A crisis is a terrible thing to waste

As you'd expect, each of the business champions we talked to has a different take on the nature of the adversity, and a different strategy on how to free up the opportunities from it.  

Joe Sirianni, director at Smartline, says the ability to offer other products has proved particularly beneficial.  And he thinks this kind of broad-based diversification will continue to be the smart way to do business.

Also, Smartline has picked up new recruits from within the industry. "Independent brokers looking for comprehensive support have found good systems and a steady reputation to be of benefit," he says. 

Lisa Montgomery, head of marketing and consumer advocacy at Resi, says developing ancillary products to broaden the mortgage manager's share of wallet and bring it in line with other organisations has proved to be a successful strategy so far.

From a banking perspective, Citibank's head of mortgages, Steven Ramage, says his goal was - and still is - to maintain a measured business approach during this downward cycle. "Right now building a great broker proposition is our priority," he says.

And at AFG, general manager Mark Hewitt is using the aggregator's CRM platform to good effect against the market contraction.

He profiles each of the broker databases, and separates them according to their discharge risk.

"This way our members achieve the maximum lifetime value out of each client," he explains.  

Meanwhile Matt Lawler, regional general manager at NAB Broker, feels the crisis has provided brokers with the best opportunity yet to reinforce the value of the advice they give to their clients.

That said, his own focus during this time has been to develop 'a deeper understanding' of the industry's unique profit drivers.

"So we can establish parameters for the type of business we want to attract when it's over," he says.

Focus on the long term

Avoid focusing on short term doom and plan for the future.

Sirianni says that over the last twelve months Smartline has set about building equity in its brand through advertising and developing an internet marketing strategy.

It has also assessed every part of the business to determine which ones need overhauling.

 "And we've upgraded our lending software - adding more features to make it even more user friendly," Sirianni says.

At Resi Montgomery's spends a lot of time considering the shape a likely customer proposition for a mortgage sale will take twelve months from now. 

"Will it be a discrete or a broader plan sale, or will it be something that will require a more professional approach and accreditation?" she says.

Recent trend analysis tests undertaken at the non-bank lender indicate that consumers are likely to be more conservative after the crisis, and Montgomery says - without giving any trade secrets away - she's prioritizing key markets and strategies in accordance with these findings. 

NAB Broker is using the time now to invest in infrastructure, to enable 'a more streamlined' experience for brokers and their customers.

 This includes a strengthening of its product range as well as support for brokers.

"It will improve the cost structure of our business as well," says Matt Lawler.
Things to avoid

Citibank's Steve Ramage says one should avoid making short term 'knee-jerk' decisions under pressure.

Instead, to fortify the Citibank business against the contracted trading conditions, Ramage has sought to maintain a strong business discipline.

"Chasing non-profitable business did not make sense, nor did it meet our targets," he says.

Lawler says NAB Broker has taken a strategic position not to pursue volume growth to the detriment of its business fundamentals.  

"So we do not chase volume through loose credit policy, or pricing positions," he says. 

The post-crisis broker

The good news for those that do see out the storm is they are likely to be far stronger for it.

Sirianni expects a better quality mortgage broker to emerge from the credit crunch.

He feels clients will find greater value in having a broker act as their advocate because it will save them both time and money.

And, for lenders, he reckons quality loan submissions will remain the most cost effective source of new clients.

 "So while the broking landscape has changed, broking groups that have these two factors in mind will not only survive the crisis but they'll be stronger for it too," he says. 

Ultimately the market will be more robust, says Ramage. But it will be a more disciplined one, based on solid financial management principles.

He expects there to be fewer players, each with more focused offerings, a view shared by Mark Hewitt, who says lenders are making it clear already they won't tolerate sub-standard practices.

Hewitt expects this year to be the one where the lower-grade brokers exit the industry.
The role of an aggregator is evolving too, and Hewitt feels there is no question the industry will be made up of a more committed group once the crisis is over.
Meanwhile Matt Lawler sees a better quality, more dedicated professional offering high quality advice and operating with a strong client-centric ethic. 

"All players will have a deeper understanding of the economics of the industry - the mechanics of interest rates in particular - and will take longer term views when making decisions," he adds.
Lessons learned

For Smartline, the greatest lesson to emerge from the economic slowdown is: good basic business sense will see you through the crisis times.
"As long as brokers deliver a quality service, to clients and lender partners alike, they'll continue to remain valid and competitive," Sirianni says. 

Meanwhile being well capitalised and not over resourced have proven to be very important to Resi in riding out the contracted market so far. 

"A lot of players have not survived because they have failed to underpin their businesses from a financial and resource perspective," Montgomery says.

But having the resources and strong financial fundamentals is not enough. According to Ramage being open-minded and flexible are the key lessons Citibank has learned. "I think it's also important to avoid getting caught up in the myriad of negative viewpoints that are flooding the market," he says.

For AFG success is all about 'investing in the groundwork". Hewitt believes that aggregators who don't continually seek to improve processes and look for product diversification options in the good times, will suffer when market contractions occur.

And from a lender's perspective, Lawler says it is all about quality.

"Quality trumps quantity when the tide turns."

For him, the crisis has reinforced that the broking industry has a high proportion of capable entrepreneurs.

He believes the future is bright if brokers and lenders go ahead and work together - in the best interests of the customer.

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