Commercial brokers can also diversify

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Calls for diversification frequently involve encouraging residential brokers to branch out into commercial – but Finsure says this street can run both ways

WHILE MORTGAGE brokers in residential lending have long been encouraged to diversify into the commercial space to boost their revenue streams, the push is also on to draw more commercial brokers into the residential market. Finsure’s national commercial manager, Jas Fazlic, says there are enormous benefits for traditional commercial brokers to diversify into residential lending. Fazlic says diversification has been important in the broking sector for many years, with mortgage brokers encouraged to offer a broader service to better support their customers and grow revenue. “Some mortgage brokers have found the jump from residential lending to commercial lending to be a challenge due to additional accreditation requirements, deal structure complexities and finance knowledge gaps,” he says.

Established in 2011, Finsure has evolved into one of Australia’s largest mortgage broking groups. The core of our business ethos is a desire to provide the strongest value proposition to all our broker partners. This underpins who we are as an organisation and why we are able to provide the maximum value to those who align with us. We currently have a network of over 3,100 brokers, while our loan book exceeds $100 billion. With an international presence, Finsure is a dynamic, scalable, technology-enabled aggregator that is ahead of the pack and driving broker recruitment through our innovative solutions and breadth of service.

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Jas Fazlic, Finsure

“When we reverse the situation and instead look at how commercial brokers are diversifying their business, the trends are much more positive. Despite some additional compliance requirements, it appears the jump from commercial to residential presents less challenges and greater opportunities for traditionally commercial brokers. “It makes a great deal of sense. Commercial brokers are dealing regularly with business operators, and they need home loans too.” Fazlic says for much the same reasons that brokers specialising in home finance are encouraged to diversify their service offerings, commercial brokers also need to tap into new revenue streams.

Jas Fazlic, Finsure

“Instead of relying solely on commercial finance, brokers can offer residential mortgages, personal loans and asset finance. “Providing this variety of diversified services can help brokers attract a wider range of clients. Some clients may have diverse financing needs, such as owning both residential and commercial properties or requiring personal loans alongside their mortgage. “In a highly competitive mortgage market, diversification can give brokers a competitive edge. By offering a comprehensive suite of services, brokers can position themselves as a one-stop solution for all their clients’ financing needs. “This expanded service offering can enable brokers to enhance client retention and loyalty. When clients can access multiple financial products and services through a single broker, they are more likely to stay with that broker for all their financing needs. This can lead to long-term relationships and repeat business, which is beneficial for both the broker and the client.” The MFAA Industry Intelligence Service 16th Edition found that as of March 2023 there were 5,864 brokers also writing commercial loans in Australia.

“Despite a small decline from the previous six-month period, there was an increase of 8.67% year-on-year, or 468 [brokers], continuing the consecutive growth each year from October 2019,” Fazlic says.

In recent years the broking industry has experienced some dramatic changes in market conditions, Fazlic says, with property prices strengthening through the COVID-19 pandemic and beyond, and then higher inflation prompting big rises in interest rates.

“It appears the jump from commercial to residential presents less challenges and greater opportunities for traditionally commercial brokers”

“Instead of relying solely on commercial finance, brokers can offer residential mortgages, personal loans and asset finance”

Calls for diversification frequently involve encouraging residential brokers to branch out into commercial – but Finsure says this street can run both ways

“Diversification enables brokers to adapt to changing market conditions. For instance, if the commercial finance market experiences a downturn, brokers can rely on their residential mortgage or personal loan services to offset any potential losses. By diversifying, brokers can mitigate risks associated with market fluctuations and maintain a stable income stream.” Fazlic says the broking industry and Finsure place a strong emphasis on professional growth and development, with regular personal development days and bespoke, targeted masterclasses arranged for brokers. “Diversifying services can contribute to the professional growth and development of mortgage brokers,” he says. “Expanding their knowledge and expertise in different areas of lending allows brokers to become more versatile and skilled professionals. This can lead to greater personal satisfaction, career advancement and the ability to take on a wider range of challenging projects.” Fazlic says banks restructuring their businesses and closing branches led to a rise in the number of brokers and loans being written by brokers. “When looking at the Finsure broker network as an example, one of our major bank partners noticed that between January and April in 2023 more than $500 million in new home lending could be attributed to business banking customers applying for or refinancing their loan through our mortgage brokers.

“As a result, there is an enormous opportunity for ex-bankers to use their detailed knowledge and transition into the mortgage broking industry.”

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“Instead of relying solely on commercial finance, brokers can offer residential mortgages, personal loans and asset finance”

JAS FAZLIC, FINSURE

Dramatic changes in market conditions for brokers

Published 04 Mar 2024

YoY change

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+28.9%

+5.4%

+14.2%

+8.7%

Rising number of mortgage brokers also writing commercial loans

6,000

5,500

5,000

4,250

Source: MFAA

4,486

6 months to March 2020

Proportion of total broker population

4,000

6 months to March 2021

6 months to March 2022

6 months to March 2023

4,727

5,396

5,864

27.4%

27.8%

29.0%

30.1%

Value of home loan lending at one bank from business banking customers applying for or refinancing through Finsure mortgage brokers (January–April 2023):

$500m

How brokers can add residential loans to their offerings

So, how do commercial brokers who want to add residential lending to their repertoire make the transition? “It can simply be a matter of incorporating the service offering early in the sales conversation by chatting about a

Source: Finsure

client’s existing home loan while examining their business finances, as these self-employed clients may have potentially cross-collateralised their home to assist their business or have their home financed in isolation,” Fazlic says. “It’s also important to develop relationships with the right lenders. All the major banks who offer commercial offerings have residential loan solutions. So, it is worth understanding what other residential lenders are out there and what they are offering to ensure you can help find the customer the solution that’s in their best interest.

“Further communications with your existing clients can also help generate residential loans. “If you are a smaller brokerage focused on commercial lending, it may also be worth expanding the team and bringing in a mortgage broker who specialises in residential lending. Not only could they fulfil any residential enquiries, but it provides you with an opportunity to train them in commercial lending and further support your business growth. “Transitioning from a commercial focus to both commercial and residential will demand time and resources to acquire new knowledge and skills. But doing so offers brokers significant opportunities, and the potential rewards are substantial,” Fazlic says.

Business customers also need home loans

“Instead of relying solely on commercial finance, brokers can offer residential mortgages, personal loans and asset finance”

Jas Fazlic, Finsure

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