MPA brought together representatives from seven of the country’s largest non-major banks to discuss the big issues the mortgage industry faces today. Their insights were fascinating
MPA brought together representatives from seven of the country’s largest non-major banks to discuss the big issues the mortgage industry faces today. Their insights were fascinating
While there’s no doubt that Australia’s major banks are providing a valuable service to mortgage brokers, the non-major banks are hot on their heels, developing innovative mortgage products and services aimed at bringing more brokers into the fold.
To find out more about the non-major bank service proposition, and to get the perspective of the non-majors on some of the key industry issues, MPA brought representatives from seven of the country’s largest non-major banks around the same table for a fascinating discussion on the state of the market.
So, what’s the non-major take on the major issues facing mortgage brokers? The insights from our seven panellists are presented in this special report – truly a must-read.
Please click for larger image
STATE OF THE MARKET
To kick off the discussion, we quizzed our panellists on the state of the mortgage market and what advantages the non-major banks can offer brokers.
For ME Bank national broker manager Stewart Saunders, one of the non-major sector’s strengths has historically been its ability to produce innovative products and drive competition.
“While brokers may not benefit directly from every loan that they put to a non-major, we’re seeing increased competition across the market that non-majors are driving,” he says.
Bankwest state manager, Vic/SA, Jarrod Cahill agrees, adding that the non-majors are all looking to differentiate in one way or another.
“For brokers I think that creates an element of choice,” he says. “And for the consumer that ultimately is the benefit.”
One point that AMP Bank head of sales and marketing Glenn Gibson brings up is that, from his perspective, there has been a shift in attitudes among the non-majors in recent years – from competing among themselves to trying to go toe to toe with the majors.
“So we’ll try something different; we’ll bring out a niche,” he says. “It could be a change in credit or it might be a change in product or it might be a change in price. But it’s not necessarily aimed amongst ourselves anymore; it’s more so aimed at the wider market, and I think we’re all seeing the benefit of that.”
The ability to offer a personalised service is something that Adelaide Bank senior manager, broker distribution, Fons Caminiti highlights as a strength of the non-major sector.
“I think it’s something that we try and leverage off quite frequently, because we’ve got the scale to be able to do that. And I think that’s really important for us,” he says.
Offering a genuine choice is also important, adds Suncorp Bank head of intermediaries Steven Degetto. “And for brokers it’s being able to offer something to differentiate themselves from other brokers,” he says.
This is an issue that St.George Banking Group mortgage broking general manager Clive Kirkpatrick picks up on. From his perspective, it’s important to work hard with brokers to be, if not a first choice, then a sound alternative.
“You’ve got to actually work hard to make sure that your products are there to provide the choice to the broker, and therefore the customer,” he says. “I think we all need to work harder to get that to be the viable alternative.”
While the GFC proved to be a major hurdle to the industry in terms of funding, ING DIRECT national sales manager Ray Esho is cautiously optimistic that the non-major banks are able to really compete on this front again.
“Whilst we can’t get too complacent about risk appetite having returned and things having normalised, I think small lenders and non-majors more broadly are able to get back into the game,” he says. “So, whilst we’re not on the trajectory that we would have been on had it not been for the crisis period, I think things have normalised.”
This normalisation, combined with the nonmajor banks’ nimbleness and general lack of legacy issues, has allowed the non-majors to bring out seriously competitive products, he explains, which in turn is creating a larger appetite among brokers to “think outside the majors”.
THE CHALLENGE AHEAD
In terms of challenging the majors for a larger slice of the mortgage pie, Cahill believes it’s vital to listen to brokers and adapt to their feedback.
“Given the majority of our loans at Bankwest are introduced though the third party, we see that as a great offering to be nimble,” he says. “And ensuring that we’re always seeking that feedback to better ourselves.”
For Gibson, it all comes down to service. In the broker sphere specifically he says it’s essential not to take a one-size-fits-all approach, and service the brokers in the way that they want to be serviced – whether it’s on price, product, BDM support or credit access, for example.
“How do we deliver a service not only to our brokers but to the end customer the way they want to receive it?” he asks. “I think the non-majors are fairly nimble in their ability to change from one broker to the other, and I think that’s certainly showing in our favour too.”
Service is an issue that Caminiti says is also a key area of focus at Adelaide Bank, highlighting turnaround times in particular.
“We’re talking a lot more to brokers than we have in the past about what their needs are,” he adds. “So for us it really is about staying relevant in the market … and giving them alternatives to the majors.”
Consistency is the key word when it comes to service, in Degetto’s view, which is why his organisation, Suncorp Bank, has been attempting to hammer the service consistency message home with its service guarantee, to prove that it’s a genuine alternative to the majors.
“That consistency also helps build confidence and then you can, I guess, earn the right to ask for a greater share of a broker’s business,” he says.
For Kirkpatrick, innovation is vital. As well as looking at niches in which his organisation can excel, such as SMSF and non-resident products, he adds that innovation through technology has been another area of focus. Allowing brokers to submit supporting documentation online, for example, helps to create cleaner deals and faster turnarounds.
“I think that’s key to the broker, to get an answer quickly, whether it’s a yes or a no – preferably a yes,” he says. “But we just get the answer quick, so they can either move on to another funder or provide the answer back to the client.”
Esho echoes the sentiments of the rest of the panel in highlighting service as one area in which the non-majors must – and have been – competing. He also returns to the improvement in funding conditions as another reason why the non-major banks can make an effort to increase their market share.
“The non-majors are punching well above their weight in terms of what they can offer the broker, and ultimately the end customer,” he says.
Saunders adds that, based on his conversations with brokers, he believes brokers want to be made to look outstanding in the eyes of their customers. What this means for non-major banks like ME Bank, he thinks, is that it’s vital to deliver consistent service in the areas that matter, as well as compete on price.
“One thing that we’ve struggled with is that non-majors do have outstanding customer service scores in the eyes of their customers, but we haven’t been able to convert that into building business and market share yet,” he admits.
But he agrees with Kirkpatrick that investing in technology to be able to deliver consistent service is one way the non-majors can improve that situation.
GIVE US A GO
On the question of how the non-major banks can persuade brokers to give them a go in the wake of the post-GFC consumer flight to the majors, Gibson brings up the familiar theme of going for a niche.
“Once you get that niche, and once somebody starts to utilise you and appreciates that you’re very good at doing that, then you get more business,” he says. “If you look at AMP, we very much specialise in self-managed super funds. Obviously, with our brand it makes a lot of sense. And brokers start to utilise us for that product and then realise, well hang on, we have the whole suite of products, so we’ll get a little bit more of a broker’s business.”
It’s a point that Caminiti can’t argue with. He talks about Adelaide Bank’s recent success in building up recognition of its fixed-rate 100% offset products – with “all the bells and whistles”.
“Once they use you a few times and they see you can underpin an offer with a service proposition that’s going to meet their needs and their clients’ needs, then you’re in the door,” he says, adding that the bank’s commitment to the broker industry is also a key selling point.
For Degetto, however, he’d rather focus on being a genuine alternative than a niche player. In the case of Suncorp Bank, he believes it’s important to build confidence in the brand.
“It’s probably the best-kept secret that 40% of a broker’s customers are already customers of our group,” he says, adding that the group encompasses several large insurance brands as well as $93bn assets under management.
“So, what myself and my team have tried to do over the past 12 months – and continue to do – is help brokers explain that to customers,” he says, “to build that confidence that we are a good business for them to consider their lending needs for.”
The issue of choice is one that Kirkpatrick says is very important to both brokers and their customers, and he believes that – whether it’s providing a branch network, cheap products or complex products such as SMSF loans, for example – the non-major banks come up trumps in this area.
“I think it’s important that we work with the brokers to continually educate them on what we as a group can provide – not just the St.George group but the non-major bank group,” he says. “We can provide basically anything that the customer walks into the door wants.”
For Esho, the flight to the perceived extra safety of the majors hasn’t been as much a driver of customer behaviour in the last couple of years as it was in the immediate aftermath of the GFC.
That said, he believes that brokers forged strong ties with the majors during the crisis period, so the job for non-major banks is to convince brokers to branch out.
“At ING DIRECT, we’ve been working on a number of things,” he says. “Apart from raising awareness about what we think are very competitive home loans, we’ve been pushing the commercial message.”
Also in the offing, Esho says, is a broker referral program.
Saunders accepts that, for the non-majors, building market share from a base that’s significantly lower than that of the majors is a challenge, but also a great opportunity. And in order to capitalise on this opportunity to persuade more brokers to give them a go, he believes the non-majors need to keep innovating, as well as generating positive word-of-mouth referrals within the broker community.
“It’s always a much stronger message coming from another broker that they’ve had a good experience with a bank, and they’ve delivered on their expectations. And that’s been a fantastic way that all of us have been able to capitalise and grow market share recently,” he says.
“I think we’ll all put our hands up and say we can’t do it in every single situation, but most of the time we do get it right. And we take on board the feedback from brokers, and continually work on fixing any service issues or any opportunities that we can to improve the service across the board.”
Customer satisfaction is as important as broker satisfaction, argues Cahill – and, from his perspective at Bankwest offering unique credit policies, such as products with 95% LVR plus capitalised LMI, it goes a long way.
“It’s a great time for us to be competing. And I think ultimately the consumer and the broker will benefit,” he says.
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SUPPORT AND PROCESSING
Another area where the non-majors can’t afford to lower their game is their back office, and this is a zone that Caminiti and his team at Adelaide Bank have been investing in.
“We’ve done a lot of work in that third-party mortgage operations space to improve our touchpoints with brokers along the journey, from the submission coming in to contracts being issued and then settlement,” he says. “And that seems to be having a really good effect.”
For Degetto over at Suncorp Bank, the heavy investment has been in automated workflow processing, which he believes has allowed the bank to grow without seeing service standards deteriorate.
“I think brokers want two things around service: they want consistency and they want transparency,” he says. “So if they’re talking to a customer and they say it’s going to take two days, it takes two days.”
Interestingly, he’s also found that offering flexible work arrangements to back-office staff – such as the ability to work part-time and offsite – has helped to bring in good-quality loan processors. He adds that their performances are measured, in part, on the percentage of loans they get through to settlement.
Kirkpatrick admits that the issue of back-office support and processing has been a “pain point” for the St.George Banking Group, and this has spurred major investment in that area.
“We went out with a number of campaigns that drove volume in, and we weren’t structured at the back end to handle that, so we’ve invested quite
significantly,” he explains.
On the assessment and approval front, he says the number of staff looking at broker deals has increased by 40%. Meanwhile, there’s been a delegated authorities restructure that’s reduced hand-offs.
He adds that the aforementioned ability of brokers to submit supporting documents online is speeding up the process.
“At the moment we’ve got deals turning around in four hours or less – and docs out same day,” he says. “So we invested heavily in the front end to try to get the fastest time to ‘yes’, as quickly as we could.”
Settlements have also been brought onshore, he says, with a First Mortgage Services partnership providing “a fully localised settlements capability and certifications capability in each capital city”.
“We just haven’t done a good job and we think we’ve now got the capability to deliver,” he says. “It’s so important to get your fastest time to ‘yes’. But then when you settle a loan, settle it when you promise to do it.”
Consistency is vital, adds Esho, as brokers can’t manage their customers’ expectations without it.
“I think not all of us can be lightning fast at our turnaround times, and I think that’s fine. But what brokers will tell us is just make sure that you’re not susceptible to volume shocks, and I think we’re all getting a lot better at that,” he says.
It’s also important, says Esho, not to take a cookie-cutter approach when servicing brokers. To that end, taking a tailored approach to meeting their needs is vital.
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Saunders picks up on the volume shock theme, noting that investment in technology can help the non-majors build scale without sacrificing consistency. He notes that ME Bank, for example, is in the final year of a four-year $70m automation project.
“We won’t see the benefit of that until late this year. So we’ve had to – similar to St.George – increase the manpower in our credit operations area by over 45% in the last 12 months,” he says.
Technology is the key for Cahill, too. “For us at Bankwest we see the digital platform as a great way to move forward,” he says, adding that click-to-chat, Kofax and optical character recognition are all exciting developments in this field.
“It enables the system to read the documentation which is being sent through, removing the human capital validation piece. And that allows us to shift some resources into more complex transactions,” he says. “That then filters into our aspiration to have 80% of all deals unconditional within five days.”
Returning to the volume shock theme, there are also lessons the non-major banks can learn from history, Gibson explains. He notes that over the last 10 years “every lender has blown up their back office, whether they’re a major or a non-major, because they just haven’t picked the market properly”.
He’s optimistic that these lessons have been learnt by a maturing non-major sector, which nowadays thinks about its operational capacities before launching new products.
“Realistically, we could all come out with the best price and the best product in the marketplace tomorrow. But the first conversation we have in our pricing meetings is ‘can we handle the volume?’,” he says.
Once again, the recurring theme of technology takes centre stage, with Gibson noting that the non-major banks tend to benefit from tech providers choosing smaller operations to test their new solutions with.
“You always test out on a pilot, and your pilot’s always a smaller organisation,” he says, adding that non-majors are also able to be nimble when it comes to reassessing, or even replacing, front-end mortgage origination platforms if they’re not working.
AGGREGATORS TO THE FORE
Of course, a key intermediary between the nonmajor banks and brokers are the aggregators. And,as Degetto points out, the non-majors are all keen to form strong relationships with their aggregator business partners. But how does this relationship work, and where do brokers fit into the picture?
“For us it’s around trying to understand what are their goals,” he says. “What are they looking to achieve? What’s their point of differentiation? And certainly, having an understanding of that, I think that allows us to target what we provide to aggregators.”
One core request, he says, is that every one of an aggregator’s brokers receives a high level of service. And this is something that Suncorp Bank has taken on board.
“We’ve consistently provided 48-hour service to conditional approval for every broker within an aggregator. If we don’t, we pay the client $500,” he explains.
Kirkpatrick agrees that understanding an aggregator’s goals is vital to forging strong ongoing relationships.
“Understand what their goals are, where they want to take their businesses, what they see as their differentiators,” he says. “And then lock in mutually beneficial sponsorship packages so that we get access to as many of the brokers as we can through the aggregator.”
In addition, he adds that it’s important for the bank’s technology to link in with the aggregator’s to make life as easy as possible for the broker.
The theme of understanding the aggregators’ strategies is one that Esho runs with. He notes that his organisation, for example, has recently put in a framework to guide interactions with aggregator partners.
“We’ve been applying a bit of pressure on getting some information out of the aggregators about what their strategies are and how we can get them to align with what our strategy is,” he explains. “So we’ve been talking a lot about, at ING DIRECT, the primary bank strategy and how we can work with the aggregators and their networks to do more than just the home loans.”
He adds that the better aggregators know their network of brokers and what’s important to them, and can offer frank and useful feedback to banks as a result.
“When we’re interacting with these aggregators they’ll often say to us: ‘With what you’re looking at doing, don’t waste your time’. And that’s fine, but at least we know,” he says.
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Saunders adds that the nature of the relationship varies from aggregator to aggregator.
“We do see a vast difference across the different aggregation groups on how they work with nonmajor banks to be able to get that message out there,” he says.
“For me, there’s no value in standing at a table doing a business card draw and that’s the only interaction I have with brokers during the day. We want brokers to be able to talk to their aggregator about how can we help add value to them – be it at PD days, at separate sessions – to be able to really provide value for their businesses.”
For Cahill, communication is vital at all levels of the relationship. “It’s about being consistent and transparent around what our goals are as an organisation and how they can be tailored to fit in with yours,” he says, noting that Bankwest, for example, has increased its sponsorship with aggregators this year.
He also agrees with Degetto that providing a consistent service to all brokers under an aggregator’s umbrella is crucial.
“It doesn’t matter what volume you write; we see potential to grow that relationship,” he says.
On the subject of relationships, Gibson explains that the relationship between a non-major bank and work aggregator sponsorships, and that this will be an area of focus this year.
“I think, at the end of the day, what I want to do is work a lot more differently with the aggregators, to be honest, to try and seek mutually beneficial outcomes,” he says.
MESSAGES TO BROKERS
Before wrapping up the roundtable, MPA offered the non-major bank representatives the opportunity to offer their feedback to brokers on what the key issues are that they encounter with mortgage applications – and how brokers and lenders can work together to improve turnaround speeds and conversion rates.
As Esho points out, conversions have always been a hot topic in the market, but what his team at ING DIRECT are focusing on internally is having more of a targeted approach when it comes to rework.
“Conversion rates can hold but reworks can increase,” he says. “So deals are settling but there are just more touchpoints in getting them to settle. So we want to try to be able to improve the turnaround time and the proposition for the broker and the customer.”
He adds that this isn’t a systemic issue, but there is a pocket of traffic that he’d like to target on this front.
In addition, Esho calls on brokers to sell “on the front foot” package deals as well as possible and pre-empt any questions the assessor may have. Rework is an issue that Saunders zones in on as well, noting that every deal is different and it’s important to think about the questions that need to be answered and supporting documents that need to be provided to speed up the process in each instance.
“The majority of brokers are very quick at responding to requests for information. But again that slows up the process when it’s double handled, triple handled, picked up four times,” he says.
“Having that information available and trying to provide it all up front with the transaction is what you see from the really strong brokers in terms of their low rework percentages.”
He adds, however, that ME Bank is focusing on its internal process to reduce rework for brokers as well.
Cahill agrees that the banks need to make it simple to lodge deals, noting that constant reviews of documentation requirements are critical.
“Recently we announced some changes within our payslips, reducing them from two to one, and also our contract for sale requirements,” he says.
“The second element is ensuring that our partnership managers are educating the brokers on what our policies are.”
He also urges brokers who have any uncertainties to speak to partnership managers on Bankwest’s credit hotline.
All of the panellists agree that improving the application process is a two-way street, involving lenders as well as brokers. And Gibson recognises that banks need to understand how brokers work.
“I would prefer that a broker could submit it fully packaged; it would make life easier,” he says. “I think where we’ve come from is to simply say, how do brokers actually operate?
Recognising that all brokers operate differently, he notes that around 40% of brokers take up AMP’s upfront valuation option, while around 60% submit the deal first before ordering the valuation. Not ordering the valuation up front, however, creates double-handling issues.
Caminiti believes the team at Adelaide Bank feel that they’re doing a good job in explaining their requirements to brokers.
“We’ve had a quality control or a compliance regime in place for four or five years now. What we find is that it works, it’s very effective, it’s efficient, it works well for the brokers,” he says.
“We give regular reporting back to our BDMs through the third-party mortgage operations team, and they get back to the brokers if there is an issue there very very quickly. We move those deals on as a priority when the information comes back in that’s required.”
He adds, however, that this doesn’t mean they’re going to be resting on their laurels.
“We’ve got to keep monitoring these things and working on them to keep gaining efficiencies so that you’re processing effectively,” he says.
For Degetto, it’s all about the simple things. As well as the basics of using Suncorp Bank’s checklists, carrying out serviceability checks and signing forms in the right area, he reminds brokers that they have an obligation to make reasonable enquiries about a borrower’s capacity to repay.
“I think that ultimately the first thing we all need to look at is: can the borrower afford it?” he says.
“Interest rates I don’t think will stay low forever, so it’s really ensuring that that’s considered.
“But also from us it’s really listening. And we’ve got some people that are fantastic at that in our own organisations, and assessing transactions on their merits. But that’s certainly our aim to do that, continue to do that, and get better at it.”
Kirkpatrick accepts that each of the non-major banks has its idiosyncrasies when it comes to application requirements.
“We acknowledge that, as a broker, you’ve got to learn a lot,” he says. “So it’s up to us to make it easier.” To that end, he explains that the St.George group has been looking at dynamic checklists to make sure the right documents are presented, as well as the capacity to submit supporting documents online.
“The big benefit to that, as one broker’s telling me, is around the tax file numbers. So you can actually redact the tax file number online. They’re telling us that saves about 15 minutes per deal,” he says, adding that character recognition can make sure that payslip dates match with policies.
Communication, too, is essential, says Kirkpatrick, to make sure the right documents are submitted to allow the deal to go through without delay. “It’s around how we’re communicating that to whoever the correct party is, whether it’s the broker, the solicitor or the customer direct,” he says. “So there’s a lot of work that we can do around communicating better.”
Returning to the technology theme, he believes brokers would be well served in the long run by taking the time to learn about the tools on offer.
“The first couple will take you a bit longer, but it’s going to give you a great result in the end.”
“As the guys were saying, if we work better, with much more clarity, it’s going to be beneficial, particularly to the customer in the end.”
While there’s no doubt that Australia’s major banks are providing a valuable service to mortgage brokers, the non-major banks are hot on their heels, developing innovative mortgage products and services aimed at bringing more brokers into the fold.
To find out more about the non-major bank service proposition, and to get the perspective of the non-majors on some of the key industry issues, MPA brought representatives from seven of the country’s largest non-major banks around the same table for a fascinating discussion on the state of the market.
So, what’s the non-major take on the major issues facing mortgage brokers? The insights from our seven panellists are presented in this special report – truly a must-read.
Please click for larger image
STATE OF THE MARKET
To kick off the discussion, we quizzed our panellists on the state of the mortgage market and what advantages the non-major banks can offer brokers.
For ME Bank national broker manager Stewart Saunders, one of the non-major sector’s strengths has historically been its ability to produce innovative products and drive competition.
“While brokers may not benefit directly from every loan that they put to a non-major, we’re seeing increased competition across the market that non-majors are driving,” he says.
Bankwest state manager, Vic/SA, Jarrod Cahill agrees, adding that the non-majors are all looking to differentiate in one way or another.
“For brokers I think that creates an element of choice,” he says. “And for the consumer that ultimately is the benefit.”
One point that AMP Bank head of sales and marketing Glenn Gibson brings up is that, from his perspective, there has been a shift in attitudes among the non-majors in recent years – from competing among themselves to trying to go toe to toe with the majors.
“So we’ll try something different; we’ll bring out a niche,” he says. “It could be a change in credit or it might be a change in product or it might be a change in price. But it’s not necessarily aimed amongst ourselves anymore; it’s more so aimed at the wider market, and I think we’re all seeing the benefit of that.”
The ability to offer a personalised service is something that Adelaide Bank senior manager, broker distribution, Fons Caminiti highlights as a strength of the non-major sector.
“I think it’s something that we try and leverage off quite frequently, because we’ve got the scale to be able to do that. And I think that’s really important for us,” he says.
Offering a genuine choice is also important, adds Suncorp Bank head of intermediaries Steven Degetto. “And for brokers it’s being able to offer something to differentiate themselves from other brokers,” he says.
This is an issue that St.George Banking Group mortgage broking general manager Clive Kirkpatrick picks up on. From his perspective, it’s important to work hard with brokers to be, if not a first choice, then a sound alternative.
“You’ve got to actually work hard to make sure that your products are there to provide the choice to the broker, and therefore the customer,” he says. “I think we all need to work harder to get that to be the viable alternative.”
While the GFC proved to be a major hurdle to the industry in terms of funding, ING DIRECT national sales manager Ray Esho is cautiously optimistic that the non-major banks are able to really compete on this front again.
“Whilst we can’t get too complacent about risk appetite having returned and things having normalised, I think small lenders and non-majors more broadly are able to get back into the game,” he says. “So, whilst we’re not on the trajectory that we would have been on had it not been for the crisis period, I think things have normalised.”
This normalisation, combined with the nonmajor banks’ nimbleness and general lack of legacy issues, has allowed the non-majors to bring out seriously competitive products, he explains, which in turn is creating a larger appetite among brokers to “think outside the majors”.
THE CHALLENGE AHEAD
In terms of challenging the majors for a larger slice of the mortgage pie, Cahill believes it’s vital to listen to brokers and adapt to their feedback.
“Given the majority of our loans at Bankwest are introduced though the third party, we see that as a great offering to be nimble,” he says. “And ensuring that we’re always seeking that feedback to better ourselves.”
For Gibson, it all comes down to service. In the broker sphere specifically he says it’s essential not to take a one-size-fits-all approach, and service the brokers in the way that they want to be serviced – whether it’s on price, product, BDM support or credit access, for example.
“How do we deliver a service not only to our brokers but to the end customer the way they want to receive it?” he asks. “I think the non-majors are fairly nimble in their ability to change from one broker to the other, and I think that’s certainly showing in our favour too.”
Service is an issue that Caminiti says is also a key area of focus at Adelaide Bank, highlighting turnaround times in particular.
“We’re talking a lot more to brokers than we have in the past about what their needs are,” he adds. “So for us it really is about staying relevant in the market … and giving them alternatives to the majors.”
Consistency is the key word when it comes to service, in Degetto’s view, which is why his organisation, Suncorp Bank, has been attempting to hammer the service consistency message home with its service guarantee, to prove that it’s a genuine alternative to the majors.
“That consistency also helps build confidence and then you can, I guess, earn the right to ask for a greater share of a broker’s business,” he says.
For Kirkpatrick, innovation is vital. As well as looking at niches in which his organisation can excel, such as SMSF and non-resident products, he adds that innovation through technology has been another area of focus. Allowing brokers to submit supporting documentation online, for example, helps to create cleaner deals and faster turnarounds.
“I think that’s key to the broker, to get an answer quickly, whether it’s a yes or a no – preferably a yes,” he says. “But we just get the answer quick, so they can either move on to another funder or provide the answer back to the client.”
Esho echoes the sentiments of the rest of the panel in highlighting service as one area in which the non-majors must – and have been – competing. He also returns to the improvement in funding conditions as another reason why the non-major banks can make an effort to increase their market share.
“The non-majors are punching well above their weight in terms of what they can offer the broker, and ultimately the end customer,” he says.
Saunders adds that, based on his conversations with brokers, he believes brokers want to be made to look outstanding in the eyes of their customers. What this means for non-major banks like ME Bank, he thinks, is that it’s vital to deliver consistent service in the areas that matter, as well as compete on price.
“One thing that we’ve struggled with is that non-majors do have outstanding customer service scores in the eyes of their customers, but we haven’t been able to convert that into building business and market share yet,” he admits.
But he agrees with Kirkpatrick that investing in technology to be able to deliver consistent service is one way the non-majors can improve that situation.
GIVE US A GO
On the question of how the non-major banks can persuade brokers to give them a go in the wake of the post-GFC consumer flight to the majors, Gibson brings up the familiar theme of going for a niche.
“Once you get that niche, and once somebody starts to utilise you and appreciates that you’re very good at doing that, then you get more business,” he says. “If you look at AMP, we very much specialise in self-managed super funds. Obviously, with our brand it makes a lot of sense. And brokers start to utilise us for that product and then realise, well hang on, we have the whole suite of products, so we’ll get a little bit more of a broker’s business.”
It’s a point that Caminiti can’t argue with. He talks about Adelaide Bank’s recent success in building up recognition of its fixed-rate 100% offset products – with “all the bells and whistles”.
“Once they use you a few times and they see you can underpin an offer with a service proposition that’s going to meet their needs and their clients’ needs, then you’re in the door,” he says, adding that the bank’s commitment to the broker industry is also a key selling point.
For Degetto, however, he’d rather focus on being a genuine alternative than a niche player. In the case of Suncorp Bank, he believes it’s important to build confidence in the brand.
“It’s probably the best-kept secret that 40% of a broker’s customers are already customers of our group,” he says, adding that the group encompasses several large insurance brands as well as $93bn assets under management.
“So, what myself and my team have tried to do over the past 12 months – and continue to do – is help brokers explain that to customers,” he says, “to build that confidence that we are a good business for them to consider their lending needs for.”
The issue of choice is one that Kirkpatrick says is very important to both brokers and their customers, and he believes that – whether it’s providing a branch network, cheap products or complex products such as SMSF loans, for example – the non-major banks come up trumps in this area.
“I think it’s important that we work with the brokers to continually educate them on what we as a group can provide – not just the St.George group but the non-major bank group,” he says. “We can provide basically anything that the customer walks into the door wants.”
For Esho, the flight to the perceived extra safety of the majors hasn’t been as much a driver of customer behaviour in the last couple of years as it was in the immediate aftermath of the GFC.
That said, he believes that brokers forged strong ties with the majors during the crisis period, so the job for non-major banks is to convince brokers to branch out.
“At ING DIRECT, we’ve been working on a number of things,” he says. “Apart from raising awareness about what we think are very competitive home loans, we’ve been pushing the commercial message.”
Also in the offing, Esho says, is a broker referral program.
Saunders accepts that, for the non-majors, building market share from a base that’s significantly lower than that of the majors is a challenge, but also a great opportunity. And in order to capitalise on this opportunity to persuade more brokers to give them a go, he believes the non-majors need to keep innovating, as well as generating positive word-of-mouth referrals within the broker community.
“It’s always a much stronger message coming from another broker that they’ve had a good experience with a bank, and they’ve delivered on their expectations. And that’s been a fantastic way that all of us have been able to capitalise and grow market share recently,” he says.
“I think we’ll all put our hands up and say we can’t do it in every single situation, but most of the time we do get it right. And we take on board the feedback from brokers, and continually work on fixing any service issues or any opportunities that we can to improve the service across the board.”
Customer satisfaction is as important as broker satisfaction, argues Cahill – and, from his perspective at Bankwest offering unique credit policies, such as products with 95% LVR plus capitalised LMI, it goes a long way.
“It’s a great time for us to be competing. And I think ultimately the consumer and the broker will benefit,” he says.
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SUPPORT AND PROCESSING
Another area where the non-majors can’t afford to lower their game is their back office, and this is a zone that Caminiti and his team at Adelaide Bank have been investing in.
“We’ve done a lot of work in that third-party mortgage operations space to improve our touchpoints with brokers along the journey, from the submission coming in to contracts being issued and then settlement,” he says. “And that seems to be having a really good effect.”
For Degetto over at Suncorp Bank, the heavy investment has been in automated workflow processing, which he believes has allowed the bank to grow without seeing service standards deteriorate.
“I think brokers want two things around service: they want consistency and they want transparency,” he says. “So if they’re talking to a customer and they say it’s going to take two days, it takes two days.”
Interestingly, he’s also found that offering flexible work arrangements to back-office staff – such as the ability to work part-time and offsite – has helped to bring in good-quality loan processors. He adds that their performances are measured, in part, on the percentage of loans they get through to settlement.
Kirkpatrick admits that the issue of back-office support and processing has been a “pain point” for the St.George Banking Group, and this has spurred major investment in that area.
“We went out with a number of campaigns that drove volume in, and we weren’t structured at the back end to handle that, so we’ve invested quite
significantly,” he explains.
On the assessment and approval front, he says the number of staff looking at broker deals has increased by 40%. Meanwhile, there’s been a delegated authorities restructure that’s reduced hand-offs.
He adds that the aforementioned ability of brokers to submit supporting documents online is speeding up the process.
“At the moment we’ve got deals turning around in four hours or less – and docs out same day,” he says. “So we invested heavily in the front end to try to get the fastest time to ‘yes’, as quickly as we could.”
Settlements have also been brought onshore, he says, with a First Mortgage Services partnership providing “a fully localised settlements capability and certifications capability in each capital city”.
“We just haven’t done a good job and we think we’ve now got the capability to deliver,” he says. “It’s so important to get your fastest time to ‘yes’. But then when you settle a loan, settle it when you promise to do it.”
Consistency is vital, adds Esho, as brokers can’t manage their customers’ expectations without it.
“I think not all of us can be lightning fast at our turnaround times, and I think that’s fine. But what brokers will tell us is just make sure that you’re not susceptible to volume shocks, and I think we’re all getting a lot better at that,” he says.
It’s also important, says Esho, not to take a cookie-cutter approach when servicing brokers. To that end, taking a tailored approach to meeting their needs is vital.
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Saunders picks up on the volume shock theme, noting that investment in technology can help the non-majors build scale without sacrificing consistency. He notes that ME Bank, for example, is in the final year of a four-year $70m automation project.
“We won’t see the benefit of that until late this year. So we’ve had to – similar to St.George – increase the manpower in our credit operations area by over 45% in the last 12 months,” he says.
Technology is the key for Cahill, too. “For us at Bankwest we see the digital platform as a great way to move forward,” he says, adding that click-to-chat, Kofax and optical character recognition are all exciting developments in this field.
“It enables the system to read the documentation which is being sent through, removing the human capital validation piece. And that allows us to shift some resources into more complex transactions,” he says. “That then filters into our aspiration to have 80% of all deals unconditional within five days.”
Returning to the volume shock theme, there are also lessons the non-major banks can learn from history, Gibson explains. He notes that over the last 10 years “every lender has blown up their back office, whether they’re a major or a non-major, because they just haven’t picked the market properly”.
He’s optimistic that these lessons have been learnt by a maturing non-major sector, which nowadays thinks about its operational capacities before launching new products.
“Realistically, we could all come out with the best price and the best product in the marketplace tomorrow. But the first conversation we have in our pricing meetings is ‘can we handle the volume?’,” he says.
Once again, the recurring theme of technology takes centre stage, with Gibson noting that the non-major banks tend to benefit from tech providers choosing smaller operations to test their new solutions with.
“You always test out on a pilot, and your pilot’s always a smaller organisation,” he says, adding that non-majors are also able to be nimble when it comes to reassessing, or even replacing, front-end mortgage origination platforms if they’re not working.
AGGREGATORS TO THE FORE
Of course, a key intermediary between the nonmajor banks and brokers are the aggregators. And,as Degetto points out, the non-majors are all keen to form strong relationships with their aggregator business partners. But how does this relationship work, and where do brokers fit into the picture?
“For us it’s around trying to understand what are their goals,” he says. “What are they looking to achieve? What’s their point of differentiation? And certainly, having an understanding of that, I think that allows us to target what we provide to aggregators.”
One core request, he says, is that every one of an aggregator’s brokers receives a high level of service. And this is something that Suncorp Bank has taken on board.
“We’ve consistently provided 48-hour service to conditional approval for every broker within an aggregator. If we don’t, we pay the client $500,” he explains.
Kirkpatrick agrees that understanding an aggregator’s goals is vital to forging strong ongoing relationships.
“Understand what their goals are, where they want to take their businesses, what they see as their differentiators,” he says. “And then lock in mutually beneficial sponsorship packages so that we get access to as many of the brokers as we can through the aggregator.”
In addition, he adds that it’s important for the bank’s technology to link in with the aggregator’s to make life as easy as possible for the broker.
The theme of understanding the aggregators’ strategies is one that Esho runs with. He notes that his organisation, for example, has recently put in a framework to guide interactions with aggregator partners.
“We’ve been applying a bit of pressure on getting some information out of the aggregators about what their strategies are and how we can get them to align with what our strategy is,” he explains. “So we’ve been talking a lot about, at ING DIRECT, the primary bank strategy and how we can work with the aggregators and their networks to do more than just the home loans.”
He adds that the better aggregators know their network of brokers and what’s important to them, and can offer frank and useful feedback to banks as a result.
“When we’re interacting with these aggregators they’ll often say to us: ‘With what you’re looking at doing, don’t waste your time’. And that’s fine, but at least we know,” he says.
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Saunders adds that the nature of the relationship varies from aggregator to aggregator.
“We do see a vast difference across the different aggregation groups on how they work with nonmajor banks to be able to get that message out there,” he says.
“For me, there’s no value in standing at a table doing a business card draw and that’s the only interaction I have with brokers during the day. We want brokers to be able to talk to their aggregator about how can we help add value to them – be it at PD days, at separate sessions – to be able to really provide value for their businesses.”
For Cahill, communication is vital at all levels of the relationship. “It’s about being consistent and transparent around what our goals are as an organisation and how they can be tailored to fit in with yours,” he says, noting that Bankwest, for example, has increased its sponsorship with aggregators this year.
He also agrees with Degetto that providing a consistent service to all brokers under an aggregator’s umbrella is crucial.
“It doesn’t matter what volume you write; we see potential to grow that relationship,” he says.
On the subject of relationships, Gibson explains that the relationship between a non-major bank and work aggregator sponsorships, and that this will be an area of focus this year.
“I think, at the end of the day, what I want to do is work a lot more differently with the aggregators, to be honest, to try and seek mutually beneficial outcomes,” he says.
MESSAGES TO BROKERS
Before wrapping up the roundtable, MPA offered the non-major bank representatives the opportunity to offer their feedback to brokers on what the key issues are that they encounter with mortgage applications – and how brokers and lenders can work together to improve turnaround speeds and conversion rates.
As Esho points out, conversions have always been a hot topic in the market, but what his team at ING DIRECT are focusing on internally is having more of a targeted approach when it comes to rework.
“Conversion rates can hold but reworks can increase,” he says. “So deals are settling but there are just more touchpoints in getting them to settle. So we want to try to be able to improve the turnaround time and the proposition for the broker and the customer.”
He adds that this isn’t a systemic issue, but there is a pocket of traffic that he’d like to target on this front.
In addition, Esho calls on brokers to sell “on the front foot” package deals as well as possible and pre-empt any questions the assessor may have. Rework is an issue that Saunders zones in on as well, noting that every deal is different and it’s important to think about the questions that need to be answered and supporting documents that need to be provided to speed up the process in each instance.
“The majority of brokers are very quick at responding to requests for information. But again that slows up the process when it’s double handled, triple handled, picked up four times,” he says.
“Having that information available and trying to provide it all up front with the transaction is what you see from the really strong brokers in terms of their low rework percentages.”
He adds, however, that ME Bank is focusing on its internal process to reduce rework for brokers as well.
Cahill agrees that the banks need to make it simple to lodge deals, noting that constant reviews of documentation requirements are critical.
“Recently we announced some changes within our payslips, reducing them from two to one, and also our contract for sale requirements,” he says.
“The second element is ensuring that our partnership managers are educating the brokers on what our policies are.”
He also urges brokers who have any uncertainties to speak to partnership managers on Bankwest’s credit hotline.
All of the panellists agree that improving the application process is a two-way street, involving lenders as well as brokers. And Gibson recognises that banks need to understand how brokers work.
“I would prefer that a broker could submit it fully packaged; it would make life easier,” he says. “I think where we’ve come from is to simply say, how do brokers actually operate?
Recognising that all brokers operate differently, he notes that around 40% of brokers take up AMP’s upfront valuation option, while around 60% submit the deal first before ordering the valuation. Not ordering the valuation up front, however, creates double-handling issues.
Caminiti believes the team at Adelaide Bank feel that they’re doing a good job in explaining their requirements to brokers.
“We’ve had a quality control or a compliance regime in place for four or five years now. What we find is that it works, it’s very effective, it’s efficient, it works well for the brokers,” he says.
“We give regular reporting back to our BDMs through the third-party mortgage operations team, and they get back to the brokers if there is an issue there very very quickly. We move those deals on as a priority when the information comes back in that’s required.”
He adds, however, that this doesn’t mean they’re going to be resting on their laurels.
“We’ve got to keep monitoring these things and working on them to keep gaining efficiencies so that you’re processing effectively,” he says.
For Degetto, it’s all about the simple things. As well as the basics of using Suncorp Bank’s checklists, carrying out serviceability checks and signing forms in the right area, he reminds brokers that they have an obligation to make reasonable enquiries about a borrower’s capacity to repay.
“I think that ultimately the first thing we all need to look at is: can the borrower afford it?” he says.
“Interest rates I don’t think will stay low forever, so it’s really ensuring that that’s considered.
“But also from us it’s really listening. And we’ve got some people that are fantastic at that in our own organisations, and assessing transactions on their merits. But that’s certainly our aim to do that, continue to do that, and get better at it.”
Kirkpatrick accepts that each of the non-major banks has its idiosyncrasies when it comes to application requirements.
“We acknowledge that, as a broker, you’ve got to learn a lot,” he says. “So it’s up to us to make it easier.” To that end, he explains that the St.George group has been looking at dynamic checklists to make sure the right documents are presented, as well as the capacity to submit supporting documents online.
“The big benefit to that, as one broker’s telling me, is around the tax file numbers. So you can actually redact the tax file number online. They’re telling us that saves about 15 minutes per deal,” he says, adding that character recognition can make sure that payslip dates match with policies.
Communication, too, is essential, says Kirkpatrick, to make sure the right documents are submitted to allow the deal to go through without delay. “It’s around how we’re communicating that to whoever the correct party is, whether it’s the broker, the solicitor or the customer direct,” he says. “So there’s a lot of work that we can do around communicating better.”
Returning to the technology theme, he believes brokers would be well served in the long run by taking the time to learn about the tools on offer.
“The first couple will take you a bit longer, but it’s going to give you a great result in the end.”
“As the guys were saying, if we work better, with much more clarity, it’s going to be beneficial, particularly to the customer in the end.”
This feature is from Mortgage Professional Australia's June Issue #14.06. Click on the link to read more.
