POINT BLANK -- A bold move into broking

Mortgage Business asked NAB’s Matt Lawler about the rationale behind the bank’s move to acquire Challenger Mortgage Management and what it means for the industry.

Q: WHAT DOES THE NAB PURCHASE MEAN FOR THE 5000+ BROKERS THAT ARE MEMBERS OF PLAN, FAST AND CHOICE?

The first message I want to convey to brokers – and the general public – is that the broker proposition to their clients and their ability to select the best product will not be affected.

PLAN, FAST and Choice brokers will remain completely independent and their advice will not be biased in any way.

Australians can rest assured that we won’t be secretly forcing any brokers to use our products.

The second thing I want to emphasise is that the brokers should feel very confident that a major lender is seeing a future for this industry.

A lot of people have been worried that the banks were going to take non-bank lenders out of the market, but I think we have proven once and for all that NAB has a long-term outlook and sees a future for this industry.

Finally, our support and backing means the plans that Challenger Mortgage Management had in place can be certainly be achieved because they will now have the funding to accomplish them.

They will now be able to give their brokers different product options because of our support.

Q: HOW WILL NAB GROW CHALLENGER MORTGAGE MANAGEMENT AND WHAT MAJOR STRUCTURAL CHANGES LIE AHEAD FOR THE GROUP?

We have no plans to change the structure [of the business]. This is not an acquisition where you take two businesses and combine them. We want the businesses to stand alone and continue to do what they have done in the past.

Our merger with MLC was very successful because the industry evolved to become more advice-based and we think the mortgage industry is headed in the same direction.

Do we think mortgage brokers will become financial planners? No. But we do believe that both financial planners and mortgage brokers are advice givers. The only difference between them is the advice they provide.

We believe the industry will continue to evolve and that mortgage brokers will become valued advice givers for the community. A mortgage broker’s business involves more than just product offerings. They are client managers as well as advice givers and that is where we see the value in the longer term.

The white labelling capabilities that Challenger has will also provide us with an interesting and new facility. At present, we don’t have a white labelling capability but we do have funding, whereas Challenger has the capability and distribution but due to the financial crisis have been struggling for funding.

[The Challenger acquisition] now represents a major opportunity for both mortgage managers and those who are interested in white labelling. What has been missing is the opportunity for those people to get funding and support.

With a new injection of funding into the market place I believe we will see the differential brands and differential and competitive propositions continue to evolve.

What we are also going to see is access to a very big, secure balance sheet.

Q: WHY DID NAB DECIDE TO TAKE A STAKE IN THE THIRD-PARTY DISTRIBUTION CHANNEL? HOW DID YOU IDENTIFY CHALLENGER AS REPRESENTING THE BEST ACQUISITION TARGET?

Over the last decade NAB has kept a watchful eye on the economics of the mortgage broking industry and the move towards regulation.

More than 40 per cent of customers now actively seek advice from the mortgage broking channel, which is a great indication that the channel has embedded itself in the Australian psyche.

With the introduction of regulation I believe we will see improvements in both the level of professionalism of and quality [of people] in the industry, which is likely to make it a very lucrative investment opportunity.

When the opportunity to invest in the Challenger business presented itself we knew it would be a sound investment. We felt that NAB was philosophically aligned with Challenger and we found that their principles on business and ideas about the evolution of the industry were very much in sync with our own.