Mortgage broking: an industry in decline?

I am not sure if this profession will have the strength going forward?
I say that because banks are making it easier to source products, information portals are making it easier to compare offerings, consumer behaviour is rapidly favouring all things digital, services offerred by mb's are becoming commodities and thus replicable by lower cost channels and sources...
I do realise there are many non commoditized services offered by mb's...but overall I can't see this industry have the strength that it currently has or has had in the past.
I could be wrong... Never dealt with mb's...when I bought my place, my mb's were a cabbie and a used car salesman who recommended some good home loans to check out (and they were spot on by the way..haven't changed lenders since).
I'm sure I'm oversimplifying this profession.. But I can't see a growing industry here (as there are too many valuable services that could be easily replicated) and am sure the mb's on this forum can add further value, and will likely refute my post. .. Welcome arguments against , but don't shoot the cabbie and the used car salesman because they gave excellent advice that no mb, lender, agent etc could ever do. And we're cheap too...

 

I think long term to the hard worker, it will be a gold mine, but the amount that have become brokers and agents etc at the tail end of Sydney and Mel boom and with the new finance myriad of complexities along with tightening, I would say there will be a lot of drop outs/offs.

I thought it was a running joke for a while, so many people were telling me they had become brokers.

I will keep using brokers.

 

Won't anybody think also of the poor Rea?

 

I think it's a declining industry for many - perhaps the majority of brokers. However the really good ones who have specialised knowledge and take more of a advisory role than a 'cheap rate' selection role will still be in demand.

Many people still really value having a person to nut things out with, or to reassure them when they're nervous.

Anyway - so far so good.

 

I think it's quite the opposite. Brokers are certainly having to work a lot harder, but it's getting a lot harder for borrowers as well. This only creates opportunities by my thinking.

After 15 years at it, I reckon I've seen almost everything. The GFC, 30% commission cuts, a couple of fairly serious downturns, credit licensing, APRA, remuneration reviews and the Royal Commission. It's almost one crisis after another, each tougher than the last.

Each period is frustrating and both brokers and bankers leave the industry. At the same time it makes it harder to get loans approved, especially for investors. I only seem to ever get busier and in more demand.

The interesting think about comparison websites - I suspect they're under more threat than they realise. Odds are they're the third party that's most likely to be affected by the Royal Commission, not brokers themselves. All they do is compare two comparison rates and get paid to direct customers to a lender. No advice and frankly brokers can actually beat them on rates a lot of the time.

There certainly are some challenges on the horizon and there's the possibility it will be an almost dead industry within a few years, but I think this is unlikely. More likely we'll see people needing better advice and ongoing service. I think there's a lot of opportunities for brokers that know what they're doing and are resilient.

 

A formed opinion with a baseline of zero experience.

Seems to happen a lot around here!

pinkboy

 

It depends what comes out of the Royal Commission. If commissions are banned, brokers need to move to a fee for service model.

I suspect one off /uncomplicated buyers mostly wont want to pay a fee - and that volume will mostly go to the banks or online lenders.

The great concern with that is that in trying to avoid paying a professional, many of those simple /uncomplicated borrowers will see bank trained "expert" who doesn't know anything besides their own product, doesn't offer any value aside from processing the paperwork, and they'll end up worse off. I know its "possible" some branch staff may do a good job beyond the paperwork... little things like pointers , advice, guidance, lessons learned from years of experience etc etc - but in my extensive experience its extremely rare. It will be a transaction - nothing more, nothing less.

For sophisticated/complicated borrowers - and these days that means anyone with multiple properties/multiple loans , where borrowing capacity is a sensitive issue requiring delicate and skilled hands- I dont think branch land or online land will serve them well at all. Not well at all.

The big question is - will people pay brokers for their time if comms are banned? I dont know the answer to that. People pay accountants, lawyers, planners ...they even pay call out fees for trades. But they don't pay brokers, who come to your house or your workplace, spend hours doing preliminary work and may still not get your business ... maybe that will change. maybe it wont. Perhaps aggregators and brokers have been foolish about all of this for too long now, and should have moved towards a fee for service model already... I dont know??? I see it from both sides. All I can tell you is that I run a B2B business and speak with lots of brokers every week - and Im a broker myself as well , with nothing but multi loan/multi property clients ( I dont take on FHB's, refi's etc- I only deal with investors) - and they ( and I) are increasingly spending hours and hours of unpaid time just trying to rearrange the pieces of investors finance jigsaw puzzles to see where things do (or dont) fit in the post APRA world. And as often as it results in business, it results in "sorry- cant help" and your time goes unpaid. No one likes working lots of hours for no pay. I think these things are only going to get worse for and more time consuming for brokers because of the APRA changes as more clients reach the end of the IO periods and need a broker to try to unjumble their financial jigsaw puzzle - and that's coming whether comms are removed or not - so Im already seeing many brokers considering the introduction of some sort of "call out" fee or "borrowing capacity" fee or "jigsaw puzzle" fee irrespective of the comm issue. The amount of work and time required just to do a proper , thorough borrowing capacity analysis these days ( for those with multiple properties and loans, I mean) certainly warrants them charging for it.

But if comms are removed they will definitely have to start charging, either way... its as certain as the sun rising and setting - and if borrowers wont pay ,the brokers wont survive...but borrowers wont thrive either. Branch land and online land just cant do what broker land can do.

 

In that case, why not become bank staff? I know bank lenders can make very good money.

 

I could never become an employee again! a wage slave.

 

Amen

 

Isnt it like real estate agents? Market drops, a lot of agents get shaken out. The good ones get a bigger share of a smaller pie. FHBs who go to volume brokers wouldnt pay for it. People with multiple IPs and complicated finances will.

 

The difference is about 98% of brokers would be shaken out. When REAs have a downturn, perhaps 10%-20% quit. Big difference.

People don't pay for advice, at least not with home loans, there's plenty of evidence of this on this forum. A lot of good brokers would end up out of business. In fact the ones left would be the once with good sales systems, not necessarily those with good advice.

I think ASIC realises the value brokers bring to the market and they're not going to eliminate commissions. There will be some shrinkage of the industry numbers, but overall I think brokers will come out of all this much stronger.

 

I suspect it won't be regulatory changes that drive a fundamental change in the industry, but rather natural market forces that drive change and a changing consumer base over time.

In the medium to long term, i agree with you, brokers won't exist in the number volume or size that they do now. I suspect it will likely be a bigger tech players that have far greater economies of scale, AI skills, investment, tech and processing ability than 16000+ brokers. I.e. the industry will eventually be uberized. Many industries will change dramatically as automation takes hold. Origination of loans is a relatively systemised process thats repeatable (and subject to automation and AI). Much of the world will be subject to tech change and industries will fundamentally change. It usually for the greater good of consumers and progress.