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Third Party Banking Report 2014 - Non-Major Banks

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John Bastick 15 minute read

It's all the results of The Adviser's annual polling of the non-major banks currently operating in Australia. Who's had a stellar year? Who's improved year on year? Who's scored a 'try harder' from brokers?

THERE CAN be no doubting the value of the role that Australia's non-majors play in residential home loans in the country and their importance in offering a real alternative to the big four.

The non-majors have always had an important relationship with the broker network too. It's a mutually beneficial relationship that requires brokers to be strong advocates of their products to offer a credible product alternative to the big players.

Likewise, the non-majors, without the support of a massive branch network and marketing budgets need, in many aspects, the third-party channel to survive, particularly in today's highly-charged mortgage market.


Sure, the lender-broker relationship is hugely important but that's not to suggest it's not occasionally fractious and a little bit fraught. Cue The Adviser's annual ranking of the performance of the current non-major players.

Again, this year's poll received a huge response from brokers with some 929 completing the survey and, we hope the results provide excellent market intelligence for both parties. For the lenders themselves, the rankings provide an astute commentary of what brokers think of each business' offerings and the views of their competitors.

Meanwhile, for brokers, the rankings make a compelling tale of who's doing well and who's doing less so, and are a tempter to try a different lender they may not have considered for a while, or ever.

Once again the Likert Rating Scale was utilised to compile the results. Respondents were asked to rate the lender in four major categories – product, technology, support and commission. In those four major categories were some 23 sub-categories.

Brokers were asked to rate each lender from one to five – one being very poor and a five being very good. It should be noted that the Likert Rating Scale doesn't make for 'winners or losers' per se and it should be remembered that any score above 3.5-plus meant the lender – regardless of rank – was doing a competent job in that area. Anything four-plus is an indicator the lender has proven truly exceptional.


So, without further ado, The Adviser is once again proud to present all the results from its annual non-major rankings for 2014.

We trust you find them of real value...


Any lender can have the shiniest, happiest marketing campaign but it'll amount to little if the product's no good. And when it comes to product it's not just rates, but range, policy and the ability to cross sell too.


It's all well and good to talk about price and service, but one area the non-majors can truly excel is in product range. And, it's not about a vast flotilla of products aimed at everybody, rather it's good, effective, and often simple products that brokers and their clients are after.

Again, ING DIRECT have proven to be best in market, although its score dipped slightly on its 2013 results. Interestingly – despite its second placing – brokers aired concerns about Bankwest's recent changes to its credit policy which it had "kept secret from brokers".

Another theme was the similarity between non-major's products, meaning the choice of lender most often came down to "policy and turnaround".


Most brokers claim that price isn't a huge factor in where they place loans. But, that every lender has raced to be cheapest in the market – particularly over the past three to six months – may suggest otherwise. Once again ING DIRECT was voted as having the best priced product. "Very sharp pricing," said one broker of ING DIRECT's offerings.

While another offered: "Some of the cheapest fixed and variable rates in the market coupled with quick service."

ME Bank's efforts over the past year to win business on price was also acknowledged – the bank moving up four places to fifth in the rankings. That said, although brokers recognised ME Bank's efforts in lowering rates, many commented that had not translated to brokers writing loans with them.


Respondents to this category were asked to rate all the non-majors on their comprehensiveness of policy of products across key markets, which resulted in yet another firstplace for ING DIRECT. As a concern, brokers felt that this was one area the non-majors needed to improve when compared to the big four.

"It can be really challenging for this tier of banks to have the strength to match the majors," commented one broker.


ING DIRECT confirm a stellar 12 months in the product category with another first-placing. Brokers believed that the majors arguably did a better job at the cross-sell than the non-majors and there wasn't enough of a financial carrot to up-sell their additional products. "Take CBA," said one broker, "they'll throw you a few dollars if you up-sell a product of theirs. The non-majors don't do enough to incentivise you."


With less reliance on a branch network, you'd expect the non-majors to be proudly flying the flag for all things tech. But as this year's survey reveals, brokers feel there's still some work to do.


Here, brokers weren't simply asked about a lender's web presence, rather it was the effectiveness of the broker web portal, ease of navigation, relevance, and the availability of information.

Arguably a strong web presence is even more important for the non-majors due to their lack of a branch network, however, broker responses (and scores) suggested there was still a lot of work to do, particularly in matching the big four. Common gripes included too little information, lack of downloadable forms and the inability to track loans.

"They could learn a lot from the majors here," said one broker. "Their [the majors'] policies are clearly outlined and, what's better, they stick to it."

Another added: "It's too hard to track loans and even if tracking systems exist the information is seldom credible."


With the need for speed and race to all things technology and a paperless process, online lodgements become all the more important.

However, it becomes a moot point if a lender's offering is laborious or clunky or, worse, the broker hasn't the foggiest how to use it. Again, brokers liked what they saw with ING DIRECT, with 55 per cent of brokers who wrote loans with it rating its lodgement process as good or better.

Many respondents said they bypassed lenders' systems for their aggregators, while brokers were scathing of the banks that still asked for documents to be sent by fax.

One broker dismissed the whole online process altogether: "It's too confusing and I just get my PA to do it all," they confessed.


This new category to the rankings called for brokers to rate lenders on their respective online application status tracking in regards to overall features, efficiency and usability. ING DIRECT topped the rankings, but overall brokers felt that the performance of all lenders in this area was largely average.

Heritage Bank (2.91) and AMP Bank (2.93) clearly had the most work to do. Overall, brokers wanted simpler systems, plainer English and for sites to be updated more regularly. Those lenders offering an online broker chat forum also won high praise.


Technology is supposed to offer brokers immediacy and speed, so how do the lenders fare when it comes to ease of downloading the latest forms, new product information and policy information? Yet again it's ING DIRECT doing everything right, while all other lenders were rated average or better in this category. Again, many brokers commented they accessed these documents via their aggregators' sites and some made mention it was often easier (and quicker) to simply phone a BDM to get them to email the documents through.


This category asked respondents to evaluate each lender's valuation ordering online when it came to overall functionality, efficiencies, and whether it provided greater consistency. It was a number one ranking for Macquarie who – with 54 per cent of brokers voting them good to very good – is clearly the industry's benchmark.

"St George still segregates brokers who can or can't order valuations up front," one broker commented. "Given I'm not a Flame broker I don't have this option and so it's a great way to ensure I don't give them any deals."


With mobile devices – tablets, smartphones and the like – fast becoming a broker's essential tools of the trade, it's imperative that lenders provide compatible software and interface too. Taking into account the scores, no one lender was deemed to be doing exemplary things here.

However, it could be argued it's not the lenders' platforms, but rather a case of brokers not embracing this new, fearless digital age. Broker comments suggested that they didn't realise lenders offered a mobile device interface, while those who did complained of compatibility issues.


Without the proper support the lender-broker relationship is a fraught one. Here, we acknowledge the non-majors who are getting things right when it comes to their back-end support.


There are two things that brokers want when it comes to a lender's credit assessment staff – knowledge and speed. And it would appear hell hath no fury like a broker dealing with clumsy back-end staff.

It's Macquarie who are clearly doing something right, usurping ING DIRECT for top spot. "Macquarie want to work with you to try and get the deal over the line," commented one broker. "They're very helpful and don't keep asking for more and more paperwork unlike a lot of them."

Meanwhile, something's clearly amiss at the St George/Bank of Melbourne/BankSA trio, with brokers voting them into a resounding last position. In fact, almost 27 per cent of brokers who used them voted them poor to very poor for their credit assessment staff.


Lenders will tell you that when it comes to the third-party channel, the humble BDM is the linchpin that holds the relationship together. That said it should be acknowledged that a great BDM often comes down to the individual person and their attentiveness rather than a corporation as a whole. Evidence of that were broker comments to the rankings praising individual BDMs rather than lenders specifically.

"Your BDM experience is the key to choosing a lender," said one broker. While another mirrored a number of the comments: "I haven't been contacted by any of these lenders' BDMs in over five years." On a sour note for the St George group, a third of brokers who wrote a loan with the trio rated its BDMs poor to very poor. Only 12 per cent rated them as very good.


With their mantra of service and price, it's things like a lender's turnaround times that make a big difference for brokers. Macquarie Bank ranked in the number one spot with respondents impressed with its 48-hour turnarounds. The stragglers here were ME Bank and the St George group who copped flak for five-plus-day turnarounds and polled last and second last respectively. Broker feedback again centred on a bank's good product being let down by poor back-end support and response times.


In a new category to the 2014 rankings, ING DIRECT came first, although all the lenders polled relatively well here. Brokers weren't fans of long waits on the phone, overseas call centres, and staff who didn't appear educated enough to answer queries or, alternatively, gave the wrong advice. "All call centre staff should be trained loan managers," remarked one broker. While another felt that many call centres were making themselves irrelevant. "They're a waste of time," the broker explained, "they just tell you to call the BDM anyway."


When it comes to lender's effectiveness in servicing the borrower post-settlement, again it was a clear tick of approval for ING DIRECT. Most lenders scored a ranking in the mid-threes, meaning brokers were generally happy. If brokers had a concern, it centred on lenders communicating with brokers' clients and the threat of channel conflict. "I'm always worried if I write a big loan – $1 million-plus – that the lender will do their darndest to pinch the client off me," said one broker.


In this new category, brokers were asked how committed they felt non-major lenders were to the third-party channel – be that in product, services and support. ING DIRECT stormed into the number one ranking with an impressive 3.94 while the St George-aligned lenders bought up the rear with well over a quarter rating its commitment poor or worse. Broker responses to why they judged the way they did were eclectic – with tech platforms, commissions and plain action all being cited.


What is broker interaction, exactly? Put simply, it's the ability of the lender to effectively deal with brokers' issues, problems and queries be it over the phone, in writing or digitally. ING DIRECT may have once again taken out the number one spot, however, brokers moaned it tended to send too much information. "If it wasn't a serious problem it would be a joke," said one broker. The advice to lenders appears to be a central trouble-solving hotline manned by staff that can actually solve the problem.


Channel conflict's not just this idea of a lender pinching a client as soon as they walk into a branch. It's also about lenders favouring their own branch networks with better rates, products, LVRs, or simply ignoring the third-party channel. ING DIRECT were deserved first-place sitters. A whopping 70 per cent of respondents rated the lender as good to very good.


When it comes to product knowledge and understanding processes, arguably nothing beats training by the lenders – be it PD days, onsite visits or the like. If this year's rankings are worth their salt, the big players – the INGs and Macquaries – appear better at it than the smaller players, proving the significant cost and staffing impost this has on lenders to successfully deliver it. As was to be expected, regional brokers again bemoaned that they were either forgotten when it came to lender training (particularly by BDMs) or it was too far to travel. However, an antidote to that, brokers believed, was the webinar. Finding the time to undergo the training was another gripe of brokers. Brokers wanted, relished and saw the benefit of lender education. "They'll get far more business if they come out and do it face-to-face," enthused one broker.


How well are the non-majors helping brokers build their businesses? Not very, according to this year's rankings. Again, the bigger players – ING and Macquarie – appeared to be doing their bit. Lenders such as AMP, Heritage Bank and Adelaide Bank all ranked poorly in the category. Broker feedback generally reflected the polling.

"They don't give a stuff about my business, it's all about targets for them," said one broker.

"I don't need or want them involved in my business," said another. While for other brokers, a lift in commissions and trails would be the best way to show a lender supported their businesses.

"They've not paid us any more since 2008; how can we be expected to build our business when we're not paid enough to employ, train or mentor new staff?"


Brokers will struggle to articulate a lender's product if the communication surrounding it is poor; hence, the all-important broker communication that informs brokers of changes surrounding pricing, products, policy changes, servicing times and the like. Again, brokers particularly liked what ING were doing, with 71.6 per cent rating its communications as good to very good. The resounding response from brokers was that they didn't want to be bombarded with the stuff – once a week appeared the preferred norm – and they wanted allcommunications to be explained easily and simply.

"Keep the template consistent and send it at the same day and time each week." Overall, brokers appeared happy with the communication they were receiving rating most lenders above average.


Let's face it, no one's doing this for charity. And though commissions shouldn't be a driver to place loans a lender's financial incentive remains a consideration. Yet again, it appears Macquarie dangles the biggest carrot.


When it comes to commission structures, respondents were asked to rate lenders' commissions based on their simplicity to qualify for maximum available remuneration. Macquarie again came out on top, cementing its reputation as the best non-major when it comes to commissions. Brokers were less favourable of Heritage Bank, St George and Adelaide Bank commission structures, ranking them last, second last and third last respectively.

Unsurprisingly, brokers' gripes were around lenders not paying commissions in the first 12 months. "A lot of the second-tier lenders pay good upfront, but I'd prefer trailing from year one," said one broker. Another complained of too much confusion. "You never get any up-to-date information," they griped. "Lenders never keep you informed of what level you are on and why."


Again, Macquarie Bank cemented its position as top payer of all the non-majors, although ING DIRECT were just a whisker behind in the polling. Overall brokers appeared relatively happy with the levels of remuneration, but if there's work to be done, it's with Heritage Bank who ranked last for remuneration, with only 4.5 per cent of brokers ranking their remuneration offering as very good.

As to be expected, many broker comments were around commissions not increasing since they were cut during the GFC. While lenders offering bonuses for volumes also caused some ire. "They're unfair to the broker and the client and should not be used," commented one broker. While another agreed saying, "Their [volume bonuses] are open to abuse and are a conflict of interest. I'd much rather see bonuses paid on quality."

Third Party Banking Report 2014 - Non-Major Banks
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