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Industry weighs in on Loan Market acquisition

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    Yesterday, one of Australia’s largest aggregators, Loan Market, dropped a bombshell on the finance industry, announcing its acquisition of NAB owned aggregator groups FAST, Plan and Choice.

    The news came just months after a merger between Connective and AFG – and amid speculation of a possible merger between Aussie and Lendi.

    MPA spoke with some of the nation’s fellow aggregators as well as some of the country’s top brokers to see what this acquisition could mean for the finance industry and whether it will be a good thing moving forward.

    Tanya Sale, CEO, Outsource Financial

    Loan Market’s acquisition of FAST, Plan and Choice is a win for the broking industry, said Outsource Financial CEO Tanya Sale.

    “It has always been my stance that aggregators should not be owned by a bank,” she said. “One word – Independence!”

    While she welcomed the deal, she said brokers need to think about what they are looking for from an aggregator, adding that the merger could create a lot of movement within the industry.

    “Do they want a conglomerate where they will be a number, or do they want support, service and relationship?

    “The demand Outsource is seeing is that mortgage brokers are looking for relationship and support. In my eyes, that would be very hard to achieve with a large conglomerate.”

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    Blake Buchanan, Aggregation, Acquisition, Strategy, Specialist Finance Group

    Aggregation manager for Specialist Finance Group Blake Buchanan said SFG welcomed the acquisition, congratulating executive chairman Sam White and the Loan Market Group on the deal.

    “Similarly, we have always maintained our position of being independent of bank ownership and a family owned aggregation business,” he said. “The ability for groups such as ours to acquire and grow is testament to our model and performance, particularly in recent years.

    “Over recent periods, there has been increasing discomfort with either bank owned or larger groups and while this will serve to reduce some of those concerns, there will still be an overall reduction in the aggregation competition space.”

    The deal could potentially see 80% of the broker population being partnered with just two aggregation groups if the much talked about merger between Connective and AFG takes place, he added.

    “Already we have seen heightened enquiry as a result of brokers looking for a partner who can offer different support and so they do not get lost in a sea of numbers,” he said.

    “I anticipate that there will be a bit of broker movement in the coming months as they seek to maintain competition in this space and take this moment to reflect on their current situation and what it means for their future.”

    Jeremy Fisher, director, 1st Street Financial

    Director and founder of MPA’s number one Top Brokerage, Jeremy Fisher, said brokers will stand to benefit from the merger.

    “The brokers in both networks of Loan Market and the old NAB group are getting the best of both worlds now,” he said. “I think similarly we’re going to see that with the Connective and AFG deal that’s come to fruition.

    “Each aggregator has their own specialities that they’re known for and there is a big benefit to the broker because this provides a greater proposition.

    “You could say that there’s less choice from a broker’s perspective but I think that the value proposition for the broker being able to choose one of these larger groups means there’s a lot more on the table for them in terms of support and service – and I see that as a good thing.”

    Aaron Christie-David, managing director and finance broker, Atelier Wealth

    Top broker Aaron Christie-David said the acquisition was another positive step towards having less fragmentation in the aggregation space; enabling greater focus on broker support and the sharing of resources, such as compliance, IT and commissions.

    “This will also enable aggregators do what they do best – support broker businesses to flourish,” he said.

    “This is huge for our industry.

    “On one hand it increases Loan Market’s footprint to create economies of scale for their support services such as compliance, marketing and broker education. On the other hand, for NAB, it allows them to delink their broking arms, an issue flagged during the Royal Commission.”

    This most recent acquisition, alongside the recent merger between Connective and AFG, as well as the possible deal between Aussie and Lendi, is a telling sign for Christie-David.

    “Aggregators are being squeezed with their resources – more compliance, managing IT infrastructure, increased reporting plus offering more broker support and education,” he said.

    “The industry is seeing more consolidation at the aggregator level as they cope with more regulatory changes and tweak their business models. Ultimately, I see banks distancing themselves from their broking owned channels – a great outcome for our industry and for Australian borrowers too.”

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    Mario Borg, Mortgage specialist and principal, Mario Borg Strategic Finance

    Consolidation seems to be the flavour of the month, said Top 100 broker Mario Borg about the Loan Market acquisition and the talk of an Aussie/Lendi merger.

    “I’m not surprised with the acquisition, I must say, given the change in mood by the major banks from the shake out of the royal commission,” he said.

    “At that time, the majors were vocal about divesting some of their non-core businesses and going back to simple banking. Economies of scale make perfect sense nowadays given the sheer amount of additional compliance required for brokers – and now with BID, the plot thickens.”

    He added that IT remains a significant investment for any aggregator.

    “For an aggregator to survive nowadays, it’s important for them to continue to grow their distribution in order to remain relevant and to continue invest in their IT platforms,” he said.

    Jonathan Preston, senior mortgage broker and founder of the Australian Property podcast, Home Loan Experts

    Consolidation seems to be the natural next step for our industry when you note what has happened with the banks and the regulatory environment recently, said Jonathan Preston.

    “The good news is that it looks like there will still be at least three large players in the aggregation space which should still foster competition in the broking space,” he said.

    “I think this is the natural next step in moving the industry forward in a more coordinated fashion.”

    He added that the deal is a win for Loan Market.

    “NAB are in the position where they need a buyer and there aren’t many in the market, so a tie up like this potentially makes sense,” he concluded.

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    Original Article