Australia’s major banks have been quick to acknowledge the findings of The Adviser’s Third Party Banking Report – Major Lenders. While they all have their shortcomings, the majors are focused on lifting their third party operations
The Adviser’s Third Party Banking Report –Major Lenders report revealed some big views by brokers about the five banks that dominate mortgage lending in Australia.
It is clear from the report that the banks’ approach to third party distribution has a massive influence on the broking industry
Five banks dominate mortgage lending in Australia and their approach to third party distribution is a massive influence on the broking industry. Last month, brokers were given the opportunity, through The Adviser ’s Third Party Banking Report – Major Lenders , to provide the big five with critical insights into how they rated across their entire third party operations.
The report unveiled the views of almost 470 professional brokers – all of whom write regular business with the majors.
Each of the initial 740 brokers who participated in the survey were asked to rate the five banks on a scale of between 1-5 (5 being very good), on a total of 16 metric covering product, support, technology and commissions.
The final scoring was determined only from the responses by brokers who had written with at least four out of the five majors in the last six months.
This brought the number of surveyed participants from 740 to 469, in order to ensure the accuracy and relevance of the feedback on the majors.
The responses were analysed by Retail Finance Intelligence (RFI) – a research house specialising inthe mortgage industry – to ensure the results were transparent and credible.
The Adviser presented the full findings of the report to each bank individually, giving every institution the opportunity to consider its perceived strengths and weaknesses from the eyes of its customers – the broker.
There were failings across the board in certain areas – most notably in BDM support, turnaround times, business support and channel conflict – but overall there were many positives to be drawn.
While all the banks fell down in some areas, there were others where they collectively performed well. Most of the brokers surveyed were largely satisfied with the majors’ product range, policy, pricing and web presence, for example.
In terms of product, ANZ stood out for having the best range, CBA fared well in terms of cross-sell, while NAB outshone the other majors in terms of policy and pricing.
ANZ and CBA were the clear leaders in regards to support through their BDMs, credit assessment staff and clients. They also posted positive turnaround time feedback. Separately, brokers viewed CBA as leaders in the field of education and training.
ANZ fared well with commissions, while Westpac received positive feedback based on their technology platform and web presence.
It is, however, on an individual basis where there were stark differences in the findings of the report.
What will be of considerable interest to the broking industry is how the different institutions address their successes, and perhaps more importantly, their shortcomings.
Over the last few weeks The Adviser’s editor, Jessica Darnbrough, spoke to each of the third party heads to find out what impact the report had made on the banks, and how broker feedback would influence their approach to the third party channel over the coming 12 months.
In this issue of The Adviser the majors give their reaction to the survey, and in many cases reveal how they plan to address the areas of their business where there is room for improvement.
Most lenders said that The Advisers’ report concurs with much of their own research but there are certainly areas of some lender’s third party operations where some issues have been unearthed.
The third party figureheads of each group have acknowledged the concerns of the broking industry and it would appear that action will be taken in many of the areas where than fall short.
LESSONS FROM THE FIELD - NAB
Despite being ranked last by brokers in terms of overall service, NAB has acknowledged that there are areas of its third party business that need addressing, and says that change is already underway.
NAB fell short of the field in the Third Party Banking Report – Major Lenders after failing to meet broker expectations on BDM support, turnaround times and remuneration.
But while the result was disappointing for the major, NAB Broker general manager of distribution John Flavell says the bank’s ranking accurately reflected where NAB stood at the time of the survey.
Mr Flavell is the first to admit that the major’s service levels were not where they should be when the survey was conducted.
NABs turnaround times blew out after Westpac hiked its standard variable rate 20 basis points above the RBA’s 0.25 per cent increase.
Mr Flavell says Westpac’s decision to step out of line with the RBA caught NAB off guard, leaving the major unprepared to deal with the sudden influx of business.
However, Mr Flavell says the major is determined to turn this problem around and has, for the last 16 weeks, consistently concentrated on delivering positive changes.
“The results of the survey reinforced that we are focusing on the right areas,” Mr Flavell says.
“We commenced rolling out improvements in early March and have made significant progress in enhancing servicing times with changes to policies and processes.”
According to Mr Flavell, the bank has already made vast inroads into improving turnaround times, which is reflected in the positive feedback the major is now receiving from its brokers.
“In April, we achieved our second largest settlement volume ever, and record numbers of applications and unconditional approvals,” he says.
NAB’s turnaround times were not the only major bone of contention for survey respondents, with brokers also voicing their concerns over the major’s lack of BDM support.
“The low scores for the support and service we were providing our broker partners at the time of the survey were very disappointing,” Mr Flavell says.
Since the survey was conducted NAB has increased its support team’s autonomy and their ability to escalate disputes however.
With this approach NAB hopes to ensure minor matters are resolved quickly and easily.
Mr Flavell says that for the bank’s brokers to be confident in the face of customer enquiries or complaints, they must have “trust in the relationship manager’s efficiency as a ‘fix it’ point to assist when processing or credit issues arise”.
“The service levels brokers would have received from us at the beginning of the year clearly eroded some of this trust and it’s reflected in our credit assessment staff and client support results in the report.”
BANKING ON TECHNOLOGY
The bank says it will continue to invest in its technology, with the aim of improving the efficiency of Homeside’s online application systems through simplifying and automating the processes.
Future changes will take effect in August, and will bolster bank’s processing capacity and streamline its credit policies.
“There are many initiatives in place that will improve our technology platform, policies and processes. Once these are implemented, we believe we will be in a great position to be the partner of choice for brokers,” says Mr Flavell.
Another area of focus this year is the provision of guidance and advice to help brokers build sustainable business as the industry transitions to licensing.
“NAB Broker is committed to the broker market and we see the mortgage broking industry as a long-term, viable part of the financial services industry.”
RESOLUTE IN ITS STRATEGY - WESTPAC
Despite placing fourth, Westpac remains confident that it is on the right track and says there are plenty of positives the bank can take from the report.
There is little doubt that Westpac’s current product pricing and tighter maximum LVRs have cost the major broker support. But Huw Bough, Westpac’s general manager broker distribution, remains bullish about the bank’s performance in the third party distribution channel.
Westpac took top honours for its internet presence and performed well with its online lodgements in The Adviser’s Third Party Banking Report – Major Lenders – a position that didn’t surprise Mr Bough.
“The marketplace has consistently recognised our online process as one of the easiest to use,” he says.
But while Mr Bough concurred with The Adviser on Westpac’s strong performance online he was reluctant to accept the bank’s poor performance in other areas.
Westpac consistently ranked fourth or fifth in all other areas of the survey, apart from turnaround times and simplicity of commission structure – where the bank came in third.
“Independent research that we subscribe to suggests our current broker relationship model is working well for our professional brokers who have very strong local relationships with us,” Mr Bough says.
Westpac’s local broker relationship model was launched in May 2009 and is aligned to the bank’s overall strategy of “delighting both brokers and their clients”, according to Mr Bough.
“Overall our key focus here is to ensure that Westpac-accredited brokers provide an optimal customer experience and quality advice about Westpac's mortgage products, policies and associated services,” he says.
Mr Bough was also quick to defend Westpac’s product policy and pricing, stating that this was not an area of concern for the bank.
“Over the last 12 months, our products and services have achieved number one position in a range of reviews conducted by independent panels of professional brokers and industry specialists,” Mr Bough says.
The Adviser’s regular bi-monthly product showcase consistently placed Westpac products in first place throughout 2009, but broker support flagged in 2010.
The bank’s fall from its regular top spot last year to fourth and second in the two rankings conducted so far in 2010 coincides with the lender’s reduction of its maximum LVRs and a blowout in its variable rate.
But product was not the only area where Westpac was reluctant to accept broker criticism.
Despite ranking last in cross-sell, Mr Bough says Westpac is strong in this area.
“Our business is closely aligned to our local branches to ensure broker-introduced mortgage customers are on-boarded in a seamless fashion to a local Westpac branch, and in agreement with the broker further products and services are discussed with the customer.
“Currently our average product per customer is 2.54 – the highest of all the major Australian banks.”
KEEPING IT LOCAL
With regard to overall advocacy and support, Mr Bough says Westpac's accredited brokers are meeting their local bank mangers face-to-face to harness a one-team approach, leading to reductions in potential channel conflict and improved cross-selling opportunities locally.
“We will continue our focus on building stronger local relationships between brokers and our branch teams that result in delivering sustainable and valued business partnerships to benefit the customer,” he says.
Over the next 12 months, Mr Bough says Westpac’s brokers and their clients can expect further enhancements to the bank’s local relationship model and its service proposition as it continues to receive feedback from the industry.
“For our key broker partners, Westpac is leading the marketplace on service proposition, with unconditional residential finance approval being achieved in less than 24 hours for applications that fit our auto approval criteria,” he says.
SIZE DOESN'T MATTER - ST GEORGE
The smallest of the majors secured a respectable third place, but rather than rest on its laurels, St George has vowed to invest further in BDM support to boost its third party operations.
Despite being the smallest lender among the major five, St George bank still managed to out rank parent company Westpac as well as NAB.
St George’s general manager of third party banking and distribution Steven Heavey says the results of the survey were a welcome surprise.
“Given the broad range of brokers surveyed, I thought the placing of St George was fair, and reflects positively on our level of service provided to all brokers,” he says.
In fact, the major stacked up well against its larger competitors despite the increasing ‘flight to brand’ that came about as a result of the GFC.
“The GFC prompted a shift to the major banks as customers increasingly wanted to deal with a ‘stable brand’.
“We didn’t benefit from this as much as the other banks. But the fact that we were able to maintain the high level of advocacy that we did gives us the confidence to say we are well positioned in this industry, and we are doing a reasonable job,” Mr Heavey says.
Despite not coming first in any of categories, St George was the only bank not to come last in any section– highlighting the bank’s “across the board service”.
“Our commitment to the broker channel is stronger than ever; it is a critical element in the distribution strategy of St George,” Mr Heavey says.
“Our goal is to be the best mortgage lender brokers deal with by providing award winning products and service.
“We understand what brokers need to build effective and long lasting relationships. We will continue to build on St George’s strengths by showing brokers how they can benefit from the bank’s commitment to quality business.
“We pride ourselves on being a bank that offers brokers the strength, security, products and services of a big bank, with the genuine support and friendly service of a small bank.”
While St George performed well across the board, Mr Heavey says there is always room for improvement.
The bank is currently working on better managing its broker relationships. Within the survey, St George ranked third overall in terms of its BDM support and broker communication – a position the bank would like to improve.
Mr Heavey says it was interesting to see in the survey that most brokers believe St George doesn’t have enough front line staff and BDM support – a perception he would like to change.
“We have a dedicated frontline support centre. We not only have relationship managers, but also scenarios and post settlement teams, and I don’t think our brokers fully understand how comprehensive our support team is,” he says.
Mr Heavey says given the investment put into its BDM force, he was “surprised” the bank did not perform better in this category.
“Having seen the results, I now think we could better advise the market that St George has a huge frontline team.
“There are not just BDMs, but indeed a whole group of dedicated professionals that can provide support around scenarios, support around deal progress and support around post settlement.
“It is important for us to get out there and let our brokers know that they do have alternative avenues to take if they can’t get hold of their BDM.”
THE FUTURE IS TECHNOLOGY
Another area the bank is hoping to invest in over the coming 12 months is online technology.
The bank recently re-launched its online platform for brokers.
The platform provides a range of functions that brokers can use to gain a better understanding of deal progress.
“Our brokers will be able to lodge electronically over that platform as well as view, at any given time, key measures like conversion rates and run off,” Mr Heavey says.
“There is a wide range of functionality that brokers can access to get a good understanding of the customers they have introduced to St George.
FAR FROM COMPLACENT - ANZ
ANZ was a stellar performer in this year’s ranking, landing within a whisker of first place, but the major says there is still room for improvement.
ANZ performed very strongly in the Third Party Banking Report – Major Lenders, falling just 0.2 points shy of CBA in first place. But despite being pipped at the post by CBA, Meg Bonighton, ANZ’s head of broker distribution, says the bank was pleased to be ranked second overall since it will force the major to better itself in the year ahead.
ANZ excelled in numerous areas, including product range, BDMs, broker interaction, broker communication, channel conflict, online lodgements and remuneration.
However, Ms Bonighton says the bank will be far from complacent. In fact, the bank is planning to expand its product suite where possible and invest further in BDM support.
Ms Bonighton says ANZ is constantly looking to “tweak its product suite to ensure its customers are well catered for”.
“We are not looking to have the biggest suite of products, rather we want to have a suite of products that suit all of our customers’ needs,” Ms Bonighton says.
“ANZ is quite well known for excelling in product range. We have received numerous awards over the years for our products and it is something that we continue to invest in.
“I guess the more recent highlights around our range would be the Simplicity PLUS product, which has been extremely popular, and also the ANZ Portfolio – which was launched last year and has been very successful.”
But product suite aside, Ms Bonighton says the bank’s primary focus will continue to be on BDM support.
“ANZ understands how important good BDM support is; we also know how crucial broker communication is. That is why we invest so heavily in those areas, and it was pleasing to see those were also the areas we excelled in,” she says.
Moving forward, ANZ has vowed to continue to invest heavily in BDM support, broker service and turnaround times.
“As a bank, we are dedicated to providing a great working environment for our third party distribution channel. And one way to do that is by improving our broker service and turnaround times.”
Pre-GFC, 48 hours for assessment was widely considered to be the industry average. However, when the GFC hit, all five majors saw their lending volumes raise sharply.
GATEWAY TO THE FUTURE
Ms Bonighton says ANZ is hoping to get turnaround times back to where they were pre-GFC, however, they are also working with brokers to understand what is an acceptable turnaround timeframe.
The lender is also planning to invest heavily in its online technology in a bid to improve transparency and flexibility.
Ms Bonighton says the bank is aiming to give its brokers greater visibility in terms of loan progression.
“We want to support our brokers and their businesses. One of the key things we will take from this survey is the need to increase our level of business support.”
Indeed, one of the only areas ANZ failed to meet broker expectations in was business support.
But not one to be left behind, ANZ is determined to improve its level of business support within the next 12 months through holding regular broker meetings to get a better understanding of how the issue can be resolved.
“We want to ask our brokers what type of support they want from their lender. Ultimately, we want to do what we can to help our brokers grow their businesses, while at the same time, help them understand more about ANZ and what we, as a lender, can offer them and their clients,” she says.
“We want to work together with our brokers to ensure they are providing the best customer experience.”
With these goals in place, ANZ hopes its improvements to broker communication, online presence and business support will push the lender into first place in next year’s ranking.
“I would like to think that this time next year, coupled with all the progress we are making in the service side, that we could certainly be number one in this ranking.”
“One of the key things we will take from this survey is the need to increase our level of business support”
TAKING THE GOLD - CBA
CBA topped this year’s Third Party Banking Report – Major Lenders, having performed well in most categories. But despite the good result, CBA is committed to further improve its offering
CBA solidified its reputation as Australia’s leading major lender when it placed first in The Adviser’s inaugural Third Party Banking Report – Major Lenders.
The major consistently ranked first or second in most areas of the survey apart from policy and pricing and remuneration, where the bank came in fourth.
Kathy Cummings, CBA’s executive general manager of third party and mobile banking, says the survey results correlated very closely with the ongoing feedback the bank receives from its brokers.
“This tells us that we are on the right track with our emphasis on training and education, and our focus on quality business,” she says.
Ms Cummings says the bank is committed to being the number one lender for brokers – and it would appear it is on the right track, although ANZ is not far behind. Earlier this year, CBA was named ‘Lender of the Year’ at the MFAA Excellence Awards, suitably impressing broker voters with its consistent service and business support.
In the report, brokers named CBA as the number one lender for business support – the achievement Ms Cummings is most proud of.
“We have been trying very hard to help our brokers build their businesses. We are the only major Australian bank to reward brokers for selling non-home loan products,” she says.
FOCUS ON CROSS-SELL
The bank has a referral program in place that aims to encourage brokers to look after their customers’ total banking needs.
The program, called CONNECT, has been high on the priority list for CBA for some time, with the major investing in the program for the last five years.
“While we understand the home loan is the core product, we also know customers need a transaction account, credit card and loan protection insurance.
“Brokers who support their customers with these products deliver higher customer satisfaction, which generates more referrals, and as we know, referrals are the lifeline of a broker’s business.”
Through the CONNECT program, brokers are remunerated for every converted referral they pass on to CBA.
The bank recently expanded the number of products brokers are remunerated on to 16.
CBA currently runs training workshops to help brokers understand how to use and maximize profitability through the CONNECT program.
Training and education was another area CBA managed to excel in, according to the survey.
Broker respondents placed the bank first in education, giving it 3.42 out of 5 – markedly higher than the average score of 2.99.
Ms Cummings says the bank has significantly increased its investment in education and training in the wake of the GFC and in preparation for the pending regulation, including programs tailored to assist customers in financial hardship and protect the broker’s trail.
“Since January this year we have conducted more than 350 workshops/training sessions which have attracted more than 4,500 brokers; 78 per cent of the brokers rated the training as offering information appropriate to their needs,” she says.
ROOM FOR IMPROVEMENT
While CBA managed to impress the broker channel in most areas, the major failed to impress when it came to remuneration – placing fourth out of the five major lenders.
Despite the unfavourable result, CBA says it has no plans to change its current commission and remuneration structure.
The bank came under fire in May 2008 when it cut commissions.
Ms Cummings argued that broker remuneration was restructured in line with market economics to ensure the sustainability of the mortgage broking industry – a stance she continues to support – and says CBA’s current remuneration structure is still in line with market conditions.
“We have no plans to alter our commission structure, which is based on a five year loan life,” she says.
Instead, Ms Cummings says that the bank will focus its energies on supporting its broker channel as they head towards regulation.
“For our quality, high volume producers this means we will continue to offer them education and training in the areas of business management, and we will help to improve their efficiencies by offering them the ability to print home loan documentation in their office,” she says.
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