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Broker Group of Choice: Special Feature - The Deal Breakers

13 minute read

As competition between aggregators heats up, new research indicates brokers are demanding greater service provision with a steady eye on innovation

The rise of aggregation has undoubtedly been a positive in the development of the mortgage broking industry. In so many corners of the financial system, the game is rigged in favour of the house, but an increasingly nimble and competitive aggregation market has awarded intermediaries greater clout when dealing with lenders, politicians and others who have sway over their everyday business reality. Aggregators provide not just power in numbers, but peace of mind.

But as the broking industry continues its journey into professionalism, aggregators are under increasing pressure to adapt and refine their services in line with the changing needs of their members.

As brokers have worked on redefining their value propositions and boosting levels of customer service, now aggregators have been called on to avoid taking their own customer base for granted.


The Adviser’s soon-to-be-released Broker Group of Choice Report 2015 – compiled off the back of a wide-ranging survey of 500 brokers over three weeks in May – indicates that while the number of brokers unsatisfied with their current aggregator or contemplating an upcoming switch is relatively steady, when it comes to the reasons for a switch, there are important and noticeable shifts driving satisfaction levels (or lack thereof).

In fairness, many aggregators are investing heavily in adapting to the changing landscape, with new business models and service packages being taken to market frequently. In addition it is worth remembering that the majority of brokers are satisfied with their current agreement and do not intend to switch.

However, the latest research not only shows the areas where the aggregators need to continue to invest in order to gain share of the increasingly competitive market, but is reflective of brokers’ top business priorities presently, with potential implications for the future direction of the industry.

Keeping them happy

Aggregation executives and employees may be comforted by the revelation that in 2015, fewer brokers indicated they are dissatisfied with their current aggregator than in previous years. Overall, a total of 71.3 per cent of brokers taking part in the Broker Group of Choice survey indicated they were “satisfied” (35.1 per cent) or “very satisfied” (36.2 per cent).


This figure represents a significant spike in positive sentiment when compared to the 66.9 per cent that were “satisfied” or “very satisfied” in 2014 or the 58 per cent in 2013. In addition, the number of “very dissatisfied” brokers fell from 5.1 per cent in 2014 to 3.2 per cent in the most recent survey. The number of brokers intending to review their current aggregation agreement or contract in the next 12 months also fell from 31.9 per cent to 28.7 per cent, indicating demand for short-term switches is in decline. But at the same time it would be premature for aggregators to pop the champagne.

Almost 30 per cent of the market is not satisfied and just over 40 per cent either intends to review their contract or is not opposed to the idea of switching. Regardless of their current standing on the broker-numbers ladder, aggregators would be well-advised to heed, not only the great number of intermediaries keen to go shopping, but the underlying trends that could bolster – or salvage – their growth plans.

The fintech friend

At the recent Australian Securities and Investments Commission annual forum in Sydney, New York-based consultant Paul Schulte – a financial markets expert and adviser to the White House National Security Council and China Construction Bank among others – warned that the digital age will see “profound disintermediation” of financial services. Considering he was speaking to an audience of financial intermediaries, his words struck a chord, with the clear message that investment bankers, financial advisers, mortgage brokers and others will need to adapt to new technology or simply die off.

His speech is an example of the frenzied discussion of “fintech” and “digital disruption” currently taking centre stage in the media, including this publication.

But while journalists, publishers and keynote speakers like Mr Schulte are often accused of fuelling the fire on this issue, the Broker Group of Choice Report 2015 suggests brokers are taking the issue of technology very seriously.

In fact, the most recent survey suggests that “poor software/technology” has emerged as the most popular reason for a broker to leave their current aggregator.

The 2015 report suggests that 43.0 per cent of respondents listed this as the most probable issue to trigger a switch, compared to 40.9 per cent in 2014. The number is also greater than the 35.6 per cent who said “poor software/technology” lay behind a previous decision to switch aggregators.

Perhaps having heard the “disintermediation” warning, brokers are looking to aggregators to provide the most cutting-edge software and technology offerings. Just as they have acted as a representative on behalf of their members when dealing with lenders, the most recent figures suggest brokers expect them to play a similar – perhaps even more important – function when dealing with technological service providers.

Aggregators who invest in their tech literacy are likely to be rewarded in light of this new research indicating tech is not just noise for brokers, but seen as a fundamental part of their decision-making process when it comes to alignment with an aggregator.

Interestingly, while as a whole, brokers are demanding greater technology offerings, when you apply a demographic analysis, it seems some are more frustrated on this topic than others.

More specifically, the research indicates there is a direct correlation between average loan settlement value and technology concerns. Almost 60 per cent (59.5 per cent) of brokers with an average monthly loan settlement figure of greater than $5 million listed “poor software/technology” as their number one reason they would switch, compared to just 42.3 per cent of those with an average monthly figure of less than $1 million.

This may indicate that brokers with lower monthly figures have already mastered technology when compared to those higher on the earnings table. However, more likely, it suggests that those writing the most business are most in need of new technologies to drive efficiencies as they move forward, compared to those with more pressing short- to medium-term business concerns.

The research also suggests a correlation between technology concerns and length of time with a particular aggregator. New entrants to an aggregator (ie. those that have been with the group for less than one year) were more worried (with 50 per cent listing it as the number one trigger) compared to 38.5 per cent of those that have been with their respective group for more than 10 years. The number suggests brokers expect technology offers to be up to scratch when joining a new group, confirming investment in tech may be a key to successful recruitment.

Female brokers were found to be even more concerned about technology offerings than their male counterparts, with 42.4 per cent and 48.8 per cent placing high priority on the issue respectively. The figures suggest that for the ever-growing ranks of women in the mortgage broking industry, the benefits offered by new technological models are very much front of mind.

Talking turkey

In the 2014 Switching Aggregators Report, “unfair commission structure” was found to be the number one reason why brokers would change from their current aggregator, with a chart-topping 41.9 per cent. However, in 2015, that number dropped to 36.0 per cent, falling behind technological concerns as the most popular trigger. It is difficult to say definitely what lies behind this shift. Partly it is likely to be a corollary of the increased focus and attention on technology, as previously discussed. It may also indicate that aggregators have responded well to the previous findings, incorporating more flexible and forward-looking models, such as flat-fee arrangements.

Despite the slight shift, it would be inaccurate to view these figures as an indication commission structures are no longer a top priority when choosing an aggregator. When compared to the 22.7 per cent who listed “unfair commission structure” as the reason for a previous switch, 36.0 per cent still suggests it is front of mind now compared to the past. Brokers with lower monthly loan settlement values are particularly sensitive to commission structures, with 41.0 per cent listing this as a reason, compared to 28.9 per cent of those in the $3 million to $4 million bracket and 21.7 per cent of those in the $4 million to $5 million bracket.

The report also found a slight rise in the number of brokers listing “unsatisfactory aggregation fees” as the primary reason for a switch, up from 33.0 per cent in 2014 to 34.4 per cent in 2015.

This further indicates that the transactional relationship between aggregator and broker continues to be a potential deal-breaker, despite the rise of technology as an important issue.

Keeping their promises

While initially aggregators emerged to provide brokers with greater access to lenders – and the ability to negotiate rates and offers with those lenders – the competitive companies we see operating under that banner today have rapidly expanded their suite of services.

A cursory glance of the websites of the major aggregators, or their media release pages in particular, will likely uncover no shortage of promises to not only provide brokers with additional leverage and access to loans, but actively grow their businesses. Many will offer business development and strategy services including, but not limited to, compliance training, marketing and sales skills and basic business skills on issues like hiring, firing and retention.

In recent years brokers have been eager to hold the aggregators to account on their business development promises – understandably, given they’re the ones paying for it. In 2014, 40.3 per cent of respondents to the Broker Group of Choice survey listed “lack of business support” as the main reason they would leave their current aggregator. However, in 2015, the number has dropped significantly to 32.8 per cent.

It is likely the drop partly reflects the surge of home loan activity in the months since the previous survey. In June the total value of outstanding home loans written by banks and ADIs surged to an all-time record of $1.39 trillion, according to the Australian Bureau of Statistics, while a number of aggregators also achieved personal bests in terms of monthly loan settlement figures.

Against this backdrop of record activity – and ever-rising house prices in the major cities – it is perhaps expected that brokers are less concerned with seeking business support from others, given their own businesses are experiencing an organic surge. However, a less cynical reading should also acknowledge the aggregators themselves have been continually putting money where their mouths are and investing in providing greater business support and development services, as promised in the recruitment marketing communications. This enhanced service offering may also be contributing to what seems to be higher levels of satisfaction with business support services, or at least, its diminishing a trigger for switching groups.

Having said that, younger brokers and career-shifters continue to place a lot of emphasis on business support, with 43.8 per cent of those that have been in the industry for less than 12 months indicating “lack of business support” was a potential deal-breaker, followed by 41.5 per cent for those that have been in the game for between one and three years.

Brokers with a lower monthly average of loans settled also recorded greater focus on business support, with 48.7 per cent of those with an average of less than $1 million per month placing high priority on business development services compared with only 21.10 per cent for brokers in the $4 million to $5 million bracket.

Therefore, while it may be on the whole a diminishing concern, it would be a brave aggregation boss to pull the pin on high-quality business support services with so many competitors nipping at their heels and a broker force willing to flex its muscles.

Blaming the parents

This publication has reported at length on the significant consolidation taking place in the aggregation market, with banks, lenders and financial product manufacturers seemingly hungry for purchase of their own distribution model.

Vertical integration is increasingly a buzzword in the mortgage world – thanks in no small part to the problems faced by the financial planning arms of the major banks and media and parliamentary scrutiny of ownership structures in the advice space. However, while many brokers take an interest in the ownership of their aggregator, this year’s Broker Group of Choice report indicates it is diminishing as a potential reason for switching.

In 2014, 19.4 per cent of respondents said they would be open to leaving their current aggregator due to being “unhappy with the ownership model”, but in 2015 that percentage has fallen to 17.4 per cent. Male brokers are particularly unfazed, with only 15 per cent listing ownership structure as a potential deal-breaker, compared with 27.9 per cent of their female colleagues.

Naturally, those that had been with an aggregator for longer – and therefore may find themselves in circumstances different to those of the aggregator they originally joined – had a bigger problem with ownership structures than recent recruits, but even then, only 21.9 per cent listed it as a major problem.

By contrast, of the 30.4 per cent of financial planners not satisfied with their current dealer group (roughly equivalent to aggregators), 53.6 per cent said they would not choose a group aligned to or owned by a major financial institution, according to a report conducted by The Adviser sister title InvestorDaily. This report indicates that for financial planners, ownership and alignment is very much a sticking point when making a decision about switching groups.

The financial planning analogy is an interesting one. Brokers have often been portrayed – unfairly – as the less professional and mature of the two segments. And yet, if the Broker Group of Choice Report 2015 is anything to go by, broking professionals are looking beyond commissions and industry politics, to the more long-term and important issues of technology investment and implementation.

Admittedly, these are results inextricably linked to the period in which they were surveyed – a period of unprecedented home loan activity. Yet perhaps in time, they may also come to reflect a turning point where technological innovation trumped short-term economic incentive once and for all, placing the mortgage broking industry on a path to more efficient, profitable and client-centric businesses. Only the 2016 Broker Group of Choice survey will tell.

Broker Group of Choice: Special Feature - The Deal Breakers
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