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Future proofing the role of the broker

Yes, the market is changing, but we are an adaptable bunch

Nick Ray Director Claratus Commercial Finance

T

he advance of technology raises questions as to what the role of the broker is, presentsopportunities to us, but also threatens our existence.

Are we just a function of lenders wanting low cost origination and businesses struggling to be serviced by mainstream funding options? Or are we a vital service, adding value, reviewing information, and ensuring lenders only receive proposals which are likely to meet their lending criteria and allowing businesses to access the most suitable funding?

We believe those brokers without any distinct specialisms will struggle against lenders (in part supported by the Capability & Innovation Fund) leveraging technology to lower costs of winning new business, by reducing the cost of generating opportunities and time/cost to underwrite facilities. Why would customers who are able to directly access lenders choose to use brokers if they only add cost? If technology is the key to the future of the broker, then the industry could become akin to the consumer insurance market, where commoditised mainstream business is written through comparison sites.

Brokers need to evaluate their USPs and seek to protect and enhance these. As more information and options become available, it becomes harder to collate and assimilate, leaving an opportunity for service-focussed introducers to take the role of trusted advisers. In our personal lives we are all familiar with the use of the internet to search for options comparing cars, technology, holidays, financial products, appliances etc., but as our lives evolve time becomes more precious. The greater pressures for our customers, with running a business and juggling family time, mean the value of advice to quickly find the ‘best’ option becomes much more important. One of the key values of a good broker must be saving clients that most precious thing of all: their time.

The increased number of providers and products that have evolved since the financial crisis and their associated nuances in relation to lender’s risk appetite, rates, terms, commission etc. creates a real opportunity for the enthusiastic introducer. At Claratus we took the chance to move away from the ‘we have a product to sell, let’s find some clients’ approach to the solution approach: ‘what does our client want, how can we provide it?’ Our belief is this gives us the chance to build real relationships with clients and for us is a more satisfying model than sticking to one product and moving on to the next new client. As has been written before in these pages, the broker is increasingly replacing the role that a good bank manager would have fulfilled in the past. We believe it is imperative to research and understand all options available to our customers, running a complex matrix of all lending options to make sure the customer gets the right product for their business.

We therefore envisage a split of the market, where tech-savvy business with more standard requirements will go to one of a few larger players, whereas those with specialist requirements will still seek and require the services of a traditional broker, who will meet, collate detailed information, understand their business and even challenge them as to what type of finance is the best fit.

At Claratus, we choose to remain in the traditional broker camp, but see technology as a means to enable us to improve customer service. E-sign documents, quotes, process automations, web forms integrating with our CRM system are all areas we use or plan to in future, but the focus isn’t to become a low touch offering, it’s to free up our resource to spend more time building deeper relationships with our customers and lending panel.

With the number of lending offerings high, so increases the need for brokers to analyse and review their business to see where profits are made and where efforts should be focussed. From a regulatory perspective, it’s only going to become more important to demonstrate the option offered was the best fit for the client and the logic for selecting one product/lender over another was sound.

The final opportunity we see for the industry is the most technologically savvy brokers running funding marketplaces, where brokers package fully for their clients, using a mix of credit data, open banking and financials, with some qualitative information. Lenders could then compete to offer the funding at the lowest cost, with the broker remunerated either on a fixed fee or percentage saving versus a baseline cost.

In summary, future proofing the role of the broker will take two approaches: one of using technology to automate the customer journey and the other using technology behind the scenes to allow resources to be used to offer exceptional customer service and a personal approach. At Claratus, we’re clear it will be the latter.

“One of the key values of a good broker must be saving clients that most precious thing of all: their time