The Adviser's Third Party Banking Report – Major Lenders 2015 attracted feedback from almost 900 mortgage brokers across Australia.
It has been a big year for banks and brokers as record-low interest rates and strong demand for residential property continue to drive demand for mortgages.
With brokers now writing the majority of home loans, the major lenders have all worked to improve their individual offerings and in the eyes of loan writers have largely improved over the past 12 months. Judging by this year’s feedback, all four majors have upped their game, recognising the significance of the third-party channel and deepening their relationships with brokers.
This was most evident in broker sentiment towards remuneration over the year, with a 12.47 per cent improvement on last year’s result, indicating that the third party has welcomed an increase in commissions delivered by the big four.
Many brokers who dealt with Westpac over the past 12 months felt compelled to leave their feedback, suggesting a high level of engagement and satisfaction with the products and services of Australia’s oldest bank.
While Westpac has perhaps not been the lender of choice for many brokers over the past five years, the results of this year’s survey show the bank has gone to great lengths to up the ante across all areas; those who use Westpac on a regular basis are now overwhelmingly pleased with the bank’s offering.
Westpac’s hunger to take out the top spot in the rankings was therefore strikingly clear in this year’s broker survey findings.
To determine this year’s rankings, we invited brokers who subscribe to TheAdviser.com.au’s daily bulletin to fill in a questionnaire which included 23 metrics in four categories – product, support, technology and commission.
The poll was left active for a three-week period. Each lender was also given the opportunity to send the survey to its accredited brokers.
This year, a record 896 brokers completed the questionnaire. Respondents were asked to rate each of the big four banks on a scale of 1 to 5. (1: ‘very poor’; 2: ‘poor’; 3: ‘average’; 4: ‘good’; and 5: ‘very good’). It needs to be stressed that these are rankings – not a conclusion that the lender is either good or bad – and a score above 3.5 typically means the bank is doing pretty well in that area. Any score in the high threes or low fours represents a job well done.
Arguably, the best way to see how a major has performed in the past 12 months is to compare its results in 2015 with last year’s scores, and again, we’ve done just that with the easy-to-read graphics.
With similar pricing and product offerings across the major banks, policy has influenced where brokers place clients.
Even before the Reserve Bank cut the official cash rate, Australia’s big four banks were all individually tweaking the prices of their offerings, particularly for fixed-rate loans, thanks to a prolonged period of cheap funding.
But with the cash rate slashed to an all-time low of 2.25 per cent in February, the majors now have even more incentive to drive competitive products through the third-party channel.
With that said, it is not all about rate. While it can often be hard to look past much of today’s home loan pricing, brokers understand that having a range of options and, more importantly, the right policy can determine where a broker places their client.
Overall product ranking
Westpac made huge progress over the past 12 months in expanding its range of loan products. The lender has leapt all the way from last in 2014 to first place this year, beating second-placed CBA by 0.29 points to achieve a score of 4.19.
Over the past year, many of Westpac’s new products have now found their way into the broker channel and the group is seeing a positive response from loan writers across the board.
Westpac has introduced a range of new cross-sell products for brokers including general insurances, mortgage protection, equipment finance and personal loans.
One broker commented that Westpac’s product range has improved significantly over the past 12 months, “but realistically this has turned around in the [far more recent] few months”.
CBA, meanwhile, improved marginally on its product range score this year, while ANZ lifted its game by 0.12 points.
Competitiveness of policy:
Westpac shone this year with its competitive policy. Building on last year’s impressive 0.43 point gain, Westpac has this year engaged with its brokers across policy options to take it from fourth place to first in 12 months.
Over the past 12 months, Westpac has opened up specialised policies for brokers to service their broader customer base through its medical and industry specialisation policies in addition to its well known policies regarding overseas investors, which sees it take a large portion of that market.
One broker highlighted that “Westpac accept overseas income and have faster processing than other lenders”.
Another said they would value a change in policy for self-employed clients.
The good news is that all four majors improved in this category, CBA was a close second this year, with 3.91, and with ANZ hot on its heels on 3.85. NAB Broker also improved by 0.07 points this year.
In this category, brokers were asked to rate the big banks based on the availability and quality of any products that could be provided alongside the home loan, as well as on the level of support for doing so.
Successful brokers build their businesses on more than one revenue stream; lenders that can help them achieve this are highly regarded.
Proving that it has truly turned a corner with product, Westpac was in pole position this year without any shadow of a doubt. The major improved by a whopping 0.46 points for a score of 4.05 in 2015. This achievement built on last year’s improvements, while Westpac gained 0.39 points to be placed second.
Over the past year, Westpac has introduced new cross-sell products across its business. One broker commented that the lender offers a “good” credit card product, while another said Westpac’s offering could be improved “if there was a commercial benefit to ‘sell’ the bank’s transactional offerings”.
Conversely, one broker pointed out that “mandatory credit cards are becoming an issue as more clients do not want to hold one”.
Longstanding leaders in the cross-sell category, CBA improved marginally over the past 12 months to place second with a score of 3.87.
“CBA make it easy for brokers to cross-sell and give a referral fee for doing so,” said one broker.
“The other three majors don’t, even though they advise that the customer goes into a branch to sign documents.”
NAB Broker once again proved that it is the market leader on rate. The bank maintained its position, improving marginally by 0.02 for a total score of 3.83 this year. On February 3, the Reserve Bank slashed the official cash rate to a new record low of 2.25 per cent, causing the majors to quickly pass on the rate cut in varying amounts.
CBA led the big four by announcing a standard variable rate of 5.65 per cent within hours of the RBA’s decision. Next was Westpac, followed by NAB and ANZ.
While the standard variable rate is a good competitive benchmark, the true value proposition of a broker often comes in their ability to achieve discounted rates for their clients from the major lenders.
In this year’s major bank ranking for rate competitiveness, CBA and Westpac tied for second with a score of 3.78. For CBA this was a 0.07 point increase on last year, while Westpac saw a 0.35 point leap, overtaking ANZ which came in last with 3.58. Over the past five years, Westpac remained the bottom of the bunch on rate as brokers looked to other banks for more competitive offerings. However, the lender’s scores have steadily risen since 2012. While the major has never been outspoken about using rates to drive business, it is clear from this year’s results that its new prices have won business from many brokers.
All majors in this category increased their score from last year and should be congratulated for remaining competitive on rates and providing cheaper mortgages for brokers and their clients.
As the backbone of a broker’s service proposition, support is critical for getting deals across the line. Timing is everything in today’s market. The lenders that have invested in their support systems have had a massive impact on brokers this year.
This section of the report covers the most categories and includes credit assessment staff, turnaround times, call centre support, BDM support, broker communication, broker interaction, training and education, business support, commitment to the third-party channel and channel conflict.
With such a comprehensive range, it is clear to see how support goes far beyond the loan approval process; it is also about educating brokers in new products, services, technologies and systems.
As well as being competitive on turnaround times, the majors that have spent time training their brokers and keeping the lines of communication open are the ones who have reaped the rewards across this category.
Westpac has made significant investments across all areas of its third-party support services in the past year. The bank increased its BDM team by one third; delivers four-hour turnaround times and direct access to credit managers for its Platinum brokers; and is moving towards an overall standard credit assessment turnaround time of 24 hours.
Westpac has also implemented a cultural change program for its BDMs and broker support service teams designed to go beyond the mortgage transaction by helping brokers grow their business.
Overall support ranking
Credit assessment staff:
This year's results are a vast improvement on two years ago when brokers universally rallied against the majors that had offshored their processes. Last year, this was less of an issue for brokers, and in 2015 it looks as though the issue has been largely forgotten or at least lost its importance to the third-party channel. All major banks should be congratulated on boosting their scores and investing in their credit assessment staff over the past 12 months.
The top gong goes to Westpac, which ramped up its proposition in this area by a highly commendable 0.64 points to secure first place. That’s a big improvement on last year, when the lender ranked last in credit assessment staff yet improved markedly on 2013.
CBA came in second with 3.88. Next was NAB Broker with a comparatively steady 3.65. ANZ was last in this category but still managed to improve on last year’s score by 0.26 points.
Call centre support:
This category was first introduced last year and looks at the overall service quality of the majors’ technical knowledge, responsiveness and helpfulness when it comes to call centre support. Last year, many brokers vented their spleens about the frustrations of overseas call centres; however, all four banks will be happy to know they have improved in this category.
Westpac scored 3.97 this year, taking it from fourth place to first and improving its rating by 0.58 points.
One broker suggested that “the call centre need a lot more training and need not be afraid of asking questions of the file owner, which seems to be the case as an email is easier for them to send and ask for a phone call back”. Another noted the improvement across all majors over the last year.
CBA was a close second, while ANZ improved considerably to score 3.62 for call centre support.
NAB Broker also improved in this area.
This category is a critical one for all brokers. Turnaround times can make or break a deal. Brokers are extremely sensitive to the turnaround times of the major banks, which can change daily.
This year all four majors have been on the front foot with their turnaround times, which have increased significantly across the board. NAB Broker saw a minimal improvement on last year’s result and consequently came last in this category with a score of 3.61.
ANZ improved dramatically, scoring 0.52 points higher with 3.88, while CBA also boosted its turnaround efficiency by 0.23 points for a mean score of 3.72.
“ANZ have definitely increased productivity for credit assessment and doc preparation for WA brokers,” said one happy broker. “I had a 90 per cent LMI deal for a casual employee first home buyer approved in a day after submission - have not had that in over eight years! Had docs e-mailed to the client 24 hours after that - amazing!”
Westpac took first place for the second year running with a huge score of 4.19, up 0.57 points on 2014.
In two years the bank has risen from fourth place to first and held its position.
Westpac is currently in the process of moving towards an overall standard credit assessment turnaround time of 24 hours.
“Since being Westpac Advantage Plus, all dealings have greatly improved,” said one broker, while another broker said that “being on the priority program with CBA and Westpac has helped a lot with turnaround times”.
BDMs are a broker’s first port of call. In addition to getting loans over the line, BDMs provide valuable support for brokers building their businesses into a tangible asset with the introduction of new products and services. After taking the top spot for three years, NAB Broker has relinquished its title to Westpac this year, following 12 months of strong investment in BDMs by Australia’s oldest bank.
Westpac grew its BDMs by 33 per cent over the last 12 months as it sets its sights on becoming the number one lender among brokers for overall value and service this year. The bank has been steadily building on its support network since 2013, when it scored 2.79 in this category. Last year Westpac received a more positive result from brokers (3.39) but not enough to lift it from the bottom of the pile.
This year, with a 0.80 point boost and mean score of 4.19, Westpac’s work across its BDM network has really resonated with mortgage brokers.
“WBC always respond very quickly,” said one broker.
“Sue Hartigan from Westpac has been very helpful,” said another. “We’re very lucky to have her support.”
Another broker praised their NAB BDM, commenting that “Nick Dellis (NAB) provides the highest level of service and relationship relative to all the other lenders.”
Another said that they “rarely hear from ANZ & CBA” while another heaped praise on their BDM, noting that “Blake Hauber from Westpac has been fantastic in going above and beyond what was required”.
In this category, brokers voted on how well the major banks demostrated effective servicing of clients post-settlement. This year CBA was knocked off its podium by a strong performance from Westpac, which has once again built on last year’s notable score of 3.55. Brokers voted with their feet to bump Westpac up to first place this year with a mean score of 4.10, a 0.55 point increase.
“Westpac has improved its post-settlement support markedly in recent times,” remarked one broker, while another commented that “Westpac's branch interaction with brokers has improved significantly”.
Another broker said that “the CBA pricing request process is extremely difficult for anything other than the most basic of requests”.
One broker made a more general comment about all four majors, sayng that “depending on the client’s needs at the time, some lenders are poor some are average to good”.
All majors improved their client support in the eyes of brokers this year, with CBA increasing 0.14 points to secure second place, ANZ upping its game by 0.18 points to 3.61 and NAB Broker once again in fourth position but still improving by 0.11 points.
However, some feedback from brokers this year suggestes the majors still have room for improvment.
“Third party after support is great - branch network still do not understand how powerful the broker network is and try to undermine us,” said one broker.
Banks that have managed to clearly communicate their offerings to the third-party channel over the last 12 months performed well in this category. After holding the top spot for two years, NAB Broker was knocked down to third place after a huge improvement from Westpac with a score of 4.19, 0.24 points ahead of runner-up CBA with 3.95.
Westpac’s investment in broker support and technology, particularly electronic messaging and a strong social media strategy, has resounded with brokers. This year the lender has rocketed from fourth place to first.
Last year it was a close call between CBA and NAB, with Australia’s largest bank losing out by 0.08 points.
Last year NAB Broker overtook CBA to claim first place in the broker interaction category, following strong engagement with the third-party channel in 2014. However, this year the tables have been clearly turned in Westpac’s favour.
Westpac leapt from last to first place, improving its score by 0.62 points to 4.04. Following feedback, the bank relaunched its annual broker roadshows to drive further engagement with brokers by including their families and friends.
CBA reclaimed its position ahead of NAB Broker with a 0.08 point lead for second place while in third position ANZ saw the second-biggest improvement on last year’s result, gaining 0.22 points for a score of 3.73. NAB Broker fell from the top spot to last with an improvement of 0.07 points over the last 12 months and a – still respectable – score of 3.71.
Training and education:
As with previous surveys, brokers voted for majors that provided solid training and education around product and compliance in this category. Banks that have done this well over the past 12 months have formed closer relationships with their broker partners through support in this area. Last year’s winner, NAB Broker, has fallen to third place this year with a score of 3.59, despite a 0.05 point marginal improvement.
CBA improved significantly, maintaining second place with 3.82 while ANZ also saw a sizeable improvement, scoring 3.58 against last year’s 3.18. But Westpac outstripped all other lenders in this category, jumping 0.66 points to secure first place with a total mean score of 3.93.
NAB Broker has fallen to the bottom of the pile despite a marginal improvement on last year’s score.
In third place, ANZ picked up 0.44 points over the last 12 months for a score of 3.46. CBA secured second place for the third year running with the help of a 0.36 point increase for a score of 3.59.
Westpac took the title for this year’s best supporter of broker business with a score of 3.86, jumping 0.75 points over the last 12 months and moving up two places.
“With the ability of placing clients at all levels of the relationship model it makes WBC a good option for higher-end clients,” one broker said.
“Plus the educational days WBC provides are informative.”
Commitment to channel:
This category was introduced last year and asked brokers to rate the major banks’ commitment and loyalty to the third-party channel. Areas covered included service enhancements and ongoing support to brokers and their businesses.
In 12 months Westpac has switched places with NAB Broker; this dramatic shift was the result of a 0.77 point increase in Westpac’s score versus NAB Broker’s 0.01 point upward change.
Westpac has recruited new state managers and revamped its third-party leadership team over the past 12 months.
CBA and ANZ maintained their positions as second and third with scores of 3.81 and 3.74, respectively. ANZ added 0.29 points to last year’s score while CBA saw a 0.24 point gain.
This is a sensitive one for many brokers. Channel conflict has become less prevalent in recent years – right across the board – since most lenders now see the value of the broker channel.
As one broker put it, channel conflict remains “an ongoing issue but [one that] is improving”. Another noted that “no one's perfect when it comes to this”.
Last year, the ratings of all lenders fell in this area except for Westpac, which added 0.31 points to its 2013 result. While Westpac remained the weakest of the group, it is clear the bank has been steadily improving, taking out the top spot this year.
CBA and ANZ maintained their positions at second and third in this category, but both banks also saw notable improvements on last year’s result.
Broker commissions have come a long way since the dark days of the GFC. All four majors are now clearly committed to rewarding broker business.
Representing the only form of remuneration for many mortgage brokers, commissions are thus a key point of competitive advantage for the majors. However, history has shown that support and good service are far more valuable to busy loan writers than are commissions.
Nevertheless, upfront – and especially trail – commissions reflect not only the value of the third-party channel in the eyes of the majors but their commitment to it.
The past 12 months have seen a number of announcements on commissions from the big four. NAB announced the reintroduction of its first-year trail of 15 basis points on 24 June 2014. The commissions apply to all new loans written from October 2014. At the same time, NAB announced that fifth-year trail would be reduced from 35 to 30 basis points from October 2014.
Three months later, on 25 September, CBA announced a new commission structure. Since 1 January 2015, CBA has offered a standard commission structure that includes first-year trail of 0.15 per cent on all new settlements.
The bank also announced it is in discussions with broker groups on a second commission plan offering increasing trail payments in subsequent years. CBA also paid an extra 0.10 per cent upfront for loans settled between 1 October and 31 December last year.
ANZ and Westpac have been less aggressive regarding commissions over the past 12 months. However, they have both changed their commission structures after listening to brokers and aggregation groups.
ANZ’s trail is ramped at year four, while Westpac currently offers no ramped trail commission structure. Both banks offer a 50 basis point upfront commission.
Overall commission ranking
Once again, NAB Broker holds the title for the best major bank in this category. The lender’s 65 basis point upfront commission is the highest of the majors, surpassed within the industry only by Macquarie and Bankwest.
NAB’s 15 basis point first-year trail is on par with the rest of the majors but a ramped structure has seen it succeed for a number of years across this category.
“Currently, NAB are cheaper, faster and pay more,” said one broker.
“NAB have the best remuneration system,” claimed another.
When the bank reintroduced first-year trail in June last year, it represented an endorsement of NAB’s commitment to mortgage brokers and reflects the level of profitability that has returned to Australian mortgage lending since the GFC. NAB’s aggressive stance on broker commissions also piles pressure on the other banks if they are to remain competitive in a burgeoning third-party distribution market.
NAB’s ramped trail structure has been a hit with brokers since its launch and continues to win over the third-party channel. A number of brokers simply commented “ramped trail” when asked why they preferred this bank.
Westpac has made solid ground, improving the most of the big four over the past 12 months to work its way up from fourth place to second.
However, brokers voiced their concerns about the bank’s inconsistent commission structure: “Westpac’s commission structure is ambiguous and lacks certainty. The chop and change makes Westpac less appealing,” said one respondent.
Many brokers, such as those from Mortgage Choice, said commissions are irrelevant to them since they are paid the same across the board.
Clearly, all four banks have listened to brokers and aggregators when it comes to commissions and are keen to secure third-party business in the future.
Technology is fast becoming a critical tool for brokers as they look to deliver quick and easy mortgage solutions to their customers. The majors are well positioned to help brokers enhance the home loan experience.
As the financial services industry moves deeper into the digital age, customers look to the big banks to drive innovation in new technology.
For brokers, these expectations are even greater as the big four now control in excess of 85 per cent of the Australian mortgage market and are a key business partner for the broker channel.
Keeping up to speed with new technology across front- and back-end systems is what has separated the winners from the losers in this category.
CBA led the charge in the tech category in 2013, NAB took the title in 2014, but with a changing of the guard (including the appointment of a new chief executive) Westpac has now taken the lead.
When Westpac CEO Brian Hartzer took over from Gail Kelly in November last year he pledged to maintain shareholder returns by focusing on technology.
As this year’s results clearly show, the bank’s digital offering has been steadily gaining momentum. Westpac improved in 2014 and has built on its progression over the past 12 months.
NAB Broker’s technology offering slipped over the year, according to brokers, while all other majors improved their digital services.
However, Westpac’s efforts resulted in a victory based on a 2.81 point increase this year – more than double the increase of CBA in second place.
Overall technology ranking
The effectiveness of the major lenders’ web presence differs broadly in this year’s results. Westpac has come out on top after improving by 0.47 points this year.
It is worth noting it was the only lender to improve in last year’s ranking across this category, where all other lenders fell. While it only got to third place in 2014, this year it has claimed the top position for the first time in five years.
One broker commented that “All facilities required by brokers are generally available” across all major lenders, while another pointed out that “Westpac times out too quickly, but is the most up-to-date”.
Another said that all lenders “could be much clearer and more user friendly”.
Some brokers were less than impressed. “If we are going to be referred to the broker site, how about updating the info that is on it? NAB has two - one that only the staff can see, and another one that the brokers can see,” said one broker.
NAB AND CBA have dominated this category for the past few years. In 2012, NAB got the vote from brokers for online lodgements but lost out to CBA in 2013 and then regained it last year.
This year, Westpac has knocked them both from the podium to storm into first place with a 0.27 point lead. The lender has been steadily improving its online systems over the past year across its entire broker offering.
Meanwhile, CBA managed to maintain second place this year while ANZ took third.
“NAB and Westpac both have upload of supporting docs to the online application, ANZ are saying it is coming and the CBA system is still the old system,” noted one broker. “The CBA system has some good points, however, where the broker can amend the application online, which the others do not have.”
One broker said that they found it “frustrating having to do amendments online, rather than a simple email for CBA”.
Mobile device interface:
As brokers become more tech savvy and the use of mobile devices gains momentum, all four major banks are looking to sharpen their offerings in this area. The results are close across this category, with all lenders improving their mobile offerings by roughly the same amount. It should be noted that this category was first introduced last year and is still in its infancy as brokers start to migrate towards mobile devices.
Westpac managed to snag first place by a whisker, followed by CBA, ANZ and NAB Broker.
“CBA seem to prefer iPhone users to smartphone,” said one broker. After winning the category in 2014, CBA relinquished the top spot to Westpac by a whisker.
Online status tracking:
Westpac led the charge with its online application status tracking after making significant improvements in the last 12 months. This has clearly resonated with brokers, with one commenting that “Westpac is well ahead in this area. No other bank has come close”. However, not all brokers felt the same: “Westpac’s online application status tracking is outdated and not easy to navigate,” said one.
All lenders increased their performance in this category, with CBA taking second place followed by NAB Broker and ANZ.
Westpac and CBA tied for first place in this category, which had previously been dominated by Australia’s largest lender. After improving by 0.40 points over the last 12 months, Westpac has made significant inroads, boosting its online resources for brokers.
In second place was ANZ with a 0.17 improvement on last year’s result, followed by NAB Broker.
“NAB needs one full application form so no issues arise around privacy consents, customer ID, and personal details,” said one broker. “ANZ are not always up to date,” they continued, adding that “CBA doesn’t align with internal credit scores.”
Valuation ordering online:
Scores in this category were lower than last year for all the majors except Westpac, which improved significantly to achieve a third place ranking. NAB Broker saw a notable decline by 0.65 points.
ANZ took the top spot once again, however, with its upfront model estimate option a big hit with many brokers. “It’s really handy,” said one. “Westpac does it internally but not upfront, l think.”
Another broker said “Westpac is the only major that I can’t get an upfront valuation from. It means 100 per cent of my refis go to the other banks.” One broker said “CBA’s valuations [are] too conservative” and that “NAB’s valuations are poorer than they have been previously”.
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