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While welcoming that more lenders are proactively publishing their turnaround time data, Connective CEO Glenn Lees has said that a lack of consistency in definitions has added to overall opacity and confusion.
Speaking to The Adviser, the CEO of the major aggregator said that having a clear picture of the length of time it is taking lenders to approve loans is increasingly important for brokers given the current blowout in turnarounds – particularly for third-party introduced loans – and the new best interests duty.
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However, he added that while it was “really positive” that lenders have become “more active than ever in publishing their own data about their own turnaround times”, gaining a clear and transparent idea of where turnarounds where at had become harder for brokers, given a lack of standardisation in reporting.
Mr Lees explained: “Compared to a couple of years ago, there’s a lot more transparency out there with more data being released, but with that has come with a complication, in that every lender is publishing different information. They might measure things in different ways, or they are measuring different things; there’s no consistency of terminology between one lender and the next.”
As an example, the Connective CEO said that some lenders are only releasing internal processing measures, or their credit decision, while others define their turnaround periods as time to preapproval, or to unconditional approval.
“While all of those figures are important and valuable and useful, it can be hard for brokers – and their clients – to understand what that truly means for approval times,” he said.
Mr Lees added that some lenders use averages when speaking of the processing times, while others used medians, and others just cited the fastest time to approval possible.
He told The Adviser that Connective had therefore launched its Lender Turnaround Time (LTT) Dashboard on its CRM platform, Mercury Nexus, to offer Connective brokers “a standardised way of looking at lender approval times and benchmark one lender against another, to be able to assess performance”.
He said: “As volumes have increased dramatically through the broker channel in the last 12 months, we’ve approached this whole issue of giving brokers information that they probably can’t get direct from a lender.
“Our LTT uses ‘time to unconditional approval’ as its turnaround metric, which we chose because all lenders have that as a milestone.
“Plus, from a broker client’s point of view, that is the critical decision from the lender; they aren’t concerned about when a lender might pick up a file, they just want to know how long it will be before they know whether they can have the finance for their house or not.”
The dashboard – calculated from lender data from the back channel messages sent through the aggregator’s system – also shows brokers the median time taken to unconditional approval, rather than the average, which Mr Lees said removed the risk of turnaround time data being blown out by one or two outlier loans.
He explained: “If there is just one loan that was approved by a lender after a year – which sometimes might happen – that will really skew the average and not really be reflective of where that lender is sitting for most loans.
“So, we use the median time to unconditional approval, which is calculated every night, as that gives brokers a much better sense of how half those loans are faring.”
Mr Lees said he believed that it was critical that brokers were aware of how quickly or slowly a lender can approve a loan given that they are now held to a best interests duty requirement.
He said: “The best interests duty requires a lot of inputs for a broker to assess to ensure they are meeting them. The regulatory take on best interests can often skew towards the cheapest loan, whatever that might mean, but when you think holistically about what a customer needs, timing is always or often of the essence.
“If there’s a settlement date or approval that needs to be met for contractual reasons, then having a good understanding of which lenders are going to be able to (or are likely to be able to) meet that time becomes a really important consideration in recommending a lender,” he told The Adviser.
“So, it’s really adding another dimension of real intelligence into that selection and recommendation process that you can’t get any other way. And the ability to get the loan approved is a critical part of lender selecton,” he said.
The CEO said that there should be stronger connection and communication between lenders and brokers regarding turnaround times, adding that the aggregator is today (1 June) hosting an open webinar facilitating a conversation between lenders and brokers on the issue of lender turnaround times via webinar.
Senior leaders from lenders, including ANZ, Commonwealth Bank, ING, Macquarie, NAB and Westpac, will take part alongside representatives from Connective Essentials.
“We think it’s a positive thing to be doing for the industry,” he said.
You can find out more about the turnaround time channel conflict issue and what the major bank CEOs, aggregators, associations and tech providers are doing about it in the June 2021 edition of The Adviser magazine, out now.
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