The Adviser asks Australia’s big four banks to share their thoughts about the 2015 Third Party Banking Report – Major Lenders
The results of The Adviser’s biggest and most influential ranking are always highly anticipated, and this year was no different. In 12 short months, Westpac managed to leap from fourth place to first, trading places with NAB Broker in the process. Meanwhile, CBA and ANZ retained their positions in second and third place, respectively.
While the final rankings were striking, what is perhaps more significant is that every bank upped its game in the eyes of brokers over the past 12 months – proof that the third-party channel is being given the support and attention it deserves from Australia’s biggest lenders.
Brokers are writing the lion’s share of Australia’s residential home loans. This is a fact the majors can’t ignore, and judging by their response to the report, the broker offering of the big four will only continue to grow. Westpac finished outright first in 18 of the 23 categories in the report and equal first in another (with CBA). NAB Broker won three categories outright while ANZ won one category outright.
Across the board each of the majors showed their strengths and revealed areas for improvement across broker support, remuneration, product and technology.
This year, 896 brokers completed the survey, up from 677 last year. This level of engagement is not only evidence of the third-party channel’s commitment to improvement, but reflects the level of engagement the majors have with their broker partners.
The proof is in the pudding, as they say, and this year 82.51 per cent of respondents had written a residential loan with Westpac in the past 12 months. The next closest was ANZ, with 69.41 per cent, then CBA with 67.49 per cent and NAB Broker with 62.98 per cent.
2015 OVERALL RANKING
Product: 3rd(+0.38 on 2014 score)
Support: 4th(+0.28 on 2014 score)
Commission: 1st(+0.75 on 2014 score)
Technology: 4th(-0.21 on 2014 score)
NAB has done incredible things for third-party banking over the past five years. The lender continues to improve, and this year retained its position as the best of the big four on the remuneration front, as well as leading the market on rates.
“Overall, clearly NAB Broker would have loved to have finished on top of the list,” Mr Kane says.
“It’s a great recognition and also a good lead indicator of what you need to focus on in relationships with your customers – the brokers,” Mr Kane told The Adviser.
“So while it’s a little disappointing, we have managed to maintain or even grow our percentages in the various categories so we haven’t really gone backwards,” he says.
Mr Kane notes that the ranking contributes significant value to NAB Broker’s overall operating model: “It’s valuable feedback,” he says, “and we clearly have done a number of things to improve our proposition in the broker market and that is evidenced by the level of business we are getting at the present time, which is significantly greater than this time last year.”
NAB Broker improved in a majority of categories, just not at the same rate as the lender’s competitors, which leaves plenty of room for improvement.
Remuneration will always be an important proposition for the bank and brokers clearly value its unique stepped-trail model. While few brokers are driven by commission, remuneration remains an important way of recognising the value broker-introduced customers bring to the banks.
“Over time it creates value on a customer basis rather than on a loan basis,” NAB Broker’s general manager of broker distribution Steve Kane says.
“That does a couple of things: firstly it continues to reward the broker to do what we want them to do because we offer ramped trail and they look after the customer; and it continues to keep the customers with us, either on that particular mortgage or the next one,” he says.
“Importantly for the broker, it is an increased revenue stream, but it also builds long-term value to their business because those businesses are valued at a multiple of trail and if it is increasing with the ramped trail, that increases the ongoing value of a broker’s business.
“It is really our view to continue to be competitive in the market around pricing but also make sure we recognise the value brokers bring to us, not just with the mortgage but with the customers themselves.”
All major banks are looking to harness the power of technology and NAB is no different in this area.
“We are always focused in on our technology piece and clearly we’ve got some great learning through UBank around the digital space,” Mr Kane says. “One of the things we say to brokers is that the digital space is not something to be frightened of; it’s something we should learn to use to our advantage in this channel.”
Mr Kane says the bank is continually looking at ways to improve connectivity between the customer, the bank and the broker. Over the next 12 to 18 months, NAB Broker will explore how to benefit from the increased digital interaction by customers and bring brokers into the loop.
Not too long ago, NAB boasted the largest BDM force in the market; however, the lender’s competitors quickly realised this strategy and replicated it.
While other banks look to improve their relationship with brokers, NAB has set up a process whereby the area that services all brokers for credit approval, documentation and settlements is now lined up with the way the BDMs manage brokers on an account basis under the various aggregators.
“We are also looking to add value by strengthening those teams so there will basically be a lead BDM who will have the senior relationships, there will be an in-house person making sure everything goes through very smoothly and they will be supported by others which flow through to our third-party area,” Mr Kane explains.
“So we are aligning them on a pure account management basis so a broker will know exactly who they are dealing with from when they work with us at a BDM level right through to the transaction and beyond,” he says. “We are reorganising our structure within NAB Broker.”
It is in a bank’s own best interest to have more products with every customer; the strategy simply builds the profitability of the channel.
Most importantly, banks need to do this in partnership with brokers.
NAB sees the real challenge and opportunity in not so much the cross-sell of transaction accounts and insurance products, but the cross-sell of additional lending products.
“We entered into the commercial broking sphere two years ago and that has been very successful and is the largest commercial bank in Australia,” Mr Kane says.
“We are looking at the small business market and will come out with an offering shortly in the small business market that will assist those brokers deal in that market, particularly the sub-$2 million category where the property is security,” he says.
“We see those as real growth opportunities for the broker market and we think that’s more akin to the way in which we diversify.”
2015 OVERALL RANKING
Product: 4th(+0.34 on 2014 score)
Support: 3rd(+3.16 on 2014 score)
Commission: 4th(+0.52 on 2014 score)
Technology: 3rd(+0.98 on 2014 score)
ANZ’s head of third-party relationship channels, Keiran Evans, says the lender is pleased with the progress it has made over the past year. The major bank continues to identify better ways to support brokers and its improvements across most categories this year continue to show ANZ is listening to what brokers want, Mr Evans says.
“We made a significant investment [in] increasing and strengthening our BDM team to deliver better service to brokers,” he says.
“We also increased investment in industry business development via major sponsorships in aggregator professional development programs.”
Behind the scenes, turnaround times have improved even further since the survey was held, with over 90 per cent of all deals assessed the same day.
Towards the end of last year, ANZ moved to ‘six days a week’ assessment so customers thinking of purchasing property on a Saturday could secure a home loan with ANZ via their broker.
Working with ANZ offers brokers access to diversification opportunities, particularly through the bank’s dual commercial app, Mr Evans noted.
“With our third-party channel delivering about half of all ANZ home loans and many new-to-bank customers, we remain committed to our broker business,” he says, adding that ANZ’s challenge is to keep working hard with brokers to ensure the home loan experience is surprisingly easy.
2015 OVERALL RANKING
Product: 2nd(+0.23 on 2014 score)
Support: 2nd(+2.50 on 2014 score)
Commission: 3rd (+1.08 on 2014 score)
Technology: 2nd(+1.21 on 2014 score)
Australia’s biggest bank has been busy working on a number of initiatives aimed directly at making it easy for brokers to do business with CBA. Overall, the bank was pleased that it has shown improvement in most categories. Widely considered to be the leader of the pack in terms of its digital offering, CBA sees its technology as a key point of difference.
“Our leading technology differentiates us in the market and we are constantly reviewing opportunities where this can benefit our broker partners,” CBA general manager of broker sales, Sam Boer, says.
“Our CommBroker website is a great example of a ‘one stop shop’ for brokers, providing all the information and forms they need to lodge an application as well as being a portal to lodge online and track,” Mr Boer says. “In addition, our efforts to digitise mortgage documents will reduce the administrative burden for brokers so they can spend more time providing valuable advice.”
Over the past 12 months, the bank has implemented a range of policy and process simplification initiatives, including the new fast track process, which delivers decisions on most simple home loans in 24 hours, and an online pricing tool which delivers an immediate answer.
CBA also conducted a review of its support structure and realigned it to better suit the market, growing its broker support team with an additional four relationship managers and six broker direct staff to provide support, coaching and business development for brokers and their teams.
Mr Boer expects these changes to really start delivering benefits to brokers over the coming months. In consultation with brokers and aggregation groups, CBA rolled out a new standard commission model that includes 0.15 per cent first year trail and a ramped trail option.
“These changes, along with a raft of other policy and process changes, are very clear signals of our commitment to the industry,” Mr Boer says.
Pricing is one key pillar of CBA’s strategy and brokers can use the bank’s online pricing tool to secure a better rate for their customers. However, Mr Boer admits that a strategy built on pricing alone is not sustainable.
“Along with focusing on delivering great products, consistent processing, robust credit policy and market-leading technology, customer service is at the heart of everything we do,” he says.
2015 OVERALL RANKING
Product: 1st (+1.77 on 2014 score)
Support: 1st(+7.11 on 2014 score)
Commission: 2nd (+1.39 on 2014 score)
Technology: 1st(+2.81 on 2014 score)
Rocketing up the rankings into the top spot, Westpac has proved that investing in the lender’s third-party proposition has helped brokers in all areas of their business.
“We are very pleased with the results,” Westpac general manager of broker distribution Tony MacRae says.
“We are also very privileged that brokers have taken the time to respond and have ranked us in the way they have,” he adds. “It has been a transformational journey for us. If you look through the results of previous years, we started closing the gap two years ago and got a little closer last year.”
This ‘transformational journey’ has also been one of growth for Westpac, which over the past few years has changed from being a mono-line product provider focused on transaction to very much moving towards a true partnership model.
Mr MacRae says Westpac’s strategic approach has been closely aligned to the growth and success story of the mortgage broking industry in Australia.
“With well over 50 per cent of mortgage consumers using a broker, our industry has grown very fast and is an established component of the Australian financial services landscape which actively contributes to the overall prosperity of the nation,” he says.
“However, growth for growth’s sake is short term, and together with aggregators, brokers and our One Team Westpac partners, we have a view of deepening and strengthening the level of our partnerships to ensure we are growing business in a sustainable, reputable manner to help home loans customers own their homes sooner.”
Westpac was ranked overall leader and number one across 18 of the 23 survey categories.
“This speaks volumes around quality growth and balancing improvement across every aspect of the key broker business drivers when considering their lender of choice,” Mr MacRae says.
“Moreover, under the current economic environment, brokers are placing both higher value and priority on these key drivers – over price, rate, commission and remuneration – when taking a long-term view of good quality growth,” he says.
“That starts from our relationship with brokers and aggregators through to our relationship with branches and ensuring that the brokers feel they have a relationship with the branch. But also, they should feel close to our credit team, our operations team, our product team – and then broadening that relationship to other parts of the bank.”
Last year, Westpac introduced personal lending and general insurances that brokers could sell. This year, the lender wants to expand the idea and is looking to move into other risk products, as well as with a particular interest in foreign exchange.
“We have a lot of borrowers who do business overseas or transact overseas and we think that we can add some value by providing a really nice foreign exchange service,” Mr MacRae says.
One of the most pleasing aspects of the survey was the bank’s score and the movement of that score in the category ‘Commitment to the Channel’, notes Mr MacRae.
“By opening up a broader part of the bank, brokers have felt that we are back and committed to the channel. We never left, but there was a perception that we perhaps weren’t as committed as other banks,” he says.
Helping brokers add new revenue streams to their businesses has also played a key role in Westpac’s strategy.
“We have also listened to other things brokers have told us,” Mr MacRae says.
“We needed more BDMs, a different skill set from our BDMs and we needed them to be far more visible. We have increased our BDMs by a third in the last 12 months and are training them in new skills and services so they can bring new skills and services to brokers.
“We listened to brokers on commissions. We didn’t want to lead the way, but we needed to get back into the market on commissions. We have made some small changes around our product pricing. In February, we went above and beyond the RBA interest rate cut.”
Westpac’s journey of improvement in the third-party space has been about re-engaging with brokers whom it may have disenfranchised or lost touch with, according to Mr MacRae.
“If you just look at the way we do business today it is very different to the way we did business five years ago,” he says. “Our relationships and partnerships with all of the internal bank players are significant today. What we do in our back office is completely different. The ownership and culture of the guys has completely changed.
“This is not just about our BDMs working with brokers; this is about the whole bank going on this journey. We call it the service revolution and it’s about making life better for brokers, aggregators and customers so that they can fulfil their dream of home ownership and financial security.”
Westpac has almost doubled the number of brokers in its Platinum, A Plus and A Plus Prestige segments over the past 12 months.
“That’s because they have grown the volume of business that [they do] with us or the quality of business they deliver for us,” Mr MacRae says.
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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