Death of the middleman: Staying relevant in an online world

As the popularity of online lending grows, mortgage brokers are under pressure to carve out their niche in the market and hang on to their market share. MPA looks at the best ways to beat the online channel.

As the popularity of online lending grows, mortgage brokers are under pressure to carve out their niche and hang on to their market share.

Intermediaries or gatekeepers are increasingly being forced to justify their place in the market, as technology connects consumers direct with manufacturers.

According to a recent report from Deloitte, one-third of our economy faces “imminent and substantial disruption” from global technologies.

John Black, relationship manager at Nexus Partners, says brokers are far from exempt.

“You can kid yourself with as many comfort statements as you like and quote as many so-called facts, but reality is online services are capturing a growing share of business in the mortgage broking industry as they are in every industry that sells either product or service.”

But this doesn’t mean that brokers should lie down and accept lower revenues, says Black.

“Prepare yourself for change, don't be in fear of innovation and technology, be part of the revolution and create your own online presence or continue to kid yourself that the industry you operate in is static in nature.”

The key to doing this, says Black, is to personalise your interactions with customers, and show them what you can offer that online lenders cannot.

“A great percentage of today's borrowers are astute and well-resourced in product information, especially those who are seeking refinance and have past experience with borrowing.

“The question we, as mortgage brokers, have to ask ourselves and be able to demonstrate to clients is what is the value proposition we offer clients, and to my mind it has to be more than simply choice of product.”

Business strategy expert Michael McQueen says brokers and other "middlemen" that fail to react to the online market are doomed to fail.

“Markets want to be free; consumers want to have choice – and they will always eventually get their way.

“Rather than fight the death of the middleman, businesses and industries must re-define their role if they are to stay relevant in the years to come.”

McQueen offers three key ways that brokers can define their worth to customers:

1.Experience

In order to separate themselves from online lenders, brokerages need to be more than just a place for business transactions.

The experience of going to a broker needs to be pleasant for customers, suggest McQueen, they need to feel welcome and valued from the moment they walk into the door so that they want to keep coming back.

2. Expertise

 “A second way that middlemen can offer unique value to customers is by offering expertise that Google simply can't," says McQueen. "While there is an abundance of information in the marketplace, consumers will always compensate companies and individuals who can help take that information and turn it into advice which is personalized and relevant to their needs.

“This is certainly the case in the financial services sector. Simply generating 'boiler plate' statements of advice for clients that crudely link their needs with financial products will not be enough – they can do this on their own with a bit of research.

"However, advisers and brokers who can drill down to understand the true needs of a consumers and can leverage expertise to craft tailored solutions will have a path beaten to their door.”

3.Expedience

Customers looking for a simple transaction are increasingly unlikely to bother with intermediaries, something banks have been seeing for years as their in-bank transactions drop.

What customers will look for is someone that can explain the obscurities to them, who can break down the legalese and jargon of complex loan systems in a clear and concise way – and this is where brokers need to start focusing their attentions, says McQueen.

“Consumers are time-poor and option-rich. As such, the role of middlemen and gatekeepers in the future will centre on convenience more than ever before.”

Ignoring the online channel is no longer an option, says McQueen. Brokers need to make a conscious effort to prove their continued relevance in a changing marketplace, or risk becoming obsolete.

“While middlemen and gatekeepers will always exist, 2013 will see the death of those who define themselves by these titles.

“Simply standing in the middle of consumers and the products or services they require is no longer viable or necessary. In the same way, guarding the gates of access to the providers of these products and services is futile. In the years to come, such intermediaries must provide unique value through experience, expertise or expedience if they are to stay relevant.”

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