In August 2012, The Adviser surveyed brokers to find out what would encourage them to switch aggregators, and the results were interesting
Competition between Australia’s aggregators has never been hotter.
With a lack of new recruits entering the industry, aggregators are pulling out all the stops to lure brokers away from their competitors.
Slick sales proposals and the promise of bottom line benefits are being thrown into the ring in a bid to retain critical mass.
And, it seems a large proportion of brokers are reacting favourably to these proposals.
According to The Adviser’s 2012 inaugural Switching Aggregators Survey, more than 40 per cent of brokers are planning to review their current aggregator contract within the next 12 months.
Of the 400-plus brokers who completed the survey, a further 39 per cent said they would stay put for the next 12 months while the remainder were unsure “what the future will bring”.
Perhaps of even greater interest is the fact that of those surveyed, more than 70 per cent admitted they had been approached by another aggregation group within the past 12 months – highlighting just how competitive the aggregation sector has become.
According to the survey, conducted online over a two-week period, there are several reasons why a broker would choose to leave their current aggregation partner in search of greener pastures.
According to the survey responses, whether or not they can take trail weighs heavily on a broker when they are deciding whether or not to switch.
In fact, 95.7 per cent of brokers said the ability to take trail would be “important” or “very important” in any decision.
This finding suggests companies that advertise a ‘no handcuffs’ approach to aggregation are likely to be viewed more favourably than those that do not allow their broker partners to take their trail book if they leave.
With competition between aggregators running hot, this could be leveraged in a bid to recruit a greater number of brokers.
Technology was also deemed to be “very important”, with 70.7 per cent of brokers saying they would consider switching to a partner with a better software platform.
Loan Market’s Mark De Martino said this result was “hardly surprising” given how much brokers rely on their aggregator’s software platform to run their business.
“Brokers are always looking for ways they can do their manual loan work faster,” he says.
“The last thing brokers want to do is spend valuable time typing client details into an application form numerous times. They want more time to spend meeting clients and this is where good software comes into play.
“A good software platform will allow brokers to easily and efficiently complete the loan application process, giving them more time to meet clients.
“As such, it is no surprise to see brokers say they would switch aggregators if it meant they would have access to better software.
“That said, I don’t believe any aggregator software platform is perfect. There are flaws in every platform and I think that is something that all aggregators could work on.”
LoanKit’s Simon Dehne agrees, and says it is fair to assume that all brokers want and need a software/CRM system that is accurate, simple, delivers on helping them meet their customer needs and improves their productivity.
More than just software, however, Mr Dehne says brokers also want and need continuing support from their aggregator – regardless of how long they have been in business.
“All brokers want someone in their corner if they need help with an issue – an aggregator that is prepared to look at the situation or issue, get their hands dirty and go in to support them.”
But while Mr Dehne believes the level of support would be a “major consideration” for any broker reviewing their current aggregator, this proved not to be the case, with just 38.7 per cent of brokers nominating business support as a “very important” role in their decision making process.
Similarly, just 35.9 per cent of brokers said compliance support was “important”.
Even access to a high volume of leads did not register as significantly with brokers as might have been expected, with a majority of brokers saying it was “one of a few considerations”.
Further training and education found itself in the same boat.
According to the survey, brokers are not looking for an aggregator that can provide them with access to a wide range of educational services, business leads or compliance support. They’re more focused on a strong software platform and a good commission structure.
Once they have identified exactly what it is they are looking for from their aggregator, however, how do they go about finding it?
Making the switch
According to The Adviser’s survey, almost 50 per cent of brokers would approach three or more aggregators if they were to decide to switch.
Just 11.2 per cent said they would approach just one, while 39 per cent said they would approach two aggregation groups.
Vow Financial’s chief executive, Tim Brown, says it makes “business sense” to approach more than one group.
“Switching aggregators is a big decision and one that should not be made lightly,” Mr Brown says. “It is imperative for all brokers looking to switch to do their due diligence.
“Have a chat with the various aggregation heads and find out what they can do for you and your business. If you are looking for more business support than you are currently receiving, you need to make sure the aggregator you join can provide you with the support and service you need.”
It often pays to talk with other brokers who have just made the switch, so as to get their thoughts on the matter.
“Your peers will be transparent,” Mr Brown says. “They are not going to beat around the bush and tell you what they think you want to hear. They are going to be honest, and when you are making a decision like this, honesty is the most important thing.”
They say what?
“Certain aggregators have made it very difficult for brokers to change because their business and trail is handcuffed. I am starting to see a lot more aggregators offering their brokers client ownership but I think this needs to happen across the board.”
“I would definitely consider selling my trail book if ever I was to leave the industry. I find aggregators today are too greedy and their commission splits are ridiculous. In addition, they will take a higher cut if our volumes drop below a certain level.
It is very hard to work under these conditions, especially now with licensing in play. It costs about $4,000 per year to maintain my licence. As such, it is becoming almost too expensive to be a broker.
I believe this industry discriminates against its own members. In what other industry is the income uncertain for up to two years because of the draconian clawback provisions for the actions of the borrower, over which the broker has no control?”
“I recently switched aggregators for better support and a better technology platform. It took courage to make the switch, but I am certainly glad I did.”
“Once you get a decent sized book, the cons associated with switching (leaving behind the trail book etc) outweigh the pros. So, it is almost impossible to justify moving aggregators from a financial perspective.”
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