Macquarie and Concentra may only have been the first, with broker trainer Greg Williamson identifying “disintermediation” as a growing industry trend. In common parlance that means lenders are looking for ways to cut out the middleman and beat a direct path to the customer
“Lenders will always be looking for a shorter route to the client,” said the broker, as part of his webinar “180 DEGREES ACADEMY - Winning the Rate War.” “That means cutting out the intermediary. There is only one way to stop, or slow down, the process of disintermediation, and that’s through innovation.”
The frank talk follows on the heels of Macquarie Financial’s decision to quit the broker channel, although it will continue to offer mortgages to wealth management and other private clients directly and through Paradigm Quest. Much smaller lender Concentra also ceased originations through the broker channel in late June. The collective exit, sped up by a protracted period of thin interest rates spreads, has raised concerns about broker channel viability in the face of an onslaught by the banks. Brokers have a right to be concerned, Williamson said during the webinar focused on steering the industry toward safer ground.
“What most brokers need to hear, and need to change, is getting better at closing deals,” he said. “We have to get to the point of saying that we’re not always going to have the best rate, but we’re always adding value.”
Other industry players have now floated the idea of lowering upfront broker commissions as a way of protecting mono-line lenders largely without the product lineup of the banks, which allows them to cross sell and effectively use mortgages as a loss-leaders.
“There are a few mono-lines that are trying to develop themselves into the banking-type entities, but you’re talking about a five-to-ten-year process,” John Bargis of Mortgage Edge told MortgageBrokerNews.ca. “The crisis is upon us today.”
Williamson argues that it’s entirely possible other lenders may seek to cut out the middleman in the originations process as a way of meeting that crisis head on. Improved broker efficiency and a more aggressive lead generation strategy can effectively block disintermediation without mortgage professionals having to sacrifice compensation, he said.
Part of the solution is taking control of the lead generation process rather than relying of real estate agents and other referral partners – themselves increasingly the target to disintermediation.
“As a group we can push back against it,” he told Webinar participants.