OPPORTUNITIES abound for Homeloans Limited to move into the potentially lucrative wealth management business, adding value to its existing customer base in the process, according to the business’s managing director.Tim Holmes said while Homeloans’ efforts rested primarily with the expansion of its home mortgage origination business, wealth creation and financial management were likely to become integral components of the business. (Mr Holmes expects market share to double within the next few years from its current 0.8 per cent share of the mortgage market).“I think there are opportunities going forward to provide other financial services to the customer base,” Mr Holmes told WA Business News.“One is wealth creation or wealth management strategies, and is something that we would look to get into.“We still see that there is tremendous opportunity in our existing area but we do see that as a logical add-on to be able to offer to our customer base other financial services, but that will be some time in the future.“Whether we do that ourselves or through an alliance we will need to investigate. It benefits the customer and gives us an alternative revenue steam. And usually, in a wealth creation strategy, a mortgage plays a critical role, so that is something we would consider doing.“But we certainly will be exploring every avenue to see what would be the best fit and which had the best product range and the best reputation.”But wealth creation is just one of a number of opportunities Mr Holmes sees for Homeloans and other mortgage originators.“I think the banks cartel will be somewhat broken down over the next couple years,” he said.“That should make it very interesting. If access to the payment system is somewhat liberated and allows other organisations such as insurance companies and other major institutions to enter that marketplace then it is another pillar, if you like, in banking that becomes more open to competition.“So you might find interest rates on credit cards might come under some competition.“And you might find that service aspects may be subject to increased competition, and consumers can only benefit from that.“Other things like personal loans and other banking services may come under greater competitive pressure. At the moment you are paying around 16 per cent on your credit card and official rates are 4.75 per cent and mortgages are 6.5 per cent. There is something wrong somewhere and something will have to give.”Another aspect of banking to evolve over the past decade was ‘disintermediation’, which was likely to continue in the future.“Banks have found that they are not very effective retailers or distributors of their product base or their loan base. More and more they are relying on third parties to generate their business,” Mr Holmes said.He said there were two basic but distinct business models used by third-party mortgage originators.“One sort is the ones that are like us, such as Aussie (Home Loans) and Rams and Wizard, and the other is the broker-type model such as Mortgage Choice, and AFG. The difference is that they get paid a brokerage but after originating a mortgage the ownership moves to the financial institution that they originated for.“Under our model the customer remains ours and it’s not all that transparent who the funder is. Their relationship is with us.”
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