Every year, The Adviser commissions Momentum Intelligence to undertake its annual Third-Party Lending Report to understand what brokers think of the lenders they are using, in a bid to help form more constructive partnerships. This year, the reverberations of the royal commission were truly felt - with a new major bank becoming the favourite of brokers.
It seems almost absurd that last year’s feature revealing the key findings of Momentum Intelligence’s Third-Party Lending Report - Major Banks started out by stating that the banks had “taken a beating” under the Productivity Commission report. In the September 2018 feature, I had suggested that the foundations of the banking system had been “well and truly shaken”. Fast forward to July 2019, and it feels like they’ve not stopped shaking since.
Since the last Third-Party Lending Report was released, the lending landscape has been shifting rapidly. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry brought with it many shocking revelations, but perhaps none so shocking as CBA CEO Matt Comyn’s revelation that he supported a consumer-pays model for the broking industry.
In November 2018, the CEO noted his support for a Netherlands-style fees-for-service model (whereby consumers are charged a fee for mortgage advice) and revealed that CBA had sought to introduce a “flat fee” commission-based model in January 2018 before choosing not to go ahead with the change in fear that the rest of the sector would not follow suit.
“We come to a view that nobody will follow, we will suffer material degradation in volume [and] we will not improve customer outcomes,” he said.
The admission was met with widespread outcry from the broking industry and, months later, is still the source of much anguish and distress for brokers. Unsurprisingly then, this year’s Third-Party Lending Report, which was undertaken just as the final report from the royal commission came out, shows that brokers are not well pleased with the Commonwealth Bank.
Over 1,000 mortgage brokers took part in Momentum Intelligence’s Third-Party Lending Survey 2019, which was conducted over February and March 2019. The survey asked brokers to rate the performance of 30 residential mortgage lenders (both banks and non-banks) across 17 attributes covering product, support and technology (turn to page 31 for more on the methodology).
Brokers were asked to rate the performance of lenders on attributes on a scale of “Above average” (5) to “Below average” (1). The scores were then calculated to get an overall score out of 100.
The full findings can be found in Momentum Intelligence’s interactive Third-Party Lending Report 2019, a comprehensive report and detailed competitive analysis of the survey results, which enables brokers and lenders to compare and contrast all of the findings from the survey and how each lender compares to another.
Meanwhile, here are some of the key themes emerging from that report in relation to the big four banks.
In the Third-Party Lending Report 2019, Momentum Intelligence has, for the first time, combined into one report the results of the Third-Party Lending Survey for all mortgage lenders. In previous years, the survey was split into three different reports for each of the lending segments: one for major banks, one for non-major banks, and one for the non-banks.
In order to provide a more holistic picture of how brokers view the mortgage lenders, this year’s report combines all the results into one major report and comes with a new, digital platform that enables users to directly compare and contrast how the top 30 lenders are performing. Given the new format, it has been possible to glean new insights into how brokers view the mortgage lenders across segments.
The report shows, for instance, that non-major banks are rated much more highly by brokers than the majors.
In fact, both non-major banks and non-banks were given a score higher than 70 out of 100 while the ratings for the big four banks hovered around the mid-60s.
Further, when looking at authorised deposit-taking institutions (ADI) specifically, the top six most highly rated banks were non-majors (see last month’s supplement for more on this).
In fact, the majors all fared very badly for their product pricing, being rated the lowest four banks out of the 19 ADIs for this part of their business (with Westpac being the best of the majors with a rating of 3.22).
For the first time in three years, ANZ fell off its top spot, ranking second this year.
While ANZ was the highest-rated bank of all 19 ADIs for upfront valuations (with brokers giving the bank a rating of 3.92) and the highest-rated major bank for channel conflict (with a rating of 3.05) and for BDMs (3.58), it was NAB that won brokers’ hearts this year.
Overall, brokers most highly rated NAB out of the four major banks, which came in with an overall score of 66.18 out of 100. This ranked the lender in seventh place out of the 19 ADIs.
In the feedback section, one broker stated: “Out of the big four‚ ANZ and NAB have the best BDMs‚ best profile and marketing to say they back brokers 100 per cent.”
Another broker agreed, saying: “The Bankwest and ANZ and NAB BDMs I have are the best around.”
The feedback section also saw brokers praise the system used by the banks, with one broker saying that they thought that NAB Broker and ANZ Tool Kit (along with Macquarie Online) were “by far the easiest to navigate”.
Westpac was highly rated for its training and education, coming up top of the major banks in this category (with a rating of 3.32), just falling behind its subsidiaries (3.39) and Bankwest (3.40).
At the other end of the scale, CBA was ranked 18th out of the ADIs and received the third-lowest score (62.12 out of 100) of all 30 institutions in the report. The only two lenders falling behind CBA were BOQ (58.33) and Better Choice Home Loans (61.44).
Further, the feedback section of the report, in which brokers left hundreds of comments for the lenders, was filled with brokers talking about CBA. Given the royal commission commentary, many brokers voiced their dissatisfaction and disappointment with the lender.
For the category of commitment to the broker channel, CBA scored the lowest of any lender in the survey, with an attribute rating of 1.70. Westpac came second-last for its commitment to the channel, with a score of 2.68. Meanwhile, ANZ was rated 3.17 out of 5 for their support and NAB were rated 3.39.
In comparison, ME Bank came out on top for the support of the channel, with an impressive rating of 4.21.
“CBA have made it very clear at the RC how they feel about brokers. This is disappointing,” one broker said.
“CBA‚ and in particular, Matt Comyn‚ has almost certainly created a generational rift in lender/broker relationships. This was bad under the former CEO with the 2016 Broker Busting Strategy but has increased to new heights with what is hopefully a transparently self-serving and cynical call to move to a client-paid flat fee,” another wrote.
However, CBA was rated very highly for a few individual areas. The Commonwealth Bank was rated second highest for its web presence across all banks (after sister company Bankwest), with a score of 3.65. The same pattern was also true of online application status, with the big four bank being rated 3.44 behind Bankwest’s 3.76 and for online resources, where it scored 3.57 to Bankwest’s 3.61.
“Major banks need to reduce headline rates. More products should have offset on fixed rate.”
“Major banks can improve their service by not outsourcing so much overseas and keeping experienced staff in assessment positions where they vastly improve the service.”
“ANZ had really stepped up its game with training‚ market leader.”
“ANZ has the most complicated of the broker needs analysis I have seen. Think we are at eight pages now, up from, I think, the old three pages in the last few months. A hit of overreaction from the royal commission?”
“CBA is a huge disappointment along with NAB and WBC in terms of feedback I receive from clients post settlement.”
“CBA support has diminished steadily over the past couple of years. As a Diamond broker‚ I had a senior BDM‚ then that changed to a junior new person who has called once in 12 months and doesn’t respond to emails. CBA response time has been slow.”
“CBA can be better if they can treat the applications from their branch and brokers on equal footing. Assessment standards adopted are unnecessarily complicated for broker applications.”
“Westpac, just horrific. Actually, so painful to deal with their call centre/assessment centres. It’s almost like they are actively trying to make your life hard. Move away from the ridiculous model where your file is reallocated almost on a daily basis. Any difficult application just gets pinballed around.”
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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