RC commentary has ‘missed’ key aspect of broker role

Mr Lees wrote: “Much of the commentary has focused on the obvious benefits that brokers provide, namely choice, convenience and, critically, fostering and driving healthy competition between lenders.

“However, I think there’s a subtle point that sometimes gets missed, and it’s my view that in a way, it’s the most important problem that brokers solve for their customers. It can be described in one word: Complexity.

“Whilst the general view is that brokers deal in rate, flexibility and convenience, I argue that the most valuable aspect of a broker’s role is in solving and managing the ever-increasing complexity in Australia’s home lending market,” he said.

Mr Lees continued: “As most brokers would know, credit policy, documentation requirements and credit appetite of lenders are varying with increasing frequency and amplitude. That is, the changes are more frequent, and there are bigger swings in all these criteria. Much of this change has flowed from increased regulatory scrutiny and in response to the royal commission itself.

“All of this adds up to more work for brokers and bank lenders alike, and as a result, credit has become more difficult to obtain.”

The Connective CEO highlighted that the broker share has hit new highlights recently, which has therefore resulted in an 11.2 per cent drop in the share of the proprietary channel.

“Think about that – 11.2 per cent of direct bank customers deserted their branch and turned to a broker to solve that complexity for them. In one quarter,” he wrote.

“It’s little wonder that the likes of Matt Comyn and CBA appear so intent on the destruction of mortgage brokers – they represent an existential threat to the legacy branch network of the large banks.

“Having noted the huge fall in bank direct share, it of course begs the question of why? I think the answer lies in that one word – complexity.”

Mr Lees elaborated: “As lender policy has become more complex, bank direct lenders have simply been unable to meet their existing customer’s needs. Direct customers who are now being told that they no longer qualify and are faced with a choice – do they walk down the street to the next bank, and risk getting the same answer (“computer says no…”) – or do they turn to a professional who specialises in solving the very complexity that most borrowers (and branch lenders) are not able to solve on their own?

“The answer is obvious.”

He concluded: “Following the release of the royal commission’s final report, there is now a stark choice before both government and opposition: do they support the channel that provides choice, convenience, competition and efficiently solves the problem of ever growing complexity, or do they follow Hayne’s poorly argued and perverse recommendations and hand power back to the big banks?

“Again, I think the answer should be obvious,” he said.

Connective has recently joined the building swell of groups launching campaigns to back the broker channel, with the Connective #Choicematters campaign focusing on fact that mortgage brokers offer home buyers value, service and choice. It is calling on consumers to pledge to support their broker because they “guide [them] throughout the loan process, provide [them] with access to a wide range of loans, offer [them] advice when choosing a loan, and give [them] ongoing support to ensure [their] loan remains suitable and competitive."

Associations, aggregators and brokers have all been voicing their support of the broker channel in the past week, with both non-bank lenders and the major banks also noting that any changes to remuneration will require great care and consultation.

[Related: Brokerage heads warn of banking royal commission impacts]