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Offering asset finance is helping mortgage brokers cope with changing market conditions
The Royal Commission has certainly made brokers more aware of the need for diversification, especially considering the impact the tighter lending criteria and softer housing market conditions have had on their core business.
Asset finance is one way they can diversify, with benefits such as a solid investment return and positive consumer outcomes.
It also makes sense as one of the biggest assets brokers have is the trust they’ve established with their customers.
Once a customer knows their mortgage broker can also organise asset finance – whether for a car or other depreciable item – it’s more than likely they will use their broker because of the value they place on that relationship.
The key advantage brokers have in adding asset finance into their mix is that they already have the infrastructure in place to offer it. Adding this extra string to their bow is not going to be prohibitively expensive – and in most cases it’s part of the natural conversation that occurs during the home loan interview.
Going back five or six years, asset finance used to be uncharted territory for mortgage brokers, but an increasing number are now investigating how to make it a regular part of their business.
Offering asset finance is much easier thanks to advancements in technology.
Five years ago brokers didn’t have a platform through which to provide such a service, but now a number of different services can be transacted via one portal.
There will always be brokers who resist change, but most have recognised the need to adapt to what the market wants. If they didn’t before, the royal commission has certainly woken them up to it.
Over the past year, we’ve had a 45% increase in brokers wanting to partner with us to offer asset finance to their clients
The brokers who have come on board with asset finance are taking the time to educate themselves on the key differences between this and home loans, as both are specialist areas requiring different knowledge and processes.
Education alleviates fear
Fear of the unknown will always be the biggest barrier to offering this service, but that is changing as more resources become available to help educate brokers about its benefits. Over the past year, Platform Finance has had a 45% increase in brokers wanting to partner with us to offer asset finance to their clients.
A greater understanding of the value proposition asset finance offers to their business is a key driver of this. Once they start offering this service, brokers may find that one challenge is letting their customers know they offer it.
When people think of mortgage brokers they instinctively think of home loans. This is changing, but it takes time. We assist brokers by helping them to understand how offering asset finance can help their business.
From there, they can go on to educate their clients.
Our business was built on replicating that of the home loan space. The value proposition is identical – offering a large and diverse lender panel with multiple options, underpinned by broker-centric processes and operations. We’ve found that brokers who have successfully diversifi ed into asset fi nance are the ones who have taken a persistent – and consistent – approach.
It’s important to have clear and constant messaging so that when people are considering large purchases, like their next car, their broker is top of mind.
Energy the next wave
Brokers may also want to open their eyes to the growing range of assets that can be financed. Cars tend to be the ‘bread and butter’ category, but equipment finance is also proving popular. However, the next wave is definitely energy finance as more businesses look to buy products like solar panels and battery storage solutions to meet their needs. While diversifying into asset finance makes sense for many brokers, there will always be some who want to stick with home loans.
However, this group can still take advantage of the trend as, for example, we have a direct sales team that helps facilitate deals between brokers and their customers who are interested in asset finance.
We find that once these brokers start writing asset finance business, they’re happy to continue providing it. It’s an exciting time for brokers interested in learning more about how asset finance can help their business.
The early adopters are doing well, and we expect a big increase in brokers seeking to diversify into this space over the next two to three years – especially as they continue to focus on good customer outcomes and more competitive pricing structures.
Damian Mantini is director of aggregation and strategic partnerships at Platform Finance.He joined as a shareholder in 2012 and has more than 20 years’ experience in the finance industry, specifically in the broker channel.