Brokers on Aggregators 2023

 

 

The top aggregators are clearly refining their value proposition. With loyalty so high, how could brokers be persuaded to switch aggregators to capture more of the market?

“If I were running an aggregator business, I’d be looking at how to maximise value for my current members,” says Matt Atkin, president of the Commercial & Asset Finance Brokers Association of Australia and managing director at Atlas Broker. “If they wanted to change brokers’ minds, it comes down to the value-adds and refining their systems.”

One broker said access to better rates and products was the most common reason for switching: “If a borrower or broker finds that another aggregator offers more competitive rates, a wider range of products, or more favourable loan terms, they may be motivated to switch.”

When aggregators are performing at their peak, everybody wins.

For non-bank lender Mortgage Ezy, named Mortgage Manager of the Year at the 2022 Australian Mortgage Awards, the best aggregators identify gaps in the market and encourage non-banks to fill them. They also connect brokers with lenders beyond the legacy lending space and play a key role in educating brokers on those opportunities.

“The top aggregators strive to educate their brokers on writing business in specialised lending areas, and they win over quality brokers from competitors by offering access to the best non-bank lenders,” says Mortgage Ezy founder and executive director Peter James.

Another lender in the third party channel, Teachers Mutual Bank Limited works with aggregators of all sizes. With a 22-year record of above-system growth, the customer-owned bank has seen an upward trend of borrowers favouring banks with responsible lending and social credentials. “We believe competition and offering customers an alternative customer-owned banking proposition is good news for customers, and aggregators play a key role in ensuring this optionality exists,” says head of third party distribution Mark Middleton.

Keep reading as we dive deep to reveal the results in detail.

 

BROKERS’ TOP PRIORITIES

As loyalty increases, brokers prioritise finances, but concerns linger over tech progress

 

The loyalty of Australia’s brokers is clear. One broker said of his long-time aggregator: “Even though it’s tempting to go to a flat-fee model, no other aggregator seems

to invest as much into the success of their brokers running businesses, not just writing loans.”

 

Another said changing aggregators “will not occur, regardless of minor or major issues, because loyalty is paramount”.

The top three factors cited by brokers as reasons why they might jump to a competitor have held steady since last year: poor accuracy and timeliness of commission payments; poor IT and CRM support; and poor BDM support.

 

It’s the second year in a row that the top three most important aggregator services have remained the same – accurate and on-time commission payments, followed by quality of lending panels and IT and CRM support.

There was a shake-up of winners in the payment of commissions category among aggregators in 2023. National Mortgage Brokers took the gold medal, with silver going to Loan Market and bronze to Connective in a

close race. In the boutique aggregators category, which covers sub-aggregators, Liberty Network Services and MoneyQuest continued their winning streak, with LNS taking gold and MoneyQuest silver.

Some brokers reiterated concerns about commissions:

• “We have not seen an increase in our commissions, but it is double the workload since BID”

• “It’s about getting rewarded a fair commission for our work and the risk we take in giving credit advice”

• “Commissions need to be changed to a flat fee for every loan, plus a variable component on top”
   

 

While a small percentage of brokers continue to be unhappy with fee and commission splits, and just under a third say they’re somewhat happy, there was a marked hike of four points to 68% of brokers who are very happy.

 

 

 

In 2023, brokers achieved annual settlement values in the following proportions:

• 26% of brokers settled less than $10m (five points higher than last year)

• 23% settled $10m–$20m

• 24% settled $20m–$40m

• 12% settled $40m–$60m

• 15% settled $60m or more (one point lower than last year)

 

 

Brokers continue to focus on finances, prioritising accurate and timely commission payments as the most valued service provided by their aggregator and a potential catalyst for breaking away.

 

The continued downward trajectory of IT and CRM support as a reason brokers might leave may indicate confirmation of

aggregators’ successful tech improvements.

 

“My aggregator is a solid supporter of the brokering industry, but they could find ways to streamline information-gathering further by building it into the CRM,” a broker said. Another noted that their aggregator was going above and beyond, but “they could assist with marketing strategy and refining workflows with broker groups to better integrate with CRM”.

Among aggregators, outsource Financial ousted two-year reigning champ Loan Market to take gold for IT and CRM support. nMB claimed silver in a tight race. The bronze went to Loan Market.

In the boutique aggregators category, MoneyQuest again clinched the gold medal, and the silver went to LNS.

Mortgage Ezy’s Peter James observes that despite economic headwinds, the top aggregators stand out. However, boutique aggregators are building market share at the expense of the bigger competitors.

“We seek aggregators who aim to provide a comprehensive panel so that best-in-class lenders are available for a broad range of loans,” he adds.

“We want to be given access to their members based on merit and are attracted to those aggregators with a strong educational ethos.”

Teachers Mutual Bank Limited’s Mark Middleton emphasises that if aggregators want to capture more of the broker market, they must engage in conversation.

“This understanding will enable aggregators to identify the value proposition that aligns with each broker’s goals.”

 

 

 

 

WISH LISTS AND FRUSTRATIONS

Brokers reveal a long list of hopes for lending panels and BDMs, but concern about hidden costs is on the rise

 

Mirroring 2022, the quality of an aggregator’s lending panel ranked as the second most essential aggregator service this year, and fifth most likely reason to jump to a competitor.

 

Loan Market once again won gold in the aggregators category for the quality of its lending panel, followed by AFG and Finsure, in a narrow race that separated them by small margins. Among boutique aggregators, MoneyQuest won the gold medal, with the silver going to Liberty Network Services.

 

Most brokers remained satisfied with the size and quality of their aggregator’s lending panel, but there was a consistent desire for:

• panel and product diversification, including lower-rate products

• more lending panel education and support

• improved tools and calculators
   

 

 

When asked which lenders they would like added to their panel, perennial wishlist favourites HSBC and Liberty surfaced.

Compliance support remained in fourth place as a must-have and was the fourth most popular reason a broker might leave an aggregator. But some brokers continue to feel burdened by what they see as excessive administrative processes that hurt their efficiency:

• “Reduce compliance and regulatory hurdles, improve software capabilities, and streamline documentary requirements”

• “My aggregator has rolled BID and NCCP responsible lending into one big headache, making brokers less competitive and more difficult to work with than customers going directly to the lender”
   

 

 

 

Another broker wanted additional compliance training and support to combat fraudulent applications.

 

Brokers’ faith in aggregators remains unchanged from last year, with 82% saying hidden costs are not a problem. That’s a significant decline, however, from the 90% of brokers who in 2021 had higher trust levels and little concern over their aggregator’s practices.

 

The proportion of brokers who said hidden costs were either a major or a minor problem held steady at 18%. However, the 8% rise over two years suggests that brokers’ confidence in their aggregators’ commitment to transparency and straightforward communication may be eroding.

The reasons that brokers considered hidden costs worrisome were varied.

• “They have put up their costs, but we are not getting any additional benefits”

• “Broking costs have increased threefold in the past 24 months, while our real commissions have contracted”

• “Stop introducing endless new charges for programs and tools that I don’t want but are made compulsory by the aggregator, who then tries to sell me what good value they are”
   

 

 

 

BDM support traded places with communication to rank fifth on brokers’ priority list this year. This might signal a shift in brokers’ priorities towards a more meaningful relationship with their aggregators to drive growth and prosperity.

 

“We need help with growth opportunities,” a broker said. “I get an annual check-in with the area BDM, but apart from that, it’s low-touch.” Many brokers offered ideas that aggregators could implement to help them achieve business goals:

• “More BDM visits to regional areas to ensure we are running things correctly”

• “Provide business coaching and planning to help brokers create better business practices”

• “To show they care, even just a phone call occasionally. I could not even tell you who my BDM is”
   

Over half of the brokers (55%) surveyed cited the lengthy and cumbersome process of lender reaccreditation as the top obstacle – for the second year – to leaving their aggregator. It’s notable that in 2021, lender reaccreditation was relegated to the ‘other’ category. This year, data migration and IT ranked as the second biggest hurdle, and a noticeably higher number of brokers listed lack of time in third place.

 

Regarding which aggregator brokers would choose if they had to change tomorrow, the top pick was Connective at 33%, followed by outsource Financial at 19% and Finsure at 12%.

Connective picked up 15% more brokers this year, driven, in part, by peer referrals and word of mouth, along with its flat fee and solid IT platform.

One broker said they had just switched to Connective “because of better systems and commission structure; their marketing and BDM support are excellent”.

outsource Financial was lauded for being “not too large and most likely to have personalised service”. A few brokers already

with the aggregator emphatically said they wouldn’t jump to a competitor. “I don’t believe anyone else is close to outsource; they have been an amazing help to my business,” one said. Finsure was noted for its “commission, better deals, and less documentation and time spent on compliance”.

 

Lastly, despite the increasing pressure on the lending market and the ever-changing nature of the mortgage industry, an overwhelming majority, or 90%, of brokers said their aggregator was fostering their professional growth and helping them diversify.
 
Of the brokers who felt unsupported, their reasons included:

• a lack of information

• clawbacks that hindered business growth

• scarcity of lead generation teams to maximise settlements for brokers
   

“Brokers have a lot of choices when it comes to aggregators,” says CAFBA president Atkin. “Aggregators are fighting the good fight for the brokers and the industry, which is positive, and I think brokers appreciate that.”

 

Methodology

In MPA’s 13th annual Brokers on Aggregators survey, brokers were asked to rank their aggregators across 11 categories: accurate and on-time commission payments; IT and CRM
support; quality of lending panel; communication with brokers; BDM support; compliance support; training and education; additional income streams; marketing support; white label offering; and lead generation. Brokers could rank their aggregator with a score out of five in each category.

 

Due to the varying sizes of aggregator groups and the disparity in the number of respondents per aggregator, only those that achieved a response rate of at least 10% of brokers for each aggregator were included in the final list.

 

MPA also asked brokers a series of questions relating to their aggregator’s service and other needs, but these did not affect the overall score.