Mortgage Professional Australia 20.03

MPAMAGAZINE.COM.AU ISSUE 20.03

BROKERS ON BANKS 2020 How the team at this year’s winning bank made it to the top

FINTECH ROUNDTABLE How technology is improving outcomes for customers

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CONSTRUCTION FINANCE New funding opportunities in this challenging sector

ADAM CROUCHER CBA’s head of third party on the importance of brokers

10/03/2020 9:32:13 AM

THE BANK BEHIND THE BROKER behind Alfie’s new playground

We support brokers to help families grow. Contact a NAB BDM or visit nabbroker.com.au

© 2020 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. A154041-0120

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MARCH 2020

CONNECT WITH US

CONTENTS

Got a story or suggestion, or just want to find out some more information? twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU

UPFRONT 02 Editorial

Excited about technology

04 Statistics

Housing affordability looking up

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06 Head to head

FEATURES

10 Opinion

BROKERS' NO. 1 BANK

What made this year’s top bank achieve success?

The changing relationships of banks

08 News analysis

Fintech and the new face of the borrower Compliance in a best interests world

FEATURES 50 Shifting expectations

SPECIAL REPORT

The importance of customer service at Liberty

Sentiment has shifted in the last 12 months, and for the first time a non-major bank has taken out the top spot

PEOPLE

BROKERS ON BANKS 2020

52 Brokerage insight BIG INTERVIEW

ADAM CROUCHER

Commonwealth Bank’s head of third party talks about his learnings a year into the role

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FEATURES

MPA chats to Empower Wealth

54 Career path

Big-four exec moves to fintech

56 Other life

Marathons keep this broker motivated

FINTECH ROUNDTABLE

Four of Australia’s biggest fintechs gather to talk broking

46 FEATURES

CONSTRUCTION FINANCE A look at the challenges and opportunities facing the market

MPAMAGAZINE.COM.AU NOW ONLINE: Our daily newsletter. Keep on top of property market trends, business strategy, and what industry leaders have to say.

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9/03/2020 1:15:15 PM

UPFRONT

EDITOR’S LETTER www.mpamagazine.com.au MARCH 2020

Talking tech and broker sentiment

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his month’s issue is a full one, featuring both the fintech roundtable and the results and analysis from our annual Brokers on Banks survey. The fintech roundtable was a great event, taking place on one of the warmer February days. One fintech representative who joined us was the head of lending at 86 400. That was very exciting for me. I attended the announcement of 86 400 back in June 2018, not really clear on what was going on, but the more I heard, the more I loved the idea of it. Being from the UK, I’d heard of the bank that one of the founders had already established over there. But then came all the other information that just screamed “cool”. For a few months after that, 86 400 was pretty quiet as it planned away, like an exciting enigma that I was keen to find out more about. Now that the ‘smartbank’ has properly launched, not only with bank accounts but also home loans, it was great to welcome home loan lead Melissa Christy to our fintech roundtable. Having

The other big thing in this month’s magazine is the Brokers on Banks survey. It was really interesting to see the shift in sentiment her there alongside the incredible guys from Prospa, Moula and OnDeck made for a really interesting discussion and mix of perspectives. The other big thing in this month’s magazine is the Brokers on Banks survey. It was really interesting to see the shift in sentiment – and by just how much the scores for each bank had increased. Also this month we have a Big Interview with Commonwealth Bank’s head of third party, Adam Croucher. I sat with him at CBA’s offices in Sydney to talk about his life, the broker industry and what he had learnt since he took on the role. What struck me about this interview was Adam’s passion for the broking industry. It can be very easy for some people to know exactly what to say and how to play the part, but when he talked about being humbled by brokers’ trust in the bank and about his determination to help them, it was clear that was real. I hope you enjoy reading the feature and all of the other great content we have this month! Rebecca Pike, editor, MPA

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EDITORIAL

SALES & MARKETING

Editor Rebecca Pike

National Sales Manager Claire Tan

Journalist Tom Goodwin

Global Head of Communications Adrijana Monevska

Contributor David McQueen Production Editor Roslyn Meredith

ART & PRODUCTION Designers Cess Rodriguez Noel Avendano Traffic Coordinator Kristine Jamir

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

tel: +612 8437 4784 rebecca.pike@keymedia.com

SUBSCRIPTION ENQUIRIES

tel: +61 2 8311 5831 • fax: +61 2 8437 4753 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES claire.tan@keymedia.com

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Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL neil.sharma@kmimedia.ca T +1 416 644 8740

Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.

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UPFRONT

STATISTICS

FHB numbers shoot up First home buyers hit a decade high as affordability shows signs of improvement THE OUTLOOK is much brighter for the future of housing affordability, according to the Housing Industry Association. While its latest Affordability Index shows a slight deterioration in affordability, the ratio of income to mortgage repayments compares favourably against the last 20 years. The research shows that servicing a mortgage is less of a problem than obtaining it in the first place. Not only are increasing house prices making it harder to save a deposit, but “structural changes to the banking sector” are also “working

32%

against” first home buyers (FHBs), the report says. Banks are being discouraged from lending to those borrowing with a high LVR, which includes most FHBs, and banks are also required to increase their capitalisation for loans with less than a 20% deposit. Despite this, FHBs have come back into the market with a vengeance, hitting a decade high. While initial numbers suggest this was driven by the First Home Loan Deposit Scheme, RateCity research director Sally Tindall points out that the market was picking up before this started.

57%

56%

of FHBs are positive about the property market

of FHBs worry about property prices becoming unaffordable

of FHBs believe property prices will increase in the next 12 months

AFFORDABILITY ON THE RISE While affordability deteriorated in five out of eight capital cities in Australia in the December quarter, the trend has been one of rising affordability levels, which are still above the 20-year average. Perth and Darwin continue to be the most affordable capitals, with ongoing dwelling price declines adding to earnings growth. On the other hand, in Sydney and Melbourne, the bounce-back in property prices offset ongoing earnings growth, leading to dip in affordability in the December quarter.

94%

of FHBs believe housing affordability is a big issue Source: ME Quarterly Property Sentiment Report, Q1 2020

GROWTH IN FIRST HOME BUYERS

MORE COMFORTABLE WITH DEBT

Growth in the segment has hit a decade high, and data shows the number of new loans to owner-occupier FHBs jumped by 21.33% year-on-year. New loans to owner-occupier FHBs (seasonally adjusted)

In a separate report, ME Bank looked at the factors driving changes in financial comfort. Comfort with debt showed the greatest improvement (up 5% to 6.55). Key drivers of financial comfort Living expenses

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Debt (all sources) 6.80

21.33%

First home buyers

20

10

6.41%

Index (scores out of 10)

(highest since Sept 19)

6.23%

Income

6.30

Refinancers 15

Current financial situation

6.50

(highest since Dec 09)

6.00

Net wealth

5.80

Expected changes to financial situation

5.50

Anticipated standard of living in retirement Recent changes to financial situation

5.30 5.00 4.80

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Savings

4.50

3.61%

Investments

4.30 4.00

0 % change Nov–Dec 19

% change Dec 2018–19

Source: ABS lending to households and businesses statistics for December 2019, released 11 February 2020

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Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19

Ability to cope with a financial emergency

Source: ME’s 17th Household Financial Comfort Report

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National NSW 04-05_Statistics_SUBBED.indd 4

83%

84%

VIC

88%

QLD

80%

SA

75%

WA

82%

TAS

77%

ACT

83%

NT

77%

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AFFORDABILITY ABOVE 20-YEAR AVERAGE IN ALL CAPITAL CITIES HIA Affordability Index by capital city, December quarter 2019 20-year average

Dec quarter 2019

150

129.0

More affordable 

130 110

124.6

100.3

99.8

91.3

86.9

90

79.4

71.0 70

59.2

50 30

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

Average of eight capitals

Source: HIA Affordability Index/ABS

PROFILE OF A FIRST HOME BUYER

Figures from the First Home Loan Deposit Scheme paint an interesting picture of the age and gender breakdown of first home buyers taking up the initiative.

Gender Men

Women

52% 48%

Age 20–30 years

BANKS PULLING BACK

The HIA used its Affordability Index report to show that changes in the banking sector are affecting the types of loans these lenders are willing to taken on. Residential lending to households

30–39 years

40–50 years

Moderately high LVR (80–90%)

40%

20%

High LVR (over 90%)

Low-doc

25%

15% 10%

Source: Aussie Home Loans

Source: HIA Affordability Index, Dec Qtr 2019

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Jun 19

Jun 18

Jun 17

Jun 16

Jun 15

Jun 14

Jun 13

Jun 12

Jun 11

Jun 10

0%

37%

Jun 09

5%

Jun-08

Share of new loans

20%

5

10/03/2020 10:05:57 AM

UPFRONT

HEAD TO HEAD

Do you think working with the banks has changed? Brokers agree the level of detail they are required to go into has increased since the royal commission

Tim Victory

Sze Chuah

“Fundamentally, working with the banks’ processes has not changed in the way we go about a finance application. What has changed is the level of detailed information about people’s individual positions (age, budgets, employment, retirement strategies) and the additional paperwork required to now gain those same approvals. “I believe our industry has been very cooperative and supportive of the changes, and we all work together to ensure we satisfy the new standards. These are only for the betterment of all. The banks have been very informative and understand sometimes the frustration this creates for clients and all involved; however, we do work together to ensure the clients’ best interests are met.”

“I don’t think things have improved significantly over the last couple of years. The same level of scrutiny from credit and risk teams has been maintained since the APRA reforms and the royal commission happened. Many banks seem to be even more sensitive now, especially when it comes to living and investment expenses and all the verification that comes with it. “On the positive side, servicing is starting to ease now that assessment rates are heavily linked to actual interest rates, but for the more left-field deals it’s easier to deal with the lower-tier lenders who seem to have a broader appetite at this point in time.”

Finance broker Victory Commercial Finance

Director MLS Finance

Mhairi McLeod Principal Astute Ability Group

“We have seen significant changes in the overall banking culture over the last several years. This stemmed from a few unfortunate questionable actions within some financial institutions that directly affected the confidence of the banks’ clientele and brought to light the need for regulators to take a sharper look into lending policies and ongoing customer services. “Meeting customers’ needs has never been more important to all banks. The last two years have been challenging as we’ve faced changes to lending policies, but have also been rewarding, knowing that our customers’ financial needs are paramount. Consumer confidence is now showing positive trends upwards.”

BENEFITS FOR NON-BANK LENDERS The need for a near prime solution in the market today has never been greater, according to Aaron Milburn, Pepper Money’s general manager, mortgages and commercial lending. Mainstream lenders tend to gravitate towards clean-credit vanilla customers that sit within a predefined box. But that’s not always reality, he explained recently to MPA. “Unfortunately, more Australians who can afford to get a loan will find themselves needing to look for other options as credit policies tighten and comprehensive credit reporting is fully rolled out,” he said. “That’s why we’ve seen more non-bank lenders move to offer a solution in this space. Near prime products help bridge the gap caused by traditional lenders tightening their lending criteria in all aspects of prime lending.”

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86 400 Ltd ABN 13 621 804 813 AFSL and Australian credit licence 506560

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9/03/2020 10:03:22 AM

UPFRONT

NEWS ANALYSIS

Opening up competition With the hearings of the Senate’s select committee into fintech and regtech now over, MPA looks at the opportunities that might come out of the inquiry for the fintech space moving forward THE FINTECH space has continued to grow over the last five years, with more and more players coming into the sector and offering alternatives to Australian consumers – but who is regulating the market? While some small business lender fintechs have come together to create almost their own form of accountability, there is also an inquiry underway to address issues like access to capital, skills, taxation, regulation and culture. The Senate’s Select Committee on Financial Technology and Regulatory Technology began receiving submissions in October and held its public hearings in Sydney and Canberra in February. Fintech lenders have submitted their responses, with recommendations as to how the industry could be improved. It is not just about improving the fintech sector, however. The CEO of ‘smart bank’ 86 400, Robert Bell, said this inquiry shows that the government is committed to ensuring technology can effectively help take the whole financial services industry forward, and there are particular topics that it will be helpful to talk about. “We need policy support, we need protection from anti-competitive moves from the biggest financial institutions, and we need to ensure that all voices are heard on specific topics — notably the Consumer Data Right, open banking, the New Payments Platform,” Bell said. “Consumers are hungry for technology-led approaches to help them make their biggest financial decisions – like saving for a new

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house or securing a mortgage — and this inquiry helps us start to overcome some of the barriers to get there.”

Overcoming challenges As part of its submission to the committee, Stone & Chalk said governments needed to provide more support and work closer with the industry to address concerns like the barriers to uptake of new technology, which can result from the difficulty of raising funds, and problems with procurement. In its submission it said, “As a nation we need to better respond to the reality that we are in an Age of Disruption.” OnDeck Australia launched in 2015 and may have had the backing and support of its

customer expectations. He said that while he felt the government overall had been supportive of the fintech sector, there was more that could be done. “Whether it’s through the securitisation fund or other initiatives, they have been supportive,” he said. “That said, government could do more, such as allowing more access to data (such as from the ATO) and support for mandatory comprehensive credit reporting being extended to commercial customers.”

“We need policy support, we need protection from anti-competitive moves from the biggest financial institutions, and we need to ensure that all voices are heard” Robert Bell, 86 400 parent company in the US, but it has still faced many of the same challenges as the rest of the fintech sector. In a recent MPA roundtable, OnDeck’s head of marketing and partnerships, Ollie Wade, mentioned obstacles such as growing the company’s presence and managing

Fellow SME lender Prospa submitted a response to the committee that outlined the barriers the company had faced, such as access to government data; regulatory risks and costs; a shortage of talent; and low adoption of alternative lenders. As one of the first fintechs on the scene,

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FINTECH ADOPTION IN AUSTRALIA

58%

Australian consumer fintech adoption in 2019

How does this compare to the rest of the world? 87%

Mainland China Russia

82% 76%

Colombia

71%

UK

67%

Singapore 51%

Italy

46%

USA 34%

Japan

64%

Global average

Prospa was the first to join an aggregation panel and has seen the fintech sector grow from being almost unheard of to becoming a genuine alternative lender to rival the mainstream banks. The head of partnerships at Prospa, Alex Brgudac, said he commended the government for what it had done. “This includes the appointment of a fintech minister, the creation of a Senate committee on fintech and regtech, and the

The opportunities of technology In 86 400’s submission to the committee, its key recommendation was to level the competitive playing field. Bell said the government had a role to play in ensuring there was scope for disruption and improvement within the banking industry. “Allowing fintechs to innovate and take on incumbents fosters a broader culture of innovation,” he said. Specifically, the digital bank wants the

“Government could do more, such as allowing more access to data (such as from the ATO) and support for mandatory comprehensive credit reporting being extended” Ollie Wade, OnDeck establishment of the $2bn business securitisation fund,” he added. “All of these help grow awareness and credibility of alternative lenders like Prospa, and additional government support will boost customer confidence and consideration of our sector.”

government to “elevate the importance of the fintech sector” to investing in the future and “ensure the smooth and timely introduction of new platforms or ecosystems”. Bell said the opportunities coming out of the inquiry “are huge”, adding that both open banking and the Consumer Data Right would

0

0

20

20

40

40

60

60

80

80

100

100

Source: EY FinTech Australia Census 2019

shift power from the financial institution to the consumer. He pointed out that these changes would enable faster and simpler mortgage approvals. “Currently, any data that is created by consumers – for example, their transactions history, bill repayments and loan history – belongs to the banking institution where it resides,” Bell said. “We disagree with this. That data has huge potential to be used for the good of consumers, and we want to see consumers get the most of it.” 86 400 has already seen the use of data from other financial institutions benefit customers; the bank allows account customers to connect other bank accounts so they can see their whole financial picture in one place. Its mortgage processes also use the technology to take a snapshot of an applicant’s income and each line of their expenses. “There is a great propensity here for technology to help to make better credit decisions, and generally better credit decisions are better for people as well,” Bell said. “Banks actually have no interest in lending money to people who can’t afford it. It’s not in anyone’s interest to do that.”

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9/03/2020 10:12:08 AM

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email rebecca.pike@keymedia.com

Customers at the heart of compliance As the industry gets ready for the best interests duty to come into play this year, Loan Market’s David McQueen looks at why customer needs remain front and centre AT ITS ESSENCE, the best interests duty is about driving better customer outcomes. While the immediate reaction may be to see this as a regulatory demand that will require strong compliance layers, this only gets you halfway.

Best interests duty as a strategic opportunity Compliance has rarely been considered a strategic function. It has typically operated in isolation, tasked with preventing negative incidents occurring, with a core focus on defining rules and frameworks to meet the requirements of regulations and laws. There is a need to move away from this status quo – in which compliance comes first – towards a world that is outward-looking and focused on delivering comprehensive, exceptional customer outcomes. I’m not talking about reducing the significance of compliance; it’s about changing what we can achieve in a world in which regulation will evolve at a faster pace. Ultimately, it will be critical to enable brokers to succeed in this new world by delivering the right technology and processes that can save time, keep them safe from risk, and help them find and keep clients and build their businesses.

on control and risk, avoiding potential financial and reputational damage. However, in today’s competitive environment, the customer experience cannot be sidelined. There is now a need to work collaboratively where, as an example, regulatory forums blend with design and technology sessions.

Policies and processes will change; principles won’t This new era of principles-based regulation will require an evolution of the compliance function. We’re entering an era of increased focus on ethics, culture and principles that will enable change and simultaneously become a source of competitive advantage.

Broker support and engagement Finally, in this new world, broker support and engagement will be more critical than ever. At Loan Market, we have four key focus areas: to keep our brokers safe, save them time, help them grow their businesses, and help them find and keep clients.

There is now a need to work collaboratively where, as an example, regulatory forums blend with design and technology sessions Compliance by design Compliance, like most functions, needs to be rethought and disrupted. We need to get back to its intent: ensuring we service customers within boundaries that set long-term sustainable outcomes for both the client and the broader environment. And to do so, we need to adopt a ‘first principles’ strategic approach to compliance. Banks have multiple legacy systems and fractured views of their clients, which makes delivering on a strategic outlook incredibly difficult. But for smaller, more agile organisations like aggregators and brokers, this can be achieved by aligning these changes with new digital solutions.

Focus on the customer and the rest will follow

Technology as an enabler

The common error when attempting to meet these new regulatory requirements is to focus

The future isn’t simply digital, but digitally assisted. As an example, utilising AI and

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ranking algorithms to support product recommendations will become increasingly critical. Yet, simultaneously, the need for human interaction will remain. In this instance, AI will become the enabler, with brokers earning back time to focus on the customer experience instead of being distracted by manual or quantitative tasks.

Having been across the country to talk to our broker partners, I am more confident than ever that the ‘Loan Market Way’ – integrated into our award-winning technology platform MyCRM – will ensure that our brokers are acting in customers’ best interests, while also supporting them in building successful businesses. Rather than seeing the best interests duty as something to fear, I’m excited to work with our brokers to further prove why customers continue to choose us – because we work for them, always have and always will.

David McQueen is the new chief regulation and compliance officer at Loan Market, a family-owned and led mortgage brokerage.

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9/03/2020 1:32:21 PM

PEOPLE

BIG INTERVIEW

ADAM CROUCHER: STAYING HONEST Having taken the reins of third party at Commonwealth Bank just over a year ago, Adam Croucher sits down with MPA to talk about his learnings from the last 12 months and his passion for the industry

ONE OF Adam Croucher’s biggest learnings as head of third party at Commonwealth Bank has been about the importance of transparent communication. The former Vic/Tas state manager began in his new position a little more than a year ago, just as the royal commission’s final report was due to be released. Rather than looking back at this as a tough time, he sees the journey the industry has taken over the last two years as a learning curve. Croucher says he has also learnt to be “relentless” in making sure the bank’s proposition remains strong and relevant. Growing up in Tasmania, Croucher joined the finance industry around 24 years ago when a family friend guided him into the world of finance. He began as a lender of all varieties of loans and within a year had started to move into management roles. The first 10 years of his career saw Croucher managing retail branches at CBA, and in 2010 he left Tasmania for Victoria

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with his wife and children. By 2014 he had moved into the third party banking space as state manager, and at the start of 2019 he rose to the position of head of third party.

important not only because of the customers it brings to the bank but also the choice it offers those customers. “Brokers are certainly more accessible

“It was one of my proudest moments to see the joy that we brought to those customers’ faces and that the brokers brought as well” Despite the national scale of the role, Croucher remains humble. Talking about the difference between his new position and the last, he says, “At the end of the day we’re still making life as easy for customers as we possibly can. That hasn’t changed.” Croucher understands the tough time the broking industry has gone through and is keen to continue supporting it, focusing on strong messages and clear communication with brokers. He sees the third party channel as

to a lot of customers, as we all become exceptionally busy in our day-to-day lives,” Croucher says. “I think the service with sub-60% coming through the channel is testament to consumers talking with their feet, because brokers are delivering a great service.”

Working with brokers for brokers To continue helping brokers, CBA is working to train and educate its own internal

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9/03/2020 1:34:20 PM

PROFILE Name: Adam Croucher Company: Commonwealth Bank of Australia Title: Head of third party lending Years in the industry: 24 Career highlight: “It would probably be the start of my management career: in trying to be someone I wasn’t, I learnt very quickly to engage your team and engage the people around you; you just had to be yourself and authentic.” Career challenge: “It’s certainly been in this business, there’s no doubt. Over the last 12 months, to see my team nationally get out with brokers and be front and centre and not be afraid to stare into any problems or issues that we’ve had.”

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9/03/2020 1:34:47 PM

PEOPLE

BIG INTERVIEW

staff to ensure they are relevant out in the field and can guide brokers through any changes necessary. The major bank has also invested in its technology, providing online platforms, back-channel messaging and loan tracking systems, on top of the new systems it is planning for the months and years ahead. Good communication is a priority for CBA; Croucher says he wants to make sure the messages are getting through to brokers and are clear and concise, because there are already so many pieces coming through from other lenders. “What we’re really focusing on is trying to make sure that our innovation goes into serving our brokers so they can get the information they need as quickly as possible in order to give consumers a better, quicker outcome,” he says. To ensure that CBA is investing in the right areas, Croucher says the bank gets continual feedback from brokers so that it understands the pain points and what it can do to improve. While forums like professional development days are often the best way to do this, Croucher says he likes to get out and about in the field with his team and listen to brokers first-hand. “It’s an important part of my role to be out there in the market to listen to that feedback directly. It gives me a good opportunity to keep up with the things that are important,” he says.

The importance of third party CBA is one of two big four banks that are participating in the First Home Loan Deposit Scheme launched this year, and Croucher says he is proud of his team for the work they have done in preparing for and delivering it. At a recent feedback session, he got to hear the “joy and excitement” of those borrowers who had thought they were another 18 months away from buying their

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PROTECTION FOR HOMEOWNERS Commonwealth Bank recently announced its Home Loan Compassionate Care initiative, which is designed to provide complimentary protection to owner-occupier homeowners to support them in making their loan repayments for around 12 months if they, their spouse or dependant passes away or is diagnosed with a terminal illness. The launch came after research by the bank showed that a third of Australians would only be able to cover their home loan repayments for up to six months in these circumstances. Only one in 10 would be able to cover repayments for one month or less. Home Loan Compassionate Care is available for its customers’ eligible new and existing owner-occupier home loans, regardless of whether they took out the loan directly with CBA or through a broker.

first home but were able to buy early thanks to the scheme. “It was unbelievable. It was one of my proudest moments to see the joy that we brought to those customers’ faces and that the brokers brought as well,” he says. CBA had made a point of ensuring

brokers for sticking by the bank and having faith that CBA can continue to deliver a consistent proposition. He also praised the work of the Combined Industry Forum in coming together to work towards sustaining the channel in the long term. “We’ve been through a very tough time as

“We’ve got a lot of competition, which is great for consumers, but that also keeps us very honest in making sure we are at the top of our game every day” brokers could bring their borrowers to the bank to apply for the scheme. Croucher says it would have been “unfair” to restrict borrowers to direct customers only. “Forty-two per cent of our business comes from brokers in the home lending space,” he explains. “It would be imprudent of us not to include such a large, important part of our business and to be exclusive to one channel over the other. Ultimately, it’s the customer’s choice who they go through to enter the scheme, and we wanted to make sure it was the customer’s choice.” Commenting on the broker channel more widely, Croucher says he wants to thank

an industry, and for our brokers to have stuck by us and come on that journey and trusted that we would improve and get better, I’m very humbled by that,” he says. “It’s a credit to everyone who has been involved in the CIF and our industry bodies that we put our best foot forward to make sure there is clarity around the broker industry. That has been really rewarding and motivates me to continue to look at being better than we’ve ever been. We’ve got a lot of competition, which is great for consumers, but that also keeps us very honest in making sure we are at the top of our game every day.”

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9/03/2020 1:35:06 PM

ondeck ontop Thanks to you.

You’ve come onboard. Now we’re on top. We’re proud to be recognised as Fintech Lender of the Year. Thank you to the brokers who’ve embraced us and the small businesses that inspire us to stay on the front foot.

To come onboard Visit ondeck.com.au/mpa Call 1800 831 294

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9/03/2020 1:35:14 PM

SPECIAL REPORT

BROKERS ON BANKS

BROKERS ON BANKS 2020

After the difficulties of last year, the banks are back on top, with most scores rising well above the highest ranking received in 2019. With the lift in broker sentiment also came a complete shake-up of the top spots LAST YEAR’S responses to the Brokers on Banks survey mirrored the mood of brokers across Australia following the royal commission and the subsequent difficulties of working with the banks. This year, however, all that seems to be behind us. In 2019, for the second year in a row, the winner of the survey was major bank ANZ; its overall ranking was 2.54, and it was one of six banks with a score above 2. In contrast, this year the top score was 4.03, and scorers starting at 2 were at 13th position and under. What else has changed in the last 12 months? Well, ANZ has lost its top spot. Instead, the bank has fallen to fifth place, and Bankwest has moved up from second position to claim the winning title. Another impressive move saw Macquarie jump from eighth to runner-up. While the profile of brokers who usually respond to these surveys remains more or less the same each year, interestingly, those taking this year’s survey have broken the mould.

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Usually, brokers from NSW and Victoria make up the majority of respondents, but Victoria took a step back in 2020 and brokers from the state made up less than 16%. We saw more experienced brokers take part in the survey this year. While in 2019 the largest proportion of respondents had only been in broking for between three and five years, this year the majority have been brokers for more than six years, with most having worked in the industry for more than 15 years. In an almost shocking twist, when brokers were asked what their most important priorities were, turnaround times was not ranked first, as it usually is. Instead, commission structure was was ranked as highest priority, with product diversification opportunities a close second. This is despite the fact that most brokers believe turnaround times have worsened over the last year, which would suggest it should become a more important issue. Product diversification opportunities, which is usually

much lower down the priority list – last year hitting the bottom at ninth place – has grown substantially in importance, presumably as more brokers look to expand their portfolios. The importance of interest rates has also dropped, but this could be the result of banks’ rates decreasing so dramatically alongside the RBA rate cuts. As you flick through the following report, the top three banks will soon become apparent. The bank in first place took out six of the nine categories and came second in the other three categories – so it’s a standout on every page. The bank in second place also received an award in every category and has a particular reason to celebrate after jumping from eighth place last year. As always, thank you to everyone who took part in the survey. It provides a wonderful insight into the changing sentiments of brokers and enables not just us but the banks themselves to see where they can improve in the future.

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OUR TYPICAL RESPONDENT

Writes $20m–$40m worth of mortgages a year

Aged between 45 and 55

Has been in the industry for more than 15 years

Is most likely to work in NSW

WHAT DO BROKERS WANT? 1 = not important; 5 = very important Commission structure

4.138

Product diversification opportunities

4.134

Communications, training and development

4.113

Turnaround times

4.106

Online platform and services

4.085

Credit policy

4.074

Product range

4.067

Interest rates

4.057

BDM support

4.032

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SPECIAL REPORT

BROKERS ON BANKS

PRODUCTS AND PRICING With the RBA cutting rates over the past 12 months, the pricing of home loans has certainly improved. One bank in particular has made great gains this year in the ranking not only of its interest rates but its product range, credit policy and diversification opportunities EIGHTEEN MONTHS AGO, interest rates were rising as global funding costs put greater pressure on the banks. In fact, just a year ago, we were talking about

DO YOU BELIEVE CHANNEL CONFLICT EXISTS?

32.51%

17.31%

“The non-majors have passed on greater savings; have better upfront rates without the need to ask for pricing” Survey respondent

Not a problem Minor problem Major problem

50.18%

increasing rates in this report. But soon after, these pressures decreased, and the

2020 HIGHLIGHTS: PRODUCTS AND PRICING

Interest rates

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RBA began cutting rates, which allowed the banks to cut theirs. Now, rates in Australia are at record lows. This possibly explains why more than

Product range

Product diversification opportunities

Credit policy

2020

2019

2020

2019

2020

2019

2020

2019

1st

Bankwest

Bankwest

Bankwest

ANZ

Macquarie

ANZ

Bankwest

ANZ

2nd

Macquarie

ING

Macquarie

CBA

Bankwest

CBA

Macquarie

Westpac

3rd

ING

ANZ

CBA

Westpac

CBA

Westpac

CBA

CBA

54% of brokers responding to our survey said product ranges and pricing had improved – although the response was similar last year. In this year’s survey, we asked brokers whether they thought banks were passing on the best savings to customers, considering the low interest rates. Respondents listed banks like Bankwest, Macquarie and ING, which were the top three in the interest rate category. Other banks listed included AMP, St. George and regional bank Heritage. “The non-majors have passed on greater savings, have better upfront rates without the need to ask for pricing, such as Macquarie Bank,” said one broker. While many said some were passing on savings, others were not so convinced. “None of the banks are passing on the savings to existing customers. The gap between what banks are offering to new

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clients and what their existing clients are receiving is astonishing. Sometimes it can be as much as 1%. For new clients the second-tier lenders are passing on bigger savings,” said a broker. Interest rates and product ranges are an important factor when brokers choose to use certain banks. In the survey, we asked whether brokers had given more business to a particular bank in the past 12 months, and why. Most brokers pointed to product ranges

gold medals for product range, credit policy and product diversification opportunities and two other majors were also listed. This year, Commonwealth Bank was the only major to place at all in these areas. Channel conflict was also highlighted as a continuing problem. More than 80% of respondents said it was a minor or major issue, although this was a slightly lower proportion than in the previous two years. Asked at which banks they had had a particular experience with channel conflict,

“The gap between what banks are offering to new clients and what their existing clients are receiving is astonishing” Survey respondent and policy as their main reasons for sending loans to banks. One broker said they had sent more business to certain banks because of their products, rates and policies – backed by good, consistent turnaround times. “I have the majority of IO investment loans going to Virgin Money due to their competitive rates, velocity points and low fees, as well as servicing,” said another. One respondent said they used Macquarie because of its rates and service and ANZ for its product offering and the number of different options it could provide. Based on the survey feedback, product diversification opportunities are particularly important to brokers this year. Respondents placed this category as the second most important out of nine categories. Bankwest did particularly well in the areas of product and pricing. The results in this category are in stark contrast to last year’s, when one major bank took home

the top three picked by brokers were all major banks. One broker said, “They all have best interest duty to themselves. Channel conflict is alive and well.” Several brokers also talked about banks phoning their clients and trying to entice them away, but one said it was not necessarily the banks’ fault. “I find that it is individuals at organisations that cause the conflict,” they said. “The lender can see in the system that the loan has been introduced to the bank via a broker, and yet they still internally refinance the loan, offering lower rates and cashback, which is not available via the broker channel. “I have had instances where the bank staff advise the client they should not have engaged a broker at all, and that we are only doing business to be paid a commission and not acting in the best interest of the client.”

HAVE PRODUCT RANGES AND PRICING IMPROVED OR WORSENED OVER THE LAST YEAR?

Improved significantly

10.60%

Improved

43.46%

No difference

38.87%

Worsened Worsened significantly

6.71%

resp

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“T ha gr be wi as

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SPECIAL REPORT

BROKERS ON BANKS

SUPPORTING BROKERS After all the scrutiny and regulatory changes, brokers are prioritising banks that are sticking up for the industry and making processes easier

COMMISSION STRUCTURE came out on top as the most important category in this year’s survey, despite only being voted the eighth most important for the last two years. Brokers are asked to rank each category from 1 to 5 in terms of its importance, and then the average of these is calculated. Commission structure received a score of 4.138, while last year it received a score of just 3.63. Although it seems interesting that commission is more of a priority this year, last year’s survey was completed just before

the royal commission’s final report came out, recommending the abolition of trail, and thus brokers may not yet have realised the risk to their remuneration. While the Coalition government decided

Some brokers have also been turning more to banks who provide support in areas beyond commission, for example through BDMs, online platforms and better communication

2020 HIGHLIGHTS: INCENTIVISING BROKERS

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to keep trail and hold a review in 2022 to determine the consequences of changing broker pay, it is clearly still front of mind for brokers. The non-majors have made gains in the

Commission structure

Communications, training and development

1st

Bankwest

Bankwest

2nd

Macquarie

Macquarie

3rd

NAB

ANZ

commission structure category this year, with Bankwest taking gold, knocking ANZ off the top spot from last year. NAB has managed to remain in the top three but has fallen to third place, giving Macquarie a spot at second. These scores could also be a reflection of brokers’ attitudes towards the major banks that have supported them with their commission structure. For instance, Commonwealth Bank placed in fourth position last year, but this year it came in at 14th – which was possibly a reaction to comments made by the major bank’s CEO during the royal commission hearings. Some brokers have also been turning more to the banks that provide support in areas beyond commission, for example through BDMs, online platforms and better communication.

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One broker commented that they gave more business to those who supported them with “decent credit policy and, importantly, turnaround times”. “This gives us a point of difference to the local bank branches, which have terrible turnaround times,” the respondent added, explaining that they gave more business to the likes of Bankwest, Commonwealth Bank, ING and Macquarie.

HAVE YOU GIVEN MORE BUSINESS TO A PARTICULAR BANK IN THE LAST 12 MONTHS, AND IF SO, WHY? Answers

Yes

“Product, rate and policy – backed by good, consistent turnaround times”

“Overall experience from lodgement to settlement”

“Service and turnaround times from BDMs and lenders where something actually gets done”

“Excellent rates, good communication from BDMs; turnaround times are good; common-sense policy, and quality of all-round service”

“No, it has been spread between different banks due to the needs of the clients”

No

“Spread evenly across 14 lenders. Small upward on HSBC, Macquarie and CBA for specific capabilities around overseas income, common debt reducer and shared loans capability (respectively). Always looking to banks that do niches well”

“Customer’s choice. I give the customers the option of selecting the financial institution they prefer”

“Not particularly. It all comes back to the individual’s circumstances and what they want”

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“Due to quick service, good policy and BDM support”

While the Coalition government decided to keep trail and hold a review in 2022 ... it is clearly still front of mind for brokers Communications, training and development was voted the third most important category for brokers, and banks have been making a point of focusing on these areas over the last year as they continue to push for diversification and keep track of the changing regulations. Bankwest and Macquarie also took the top spots in this category, and respondents praised these two banks when asked whether brokers had given more business to any particular banks. Talking of Macquarie, one broker said, “Their rates have remained reasonably competitive; [they have] a relatively broad policy and exceptional turnaround times. Their BDM is also exceptional!”

What you said

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SPECIAL REPORT

BROKERS ON BANKS

TECHNOLOGY, TURNAROUND TIMES AND SERVICE Despite the fact that technology and online platforms are supposed to speed up the loan process for brokers, many have complained of having to do more work and wait longer for a decision NOT ONLY did the royal commission call out bad behaviour by the banks when it came to lending money, but the industry has been subject to other reviews and scrutiny, such as from the Productivity Commission and ASIC. Commissioner Kenneth Hayne, in his interim report released in 2018, noted the banks’ use of the Household Expenditure Measure benchmark. He said this “can lead only to the conclusion that in many of those cases the broker has not taken any effective

steps to inquire into, or verify, the expense information supplied by the borrower”. Since then, some have criticised banks for going too far the other way, requiring an increased amount of documentation to support their expenses, and in many cases they conduct extra follow-ups to scrutinise borrowers’ expenses. There may be light at the end of the tunnel, though. One broker said banks had “spiked to the harsh end of the spectrum and then dropped back a little”.

2020 HIGHLIGHTS: TECHNOLOGY, TURNAROUND TIMES AND SERVICE

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Turnaround times

BDM support

Online platforms and services

1st

Macquarie

Macquarie

Bankwest

2nd

Bankwest

Bankwest

CBA

3rd

ING

NAB

Macquarie

Another broker said it had become “ridiculous”. “It has slowed down processing of loan applications. The broker has to enter itemised living expenses at least three times per application,” they added. It’s no surprise then that turnaround times continue to be a problem for brokers, with more than 50% saying they had worsened or worsened significantly. For some respondents, it was not just the increased workload making turnaround times worse. A number pointed to the banks reducing their staff and the impact this had. When asked what technology had helped improve turnaround times, one broker said, “Upfront valuations have helped, but the staffing at banks continues to be a problem.” For others, technology had made much more of an impact. “Bankwest has continued to provide excellent turnaround times. Their platform and having a single file owner gives them consistently high service levels, which they meet,” another broker said, highlighting the bank’s use of electronic signatures for loan contract documents. This was not the opinion across the board, however. Many brokers said turnaround times were not improving. “Technology seems to create situations where you have to repeat processes,” said one broker.

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IS THERE A PARTICULAR TECHNOLOGICAL IMPROVEMENT (EG NEW BROKER PLATFORMS) THAT HAS IMPROVED TURNAROUND TIMES?

Yes “Electronic DocuSign of mortgage documents improves turnaround times for settlement” – WA broker “Bank statement integration, AOL back-end integration by the likes of Macquarie, with quick conditional and turnaround time to pick up under four hours” – Qld broker “Bankwest and their online digital signing etc.” – WA broker “Bankwest has BrokerChat, which is really helpful and convenient (no need to wait for assessor to pick up call)” – WA broker “CashDeck – [for] needing to get more detailed statements from customers this has been a game changer” – NSW broker

No “Not that I’m aware of – secondtier lenders just have their act together better I think” – WA broker

HAVE TURNAROUND TIMES IMPROVED OR WORSENED IN THE LAST YEAR?

Improved significantly

6.36%

Improved

21.20%

No difference

21.20%

Worsened

32.16%

Worsened significantly

19.08%

“No, but streamlined and sensible policy has” – Qld broker “Technology seems to create situations where you have to repeat processes. Eg Preliminary Assessment: Broker interview guides are essentially the same things” – NSW broker “No. The banks lay staff off, so we have to do more, and this also impacts turnaround times due to them not employing more credit staff” – WA broker “To me, broker platforms need to simplify; [there’s] too much going on, no real flow” – Vic broker “No, most lenders who have decent turnarounds have reverted to email rather than doc upload in ApplyOnline” – VIC broker

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SPECIAL REPORT

BROKERS ON BANKS

WHAT YOU’RE SAYING From lender choice to best interests duty, brokers provide their thoughts on some of the industry’s most topical issues AS A result of the royal commission’s final report, the government has passed a bill to ensure mortgage brokers work in the customer’s best interests. Commissioner Hayne had raised concerns about a conflict of interest between brokers and their customers, and in the final report he recommended that, in relation to home lending, mortgage brokers must act in the interests of the borrower. In August 2019 the legislation went out to consultation, and in November Parliament released a draft bill, to which the industry began responding with suggested changes. In February this year, the legislation was officially passed and is due to come into play on 1 July. While there has been mixed reaction to the duty across the industry, a slightly higher proportion of survey respondents thought the legislation was unnecessary. Some said it would make the industry a better place, but others said it would create more work. Another topic that continues to be an issue for many brokers is channel conflict. This year, more respondents than in 2019 said it was ‘not a problem’, but over 80% said it was a minor or major problem. The banks specifically called out were all major banks. According to ASIC research, the average broker sends 80% of loans to four lenders, so as our Prize Question we asked brokers if this was true for them. Again, there were mixed results, and some responses are highlighted on this page.

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PRIZE QUESTION: BROKERS ON LENDER CHOICE ASIC has found that the average brokerage sends 80% of loans to four lenders. Is this true for your business? Please explain why/why not? “Due to the majority of my business being regional, in which only two lenders have an appetite for business at LVRs of 80–90%, thus giving me limited choice for a large portion of customers.” “Yes, due to service, policy, consistency, products, market segment, turnaround times and BDM support. It’s about trust for brokers and customers.” “This is true. There are a number of lenders who consistently stand out and provide all-round better service and rates. Brokers use them as an acknowledgement of this.”

“This is not true for my business; although I do have my favourites they vary from time to time dependent on current offers. I am actively and regularly using at least 10 lenders on my panel.” “Not true for us. Our client base varies, so the lender options vary in the same way. My clients are not identical.” “No, not quite that much, maybe 60%. This is due to demographics and a handful of banks covering most possible niches.”

Star comment “Absolutely not. We pride ourselves on treating each application on its merits and finding the best solution for the client. Generally this is more about policy than pricing, and it amazes me how any broker could deal with just a few lenders – we need the full suite of credit providers to function effectively.”

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HOW HAVE YOU FOUND BANKS’ ASSESSMENT OF LIVING EXPENSES OVER THE PAST 12 MONTHS? “Poor. Inconsistent fields across lenders. Some categories included as basic when they should be discretionary. Almost no consideration of expenses for self-employed, who may fund vehicle, phone, electricity and other expenses through the business, but no change to HEMs allowable.”

IS THE BEST INTERESTS DUTY LEGISLATION NECESSARY? Yes

28.62%

34.98%

6.01%

No

Unsure

Other

30.39%

“It makes brokers a step ahead of the banks, as we work in the clients’ best interests where the banks don’t need to.” “The government should have kept their nose out of something that wasn’t broken. It is creating a more arduous, costly, time-consuming system. Detrimental and more costly to the customer.”

“Varied in what they want for verification, but all take same approach and either use the HEM or, if the customer figure is higher, then they use that.”

“If it is necessary to legislate for what should be standard practice, then the industry is poorer for it. A bank employee has no ‘best interest’ rules to follow, only what is best for his employer.”

“As long as the questions are reasonable, I have no issues. It is confusing, however, how some banks will look at historical expenses versus future expenses. It is also very muddy trying to determine which categories are inside or outside of living expenses, as this will change HEM and is different for every lender.”

“Our role is to ensure we do what is in our clients’ best interest; if they have to legislate it to enforce it, then that’s fine – it weeds out the undesirable brokers.”

“It will eliminate those in the industry who do not act in the best interests of the clients.”

I don’t believe it is necessary, but it isn’t a bad thing. A large majority of brokers already implement this without being forced to.”

HAVE YOU EXPERIENCED CHANNEL CONFLICT?

“Ridiculous. It has slowed down processing of loan applications. The broker has to enter itemised living expenses at least three times per application – in the credit guide, serviceability calculator and the loan application. Having to provide loan statements for each savings and credit card account to verify living expenses. Going into detailed analysis of the client’s living expenses once with the client and then again with the lender.”

“We have experienced channel conflicts with all of the big four banks at some point throughout the last year. Most of the time we are able to resolve through communication via our BDMs, but it’s disappointing that we have to waste time and resources doing so.”

“There are extremes here. Some are using a common-sense approach, whilst others seem to be going so far over the top it is a joke.”

“I have yet to experience channel conflict in my 16 years as a broker; manage your client and manage their expectations.”

“We have had first-hand accounts of branches being told to contact broker customers in an effort to rewrite the loans.”

“This is always a problem where branch staff are still being led through hitting targets and not delivering good customer outcomes. Such a shame!” “None really. Those clients who have been to branches have been helped, and loans are still with me.” “It should be mandatory where a client approaches a lender post-settlement that any enquiry goes back to the introducer. Too many banks and staff create issues by ‘poaching deals’.”

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SPECIAL REPORT

BROKERS ON BANKS

FINAL RESULTS Here we take a look at the overall winners of the 2020 Brokers on Banks survey and at the areas in which they made their mark MACQUARIE

BANKWEST Position in 2019: 2nd Position in 2018: 6th Becoming the first non-major bank to take the top spot in our Brokers on Banks survey, Bankwest has proved that with a commitment and focus on the broker industry, it can make an impact. Brokers have clearly noticed the improvements, ranking Bankwest significantly higher than any bank in last year’s survey. The bank appeared in the top two in every category and was the only bank to receive an overall rating of above 4. It did particularly well in the area of interest rates – keeping its gold medal from last year – and in a year of dropping rates this reflects

just how much brokers trust that the bank is passing on those cuts. Bankwest also ranked much higher than all other banks in the category of communications, training and development. After last year’s secondplace position, it made great gains by working closely with the broker industry to ensure brokers were not only kept up to date but were also continually trained. Rising from a score of less than 2 in 2018 to second place last year with a score of 2.50 and now to the peak position with a score of 4.021, it will be interesting to see how Bankwest continues to work with the industry and where it places next year.

CBA Position in 2019: 3rd Position in 2018: 3rd For the fourth year in a row, CBA has once again been awarded the bronze medal. Despite its poor results in categories like commission structure, it did take away medals in several categories. In fact, it won four medals in total – more than any other major bank. Its biggest achievement was in online platforms and services, for which it gained a silver medal. CBA might be pleased to know this after investing in its technology and services; however, it did drop back in this category compared to last year, when it scored a gold. It also fell back from gold to a bronze medal for its credit policy, despite the scoring being so much higher than last year; however, the scores between the top three were incredibly close. While the rest of the major banks have fallen back – a particular blow for last year’s gold medallist – the fact that CBA has remained in the top three is a huge deal and one it should be proud of. Let’s see how the major banks fare in another year’s time.

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Position in 2019: 8th Position in 2018: 9th If Bankwest was the big story from last year, rising through the ranks to place second, Macquarie is certainly the story for this year. Leapfrogging into second place after coming in eighth and ninth in 2019 and 2018, respectively, is a huge accomplishment. Throughout this year’s survey brokers continually praised Macquarie in areas such as BDM support and credit policy, which reflects the gold medals the bank achieved in those areas. While BDM support ranked bottom of the list in terms of importance to brokers, this was not reflected in their wider responses. Brokers talked about fantastic BDMs as key reasons for going back to lenders with more business, and whenever Macquarie was mentioned, so were its BDMs. But the highest score across the board went to turnaround times, giving Macquarie its third gold medal. A win in this category, which brokers usually find most important, is an achievement in itself.

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4th

Position in 2019: 6th Position in 2018: 8th Climbing the ranks to narrowly miss out on a medal, ING is continuing to improve on its services, and brokers have noticed. After winning just one medal in 2019, the non-major has taken out three this year. Its highest score was for its interest rates – the category the bank won its only medal

5th

for in last year’s survey – showing a consistent approach in this area. The two other medals it achieved this year were in important categories: BDM support and turnaround times. ING was also praised for its Orange Advantage loan, which came in the top three best products when brokers were asked to list their favourite mortgage products of the last 12 months.

To generate the overall results we took an average of the results of every category of service. This means every category had an equal impact on the final results. Bank

Overall score

Bankwest

4.038

Macquarie

3.798

CBA

3.412

4th

ING

3.348

5th

ANZ

3.241

6th

AMP

3.238

7th

NAB

3.233

8th

Westpac

3.195

9th

St. George Banking Group

3.181

10th

ME (Bank)

3.162

ANZ

Position in 2019: 1st Position in 2018: 1st While ANZ scored much higher than it did last year, scores across the board were considerably higher, and this pushed the major bank down to fifth position. It is a huge change from last year’s results, which saw the bank achieve five gold, one

6th

OVERALL RESULTS

ING

silver and three bronze medals. This year, ANZ managed to rake in one bronze medal for its communications, training and development. In fact, when brokers were asked if there were any banks they had stopped using in the last 12 months, ANZ was one of two major banks mentioned the most.

AMP

Position in 2019: 9th Position in 2018: 10th AMP beat two of the four major banks in this year’s survey, as both NAB and Westpac have dropped off the Final Results page completely. Considering that AMP came in ninth place last year, making its way up to sixth position was a great

achievement. While it didn’t take away any medals, it was hot on the heels of a couple of bronze medallists. The bank’s highest score was for BDM support, in which it ranked fourth. Brokers also mentioned AMP when asked which banks were passing on the best savings to customers.

Note: Scores go from 1 (very bad) to 5 (very good)

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SPECIAL REPORT

BROKERS ON BANKS

BANKWEST RISES TO GOLD After coming in second place last year, Bankwest has claimed the crown in 2020, with brokers voting for the bank in an incredible six out of nine categories You came first in six out of nine categories. Why do you think that is? Ian Rakhit, GM third party banking: We like to think it’s because we go that extra mile for our customers, something we’ve taken great pride in doing since 1895. Our history of serving customers spans 125 years, and we’re incredibly proud that we’ve been recognised for our service to our customers and our contribution to the community and economy on many occasions. Helping our customers purchase a home or investment property – a real milestone moment in their lives – is a big thing for Bankwest. We feel privileged to help our customers achieve their property goals and improve their financial wellbeing, whether they have come to us directly or through their broker. Additionally, Bankwest was one of the first institutions to step into the brokering world, and today our relationships with brokers are still just as important to us as our relationships with customers. After all, more than 80% of our customers

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choose Bankwest because of their broker! As we look to the future, brokers are a key part of the Bankwest strategy, and we’ll continue to make significant investments in the channel. Our vision is to deliver brilliant customer experiences every day, and as we evolve our broker offering we stay in continual dialogue with brokers to ensure we’re designing products and services that meet their needs. Ultimately, by listening to and working closely with brokers, we can help them deliver brilliant service to customers across Australia who own or aspire to own a home. Your highest score, although a silver medal, was for BDM support. What have you been doing in this area, and why is it important to you? IR: We’ve designed our support structure so that each broker is supported by a BDM and a desk-based business support manager (BSM), which means that a point of contact is always available. Over the past year, Bankwest has worked with a business management consultancy to support the ongoing develop-

ment of our BDMs and BSMs. Brokers tell me they also want to engage with Bankwest in a way that supports their specific business needs, so we’ve designed a flexible model of contact points that empowers brokers to choose how they connect with us for service and support. This means some brokers prefer our highquality phone support, or to use our web chat functionality to talk to our support teams; others prefer our self-service tools, and others want an ‘on the road’ BDM running through scenarios face-to-face in their offices. The relationships our BDMs have with their brokers is essential to the way we do business, and by providing brokers with the digital tools they need to serve customers, we free up our BDMs to support brokers on other important aspects of the job. I also want to call out the tremendous work my state managers perform, supporting their teams day in, day out, and for their passionate drive to support our broker partners via daily coaching and support of the frontline teams.

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Although your score was high, you were pipped to the post in the turnaround times category. What will you be doing to ensure brokers aren’t waiting longer than they need to for loan approvals? IR: This is a real focus area for us. The case ownership model has been in operation within the Bankwest broker-introduced housing loan assessment department for a number of years. The process ensures singleperson responsibility for the processing of an application from lodgement to the application being ready to book for settlement. We feel a real benefit is the broker dealing with the same person through the process, meaning the notes are understood from day one; any mitigants are explained only once; and we can get on with approving the loan. Our broker portal allows our brokers to track home loan applications in real time and view their Bankwest customer details in one spot. We are using broker feedback to help expand our range of digital self-service tools on the portal to make dealing with us simple, consistent and efficient. More recently, we launched digital signing for home loans. Bankwest home loan customers can now sign their home loan contracts digitally, from any device, within minutes. Previously it took about 13 days for a new home loan to be made ready for settlement. With the new service, this can be reduced to less than seven working days for new home loans and within 24 hours for increases to existing loans. We also send the documents to brokers for review 12 hours prior to the customer. This not only gives the broker the chance to pick up on any errors and have them fixed; it also allows the broker to contact their customer and tell them the good news, which we know is an important moment in the broker-customer relationship. Going forward, Bankwest is reviewing the updated responsible lending guidelines, which we expect will support turnaround times. We’ll continue to listen closely to brokers as we explore new ways to improve turnaround times and enhance our offering.

MACQUARIE You’ve jumped from eighth position to second place in the last year, with a medal in every category. How does that feel, and why do you think that is? Ben Perham, head of personal banking: We’re delighted to see these results and to know our offering is resonating with brokers and their clients. These results reflect our ongoing dedication to the broker industry over many years, and our relentless focus on delivering the best client experience. We’ve made large investments in building our teams of people who work with brokers and assess loan applications. We’ve also invested in technology that delivers a seamless application process, an outstanding client experience, and leading product features. Over 90% of our home loan applications come from brokers, so we’re really focused on making sure the experience we deliver to brokers and their clients is the best it can be. Our mindset is one of constant improvement, so this year we’re continuing to invest in making our offering even better for clients and brokers. We’re doing this across the full breadth of our offering – including both the application experience and the experience of being a customer.

CBA You were particularly praised for your online platform and services. How have you invested in this area to help brokers? Adam Croucher, GM third party banking: Our objective each year is to sustain a strong mortgage broking channel, and as one of Australia’s leading home lenders we recognise mortgage brokers as a key channel for customers who are looking to purchase a home. Our strong results in this survey each year reflect the positive feedback from our brokers and our ongoing commitment to the third party channel. We continue to invest in technology, as evidenced by our new Loan Tracking software platform, and our upcoming CommVal Home Loan Pricing Tool Uplift. Our brokers made it clear that not having the ability to track their loans in real time was a pain point for them and their businesses. We listened and responded to this feedback by offering our new CommBank Loan Tracking software platform, a self-service tool that puts application tracking in our brokers’ hands. We have been investing heavily in our valuation infrastructure with the launch of CommVal in early 2020 to improve the customer and broker experience around valuation ordering. The CommBroker website is a world-class customer service platform for our dedicated mortgage brokers. Recently enhanced, CommBroker provides our brokers with all the information and tools they need to provide customers with a Commonwealth Bank home loan in one convenient location.

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SPECIAL REPORT

BROKERS ON BANKS

BROKERS’ PICKS As well as ranking the banks in each of the nine categories, brokers were asked about their favourite mortgage products from the last 12 months. The following gained the most votes.

BANKWEST Complete Home Loan Package

Offset Home Loan Package

More brokers picked Bankwest’s Complete Home Loan Package product than any other for a second year running. Brokers are clearly impressed with the bank’s entire range, but this one product came out on top. Brokers praised it for being a “great package with multiple offset accounts” and “competitively priced and flexible”. Comments highlighted the nine offset accounts, easy set-up for customers and good interest rates. One broker said, “[It’s a] brilliant product that fits many clients’ scenarios; great rates and overall great options for all.” Another said it had allowed more first home buyers into the market “without the punishment of a tier-two lender”.

With the second-highest number of votes for mortgage products, Macquarie was praised for its Offset Home Loan Package. Brokers picked it for its low interest rates and fees, fast turnarounds and being competitive in the lower-LVR space. On a wider level, brokers were positive about the bank’s BDM support, communication, and digital capabilities. One broker said: “Macquarie historically have placed themselves at the discount end of the market. More importantly, they are making the broking process as practical and streamlined as possible, which translates vitally to a great customer experience, which results in a lower clawback rate and more referrals in my experience.”

ING

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MACQUARIE

CBA

Orange Advantage

Mortgage Advantage

For another year, brokers have chosen the ING Orange Advantage loan as one of their favourite products of the last 12 months. It was mostly praised for its good rates – which reflects the medal ING received in the interest rates category – and for being a simple, “no frills” product. Brokers also said it was simple to manage and mentioned how great it was to work with ING across the board, praising its consistent turnaround times and good client onboarding. “[I’ve] not had a client in 20 years disappointed by ING post-settlement,” one broker said.

After scoring a bronze medal for its product range, it shouldn’t come as much of a surprise that CBA was picked as having one of the best mortgage products of the last 12 months. Its Mortgage Advantage product got the thumbs-up, with brokers saying it was easy to use and apply for. One broker said they “hated” to recommend the bank, but “the ability to waive application and ongoing account fees; incorporate a fee-free credit card; allow multiple offset accounts against the same loan split; and provide a high-quality online banking platform makes MAV still the market leader”.

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FEATURES

BROKERS ON BANKS

Non-major takes the top spot After an impressive ranking in last year’s Brokers on Banks survey, Bankwest has risen again to take out the gold medal. General manager of third party banking Ian Rakhit talks about the non-major’s relationship with brokers

COMING FIRST in the Brokers on Banks survey is always an incredible achievement, but never more so than when the top spot is taken by a non-major bank for the first time. Jumping to gold from an already-impressive second place last year, Bankwest won over the hearts of brokers with its commission structure, interest rates, product range and communication. But the bank’s general manager of third party, Ian Rakhit, says it’s the team and the collaboration between many parts of the business that have resulted in this success. With a company strategy of being the ‘Best Broker Bank in Australia’, all levels of Bankwest are focused on delivering brilliant customer experiences every day; and for this non-major, it follows that the broker is also the customer. “We aspire to make every customer experience and interaction brilliant, and where we really aim to differentiate is by providing brokers with the ability to grow their own businesses by providing an outstanding customer experience,” Rakhit says. “This means great BDMs supported by teams who have brokers as their sole focus,

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all delivering a consistently brilliant service in answering scenarios and getting to approval quickly.”

Providing support to brokers Bankwest has invested in its BDM model, growing its BDM numbers as well as the deskbased support provided by business service managers (BSMs). It has also widened its

so he can discuss “all things Bankwest” and provide the right support when they need it. The non-major has all the technology to make things easier, but Ponchard says it is also important that brokers have easy access to their BDM when they need it. “Building the relationship and under­ standing a broker’s business are key to ensuring long-term success,” he adds.

“We continue to invest in digital tools which help brokers manage their businesses so they can focus on delivering highly valued services to customers” Ian Rakhit, Bankwest contact centre support models to cover both new and existing customers. As one of Bankwest’s BDMs, Michael Ponchard says he knows brokers want to be able to workshop difficult loan scenarios prior to lodgement to ensure the lender is the best fit for the customer. Because of this, he aims to be available face-to-face or over the phone

“I think the challenge in the current environment has been to provide a consistent broker experience during uncertain times. Bankwest has worked hard to ensure we are listening to broker feedback and responding quickly to changing broker needs. From our frontline BDM/BSM team to our Validations and Credit, we are all working hard towards

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Sponsored by

providing best-in-market experience.” Technology is still important, though, and Bankwest scored a gold medal for its online platforms and services. For the past two years brokers have commended the non-major’s broker portal, and Rakhit says Bankwest has continued with “the same passion and focus” to deliver further innovation over the past 12 months, such as a Policy and Postcode Tool and digital contract signing. It has also extended its pricing tool capability to include existing customer pricing so that a broker can look up their existing customer’s details – such as loan amount and LVR – and can reprice in an instant. “The Bankwest Broker Portal remains a very popular platform; last year the portal had over 177,000 log-ins,” Rakhit says. “We continue to invest in digital tools which help brokers manage their businesses so they can focus on delivering highly valued services to customers.”

Ongoing relationship-building While the Brokers on Banks survey is a fantastic way to get broker feedback, Bankwest engages in a number of different forums and sessions with brokers to ensure they are in constant communication. The nonmajor received a gold medal position for its communications, training and development. Ponchard says communicating with brokers is “critically important” and will vary

BANKWEST WINS: 2019 VERSUS 2020 2019 BDM support

Commission structure

Communications, training and development

Credit policy

Interest rates

Online platforms and services

Product diversification opportunities

Product range

Turnaround times

a face-to-face visit with the broker is generally best,” he says. “This provides the broker with the opportunity to discuss the change and

“Building the relationship and understanding a broker’s business are key to ensuring long-term success” Michael Ponchard, Bankwest depending on the broker’s business. “Many brokers like a quick phone call or SMS to provide a simple update; however, where the message is more complicated,

2020

potential impacts on them.” After coming first in this year’s survey, the bank is looking at how it can continue its strong relationship with the broker channel.

Rakhit says Bankwest has a program of initiatives to further support its partners. This includes not just strengthening its technology but also understanding what others are offering that brokers value, and providing support and solutions to help brokers deliver greater outcomes. “Everything we have built in the past few years has been researched with our brokers and headgroups,” he says. “This level of engagement, challenge and support has ensured we have delivered what brokers want. This will continue, and we remain determined to support brokers in delivering great customer outcomes.”

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SPECIAL REPORT

FINTECH ROUNDTABLE

THE FACES BEHIND FINTECH Looking back at the growth of technology in the finance world over the last few years, it is fascinating to think where it could take us in another few years’ time. Fintech representatives gathered at this year’s MPA roundtable to talk about the future of the sector and their relationship with brokers

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TECHNOLOGY IS something the world can no longer live without, and as it grows and develops it becomes harder to see how we ever coped before. In the finance space, technology has been a huge game changer – seen in simple actions like being able to check bank account balances at the tap of a mobile phone screen, to more complex transactions like loan applications. While it has meant everyday people can do more without visiting a branch and seeking the help of bank staff, there is still a place for human interaction – and that is why many fintechs turn to the broker channel. In fact, one of the panellists at this year’s fintech roundtable said their loans were 100% broker-led, and the others claimed that around 70% of their loans were from brokers. Other fintechs have gone down a different route, choosing to be direct-to-

consumer with mobile apps and simple application processes, but the fintechs MPA spoke to at the latest roundtable – among others – remain insistent that the face-toface aspect and support a broker can provide is vital. Particularly at a time when mainstream banks and lenders are less trusted than in previous years, brokers are playing an important role in educating borrowers about what alternative lenders like fintechs can provide. During the discussion the fintechs spoke about the growing understanding of what fintechs can offer, but they knew there was still a way to go. We also invited two brokers to join the roundtable so participants could glean insights from their experiences of using fintech lenders. They provided a good balance, with one

focusing more on small business lending and the other on residential lending. One broker said he had noticed a shift in the way borrowers were reacting to fintechs – some even asked him to avoid mainstream lenders full stop. As discussed last year, the fintechs are becoming thought of as more mainstream. Around the table this year were Melissa Christy, the home loan lead at new ‘smartbank’ 86 400; Ollie Wade, head of marketing and partnerships at OnDeck; Tas Tzimos, national sales manager at Moula; and Alex Brgudac, head of partnerships at Prospa. The brokers were Matthew Dimos, director of Clarence Independent Finance Brokers, and David O’Toole, managing director of Designer Financial Services. Thank you to everyone who took part. You can read about our next event with the non-major banks in the April issue of MPA.

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SPECIAL REPORT

FINTECH ROUNDTABLE

THE PANELLISTS FINTECHS

Alex Brgudac Prospa

Melissa Christy 86 400

MPA: Last year we talked about fintechs becoming mainstream. How has that developed over the past 12 months? Looking back over the past five years, digital lenders have grown from being small, outof-the-box players to larger, legitimate options for borrowers needing finance. At last year’s roundtable, it was suggested the word ‘fintech’ was almost outdated as these new lenders slotted into this more mainstream position. Moula’s national sales manager, Tas Tzimos, said that over the past year the fintech had continued to evolve and grow as more of a non-bank lender. “Diversification has been a key topic in the broker space, post the royal commission,” he added. “We’ve continued to experience steady growth and have seen more aggregators want to join our panel and more brokers wanting to offer our product. Becoming more mainstream sees our BDMs spending more time with brokers and conducting more PD sessions.” According to research by the RFi Group, SMEs’ awareness of alternative lenders grew from 51% to 65% in the year to December

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BROKERS

Tas Tzimos Moula

Ollie Wade OnDeck

2019. The head of partnerships at Prospa, Alex Brgudac, said that this, on top of a busy January, showed how much brokers were embracing the idea of diversification. “We’re seeing new brokers dealing with us that we haven’t seen before, and that’s growing and growing,” he said. “I think if you look at the government initiatives in

Matt Dimos Clarence Independent Finance Brokers

David O’Toole Designer Financial Services

and increased the number of aggregator panels it is on to 10, and in response, the reaction from brokers had been “fantastic”. “I think they realise the solution we provide, and the way we provide it, is so much better,” he added. “To be able to access capital within 24 hours, sometimes less, is a real game changer, and we’re at the

“We’ll continue to evolve, but what continues to remain at the forefront of everything we do is that speed and service. It’s becoming fundamental” Alex Brgudac, Prospa the last 12 months, at the support of alternative lending and the appointment of a minister for fintech – that sort of speaks a thousand words.” Echoing these sentiments, OnDeck’s head of marketing and partnerships, Ollie Wade, said 2019 had been a particularly busy year for the small business lender. He said the group had tripled its broker team

forefront of providing that.” Offering a different perspective from that of the small business lenders was a new addition to the roundtable in the form of ‘smartbank’ 86 400. The bank first announced its launch in June 2018, receiving its banking licence in July 2019 and opening to customers in September. While 86 400 could not make a

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comparison with its last 12 months in the same way the other fintechs around the table could, home loan lead Melissa Christy said it had been “the year of the neobanks”, with three others also being granted a licence. Unlike its competitors, 86 400 kicked off its home loan offering within just a couple of months. Saying they still thought of themselves as fintech, Christy said, “There’s more awareness of the new banks. What we’re seeing is that brokers are actually asking their aggregators when are we going to get this lender on our panel. It’s really exciting for us to get that enthusiasm soon after we launched.” It is not just the fintechs themselves that are seeing a change in borrowers’ attitudes. Giving the broker’s point of view, Matthew Dimos, director of Clarence Independent Finance Brokers, said he had customers coming to him frustrated with the mainstream lenders and asking for different alternatives. Agreeing, David O’Toole, fellow broker and managing director at Designer Financial

Services, said borrowers had become frustrated with mainstream lenders that did not take the time to understand the client’s business and focused too much on policy and process. “As a fintech, the information you gather really allows you to understand the SME clients in a lot more depth,” he said. “So we find the customer experience is really improving, and that’s what clients are wanting, and increasingly on the SME side we don’t have a choice. Mainstream lenders in the SME space just don’t want to do the deals; they’re getting tougher and tougher on what they want to do, so we need to go to alternative lenders.”

MPA: What developments have you brought in over the last year in terms of products and services? All around the table, participants agreed 2019 had been a busy year as they continued to innovate and compete with new and

growing players in the fintech realm. As the newer fintech, all of 86 400’s products and services have been introduced recently, so Christy kicked off this discussion by explaining a little more about what customers could expect from the bank. She said its home loan proposition would be 100% broker-led, primarily because the broker market represented 60% of the residential mortgage equation. “What we’ve delivered is a digital home loan for brokers,” she said. “They don’t need to provide traditional documentation like payslips and statements and rental agreements; we verify all the information digitally, and we just require a contract of sale or purchase. “What we are doing is speeding up the process to assess the loan so they get a faster approval. We’ve got next-to-no paperwork, so it’s a lot easier for customers and brokers.” For Prospa – which of all the panellists had been around the longest – Brgudac said it had been an innovative year, but there was

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SPECIAL REPORT

FINTECH ROUNDTABLE

still a long way to go. After listening to feedback from both customers and brokers, he said the lender had extended its terms and its limits, as well as introducing a new revolving line of credit product. “We do our own little roundtables and look to see what problems we can solve and how we can deliver an even better experience, not just for small businesses, although ultimately that’s our aim, but for our partners,” he said. “Are we there yet? No. We’ll continue to evolve, but what continues to remain at the forefront of everything we do is that speed and service. It’s becoming fundamental; it’s no longer a luxury but a necessity.” Last year, Moula adjusted its own terms and loan limits in response to feedback and demand. Tzimos said that, in such an agile environment, the lender was constantly learning. It had also released an SME payments product – Moula Pay – providing extended payment terms for businesses that were offering products or services to other businesses. “It’s a rapidly changing market; there’s a lot of competition,” Tzimos said. “We’ve got a highly experienced BDM team, and this feedback is being delivered daily, and the strategy team is developing new products. “2020 is going to be the year of increased innovation, and what we see today is likely to be very different in two years’ time.” Talking to customers and acting on their feedback is something that fintechs pride themselves on, as it sets them apart from the mainstream. Wade said OnDeck and fintechs in general were so much more in touch with customers and able to listen to them and pilot new innovations in response. As evidence of this, last year OnDeck tested a new equipment finance product with brokers after its research showed that more than 30% of the loans they wrote were for equipment-related needs.

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SMES’ ACCESS TO FINANCE In the July 2019 quarter, 35% of SMEs said it was hard to access finance, compared to 30% in the previous quarter.

13% Easier to access finance

35%

About the same to access finance

52%

More difficult to access finance

Source: Sensis Business Index November 2019

“2020 is going to be the year of increased innovation, and what we see today is likely to be very different in two years’ time” Tas Tzimos, Moula “We’re constantly talking to customers; I think that’s one of the differences between our category and traditional banks,” he said. “We also have the benefit of being part of a larger international business. OnDeck in the US are listening to their customers over there, and we see them as a couple of years ahead of us. “So it’s great for me, particularly in a marketing context, to sit down with the team over there to see what’s changing, what

they’re seeing, and the ideas we can potentially pilot over here.”

MPA: For you brokers, how important is it that the fintechs can offer these products and services? The brokers at the table praised fintechs not only for their ability to act on feedback but because they actually acted on this feedback to improve their product and service offerings.

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SPECIAL REPORT

FINTECH ROUNDTABLE

Dimos said the fintech offering was an important addition to the suite, particularly as dealing with mainstream providers and their changes to policies had increased both the effort required and the time frames brokers were now dealing with. “It’s very important to have these fintechs develop new products, because it will continue to raise the bar in the industry and create further competition,” he said. “This in turn will enable us as brokers to introduce efficiencies in our business and create better outcomes and solutions. “If there are more products and solutions to work with, it will mean there is a bigger net to catch the business with, and the more solutions we can offer our clients the better.” Dimos added that after working in an environment with so many BDMs from various banks and lenders, he saw a real difference in the culture at fintech lenders. “My experience with BDMs at these neo-, fintech, smart, whatever we want to use, is that they are asking questions: can you give

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“We definitely want to challenge what’s out there at the moment, and we think we’ve got the potential to do it” Melissa Christy, 86 400 us feedback? What is not working? “People are talking about it around the table, but it’s a real thing; it actually happens. They’re coming into my office almost every second day asking for feedback, and that’s impressive. Then a few weeks later the feedback is implemented in some cases. That’s the difference.” O’Toole said he felt like the progress being made in the fintech space was due to the fact that everyone was a customer – both the borrower and the broker. “Without listening you can’t continue to refine and improve the customer experience, so I think the listening piece is driving things,” he added.

“That’s your culture. At the heart of every transaction is the client, and if you want to deliver a great experience you’ve got to listen to the people that bring you the clients. You are actively listening to broker and customer feedback, then making changes to enhance your offer continuously. I think that’s in the culture; that’s the difference from mainstream banks, because they just can’t change.”

MPA: Where else can fintech go? What will it look like in five, 10 years’ time? As technology continues to change and improve the way lending is done, one can only imagine how advanced it will be in

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SPECIAL REPORT

FINTECH ROUNDTABLE

SMES’ PREFERRED OPTIONS FOR FINANCE In the July 2019 quarter, 17% of SMEs applied for finance, of which 63% were successful, 26% unsuccessful and the rest were pending. When asked about their options for accessing finance, a third showed a preference for bank loans. If you needed to access finance in the next six months, which of these would you consider?

16%

21% Credit card

12%

Overdraft

19% 32%

Bank loan Equity capital raising Other

Source: Sensis Business Index November 2019

“To be able to access capital within 24 hours, sometimes less, is a real game changer, and we’re at the forefront of providing that” Ollie Wade, OnDeck years to come. But Tzimos said having this bit of “the unknown” was one of the great things about it. While he sees it as not just about the technology but about having the right people as well, he expects that systems, data and AI will allow Moula to be even simpler to deal with, offering outcomes and faster decisions. “Certainly, in the next two years we’ll

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continue to become more agile and a lot more knowledgeable in terms of where we sit in this domain, because brokers and their customers are wanting the best products and a simpler application process,” Tzimos said. As a new bank, 86 400 is looking to the future and planning to have a full suite of products in the next five to 10 years, with the aim of being a top 10 bank within the next

decade. Considering the rate fintech has grown at in the last five years, that aim is certainly possible. “We definitely want to challenge what’s out there at the moment, and we think we’ve got the potential to do it,” Christy said. “I think if fintechs can keep up with customer expectations, with new technology, and get the service proposition right, they definitely will succeed and take over the incumbents.” Observing the market from OnDeck in the US, Wade predicts one thing that will happen in Australia is the consolidation of lenders, but also an increased offering from those who keep going as the competition becomes stronger. “The innovation around our products will increase; the nature of competition will force us to,” he said. “If our competitors have it and we don’t have it, then we’ll develop it or something better; but equally, it will force us to think outside the box, about what are some of the new products that we’re not even talking about today? “We’re probably better positioned in that space than the more traditional lenders. I’m really excited about what we will be talking about in a couple of years.” Brgudac said it paid to look back at where fintech had come from to determine what the future would hold. Five years ago, he said he was having conversations with brokers and aggregators, trying to explain what fintech was. “In five years it’s grown dramatically, but excitingly, we’re just at the start of what we can achieve together,” he said. “The next five years is still very much about education and the awareness of alternative lending, and we’ll play a big part in promoting that.” Encouraged by the conversation around the table and the increased market share of alternative lenders like fintechs, O’Toole said the more these lenders were used, the better the experience for the customer.

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SPECIAL REPORT

FINTECH ROUNDTABLE

“Improving customer experience for me as a broker, I’ll win more business because you give good solutions, the product meets the client requirement, and you give them a good experience in the process,” he said. “It’s really encouraging for me to think that in five years’ time, what could it look like?”

MPA: What are some of the challenges facing the fintech space at the moment? Joking that the other fintechs keeping him up at night was a challenge, Wade added that there were challenges in terms of the cost of growing OnDeck’s presence, competition from other players, and the general “noise” from other players in the space, such as comparison sites, lead generators and smaller lenders. In terms of day-to-day business, he talked about managing customer expectations and ensuring their speed and service matched up. One challenge the group have made great gains in overcoming is the criticism that fintech is an unregulated industry. OnDeck, Prospa and Moula have all joined the

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Australian Finance Industry Association (AFIA) and developed the AFIA Online Small Business Code of Lending Practice. As a result, they brought out a comparison tool called SMART Box. “All of these things, whether it be selfregulation or not, show the market what we’re willing to do,” Wade said. “While we may not be regulated as an ACL holder, we comply with so many other regulations.” Tzimos said the biggest challenge would be tapping into the right talent, whether that’s in building the technology or distributing the product. “We started as a cash flow lender, and we’ve always maintained a clear position on assessing loans with technology and on the merits of the client; it’s having the right staff to navigate through those conversations,” he said. Christy said 86 400’s challenge was to “stay focused and deliver”. Rather than launch into several types of lending from the outset, the team know there are lots of different things they want to do, but they want to perfect the home loan offering first.

“We have started with more vanilla home loans because we wanted to get to market, make sure that worked, improve it, then expand later,” Christy explained. “We are moving so fast, the challenge for us is to make sure we don’t lose sight of the customer’s and the broker’s needs.” Brgudac said Prospa’s number one challenge was education and increasing awareness, adding that 90% of small business failures were linked to poor cash flow. “The fact that any one of us could have potentially helped but they just didn’t know we existed – that’s what keeps me going,” he said. The challenge doesn’t stop with the lenders. Dimos said his challenge as a broker was the ability to retain and remember. “The challenges of being a great broker have a lot of different facets, but one of them is making sure you understand all the possible solutions available to you,” he explained. “Then when you’re in front of the customer and they’re telling you what the problem is, it’s important you know what lenders will write that business.”

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FEATURES

CONSTRUCTION FINANCE

Building greater opportunities For those mortgage brokers who have not yet delved into the world of construction finance, MPA talks to one lender in this sector about what it is, what you need to know, and who is best placed to help you

IT’S NO secret that the banks have pulled back from lending in a number of areas over the last couple of years. One sector that has been especially affected, thanks to restrictions imposed by APRA, the changing property market and the scrutiny facing the finance sector, is construction lending. But instead of leaving holes in the ground, brokers have been turning to one solution in particular: private funders and non-bank lenders. After APRA introduced regulations limiting banks’ growth in investor lending to 10% and requiring a 30% cap on new interest-only loans, banks began increasing interest rates, constricting their loan-tovalue ratios and increasing presales hurdles, which made it more difficult for investors and developers to get loans. As a result, brokers say they have had to

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turn more and more to private funders to get the loans approved. One such lender, Supra Capital, says it has noticed a shift in brokers bringing more business to the company since the

the 1990s, and managing director Adriana Zuccala says there are benefits to be gained from the group’s experience. “Being property developers historically, we understand the risks of construction

“Being property developers historically, we understand the risks of construction funding at a practical level and can mitigate those risks in a way that’s very different” Adriana Zuccala, managing director, Supra Capital banking restrictions came into play, as the bigger banks don’t have the benefit of being flexible and tailoring individual deals to someone’s commercial merits. The non-bank started out in real estate in

funding at a practical level and can mitigate those risks in a way that’s very different to, or possibly won’t be permitted by, the inflexible criteria and regulation of the traditional banks,” she says.

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te

So, what is construction finance and what trends are we seeing? Construction lending is the provision of finance to developers for the construction and development of their properties, be they residential, retail, office or industrial. One of the biggest obstacles in securing construction lending from more traditional lenders is often the requirement to achieve significant presales, frequently as much as 100%, before finance will be given. In the changing landscape, securing this high proportion of presales is often not only difficult but also undesirable. “The difficulty of presales has been one of the bigger trends in the last couple of years, and this has been for a number of reasons,” says Zuccala. “The limitations regarding interest-only loans have discouraged purchasers; overseas restrictions and additional taxes on foreign buyers have led to a drop in foreign investors; and changes to stamp duty concessions have removed incentives to buy off the plan.” Further, Zuccala notes that there is a growing trend of younger Australians preferring to rent instead of buying a new home. As a result, developers are often keen to hold the developed product. In such cases, this requires developers to provide further equity to maintain LVRs. “Those lower LVRs mean developers are not using their equity as well as they could or should,” adds Zuccala. By contrast, Supra Capital can not only offer less stringent presales requirements and higher LVRs but will also consider the experience and track records of the developer and project teams, other asset positions and the proposed exit strategies. Supra Capital may also provide mezzanine debt behind a bank as financing that the developer would otherwise need to chip in, thereby reducing the potentially onerous LVR requirements imposed by the traditional banks.

MORE BUILDING, LESS BUYING The value of business finance commitments for construction and the purchase of property have continued to converge over the past year in trend terms.

$bn 9

Construction – seasonally adjusted Construction – trend

8

Purchase of property – seasonally adjusted Purchase of property – trend

7 6 5 4 3 2 1 0 Dec 03

Dec 05

Lending to businesses

Dec 07

Dec 09

Dec 11

Dec 13

Dec 15

Dec 17

Dec 19

December 2019

Month % change

Year % change

Construction

3.13%

-0.2%

46.6%

Purchase of property

4.75%

-0.5%

-15.7%

Source: Australian Bureau of Statistics, Lending Indicators, December 2019

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FEATURES

CONSTRUCTION FINANCE

BROKER’S TAKE: PRIVATE LENDERS ADS Property Finance director Andrew Samios has been working with Supra Capital for about five years and says that just like there are bad bankers and good bankers, there are bad private lenders and good private lenders. “I’m probably more frightened of the banks than I am of privates,” he says. “I am always a little amused when people say privates are untrustworthy, when we have just had a royal commission into banks’ misconduct.” He adds that the development space is a “small world”, and as a professional, experienced broker you not only get to know what good offer terms look like, but you know people in the lending space and learn who to trust. Understanding the market as well as he does, Samios can also guide his clients through the advantages and disadvantages of choosing a private lender. “With a private lender you can get a loan offer today or tomorrow, get a valuation done in a week, and get the funds within 10 days,” he explains. “For people who want to build, it’s all about timing – the fact they can start in a couple of weeks is very powerful for them. “It might cost more in interest rates, but they don’t have to presell. People are paying more for finished property, so they can actually improve their bottom line.”

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Andrew Samios, the director of ADS Property Finance Pty Ltd, deals with high-networth developers and has been no stranger to the struggles of acquiring construction finance from the banks over the last few years.

lack of complexity of our organisation and regulatory framework, as opposed to the banks who do need to go through multiple layers of processes,” she adds. This means that brokers are not only able

“The difficulty of presales has been one of the bigger trends in the last couple of years” Adriana Zuccala, managing director, Supra Capital He says that, particularly in this space, banks will change their appetites frequently, and that is why he has turned more to nonbanks and private funders, working with the likes of Supra Capital. “What happens with the banks is they just put the brakes on, and they stop lending overnight,” he says.

How can non-bank lenders assist brokers? For the non-bank lenders that can provide alternatives for borrowers, brokers are usually their main referral source. Supra Capital is no different and procures many of its financing opportunities directly from the broker channel. Zuccala considers the relationship between non-banks and their brokers to be of the utmost importance, saying it is one of mutual collaboration and cooperation, comprising of complementary knowledge and expertise, with both parties focused on solutions, customer service and choice. “Understanding the property market in the area of construction is vitally important to enable the proper assessment of risk,” says Zuccala. She reiterates that Supra Capital is in a prime position, having been a property developer in the past and being a boutique lender now, to analyse an individual deal and assess its particular risks. “The speed at which we can analyse a deal and provide funding is faster than the major banks, because we’re more bespoke and our processes are less complex as a result of the

to provide their clients with a more flexible approach to their construction lending requirements, but also a more timely one. Samios has seen first-hand that the slowing of presales in the construction market has meant banks are harder to borrow from, and this is where he has benefited from turning to a private lender. “In the private market we can negotiate with little or no presales,” he says. “That suits the developers, especially the experienced ones. They’re more than happy building in a market like Melbourne or Sydney, because that’s where people want to be, and where people want to be, they want to buy.”

What do brokers need to know about construction finance? For brokers who are new to construction lending or have never worked in the space before, Zuccala recommends partnering with a broker who already has experience in the sector, and then partnering with a lender like Supra. “We’re happy to work with brokers who have not necessarily worked in the space so we can explain to them what it is we need from the outset so that they can ensure they look after their client in the best possible way,” she says. As a piece of advice, Zuccala says it can be good to start the process of getting funding two to three months before the client needs the finance to ensure enough time to arrange the various reports a funder will need, such as valuation reports and an initial report from a quantity surveyor.

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FEATURES

CUSTOMER SERVICE

Service excellence driven by the client In the ever-evolving mortgage landscape, expectations around customer service are shifting. How can businesses work to keep up and bring their best to the table? John Mohnacheff of Liberty shares his insights with MPA CUSTOMER SERVICE has always been a cornerstone of the broking industry, but expectations have evolved. Today’s customer expects a high level of fast, flexible and personalised service. If you don’t meet their needs, they won’t hesitate to walk away. “Speed of service has become vital,” explains John Mohnacheff, national sales manager at Liberty. “Society has become accustomed to fast turnaround times and quick responses. Customers don’t want to wait for an answer. That’s not to say that we have become impatient – it’s more that a higher standard has been set.” Mohnacheff notes that there are many things brokers can do to provide speedy service and positive customer experiences.

Getting the basics right from the beginning provides a strong foundation to build from, but overlooking fundamental issues is going to lead to key problems with the structure of the business later. Take responding to enquiries, for example.

“Thank customers for taking the time to share their experience, and see it as an opportunity. This crucial element of running a business helps you to grow” John Mohnacheff, national sales manager, Liberty

ABOUT LIBERTY FINANCIAL Liberty is a leading lender that offers free-thinking solutions at competitive prices to support customers with greater choice. With a wide range of loans for your home, car, business and personal needs, Liberty can help customers get financial even when others say it’s not possible. Our innovative and flexible approach has allowed us to help over 500,000 customers by advancing more than $25bn in funds, over 21 years. For more information, visit www.liberty.com.au.

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“While it should be standard practice to reply to enquiries promptly, there are going to be times when this isn’t always possible,” says Mohnacheff. “Auto-responses and voicemail messages only take a few minutes to set and can help to manage customer expectations

around when they’ll hear back from you.” Additionally, most brokers will be aware that loan delays can be a major source of customer frustration. While there will be times when this is out of your hands, Mohnacheff stresses that it is still crucial to ensure that you are completing applications correctly and providing all of the necessary documentation – this will help lenders process your application more promptly and in turn lead to better outcomes for the client.

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Sponsored by

Mohnacheff recommends that one of the most valuable resources brokers looking to enhance their customer service have available to them is their customers. It’s a great place to start if you’re actively looking for ways to improve. One of the best things you can do as a business owner is to encourage open and honest dialogue with your customers. “Speak to customers directly and listen to their concerns,” says Mohnacheff. “You might also consider incorporating a follow-up service satisfaction survey into your standard practices.” Mohnacheff cautions that the feedback you receive from customers may not always be 100% positive – but that’s actually a good thing because it serves as a basis for working on improvements to the business as a whole.

Providing an open forum for your clients can help make you aware of issues that you didn’t necessarily know existed, and potentially win back those who might be considering taking their business elsewhere. “Sometimes there will be customers who haven’t been completely satisfied with your service, but they will not be willing to voice their concerns,” explains Mohnacheff. “Why? Quite simply, it’s too much trouble. Instead, they might just choose to take their business elsewhere.” Brokers rely on referrals and word of mouth. When you engage with customers who are willing to share negative feedback, it’s important to respond to them professionally and politely. “Thank customers for taking the time

to share their experience, and see it as an opportunity,” says Mohnacheff. “This crucial element of running a business helps you to grow.” Mohnacheff also believes that technology has been a key enabler in helping improve customer service standards in the broking industry. Indeed, some might argue that it’s essential to running a modern, successful broker business. Processes can be sped up, enquiries can be answered more quickly, and leads can be reached far more easily than in previous generations. However, it’s still the implementation that will be the make-or-break factor in its success. Reasonable judgment should always prevail – tech should be used as an aid to enhance your services, rather than a crutch, notes Mohnacheff. Connection to the outside world via human means is essential. “While it’s easy to start relying on digital marketing alone to bring in leads, getting out there and remaining active in your local community is essential to broker success,” says Mohnacheff. Ultimately, running your business efficiently should support your customer service efforts by allowing you more time and flexibility to focus on finding solutions tailored to their individual needs. Mohnacheff also notes that good customer service isn’t necessarily about being personable and well-liked. This is important, of course, but it’s not always the best approach – good customer service is about getting the job done to the highest standard and providing a fussfree experience for the customer. “Customers come to you for your expertise, and they expect you to be able to efficiently support them in achieving their goals,” says Mohnacheff. “They’re seeking a service, and they expect it to be performed at a high level.”

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PEOPLE

BROKERAGE INSIGHT

Future-focused finance advice Mortgage broking has traditionally been a siloed profession, focused primarily on property rather than finance per se. But Ben Kingsley of Empower Wealth believes brokers of the future will be geared towards helping build wealth far more broadly BACK IN 2007, Ben Kingsley had a vision – a brokerage that could serve as a holistic firm, providing buyers with specialist property investment lending while also acting as a wealth advisory firm. With experience running a broking franchise, as well as years spent in sales and marketing, Kingsley was confident he could bring his combined skills to bear in tackling this new challenge. “Essentially, we wanted to be able to do the lending and provide advice to clients simultaneously,” Kingsley explains. “We had visions of financial planning and acting as buying agents, but we thought it was probably best to get the broking aspects right first!” Empower Wealth was born out of this vision – and almost 13 years later the company has expanded its services to encompass all of

those initial goals and more. Today, its clientele are primarily made up of investors who are looking to make their mark in property and build their wealth in the process. “We’ve got a lot of repeat purchasers who are expanding their portfolio,” Kingsley says. “Those who don’t fall under this umbrella are usually referrals from our investor clients, though. Sometimes they’re looking to refinance, or maybe to buy a family home.” Given that Kingsley also sees Empower Wealth as a wealth-building and financial transformation consultancy, not simply a brokerage, the focus has been mainly on residential property, rather than commercial. “We want to help households organise their money and invest wisely,” says Kingsley. “We want to be as reliable as possible on our

returns, so that means we naturally gravitate in that direction. Residential properties are always going to be essential – people need somewhere to live, after all.” Since Empower Wealth was founded, Kingsley feels the industry has matured and the average consumer is much more educated about how the market operates and the role a broker plays in the process. “In 2004, when I first got into broking, you had to explain what a broker was, how they worked with lenders and how they got paid,” says Kingsley. “But these days over 60% of home loans in Australia are carried out via brokers, so we have a much greater presence in the public eye.” That said, Kingsley is swift to point out that while consumers have a better baseline

BROKERS AND FUTURE REGULATION The financial services royal commission has led to increased emphasis on compliance and regulation in the broking industry – something that Ben Kingsley sees as positive from a consumer perspective. “From an advisory perspective, we need to make sure we’re more well-rounded,” says Kingsley. “Compliance isn’t going anywhere, and we need to make sure that we’re going above and beyond to help clients get what they need.” What concerns Kingsley more is regulators that are actively looking to legislate down to the lowest common denominator. While consumer protections are “crucial”, Kingsley believes that regulating in such a fashion could have an overall detrimental effect on outcomes. “There’s inherent complexity in issues like managing money, buying property and investing,” he explains. “It’s part of our role as brokers to enable people to take calculated risks – if you regulate to the lowest common denominator, it removes our ability to do that effectively.”

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FAST FACTS Company: Empower Wealth Founder: Ben Kingsley Location: North Melbourne and Sydney Year founded: 2007 Services offered: Mortgage broking, property investment advice, financial planning, buyers advocacy Number of employees: 54

“A mortgage is just one part of a person’s wider financial solution or solutions, and we need to make sure that we’re offering a better value proposition for people accordingly” Ben Kingsley, Empower Wealth understanding, the complexity around mortgages has also expanded. Offset accounts, redraw, introductory rates and fixed versus variable are still cryptic concepts to many. “When you look at the best interests duty legislation that’s being implemented later this year, it’s clear that we need to look at mortgages much more holistically,” Kingsley says. At a very basic level, this means looking after the customer by keeping eyes on factors such as interest rates and ensuring they have the most competitive rates possible. But the wider value propositions that brokers offer need to be enhanced for brokers to truly be effective in the new marketplace. “A mortgage is just one part of a person’s

wider financial solution or solutions, and we need to make sure that we’re offering a better value proposition for people accordingly,” Kingsley explains. “It’s going to put more pressure on brokers, though – how can they get into those conversations?” Kingsley believes that trends like open banking and the attendant tech that grows around it will be among the key drivers. More data will flow around managing money and finances, enabling multifaceted financial services agencies to thrive. The future of broking, as Kingsley sees it, will be about attracting customers into a wider financial ecosystem – an end-to-end experience that he likens to a smartphone’s operating system.

Awards: Your Investment Property Property Investment Advisor of the Year 2018 and 2019; AMA Brokerage of the Year (6–20 Staff) 2019; MPA Top 10 Brokerages for 2019 – #7; BRW and Financial Review Fast 100, 2016, 2017 and 2018

That future isn’t quite here yet, says Kingsley, but it’s something that will prove to be exciting for customers and brokers alike when it does arrive. It will need to provide customers with an entertaining experience at the front end, while also fulfilling crucial needs at the back end. The power of automation will enable customers to focus on the larger, more pressing issues, while the rest is handled in the background. “Data’s the new oil, as people like to say – so how can we use that data to provide clients with insights that will help impact their financial behaviour positively?” says Kingsley. “Wealth transformation starts by grappling with surplus. If we have tools that enable us to look at a client’s surplus more holistically in the context of their family situation, that gives a better foundation to look at where they can best use it for building wealth.”

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PEOPLE

CAREER PATH

A PASSION FOR RISK After more than a decade working in management roles at big four banks, Joanne Edwards has landed in fintech as Wisr’s credit risk and data officer Joanne Edwards joined UK lender GE Consumer Finance as a graduate credit risk analyst in 2003 after completing her maths degree. She then spent four years moving around various teams before becoming a manager, working across customer SETS HERSELF UP management strategies, including credit FOR SUCCESS 2009 limit management, pricing optimisation, HEADS FOR and collections and recoveries strategy. AUSTRALIA “I was very lucky to have worked here at the outset After leaving the UK and of my career and will always feel privileged to have had backpacking around India and Southeast the opportunity, as well as to meet so many amazing people.” Asia, Edwards landed in Australia and within three days began her job as a quantitative analyst at Westpac. Her role 2010 involved building and implementing models as part of the commercial lending FOCUSES ON PRODUCT Basel II accreditation project, after the bank’s acquisition of St George. Edwards moved over to Commonwealth Bank to join the personal lending product “It was a brand-new area for me, so learning about commercial lending and Basel II was team, becoming executive manager within a year and helping to set up business a steep and interesting learning curve.” insight and reporting, implementing risk-based pricing strategies and supporting a business transformation program to improve the end-to-end origination process. “My proudest achievement was when a consultant 2011 group from the US were working with CBA to MANAGES RISK strategically advise on how to uplift analytics. Leaving the realm of products, Edwards spent the new few years This team described the personal lending moving through various executive manager roles at CBA, including business as one of the most advanced examples, in credit risk personal lending, risk delivery and implementation, which was great because that was a year’s and customer risk insight and strategies. worth of effort to get the business there.”

2003

Although I loved working in the product area, I really missed my credit risk days at GE and longed to be back in that area

2015

UNITES TEAMS Pulling together the customer risk and delivery teams, Edwards took on a new role as head of customer risk, leading a team of over 25 staff. “I proposed this role to my boss by putting together a business case that combined my two previous roles into one team. It made sense to pull together the customer risk team with the delivery teams as we were all focused on a larger program of work.”

2020

MAKES FRESH START IN FINTECH At the beginning of this year, Edwards moved away from big four banking and joined fintech firm Wisr as its chief risk and data officer. Focusing again on credit risk, she will review the group’s processes to become “even more customer-centric”. “It’s early days, so watch this space!”

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2017

DELIVERS ON PROJECTS Edwards became responsible for managing all aspects of credit risk for the consumer finance business as general manager, unsecured risk. Managing a team of more than 80 credit risk professionals, she oversaw major restructures and the end-to-end CCR program.

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BROKERAGES 2020 Are you the best in the business? MPA will once again celebrate brokerages who have set themselves apart in Australia’s mortgage industry. All brokerages with five or more loan writers (authorised credit reps) in a single office headquartered in Australia are encouraged to put themselves forward and see where they stand among the best.

DEADLINE OF ENTRY IS ON

3 APRIL 2020

For more details,

visit mpamagazine.com.au/best-mortgage-brokers

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PEOPLE

OTHER LIFE

TELL US WHAT YOU GET UP TO Email rebecca.pike@keymedia.com

27

Age when Gibson took up running

“ I run whenever I travel. It’s a great way to take in your surroundings – look and see things you wouldn’t normally get to see”

6.30am Time Gibson starts her runs

4.05

Personal best in Melbourne Marathon

HITTING THE PAVEMENT Since she started running in her late twenties, Belinda Gibson has taken part in many marathons and now wants to go international AFTER HER daughter turned two years old, director at Thomas Magdalene Finance Group Belinda Gibson decided she wanted to get fit, so she took up running. Joined by two girlfriends, she started by running 5km stretches and later signed up for the NIKE Fun Run in Melbourne. Gibson progressed to taking part in events like the 15km City to Sea. She ran a number of half marathons, including the Sandy Point Half Marathon and the Run Melbourne Half Marathon, before taking on her first full marathon in 2017. She acknowledges that running is not easy, but says that as she joined longer events she really enjoyed the freedom and enjoyment of running. “I love the discipline of the training and having a running schedule – the increase in distance, hill training and the number of runs to complete in a week,” she says. “Mentally, you know, if you don’t complete the training you won’t have the physical or mental stamina to complete the event.” While training for her most recent marathon, Gibson was injured, but she says this made her much more relaxed as she was simply grateful to be on the starting line. Now she runs with her husband and enjoys long Saturday runs; they have completed three Melbourne Marathons together, and a couple of half marathons. In the past, Gibson has supported charities like FightMND, and a Bankwest BDM with gifts for orphans at OzChild. Looking to the future, the couple want to run the Gold Coast and Melbourne Marathons this year and possibly Chicago in 2021.

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