achieve.

Gerald Foley: Specialist lending gives brokers an advantage over direct lenders as it completes the full set of available options to satisfy a broader range of client needs. Having access to a full panel of lenders across a wide range of segments is a key to brokers continuing to gain share over lenders.

Mark Haron: It definitely gives brokers a competitive advantage from the point of view that they’ll be able to convert more business and be more profitable. It also enables brokers to build a loyal customer base because if they help borrowers out in a more significant time of need, they have more of a chance of retaining that client and putting them into a more mainstream funding solution when the time is right for them to switch. Also, happy clients are more likely to refer more customers to their broking business.

Tim Brown: Absolutely. Without the alternative, it would be a lost opportunity.

Aggregator roundtable: Specialist lending
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