In our view there are two things that today’s mortgage broker can be certain of:

  1. Cost of leads generation is increasing; and
  2. The commission amounts lenders pay to mortgage brokers will eventually reduce.

With the influx of new digital players in the mortgage market relying mostly on online leads, the competition for each lead will significantly increase. Online advertising market (as the ultimate source of online leads) is dominated by Google and Facebook and naturally any increase in competition will also increase the cost of online advertising. Brokers relying on online lead generation will therefore have to pay more for each lead.

Similarly, economics of other lead sources will follow this increase and referrers would require increase in commissions paid to them.

Over the past few years, loan amounts increased as did the broker market share. Amongst several reasons behind this growth, these probably stand out:

  • Quality of broker-delivered customer service is higher than that of a bank employee;
  • Consumers can generally get a better deal from a broker than from a bank.

Apart from the increased market share and increased net commission as a result of larger loan size, lenders are faced with higher costs of managing their broker sourced loans. Banks generally require more staff to process their broker originated loans. There are 15,000 brokers that all have their own way of preparing and submitting loan documentation. While they all have to use lender specific guidelines and standardised gateways, banks are faced with the increased cost of indexing files and mapping it to their own systems.

Overall, banks are seeing a higher percentage of their revenue slipping to broker businesses and at the same time they need more staff to manage influx of broker originated deals. Clearly banks would love to convert some of the broker business to their in-house or cheaper channels. Our understanding is that broker commissions will be reduced as soon as banks have a viable, more cost effective alternative – such as fully or partially owned online lead conversion channels. Therefore, the question isn’t ‘will the banks reduce broker commissions’ but ‘when will this occur’.

With the increasing cost of lead generation and expected reduction in broker remuneration the most logical question is ‘what is the future of mortgage broking’? The only ways brokers can continue to be competitive in the future are diversification and increased lead conversion efficiency.


Very few mortgage brokers diversify their offering – I heard a figure of 6%. A broker’s office can market to and offer most of the following services to each of their leads/customers:

  • New and refinance mortgage loans (typical revenue for large majority of brokers)
  • Commercial loan
  • Asset finance
  • Personal loan
  • SME loan
  • Car buying service
  • Vehicle gap and general insurance
  • Mortgage protection insurance
  • Home and content insurance
  • Life, TPD, trauma and income protection insurance (financial advisers only)
  • Superannuation and investment services (financial advisers only)
  • Other financial planning services (financial advisers only)

Key challenge in diversifying is finding time and skill to do some or all of the above. Many brokers currently cross refer. Referring own leads has several issues, namely:

  • Loss of control over service delivery to own clients
  • Loss of revenue to other finance professionals

The challenge in diversifying own business successfully is in improving lead conversion efficiencies (time) and increasing skill level to offer multiple products (knowledge).

Conversion Efficiency

Increased regulatory obligations and frequent changes to lender (and other provider) policy generally put upward pressure on broker time. In addition, most CRM solutions take time away rather than reduce time requirement component. New leads require more conversion time than the existing clients that are already (hopefully positively) experienced in broker service.

These factors improve lead conversion efficiency:

  • Dealing mostly with the existing clients or ‘warm’ leads vs. online or cold leads;
  • Efficient CRM for new lead management and automated marketing;
  • Efficient CRM for reduced data entry requirements, application processing and document preparation;
  • Skilled and cost effective support staff;
  • Improved core internal capabilities (deal packaging, product knowledge and customer service);
  • Ongoing customer service that frequently surpasses service offered by the banks and other mainstream institutions.

All of these factors are fully controllable by any broker or broker office. The solutions required are simple:

  • Organisation structure to support diversification (when more than one broker is involved in a business);
  • Selection of a CRM that can provides automation and efficiencies;
  • Selection of the support team capable of diversifying (outsourced or in-house);
  • Training programme for staff and contractors.

Once these are in place mortgage broker will convert into a ‘finance consultant’ – a person or organisation responsible for all financial needs of their clients.