An Australian challenger bank will look to further align itself with the broker channel, which it views as critical for the success of the group’s 2020 strategy.
As part of its commitment to the third-party channel, ING Direct has outlined a new strategy in which it will reward brokers a higher commission for selling a mortgage product aligned to a transaction account.
Speaking to The Adviser, ING Direct head of third-party distribution Mark Woolnough said the non-major bank has a “very clear strategy” in terms of earning the primary bank relationship with its customers.
“We can achieve that through acquiring customers in savings, transaction accounts or mortgages,” he said.
“Brokers account for 50 per cent of the Australian mortgage market, and they account for more than 90 per cent of our home loans. Mortgage customers are prime candidates for helping us to earn that primary bank relationship with customers.”
This week ING Direct announced a new upfront commission model that will come into effect on 1 January 2016.
Brokers who sell Orange Advantage home loans will be rewarded with a higher commission.
“Our Orange Advantage loan is the loan with the offset account, so it aligns with the transaction account,” Mr Woolnough said.
“If you look at our most recent promotion and pricing initiative, 3.99 per cent, that is only available on that particular product. We have seen tremendous uptake from brokers of that particular product,” he said.
“Therefore naturally loans that settle from 1 January onwards on that product will accrue the higher commission, subject of course to the borrowing purpose, which is owner-occupied, and LVR conditions.”
Mr Woolnough said there can be “no link” between the new model and any incentive to drive undesired behaviours from brokers.
"If brokers approach this with a view that the higher commission will drive undesired behaviours, they are absolutely incorrect," he said.
"This is the future, where the best interest of the customer, and we believe the broker, are paramount. All the regulatory and industry change that you see occurring around us is leading to increased transparency to how we as an industry do business, and I believe this is what will help us all to get ahead."
One of the benefits for brokers, Mr Woolnough said, is that as ING Direct earns these customers and takes them through their financial journey, the bank is rewarding one of our distribution points, which is the broker. "Brokers are a critical distribution channel for our 2020 strategy," he said.
“We are aligning ourselves to the future with the broker in mind, understanding the importance that they currently play and will play in the future in helping Australians get ahead,” he said.
[Related: ING Direct lifts variable rates]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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