The Australian:
In the past decade, franchised mortgage brokers have experienced boom times.
Mortgage Choice, RAMS, Wizard and others have expanded to meet the demand for credit from the proliferation of non-bank credit providers — until recently.
There’s no escaping the brutal reality of the credit crisis: it’s hitting the big banks hard and the non-bank sector hardest. According to the Mortgage and Finance Association of Australia, the market share of non-bank mortgage originators has declined from a peak of 15 per cent to about 4 per cent, bringing an abrupt halt to the trend from the late 1990s. The appeal of buying into a branded, non-bank franchise may be waning.
Mortgage broker Otto Dargan says his experience working in a franchise environment before moving to be an independent was instructive. “The franchisee had a lot of controls placed on them. People trust brands but the franchisees are disadvantaged by not being able to operate freely in their markets,” Dargan says. “Commission structures are stacked in favour of the franchise group The agreement terms are onerous.”
Sydney-based Dargan, operating under his own brand, Home Loan Experts, says many franchisees are given the impression that leads will just walk in the door. “The quality of leads is minimal. They are usually web-generated and often when you follow them up they don’t know why you are calling.”
Dargan says the trend is for brokers to join aggregator groups such as Connective. “Independent brokers need to achieve volume hurdles to get access to banks and other lenders. These groups manage a lot of the compliance, professional indemnity and training services and enable smaller firms to gain access.”
Franchise systems need to get leaner and more efficient, he says. “Experienced brokers won’t go into franchises. They don’t need training. I don’t know how that business model can cope.”
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