How to avoid channel conflict in a heated mortgage market.
As low interest rates and solid house price growth continue to drive vigorous competition in the Australian mortgage market, lenders are under pressure to drop rates, maintain margins and increase settlements.
But as lenders fight to make the most of the competitive housing market, how can they ensure that they are balancing their investment into both the retail and third party channels whilst avoiding channel conflict? In an online broker poll conducted by Australian Broker, 78% of brokers said they have experienced some form of channel conflict with a bank branch. Of this, 44% said they experienced channel conflict “often” while 56% said they experienced it “infrequently”.
Who owns the customer?
This is a question which is often aired in any discussion over branch/broker channel conflict – does the broker who originated the loan own the customer or does the bank who finances the loan own the customer? The answer is both “no-one” and “everyone”. Fons Caminiti, senior manager of broker distribution at Adelaide Bank – the intermediary-only arm of Bendigo and Adelaide Bank – says both brokers and branches have a responsibility to the customer.
“In my opinion, once the customer is settled, it is the bank's responsibility to manage that customer. There is also in my opinion, an obligation for the broker to manage the relationship with the customer as well. Now, at what level the broker is able to or wants to or can manage that relationship is up to them,” he told Australian Broker. “The majority of the brokers have a relationship at some level with their customer, but the deeper they can build that relationship with the customer, the more likely they are to retain that customer.”
However, Caminiti also says that neither the broker nor the branch can call dibs on a customer. In reality, the ownership of a customer comes down to the customer’s own choice. “Yes, Adelaide Bank is an intermediary-only bank and we only deal with brokers… However, from that perspective, our value proposition differs vastly from the Bendigo retail proposition. Our value proposition is branchless while Bendigo retail doesn’t deal with intermediaries,” he said.
“There are times when we have Adelaide Bank customers that go into Bendigo Bank branches, but we do have rules around those sorts of things in our network, so the push-back is back to a broker if that is the case. However, it is driven by customer choice. If the customer wants to explore the branch-based proposition then so be it.” Tony MacRae, general manager for broker distribution at Westpac says it doesn’t have to be a question of “or”, but a question of “and” – how can brokers and branches share the customer to create a more holistic experience?
“There is no point in [banks] having a strong and a weak channel either way, so our view of the world is that we need both channels to be very strong. [Westpac] continues to invest in both channels. We continue to innovate in both channels to provide the best solutions. It is not a question of ‘or’ but a question of ‘and’,” he told Australian Broker.
“Both our channels do work together, which is the other reality. We couldn’t sell five products per customer if we didn’t work really closely with the retail network who on-board the customer and cross-sell to them. Our retail branches also wouldn’t be able to continue to grow if we weren’t introducing great home loan customers.”
Dealing with channel conflict
Whilst both banks and brokers can’t deny that channel conflict can arise, both say that working with each other rather than competing against each other is the most effective way of avoiding a conflict of interest. Jeremy Fisher, director of 1st Street Home Loans, says that a broker’s relationship with lenders and branches is just as important as a broker’s relationship with their client.
“We work closely with local branches and their teams know that we are all working to benefit the client, so we all have a common goal. By offering a very high level of customer service, brokers can reduce the chance of clients contacting lenders directly as clients should be in the frame of mind that their broker is their first point of call.” MacRae agrees, adding that brokers and branches should see each other as an extension of each other’s business.
“[Westpac] spend a lot of time ensuring brokers feel a part of the network. I always say that branches should see brokers as an extension of their sales force and brokers should view branches as an extension of their operation. We spend a lot of time ensuring our branches and specific people in the branches spend time with brokers. We hold events in our branches, particular in our new “Bank Now” branches, where we hold a big broker function and invite all the local brokers so they can see the really neat technology that we have and the service we are able to provide there for both personal and business customers.
“But also so [brokers] can feel really comfortable about being able to send their customer there because they know that we care and we treat them as a holistic customer. It comes down to relationship and ensuring that we do have the right relationships.”
A shift in the right direction
Whilst fostering relationships between branches and brokers is important in circumventing channel conflict, Caminiti says that banks can play a more proactive in educating retail staff about the role of the broker. “One of the things that is high on my agenda is to ensure that our brand and our value proposition is understood by the Bendigo retail division, and at the moment it is. I do a lot of talks to different parts of the Bendigo business to make sure that they are aware of how we do things and how they operate. There is a level of respect between both channels,” he said.
“There has been an odd instance where [channel conflict] has occurred and that has been dealt with at a managerial level and a staff level to make sure those particular parties understand why we ask that a broker customer goes back to a broker. But at the end of the day, it is very, very few and far between in our business.” He also adds that banks can play a more proactive role in educating brokers too.
“The relationship that we have with the brokers is really important as well, because if we can manage those relationships effectively then we are more likely to keep all parties happy – the customer and broker.
“When I do my presentations and I have done some to the Bendigo network managers and Adelaide Bank brokers, I put up a visual of all our competitors by logo and the Bendigo brand is not there. I make it very clear that they are not a competitor.”
However, despite a majority of brokers admitting to having experienced channel conflict during their career, Fisher admits it becoming less frequent as banks continue to understand the value proposition a broker offers a customer. “Occasionally we do experience channel conflict but it happens a lot less than it did in the past. These days, branches and brokers are mostly working together for the best interests of the client which is a shift in the right direction,” he told Australian Broker.
This article originally appeared in Australian Broker issue 12.07.
But as lenders fight to make the most of the competitive housing market, how can they ensure that they are balancing their investment into both the retail and third party channels whilst avoiding channel conflict? In an online broker poll conducted by Australian Broker, 78% of brokers said they have experienced some form of channel conflict with a bank branch. Of this, 44% said they experienced channel conflict “often” while 56% said they experienced it “infrequently”.
Who owns the customer?
This is a question which is often aired in any discussion over branch/broker channel conflict – does the broker who originated the loan own the customer or does the bank who finances the loan own the customer? The answer is both “no-one” and “everyone”. Fons Caminiti, senior manager of broker distribution at Adelaide Bank – the intermediary-only arm of Bendigo and Adelaide Bank – says both brokers and branches have a responsibility to the customer.
“In my opinion, once the customer is settled, it is the bank's responsibility to manage that customer. There is also in my opinion, an obligation for the broker to manage the relationship with the customer as well. Now, at what level the broker is able to or wants to or can manage that relationship is up to them,” he told Australian Broker. “The majority of the brokers have a relationship at some level with their customer, but the deeper they can build that relationship with the customer, the more likely they are to retain that customer.”
However, Caminiti also says that neither the broker nor the branch can call dibs on a customer. In reality, the ownership of a customer comes down to the customer’s own choice. “Yes, Adelaide Bank is an intermediary-only bank and we only deal with brokers… However, from that perspective, our value proposition differs vastly from the Bendigo retail proposition. Our value proposition is branchless while Bendigo retail doesn’t deal with intermediaries,” he said.
“There are times when we have Adelaide Bank customers that go into Bendigo Bank branches, but we do have rules around those sorts of things in our network, so the push-back is back to a broker if that is the case. However, it is driven by customer choice. If the customer wants to explore the branch-based proposition then so be it.” Tony MacRae, general manager for broker distribution at Westpac says it doesn’t have to be a question of “or”, but a question of “and” – how can brokers and branches share the customer to create a more holistic experience?
“There is no point in [banks] having a strong and a weak channel either way, so our view of the world is that we need both channels to be very strong. [Westpac] continues to invest in both channels. We continue to innovate in both channels to provide the best solutions. It is not a question of ‘or’ but a question of ‘and’,” he told Australian Broker.
“Both our channels do work together, which is the other reality. We couldn’t sell five products per customer if we didn’t work really closely with the retail network who on-board the customer and cross-sell to them. Our retail branches also wouldn’t be able to continue to grow if we weren’t introducing great home loan customers.”
Dealing with channel conflict
Whilst both banks and brokers can’t deny that channel conflict can arise, both say that working with each other rather than competing against each other is the most effective way of avoiding a conflict of interest. Jeremy Fisher, director of 1st Street Home Loans, says that a broker’s relationship with lenders and branches is just as important as a broker’s relationship with their client.
“We work closely with local branches and their teams know that we are all working to benefit the client, so we all have a common goal. By offering a very high level of customer service, brokers can reduce the chance of clients contacting lenders directly as clients should be in the frame of mind that their broker is their first point of call.” MacRae agrees, adding that brokers and branches should see each other as an extension of each other’s business.
“[Westpac] spend a lot of time ensuring brokers feel a part of the network. I always say that branches should see brokers as an extension of their sales force and brokers should view branches as an extension of their operation. We spend a lot of time ensuring our branches and specific people in the branches spend time with brokers. We hold events in our branches, particular in our new “Bank Now” branches, where we hold a big broker function and invite all the local brokers so they can see the really neat technology that we have and the service we are able to provide there for both personal and business customers.
“But also so [brokers] can feel really comfortable about being able to send their customer there because they know that we care and we treat them as a holistic customer. It comes down to relationship and ensuring that we do have the right relationships.”
A shift in the right direction
Whilst fostering relationships between branches and brokers is important in circumventing channel conflict, Caminiti says that banks can play a more proactive in educating retail staff about the role of the broker. “One of the things that is high on my agenda is to ensure that our brand and our value proposition is understood by the Bendigo retail division, and at the moment it is. I do a lot of talks to different parts of the Bendigo business to make sure that they are aware of how we do things and how they operate. There is a level of respect between both channels,” he said.
“There has been an odd instance where [channel conflict] has occurred and that has been dealt with at a managerial level and a staff level to make sure those particular parties understand why we ask that a broker customer goes back to a broker. But at the end of the day, it is very, very few and far between in our business.” He also adds that banks can play a more proactive role in educating brokers too.
“The relationship that we have with the brokers is really important as well, because if we can manage those relationships effectively then we are more likely to keep all parties happy – the customer and broker.
“When I do my presentations and I have done some to the Bendigo network managers and Adelaide Bank brokers, I put up a visual of all our competitors by logo and the Bendigo brand is not there. I make it very clear that they are not a competitor.”
However, despite a majority of brokers admitting to having experienced channel conflict during their career, Fisher admits it becoming less frequent as banks continue to understand the value proposition a broker offers a customer. “Occasionally we do experience channel conflict but it happens a lot less than it did in the past. These days, branches and brokers are mostly working together for the best interests of the client which is a shift in the right direction,” he told Australian Broker.
This article originally appeared in Australian Broker issue 12.07.
