The heads of Australia’s leading real estate groups have explained why they are developing their financial services businesses and how agents stand to benefit.
While many real estate groups now offer mortgage broking services, referral relationships between the two professions remain underutilised.
According to John McGrath, the concept is relatively new in Australia but has been well established in the US and UK for many years, where he claims the best agents all have very strong links either at a corporate or individual level to brokerages.
“All our best agents have strong relationships with brokers because they understand that they can help clients get better loans,” Mr McGrath told REB.
“It’s like having a great stylist. A good agent needs a good stylist and they also need a good home loan broker,” he said. “Mortgage broking is going to become an essential service.”
Meanwhile, Barry Plant CEO Mike McCarthy believes the industry has failed to “take control of its own destiny” when it comes to agent-broker relationships.
Barry Plant operates its own broking business, as do LJ Hooker, Century 21, Ray White, Raine & Horne and McGrath.
While financial services complement these real estate businesses by providing additional services to clients, Mr McCarthy said the industry has generally taken a “scattergun” approach to referral relationships.
“Our franchisees have pointed out that individual sales people have relationships with a range of different brokers out there. They have their own personal contacts in some cases, or perhaps a local bank branch where they have a good relationship,” he said.
“So I think what you’ve got is a very scattergun approach right now across the industry to mortgage referrals, where it relies more on the individual relationships.”
Richardson & Wrench has taken a different approach, choosing to partner with mortgage brokers rather than launching its own service.
“They are really essential for a modern business,” R&W owner and managing director Andrew Cocks told REB. “The modern property-related business has to provide a really diverse range of services,” he said.
“For a lot of real estate businesses, who are effectively small business operators, does that mean they need to have all those services in house? No, it doesn’t, as long as we can link them up with people who are very skilled, very capable and can be trusted to work with people’s clients to provide a great outcome.”
Mr Cocks said he does not align R&W with any brokers that he can’t personally vouch for.
“We go to great lengths to ensure that the partnerships we develop are going to be in the best interest of our franchise network. Ultimately, that’s what we get measured on.”
[Related: Raine & Horne revamps broking business]