At present I would agree that the broking industry may consolidate for a while or be at a relative standstill. This is primarily because most of our competitors are now bank owned, so there isn't much more consolidation left to occur. And with thin margins at our level there is no great lure for new players to emerge unless they have something that’s disruptive.
The disruptive piece is more tech driven, or are new global participants, but these are more likely in the later part of the five-year block though.
Broker market share has now moved past the 50 per cent point for new lending and is heading towards 60 per cent which is great to see. However, having said that, as you push higher you always meet with more resistance so whilst I’d like to get comfortable, unfortunately the opposite becomes true.
A great example currently is the omni-present financial services review into competition and the ridiculous papers that have been submitted by conflicted parties with vested interests who would like to see us sidelined. Comments like 'We have strong competition' are, to put it in regulator speak, misleading and deceptive. A more accurate statement would be we have too few banks left competing vigorously.
The recent EY submission together with even our own industry mags and some of our competitors suggesting we accept fee-for-service are huge threats to the industry and would see us going the way of the dinosaurs. If this came to pass it would be the death knell for competition, not just for brokers, and a great boon for a few.
To my mind, the biggest risk in the short to medium term for us are the bureaucrats and politicians and the fact that they are listening to too few in the industry.
The macro outlook in the short term is also clouding quickly in my mind though it is important not to overstate it, and just as important to remember that we can't influence it. Events in the Ukraine and in the Middle East are extremely concerning on a humanitarian level, and have the ability to impact funding and consumer confidence across the world.
I get asked a lot about what the next few years look like for mortgage brokers. Without wanting to sound complacent I think we’ve seen a fair bit of change over the past few years so I think the industry might consolidate for the short term. Technology will still move fast but I can’t see it superseding brokers as we as an industry seem to be moving as fast as the IT world. And, as long as the banks have liquidity, brokers will still be in hot demand.
Brokers are well loved on both sides of the fence at the moment from a consumer and lender standpoint, it is imperative all brokers take this opportunity and cement their position, so when the next credit crunch or softening of the economy comes, our brokers have solid foundations to aid the sustainability of the industry. Keeping competition alive and keeping our lending partners accountable is critical.
The next generation of consumers is definitely making its presence felt and I think over the coming years we’ll all have to continue to respond better to their needs. Consumers are making even the largest decisions such as mortgage finance so quickly these days, and their expectations are that the process will follow the same lightning speed. Technology is one of our greatest assets as a business, but it has given end customers the perception that everything happens at the click of a button. In the longer term and when banks start to look at risk differently and start to streamline their electronic processes this will come. But in the interim it’s our job to manage expectations and delivery whilst the finance process is a little more complex than just an ‘add to cart’ kind of deal.
So if the bureaucrats act in the nation’s interest we are fine at the micro level, and if Mr Putin steps back and the Middle East doesn't tumble further into conflict then the macro looks pretty good as well. If not, we might be looking at significant erosion to funding and confidence, as well as new flight patterns to Europe via the US.