Within the aggregator market, there is a whole range of alternatives. However, different brokers require different things, so getting the right business model is critical
Switching aggregators is a big step, but deciding which aggregation model and pricing structure suits you and your business is a whole new challenge.
Do you want to work under a brand, or is wholesale aggregation more appropriate? What kind of pricing structure will help you generate the most profit – flat fee or commission split? Will a boutique aggregator meet your needs, or would you prefer to work with a larger group?
Mark Hewitt, general manager of sales and operations at AFG, believes the wholesale aggregation model offers freedom and flexibility.
“The key to the model is the ability for the broker to trade under their own identity and not have their creativity limited by a franchise rule book,” he says.
Others, however, believe the branded model offers security, stability and a steady flow of leads.
With so many conflicting views, these decisions shouldn’t be taken lightly and brokers are encouraged to do their research.
Many brokers, however, may already be well into the process of re-assessing their aggregation arrangement.
In The Adviser’s inaugural switching aggregators survey in September, 44.8 per cent of brokers said they were planning to review their current aggregation agreement within the next 12 months. Indeed, for some, it is a regular activity, with 17.6 per cent claiming they review their contract at least once a year.
The survey also revealed that 57.2 per cent of respondents currently operate under a commission split agreement while 23.5 per cent are with an aggregator that has a flat fee structure.
Nevertheless, 55.3 per cent of respondents said that if they were to switch, they would be most likely to choose the flat fee model.
Commission or flat fee?
Glenn Lees, director of Connective, says flat fee models highlight that the broker is the one out in the trenches, doing the work.
“We give brokers accreditation and access to lenders, we give them a software platform; we’re not involved in lending,” he says.
“Just because a broker has worked really hard and written $10 million worth of business [doesn’t mean we should] get paid any more for that, because we haven’t done any more. We provided the platform and all of those enabling capabilities, but it’s the broker who has done all of the hard work.
“The broker can pay us a flat fee and they can be rewarded for the hard work because, in truth, we’ve done nothing more whether they’ve written one loan or 100 loans.”
However, PLAN Australia’s chief executive, Trevor Scott, says commission splits are all about fairness.
“A commission split model is without doubt the most equitable structure for brokers who are in the process of building their business, whether they are at start-up stage or an established, large business seeking expansion,” he says.
There is an increase in the number of groups that offer numerous solutions designed to meet different brokers’ needs.
Voula Kotsiras, director and national sales manager of Port Group, says it’s all about customising solutions for brokers: “At Port Group, brokers have the flexibility to be able to choose what sort of structure they’re on – whether it’s commission-based or flat fee,” she says.
“As their business grows, they can change between models. I know that other aggregators may pay higher splits, but brokers don’t always have the ability to change as they wish. With our model there’s flexibility between flat fee and percentage, depending on what suits their business.”
Port Group has also recently introduced a branded option for its brokers.
The Adviser talks to some of the industry’s leading aggregation experts, from boutique groups, larger groups and branded brokerages, to discover what you need to know to choose the right partner.
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