There’s no stopping Choice

Choice’s CEO talks about commissions, lifting the bar on the industry, and positioning Choice as an aggregator of the future. 

Stephen Moore has a lot to celebrate this year. The aggregator he’s been leading for the last seven years, Choice Aggregation Services, marks its 20th anniversary in 2017 with a $65bn loan book, 1,600 brokers in its network, and a net promoter score of +40.

It was also voted top aggregator by brokers in Australian Broker’s sister publication MPA, an accolade that has thrilled Moore.

It’s been a rewarding year, but the boss is not about to take it easy. Choice’s focus on and commitment to supporting brokers now and into the future is unwavering, he says.

The year ahead is about nurturing the ongoing expansion of the broker proposition, especially in commercial lending; securing fair and equitable commission structures; lifting the bar on quality in the industry, and assisting brokers with compliance tasks; and increasing the efficient use of digital platforms.

“The role of aggregators and partnering with the right aggregator has never been more important,” Moore says. Aggregators have moved far beyond being just basic providers of software and access to lenders, he explains. They must understand the different stages of development and different needs of each broker’s business and align themselves to becoming a broker’s “true business partner”.

“The aggregator of the future is about understanding those differences and then tailoring support specifically to each individual’s needs; that’s certainly something we pride ourselves on at Choice,” he says.

Moore is proud to recognise Choice’s milestones, but he’s also not about to declare victory.

“My philosophy about business is there is never victory. There are wins along the way that give indications as to whether you’re on the right track or not, but in the changing marketplace that we’re in, you absolutely need to continue to evolve what you do, and it is something that we are very focused on.” 
  Moore expects brokers’ market share to expand beyond 60% in the coming years. Commercial lending will be a key part of that, and will likely match the growth that has been experienced in the residential space, especially when considering that 30% of the customers of Choice’s brokers are self-employed.

“There is a natural synergy between looking after someone’s personal lending needs and extending that into ensuring their business needs are also looked after,” Moore says.

In the last quarter, 25% of Choice’s brokers wrote a commercial loan, something Moore would like to see increase to 30% this coming year.

The next step is providing brokers with the education to seize these opportunities. Choice has developed a commercial lending module to introduce brokers to this type of lending. It teaches them how to work through the technicalities of these deals, identify and source commercial opportunities, and develop a marketing approach.

Another area of potential growth for broker businesses is through the integration of complementary practices across the wealth and property industries, such as financial planning, accounting and consulting. Supporting commissions
For the first time since the release of ASIC’s remuneration review and NAB’s submission to the Treasury, which covered the views of its three aggregators, including Choice, Moore expresses his opinion on brokers’ commission structure.

“Commissions are fair and equitable, commissions are sustainable, and commissions are the most affordable way for Australians to get credit advice, and for that reason we are absolutely supportive of commission and commission structures in the Australian landscape,” he says.

Moore says he also sees the importance of having both an upfront and trail payment for the ongoing service and support brokers provide clients.

NAB’s submission to the Treasury on ASIC’s review proposed changing upfront commission by paying it based on the amount drawn down by the customer, not the total facility amount, and paying upfront net of offset account balances.

In regard to this, Moore says it’s fair and equitable that “brokers get paid when lenders earn”. 

“If the loan is not drawn down, a lender doesn’t make any money. Once a loan is drawn down, they do, and therefore a broker should,” he says.
 
Lifting the bar
In a market that continues to evolve, the status quo is not an option. Lifting the bar is the responsibility of brokers, lenders and aggregators, Moore says.

“Compliance is not in fact about competitive advantage; compliance is about necessity, and it makes complete sense to lift that bar when it comes to quality as an industry, so that’s something we’re absolutely committed to,” he says.

That means improving and streamlining business processes to make sure everything is done at a high-quality level, from documentation and staff management to marketing and referrer management and outsourcing non-core activities – and, most importantly, retaining and providing a high-quality customer experience, Moore says.

The Combined Industry Forum is working on closing some of the gaps in standards across the industry when it comes to best practice, he says.

“If we can agree on benchmark standards that apply consistency in processes, it benefits all participants, brokers, aggregators, lenders. Consistency of process and efficiency is ultimately a better outcome for consumers.”

One thing that can’t be ignored, however, is that quality comes at a cost.

“The challenge of course is to implement in the most cost-effective way, acknowledging that there is cost in effort but there is upside, and the upside is, with increasing confidence from consumers in the broker proposition, in turn comes further business growth.”

Digital and face-to-face
Digital channels can enable business, and brokers shouldn’t back away from embracing technology, but Moore doesn’t see digital replacing high-quality face-to-face advice. The future is about how the two will complement one another.

That was the thinking behind the new business with REA, which is now up and running under the realestate.com.au Home Loans brand. About 120 former Choice Home Loans brokers decided to join the new business, while 60 decided to opt out but still stay under the Choice Aggregation umbrella. Moore says it was up to each individual business to make the decision, and some decided that they already had enough self-generating business and referrals to go at it alone.

The lead allocation system works as it did in the past to ensure an equitable distribution to brokers in the network. Customers will interact with the REA website, and if they decide they want to speak to someone face-to-face they can reach out to the contact centre and be referred to one of the realestate.com.au Home Loans brokers, who will continue to have access to their same panel of lenders.

Choice is continuing to actively seek out opportunities to align either directly or in a preferred-provider capacity with a number of digital businesses, from those that might create new client opportunities to those that provide technology solutions to make business more efficient.

Looking up from here
Choice’s 20th year demonstrates its commitment to the broker market, Moore says, but it still remains a business that is “absolutely on the growth trajectory”.

“We are fairly and squarely an aggregator first, and that is our primary responsibility, to support brokers in growing more successful businesses. That’s what has driven Choice traditionally and that’s what continues to drive Choice today.”