The mortgage industry is maturing, and there’s been a wave of consolidation – bigger players are merging to become even stronger.
This trend means factors like succession planning, value creation, and increased merger and acquisition activity are going to come into play, according to broker coach Ash Playsted (pictured above).
“Consolidation is where the industry is heading, as is quite normal in any industry,” said Playsted, partner and adviser at Succession Plus.
According to Playsted, brokerages are facing more pressure from several areas – from extra compliance and overhead to the challenges of securing new opportunities, building teams, accessing resources, and staying profitable.
“All of these things are driving interest in consolidation; that is, businesses coming together to share resources, to share opportunities, to share intelligence and experience and expertise and to become much bigger businesses,” he said.
“I would call this the era of the super broker. This is where we're at and it's already underway.”
An interesting time to be a broker
One recent example of brokers consolidating their efforts has been the launch of Flint, spearheaded by award-winning brokers Chris Bates and Christian Stevens.
With more than $3 billion in settled loans, the brokerage started with a team of 50, including 19 founding brokers in February. Three months later, Flint launched its agri-business arm, Farmers Finance Australia, which already features a team of over 40 brokers.
In his three decades of experience in the Australian mortgage industry, Playsted said he has seen the industry move through different stages.
“From the very early days to now where it's really professionalising into a wonderful industry supported by the public and growing its market share,” said Playsted.
Brokers currently write 71.8% of all residential mortgages, according to the latest MFAA data, and Playsted predicts this to be at 80% within a few years.
With brokers on the rise and looking to consolidate and unify, Playsted said it will be “a very interesting time in the mortgage industry in Australia” with these larger brokerages becoming the norm.
How does this affect mortgage brokers?
While Playsted acknowledges that this trend will undoubtedly impact mortgage brokers, the nature of that impact depends on career trajectory.
“If you're a business-minded person, there's many opportunities to be active in the consolidation game and looking to partner up,” he said.
“Work with private equity, investors, and support networks to build a business that transitions from successful to significant.”
On the other side, Playsted said if a broker is nearing the end of their time in the industry and they've been writing loans, building a trail book, and looking to exit, then building a succession plan is most appealing.
“Make yourself a desirable acquisition target for a bigger business,” he said. “There's a lot of opportunity there as well.”
What about new mortgage brokers?
While established brokers have options for growth and experienced brokers can find strategic exits, what about new entrants? Playsted acknowledges the industry is likely past the phase where "anyone can have a go" and view it solely as a sales opportunity.
"It's a much more of a business opportunity now," Playsted said.
For those who view it primarily as sales, he suggests gaining experience by working within an established brokerage for a few years. "This will help you understand the industry and become successful before venturing out on your own."
Alternatively, new brokers could find themselves as part of someone else's succession plan.
This could involve being identified as a potential owner or part owner, with a pathway to equity within the existing business.
The bottom line
Regardless of where a broker is on their journey, Playsted underscored the importance of building a strong support team for brokerages – an advisory team that can help navigate the opportunities and challenges of consolidation.
“You need people who can help you understand all the opportunities, the threats, raising capital, coming together with other businesses, integrating properly, identifying and securing strategic opportunities, and then building a truly significant business around all of that,” Playsted said.
“If you can do that, it's a very exciting space to be.”
