To understand what the broker channel thinks of the big four banks, Momentum Intelligence, in partnership with The Adviser, asked brokers to have their say on the pillars of the banking industry. Annie Kane takes a look at some of the top findings from the Third Party Lending Report: Major Banks.
The four pillars of the Australian banking system — the Australia and New Zealand Banking Group (ANZ), the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac — have taken a beating in the last year. From damning allegations of misconduct during the financial services royal commission to the Productivity Commission’s censorious report on competition in the country’s financial system, the foundations of the banking system have been well and truly shaken.
The PC’s final report to the government states that the major banks’ market power is a “defining feature” of the financial system, but that “there is evidence that they have sustained prices above competitive levels, offered inferior-quality products to some groups of customers (particularly those customers unlikely to change providers), subsumed much of the broker industry and taken action that would inhibit the expansion of smaller competitors in some markets”.
“All are indicators of the use of market power to the detriment of consumers,” the PC report said.
The major banks, which collectively account for approximately 75 per cent of the market (according to the PC), have also been forced to divulge their shortcomings before the royal commission. As credit policies tighten off the back of the royal commission and the banks’ shift in the way they lend, we wanted to know what brokers thought of the pillars of the banking industry and who they thought was still standing tall.
In this context, we present you with the exclusive findings from the Momentum Intelligence Third Party Lending Report: Major Banks, partnered by The Adviser.
Notably, the report shows that there is diminishing satisfaction with the major banks. The average attribute rating dropped from 3.87 in 2016 to 3.54 in 2017 and this year has hit a new low of 3.35. This marks a decrease of 13 per cent over the two-year period and includes a fall in the ratings for all four major categories: product, support, technology and commission.
When compared to this year’s ranking for the non-banks, the drop is even more apparent, given that brokers gave the non-bank lenders a rating of 3.88 per cent and have rated them more highly than the big four (and their non-major counterparts) for the past two years in a row.
The big four banks were also rated least favourably for the support they offer brokers, with the support category giving a rating of 3.19 and also seeing the biggest change on last year’s figures, with a fall of 6.45 per cent.
However, where the major banks score well is in the products they put out to market through the broker channel, with the product category rated the highest at 3.62. Despite this, though, this figure was still lower than last year’s survey, by just over 4 per cent.
In March, major aggregator AFG reported that the flow of broker-originated business to the major banks (the big four and their subsidiaries) dropped from 66.14 per cent in January 2018 to 64.03 per cent by the end of February.
While this may indicate that brokers have become more willing to consider alternative options for their clients, it is also evidence of changing attitudes among the banks themselves.
For example, internal documents from Commonwealth Bank published by the royal commission reveal that the lender was actively seeking to reduce the number of accredited mortgage brokers who were either inactive or providing very little business to the group.
The project was found to be part of a broader strategy to effectively halve the number of brokers writing loans for CBA.
The royal commission also revealed that former CBA chief executive Ian Narev was supportive of changes to broker commissions. The former CEO even penned a confidential letter to Stephen Sedgwick AO in which he stated that “the use of loan size linked with upfront and trailing commissions for third parties can potentially lead to poor customer outcomes”.
However, not all the majors are on the same page when it comes to the third-party channel.
ANZ chief executive Shayne Elliott has repeatedly backed brokers, while NAB’s executive general manager of broker partnerships, Anthony Waldron, told The Adviser that mortgage brokers are a “strategic priority” for the bank.
“Growing the broker channel is an incredibly important part of NAB’s strategic objective,” Mr Waldron said.
“We want to support brokers and their customers and make sure they get the best experience they can with us.”
Overall, ANZ held on to its lead again this year, while NAB and CBA both gained one place, coming second and third, respectively.
Westpac has been notably quiet on its broker strategy in the past year, and this could perhaps explain why the bank dropped from second place last year to last place in the 2018 ranking.
Reviewing the overall categories, Westpac dropped to fourth place in each and every category (product, support, technology, commission) and was the worst rated of the big four for its support (with a rating of 2.90); while its best-performing category was product, with an average attribute rating of 3.54, this was still the lowest-rated product figure for the major banks.
ANZ was the clear favourite among brokers for its support and technology offerings, with ratings of 3.56 and 3.65, respectively.
In April, the bank partnered with Loanapp, an e-lodgement tool designed by Simpology, to be used by brokers for the submission of mortgage applications. The service is currently available through aggregators AFG and Connective.
ANZ general manager of residential broker Simone Tilley said she believes that the partnership will enhance the broker experience.
“This is a transformational step for our business,” Ms Tilley said.
“Simpology follows the agile methodology and is capable of implementing change smoothly and efficiently.
“In such a fast-changing environment, these are essential elements we look for in all key business suppliers. Ultimately, this is about providing choice, which will only further enhance the ANZ broker experience.”
Another interesting finding (and one that the Productivity Commission should take note of) is that, even though ANZ was rated the highest for product, support and technology, it was not the lender with the greatest rating for commissions. This shows that while commissions are an important piece of the puzzle, they are not the be-all and end-all of what brokers want from a major bank.
NAB was given the highest rating for commissions (with a rating of 3.53) but came second overall (its support rating and technology rating brought it down) — again showcasing that the way banks remunerate brokers is not the most desired factor when it comes to broker motivations for using (or at least, thinking highly) of the major banks.
The Adviser speaks to Simone Tilley, general manager of ANZ’s retail broker division, to find out how ANZ is working with the third-party channel.
How does it feel to top the ranking again this year?
It’s a privilege to win this award and great acknowledgement for everyone in the broker team. This is a real testament to the calibre of our retail and commercial broker BDM team, operational team and everyone else who works so hard behind the scenes.
There will always be more we can do to improve, but we are proud of the leadership and commitment demonstrated over the past 12 months in delivering results for our customers.
What does ANZ most pride itself on when it comes to serving the broker channel?
Our people - Our entire BDM team continues to stand out from the crowd for the right reasons. We often hear that our BDMs talk with confidence and clarity around credit policy, are known for their specialist knowledge, but above all, how they collaborate across the bank to get customers into homes.
Our channel-agnostic strategy - The unity between our broker Simone Tilley ANZ network and our branches is a standout. We are focused on ensuring customers have the best possible experience regardless of the channel they choose, so we need to make sure that everyone at ANZ is working together.
Our open and transparent approach - For each of the initiatives that we have delivered across the industry, we always first consult with those that will be impacted. This allows us to include learnings before we deliver initiatives to the market. The benefit of this is smoother execution.
What does ANZ have in the pipeline for mortgage brokers in the coming year?
We’re looking at new ways to be the bank of choice for brokers and are at the cusp of delivering a new commissions platform for residential brokers, using iCloud technology, which will eventually also be extended to commercial brokers.
We are also putting in place new reporting analytics with improved data packs, which our aggregators are telling us are market-leading.
We are confident sharing more information will collectively drive better customer outcomes for the Australian market.
Later this year, we are updating our current mortgage platform. This has been in the making for quite some time and means all home loans that come into the bank will be orchestrated by the one platform. One key focus being the simplification and reinvention of our customer loan contract packs in relatable, uncomplicated language. We are excited to share more as the year unfolds.
Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast.
Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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