Of the four major banks, two endorse segmentation, the other two do not. Who is right – if there is a ‘right’ – and does segmentation actually benefit brokers? The Adviser investigates
THE SEGMENTATION issue continues to divide mortgage brokers.
Supporters of segmentation say loyalty and bulk buying are rewarded in most business transactions – so why should broking be any different?
Detractors argue that segmentation encourages brokers to favour certain banks and therefore doesn’t necessarily result in the borrower getting the right loan.
Peter Wotherspoon, principal at Core Mortgage Brokers, says that segmentation definitely has a place in the market and argues that claims of inappropriate loans are unfounded.
Good brokers, whether working within a segmented structure or not, always put the needs of their clients first, he says, adding that the primary benefits of segmentation are better turnaround times and access to key people within the bank.
Ultimately, this all benefits the borrower.
“It’s a case of making sure that the needs of the client are met first,” Mr Wotherspoon tells The Adviser.
“If you sit down with the client and make sure that you ask the right questions, you will find the right loan. If it comes from a bank that doesn’t have you on their top tier, you still write the loan. It comes down to whatever best meets the client’s expectations.”
Warren Dworcan, director of Rate Detective Home Loans, concedes that while segmentation offers top tier brokers fast turnaround times and excellent customer service it can, however, make things difficult for brokers with lower volumes.
“Segmentation obviously benefits me more than a smaller broker who doesn’t write the volume that I write,” Mr Dworcan says.
Earlier this year, John Flavell, NAB Broker’s general manager, distribution, told a media briefing in February that the response from brokers NAB had received on removing segmentation had been favourable.
Mr Wotherspoon says that while NAB’s action was disappointing, it probably won’t negatively impact the lender.
“I don’t think it’s going to stop you putting a deal through NAB Broker...but hopefully they will see the benefits [of segmentation] down the track and go back to segmenting their brokers,” he says.
NAB Broker’s decision was not, however, repeated by the other majors.
Indeed, Kathy Cummings, CBA’s executive general manager, third party and mobile banking, is a strong advocate of the practice.
“In my view, any organisation that doesn’t segment in today’s market is actually displaying both ignorance and apathy towards their customers’ clients,” Ms Cummings says.
Her comments came at a time when Westpac was also reaffirming its commitment to segmentation.
Westpac’s general manager, mortgage broker distribution, Tony MacRae, dismissed claims that segmentation has no relevance.
“Our mortgage broker segmentation involves recognising those brokers that have supported us for a long period,” Mr MacRae said. “This is simply about value for value, and we are keenly aware that high performing brokers in the industry want to be recognised for their contribution to their lender partner’s ongoing success.”
James Green, general manager of Oxygen, concedes that while segmentation definitely has a place in the market, it can also represent a hurdle for new brokers.
“A new, young gun broker of high competency and capability could be overlooked by borrowers because he or she can’t offer the same day, rapid turnaround times that an experienced high volume broker can,” Mr Green says.