He’s the self-titled Australian Clark Griswold who dreams of one day taking his family and driving across the United States.
But for now, Michael Arbon is content as a straight-shooting Adelaide broker making other people’s dreams come true.
After a stint in farming and fitness, Michael discovered mortgage broking in his mid-twenties and hasn’t looked back.
Now a MFAA Young Professional panel member, and Director of mortgage brokerage AB Financial, he busies himself providing excellent customer service and passionately advocating for the industry he loves.
In this two-part Prospa Groundbreakers, Michael shares his simple and successful marketing approach, thoughts on the future of the industry and insights into achieving a competitive advantage.
MFAA: Why did you start broking?
Michael Arbon (MA): Prior to broking I always had a strong involvement in business and finance, having previously managed both agricultural and fitness businesses. In December 2014, my now business partner joined Key Invest as a business development manager and he mentioned to me the industry may be one that sort of matches my own skill-set very well, so I arranged to meet the CEO, and realised straight away that broking really was the perfect marriage for my skill-set - obviously second to my own marriage - so I’ve got a passion for finance and helping people, and this job does both of those things.
I also have a very strong ethical and moral grounding personally, which stems from my conservative Christian beliefs, and this shines through I think as authenticity and provides a huge level of comfort to my clients. I think genuine honesty and not being afraid to ‘say no’ or ‘not yet’, are a couple of my biggest strengths. You’ve got to be honest with your customers.
MFAA: From your experience what do you think are the unique challenges brokers in Adelaide have, and how do you overcome them?
MA: I think geographical issues do exist; I deal a lot with regional customers, but I do find that once you’ve completed the identification and met a person face-to-face most of the rest of the process can be handled by phone, skype and email. We live in the 21st century and the majority of people are competent at using those methods, and I find that most of the regional businesses that I deal with, they have accountants that are based here in Adelaide. Most of the accountants are very forthcoming with the information I require as well.
Probably a unique issue to Adelaide and possibly Tasmania and Darwin and those types of areas, would be the lower housing value when compared to the eastern states. It does mean the remuneration we receive per loan is considerably lower than our eastern state friends, but that also has a silver lining. Our cost of living is much lower, our houses are more affordable, mortgages are considerably smaller, and I can travel to work in five minutes in my own car and not have to catch public transport. We generally have a lower revenue base, but we also have a lot lower cost of living, and I personally prefer the modest lifestyle of Adelaide. Adelaide is culturally very good, we have very good cafes, arts and entertainment scene as well.
MFAA: What is the most rewarding part about being a broker in Adelaide?
MA: I don’t think it really matters where you are a broker, whether you are a broker in Adelaide or Sydney or even a small country town, I think we all strive for the same reward – the look on the customer's face when you successfully helped them achieve their funding. That’s the true reward. As a mortgage broker you know you’re on the right path when customers come back and refer you to their friends as their trusted mortgage broker, that is the most rewarding part about our business. We don’t have to advertise at all, we are so trusted that all of our sources of new business come from our existing client base.
MFAA: How do you manage those relationships particularly with your rural and agricultural customers?
MA: I don’t think distance is the barrier that it used to be, and I think when it comes to managing relationships with every customer, irrespective of where they’re located, is different. Some customers require contact regularly and others are happy just to have an annual or biannual review. So I really think understanding your customers' needs up-front and their needs for communication and contact is really important. I had noticed the demand for mortgage brokers is increasing every year. I think the main reason for that is probably the fact that the banks are pulling their resources out of regional areas and places with smaller populations. They’re closing branches essentially and just replacing people with machines. Humans have a need for that human interaction, especially when they’re making significant decisions around their finances, so that’s really helping us grow our market share.
Personally, I love nothing more than getting out of the city and going to meet with the rural customer, especially farmers. I have a passion for that. And farmers love to show off their businesses, they love to show you around their farms, I personally think it’s great to go out and see their businesses and get a good understanding of how they operate, and I think there’s always a strong correlation between the state of a farmer's property and that of their finances.
MFAA: What about the customers you have in the fitness industry, how does that work out?
MA: From my personal training businesses from my previous life, the vast majority of those customers are now my mortgage business customers, so it shows that it really doesn't matter what you’re doing, as long as you are a trusted person within their circle, they’re always going to use your service no matter what industry you’re in.
MFAA: From your experience, what do you think are the differences between rural and regional broking and city broking?
MA: Customers don’t vary a lot based on location, it's more the access to credit that varies I’d say. City consumers have access to a whole range of services, their connectivity to the internet, they have a short travel time to see their broker or lender, and that allows a little more ease in sourcing credit.
In the country or regional areas, I think financial service options are quite limited and I think probably a good example of that specifically is in the commercial finance space where consumers don’t really tend to go for a second opinion.
You’ll find a lot of business customers tend to stay with their bank and not really understand what other options are out there. What we do is we prepare a comprehensive credit memorandum which assesses all of the credit information of the customers to assist lenders with making a decision. We distribute that to a number of relevant commercial lenders, and they in turn respond with their financial appetite, pricing recommendations and required security. What that allows us to do then is present a comparison and results to the customer and they can make an informed decision based on the offers presented. The transparency of this process does force the lenders to offer their best rates, speed and service, and quite often we see gaps in excess of two per cent between the best and the worst tenders.
I guess you can imagine a client walking back to their traditional branch, and they might be the one that was two per cent more expensive but they would have never known if they hadn’t gone through this transparent tender process, so it’s such a good point of difference, and gives the customer, who may only have access to one local lender, access to every lender that has appetite for that deal.
MFAA: Do you have any thoughts on the future of the industry?
MA: Change is the only constant in life. We live in an environment and we work in an industry that is going to undergo wholesale change constantly, and obviously we’re under the microscope. I see the current climate slowing down prices, and the tighter credit, as one where the banks are going to be looking for ways to create greater margins. I’ve noticed certain lenders have tried to deflect their attention to brokers, as what I see, as an attempt to achieve this. They’re using the term ‘conflict of interest’ a lot to drive this change. But brokers provide choice, and they provide a fairer deal to customers. I think customers over the past couple of decades have really voted with their feet. Brokers now originate more than 50 per cent of all residential mortgages in Australia and I think we’ve helped create a really competitive lending environment. We’ve reduced net interest margins for all lenders and we’ve allowed exposure to national and regional banks who can compete with the big four, providing more competition and that results in a better outcome for consumers.
Our competitive advantage is in our relationships and our traditional service that the banks have turned their backs on. We embrace that fully. We are essentially the traditional bank manager, the customer deals with us every time, the same person, they have our mobile number, they can call us seven days a week and if they need finance in two or three or four or five years’ time, they will come back, and they will see me. It won’t be a new manager in their branch. People love stability when they’re making big financial decisions. They love dealing with the same people.
MFAA: If you weren’t the director of your own broking business, what would you be doing now?
MA: I love small business. I love being in business and running my own business, so I’m guessing I’d be doing some sort of business, but probably not in the personal training space anymore. I’m really blessed to have stumbled across mortgage broking in my mid-twenties, but I guess my other passion lies in primary production. I think farmers are the backbone of Australia. They’re responsible for feeding a huge population within and beyond our borders. My family operates a cereal grain, wool and lamb farming operation. I do enjoy the business side of agriculture, so maybe I would have been drawn back to that if I hadn’t discovered finance.
Stay tuned for part 2 in 2019.