Consolidation a matter of survival for independent mortgage brokers
Mortgage brokers received a timely reminder last week of the advantages that a mutually beneficial relationship can bring to the table.
Lydian Finance, which has been steadily growing its national footprint, announced a strategic partnership with Victoria-based independent brokerage Clark Finance Group.
The equity investment (of an undisclosed valuation) in Clark Finance grew Lydian’s national broker network to 26, with an additional 15 planned by the end of 2025.
Lydian gained a $100 million-plus brokerage in a state where its presence had been lacking through the partnership, while Clark Finance strengthened its resolve amid increasingly tough competition in the mortgage finance sector.
Discussing the deal with MPA, Clark Finance’s founder and chief executive, Vaughan Clark (pictured), explained how consolidation has become a matter of survival in the industry.
“I felt like I needed to get bigger so I could compete with the bigger guys,” said Clark. As luck would have it, so did Lydian, thus the partnership bloomed.
“I needed to grow,” said Clark. “And we felt that coming together, with us effectively looking after Victoria for (Lydian) seemed like a really nice fit for both businesses.”
As part of the deal, Clark Finance will rebrand under the Lydian name over the next six months.
“It felt like a nice transition for our brand and our people, and it made us part of a national group… It gave us the opportunity to be able to compete with the market, and when the banks start fighting back, to compete with them as well,” Clark said.
Safeguarding yourself
Clark’s concerns about escalating competition in the mortgage broking sector are palpable.
Brokers have come to dominate the mortgage market in recent years, with the latest MPAA figures revealing 76% of all written home loans now originate via the broker channel.
This has led to a massive influx of brokers to the scene, with the latest count in the ballpark of 22,000.
Meanwhile, the Big Four banks, particularly CommBank, have shown dogged determination to maintain a robust direct-to-customer channel due to superior margins.
With the might of the big banks on one side and 22,000 competing brokers on the other, it’s little wonder that single operators like Clark Finance are finding comfort in consolidation.
Regulatory matters like the NSW payroll tax debacle and increasingly rigid Best Interests Duty obligations are only making things tougher for the independents.
“Single-operator mortgage brokers are going to be potentially a thing of the past,” said Clark, adding that competing on Google Ads is nigh on impossible, while TV and radio advertising space is prohibitively expensive.
“So where’s your ability to grow your business? There’s smarts in being together, as long as it financially works for everybody,” he said.
The Lydian advantage
Speaking on the tangible benefits of the partnership, Clark said Lydian’s advanced broking infrastructure provides “the ability to grow my business without adding additional overheads”.
This infrastructure includes robust marketing, operating and processing departments. Furthermore, Lydian’s deep financial planning connections, including with H&R Block, “has now given us an additional lead source that we never had”.
Under the deal, Clark sold his existing client base and trail book to Lydian. The plan now is to work closely together to help both Clark Finance and Lydian grow, both in Victoria and across Australia.
With the addition of Clark to the fold, Lydian has gained a seasoned expert in servicing white-collar PAYG clients.
His two main niches are first-time buyers and homeowners seeking to upsize, with a helping of self-employed borrowers and property investors on the side. But Clark expects to diversify in the months and years ahead.
“We've got great connections now, because I've got a network of brokers I can really talk to, and some of them do a lot of commercial work, so I've now got expertise within the group that helps me in that area,” he said.
“With the financial planners that we're now going to work with, self-managed super funds (SMSFs) is an area that we've already been working in, but it will now become a bigger part of the business.”
Working with SFG
Mortgage aggregator SFG played a central role in bringing Clark Finance and Lydian together.
It speaks to SFG’s commitment to advancing the business needs of its members beyond just providing credit services.
“That's part of the SFG point of difference that they bring to the table,” said Clark. “(SFG) felt that it was a really good next step for us, so they were very supportive in how it was put together, how it was structured, and how we went about it. They were very instrumental in assisting us and putting this together.”
Going forward, Clark has lofty ambitions of brokering $400 million of loans annually, which is four times his brokerage’s current volume.
“I’ll try to fit a holiday in, too.” he said.
