In Focus: The rise of white label loans

• What a white label loan is and how it is best presented to a client
• The benefits of partnering with a white label provider
• What Advantedge has to say about the royal commission

Articles of interest:

Aggregator acquires strategic interest in commercial lender
Advantedge announces new appointment
Customer advocacy for brokers at ‘all-time high’: Advantedge
Bank announces new broker support appointment

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FULL TRANSCRIPT:

Announcer:    Welcome to the Advisers In Focus Podcast with your host, Annie Kane.

Annie Kane    Welcome back to another special episode of In Focus. I'm Annie Kane, editor of The Adviser and I'm here with my regular co-host, James Mitchell, managing editor of mortgages at Momentum Media, fresh from his holidays to bring you insights into a burgeoning area of the mortgage market, white label loans. In this episode, we'll be talking all things white label from the current market for them to customer take up and how brokers are using them. To give us the inside track into this topic, I'm thrilled to welcome Brett Halliwell, general manager of Advantedge, and broker and director of Connected Finance, George Mihalopoulos. Welcome to both of you and thank you for joining us. How you going?

Brett Halliwell:          Awesome. Great to be here.

George M:      Doing well, thank you.

Annie Kane    Good. I hope that I didn't butcher your last name too much, George. I just-

George M:      No. That was really good, thank-

Annie Kane    I went through it quickly hoping to get there in the end.

George M:      You did good. You did good.

Annie Kane    So just in terms, Brett, of white label loans. Now, I'm sure many brokers already use them but for those of the brokers that are listening that don't necessarily know what they are, can you just give us a brief overview of what a white label loan is?

Brett Halliwell:          Sure. White label is really just a mortgage which uses the brand of the underlying aggregator. We believe that that offers a really, really good benefit in that when a customer comes to a broker, they're looking for the broker's advice and the broker's ability to offer really sort of good products, good services, good prices, et cetera, and generally, a customer won't have ever heard of whichever aggregator it happens to be. So there's a real paradox there that a broker could recommend one of the major brands and the customer's almost certain to know them, but when the broker recommends based on trust, based on the consumer's confidence, a white label, the consumer gets their interest up a little bit. So yeah, sort of, "Tell me more. Who's the buyer?" And the broker will nearly always say, "Well, it's funded by NAB. It's a NAB subsidiary." And then from that, when the customer does experience what we do — and we pride ourselves on really good service — hopefully, we hope that the customer will be absolutely delighted by the experience, in turn, that cements the relationship with the broker because the service that we've provided makes the customer happy, makes the broker feel happy so all of it comes together.

Annie Kane    Yeah. And it's a great way, I think, as well of getting the aggregation group company name out there too. So I know that you recently relaunched your white label loans through the aggregation service providers at the end of last year, so we now have ChoiceLend, FASTLend and PLANLend. And again, these are names that people wouldn't necessarily interact with on a day-to ... Borrowers, I mean, interact with on a day-to-day basis, so it's good to get those names out there too. So in terms of actually looking at why we have white labels, you mentioned there a little bit about sort of having a little bit of a differentiation to the other products in the market and also establishing some trust, but what can they be used for? What sort of sets them apart from the other products in the market?

Brett Halliwell:          Sure. We've got a broad range of products that really meet the main needs for most customers, so be that owner-occupied or investor, and we can do sort of small loans for a couple of hundred thousand right up to multimillion and that can be as high as about $7 million. It's only for owner-occupied or investor, we don't do any business lending at all. So really that's the broad gamut of the customer needs. Our product features are really strong so full redraw facilities so customers can put extra money in as they pay, draw it out again, so it effectively gives you full access to your available funds. Debit cards, ATMs, et cetera, so that full transaction capability is there. So it's really the confidence for the customer is they get the right product that they need. Great product, great rates. But the service in terms of setting it up, we absolutely pride ourselves on.

            A lot of brokers in the market would attest to ... We've been very strongly within service levels for more than two to three years and what does that mean? 48 hour turnarounds to look at a deal if the broker packages it up right. And we really ask them to get the basics right, that's incredibly import to us. The declarations the IDs, all of those things where they do do that, it's quite frequent that we can turn deals around in less than 24 hours. Ultimately, that leads to a great customer experience because they get certainty, "Fantastic. There's the house that I've got my eye on. Lock it away, I'm good to go." So that's really important to us.

Annie Kane    Great.

James Mitchell::        I think it's important to point out as well, Brett ... Obviously, we've been talking to each other for a number of years about white label for the Adviser and I think the fact that they're only available through the third party channel, through the broking channel, I think is a real plus for brokers as well. George, I wanted to get your opinion on that. As someone who's been in the industry for just under two years, is that right?

George M:      Yes.

James Mitchell::        As a mortgage broker. But previously, you were working in the banking and financial services. To work for a group where you were selling one product essentially, if you work for a bank, to then becoming a mortgage broker and being able to offer a wide number of products and then having a white label facility which you know is purely through the channel which you're working for rather than retailers. What's that experience like for you and for your customers?

George M:      It's been fantastic especially from the service and a turnaround point of view. So when we're dealing with clients, it's all about speed to market, how fast things can turnaround, but it's also about the actual product itself, the relevant rates, the relevant fees. But from a service point of view and the ongoing service post settlement, that what's been the standout with regards to this particular white label.

Annie Kane    So just generally, how did you first come across white label? So take us into the industry now, I just wondered what point you started approaching white label loans and what you were using them for.

George M:      So I aggregate through Connective. The BDM has been very proactive with regards to keeping me up-to-date with the white label product, the offering, the benefits and it wasn't until I actually took the time to look at it in detail and recommend it to a client, so whenever I see clients. I provide a product comparison and that might be between three to five different lenders and now typically, Essentials by Advantedge is typically in that comparison. And when I first used Advantedge, it was all about within a 48 hour turnaround time and largely it's unconditional, potentially within 24 hours, so that was really a standout. And it's a basic product offering but it has actually everything the client needs and that was really another standout for my clients and that's the feedback I've had with regards to not overcomplicating the actual process, the product and they're happy to leave their banking where it is and they're purely just after a home loan. But the turnaround time's really fast, great service, really competitive rates and then the ongoing service post settlement, it has been the standout.

Annie Kane    Can you give us an example of maybe when you would have used Advantedge loan and who the borrower was?

George M:      About the circumstance?

Annie Kane    Yeah.

George M:      Yeah, certainly. So automatically, Essentials by Advantedge comes to mind when a client's looking to purchase a home. They're potentially racing against a few other vendors ... Sorry. A few other purchasers I should say, with regards to securing the property and automatically, speed, turning this around, getting this deal done is a certain priority. So there's a few lenders ... I'm fortunate enough to have a certain status with a few different lenders which offers me fast turnaround times but I automatically know I can depend on Advantedge with regards to turning it around. And the other key standout is with a number of lenders, without mentioning any names, if for example there may be something that the credit manager does question, typically what happens is there's a back channel message, comes back to me, then I've got to back through the same channels and it could be another 24 to 48 hours. Typically, the other standout with Essentials by Advantedge is that credit manager will call you and try and address that over the phone. And if they can't, they will conditional approve the loan subject to if it's a basic requirement and that might give that client the confidence to go ahead and do what they need to do potentially.

James Mitchell::        We've seen over the last couple of years, Brett and you’ll be across this as well, some of the banks, non-majors and majors alike having blowouts up to 20, 30 days and that sort of stuff and I guess I can see the huge benefit in having a fast turnaround for your clients. And I guess that's probably one of the reasons why there's been such a huge increase in the volume of white label and just the popularity of it. I know, Brett, since we've done a number of white label reports over the years with The Adviser and every year it seems, it's just increasing, increasing. But what it's looking like now in terms of the share or the popularity of white label in terms of the aggregators you work with, the number of brokers using it?

Brett Halliwell:          Really our growth has been driven by a greatly expanding broker footprint so we're now across 12 aggregators in the market that covers over 85% of brokers that have access to our products, so that's really about availability. From there, we've spoken a lot about our service which is really where we've tried to position ourselves very deliberately sort of with the right product and great rates. From there, we really work hard on building relationships. So that's relationships through our BDM team, it's also tapping in with the aggregation BDM teams trying to get their support which really then comes back to referrals and spreading the word. So I think a lot of our success ... And we do like to try and be relatively modest about it. It's really, really hard work but we know that we'll get business if we offer brokers what they're really looking for. They respect and enjoy our service and we hope that they'll talk to each other in terms of them recommending us to their clients.

Annie Kane    And I think actually ... We welcomed the news recently that customer satisfaction among borrowers who use a broker for their white label mortgages are at a record high so I think your recent statistics said that the NPS score had raised from plus 70 to now, plus 79. I think that's a great news story. We always love to hear when borrowers are coming out and saying, "My broker did a fantastic job for me." And, obviously, in this case with the white label loan. Why do you think borrowers are specifically enjoying this product? What is it about it? Apart from we've covered the broker side of things, the turnaround times that's appealing to brokers, but what is it for customers that's really pushing this sort of satisfaction do you think?

Brett Halliwell:          Many of the things that we covered earlier. If I can go to a broker, get the right service, they ask me all of the right things, make it easy, it then goes in and then within sort of a day or two days, I get a confirmation back that you're completely good to go really instils an awful lot of confidence, it makes it easy. So it's very much about the broker and the customer working together, and us being in the background there trying to deliver things that will meet their need. So with the NPS, we've recently done our consumer NPS that gave us a very, very positive NPS score of a positive 43 and that compares to a lot of the major banks tend to be typically in the negative, somewhere around the negative 10 to negative 15 mark, so that is telling us that customers are really, really happy with our setup processes. If we can do our job properly — and we try very hard to do that — we can very much make the broker look incredibly good in the customer's eyes and I think that's somewhat unique in the market.

Annie Kane    And George, have you found that as obviously offering these loans to your clients that you've had great feedback from them and maybe repeat service?

George M:      Yeah, certainly. Especially post settlement when the client potentially has to call up the customer service team for a basic requirement and it might be changing a direct debit or whatever the case may be, there's a great dedicated team there’s hardly no hold time when they call through. They're speaking to someone and they can take care of their need right then and there. And the other advantage as well is the client can actually authorise me throughout the loan process to speak on their behalf. So with some lenders, I can't actually do that. So post settlement, I can't actually call up that lender and complete a service enquiry for the client. However, with Advantedge, I can actually do that. So it offers further benefits to me as a broker to continue that service for that client or the client knows that they can speak to a specific customer team that can look after their enquiry, their needs, then and there post settlement.

James Mitchell::        Yeah. I think it's really important to get that customer satisfaction feedback, particularly in the environment where there's a focus on good consumer outcomes and that sort of thing, which ultimately can come down to something as simple as turnaround time. Customer getting their home and we're getting their financing quickly so they can obtain the home they want. But I wanted to ask George, for the clients who've received their funding and they've moved into the home, when you're sitting down with them and it gets suggested that there is a white label option available to them, what is their initial reaction? Because they may have heard of a major bank, they may have heard of a non-major, they may have even heard of some of the non-bank lenders but if you put a product in front of them, an Advantedge product, which they may not be aware of the branding, what's that interaction like? What's the conversation like with the consumer?

George M:      I'd say the key thing is really making sure that I communicate everything about that particular white label branding in giving them as much information as possible so they can make an informed decision. And a lot of time if I do that right, there's not many questions, there's no hesitation whatsoever. So typically, a scenario would look like ... I'd obviously go through the product comparison. I'd be honest with the client and pretty much say that, "You've probably never heard of Essentials by Advantedge before." I'll explain it's a subsidiary of NAB and funded by NAB, therefore, it has obviously a major bank backing and then I'll advise them exactly what the benefits are. And those benefits can obviously be around fast turnaround time, great pricing, lower fees, continued service. And as soon as I give them that further confidence, really there's no hesitation whatsoever from the client.

Annie Kane    Obviously George there is sort of highlighting the fact that there's disclosure piece about sort of saying it's backed by NAB and at the moment, we know there's a lot of focus on transparency and disclosure in the mortgage market. So for you, what would you like brokers to be saying when they're offering an Advantedge loan to a borrower? How can they best explain this relationship between the bank and Advantedge?

Brett Halliwell:          First and foremost, really starting with the customer needs and that's absolutely critical to make sure it is the right product and that the right one has been selected. So assuming that that's been done, we are very, very open. In fact, we think it's a great benefit of having the best of both worlds. So, "Yes, this is a Connective Essentials product." And exactly as George said, "It is backed by NAB, it's a NAB subsidiary." So we're very, very comfortable, we want that to be part of the process and indeed we look to incorporate references to NAB. So it's in our terms and conditions or offer letter that goes out with the loan, it's also in our consumer credit guides which are part of NCCP legislation, so the more disclosure the better. We are currently reviewing whether we can dial that up a little bit more so that it is even more transparent, but we certainly believe that that's important.

Annie Kane    Yeah, definitely. I think transparency is one of the things that we obviously really need and increasingly are getting in this sector. George, I also just want to ask about ... So you've been using Advantedge for a few years now or a year and a bit?

George M:      Yup.

Annie Kane    So I just wanted to ask, have you seen any sort of uptick in the amount of white label loans you've been writing? Have you sort of been ... I know that you said earlier that you would generally find now when you offer sort of suite of choices to a borrower that an Advantedge product would be in there, but I just wonder if you've been seeing an increase in the amount of white label loans that you've been actually writing.

George M:      I certainly have, especially when I give the client the option. And again, obviously, being a broker it’s about providing options and the client ultimately making that choice. But I think when I do provide something in writing, disclosing exactly what the rates are, what the features are, what the fees are, comparable to a number of other lenders, Advantedge clearly stands out and the client makes that choice. And because of that, certainly I've seen an uptake in clients selecting Advantedge.

Annie Kane    And George, in terms of your experience of using Advantedge, I just wondered if there was anyone who's maybe thinking about it who hasn't yet used them, what you would say a great sort of calling card is for them and what you particularly enjoy using through Advantedge?

George M:      I'd probably summarise it to say that it's easy and efficient and I'll expand on that from both the broker side as well as the customer side. So from the broker side, we've already touched base on it but just summarising, fast turnaround times, great BDMs, access to credit managers direct, access to a scenarios team who can give you a reference number once you've discussed that scenario upfront which carries through to the actual deal itself. And then through to documentation, there's digital documents, there's fast turnaround especially if you're trying to meet an urgent settlement deadline, and then the process once the settlement's complete. So a welcome letter goes out to the client, it's very clear around how they set up internet banking and how they make direct deposits and withdrawals, so it's a really efficient service and efficient process.

            From the client's point of view, they're getting a fantastic product. Great rates, great fees. The borrowing capacity for clients on the Advantedge side is most likely higher than a lot of the other lenders out there so it's an advantage as well, but the service aspect during the process and certainly post settlement is a clear standout for them as well.

Annie Kane    George is talking now a little bit about the efficiencies and the technology that Advantedge uses and you were talking about DigiDocs is it? Brett, can you elaborate a little bit on that?

Brett Halliwell:          Yeah. So we're really proud, over the last year or so, we've moved into a partnership to have digital documents through DocuSign. There's a really great advantage to that. We've had instances where customers might get an unconditional approval within 24 hours. Through our partner, MSA, documents are being issued another 24 hours later, so we're up to 48 hours. If the customer can get the document, open it, it's available there online and in some cases, they've signed them off within 24 hours so we've actually gone to a full position, done and dusted within three days. Under the old process, to get physical documents out, took about five days alone to get them to the customer and then a few days on top of that to get them back again. So it's been a remarkable improvement for us and customers are absolutely loving it.

Annie Kane    So it's that with MSA's IDyou?

Brett Halliwell:          No, that's a little bit different. So at the beginning of the process, we've got two different options there. There's ZipID and IDyou. So that's really about customer identifications, so KYC, AML, et cetera. So that can be used at the beginning of the process and then we've got DocuSign for the end of the process when the official loan documents go out.

Annie Kane    Great.

James Mitchell::        This sort of ongoing service element is something which is really important as well. You've touched on that already but Brett, I want to sort of ask you about that. Because it's not something we cover enough I'd say in The Adviser, it's probably not something that's talked about enough in the industry. Everyone talks about products and rate and turnaround times as well but in terms of the ongoing service, what are some of the things which a borrower might be needing for example that Advantedge can provide? Is it help with setting things up? What are some of the questions that they need answered which Advantedge could do?

Brett Halliwell:          Throughout the life of the loan, a lot of it might have to do with transaction so, "How do I make my repayments?" So we've got flexible mechanisms to do that through salary, through direct debits, et cetera, so that's in terms of getting the money into the account. We've also got a range of convenient mechanisms to get it out again, so through an ATM card, through our direct debit. So in effect you can use your mortgage for everyday transactions which makes it easy. Access to redraw sometimes comes up as questions. Then you've got the more complex things like security substitutions, product switches, things like that and that's why there's a great benefit. The brokers can get involved and we're very keen to work alongside brokers in doing that indeed with our systems so that we can actually give access to brokers to customer account deal details. So for those brokers who do want to have a closer relationship with their customers and effectively be the customer's own personal banker, we're in a very good position to be able to do that and I don't think that there are too many lenders in the market that can do that.

Annie Kane    How would that relationship work? Would it be that it's all done sort of through a portal or is it done face-to-face over the phone? How is that sort of relationship come about?

Brett Halliwell:          Yeah. So we can set up the broker's access to the customer's account and then from there, it's really up to the broker how they want to position that with the customer. So if you need XYZ, you've got the option of going to Advantedge direct or alternatively, if you'd like to come to me, I can assist you with that. And I think a lot of brokers really value the "come to me" because ultimately, I think where brokers are going in the Australian market is to be sort of the bankers of many, many years ago. They're there in the business for a lot longer, they're likely to be able to handle referrals from friends and family, other people and to commercial, that kind of thing. So if the broker positions themselves as, effectively, the customer's trusted financial confidant, the banker, we're well-placed to be able to help them to do that.

James Mitchell::        George, I know in previous years, may not still be the case, but there was sort of pressure on clients to ... If it was a certain bank which you get a mortgage with and they do their everyday banking with a different bank, then they transfer their banking over to the bank where they've got the mortgage with and I guess having this sort of white label option, I guess it opens the options up the customer that they don't necessarily have to switch banks. They can stick with their arrangement. They can do as they wish and still get their funding through Advantedge. I just wanted to ask you what the appetite was like for the people who were like, "You know what? I want to keep my everyday banking as it is and just have the mortgage with a separate funder." What's been the popularity of that strategy as opposed to switching banks?

George M:      It's an interesting question because your initial assumption might be that if someone is taking out a loan through a particular lender, they want to move all their banking when I've certainly seen a transition where that's not the case. Everyone's obviously getting a lot more comfortable with internet banking, not necessarily going into ibanks and branches. For them, it's an advantage to keep their banking, their transactional banking where it is and purely just have a home loan with Advantedge Essentials. So I've seen a clear difference where you ... They don't have to switch their banking across. And a lot of the times with other lenders, yes, they will offer a complete banking solution but obviously with that comes a package fee and sometimes with that package fee, a lot of clients depending on their needs and goals, they don't take advantage of the offset account or the free credit card or the discounts of a home and contents insurance. They're technically ... They're paying this larger package fee for no reason and that's probably the other attraction as well. They realise that, "I'm happy with keeping my basic transaction where it is at either no cost or little cost and therefore, I'm happy just having this product sitting over here."

Annie Kane    That's a great point. We talked about disclosure and transparency and the whole sort of way of making sure that everyone's really clearly on board with who Advantedge is and major bank backing and I think that's a really key part of what we've been seeing with all the commissions that have been going on recently. Obviously, with the royal commission, the Productivity Commission. The royal commission I think as well has been really interesting in that we've had the banks come out and really talk about the broker offering and remuneration. It's been a real focus at the moment-

George M:      Putting a lot on the table.

Annie Kane    It has been. I just wondered, Brett, in terms of NAB's sort of position. We know we had a letter from Steve Kane come out recently to brokers about sort of emphasising what the bank's position was, but how have you sort of found it with Advantedge and, obviously, with the NAB partnership too?

Brett Halliwell:          The royal commission certainly has been sort of interesting and eyeopening for a lot of us in the market and I think really what it's going to require is the banking sector absolutely relies on trust and it's absolutely critical for the banking sector to maintain and restore trust. Certainly from NAB's position and as a fully-owned subsidiary of NAB, we're very much aligned with the position that NAB is 100% pro broker. We own three of the biggest aggregators in the market. We've been very clear through the whole time in terms of our position and that is that we support upfront commissions, we support the payment of trial commissions and we've said that openly in a number of different forums, so that's through the Productivity Commission, through the ASIC enquiry through the combined industry forum and through the Productivity Commission. NAB's position has been very open, very transparent and very clearly pro broker. So that's where we want to stand and would like brokers to support us on the back of that because we're certainly the organisation in the market that supports brokers.

Annie Kane    Well, thank you for coming out and for doing that. Yeah. And obviously, as I said we run the stories on The Adviser too. So if anyone's interested in finding out a bit more about what NAB has said on the broker market, then please do check it out. It's TheAdviser.com.au. But I think that's all the time we have for today, so thank you so much to you George for coming in and sharing your thoughts on white label and Advantedge, and thank you to Brett as well for coming in and talking about Advantedge and what we can offer the broker market. For other news and features, please visit TheAdviser.com.au and tune into our sister podcast, the Advisers Elite Broker podcast which goes out every week.