MPA brought together representatives from seven of the country’s largest non-major banks to discuss the big issues the mortgage industry faces today. Their insights were fascinating
While there’s no doubt that Australia’s major banks are providing a valuable service to mortgage brokers, the non-major banks are hot on their heels, developing innovative mortgage products and services aimed at bringing more brokers into the fold.
To find out more about the non-major bank service proposition, and to get the perspective of the non-majors on some of the key industry issues, MPA brought representatives from seven of the country’s largest non-major banks around the same table for a fascinating discussion on the state of the market.
So, what’s the non-major take on the major issues facing mortgage brokers? The insights from our seven panellists are presented in this special report – truly a must-read.
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STATE OF THE MARKET
To kick off the discussion, we quizzed our panellists on the state of the mortgage market and what advantages the non-major banks can offer brokers.
For ME Bank
national broker manager Stewart Saunders, one of the non-major sector’s strengths has historically been its ability to produce innovative products and drive competition.
“While brokers may not benefit directly from every loan that they put to a non-major, we’re seeing increased competition across the market that non-majors are driving,” he says.
Bankwest state manager, Vic/SA, Jarrod Cahill agrees, adding that the non-majors are all looking to differentiate in one way or another.
“For brokers I think that creates an element of choice,” he says. “And for the consumer that ultimately is the benefit.”
One point that AMP Bank head of sales and marketing Glenn Gibson
brings up is that, from his perspective, there has been a shift in attitudes among the non-majors in recent years – from competing among themselves to trying to go toe to toe with the majors.
“So we’ll try something different; we’ll bring out a niche,” he says. “It could be a change in credit or it might be a change in product or it might be a change in price. But it’s not necessarily aimed amongst ourselves anymore; it’s more so aimed at the wider market, and I think we’re all seeing the benefit of that.”
The ability to offer a personalised service is something that Adelaide Bank senior manager, broker distribution, Fons Caminiti highlights as a strength of the non-major sector.
“I think it’s something that we try and leverage off quite frequently, because we’ve got the scale to be able to do that. And I think that’s really important for us,” he says.
Offering a genuine choice is also important, adds Suncorp Bank
head of intermediaries Steven Degetto. “And for brokers it’s being able to offer something to differentiate themselves from other brokers,” he says.
This is an issue that St.George Banking Group mortgage broking general manager Clive Kirkpatrick
picks up on. From his perspective, it’s important to work hard with brokers to be, if not a first choice, then a sound alternative.
“You’ve got to actually work hard to make sure that your products are there to provide the choice to the broker, and therefore the customer,” he says. “I think we all need to work harder to get that to be the viable alternative.”
While the GFC proved to be a major hurdle to the industry in terms of funding, ING DIRECT national sales manager Ray Esho is cautiously optimistic that the non-major banks are able to really compete on this front again.
“Whilst we can’t get too complacent about risk appetite having returned and things having normalised, I think small lenders and non-majors more broadly are able to get back into the game,” he says. “So, whilst we’re not on the trajectory that we would have been on had it not been for the crisis period, I think things have normalised.”
This normalisation, combined with the nonmajor banks’ nimbleness and general lack of legacy issues, has allowed the non-majors to bring out seriously competitive products, he explains, which in turn is creating a larger appetite among brokers to “think outside the majors”.
THE CHALLENGE AHEAD
In terms of challenging the majors for a larger slice of the mortgage pie, Cahill believes it’s vital to listen to brokers and adapt to their feedback.
“Given the majority of our loans at Bankwest are introduced though the third party, we see that as a great offering to be nimble,” he says. “And ensuring that we’re always seeking that feedback to better ourselves.”
For Gibson, it all comes down to service. In the broker sphere specifically he says it’s essential not to take a one-size-fits-all approach, and service the brokers in the way that they want to be serviced – whether it’s on price, product, BDM support or credit access, for example.
“How do we deliver a service not only to our brokers but to the end customer the way they want to receive it?” he asks. “I think the non-majors are fairly nimble in their ability to change from one broker to the other, and I think that’s certainly showing in our favour too.”
Service is an issue that Caminiti says is also a key area of focus at Adelaide Bank, highlighting turnaround times in particular.
“We’re talking a lot more to brokers than we have in the past about what their needs are,” he adds. “So for us it really is about staying relevant in the market … and giving them alternatives to the majors.”
Consistency is the key word when it comes to service, in Degetto’s view, which is why his organisation, Suncorp Bank, has been attempting to hammer the service consistency message home with its service guarantee, to prove that it’s a genuine alternative to the majors.
“That consistency also helps build confidence and then you can, I guess, earn the right to ask for a greater share of a broker’s business,” he says.
For Kirkpatrick, innovation is vital. As well as looking at niches in which his organisation can excel, such as SMSF
and non-resident products, he adds that innovation through technology has been another area of focus. Allowing brokers to submit supporting documentation online, for example, helps to create cleaner deals and faster turnarounds.
“I think that’s key to the broker, to get an answer quickly, whether it’s a yes or a no – preferably a yes,” he says. “But we just get the answer quick, so they can either move on to another funder or provide the answer back to the client.”
Esho echoes the sentiments of the rest of the panel in highlighting service as one area in which the non-majors must – and have been – competing. He also returns to the improvement in funding conditions as another reason why the non-major banks can make an effort to increase their market share.
“The non-majors are punching well above their weight in terms of what they can offer the broker, and ultimately the end customer,” he says.
Saunders adds that, based on his conversations with brokers, he believes brokers want to be made to look outstanding in the eyes of their customers. What this means for non-major banks like ME Bank, he thinks, is that it’s vital to deliver consistent service in the areas that matter, as well as compete on price.
“One thing that we’ve struggled with is that non-majors do have outstanding customer service scores in the eyes of their customers, but we haven’t been able to convert that into building business and market share yet,” he admits.
But he agrees with Kirkpatrick that investing in technology to be able to deliver consistent service is one way the non-majors can improve that situation.
GIVE US A GO
On the question of how the non-major banks can persuade brokers to give them a go in the wake of the post-GFC consumer flight to the majors, Gibson brings up the familiar theme of going for a niche.
“Once you get that niche, and once somebody starts to utilise you and appreciates that you’re very good at doing that, then you get more business,” he says. “If you look at AMP, we very much specialise in self-managed super funds. Obviously, with our brand it makes a lot of sense. And brokers start to utilise us for that product and then realise, well hang on, we have the whole suite of products, so we’ll get a little bit more of a broker’s business.”
It’s a point that Caminiti can’t argue with. He talks about Adelaide Bank’s recent success in building up recognition of its fixed-rate 100% offset products – with “all the bells and whistles”.
“Once they use you a few times and they see you can underpin an offer with a service proposition that’s going to meet their needs and their clients’ needs, then you’re in the door,” he says, adding that the bank’s commitment to the broker industry is also a key selling point.
For Degetto, however, he’d rather focus on being a genuine alternative than a niche player. In the case of Suncorp Bank, he believes it’s important to build confidence in the brand.
“It’s probably the best-kept secret that 40% of a broker’s customers are already customers of our group,” he says, adding that the group encompasses several large insurance brands as well as $93bn assets under management.
“So, what myself and my team have tried to do over the past 12 months – and continue to do – is help brokers explain that to customers,” he says, “to build that confidence that we are a good business for them to consider their lending needs for.”
The issue of choice is one that Kirkpatrick says is very important to both brokers and their customers, and he believes that – whether it’s providing a branch network, cheap products or complex products such as SMSF loans, for example – the non-major banks come up trumps in this area.
“I think it’s important that we work with the brokers to continually educate them on what we as a group can provide – not just the St.George group but the non-major bank group,” he says. “We can provide basically anything that the customer walks into the door wants.”
For Esho, the flight to the perceived extra safety of the majors hasn’t been as much a driver of customer behaviour in the last couple of years as it was in the immediate aftermath of the GFC.
That said, he believes that brokers forged strong ties with the majors during the crisis period, so the job for non-major banks is to convince brokers to branch out.
“At ING DIRECT, we’ve been working on a number of things,” he says. “Apart from raising awareness about what we think are very competitive home loans, we’ve been pushing the commercial message.”
Also in the offing, Esho says, is a broker referral program.
Saunders accepts that, for the non-majors, building market share from a base that’s significantly lower than that of the majors is a challenge, but also a great opportunity. And in order to capitalise on this opportunity to persuade more brokers to give them a go, he believes the non-majors need to keep innovating, as well as generating positive word-of-mouth referrals within the broker community.
“It’s always a much stronger message coming from another broker that they’ve had a good experience with a bank, and they’ve delivered on their expectations. And that’s been a fantastic way that all of us have been able to capitalise and grow market share recently,” he says.
“I think we’ll all put our hands up and say we can’t do it in every single situation, but most of the time we do get it right. And we take on board the feedback from brokers, and continually work on fixing any service issues or any opportunities that we can to improve the service across the board.”
Customer satisfaction is as important as broker satisfaction, argues Cahill – and, from his perspective at Bankwest offering unique credit policies, such as products with 95% LVR plus capitalised LMI, it goes a long way.
“It’s a great time for us to be competing. And I think ultimately the consumer and the broker will benefit,” he says.