Brokers urged to unlock opportunities ahead of Commission’s recommendations
Uncertainty posed by the Hayne Royal Commission’s Interim Report re-enforces the need for businesses to diversify products and strengthen customer relationships, a forum hosted by award-winning mortgage brokerage Loan Market heard on Thursday.
With remuneration structures - including trail commissions - scrutinised during the Royal Commission into Misconduct in the Banking, Financial Services and Superannuation Industry public hearings, the online discussion heard brokers must pre-empt possible legislation by expanding their customer offering.
In an upside for the industry, forum panellists - Loan Market’s Executive Chairman Sam White, Executive Director Matt Lawler and Mortgage and Finance Association of Australia (MFAA) CEO Mike Felton - said brokers were poised to win a greater slice of the mortgage market with the profession emerging as the ‘trusted’ adviser.
During the commission hearings and despite media scrutiny, the share of broker-written loans secured in Australia increased by 2.4 per cent in a clear sign ‘customers were voting with their feet’.
On the growth, Mr White said: “[Out of the hearings] who would you trust? Brokers are clearly the ones who customers are turning to”.
Highlighting the UK market, where brokers accounted for 75-80 per cent of loans written, Mr White said the Australian industry was on a ‘one-way ticket to 60-70 per cent market share’.
“We are focusing on the customer. The [bank] branch manager is focusing on their employer; the Big 4.”
Notwithstanding the forecast increase in customers, the forum heard businesses needed to future-proof their models ahead of the final recommendations from Commissioner Kenneth Hayne AC QC, due February 2019.
Mr Lawler said Loan Market had been through similar changes before, most recently in 2006 when a bank-led move abolished trailing commissions in New Zealand. Overnight, brokers moved to an upfront structure which aided cash flow but constrained long-term sustainability.
“We’ve seen this movie play out and had to pivot our business strategy to navigate this field before,” he said.
According to Mr Lawler, visionary business owners diversified their operations to include other products such as insurance, asset finance and superannuation. More than a decade on, some of Loan Market’s best performing NZ franchises’ income is derived from non-mortgage revenue.
Mr Lawler said the NZ experience had shown a path forward for Australian businesses.
“Our strategy is to keep our client based engaged by being the person they turn to for financial options. We don’t own one product or push one service as a bank manager does. We can offer multiple solutions across a number of services.
“We are looking to our New Zealand counterparts for guidance on this. In fact, Loan Market is hosting a study tour so our brokers can be on the ground getting the answers they need.”
Mr White said introducing ancillary services such as asset finance and wealth advisory to existing database customers would make businesses better placed to absorb any disruptions recommended by the Commission.
“We recognise what an unsettling time this is for some brokers and that they are working harder than ever before,” he said.
“Right now you are having your value questioned, and the future viability of your business questioned. We fully understand that and share that with you. We believe the best thing that you can do for your business is to keep looking after your customer, as you always have done and look at ways to offer them more reasons to work with you, by becoming the Trusted Adviser.”