The silver lining

It can, however, be all too easy to  focus on your own operations and overlook the perception of the broking industry as a whole.

No industry is perfect – at least not to everyone. The third-party lending channel has its share of critics and unhappy customers too.

However, rather than dismissing these complaints, examining just what consumers feel let down about unearths a wealth of constructive criticism about the industry and the areas in which brokers, as a collective, can better meet consumer needs.

And while some may not be relevant to your own business, they do provide an interesting insight into the areas consumers can find most confusing or frustrating about dealing with a broker, enabling savvy brokers to capitalise on this information and improve their offering to stand out from their peers.

With that in mind, The Adviser takes a look at exactly how many complaints are made about brokers, what consumers complain about most, and what brokers can do to avoid being the subject of such objections in the future.

Compiling complaints

There are a number of outlets for consumers to lodge complaints about broking services.

While ASIC manages serious allegations about fraud or regulatory non-compliance, it directs consumers to both the Financial Ombudsman Service Australia (FOS) and the Credit & Investment Ombudsman (CIO) to lodge grievances relating to operational matters and service provision. Then there are industry associations like the MFAA and FBAA, as well as the brokerage’s head office for franchised brokers.

When an industry grows strongly, so does the volume of complaints received.

This is simple maths – more consumers using a service means a larger number of grievances. However, it must be said that for an industry that dominates the mortgage market and settles billions of dollars in loans, there are very few complaints actually received about mortgage and finance brokers compared to the sheer volume of transactions they settle each year.

According to FOS data, there were only 100 complaints received about mortgage brokers in 201314 (the most recent year for which data was available at the time of writing), and 130 for finance brokers. This has risen strongly from the 2010 financial year, when objections to mortgage and  finance brokers lodged with the FOS numbered just 5 and 18 respectively.

CIO  gures make for similarly positive feedback on the industry as a collective: complaints about brokers have actually fallen over the last three years, both in terms of volume and the proportion of total credit-related complaints received.

In releasing its 201415 figures  to The Adviser, the CIO confirmed brokers and aggregators combined made up only 6.1 per cent of the total number of consumer protests it received – totalling 294 for the year.

That figure was 337in 201213, making up 9 per cent of the total. It was a similar story at the industry’s leading associations, the MFAA and FBAA.

“With over 11,000 loan writer members, we recorded only 125 complaints lodged in a period of 12months,” MFAA chief executive Siobhan Hayden says. For the FBAA, the figure is even smaller still.

“We would normally not see more than six a year, and most of those are readily resolved without higher progression,” notes Peter White, the association’s chief executive.

Not including complaints received directly by ASIC, that equates to a total of just 655 complaints in the 2015 financial year (assuming FOS’ volumes from the year prior). Statistically speaking, that is simply a blip on the radar.

Service enhancement

While the numbers are fairly low, nobody wants to be the subject of criticism. As such, a breakdown of the most commonly complained about areas of broking helps to highlight how consumers can be better engaged with for an even more mutually satisfying relationship in the future.

For the FOS, the clear majority of objections raised since 2011-12 have been about financial difficulty, reaching 43 per cent of mortgage broking complaints in 2013-14. The next most complained about aspect (and the most complained about for finance broking in 2013-14) was about the financial service provider’s decision.

In a pleasing note for the third-party channel, allegations reported to the CIO of failure to act with due skill, care and diligence have fallen dramatically in the past 12 months. In the 2014 financial year, almost a quarter of all complaints to CIO (23.5 per cent) related to this.

This year, however, the figure was down to just over one in 10 (10.6 per cent). It was overtaken by inappropriate finance, including responsible lending, as the most complained about aspect of broking, which accounted for 11.4 per cent of complaints.

The last financial year saw debt purchasers and collectors overtake residential lenders and mortgage managers as the most complained about credit service provider, accounting for 40.7 per cent of all complaints to CIO. The latter came in a distant second at 15.4 per cent, followed by consumer retail finance providers at 9.3 per cent.

“We only receive a handful of complaints each year which, considering the size of our network, is incredibly impressive,” explains Mortgage Choice CEO John Flavell.

“[But] the majority of the complaints we have received over the years centre around one key issue: communication, whereby our customers feel as though their broker hasn’t communicated regularly or effectively enough.

“In every instance, the complaint received is filtered back to both the broker it concerns and their state manager. The state manager then works with the broker on ways to rectify the problem so that it doesn’t occur again in the future.

“In addition, we mystery shop our brokers annually, which allows us to investigate their customer service strengths and weaknesses. By investigating our strengths and weaknesses, we can work to deliver best practice on a consistent basis,” he says.

Mr White agrees that client feedback, even the negative kind, is a good thing as it helps brokers identify areas for improvement.

“[Client feedback is] a great learning tool to ensure you have the opportunity to correct these things. We have to remember we are all human and we all make mistakes; this is one of the tools to learn by,” he says.

Other aspects of broking about which consumers vent their frustrations to an ombudsman include financial difficulty, privacy/confidentiality and disclosure.

Learn from the mistakes of other brokers, or even feedback from your own clients, to beef up your knowledge of your legal responsibilities and industry best practice standards in these areas to ensure you consistently meet – if not exceed – the expectations of your clients when they walk through your door.

“Attend professional development days with [your] aggregator, lender or association, as these subjects are always being spoken about. Plus proactively audit your business and files, if possible by a professional external auditor, annually or at least every couple of years; that way you are in front of the game,” suggests Mr White.

Misguided complaints

Of course, as a third-party channel, brokers are often on the receiving end of consumer frustration, regardless of whether they are even responsible.

The CIO’s own figures show that a credit provider’s fee or interest rate was the third most complained about aspect of broking in 201415 (7.6 per cent). Other similar complaints were received about the credit provider’s contract terms (3.2 per cent) and their application for finance being denied (1.4 per cent).

Others can be traced back to the client themselves, and can require a sensitive approach to help the client understand what caused the problem (often their own delay in supplying documentation) to diffuse the situation.

“We have a dedicated compliance and customer management division at Mortgage Choice. They work with the broker and the customer to ensure all complaints are handled in a professional and efficient manner. If the problem at the heart of the complaint is actually the result of something the customer did, we are careful not to push the blame back onto them,” Mr Flavell says.

Client education

The fact that a consumer has lodged a complaint about a broker doesn’t necessarily mean the broker has done anything wrong, merely that the consumer has the perception the broker has. Yet brokers can take control of this from the outset to minimise the risk of misperceptions arising.

It is easier for client and broker alike if the problems are avoided in the first place. Through a combination of professional experience and learning from the mistakes of their peers, as well as client feedback and consumer criticism, brokers can pre-empt areas that commonly confuse or irritate borrowers. With this knowledge in hand, you can then proactively work to head off potential problems before they even arise.

It may involve better educating your client base about the loan approval process, whether that be during individual meetings or through social media and digital marketing.

Among the paperwork you provide to clients, a one-page summary of the key loan features (including interest rate, fees, expected loan approval time and contract term) can help clients remember aspects of their loan that they may otherwise get bogged down with.

Particularly with new clients, who have either never employed a broker’s services or have previously experienced poor broker service, ensure you remain proactive in managing their expectations, over-deliver on your promises, and keep them informed and actively engaged in their entire application process.

Keep your customers happy

When it comes to maintaining a database of happy clients, industry heavyweights provided The Adviser with these valuable words of wisdom:

Get consistent feedback

“I encourage brokers to do a positive customer survey review at the end of every loan settlement – you should be learning from that as well, not on the odd occasion where you have a complaint.”
Siobhan Hayden, MFAA chief executive

Act quickly

“Deal with things earlier, not later; they get resolved better and quicker that way.”
Peter White, FBAA chief executive

Don’t get defensive with the client

“If the problem at the heart of the complaint is actually the result of something the customer did, […] the compliance team will work with the broker to highlight to the customer exactly what circumstances led to the issue and attempt to resolve it in that manner.”
John Flavell, Mortgage Choice CEO

Keep your clients informed “Recent research has shown that the more informed the borrower is up front, the less likely there are to be complaints and the far more satisfied [borrowers] are, [the more likely it is they have] understanding of the loan structure and benefits they are taking out.” 
Peter White, FBAA chief executive

Complaints about fees

An interesting point to arise is the number of complaints being generated about brokerage fees. At face value this looks like an anomaly, given that the majority of brokers provide a free-to-use service to consumers. However, it is apparent that there are brokers charging for their services in some way or another.

The CIO reported that four per cent of complaints it received in the last financial year related to a brokerage fee dispute, while in its 2014 Annual Report on Operations, the ombudsman included a case study of a woman complaining about a one per cent success fee demanded by her broker. At the ombudsman's insistence, the broker dropped the fee in this instance due to “numerous deficiencies in the disclosure of the success fee”.

The Adviser recently heard from several brokers, including Financial Elements director Jaison Singh, advocating for an embrace of the fee-for-service model as a means to create a truly independent, impartial and unbiased service for consumers. Even one of this issue’s leader profiles, James Buchanan of  Aussie Morningside (see page 20), says the thing he would change about the industry is having the option to charge a fee for service.

“I have met brokers out in the marketplace who do have a value proposition for which they provide to a customer [more than] what I suppose a normal brokerage would provide, and for that they then charge a fee. I’ve never seen a business purporting to charge a fee for no added value,” explains MFAA chief executive Siobhan Hayden.

“If you’ve got a one-stop shop that handles all the consumer needs with relevant stakeholders – so an accountant, a financial planner, insurance provisions – and then you proactively manage that client year-on-year refurnishing them with more insurance options and all those sorts of things, I think you could validate a fee-for-service around those structures.

“But if we continue to provide the same sort of comprehensive service we do today, I don’t see much of a reasoning behind charging a fee.” FBAA chief executive Peter White says a number of members have some form of fee-for-service offering, but he believes many of the complaints about this could be deceptive.

“It would depend on what exactly the ombudsman is seeing as to how that interplays with brokers,” he points out. “There have been recent issues of consumers or borrowers using the ombudsman as a delaying tactic against inevitable pending bank action, and at times it is a potential try-on to get out of paying something the borrower has agreed to legally. But without full and clear detail, it’s all speculation.”

Mr White suggests a move towards a fee-for- service model is “not something I would advocate as a way of the future […] but, always have a Plan B just in case”.

Case study: Tracie Palmer

We asked the Customer Service of the Year – Office winner at this year’s Australian Broking Awards what it takes to provide great customer service and how they respond to client feedback

What proportion of your client base is repeat business?

I would say 65 to 70 per cent is repeat business from existing customers and the rest would be referrals from our customer database to their family and friends.

What is your approach to gathering client feedback?

When we settle a home loan, we send our customers a settlement letter and feedback sheet. We enclose a self-stamped and addressed envelope to make it easy for them to return it to us. We get almost all of them back.

How do you resolve client complaints and address less-than desirable feedback?

We rarely get any complaints. I think it comes down to setting the expectations with the clients upfront. We have a customer booklet that outlines our service promise and how we will look after them throughout the process. We constantly check on our customers during the time they are working with us.

I normally ask them: ‘How are you finding things so far? Are you happy?’ That way, if there is a problem, we can nip it in the bud immediately. Normally we don’t have any real issues but, by being on top of things, it means we can sort out any little issues as they crop up.

Do you think many complaints about brokers actually don’t relate to a broker’s service at all?

In our case, it is more the service levels of other suppliers, like the lenders, that cause us grief with our customers. However, we try to keep the client in the loop the whole way through the process so they are aware of
any hold-ups or delays.

How do you approach addressing negative feedback that is actually attributable to the client themselves (such as delays caused by them in supplying documentation)?

Again, it comes down to expectations being clearly set up front. I stress to my clients that there are strict timeframes and we need them to help us by making sure they get their side of the paperwork back to us as quickly as possible, or it will slow down the process and could hold up settlement.

If we send in a loan and we get a decline due to the client having a problem with their credit file, I would always look for another lending option before I call the client. I would then say: ‘We have hit a glitch with the lender due to something that has come up with your credit file.’ I’d ask them if they knew they had a default, etc. I would then say that I have found them another option. So even though I’m giving them bad news, I’m not saying ‘No, you can’t get a loan’, I’m saying ‘It’s just not this bank, it’s going to be this bank’. It seems to take the sting out of it.