Real estate group announces mortgage broking play - The Adviser (22 December 2014)
Hockingstuart has revealed plans to move into broking after opening three other diversified businesses in the past 12 months.
Managing director Nigel O'Neil said the 50-office Victorian group expected to open its new brokerage in the next six months.
"We had a joint venture until 12 months ago, but unfortunately it didn't work out so we're deciding to start again," Mr O'Neil said.
"We're going to employ a general manager for the mortgage business who will eventually own a share of that. They're going to leverage their expertise and relationships to build a broker base from scratch."
LJ Hooker, Century 21, Raine & Horne, McGrath Estate Agents, RE/MAX and Barry Plant also have broking arms.
Mr O'Neil said Hockingstuart is frustrated that a lot of leads are going unfulfilled, and that franchisees and customers are missing out on the benefits of a one-stop shop offering.
He said that property buyers and sellers rarely initiate discussions about mortgage finance but are often open to the idea once prompted.
"With banks, their relationship management skills are very poor, so if they're with a bank (they'll be) looking to compare whether their bank will give them a better rate," Mr O'Neil said.
"Our model will be a broker model, so we'll say we have a number of financial providers and ask if they'd be happy for us to talk about comparing what their bank can offer versus what we can offer."
Hockingstuart has already made three diversification plays in the past year, adding an internal recruitment business, a removalist business and a connections business.
Australian Property Finance, which is owned by aggregator Vow Financial and real estate group RE/MAX, knows the challenges and rewards of integrating broking and real estate businesses.
Australian Property Finance chief executive Nathan Swain said that one obvious challenge is that both are very competitive industries.
Rival brokers regularly try to form referral relationships with RE/MAX agents, he told The Adviser.
Mr Swain said another challenge is that the broker is generally working for the buyer while the agent is working for the seller.
However, Mr Swain said that working across both industries can produce handsome rewards if done correctly.
"It's not just about referral fees that most finance businesses give back. It's more about control and keeping deals together," he said.
"We've had a pretty successful year with our business with the RE/MAX network, where we've probably kept together about $1.2 million of sales commissions."