MOVING IN ON THE TERRITORY
It’s not just other brokers that present tough competition, Lees said. Other players in the financial services sector are seeing the opportunity present in the mortgage market, and are beginning to make inroads.
“When you hear diversification talked about in the market, it’s always in terms of the broker diversifying outward. By far the bigger trend – and we have a lot of evidence to support this – is other allied financial services diversifying into the mortgage market. Diversification is happening, but it’s happening in the other direction.”
The movement of planners and other financial services professionals into the mortgage sector is a trend that brokers cannot ignore, Lees said. “That’s a big issue for brokers, and it needs to be recognised. They can’t take an insular view and think, ‘Mortgage broking is territory that belongs to us’.”
But that doesn’t mean brokers should hit the panic button just yet. And it also doesn’t mean brokers should feel the pressure to expand into other areas of financial services, Lees said. Despite the fact that much of the industry has touted a converged financial services model as the future of the industry, Lees argued that there is still room for traditional mortgage broking. The important thing, he said, is for brokers to have a clear plan. “The solution is to have a clear strategy of where your business is heading. And it doesn’t have to be diversification. I still believe you can specialise quite happily in mortgages and be very good at it. But someone who dithers around without a clear strategy risks being marginalised,” he said.
Another challenge brokers face is the scale afforded some of their competitors by the brands they’ve aligned themselves with, Lees said. Independence has long been a hallmark trait of the mortgage broking profession, but as the market becomes more competitive the attraction of affiliation with a large brand becomes greater, Lees suggested.
“The environment is getting competitive for brokers, and to be able to maintain a competitive edge when there’s so much scale developing among the competition out there is difficult. That sense of affiliation is quite important, and whether it’s real or not it’s certainly attractive to brokers.”
To this end, Lees touted Connective’s software platform, which he said gave the company’s brokers the tools to compete with larger players.
“The challenge for smaller players is to remain competitive, and that’s why we built tools into our software platform that allow brokers to present themselves as a much larger brand than they may be.”
RUNNING THEIR OWN RACE
Brokers aren’t the only ones facing stiff competition for business. Aggregators are also fighting hard to attract talented brokers. While the number of players continues to shrink, Lees said aggregators remain as competitive as ever for business.
“I wouldn’t say it’s becoming fiercer, I’d say it remains fierce. We kind of run our own race and we focus on what we do and our value proposition. Our aim and our goal is getting brokers to the best aggregator in the market. That’s our self-centred view,” he said.
In spite of the competition, Lees said Connective endeavours to stay focused on its own business rather than look to the strategies of its competitors.
“We’re not too fussed about what others do. We respect all our competitors, but we do look at some of the other aggregators in the market and get the feeling they’re treated as a lending business rather than a service business. We see ourselves as a service business, and if you see your role in the value chain as that it gives great clarity as to what you give the customer, and that is the broker,” he said.
GROWING THE PIE
Aggregator competition can be particularly fierce when companies are all jockeying for the same pool of brokers. Lees said he recognises that the industry needs to do more to bring new entrants into the field.
“It’s a zero sum game, because if there are only 10,000 brokers in the market, then your market is capped. Tim Brown mentioned a development program they’ve started for new-to-industry brokers. I think that is a great initiative. It’s very forward-looking, very smart and it’s to be congratulated.”
And just stripping brokers off one another isn’t a long-term strategy for aggregators, Lees said. “It can be a very introspective industry, and you’re not growing the pie.”
But Lees said Connective still believes there are many brokers in the existing market who would be a good fit for the aggregator.
“It’s not really a concern for us. We believe we have plenty of scope for growth from the existing population. The simple fact is that there are many brokers out there who are ideal candidates to join Connective, simply because of their business metrics,” he said.
Regardless of the competitive landscape, Lees sees a bright future for Connective. He pointed to the aggregator’s longevity, a trait he said some people in the market fail to recognise.
“This is our 10th year of being in business, but some people still think of Connective as being a new aggregator that’s some small boutique. We’re the second biggest aggregator in terms of volume by a long shot. So we’re always a bit bemused when we still hear the story about Connective being small or new when we’ve been around so long. We’ve been here for a while, and we’re not going anywhere soon.”
