Drives for economies of scale by mortgage aggregators may not deliver as many benefits to brokers as these groups claim.
Ballast chief executive Frank Paratore has contended that boutique aggregators may be better suited to serve brokers.
He argued that independent aggregators and broker businesses keep the market “on an even keel”, and could do a better job in the year ahead of attracting quality brokers.
“Being bigger isn’t necessarily being better. There’s only so much efficiency you can get from economies of scale through size. I’d like to think the independents provide a better service proposition and that we’re a little more attuned with what brokers require,” he said.
Echoing predictions of much of the industry that further consolidation is due in the year ahead, Paratore said both large and boutique aggregators could withstand potential economic turbulence.
However, mid-level aggregators may have to choose whether to consolidate or strip out costs.
“Whilst there’s been some rationalisation taking place in the industry over the last six or so years, that certainly will continue. Definitely that middle tier will have to look at bulking up or streamlining," he said. "It’s in that middle ground that they don’t have the economies of scale of some of the bigger players, but they also have costs that the boutiques don’t incur."
Paratore said while these models are still sustainable right now, they will need to seriously think about what the next step will be.
"Whether it’s stripping out costs and having a look at broker numbers and volumes and the resources required to manage that volume, or looking at joining bigger operations or look at acquiring someone themselves to gain additional scale.”
Ballast itself acquired Members First Group late last year, taking its numbers from 70 to 185. Paratore had flagged similar deals at the time that would see the group grow broker numbers.