PANEL DISCUSSION / BROKERS
What’s your view on the state of competition at the moment, do you think banks will remain dominant? DB: The competition is incredibly intense, I’ve never seen it better than this, but it’s really only within the major lenders and I think the major lenders are more concerned with themselves than opposed to the non-bank or the second tier.
BA: We’ve almost given up on our second-tier banks, which I hate to say, as we supported them all the way during the GFC, but we’ll get a deal approved with a CBA in three days and it will take up two weeks to get approved with one of the others – so it’s a business decision at the moment.
LS: I’m not finding that at all. And I would actually say that during the GFC, it was really the big four. You had your big four and then there was daylight between them and anyone else. Whereas what I’m seeing now is the next tier, if you sort of move away from your big four and look at Bankwest, Suncorp, ING, AMP – they are the ones that have really come back into the market with really competitive offers.
Will it help or hinder competition to remove DEFs? DB: It’s going to help the major lenders – there’s no doubt about it. Taking away a tool or a mechanism for a lender to protect themselves to be able to compete within a market is going to hamper competition. If you dwindle
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competition the major lenders are going to win, so it’s not a good thing for our industry and our consumers. So it’s probably the dumbest decision that’s ever been made.
On diversification: Do you think diversification is a viable option and are you using it in your own business? BA: We started with a mortgage broker operation and built it into a multi-faceted financial services business. We look for different areas to drive lead generation into the business, but at the end of the day, we’ve got client revenue expectations, which we can’t get off a mortgage – full-stop. We run with the bank’s philosophy – if you’ve got a client with two or three products with you it’s highly unlikely that they’re going to leave… So we believe we’ve proven the fact that diversification works. The question is do you specialise as a broker inside a diversified financial services business or do you set up a diversified financial services business and put a broker in it?
LS: I’ve looked at the whole diversification piece, especially from Mortgage Choice’s perspective, and as far as we’re concerned, the mortgage broking is the main game. Do I really need the $23.76 I get for writing a general insurance policy or referring it for a life insurance policy at $3.72 trail? I’m a professional broker that knows everything about my game but I don’t pretend to know about financial planning or insurance or anything else and I refer all of that off.
JD: You can’t be a top broker and try and flog insurance and everything else at the same time and know all the ins and outs. Like with the floods, how many people were selling insurance that made sure their Queensland clients had proper flood insurance, probably 5%?
DB: I have a strong opinion of this. We’re in a business of providing mortgage solutions, not anything else, so we’ll stick with what we’re doing to be the best in the business. I don’t understand how anyone can be perfect at what they do. We have a whole office and all we do is mortgages, all we talk is mortgages, we just breathe mortgages, so we become – I like to think – the very best at doing that. We refer everything else on. I can’t see how I could be doing the best thing by my client, if I’m doing something else.
JD: We’ve got guys that will write the insurance but we won’t sell the insurance policy at the same time as signing up the loan. It needs to be a secondary process because there’s the loan and if we don’t win the insurance, that’s ok – but I don’t want to lose the loan.
BA: I’ve done it all on my own and it’s hard work. The business we’ve got now has pods and each of those pods are specialists… and each hub, the financial planning hub, or the mortgage planning hub, provides the technical advice. And that’s the only way I can see it working.
LS: At the moment, my clients come to me and they will ask me for the name of an accountant, they will ask me for the name of the financial planner, a solicitor – any of those avenues, and because they trust me they will trust who I send them to. Now if we were all working under the same roof it would be happy days – it would be awesome.