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Major bank implements Sedgwick remuneration reforms

by James Mitchell8 minute read
The Adviser

A big four bank has announced significant changes to its incentives program, following recommendations outlined in the ABA-funded Sedgwick report into bank and broker remuneration.

NAB this week revealed that it is changing the incentives program for its most senior branch and contact centre managers to reward delivery of great customer outcomes, leadership and performance.

More than 700 NAB retail branch managers, assistant branch managers and sales team leaders in consumer call centres will move from their existing incentive plan to NAB’s Group Short Term Incentive (STI) Plan.

This will take effect from 1 October 2017, well ahead of the 2020 deadline set by Stephen Sedgwick AO for bank remuneration reforms.

NAB chief customer officer of consumer banking and wealth Andrew Hagger said that the change will see greater emphasis placed on customer outcomes, actions and behaviours, not just product sales, for staff incentives.

“Our branch managers are the respected and trusted face of our business in the community, and their priority is to deliver the best outcomes for customers,” Mr Hagger said.

“This change to our staff incentive program sends a very clear message: that the customer must be at the heart of everything we do, and that great leadership is both valued and rewarded.”

The NAB Group STI Plan has a sharp focus on deep understanding of customer needs, and also links incentives to an overall assessment against a range of factors, including risk management, conduct and adherence to NAB values.

“We’ve heard the message from our customers and the community, and we’re taking action to make banking better for our customers,” Mr Hagger said.

NAB noted that the move of these employees to the Group STI Plan is consistent with final recommendations made by Stephen Sedgwick AO in April as part of the Australian Bankers’ Association’s Better Banking Reform package, which aims to “protect consumer interests, increase transparency and accountability, and build trust and confidence in the industry”.

Mr Hagger said the change is “just one of many things” NAB is doing to ensure it is better serving its customers.

“Over the coming 12 months, we will continue to review our practices—including things that influence our culture, such as performance plans, incentives, visual management, and team meeting structures—to ensure we are consistently delivering great customer outcomes,” he said.

NAB was the first bank to commit to implementing the Sedgwick reforms and said it aims to implement them well ahead of the 2020 deadline.

The move could throw the spotlight on how mortgage brokers might be incentivised to provide good customer outcomes.

Sedgwick’s report recommended that banks adopt, through negotiation with their commercial partners, an "end-to-end" approach to the governance of mortgage brokers that approximates as closely as possible a holistic approach broadly equivalent to that proposed for the performance management of equivalent retail bank staff.

In effect, broker commissions would be governed by similar principles that banks would apply in assessing performance against a scorecard for their staff.

Mortgage aggregator AFG’s submission to Treasury in response to the ASIC review of broker remuneration focused on how broker commission structures could be changed to ensure good consumer outcomes.

A recent HashChing survey found that 65.63 per cent of brokers agree with AFG's recommendation that volume-based incentives should be replaced with bonus programmes that are more aligned to positive consumer outcomes.

"Broker remuneration has been a hot topic in the industry of late, with many differing opinions on how to reduce any perceived conflicts of interest between banks and borrowers,” HashChing COO Siobhan Hayden said.

“I think it's interesting that the majority of brokers believe volume-based incentives should be done away with in favour of bonus programmes; it demonstrates a genuine interest on the part of mortgage brokers to find an alternative that drives better outcomes for consumers while at the same time continuing to encourage competition and high levels of performance on the part of brokers."

AFG has urged the government and Treasury to treat the Sedgwick report as “a submission by just one interest group in the mortgage industry”.

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James Mitchell

AUTHOR

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.

 

Comments (12)

  • NAB informed me I had to cut up my clients Credit Card, limit $15,000, to service the loan. No longer could get the Package Deal & 350,000 Rewards Points. Loan settled and the client still wanted a Credit Card so I told them, go into your local NAB Branch and apply for one. Client was approved for a $15,000 Credit Card.
    NAB ripped my clients off 350,000 reward points that is equivalent to an $1,800 Myer Gift Card.
    So, is NAB Broker Serviceability different to Branch Serviceability? YES
    Is Bank Staff incentivised to sell additional products to meet targets? YES
    Has NAB breached the NCCP? YES
    Will NAB lose their Credit License, be fined $200,000 or sent to jail, be banned from the Industry for 10 years and not be allowed to be a director of a Company for 5 years? Ha, no chance!
    Will anyone from NAB be at all reprimanded? NO
    Lender's serviceability is a joke, the NCCP is a joke, ASIC is a joke, responsible lending is a joke, staff incentives are a joke, ABA is a joke, CEO pay packets are a joke, our politicians are a joke and the people who suffer is the underpaid Mortgage Brokers and ultimately our clients...

    Pro Broker
    6
    • Preach it brother

      Spartacus
      1
    • Bring on The Royal Commission!
      1
    • I had exactly the same thing at NAB to one of my clients with exactly the same outcome - although they did question why his phone bill payment on his bank statement for the most recent month was $130 ( $30 data pack added on for that month) and why only $100 for communications was listed in his average crystal ball living expenses projected figures.

      Common sense no longer common in lending.

      1
  • typical of a major bank using trick language to try and convince the marketplace including brokers, that they are responsible corporate citizens. The truth in all this NAB gibberish will be evidenced by leaving Broker introduced new business commissions as is and stamping out the 'us' and 'them' approach when our clients go into a NAB branch and are treated like Lepers.
    2
  • Brokers are "commissioned" by lenders, and NAB is one of those, to perform work for them for a fee. Brokers are third party/externally contracted by lenders. Provided we complete the work that we are commissioned to do, we get paid the agreed commission. Now, let's move NAB's methodology to the real world. I have a plumbing problem and call my local plumber. He agrees to undertake some repair work and at the end of the job, I will consider his sharp focus and deep understanding of my needs, link his performance to an overall assessment against a range of factors, including his risk management, conduct and adherence to the plumbers association (if there is one) values and then decide how much I will pay him. How do you reckon that will go down?..."bullsh.t" the plumber will say. "Here's my fee and you have to pay it". Nothing different to our world. We have remuneration agreements in place with our lender partners - it's our fee for services provided to the lender.
    4
    • But then they argue that it's a simple commodity product. Make up your mind banks and government
      0
    • You forgot to add that if I call another plumber over the next 2 years I can then clawback the fee I paid to the original plumber.....I bet the plumber wouldn't say " bullsh.t" they would say (what our aggregators should have said) F.ck U!
      3
  • Joke of the century..... "The NAB Group STI Plan has a sharp focus on deep understanding of customer needs, and also links incentives to an overall assessment against a range of factors, including risk management, conduct and adherence to NAB values." Fancy words but outcome would be still the same.
    6
  • "In effect, broker commissions would be governed by similar principles that banks would apply in assessing performance against a score card for their staff."

    Hello, we are not your salaried employees.
    6
  • What a crock of s .... They change the bonus payment pool to STI (assuming they must have been previously under LTI). No suggestion that anyone is doing anything different, just a movement in the bonus pool, and this is supposed to give Consumers more confidence. Perhaps Mr Sedgewick would be the only one to agree.
    3
    • So are you implying that consumers don't have confidence in remuneration for financial products? IE - Broker Commission?
      1
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