Paying it forward

by Melanie Mingas04 Aug 2019

Inspired by the support they’ve received throughout their careers, Matthew Johnson and Jean-Pierre Gortan of Simplicity Loans & Advisory have devised a new training and referral program that they hope will elevate the standard of commercial broking

When Simplicity Loans & Advisory opened its doors in July 2017, managing directors Matthew Johnson and Jean-Pierre Gortan were on a mission to pursue their passion for commercial finance. With more than 15 years of experience each, they were well versed in broking but knew that to achieve their business objectives, they would need to learn much more.

Whether for a sounding board to workshop a difficult deal or advice on which lenders are likely to fund a project, they turned to their peers – and the support they received has been the foundation of their success since.

As their industry reputations grew, they in turn became the ones advising others how to navigate difficult deals, often going along to meetings to help guide less-experienced commercial brokers. Now Gortan and Johnson have devised a formal PD program intended to elevate the standard of commercial broking as a whole.

“In our experience, it’s a very collegiate industry. We have certainly been beneficiaries of that, and, without being too altruistic about it, this is an opportunity for us to give something back,” Johnson says.

With the support of the MFAA, which has accredited each of their two-hour courses with two CPD points, Gortan and Johnson will host a series of free workshops, designed to arm established resi brokers with the basic knowledge of how to write a commercial deal and the questions to ask customers in the process. The agenda is based on feedback from brokers at various points in their careers, as well as the questions Johnson and Gortan answer everyday. 

“If we can help elevate resi brokers in how they highlight a commercial deal, it will help the industry develop as a whole and grow the market share of brokers in the commercial space,” Gortan says.

“The more the industry is able to demonstrate to customers that they are the right people to talk to instead of going to a bank, it’s the right pull for everyone.”

“If we can help elevate resi brokers in how they highlight a commercial deal, it will help the industry develop as a whole” Jean-Pierre Gortan, managing director of sales, Simplicity Loans & Advisory

Development with a difference
Industry associations, aggregators and lenders were quick off the mark when resi broker remuneration came under threat earlier this year, urging those who still have all their eggs in one basket to look beyond their primary sources of income. However, Simplicity’s own diversification into broker PD pre-dates Hayne’s recommendations. 

“Most brokers are making reactive business decisions based on things that are happening in the market today. But they are going to miss the boat unless they plan for the future,” Gortan says.

“Irrespective of whether trail is safe, making yourself an expert in an area is not an overnight thing.

For brokers to be able to diversify their business in the next 12 to 18 months, they need to start making changes now. Commercial customers want help from someone who knows what they’re doing – a service for a reasonable price.”

In tandem, another pattern was emerging in Gortan and Johnson’s observations – many brokers, when approached by a potential commercial client, were passing on the work because they didn’t want to risk eroding their brand through substandard service.

“Those conversations were the genesis – what if we could help build a system that can help these brokers help the client and help their business?” Johnson says.

As such, the workshop series is supported by a referral portal, Marketplace.finance. The site acts as the hub of Simplicity’s group training and referral network, allowing brokers to talk about their transactions and source further advice and support from a network of peers who are at various points in their own careers.

Crucially, Marketplace allows primarily residential brokers to interact with the team and complete commercial deals. The portal formalises the critical duties and roles of the individual broker and how the client is dealt with by Simplicity after being referred, including how and when each party will engage, the broker’s retention of the client, what happens with any further transactions, and the amount of commission to be split, including trail – which itself happens at the aggregator level.

After being accredited, the broker is given access to the Marketplace Advice Group Forum, which provides an avenue for brokers trying to personally write a deal to tap into a collective knowledge pool.

“Everything must be transparent and formalised to give people as much comfort as possible. We aren’t here to take their deals or clients, but to help them get deals done and build their business,” Johnson says.

Gortan adds, “The idea is to help brokers learn how to fish, rather than just feeding them.”

The rise of the non-bank and other trends
While commercial diversification is defining the broker industry currently, there are a number of market forces influencing commercial broking. First is the rise of the non-bank. A growing body of anecdotal evidence suggests that non-banks today are funding much more than mortgages and personal loans.

“Historically, we would write 90% of our business with the major banks, and over the last one to two years, it has slowly been moving to probably 70% non-bank, 30% bank,” Johnson says.

Established in the commercial arena for decades, La Trobe Financial is just one of the lenders that has seen an uptick in business. Currently averaging $400m a month in new loans across residential and commercial, the non-bank announced the appointment of Ron Dunbar as executive GM and head of commercial in February.

Meanwhile, Pepper Money stepped into commercial finance earlier this year, appointing Malcolm Withers to head its new business division.

According to Gortan, the presence of these lenders in the market has done more than simply keep the commercial lending sector afloat. 

“If the various non-banks didn’t come in, the market would likely have stalled. They have definitely taken up the slack [from the banks], and overall, it has helped the economy have a softer landing in the current property cycle,” Gortan says.

“We aren’t here to take [brokers’] deals or clients, but to help them get deals done and build their business” Matthew Johnson, managing director of operations, Simplicity Loans & Advisory

While the bulk of the demand for commercial finance still comes from business borrowers, commercial property investors are also making a mark, spurred by the current low interest rate environment.

“In commercial property, historically you don’t get the capital growth you do in other asset classes, but you do get strong yields. There has definitely been a demand for commercial property as an investment class more so than what you probably saw, say, five years ago and earlier,” Johnson says.

However, while the sector is showing strong performance, changes could be on the horizon for commercial brokers in the next five to 10 years. Gortan predicts a tech-induced contraction of the sector, which some will be more susceptible to than others. However, this can also provide opportunity, as Johnson explains.

“We are taking what has historically been a very manual process between brokers, clients and lenders, and, through digital information transfer, we aim to create a smoother, easier way of doing business,” he says.

Over the course of the next several years, much will change with regard to technology, client demand and rates. The real differentiator in that process will be how commercial brokers promote their value in protecting the flow of capital to businesses, developers and construction projects – and ultimately keeping the economy moving.