Third Party Banking Report 2013 - Major Lenders Reply

AUSTRALIA’S MAJOR lenders continue to go from strength to strength.

According to AFG’s Quarterly Competition Index, the share of loans processed by the company for the major lenders increased from 75.7 per cent in September 2012 to 79.4 per cent in March 2013.

Driving the increase was the major lenders’ success in out-pricing their much smaller rivals in fixed rate loans – a product category that has soared in popularity in recent months.

Today, the majors account for almost 85 per cent of all fixed loans written.

Particularly strong performers include ANZ, which saw its fixed rate loan share rise from 8.7 per cent to 15.1 per cent over the six months to March 2013, and the Commonwealth Bank, which grew from 18.0 per cent to 21.1 per cent.

AFG’s general manager of sales and operations, Mark Hewitt, says the scale of the major lenders gives them an inherent advantage when sourcing funding.

“As the figures show, they’ve been able to leverage that advantage to the point that they now account for four out of every five new home loans overall,” he says.

But while all major lenders have performed well over the past 12 months and continue to outperform their smaller competitors in market share terms, there could only be one ranked winner in The Adviser’s Third Party Banking Report 2013 – Major Lenders.

This year, Homeside managed to pip the Commonwealth Bank of Australia (CBA) to the post, after the lender collected first place in nine of the 17 categories, including commission structure and remuneration, business support, channel conflict and BDMs.

With an overall broker satisfaction rating of 62.54 out of a possible 85, Homeside managed to hold onto its 2012 first place, beating CBA by
just 0.28.

Indeed, CBA performed very strongly across most categories this year, placing first in seven categories and stepping up from third place overall in last year’s ranking.

Earlier this year, brokers were given the opportunity to rank and rate the big four across their entire third party operations.

The report revealed the insights and opinions of more than 400 brokers – all of whom regularly write business with the majors.

Each respondent was asked to rate the banks on a scale of 1 to 5 (1: very poor; 2: poor; 3: average; 4: good; 5: very good) across several key areas, including support, commissions, technology and product.

The responses were then analysed by business research house RFi, ensuring the methodology was transparent and the results were credible.

AND THE WINNER IS...

The battle for first place was hotly contested between CBA and Homeside, but it was Homeside that emerged as final victor.

In analysing the results, it appears Homeside’s ramped trail structure is what led the bank to its win, after the lender defeated CBA convincingly in terms of commission remuneration and structure.

At the other end of the spectrum, Westpac failed to secure broker favour, with the lender placing last in all 17 categories.

Despite its coming last in every category, however, it is pleasing to note Westpac managed to improve its broker satisfaction rating in all but one category – suggesting the bank is finally starting to reconnect with the third party distribution channel.

In this edition of The Adviser, the majors react to the ranking and outline exactly how they plan to address the areas of their business that brokers have highlighted as ‘needing improvement’.

Focusing on Improvement
Westpac

“IT’S ALWAYS good to understand our performance from all levels,” says Tony MacRae, general manager for mortgage broker distribution.

“Rankings such as these give us the opportunity to gain solid feedback from our mortgage broker partners that will help us deliver improvements across our business.”

Last year’s ranking helped the lender identify the key areas it needed to improve in, he said.

And improve they did.

Over the past 12 months, the bank has implemented a number of new initiatives including its ‘first time to right’ program and ‘best banker’ training program for its BDMs.

“We saw that we needed to deliver a strong broker service throughout key areas, including the mortgage processing unit, credit and settlements.

So we enhanced our business processes through the ‘first time to right’ program,” he says.

“We then complemented this initiative with our ‘best banker’ training program for our BDMs. The program has helped provide our broker BDMs with more of the skills they need in order to undertake strategic business planning.”

In addition, the lender introduced its ‘local squad’ campaign, which was created to help brokers form sound relationships with their local Westpac branch managers.

It is fair to say these initiatives have had a positive impact on the lender’s broker partners, with Westpac recording a jump in its broker satisfaction rating across all of the report categories bar one.

Mr MacRae says the bank plans to continue its new initiatives this year.

Furthermore, based on feedback in the report, he adds that the bank already has plans to introduce a number of new initiatives.

“We have [several] that we are planning to roll out to our broker partners this year,” he says. “The first covers our digital strategy, where we plan to extend the tools and services in our broker iPad app.

“We also plan to extend our self-managed super fund (SMSF) offering throughout the market and we are also in the final stages of piloting a couple of new products that we believe will help brokers in terms of distribution and provide them with an opportunity to earn more revenue.

“Westpac also has a continued focus on delivering exceptional turnaround times and a better service level to all our brokers. The feedback from professional brokers is very clear: delivering fast service for their clients is still top priority in their business. We believe keeping a single-minded approach in this regard will deliver an improved overall service proposition to brokers.”

Mr MacRae makes it clear that the bank has no plans to “rest”, but instead aims to make significant changes to its first party and third party proposition in a bid to “delight customers”.

“We will continue to conduct our own research as well and ask our key broker partners how Westpac can continue to build on our current broker and client support service proposition,” he says.

Consistency is key
ANZ

DESPITE SLIPPING down the ranking this year, ANZ’s head of third party and relationship channels, retail distribution, Kieran Evans says he is pleased with the bank’s overall broker satisfaction score.

ANZ managed to score a broker satisfaction rating of 59.28 – only slightly down on last year’s effort, suggesting ANZ’s third party proposition has remained relatively consistent over the past 12 months.

Mr Evans said he was pleased to see the bank’s performance was consistent with previous years as this is what ANZ aims to deliver each day, month and year.

“Our focus remains on providing high quality support to our brokers through strong and consistent service; access to knowledgeable, responsive BDMs; sustainable, competitive pricing; and easy-to-use products,” he says.

“We recognise there are areas we need to focus on, and it’s all about working with our broker partners to make sure we are delivering what’s important to them.”

Those ‘focus areas’ now include ANZ’s online presence and broker communication.

“Our strategy remains the same, and it’s about contributing to the professional development of the broker industry,” he says.

“In addition, we want to improve our online presence for brokers, with better accessibility and functionality and clearer, simpler communications.

“We will continue to work with brokers on issues affecting them and their business and look for ways to assist brokers in driving business growth.”

ANZ’s turnaround times are, however, already considered by brokers to be the best in the business.

Through achieving this, ANZ is indirectly helping brokers establish a strong business built on good client relationships.

“It was great to see we topped the leader board on turnaround times, when particularly over peak times we were still able to deliver quickly to brokers. We know how important turnaround times are for brokers and customers so it’s pleasing to see we have been in the top two for the past four years,” says Mr Evans.

“It’s really important to us to hear directly from brokers about what they think about ANZ. We regularly seek feedback from the broker industry, and we know it’s important to get further insights via external surveys like this one so that we can continue to deliver a great experience from BDM to branch.

“The report gives us great insight into what areas we really need to focus on to ensure we are supporting brokers to deliver a great customer experience.”

Eyes on the prize
Commonwealth

THE COMMONWEALTH Bank of Australia’s executive general manager third party and mobile banking, Kathy Cummings, was pleased to see the lender improve its overall broker satisfaction rating during 2012.

However, she believes CBA can do better.

“The [report’s] findings correlate reasonably well in most categories,” Ms Cummings says, “although I feel we should have scored better in the training and education, business support and channel conflict categories.”

Ms Cummings says she is confident CBA can achieve top place in next year’s ranking, especially once brokers see what the bank has in store for them.

“We are delighted to confirm that we will be introducing a transactional offset account by the end of the year,” Ms Cummings says. “This will close a long standing product gap and complement the strong market appeal of our other mortgage products, such as our MAV package and the No Fee Home Loan, which is unique.

“We are piloting an automated valuation model, which will provide more certainty of the valuation amount and lead to a more accurate indication of the amount the bank will lend against the property.

“This will contribute to a reduction in turnaround times in the loan application process and improve our service standard for brokers and their customers.

“In another effort to improve turnaround times, we recently changed our pre-offer letter to a formal approval letter in cases when there are no conditions and the security criteria have been met. This change, coupled with an upfront automated valuation, will result in a faster formal approval from CommBank.”

But while CBA has bullish plans for turnaround times, the lender remains resolute that it will not be changing its commissions any time soon.
According to Ms Cummings, CBA’s broker remuneration is in line with the market: “We are very competitive when commission is based on a five-year loan life,” she says.

“Next to this we also offer additional revenue on the referral of products through the CONNECT Referral Program. The fact is, the more products a customer has with a lender, the stronger the likelihood they will remain with that lender. This means the broker can feel more secure over the continuity of their trail.

“We also recognise customer retention and quality and reward our key strategic business partners and head groups with an incentive bonus through our partnership productivity program. We rely on the head groups for transparency on these rewards.”

Ms Cummings says CBA will remain as committed as ever to helping brokers “improve business efficiencies through productivity and initiatives”.

“We also support those brokers who want to diversify into commercial lending products and encourage commercial referrals through our Commercial Connect referral program, which provides significant rewards and remuneration,” Ms Cummings says.

“The introduction of our market leading and unique Process Excellence workshops has had amazing, positive results for those brokers who have invested in their business.”

The smallest of margins

DESPITE HOMESIDE delivering consistently good service throughout 2012, NAB Broker’s general manager for distribution, John Flavell, says he was surprised to see Homeside take out the top spot in the major lenders’ ranking for the second consecutive year.

In 2011, Homeside introduced a raft of new third party initiatives, which helped the bank curry favour with brokers and ultimately secure the coveted number one position.

Then in 2012, the bank’s main aim was to “bed down” the changes it had introduced the year before and work at delivering “consistently good service”, Mr Flavell says.

“When you’re not actively out in the market making noise, there is always a worry that your broker partners will forget you,” he says. “This wasn’t the case, and we are very humbled to have won this award for the second consecutive year.

“We endeavour to provide our brokers with an opportunity to innovate and grow their customer base and offer their customer something that is of value. To do that, we know we need to not only provide a consistently good service, but we need to work on enhancing our product suite and policies.”

Homeside’s commitment to consistently improve its product and processes ultimately paid dividends for the lender. According to Mr Flavell, however, making consistent improvements is sometimes harder than it looks – and can even cause heartache along the way.

This was certainly the case in May 2012 when Homeside made changes to its documentation packs so that all brokers received only one pack of merged documentation rather than a series of packs.

This initiative has helped reduce turnaround times, but getting to the goal was tough.

“Speaking to brokers, we found out that they would prefer us to send all of our loan documents in a single package. It was the right thing to do, but when we went through the motions, we realised we had greatly underestimated the complexity of merging several documentation packs into one,” says Mr Flavell.

“As we were trying to finalise the process, our turnaround times blew out. We went backwards to go forwards.”

The effect on turnaround times led to the lender plummeting from first in this section of the ranking last year to third place this year.

According to Mr Flavell, however, the problem has now been resolved and the ‘one document pack’ initiative is working well for the lender, with Homeside recording a significant drop in time to unconditional in the past two months.

“If we suffer a little to be better in the end, then that is something we are prepared to deal with,” Mr Flavell says.

Brokers can expect much more of the same from Homeside in future, he adds.

“We have ambitious growth plans – we plan to grow above system,” he explains. “To do that, we need to see the broker market outperform and we need to outperform in the broker market.

“We will do what it takes to grab a bigger slice of the pie. We are focused on growth, but not at the expense of our partners. Our customers, our brokers and our shareholders remain critically important to us and we will do whatever we can to deliver them a superior result.”