In August 2013, The Adviser polled brokers on the question of changing aggregators, asking what would make them switch and what improvements they’d like to see from aggregators. The findings may come as a surprise…
If you want burning industry issues, then The Adviser’s Switching Aggregators survey from late last year was like a match to a scarecrow. Fewer brokers are coming into the industry, the under 30s have almost halved to a worrying six per cent and, as a result, aggregators are going it hard to get brokers to switch.
According to the findings of the annual poll, 77.9 per cent of brokers had been approached by another aggregator in the past year to change camps. It would appear if changing aggregators isn’t on a broker’s mind then aggregators are doing their utmost to persuade them it should be.
And, if the survey results are anything to go by, the aggregators’ plans to poach brokers from their rivals could be paying off, with more than one third of brokers admitting they will review their current aggregation agreement in the next 12 months.
Of the 400-plus respondents, 38.5 per cent said they would review their ‘aggregation agreement/contract’ over the next year; 46.6 per cent said they wouldn’t; and the rest were “unsure”.
More interestingly, almost 20 per cent of all brokers said they currently review their aggregation contract at least once a year.
While 32.2 per cent admitted to having “never” reviewed their contract, the remainder not only said they have evaluated their contract, but that they do so on a fairly regular basis.
Eighteen per cent claimed they review their contract “once a year”, while 21.1 per cent said they look at their contract every “one to two years” and 28.7 per cent do it every “two to five years”.
It’s not just about commissions
And the primary reason for a switch? Surprisingly not commissions or fee structures but rather it was for greater business support.
According to the survey, 78.2 per cent of brokers identified “business support” as being either “important” or “very important” in any decision to switch or join another aggregator.
Business support, however, is just one factor among many that brokers weigh up when considering whether to look further afield. Software, commission structures and trail portability were all important considerations too.
Of the surveyed respondents, more than 70 per cent said software would be “very important” in their decision to switch and is the second year in a row that software was identified as the number one reason for switching. That said, aggregation fees and the portability of trail are also very important. According to the survey, aggregation fees are becoming increasingly important to brokers.
Nearly 20 per cent of brokers highlighted “unfair commission structure” as the main reason for which they would leave their current aggregator.
Brokers want flat fees
According to the Switching Aggregators survey, aggregation fees are becoming increasingly important to brokers.
Almost 20 per cent of brokers highlighted “unfair commission structure” as the main reason for which they would leave their current aggregator – up 2 per cent on the year before.
Moreover, 73 per cent of brokers said their “commission splits” would be “very important” to their decision – up from 65 per cent this time the year before. When asked which commission model brokers would choose if given the opportunity, a majority said “flat fee”.
Based on the survey’s results, 51.6 per cent of brokers would choose the flat fee model, while 38.4 per cent indicated they would prefer a “commission split” model. The remainder said they would prefer to be associated with a branded group or franchise.
However, while the flat fee model was most popular among brokers, its overall popularity has waned since 2012’s survey, falling by 3.7 per cent.
The popularity of the commission split model on the other hand has continued to rise – jumping by 1.6 per cent.
Brokers also indicated that portability of trail was “very important” when choosing an aggregator.
Brokers understand that some aggregators will keep their trail if they choose to leave, while others are more flexible and give brokers ownership of their trail book.
Many brokers won’t leave their current aggregator because their trail is not portable. As much as they would like to switch, they don’t want to have to start from scratch.
One NSW broker says he would definitely switch aggregators if he was given the opportunity to transfer his trail.
“It is this one reason that makes it difficult,” he says.
“Financial planners are able to transfer their book so easily, which raises the question: why can’t brokers?”
His thoughts were echoed by a Queensland broker who said trail ownership also prevents him from switching.
“Many aggregators try to smother the competition by not allowing you to transfer your trail if you decide to leave them,” he says.
And these brokers aren’t alone. According to the survey, a majority of brokers indicated that portability of trail is “very important” in a decision to switch aggregators. Of the brokers surveyed, 69.9 per cent indicated trail portability was “very important”, while a further 17.4 per cent said it was “important”.
They said what?
You can be a testy bunch when you want to, so here are the best rants, vitriol and suggestions posted by you, the brokers, to The Adviser’s Switching Aggregators survey…
"If I was able to transfer my trail I would definitely switch and it’s the one reason why switching is so difficult. Financial planners are able to do it easily and it begs the question why it’s so difficult for brokers, seeing as the banks own all but a few financial service product providers anyway."
Rural NSW broker
"It would be great if brokers had access to a direct aggregator comparison tool, so that an informed decision could be made when changing aggregators. This would also (hopefully) facilitate more competitiveness among the aggregators."
Rural QLD broker
"It would take a lot for me to move aggregators. I would only look elsewhere if my current aggregator got stupid or greedy with its commissions or if I found a new aggregator with a cheaper model."
"Flat fee aggregators generally attract a higher calibre of broker. Commission split aggregators generally attract part-time or low volume brokers. The question is, ‘Who do you want to network with?’"
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