Switched ON?

"What would happen if your aggregator didn't survive?" "Need to upgrade your business partner?" "Does your aggregator earn their commission split?"

The advertising messages from aggregators are clear: we want your business.

As the tidal wave of consolidation continues to envelop smaller aggregators, competition among remaining players grows.

And like the prettiest girls in a small town, brokers are being courted, wooed and encouraged to switch allegiances.

But how can brokers ensure they're trading up, instead of just trading over?

AB surveyed mortgage brokers from across the country to hear their stories and glean tips for other brokers with a wandering eye.

Why switch?

The reasons for pulling up anchor and casting your lot with a new broking partner are varied. But brokers cited high cost, software problems, lack of training or marketing support and poor relations with BDMs as being the top reasons.

Matthew Tuton, director of FutureProfit Financial Planning, switched to FAST for its low cost/low interference model.

"We don't need much aggregator support and really don't like being told where to place our clients' loans. In saying that, we didn't think that our previous aggregator deserved a cut from our hard work. FAST doesn't push any lenders on us and supports us when needed. Its fee structure is the best in the business," he says.

Les Watkins, director of Australian Mortgage Wise, also switched from his old aggregator for similar reasons. Watkins says he was told "if it doesn't fit CBA don't worry about it".

Both cases indicate brokers would be wise to ask potential aggregator partners if such biases exist before they make the switch.

Another issue brokers should consider is the "philosophy" of their aggregator. David Butcher, principal of Mortgage Maze, says he was at odds with his former partner group.

"My previous aggregator was insisting on minimum volumes and had an 'evangelical' approach to sales."

Right choice?

Sometimes it is easier to know what you don't want, than to know exactly what you do want.

One way to evaluate which aggregator will suit your needs best is to look at your own level of experience and the kind of support you will need in order to grow.

"If you are a broker who likes support, then go for a model which provides BDMs, education, business building and marketing help," suggests Stuart Bayliss, principal of SGB Finance.

"Otherwise, if you are a broker who is a bit entrepreneurial and can create your own lead streams and negotiate with banks yourself, then go for a Connective (clearance house) type model where you pay a set fee per month and you don't pay anything else."

Another way to find out if you are making the right decision is to test-drive the aggregator's services.

"Look beyond just accessing bank products and look at the other services you need," says Michael Schulze, Mortgage Credit. "Oasis offers an online secure multi-user client database and CRM for free while other aggregators charge a fee. They also provide lead generation tools and exclusive access to some great programs like Reverse Interest."

Also test your BDM. Call with questions and track how long it takes for a response.

A third measuring stick - references. What are current members saying?

"I have met many AFG brokers over the years and I can't recall any of them leaving or grumbling about leaving," comments John Ruddick, director of John Ruddick Home Loans.

Bill Walder, partner with Gary Tolliday Finance advises brokers to take their time before making a decision.

"Think long and hard about it.  Make sure that you are aware of all the facts - who does what and when. Make sure that all the promises are followed up in writing, especially the referral process, and are acted upon on a timely basis."

And always keep in mind, that sometimes the grass is just greener on the other side.

"If the water looks too shallow, don't dive in," Butcher says. "Conduct all your due-diligence checks objectively and set high performance benchmarks. Take your time, and assess whether a change will tangibly benefit your business; if there is little or no tangible benefit, don't change. If you do see business benefits, then the next step is to look beneath the veneer and make a subjective judgement. Ask yourself: am I going to be happy and comfortable with this new aggregator, and will they look after me and help me grow my business?

"Aggregators are as bad as banks when it comes to spin: like real estate agents they will extol the benefits but evade any negatives or shortcomings. As a new broker, you hold the ace cards; it is up to you to make sure that when you move in you don't find your new house riddled with termites," Butcher says.

And make sure you get a lawyer to look over the agreement.

Making the switch

Once you've made the decision to leave, you'll have to end the relationship with your old aggregating partner.

Very few brokers reported catching any flack from their former aggregators.

"My old aggregator asked if I could stay, even offering similar commission splits. But they are in Perth and I was in Melbourne. I simply said I wanted someone local to deal with. They are pretty easy going people anyway," says Dave Alexander, director of More Money Solutions.

One of the most important issues is trail. Make sure both you and your old aggregator are clear on how this will be handled and get it in writing. No one wants to be surprised by a new $110 per month administration fee such as the one AFG recently imposed on its former members.

And of course, there's still the matter of switching over your lender accreditations and PI insurance.

Walder described the accreditation process with his new aggregator as "somewhat annoying".

"The BDM made promises that he could not keep.  He was not working closely with the credit department and we found that we ended up doing far more administration work that what had been proposed by the BDM," Walder says.

By comparison, Bob Coleman's experience was relatively easy.

"LoanKit did everything including all the accreditation transfers. They went out of their way to make it easy. I was able to start working with them immediately," says the managing director of Mortgage Knowledgebase.

However, Coleman added that a couple of lenders wanted a letter from his former aggregator saying he'd left on his own volition.

The entire process shouldn't take any longer than a week, and if it does, you might have to take a tough stance with your new broking partner.

"FAST said the letter of separation could take two weeks, at which point I put my stern voice on and said they should do it as quickly as possible as this holding my business up. They did the letter within a few days," says Bayliss.

Assuming all goes well, you should be up and running with your new broking group without too much disruption to your business or customers.

Broker tips to make the switch

• Check your current agreement to ensure trails will continue to be paid and that your clients will remain yours

• Before making any move, make sure you have copied all relevant client information from any aggregator-supplied CRM. Your old aggregator could terminate your access before you have had a chance to capture your client data

• Provided your contractual agreement allows, immediately write to all existing clients and inform them of the change and that as a result you will be offering enhanced services. This will prevent any unscrupulous aggregator using your data to contact your clients

• When selecting a new aggregator, always check their software. Try to get a trial version and make sure it does all you want it to, and test a couple of unusual scenarios. Compare this test with your current aggregator's software

• Be confident that your new aggregator can offer you sufficient CPD opportunities. MFAA is cracking down on annual CPD requirements (and this is to become a licensing requirement).  You shouldn't have to search for these CPD points yourself; a good aggregator will provide you with cost-effective educational opportunities and ensure you remain professionally competent

• If your current aggregator has provided you with PI insurance cover under its group cover, you will need to make arrangements for new PI cover. Generally lenders will not transfer accreditation unless this has been completed, so it is advisable to start this process a couple of weeks in advance of leaving your current aggregator

• Ensure your new aggregator has a lender panel with sufficient diversity to meet your target markets. It is not the quantum number of lenders that is important, but the quality of the lenders and the breadth of loan options offered through the panel. You need to be confident that your lender panel can handle virtually every type of lending requirement that may arise 

• Check whether your new aggregator provides access to specialised value-added expertise in commercial, leasing, deposit bonds etc. 

• Check whether your new aggregator offers websites, newsletters and other marketing support

• Check whether your new aggregator will handle the transfer of your current lender accreditations

• Ask to attend an aggregator PD session. Make sure it is not simply a forum for lender promotion and that it offers practical knowledge on professional and industry issues

• Ask your new aggregator for the names of six broker members. Question them about the reliability of commission payments and software, any issues they may have had with the lender panel or the aggregator, and the quality of support from the BDM. If you buy them lunch or a beer or two, you'll get more honest answers

• Phone your new BDM at 5:30 pm and seek advice on a 'outside the box' scenario to test his/her professional knowledge. If they don't answer their phone immediately, check how long it takes them to respond; a delayed response could indicate future accessibility issue

Information courtesy of David Butcher, principal of Mortgage Maze

David Butcher