Mortgage broking big brands position themselves for challenging 2013 with diverse strategies
The last few months of 2012 were noticeable for the manoeuvrings of arguable the three most recognisable mortgage broking brands: Aussie, Mortgage Choice and newish kid on the block, Yellow Brick Road.
All three franchise groups have taken steps to shore up their revenue-generating capabilities in what is likely to a challenging 2013 for mortgage lending and the housing market.
Each brand has adopted a different growth strategy, but the ultimate objective is the same – grow market share, increase revenues and improve profitability.
The most recent media attention has been focused on John Symond selling the majority of his Aussie Home Loans business to the Commonwealth Bank.
Should the ACCC wave the chequered flag, Australia's biggest home lender will go from minority shareholder (33%) to owning 80% of Aussie Home Loans with the right to acquire all of the business at a later stage, should the bank deem it prudent.
It certainly is a prudent move from John Symond (apart from increasing his already substantial personal wealth), who will brush away criticisms that the once bank-bashing battler Aussie brand is now bank-owned.
Having re-positioned Aussie as a mortgage broker in 2002 rather than primarily as a non-bank lender prior to the GFC funding freeze (though it still offers Aussie-branded loans) the investment by the Commonwealth Bank – said to be around $160 million –will ensure Aussie can continue to grow its retail stores, mortgage broker numbers and brand.
"Our feeling is it is a bigger, better Aussie with more choice and services for consumers, and that has to be good for competition,” he told Property Observer's sister publication SmartCompany.
Symond’s former non-bank Wizard rival Mark Bouris has also taken a number of decisive steps in recent months aimed at ensuring his fast-expanding Yellow Brick Road franchise business has the funding it needs to provide competitive home loans and can generate enough leads to keep its 140 or so franchise stores busy and profitable.
The well-connected Bouris tied up a wholesale funding deal with Macquarie Bank in November, (which is itself ramping up its mortgage lending) and this month signed a reciprocal referral agreement with property management group RUN Property. Under the agreement Yellow Brick Road franchisees will offer their home loan and wealth management products and services to RUN’s 40,000 client base, many of whom are property investors.
Macquarie Group, of which Macquarie Bank is a subsidiary, cemented its ties with Yellow Brick Road by acquiring an 8.3% shareholding just ahead of the Christmas break with Yellow Brick Road strategic adviser and Australian Financial Review columnist Christopher Joye investing $1 million through Coolabah Ventures business entity.
Business Spectator's Stephen Bartholomeusz points out that in a twist of irony, Macquarie was the bank that originally funded John Symond's push into mortgage lending and is now doing something similar with his long-time rival.
Mortgage Choice may not have sought or garnered the headlines that Bouris and Symond have managed, but the ASX-listed franchise has also been re-jigging its business model and building on its strategy of diversifying its offering.
In December, as it celebrated its 20th anniversary, Mortgage Choice opening its first financial planning franchises in Sydney and another one in Brisbane.
The focus will be on providing risk insurance products – a natural fit to its home loan business – as well as superannuation and investment advice.
Mortgage Choice aims to have 10 financial planning stores up and running as part of a “soft launch” with a full roll-out planned from July 2013.
The franchise has ambitious plans for its financial planning business.
Looking ahead over the next two decades, Mortgage Choice CEO Michael Russell says the company has plans to “revolutionise the financial planning industry in the same way it did the home loan business”.
“We have put in place the solid foundations needed to successfully transition from a home loan specialist into the full financial services provider our customers have been asking for,” he adds.
These developments are good news for shareholders in these three businesses, but smaller mortgage broking groups could find the going a lot tougher, with further consolidation activity likely in the coming months.