The heads of several leading banks, aggregators and industry consultants have said that lender focus on brokers is sustainable for the near future, but warned that brokers need to become "more digitally enabled" to meet customer expectations.
The Deloitte Australian Mortgage Report 2017 asked 10 industry leaders — including representatives from AFG, Bank of Queensland, Commonwealth Bank, eChoice, Homeloans, NAB, Pepper Money, and Suncorp — their thoughts on the mortgage market in 2016 and what they expected the home lending environment to look for in the year ahead.
When asked about whether they thought the current focus by lenders on the broker industry is sustainable for the next three years, their answers were “overwhelmingly positive”.
Half of the panel said that “brokers and their influence on the market are here to stay”, while the other half said that it is a sustainable business model, but noted that the “industry will need to adapt to stay relevant in the future”.
Speaking at a briefing on the report, Deloitte consulting partner James Hickey commented: “Fifty per cent said absolutely, their influence is here to stay and they thought it would actually grow. Fifty per cent said absolutely it was sustainable but the industry does need to adapt. Brokers simply can’t sit on their heels and do what they are currently doing and expect that that will be acceptable to consumers over the next three years… They are both saying that brokers are here to stay but there does need to be evolution of what that model offers in the way it engages with the customer and uses digital.”
Meg Bonighton, general manager of home lending at NAB, commented: “I think you have brokers who are very much into the customer journey. The ones who ask how do I be there in the right place at the right time? Who is the aggregator I work with who can help me do that best? And I think there are others who still use the message of 'face‑to‑face is king'. I feel they are the ones that are in the D model, who attach the success of their model to face-to-face v thinking about this as a financial concierge concept. It’s just playing that role in a very different media.”
Malcolm Watkins, executive director of AFG, agreed that there were “two types of brokers”, adding “I think the answers were split equally because there will always be a place for someone who wants to sit down face-to-face. Gen Y, X and Millennials want to be able to do a lot of the work upfront themselves, and then connect at a relevant time to validate their decision”.
“At the end of the day, brokers will need to become more digitally enabled and capable of providing the consumer an experience that fits with the number of steps they want to manage themselves v being broker assisted,” he said.
Future broking model
Mario Rehayem, managing director for Australian mortgages and personal loans at Pepper, said he thought customer focus would be the edge for the broker channel in the future. He said: “It is a very similar transaction to someone lodging their tax returns. People have the ability and access to facilities to carry out the transaction on their own. Or they can rely on a subject matter expert to give them the reassurance that it’s done right. The brokers that focus on their customer’s needs will have a sustainable future for years to come.”
However, Peter Andronicos, CEO and managing director of eChoice, warned that brokers looking to break into the digital market need to educate themselves first.
He said: “One of the things about making the jump to digital and building yourself a social presence is it can actually become detrimental for some brokers. The reality is that, all of a sudden, you’re public. Previously you haven’t been. And if you aren’t educated as to how social media works or you expect somebody else to manage your page once a month or once every two months, you suddenly have users being able to make public reviews about your service. This can be good or bad. For example you may get: ‘broker XXX didn’t call me back’; ‘XXX never did this’ etc. When someone goes to Google and types in the broker’s name, the first thing that is likely to come up is the product review. So, it is a double‑edged sword and needs education.”
Half of the panel also suggested that integrating digital would be the “greatest opportunity for the broker model to evolve in two years’ time”.
Speaking at a briefing for the report, Mr Hickey explained: “Consumers still expect brokers to integrate digital into the [home loan] process. A great example is not turning up with paper-based forms to fill in and sign in an ink pen. Can they do it at their own leisure via an app or online portal? So certainly, broker groups need to integrate digital into the way they interact with customers because customers expect that.”
He also suggested that brokers could look at changing their model by “breaking it up into various components to better suit certain customer needs”.
Mr Hickey said at the media briefing: “If customers and lenders become more comfortable with using digital as a self-serve channel for instance, a consumer may well be prepared to do a majority of that themselves but then seek to do a final validation step with the broker. Therefore, the broker's role isn’t actually to help them through the entire journey, it's just to provide an end point validation of what the customer's already done off their own bat.”
However, AFG’s Mr Watkins said: “I think brokers want to be able to offer digital facilities to their customers and want the customers to work collaboratively and independently of them at the same time. That’s where I think the integration is. New ways for end‑to‑end valuations. All the things such as title searches, online instant conveyancing and settlement. Brokers want to integrate their services to improve the customer experience while they travel through their end‑to-end process. That’s where the big opportunity is and their strong point.”
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