Banks on brokers

A good marriage counsellor listens to both sides as do effective business partners. In last month brokers told MPA how they felt about banks and now it's the banks turn to talk about brokers

The relationship between banks and brokers isn't exactly a fairytale romance, but it does make for an exciting read.

Last month, MPA published the results of its survey of hundreds of brokers from across Australia who told us they were annoyed, fed up and flat out angry with some areas of banks' third party distribution businesses.

They spoke of bad BDMs, excruciatingly slow turnaround times, and crippling credit policies. Brokers complained that banks were becoming "arrogant". Some brokers accused banks of stealing their customers. And others said that they felt like banks just didn't care anymore.

But not all responses contained tales of relationships gone sour - brokers did feel the love from some lenders. Brokers told MPA about BDMs who stuck their necks out for them, banks that pushed loan applications through quickly to help them keep their clients, and banks that hosted special training days that actually made a difference to their businesses.

As revealed in last month's analysis of the survey results, ING Direct was this year's Prince Charming in terms of wooing the hearts, minds and business of brokers. The bank moved into the top spot, still warm from the recently departed Macquarie Bank.

Rounding out the top three were ANZ and CBA, placing second and third respectively. While ANZ is no stranger to MPA's podium (it placed third overall in 2007), for CBA it was a remarkable rise. Australia's biggest bank (though that may be about to change) clawed its way from 10th overall in 2006, to sixth overall in 2007.

In our survey, MPA asked brokers to rate banks on seven criteria: approval/loan turnaround time, BDM support, broker support, IT and electronic/technology systems, interest rates, product range and overall service level to brokers.

MPA also asked brokers to tell us which category was the most important to their business and, like other years, brokers overwhelmingly voted approval/loan turnaround times as the most important category. It therefore comes as no surprise to find that the top three overall performers in our survey also pulled high marks in that category.

Several other banks made notable impressions in other categories. Citibank placed second in BDM support, up from a fifth place finish in that category in 2007. Suncorp also made incredible gains. The bank stormed up the charts from 13th in 2007 to finish fourth this year.

In the arena of broker support, which MPA identified as training, information seminars, etc, NAB/HomeSide rose from 12th in 2007 to fourth. BankWest was also a big achiever, climbing from 11th place in 2007 to sixth in 2008.

When it came to interest rates, brokers recognised AMP. The bank shook off its 14th place finish in 2007 and climbed 10 spots to finish fourth in 2008.

St.George cracked the top three for the second year in a row for its product range, while AMP took the third spot for overall service level to brokers.

As with any game of snakes and ladders, there has to be a couple slides. Westpac took a nosedive in the approval/loan turnaround department. The lender slid from eighth in 2007 to 12th - or the bottom of the pile.

A number of banks fell in their ranking for BDM support. AMP, Adelaide Bank and Westpac all dropped down four places.

Despite no major slides for Westpac in any other category, the bank ended with a negative result overall. It fell from fourth overall in 2007 to 10th in 2008.

But the survey results only give us the brokers' side of the story. Now it's time to give the banks the chance to comment on and respond to their rankings.

ING Direct

ING waited two years to take over the top spot from Macquarie Bank, but it finally made it. Sure the victory may have been sweeter had Macquarie stuck around long enough to be included in MPA's survey, but ING deserved its successful result nonetheless.

In fact, ING increased its overall broker satisfaction rating over last year, from 66.74% to 67.4%.

ING Direct's executive director of intermediary mortgages Brett Morgan said the result is a return on ING's investment in the broker channel.

"Being a branch-less bank, we really believe the broker is our success," Morgan says.

Last August, the bank launched its broker support unit which gives each BDM a dedicated support person internally.

"So we really have three layers of contacts for brokers: they have their BDM, they have a broker's support person or BDM's associate, and they have the introducer solutions team, which is a tracking team."

The added level of support was obviously recognized by brokers who ranked ING Direct number one in this category and gave the bank a satisfaction score of 68%.

ING Direct also took top honours in approval/loan turnaround times. The process was perhaps streamlined by ING Direct's new website. Based on feedback from brokers, the bank made some loan tracking improvements and launched its online lodgment system. While more specific IT improvements aren't in the works for 2008, Morgan says ING is "building up its knowledge base of what needs to come next."

ING Direct's lowest score in the survey was for its product range. Brokers rated the bank fifth - up one place from last year.

Morgan says ING Direct has launched three different product initiatives, which should help improve its score. The bank's new product offerings include its smart pack, which Morgan describes as an aggregation-style package. The bank has also introduced a reduced equity fee product, "which is quite innovative in the market," Morgan says. The product is an alternative to mortgage insurance for better credit risks. ING Direct has also changed its fixed rate product.

As for commissions, ING Direct is reviewing its structure, but there are no changes to announce yet.

"We're a low-cost provider of mortgages in Australia, so we need to be able to compete; however, being a very strong broker advocate, we believe brokers should be remunerated appropriately."

In 2008, Morgan says ING will concentrate on the "operational side of the business in support of brokers, as opposed to the sparkly stuff."

ANZ

Like ING, ANZ benefited from Macquarie's departure and climbed up one spot. But that's not to say that the bank hasn't earned brokers' appreciation. This year ANZ received an overall broker satisfaction score of 65.4%, on par with last year's result.

Glenn Haslam, ANZ head of specialist distribution, mortgages, says the bank concentrated on making banking more convenient.

"For the broker market this means providing leading, simple products, consistent service and high quality support," he says.

The bank's best result was in the IT category - an area that ANZ payed particular attention to in the past 12 months. The bank made significant improvements to its IT and operations through the introduction of its online application tracking system and backchannel status updates, a new online valuations system, and ongoing enhancements to its Toolkit.

"We are always monitoring new trends and technologies and have just rolled out our 'eFile' initiative, a key program to further improve turnaround times, which has resulted in the removal of all paper from our back office operations. Improved automation capability, from application to settlement, is the next major area of IT improvement that we are focusing on," Haslam says.

ANZ fell one place in the area of product range, despite making an effort to simplify its offering "to help brokers find the right solutions for customers". In May, the lender launched ANZ Simplicity Plus - a new basic home loan "which caters for customers who want a value for money home loan but don't necessarily need additional features," Haslam says.

One area that ANZ made significant improvement in is the BDM support category; it climbed from 11th place in 2007 to third this year. Haslam credits ANZ's experienced team of BDMs "who understand the importance of providing consistent and personalised service".

"Our BDMs are highly committed and we continue to provide incentives to help them further strengthen their relationships with brokers."

CBA

CBA makes its debut in the top three this year. While Kathy Cummings, general manager of third party banking, would like to see the lender in the top spot, she's thrilled to see CBA make some significant improvement.

"We never stop working on our focus on customer service. We've been committed to improving the process in the back office for some time and certainly we've had a number of initiatives over the last 12 months to do that," she says.

CBA's biggest area of improvement was in loan approval/turnaround times. The bank climbed six spots to third, earning it MPA's sharpest rise award in this category. CBA was a strong performer in this area, despite experiencing a flight to brand quality volume increases. CBA reported 3.1% growth in home loan receivables in the March quarter (compared to 2.1 system growth in the same period). With both branches and brokers contributed to growth.

While brokers complained credit policy tightening across the industry was slowing the loan approval process, Cummings says CBA still works hard to get deals through.

"CBA is continually reviewing its credit policy and making sure we're competitive in the market. Where we're confident the risk is low, we've got an approach to never say no to a loan. Our credit managers get on the phone and they talk to brokers and they actually work the deal through with them."

CBA also made some ground in the BDM support category. The bank has recently increased the number of people in the field in the last 12 months and padded areas such as SA, QLD, VIC, and in NSW.

"We've have been focusing on Relationship Mastery, which is a program everyone must be accredited in. And it's all about understanding our brokers."

While brokers seemed relatively happy with the IT systems CBA currently has in place, it isn't content with the status quo. The bank is about to embark on a major overhaul of its core systems.

"We're focusing on online and as soon as your do that you get a vast improvement in the quality of applications coming through. Our online is over 70% so that's fantastic. We remove the opportunity for error."

CBA announced its changes to commissions in May (well after the survey period ended). The bank cut upfront commissions to 50 basis points from 70 basis points. Brokers can earn up to 15 basis points more for lodging 90% or more submissions online, submitting quality reports and for settlements that exceed 80% of the value of loan applications lodged. The bank also eliminated the trail commission paid in the first year and cut the trail commission paid in the second year to 20 basis points (down from 25).

It will be interesting to see if they changes will result in poorer broker satisfaction ratings next year.

BankWest

BankWest narrowly missed a spot in the top three this year - coming just a couple percentage points shy of CBA - but its overall results were positive and an improvement over 2007.

The survey highlight for BankWest would have to be the incredible gains it made in the broker support category.

Phil Colton, head of broker sales, says it is "fantastic" to see the improvement. "Over the last 12 months we've put a lot of effort in."

Brokers make up about 75% of the Perth-based bank's mortgage business. Colton says the bank supports the broker channel.

"In the past four years, I could count on one hand the amount of channel conflict that we have."

But in the most important category to brokers, the bank is still struggling to get to the top. BankWest scored ninth in loan approval/turnaround times.

"We've gone through a few ups and downs in regards to developing our settlement process, but we're starting to see the benefits of that now," Colton says.

BankWest has been working on its fully-automated, electronic system for three years teaching brokers how to use the system, "to make sure that if they get it right upfront, then we could process it as quick as possible."

The bank has further plans to improve its IT and technology systems. It's implementing a Java-based system to allow LendNet to run on both platforms.

"That's a commitment to say that we are happy to use other platforms, as long as it's lodged electronically through our system."

BankWest's BDM support received a solid result in this year's survey. It climbed from 8th in 2007 up to fifth this year. Colton attributes this year's dramatic volume increase in the East Coast to the BDM team.

After the survey closed, BankWest made some significant changes to its panel. The lender cut 59 accredited brokers and retained 17 relationships. The bank said the selected group accounted for 85 to 90% of new business. Members of the group that were cut produced low volume and had a high error rate, it said.

It will be interesting to see how these changes play out next year.

St.George

While Westpac's offer to takeover the bank was still under negotiation at the time of writing - it seems a foregone conclusion that the status quo will be altered. Westpac insists that St.George would retain its brand and there will be no net loss of branch networks, should the deal go through. But St.George has always had a slightly different business model. The lender has traditionally been much more broker orientated than the other big banks - it derives about 45% of its loans through mortgage brokers, while other banks hover closer to the one-third mark. Some analysts contend this model is slightly out of step in the credit-crunch years and maybe one area Westpac would alter. While St.George and Westpac were relatively close in scores in 2007, there was a drastic difference between the two in 2008. Perhaps by examining the results, the banks will be able to take the best of both worlds into 2009.

In all areas but two, St.George's results dropped. But if there's any area brokers are most concerned about it's turnaround times. In 2007, the bank announced its plans to improve its lodgment system. The bank planned to improve times by running faxed applications through an automated 'decisioning engine' prior to verification of proof documents.

St.George's other strength is its product range. The bank's general manager of third party and specialist distribution Steven Heavey told MPA last year, "We have a long, proud history of product innovation, being the first bank with reverse mortgages, the first with no deposit loans and now the first bank with a no deposit loan with no LMI."

The bank's lowest score was in BDM support. The bank planned on improving this category by segmenting brokers, thus allowing BDMs to prioritise their time for platinum brokers. The plan was to increase BDMs responsiveness by making them more responsive to phone calls, while ensuring they were still available for face-to-face meetings. One year in and the plan appears to have been less than a success.

Westpac

Westpac has made more than its share of headlines this year. The bank followed its decision to cut brokers’ commissions in April with a bid to takeover St.George in May. While at the time of writing the deal was still under negotiation, the results of this year’s survey give a good indication of how Westpac did on its own last year.

The answer is not good. Westpac’s scores across the board were lower in 2008 than the previous year. Perhaps the timing of MPA’s survey played a role. The banks announcement to cut brokers’ commissions coincided with our survey period, which in theory could have skewed the results, but there’s no direct evidence of that.

Westpac’s worst result was in turnaround times. The bank sunk from 8th in 2006 and 2007 to 12th in 2008. Several brokers commented that Westpac was clearly not dealing with flight to quality volumes very well.

“Westpac is having a melt down with processing new deals and settlements,” wrote one broker.

Last year the bank commented that it was trying to acquaint more brokers to its online lodgment system. The bank did receive good marks for its IT. Brokers ranked the bank fifth in this category – a nod to its heavy investment in this area.

While BDM support and Broker support weren’t strong categories for Westpac, several brokers commented positively about their own experiences with their BDM and training sessions.

In terms of overall service, brokers expressed appreciation for the bank’s Go For Broker campaign and simple gesture such as recognising high volumes with gift certificates.

Suncorp

While Suncorp didn’t top the charts this year, the bank did make bounce back from its 13th place finish in 2007 to hit 8th overall.

“We think this reflects the positive changes we’ve made to the broker channel,” said Brad Steele, head of mortgage broker sales and service.

Suncorp invested heavily in the people part of its business. The bank added capacity to both its sales and service teams, and added a new mortgage tracking team to take calls on loan processing.

The bank placed 8th in loan approval/turnaround times, but has improved its IT and technology systems.

“There’s also a significant change to our loan processing model, which was the launch of the online tracking website for brokers, which we believe is the most interactive and user-friendly loan tracking service on the market,” Steele says.

Suncorp did exceptionally well in the BDM support category – its sharpest rise in the entire survey. Steele says the bank has revamped its sales model.

“We’ve attempted to unlock the productivity of our BDMs. Unpack some of those actions with other parts of our business, that way it frees up our BDMs to better service the needs of the brokers,” Steele says.

Only two months ago, Suncorp appointed its first BDM in South Australia in five years.

“So we feel there are some opportunities we’re missing in some parts of Australia,” Steele acknowledged.

While Suncorp scored quite highly in the interest rates category, the lender is looking to improve its product mix in the next 12 months.

The bank placed 8th in broker support, but it has done a complete overhaul of its internal training programs. Staff will undergo refresher and enhanced sales and service training “to make sure they’re capable in their roles,” Steele says.

As for commissions, the bank has yet to make a decision. A group of Suncorp senior executives have embarked on a road show to discuss where they see the market moving and what effect changes to the bank’s commission structure would have on the its business partners.

AMP

By this year’s survey standards,AMP had a good year. The bank made gains in all areas except one and placed third in the survey’s newest category “overall service.”

“Improving in the MPA survey results requires improvement across all areas of the service proposition,” says Steven Craig, head of sales and distribution.

 “We’ve made a number of changes, the most major of which is a restructure of the sales and distribution team to better align to our customer’s needs. This has included introducing a new regional management structure. We’ve also made a number of incremental improvements across our offering such as technology changes in our operations area.”

The bank sits in the top third of loan approval/turnaround times. AMP’s strong result is a reflection of changes it’s made to its service chain, Craig says.

“We’ve introduced a new Customer Service Automation (CSA) tool that allows us to better manage workflows and provides quicker turnaround and improved accuracy. It also allows us to better manage our own teams’ performance. We’ve also had onsite visits from some of our key customers allowing both sides to better understand each other’s business.”

AMP is performing in the middle of the pack in several categories, but its result in BDM support stands out if only because it’s such a drop from their second place status in 2007. The bank made huge gains from 2006 – rising from 14th place.

Despite seemingly average results in BDM support and broker support, brokers gave the bank third place for its service overall. Perhaps the bank has earned brokers’ favour for its channel conflict protocol.

“A fundamental tenant of the AMP business model is building aligned distribution channels, where all parties share in the value they bring to the partnership. A key ingredient of this model is the avoidance of channel conflict. We pride ourselves as having one of the best examples of this model in the Australian market – with our model revolving around third party distribution.”

AMP remains competitive in the marketplace, placing third overall in interest rates. It’s a vast improvement over last year, when the bank said it was finding the balance between being competitive but sustainable.

Adelaide Bank

While Adelaide Bank didn’t make solid improvement overall, the bank has plenty to celebrate in the category that counts most to brokers. In loan approval/turnaround times, the lender has moved from 10th in 2006 to 6th in 2007 and 4th in 2008.

“We’ve been working really hard on first time capability. It’s actually just simplifying our processes and getting the way our broker partners submit their applications, making it easier for them,” says Tim Piper, chief general manager of wholesale mortgages.

The bank introduced its Suite Smart product line “clean simple products that are easy to apply for in the market place” to make the loan approval process easier and faster for brokers and their customers.

While brokers only gave the bank a slightly higher score this year over 2007, Piper says the bank has really expanded its products.

“We rolled out a very simple variable rate loan this time last year. Just in March we’ve added to the range including a low-doc facility, some commercial lending capability and a go-between loan which is really a bridging-type loan. It’s takes people a little while to get used to it, but we’re absolutely improving the product range so brokers can select the right product for their customer.”

The bank did drop in its BDM support rating. Piper says the bank has recently cut down the number of people in the field but increased its telephone presence to assist brokers with their queries.

As for commissions, Piper says it’s “certainly something that we’re considering and one of the things that we are about to do is engage our business partners and work very closely with the industry in working out what is the best solution going forward.”

NAB/HomeSide

NAB/HomeSide launched its dedicated third party channel, NAB Broker, last year – too late to make much of a dent in its results in 2007. However, this year the bank was hoping to see some of the fruits of its labour and the bank did make improvements across the board.

Its best result was in the broker support category, up from 12th to fourth place. Matt Lawler, NAB Broker’s regional general manager says the bank has invested in a number of value-added forums.

“… particularly around management and practice management and those have been really well received. We’ve also run about 100 'credit' breakfasts, where we’re coaching brokers on credit issues and what our current view about credit is. We’ve also invested in training and licensing about 200 brokers to give insurance advice as well.”

Improving its loan approval/turnaround times has also been top priority for NAB/HomeSide, Lawler says.

“The major investments in this space have been in our online application capability. We were well-behind the market place in that and we’ve invested several million dollars in getting that part of the process right. At the time survey was being done we were only just launching it, so that wouldn’t really be reflected in the survey so far, but hopefully in next year’s survey that will come through as a real impact.”

NAB/HomeSide is currently investing in its website to make it easier to track current client’s submissions, but in the future the bank will also be sharing data with brokers on existing clients.

“We also see the website as an opportunity to do obviously the applications online, but also allow brokers to do variations online and we’ve been told it’s a very good service in comparison to the marketplace. We do have longer term plans to replace our backend platforms or our platforms that run the services we’ve got.”

As for commissions, Lawler says some changes will be inevitable.

“We think the remuneration will actually support long-term business and good quality business. We actually see a reshaping of the commission structure. The total amount of commissions will come down, but we think that the revenue that a broker can receive over time will go up if they start to move toward this advice model.”

Citibank

Citibank has made slow but steady improvements in MPA’s survey over the last couple of years. The bank has risen from 12th overall in 2006, to 8th last year and 7th this year.

“It’s hard to look at this in isolation year on year. This is the result of a strategy that we put in place late 2005; and a lot of that strategy was placed off the back of that MPA survey in 2005 where our results were bottom quartile and obviously we’re not pleased about that. So we went about designing a strategy and now we’re bearing the fruits of that,” says Peter Hayward, head of marketing and distribution.

The bank fell a couple spots in loan approval/turnaround times, but that result was expected, says Steven Ramage, head of mortgages.

“Any organization that’s experienced a 250% increase in volumes you’d expect their processing plant to be pushed to the boundaries. At the same time we were rolling in a new settlement process for the outsourcer. So to come in and only move from third to sixth we’re really happy about that. I think it shows support from the broker network for what we were doing,” Ramage says.

A key component for the bank was communication, he adds.

“We were totally upfront and said, hey we’ve had a massive increase in business, we’re rolling in some new processes and we really appreciate the support and we’re going to take a little bit longer than we’d like to and this is how long we’re going to take. And we set that expectation with them and we delivered.”
Ramage attributes the increase in business to its good relationship with brokers, who bring in 93% of their mortgage business.

Citibank’s pricing reflects the higher cost of funding and has led to their volumes flattening out in recent months. But it’s given the bank a chance to work on its back office functions and post-approval processes.

Hayward says they are pleased with the results they received for BDM support – an area they paid special attention to in the second half of the year.

Citibank is also looking to improve its IT. The bank is installing the Pisces system for the front end and working with its current origination system to see what can be improved.