ME Bank has announced its entry into the broking space. Executive manager of brand, products and distribution, Ian Hendey, talks about the bank’s proposition
HOW LONG BEFORE ME BANK PRODUCTS ARE AVAILABLE THROUGH BROKERS?
Initially, we’re going to do a soft launch. We will work with one aggregation group to launch our product suite. Then, as we move into Q1 and Q2 2012, we will start to distribute our products through more aggregators.
There is one main reason we decided to take the soft launch approach: we do not want any servicing issues to arise. We want to trial our product suite with a select number of brokers and iron out any bugs.
Once we feel confident enough to take on greater volumes, we will start to build up our distribution by partnering with the nation’s largest aggregation and brokerage groups.
We plan to make a steady entry into the wider market over the next six to nine months.
We don’t see ourselves distributing across the entire market. Instead, we want to take a methodical, strategic approach.
WHAT TARGETS DO YOU HAVE FOR BUSINESS WRITTEN VIA BROKERS AS COMPARED WITH BRANCHES?
Initially, we want to grow our share to its natural level – about 20 per cent.
Then, I believe we can grow that share to 43 per cent of our business, especially if you align it to our customer’s needs and wants.
We did a lot of research into our existing customer base and the results were interesting. ME Bank has long targeted a certain type of client: members of industry super funds. When we analysed who these customers went to for financial advice, almost 50 per cent said they would use a mortgage broker.
Therefore, we thought it prudent to open our distribution network to include the third party channel.
That said, we will continue to invest in our propriety channels. All our channels will be treated equally. They will have the same products and the same approach to customer service.
WILL BROKERS HAVE ACCESS TO THE FULL SUITE OF ME BANK PRODUCTS?
All of our broker partners will have access to our full suite of residential mortgage products. However, brokers will only be able to sell loans to members of industry super funds and unions.
We do have a product that caters to non-members, but it is priced differently from our member products. We don’t want to confuse brokers with our products and proposition. We want to keep it very simple.
At the moment, a broker finds a client and finds them a loan that is “not unsuitable”. With ME Bank, there will be an extra step – we are only looking for members of super funds and/or credit unions.
This may prove a little taxing for brokers, but we are prepared to work with them and help them understand what we are doing and why we are doing it.
MAXIS WITHDREW FROM THE BROKER CHANNEL IN 2008. WHAT HAS CHANGED AT ME BANK FOR IT TO REVISIT THIRD PARTY DISTRIBUTION?
When Maxis pulled out, it had everything to do with timing and the effects of the GFC. We didn’t have the capacity or the funds to continue to operate in this space.
The market is very different today. When I joined ME Bank about 18 months ago, I looked at our distribution strategy and it was very clear to me why we weren’t distributing through the broker channel.
However, I thought we were missing out on a very lucrative distribution channel. Over the past six months, I have worked progressively with the team to discover how we enter the broker market once again.
We have learned a lot from Maxis and are changing the way we do things this time around. Previously, mortgage brokers played a niche role in our distribution strategy; it was also branded differently.
Today, it will form part of our core distribution strategy and we will focus on super fund and credit union members, which is why we are going out with the ME brand.
WHAT HAS BEEN YOUR EXPERIENCE WITH BROKERS?
I have been in the broking space since 1998. Originally, I looked after the eastern seaboard brokers with ANZ. I then moved into GE Mortgage Solutions, running that business as general manager. In 2004, I joined CBA which is when I moved away from the broking channel and began to look at other areas of finance.
I have kept my ear to the ground since leaving the space just over five years ago. I am abreast of what is happening in the market and am up to date on all the latest licensing requirements for brokers.
We are starting to see a completely different market evolve. This is not only a fabulous thing for the industry, but also for consumers.
IS THERE ANYTHING STOPPING BROKERS FROM GROWING THEIR MARKET SHARE?
To be honest, the only thing that will stop brokers from growing their share beyond 43 per cent is lenders trying to control it and slow it down. We have seen various goes at that as commissions have changed and service levels have changed. I think the market has what it takes to grow well beyond that 43 per cent if they are left to grow beyond that percentage organically.