Amid industry consolidation, boutique and challenger aggregators are still going strong.
Amid industry consolidation, boutique and challenger aggregators are still going strong.
When it comes to aggregation, there can be the perception that there are very few choices. A few big names dominate the sphere. Most provide great service and value to their members, but certain brokers may eschew the idea of aligning themselves with a large brand. For some brokers, bigger isn’t necessarily better. For those who want more of a personal touch from their aggregation model, boutique and challenger aggregators may be the answer. Nimble, responsive and frequently innovative, challenger aggregation models have carved out a niche in the marketplace. And while some of their larger rivals talk of increased industry consolidation in the aggregation space, these boutiques say they’re here to stay.
A personal touch
Some brokers prefer their aggregator to melt into the background. They would rather their broker group remain both unseen and unheard, providing support when they need it and offering a diverse lending panel, but generally staying fairly uninvolved. Outsource Financial’s Tanya Sale says these are typically not the brokers who are drawn to the boutique proposition.
“There are brokers out there who don’t really want a relationship, and just want their aggregator to act as a clearing house. But some brokers want that relationship, even some of the bigger writers. We’ve got some big writers as members, and they love it,” Sale says. Instead, Sale says Outsource takes an extremely personal approach with its membership.
“I think it really boils down to the relationship and what we can give to members. It’s been so important for our writers to have that relationship with us. When you’re in one of the big ones, you don’t always get down to the nitty gritty relational side of it. We sit down with our writers and ask what their needs are and what their challenges are, and we brainstorm how they can overcome those challenges,” she says.
This personal approach is not only crucial for the brokers drawn to boutique aggregators; it’s a must for the aggregators themselves. LoanKit’s Simon Dehne says relationship building is an inextricable part of the boutique proposition.
“We don’t have a zillion brokers, so we have to really look after the ones we’ve got. We work our butts off making sure they’re happy,” Dehne says.
Part and parcel of this kind of personal service is a responsiveness that can’t feasibly be delivered by some large aggregators. William Lockett is not only the managing director of Specialist Mortgage. He’s also the founder and owner. Lockett says part of the unique value of boutique and challenger aggregators is direct access to the management structure.
“Having the flexibility of being able to deal with the management or ownership structure and being able to deal with issues quickly is important for people in business. Problems get the urgent attention they should, and are dealt with accordingly,” Lockett says.
Lockett says he makes himself available to any of Specialist’s members, and is able to deal with issues quickly, as well as offer individual encouragement. Dehne agrees, and says this kind of access is one of the key selling points of boutiques.
“I think that’s why boutique aggregators are so successful,” Dehne says. “If a broker has a problem, it gets to the top very quickly. We’re much more responsive.”
But Finsure’s John Kolenda says the relational aspect of boutique and challenger aggregators doesn’t have to change based upon size. He has made no secret of the fact that Finsure does not see itself as a boutique offering, but as a challenger brand that will one day rival the nation’s largest aggregators. Regardless of how large the business grows, though, Kolenda says the personal relationships will form Finsure’s cornerstone.
“We’re very customer oriented, and our customer in the relationship is the broker. That will always be a key feature of the way we operate. Those values underpin Finsure, and part of our offering is we see the value of relationship with brokers, and all our key personnel’s objective is to support brokers no matter how big or small they are,” he says.
Knowing members also offers smaller aggregators better perspective on those members’ individual needs, says Nathan Kerr, CEO of Australian Mortgage Brokers (AMB). AMB, itself a boutique franchise proposition, aggregates through boutique broker group Astute Financial.
“What attracted me to Astute and what is attractive to brokers is the relationship. It’s really about a relationship for the life of the business. We’re very careful about what to bring to the model, and get to know our members really well and provide them a solid business plan,” Kerr says.
AMB head of operations for licensing and risk management Jason Bridgett echoes Kerr, saying the boutique nature of the business allows it to tailor solutions for its members.
“We’re not in the business of building our aggregation model. We’re in the business of making our members successful,” Bridgett says.
And making members successful makes good business sense for aggregators as well, Kerr says: “If brokers don’t have good margins and aren’t growing, neither is the aggregator. I like to see us as more than an aggregator, though. I like to see us as someone helping these guys grow their business.”
Building a business
Sale agrees with Kerr, and says Outsource focuses its resources on helping its members find success. “We’ve had writers come to us that have been settling probably around $1m a month and just can’t get over that hurdle. They just don’t have the business skills to get out there and get it on their own. We’ll find them the referral partners they’d be well aligned with to make sure we get them up to $2m, $3m, $4m a month. We had one fellow who was settling $1m on a good month, and he’s now up to $10m a month,” Sale says.
Ballast’s Frank Paratore says his company takes a similar approach. He sees Ballast’s proposition as one that helps brokers develop their businesses on a very individual level. “If I’m in town I will make it a point to catch up with our members for a drink or a coffee or dinner. But it’s not just about lunch or coffee or a muffin; it’s more of a business strategy session. I’ve pretty much got them on five-year plans. The fact that we don’t have thousands of brokers or planners means that the level of support we can provide is actually quite substantial and meaningful,” Paratore says.
In this regard, Dehne believes LoanKit has the added benefit of being owned by Mortgage Choice. While he says the aggregator remains a boutique proposition, Dehne says the resources of Mortgage Choice deliver dividends to LoanKit members. “We get the benefit of having a large organisation funnelled through a boutique aggregator. We don’t have to spend money to hire consultants. That’s already been done by a large organisation, and I can cherry pick what I think will work for our members. A great example is compliance. We have the benefit of having 500 Mortgage Choice loan writers doing this every day, and I get to share what I learn from them with our members,” Dehne says.
For Finsure brokers, Kolenda says this benefit comes from his experience in business building and lead generation. “When we do it for scale, we can generate leads far more cost-effectively than an individual broker trying to build their own footprint and branding in their particular geographic area,” he says.
Different strokes
Another strength of the boutique proposition, Lockett believes, is its flexibility. With a smaller member base, Lockett says boutiques can be more nimble and individualised in their offerings to brokers. “We’re able to offer flexibility with our agreements, whereas some of the larger operators may have only one or two models available. We have a number of aggregation or business models available to members which allows us to tailor our aggregation model purely to suit individual members,” Lockett says.
Lockett says this allows brokers to choose a membership and fee structure that suits their business needs, even if those needs change. “We see in the current changing landscape that some want to pay a monthly fee, some want an annual fee, some want a fee for transactions and some want a more traditional percentage based agreement. Having total flexibility in what we can offer is a wonderful thing for members,” Lockett says.
Paratore also sees this as a strength of Ballast’s model. “We do the whole lot, whether it’s a percentage split, whether it’s a flat fee, whether they want to trade wholesale or want to trade retail under a licensing arrangement, whether they want to refer financial services or dial them in to their own business,” Paratore says.
Kolenda also believes in the appeal of flexibility, but this flexibility goes beyond the aggregator’s remuneration. He says Finsure offers this not only in its fee structure, but in the services its members can avail themselves of. “It’s largely led by what the broker really wants. Rather than forcing anything down anyone’s throat, we’re there for them to leverage off in whatever capacity they see fit,” he says.
“Brokers all have different aspirations, different goals and different visions of themselves. They might be at the stage where they’re running a pretty good business, but they wouldn’t mind having more leads. At the other end of the scale is someone who has a business with 15 or 20 brokers who might have different expectations and different needs from their aggregator than someone running a one-man operation. We can cater for both,” Kolenda adds.
Paratore agrees, and says Ballast can offer a variety of membership arrangements, and also has the ability to offer its members a variety of ways to integrate various financial services offerings into their business. “Our model has always been predicated on providing the integration of other financial services to our members, whether they take that onboard in their own business or use a referral model. Our model is to provide our members with as many options as make financial sense for them to allow them to take control of their business,” Paratore says.
This flexibility in financial products is also a cornerstone of AMB’s proposition, Kerr says. He says helping brokers diversify their offering across a range of products safeguards the revenue of both broker and aggregator. “If you only deliver home loans, your margins are at risk. But if you can spread that margin risk across several areas, the model is a win-win,” Kerr says.
All things being equal
Among all the other benefits of boutique and challenger brands, the idea of equality may be the thread that underpins it all. Dehne says one of the attractive aspects of boutique aggregation models is that they treat brokers the same, regardless of their volumes.
“We attract people who do between one deal a month and 10-15 deals a month, and they get treated as well as the people who do 20 deals a month. It’s not that the big aggregators don’t want to treat them as well. They just don’t have the resources to treat everyone the same, whereas with boutique aggregators you have to,” Dehne says.
This, Dehne reiterates, is because smaller aggregators have to ensure they keep the members they have. They can’t afford to shed dissatisfied brokers, and have added motivation to keep their members happy.
Lockett says Specialist also employs this equal treatment philosophy. It’s all part of knowing brokers well enough to be able to offer them individual advice on growing their business, he says. “We have members who are single writers, members who are small brokering groups all the way to members who are large brokering groups. Our members are diverse, from the small one-man operation to a large team of up to 30 writers. We can easily cater our service to the requirements of those members on an individual basis,” Lockett says.
And the spirit of equality engendered by boutique and challenger groups may be what sees them forward into the future while other aggregators are gobbled up by consolidation, Paratore says. Paratore believes the diversity of boutique aggregators is an important source of competition in the mortgage broking market, and says he would like to see brokers freed more by aggregators to make their own choices of who to align with. “I would love to see that there was a time in the market when brokers did have absolute transparency and were able to move where they wanted. I believe that would give greater competition in the marketplace, and brokers would choose where they wanted to go and where they got the most value,” Paratore says.
Whether or not this comes to fruition, Dehne believes boutique and challenger aggregators will continue to flourish. “I think there’s always going to be a market out there for boutique aggregators who have a certain number of brokers who they look after really well,” Dehne says.
Is a boutique aggregator right for me?
National Mortgage Brokers (nMB) managing director Gerald Foley explains that, for entrepreneurial brokers, the boutique route could be right for them.
What do you think is the main draw of the boutique or challenger aggregator proposition for brokers?
I believe we all see value in dealing with any business that has a boutique or ‘homely’ feel. The issue then becomes, am I prepared to pay a price to receive the boutique service or do I want it all – benefits of the sellers bulking through lower costs, greater choice and great service? We always hear about aggregator consolidation and tightening margins, but it seems to be impacting some of the larger aggregators more than the challenger brands.
What is it about the boutique model that seems to make for a sustainable and profitable business proposition?
There is no doubt that there are pressures building on all aggregators to provide a broader range of services to their broker business partners. If there are any pressures on the larger aggregators then maybe these are more widely obvious to the marketplace. The true impact on the challenger brands is hard to see from the outside. I sense some smaller aggregators are struggling to hold on under increasing pressures to broaden services, increase payout rates and maintain lender relevance.
When nMB opened discussions with Aussie it was all about nMB being able to maintain its brand and feel but with the ability to tap into the significant resources of Aussie. It is the best of both worlds for us as there is little cross over in the style of broker within the Aussie model to that suited to the nMB ‘wholesale’ model.
The benefits are around stronger lender terms and corporate strength which is becoming a bigger issue for brokers who want to make sure the loan book they are building (and is their key business asset) is secure. We have already seen brokers suffering through the demise of their aggregator in the case of Refund. Brokers need to be comfortable that their aggregator is both corporately strong and financially stable. In nMB’s case, our brokers can take comfort from the strength of our parent.
Is there a particular type of broker who’s better suited to a challenger aggregator than a larger aggregator?
There are two types of brokers in the market: Those who are a broker and those who are looking to build a broking business. The nMB business model suits the person looking to build a full mortgage broking business and sees value in their aggregator’s systems, support and strength.
What does nMB see as its basic value proposition and business model?
Our basic proposition is that we are singularly focused on providing aggregator services to mortgage professionals who want to build a solid mortgage broking business and understand the value in dealing with a strong, focused business partner.
What do boutique and challenger aggregators have to do to remain viable in the current market?
All businesses, irrespective of size, to remain viable have to be able to show that they can offer a strong business proposition at competitive remuneration levels – including receipts from lenders and payout rates – whilst being able to re-invest in and grow their business.
