How do I make the right decision for my business?
It’s often overlooked or viewed as simply another regulatory requirement to start doing some business.
However, successful mortgage brokers understand the power of choosing the right aggregator for their business model.
Learn how to compare aggregators and the red flags to watch out for.
What is an aggregator?
Aggregators also go by the name “franchisor” or “dealer group”, although “dealer group” is used more commonly in the financial planning industry.
An aggregator is effectively the middleman between the bank and the broker.
They usually provide software, access to lenders and commission processing functions. Some will also provide a brand, leads and training.
They are the third party channel which means the lending panel of a brokerage is actually the lending panel of their aggregator.
The average aggregator has between 15-40 lenders on their panel. The best brokers have at least ten lenders on their panel.
Why can’t I just access these lenders myself?
Lenders have significant volume and compliance requirements that the average mortgage broker simply wouldn’t be able to meet.
Banks are effectively providing the home loan product for your client so they want to know that the broker is bringing in qualified borrowers on a regular basis.
Apart from providing you with access to various lenders and products, aggregators:
- Manage the upfront and trail commission payments so you are paid on time and in full (best case scenario).
- Provide Client Relationship Management (CRM) software so you can manage your business.
- Host professional development days, or Continuing Professional Development (CPD), to help you meet continuing educational requirements of your industry body.
- Provide Business Development Manager (BDM) support so you can continue to grow your business.
- IT support.
- Compliance support.
In order to join an aggregator, you need to have at least two years industry experience in most cases.
On the other hand, it may be easier to become an employee of a mortgage broker who is already a member of an aggregator.
Of course, different aggregators suit different business models and offer varying levels of support.
That means there can be significant differences in the cut they take from your commissions to fund the support and services they offer.
Who are the biggest aggregators in Australia?
The MFAA has an approved list of aggregators that you can check out.
Some of the biggest aggregators in Australia include:
- Astute Financial Management
- Australian Mortgage Brokers
- Choice Aggregation Services
- Connective Group
- eChoice Home Loans
- Finconnect (Australia)
- Finsure Finance &s; Insurance
- L J Hooker Financial Services
- Loan Market
- Mortgage Choice
- Mortgage House
- PLAN Australia
- Vow Financial Group
- Yellow Brick Road
Why getting the right fit is becoming more important
There are many brokers that question the benefit of working with an aggregator.
The reason is that some aggregators have either not invested enough back into their support and services or they haven’t articulated their value proposition well.
Back in the day, aggregators offered little or no service outside of administering commissions.
However, the fact is that finding a suitable aggregator is the single most important thing a new mortgage broker should do when setting up.
When it comes to aggregators, the top three most important things to a broker are being paid commission on time and in full, choice of lenders and products, and compliance support (‘2016 Aggregator Roundtable’, Mortgage Professional Australia [MPA]).
Compliance support, in particular, has become more important than ever in a highly-regulated environment.
What else are brokers demanding of their aggregator?
Good commission management
- You want to be paid in full and on time.
- Some aggregators have a “no orphan commission” policy, which means any commissions are paid out and no unclaimed commissions are allowed to stay on the book.
- You really want to ensure you’re getting bang for buck and actually benefiting from the buying power of joining a large group. The overall preference for commission split structures makes sense.
- Also, consider the fact the flat-fee structures have more appeal for high-performing brokers (financially speaking).
Lending panel and products
- Generally speaking, the wider the product selection, the more likely you are to not lose clients to other brokers. Some may only offer residential lending products.
- Some may only offer residential lending products.
- You should consider an aggregator that has access to commercial lending products like asset finance.
- Some aggregators have a non-exclusive arrangement which allows you to make direct agreements with lenders that are not on their panel.
- Some aggregators are owned by private businesses and others are owned by major banks.
- This may or may not have an impact on the lenders and mortgage products available.
Technology and support
- Their CRM software should actually make it easier to manage clients.
- Developing and maintaining software can be expensive so you should ask what their plans are to invest and improve their technology.
- Good tech and admin support is crucial.
- The importance of IT and CRM support rises with a broker’s annual volume as a result of the need to manage a higher number of incoming leads.
Training and professional development
- Find out how many CPD days they hold every year.
- The cost should be covered by your membership.
- They should be MFAA or FBAA-approved programs about specialist lending areas such as SMSF and commercial lending.
- Personalised BDM support particularly when it comes to negotiating with the bank on commission rates.
- Website and lead generation tools.
- Tips on generating referrals.
- Guidance on how to remarket to existing customers and the tools to do so such as having a great CRM system.
Confused? Consider your business needs first
Choose an aggregator that is complementary to your business model and weaknesses. For example:
- If you work well with real estate agents, consider an aggregator that has leads from real estate agents.
- If you’re extremely tech savvy, consider an aggregator with great software or a significant online presence.
- If you’ve got a lot of contacts in the local community, consider a franchise like Rams.
If you want to be supported with quality leads, training and support so you can focus on selling, that’s what we do best.
We’re always on the lookout for high-performing mortgage specialists to join our team so send through your resume to email@example.com.
Beware of empty promises!
The first thing to be cautious of are the contract clauses around:
- Client ownership.
- The continuity of trail commission payments, particularly if you leave the aggregator.
- Access and ownership of CRM data including the permission to download.
- Breach clauses such as being in breach of contract for having a bad month. Are they fair?
- Higher commission rates linked to certain volume requirements – you can usually assume you’ll get the lower commission rate because most people settle less than they plan.
- Clawback and whether it survives the termination of your agreement – this is usually the case but you need to be aware that this can be quite significant.
We recommend seeking legal advice before signing the sub-originator agreement.
Secondly, consider an aggregator that charges a yearly fee rather than takes a percentage of trail.
This annual fee shouldn’t increase significantly on the back of compounding trail.
Next, ask whether the aggregator is helping you to diversify.
Sometimes diversifying into other niches or markets is a necessity, such as when some markets come under regulatory scrutiny and see lenders pull back from lending.
Examples of this include foreign buyers and investors.
Sometimes it’s a matter of tapping into markets with fresh opportunities.
For example, commercial and business lending has been notoriously difficult for brokers to get a foothold in because of CRM limitations and the pain of the manual nature of the application process.
Beware of aggregators that avoid innovation in an always-changing financial services environment.
Do some basic due diligence and save yourself the heartache:
- Talk to existing brokers of that aggregator and see what they think of them.
- Inspect their leads and consider whether they’re for real including the number being promised and the quality.
- Work out whether the amount of support being provided justifies their fees. Support like administration, software and even office space can save you thousands in setup costs.
Aggregator fee structure
There are two basic fee structures for aggregators:
- Capped fee per deal: This is a capped monthly trail fee based on the loan amount. This fee structure earns the aggregator so little revenue that it struggles to provide any genuine service other than commission administration.
- Percentage of upfront and a percentage of trail: This can be quite lucrative for the aggregator so you have to question how much of that the aggregator is investing back into its service offerings.
We recently undertook competitor research of some of the largest aggregators in Australia.
Here’s what we found:
- Training: Ongoing training over two years
- Leads offered for free: N/A
Aussie Home Loans
- Leads offered for free: 8-10 leads per month (no guarantee).
- Contract: Aussie has open-ended contracts.
- Commission: Commissions are paid on a sliding scale but this can be negotiated
- Lead quality: Aussie will complete initial screen but there is no prequalification. You need to meet the customer face to face.
- Leads: 5-10 leads per month. Depending on your conversion rate, eChoice can increase the number of leads.
- Contract: Aussie has open-ended contracts.
- Commission: If the lead was provided by eChoice, commissions will be split 50/50. If you provided your own lead, the commission split is 80/20. You’ll be paid both upfront and trail commission.
- Cost of sign up: There is none, although you’ll need to obtain your certificate at your own cost.
- Lead quality: There are two different types of leads which are outlined in the agreement with eChoice.
We’re supported by an Australian-leading aggregator
Home Loan Experts has been able to grow to a brokerage with a loan book well over $1.5 billion.
We’ve been able to do this through the ongoing support of Connective, an aggregator that boasts one of the best CRMs on the market.
Want to join our team and build the life you want?
Check out our careers page to learn more about who we’re looking to hire and our company.
Send through your resume to firstname.lastname@example.org.