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ISCOVER
How exactly did a secretive investment bank transform itself into a dominant player in the residential mortgage market in Australia?
Macquarie had plenty of work to do when it re-entered the third-party space in 2011.
Many brokers will still remember the bank's swift departure during the GFC and as a result Macquarie had to regain the trust of the industry – quickly – if it wanted to compete in the minefield that can be the lending market in Australia.
The media-shy lender is notoriously secretive about its mortgage strategy, which has seen its loan book grow 68.9 per cent over the past financial year to $15.2 billion.
A top Macquarie loan writer has revealed how the bank managed to regain broker trust and drive significant volumes through the third-party channel.
Insider's knowledge
Finance Made Easy director Tony Bice is part of a select group of top Macquarie loan writers who meet a couple of times a year with bank executives to discuss the biggest issues impacting the third-party space.
"They get all of us large-volume writers of Macquarie Bank business in a room and delve down and really try and understand what makes a broker tick," Mr Bice says.
"They then use all that information to tailor their mortgage model so it reflects what brokers want from a bank," he says.
Mr Bice believes the key to Macquarie's success is the quality of its BDMs.
"I've been writing mortgages for a long time and I've seen BDMs come and go," he says.
"I don't care what anybody says – the volume of business that you give a bank is directly proportionate to the assistance you get and the relationship you have with that BDM."
What makes Macquarie's BDMs preferable for brokers is their strong credit background and accessibility, Mr Bice says.
"The Macquarie BDMs will actually go and fight for you in credit," he says.
"It is not uncommon for me to ring my BDM and he will be in the assessor's office talking about a deal of mine. It's the little things like that that have given them the success that they enjoy today."
The quality of the bank's broker support has been noticed right across the industry.
Storming the rankings
In The Adviser's annual non-major bank rankings, Macquarie usurped ING Direct for the top spot in both the BDM and credit assessment staff categories.
"The one thing they're excelling at is the turnaround times," says Outsource Financial chief executive Tanya Sale.
"Their BDMs are the best in the business," Ms Sale says.
"Macquarie have clearly gone out and uncovered and recruited the top BDMs in the industry and that has paid back tenfold for them," she says.
"Add to that their turnaround times, which I'd say were best in the marketplace, and that just shows you that the smaller guys, the non-majors – if you can call them that – can take it to the big four if they want to."
But the lender hasn't always enjoyed such a glowing reputation with brokers.
It wasn't that long ago that Macquarie had a very poor name in the third-party space with brokers after leaving the industry in 2008.
But it has been their response to that – rebuilding their relationships with brokers and listening to what brokers want – which has propelled them to the top of the non-major bank lending market.
Building trust
Two years ago, Macquarie's division director James Casey asked Mr Bice what the bank needed to do to gain the trust of brokers.
"I said you need to have a high-quality BDM with a strong credit background that the guys can ring and run a scenario past," he says.
"If you get a stack of those guys, then they start to make a name for themselves as the BDMs that go the extra mile.
"Once you start to get that platform, which started about two years ago, that then builds the trust with the broker network."
Fingers in pies
Aside from the support it gives to its brokers, Macquarie has put its money where its mouth is and invested heavily in a handful of mortgage businesses.
The bank holds 25 per cent of Connective and minority shares in Yellow Brick Road, Vow Financial and AFG.
It also has a 17.5 per cent stake in Bluestone and a 19.8 per cent investment in ASX-listed non-bank lender Homeloans.
"It has had a lot of growth and they have plenty of investments in other mortgages businesses but I don't know what their strategy is," Firstpoint managing director Troy Phillips says.
Mr Phillips believes that, as an investment bank, Macquarie has seen the world change and looked to the retail banking space for opportunity.
"They have had a good crack at it and resourced themselves really well and got out there with a product that works," he says.
"Everyone acknowledges that the old model is broken, so moving into this retail space is probably right up their alley."
Market is ripe
With plenty of negative press surrounding financial planning, the mortgage market looks ripe for Macquarie as a potentially lucrative source of revenue.
But while a growing loan book may cushion any future losses from the bank's more volatile investments, the real trick will be whether or not they can retain clients.
"You can grow from a standing start really quickly, but the complexity comes in down the track when you have to do up-stamps, increases, variations, discharges, and to retain existing customers is the trick," Mr Phillips says.
"It's easy to do $900 million month in and month out until you have to start servicing it – then you have to start doing all the unsexy stuff that retail banks do," he says.
"It's all good until you've got 40,000 customers calling and asking you for account balances, not knowing how to use the internet, discharging, having arrears, payments going missing, and all that unsexy stuff that goes with servicing a book."
There is no doubt that Macquarie have worked hard to regain the trust of the broker channel and done great things for the industry since its return.
But, the industry has a long memory, and with a $15.2 billion loan book and a history of losing interest when it matters most, they are still a long way from holding the trophy.
Macquarie Bank talks brokers
Doug Lee, Macquarie Bank's head of mortgage sales, says the work the bank has done within the broker channel is paying real dividends.
Judging from the feedback The Adviser has received, what Macquarie is doing is certainly resonating amongst the third party...
We put brokers at the centre of our business and focus on building and strengthening broker relationships, seeking and acting on feedback, and providing quality products and services for brokers and borrowers. This past year, we did not make significant changes to our offering but instead looked at smaller enhancements aimed at getting the basics right. We established a national broker advisory board which looks at what we're doing well for our broker networks, as well as where further work might be required to enhance our offering. The launch of the Macquarie Flyer Home Loan product suite last year, which provides borrowers with the ability to earn Qantas Points through their mortgages, was also very positively received.
If our recent non-major rankings are anything to go by, brokers certainly love Macquarie's commissions.
Brokers tell us they appreciate the simplicity, consistency and transparency of Macquarie's commission structure and we believe this is why we have ranked strongly in this area.
There also appears to have been a concerted effort in back-end support and turnaround times?
Investment in our relationship and service models saw us grow our BDM team to better support the market. We also established a new product engagement team that provides training on Macquarie products and services for brokers and particularly their back-office staff, and importantly encourages feedback. We are rolling out this initiative further in the coming year.
Another core aspect of our service proposition is the access we give brokers to Macquarie's credit team. Brokers interact directly with the credit team, as well as hear from our credit specialists who proactively contact them regarding applications. Brokers tell us they value the transparency and believe it makes the process more efficient.
Macquarie, as a whole, has been very active in the third-party channel – buying into aggregators and lenders etc. It's evident you want to be a major player in the Australian home loan market. What's next for Macquarie?
We continue to focus on our broker network to ensure our offering and approach serves their needs. We regularly ask our brokers for feedback through a range of touch points, like day-to-day conversations, satisfaction surveys and our national broker advisory board. These insights help to guide our offering and how it will evolve. It's not really a matter of what's next but what value we can continue to add to all our relationships and to enhance our overall offer.
