Precedent set after mortgage aggregator buys 28% stake in LPF
While AFG’s acquisition of Sydney-based brokerage Loan Path Finance (LPF) seemed like just another equity investment by a mortgage aggregator that has had an acquisitive appetite of late, this time things were a little different.
tHE ASX-listed mortgage aggregator announced on Monday a 28% stake in LPF. This followed the minority stake acquisitions of Melbourne-based Empower Wealth Group and Perth’s Lifespan Mortgage Services in January under its Broker Investments program.
Where AFG’s latest purchase of LPF differs is that it marked the first time AFG looked outside of its own brokerage network for something to buy.
In this instance, LPF ditched its former aggregator, outsource Financial, for AFG as part of the equity investment.
Mortgage brokerages must be a member of a recognised mortgage aggregator in order to write home loans; These aggregators earn commissions on successful loan applications, plus charge membership fees to brokers in exchange for licensing and operational support.
So it is not without controversy that AFG has started to put its feelers out into competing aggregators’ membership bases in order to find acquisition targets.
And now that the precedent is set, it is unlikely to be the last time.
AFG to pursue more acquisitions
AFG “absolutely” intends to invest in more brokerages outside of the AFG network, the aggregator’s chief executive officer, David Bailey (pictured), said in comments sent to MPA.
“The Broker Investments program is open to businesses that meet key criteria around size, operating model, and growth potential, with a strong emphasis on long-term partnerships," Bailey said.
“Each opportunity is tailored to the unique ambitions of the brokerage, and we welcome interest from businesses both within and outside the AFG network. We encourage any brokerages seeking to explore this opportunity to reach out for a confidential conversation.”
MPA asked if AFG expects these deals to be met with a degree of controversy from competition.
“The Broker Investments program is built on the principle of supporting dedicated business operators who play a vital role in our industry," he said. "Whether they operate within or outside the AFG network, these individuals have worked tirelessly to build businesses that contribute to a thriving broker channel – one that remains the preferred choice for consumers and a cornerstone of competition in the lending market.
“Regardless of affiliation, the sustainability of our industry is paramount, and this program is designed to foster growth and long-term resilience across the sector.”
MPA asked Bailey if he expects to see more competition for blue-chip brokerages among mortgage aggregators.
Although he did not directly address the question, Bailey said: “At its core, this program (Broker Investments) is about empowering brokers who are building successful, growth-oriented businesses.
“AFG’s role as a full-service aggregator means we’re committed to supporting businesses of all sizes, whether they’re just starting out or scaling up. Our focus remains on delivering the tools, resources, and strategic backing brokers need to thrive in a competitive market.”
As for LPF, the brokerage's managing director, Mina Gergis, told MPA: “Our relationship came about organically through mutual industry connections. It was a collaborative alignment from the outset — both parties saw the value in working together and shared a similar vision for innovation and client experience. From there, the partnership evolved naturally.”
AFG certainly is not allergic to courting controversy.
White-label concerns
Earlier this year, AFG removed three prominent non-bank lenders – Bluestone Home Loans, Better Mortgage Management, and MA Money – from its lender panel.
This move raised industry eyebrows, with some suggesting AFG was restricting choice to channel more business toward its own higher-margin white label products.
While AFG maintained that the decision was based on product duplication and insisted there is no conflict of interest, some brokers and lenders have expressed disappointment in the move to MPA.
“Over the past 18 months, our team put in the work to build strong relationships with AFG brokers, and the results spoke for themselves, with volumes quadrupling in that time. So to be removed by a partner we’ve supported over many years was, understandably, both surprising and disappointing,” Bluestone chief commercial officer Tony MacRae told MPA.
“AFG cited cost as the reason, though no specifics were provided. It’s possible our strong growth may have impacted their white label volumes, which tend to deliver higher margins to the aggregator. Either way, we weren’t given further detail.”
The issue is not new; the Productivity Commission previously warned of anti-competitive practices in the white-label space, though not specifically about AFG. Despite these concerns, AFG’s leadership argued that the aggregator and manufacturer are separate from the end-client product choice, and that the panel still offers extensive lender options.
Neither AFG nor LPF disclosed the value of the investment.
Outsource Financial did not comment on the acquisition.
