Aggregators’ lender panels might look largely the same, but with the rise of white labelling, small variations can make a big difference
Borrowers who are unfamiliar with the broker proposition might think all lender panels are created equal – that everyone has the same institutions on offer.
Indeed, it appears that even some brokers may not fully recognise the difference that a more diverse lender panel could make to their business.
In The Adviser’s Switching Aggregators survey conducted last year, only 2.9 per cent of respondents said “access to a wider lending panel” would drive their decision to switch groups.
This, however, does not mean lending panels have no role to play when it comes to switching.
Vow Financial CEO Tim Brown says lender panels with a range of mortgage managers and regional, state-based and international banks can offer brokers the opportunity to write more business.
“Having more lenders on the panel might only increase your business by 10 or 15 per cent, but that 10 or 15 per cent in a tough market is a lot in the sense of income and volume,” he says.
“Those marginal deals are sometimes the ones that make the difference between you making a profit in one month and not making a profit.”
The makeup of the lender panel is therefore something every broker should consider before deciding to switch aggregators.
“Any broker who is thinking of making the switch would not want to leave their aggregator for another company that has fewer lenders from which to choose,” says Ballast’s CEO, Frank Paratore.
Difference and diversity
Even though lender panels may not be at the forefront of brokers’ minds when they are looking to switch, according to Mr Paratore, a strong panel has numerous benefits for broker and borrower alike.
“A good lender panel will allow a broker to target different areas of the market, thus expanding their services and enhancing their bottom line,” he says. “A good panel will have an array of lenders that covers many different disciplines, including insurance and motor vehicle and personal finance, to name a few.
“A good panel will also enable a broker to move beyond the transaction and develop a relationship with their clients. For example, if a broker services a first home buyer, there is every likelihood that in three years, that client will become a refinancer. Then in another five years, they may become an investor.
“In every instance, they will require a different loan product – which is where a good panel comes in. If an aggregator has a good panel, it will allow the broker to service the varying needs of the client throughout their entire financial lifecycle.”
Jason Bridgett, operations, licensing and risk management manager at Australian Mortgage Brokers, says a strong lending panel can help brokers run a more diversified, stable and successful business.
“Some aggregators will not have all the disciplines that a broker requires,” he says. “Some will specialise in residential home loans and, as such, have only residential lenders on their panel.
“But broking is not just about writing home loans. While some brokers prefer to specialise in residential mortgage lending, others like to cater to all of their clients’ needs.
“Good aggregators will offer their broker partners access to a wide range of reliable, dependable lenders that can cater to their clients’ every need.
“An aggregator is only as good as their panel.”
Choice’s CEO, Stephen Moore, says when it comes to lending panels, diversity is not directly related to quantity.
“The raw number of lenders is not what’s important; it’s more about making sure the aggregator offers a comprehensive suite of lenders sufficient to meet different customer needs – it’s not about a shopping list.”
White label lenders
Many of the industry’s aggregators are divided over whether or not white label products play an important role in the quality of a lending panel.
Vow Financial’s Mr Brown says panel diversity is more important than having a white label option, but Choice’s Mr Moore believes a good white label product can make all the difference.
“I want to stress that not all white label products are created equal,” he says. “It is critical to look at the underlying lender to be confident in the long-term viability of the product.
“White label products strengthen an aggregator’s lender panel by offering competitive rates, serviceability and relationship management capabilities to brokers.
“Most importantly many brokers appreciate that white label solutions are only available through brokers. This element of exclusivity is important.”
Ballast’s Frank Paratore says white label products not only can strengthen an aggregator’s offering but also enhance the broker proposition.
“Diversity is very important,” he says, “but I think it is also good for an aggregator to have their own white label solution – it gives the broker additional choice and, after all, choice is what the broker proposition is
AMB’s Mr Bridgett, however, says if brokers are looking to switch aggregators, they should primarily be looking at the strength of the panel, not its white label offering.
“At the end of the day, it is important for aggregators to offer a variety of good quality lenders, all of whom can offer different products and services. The broker proposition is built upon choice; as such, it is critically important for aggregators to provide brokers with choices.”
The popularity of white labelling
For some aggregators, white label products are a key differentiator – and a significant drawcard for brokers.
But are brokers taking advantage of what could prove to be a real opportunity, or are they sticking to their regular panel?
Online straw polls conducted by The Adviser indicate the use of white labelling is on the rise.
In January, The Adviser asked brokers how frequently they sell their aggregator’s white label product, and 28.7 per cent of respondents answered “regularly” – up from the 12.7 per cent who gave this response in February 2012.
It also appears that more brokers are giving white labelling a go. In 2012, 48 per cent said they “never” sold home brand products, but in 2013, this was down to 40.9 per cent of respondents.
According to many industry stakeholders, this trend is likely to continue. For example, in January, FAST’s chief executive, Brendan Wright, told The Adviser the aggregator expects the popularity of white label products to surge in 2013.
“We are seeing a lot of demand for our white label products and we want to cater to this demand,” Mr Wright said.
“Brokers and their customers are crying out for alternative products to [those of] the majors, and white labelling provides them with that. White labelling is not just a strong alternative to the majors, it also gives brokers more control over turnaround times and indeed the entire loan process.
“Moreover, it provides them with certainty around commissions. They know exactly when they are going to get paid.”
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