What the Loan Market/NABregators Agreement Means for Brokers

National Australia Bank (NAB) recently reached an agreement to sell 100% of its broker aggregation business – PLAN Australia, Choice and FAST – to Loan Market Group.

Under the agreement, the major brokerage will acquire 100% of NAB’s three broker aggregations, business credit licensee and compliance service provider BLSSA, associated broker aggregation technology, including the Podium technology platform, and related commission systems and sales and operating services.

However, the four businesses – Loan Market, PLAN Australia, Choice and FAST – would continue to operate independently of each other, Loan Market Group said. They will continue to have their own aggregation agreements, their own executives, and their own sales and marketing teams.

Commenting on the purchase at the time of the announcement, Loan Market Executive Chairman Sam White said: “The acquisition means we can offer more options to our members. This will allow our business owners to decide what value proposition and support structure they need to thrive.

Mr. White has now provided more details on these options, and the business models brokers could adopt after the acquisition is complete and the three NAB aggregation businesses will begin operating under the Lending Market umbrella.

Speaking to The Adviser, the chairman of Loan Market said the acquisition would allow Loan Market to provide brokers with choices around which business model they would like to incorporate into their businesses.

“For a broker to join a group, they can either join a branded model or a flat-rate model or a wholesale model,” Mr. White said.

“We wanted to be able to give brokers different choices about what kind of service they would get and what they would pay. It’s a different value proposition than the aggregation service and it was something that was important to us as well.

DISCOVER

Mr. White explained that Loan Market operates on a percentage model, while FAST charges a fee per transaction, which primarily focuses on commercial transactions but also provides residential real estate services. Choice offers a fixed fee model for brokers.

“PLAN Australia has more of a sub-aggregation flavor where they work with larger companies,” the aggregator manager added.

According to Mr. White, the prospect of being able to offer brokers choices around the business models they would like to adopt attracted the major brokerage to this buying operation.

“Brokers can choose the type and level of service they want, what they want to include and what they don’t want to include,” he said.

“I think that means the more choice brokers have, the better for them.

Explaining further, Mr White said: ‘They can start with one business and say, ‘you know what, that’s not quite right for me, I want to move to another type of model’.

“Our vision is [for brokers] be able to do it without [them] having to change aggregator or change license.

According to Loan Market, the major brokerage aims to integrate this new framework and structure by the end of 2021.

Closing of the purchase agreement is expected to take place in early calendar year 2021.

The deal would result in a total of around 5,000 brokers in Australia and around 1,500 brokers in New Zealand, according to Mr White.

What drives aggregator consolidation?

The deal to buy the aggregator owned by Loan Market NAB is not the only deal on the horizon in 2021. Other mergers are also expected next year.

The process is underway to create the largest merged aggregation entity in brokerage through the proposed $120 million merger between AFG and Connective, despite some delays.

Completion of this merger is expected to take place early next year, which would also bring together around 5,000 brokers in Australia under the umbrella and around 1,500 brokers working in New Zealand.

Speaking about this trend of aggregator consolidation, the Lending Market Chairman said technology was a key driver, which he said has remained an expensive investment.

He said Loan Market needed scale to continue investing in technology and services for brokers, while maintaining its current culture.

“So that we can all invest more in technology in the future, there are two ways to do it,” Mr. White said.

“The first is that we get our existing brokers to pay more or we have more brokers that pay less. We think it’s better to have more brokers who pay less because it gives them a better return on their business.

He added that the major brokerage was concerned about how it might have invested in technology if it had continued to operate under its current model.

“We were concerned going forward that if we were just Loan Market, for the things we wanted to do, we would have to charge our brokers a lot more for technology going forward,” White said.

“What we’re seeing now is that it gives us the ability to really invest more without having to charge brokers more.”

The future of aggregation

In conclusion, Mr. White pointed out that the trend towards consolidation of aggregators would not reduce competition between them.

“I think for brokers we’ll probably see a bit more consolidation, but brokers will still have a lot of choice going forward, because even if the groups consolidate, I think they’ll still have different marketing channels and different options for brokers,” he said.

He also said the level of aggregator choice for brokers would not decrease, adding that while aggregators may share technology, they will operate under different business models.

“Even with our merger, we are not changing any choices with brokers. We’re just trying to keep very separate business models – it’s under one roof and we’ll get some scale to invest in technology, but the choices brokers have won’t change,” concluded White.

[Related: 2021: The year of aggregation consolidation?]

What the Loan Market/NABregators Agreement Means for Brokers




TheAdviser Logo


Last update: March 09, 2022

Posted: November 23, 2020




Malavika Santhebennur

Malavika Santhebennur

AUTHOR

Malavika Santhebennur is the Mortgage Headlines Editor at Momentum Media.

Priscilla C. Carnegie