“Mortgage broker” is a versatile term today as it covers a range of financial services in contrast to the once-upon-a-time version of the term.
We take a look at this contrast and explore the hows and whys attached to the transition.
The transition from traditional to modern
In the past, the idea of mortgage brokers offering financial products outside the home loan space wasn’t commonplace. Today, clients can and do revisit their mortgage broker for products from car loans to business funding to personal loans.
It comes off the back of our service-minded society which demands a personal approach with multiple touch points as one-time customers become long term clients.
Touch points include emails, calls, video calls, sharing of documentation and, in many cases, face-to-face meetings.
According to Nodifi Head of Partnerships, Peter Holman, this is creating stronger relationships and delivering higher life value from clients.
“It’s due to the broker’s familiarity with the client’s circumstances, but primarily the result of good service. Returning to a broker whom a client previously dealt with is a catalyst for quick and simple – something we all know clients want.”
“Quick and simple” also applies to brokers
Unlike home loans, other forms of finance have fast turnaround times. For example, asset finance typically settles within 3 days or so from initial client interaction.
From the maths book, it means roughly $395 an hour for brokers writing asset finance deals, compared to around $186 an hour that home loans offer.
These calculations take into account average commissions, loan sizes and hours worked per deal.
Mortgage broker Rob Murdoch of Hybrid Finance, agrees that additional offerings satisfy returning clients.
“I’ve found that clients typically prefer someone they are familiar with and trust when researching finance options.
“It’s not only additional revenue streams, but also a chance to showcase non-home loan products.
“Often, clients enquire about additional finance options within a year of their home loan settling so the ability to provide basic numbers and a few pointers to them on asset finance or personal loans is important.”
The stats help paint the picture
In Q3 2020, the share of residential mortgages written by brokers travelled past the 60% mark, the highest ever market share level in history in Australia.
More recent data from the Mortgage & Finance Association of Australia (MFAA) showed that as of the end of November, brokers write two-thirds of all home loans in Australia or 66.9% of all new residential home loans.
Additionally, data from the Commonwealth Bank of Australia shows that asset finance lending grew 20% YOY during the 2021 financial year. The number represented the largest volume of new asset finance lending recorded by CBA in a financial year ever.
Tim Rombouts, Director of Blue Sky Equipment Finance, has found that demand for asset finance has overtaken home loans.
“We were primarily mortgage brokers, however, with an introducer coming on board the demand for equipment finance grew rapidly.
“Today, this has changed our business where now the majority of our revenue comes from asset finance, with home loans second.
“Existing customers also return for more equipment, cars or home loans.
“Nodifi has become our go-to partner for all our asset finance.”
Nodifi insights also show that it’s not just consumers reaching out for finance but also commercial entities. Over the 12-month period from October 2020 to 2021, the platform saw a 163% increase in mortgage broker partners writing commercial finance deals.
According to the Bureau of Statistics, SMEs make up 99.8% of all businesses in Australia.
For the finance industry, that means over 2.3 million SMEs Australia wide could be requesting finance for vehicle fleets, earthmoving equipment, kitchenware or coffee machines. Around 11% of Australia’s workforce are self-employed sole traders.
Offering a wider range of financial products hasn’t always been so easy
Stocking a broker’s shelves with consumer and commercial asset finance isn’t like adding more sauces in a Woolworths aisle.
The complexity of offering additional services and the knowledge required to back them up deterred yesterday’s broker.
For example, understanding which lenders match with what kind of client seeking what kind of product was typically destined for the ‘too-hard basket’.
Today, technology solves the problem.
Solutions like the Nodifi platform essentially allow mortgage brokers to call on third parties to fill in gaps behind the scenes.
It means all bases are covered so brokers can concentrate on building relationships and delivering A1 service to their clients.
Rob Murdoch explains: “From a client’s perspective, we’re financial experts, not just mortgage brokers.
“Access to an asset finance support team means that they’ll help find the right lender for a specific client.
“That means better service resulting in more repeat business and underscores the necessity of a range of finance products.”
As consumers continue seeking brokers for more financial needs rather than simply going to whom they bank with, getting left behind is a concern.
The broker positioned as a financial expert with an established relationship stands to be the winner as they can offer quick and simple solutions for repeat and referred business by utilising asset finance platforms.
If you’re interested in offering more financial products for your clients or simply want to brush up your asset finance skills to service more clients, reach out to an asset finance provider.