A big four bank has announced significant changes to its incentives program, following recommendations outlined in the ABA-funded Sedgwick report into bank and broker remuneration.
NAB this week revealed that it is changing the incentives program for its most senior branch and contact centre managers to reward delivery of great customer outcomes, leadership and performance.
More than 700 NAB retail branch managers, assistant branch managers and sales team leaders in consumer call centres will move from their existing incentive plan to NAB’s Group Short Term Incentive (STI) Plan.
This will take effect from 1 October 2017, well ahead of the 2020 deadline set by Stephen Sedgwick AO for bank remuneration reforms.
NAB chief customer officer of consumer banking and wealth Andrew Hagger said that the change will see greater emphasis placed on customer outcomes, actions and behaviours, not just product sales, for staff incentives.
“Our branch managers are the respected and trusted face of our business in the community, and their priority is to deliver the best outcomes for customers,” Mr Hagger said.
“This change to our staff incentive program sends a very clear message: that the customer must be at the heart of everything we do, and that great leadership is both valued and rewarded.”
The NAB Group STI Plan has a sharp focus on deep understanding of customer needs, and also links incentives to an overall assessment against a range of factors, including risk management, conduct and adherence to NAB values.
“We’ve heard the message from our customers and the community, and we’re taking action to make banking better for our customers,” Mr Hagger said.
NAB noted that the move of these employees to the Group STI Plan is consistent with final recommendations made by Stephen Sedgwick AO in April as part of the Australian Bankers’ Association’s Better Banking Reform package, which aims to “protect consumer interests, increase transparency and accountability, and build trust and confidence in the industry”.
Mr Hagger said the change is “just one of many things” NAB is doing to ensure it is better serving its customers.
“Over the coming 12 months, we will continue to review our practices—including things that influence our culture, such as performance plans, incentives, visual management, and team meeting structures—to ensure we are consistently delivering great customer outcomes,” he said.
NAB was the first bank to commit to implementing the Sedgwick reforms and said it aims to implement them well ahead of the 2020 deadline.
The move could throw the spotlight on how mortgage brokers might be incentivised to provide good customer outcomes.
Sedgwick’s report recommended that banks adopt, through negotiation with their commercial partners, an "end-to-end" approach to the governance of mortgage brokers that approximates as closely as possible a holistic approach broadly equivalent to that proposed for the performance management of equivalent retail bank staff.
In effect, broker commissions would be governed by similar principles that banks would apply in assessing performance against a scorecard for their staff.
Mortgage aggregator AFG’s submission to Treasury in response to the ASIC review of broker remuneration focused on how broker commission structures could be changed to ensure good consumer outcomes.
A recent HashChing survey found that 65.63 per cent of brokers agree with AFG's recommendation that volume-based incentives should be replaced with bonus programmes that are more aligned to positive consumer outcomes.
"Broker remuneration has been a hot topic in the industry of late, with many differing opinions on how to reduce any perceived conflicts of interest between banks and borrowers,” HashChing COO Siobhan Hayden said.
“I think it's interesting that the majority of brokers believe volume-based incentives should be done away with in favour of bonus programmes; it demonstrates a genuine interest on the part of mortgage brokers to find an alternative that drives better outcomes for consumers while at the same time continuing to encourage competition and high levels of performance on the part of brokers."
AFG has urged the government and Treasury to treat the Sedgwick report as “a submission by just one interest group in the mortgage industry”.