In the Press

26 April 2010

Broker servicing: People matter

The Adviser

Alan Shields

Retail Finance Intelligence’s director of research Alan Shields offers his insights on the findings of The Adviser’s Third Party Banking Report – Major Lenders.

In March 2010, RFI in conjunction with The Adviser undertook the task of determining what mortgage brokers actually think of the nation’s 5 largest lenders – ANZ, CBA, NAB/ Homeside across, St. George and Westpac . Respondents to the survey were asked to score the lenders – across a range of criteria spanning product and cross-sale, through support and importantly, commission – out of 5 for how well they perform in each instance.

In total more than 700 Brokers took part in the survey, with more than 450 of these brokers having written business with at least 4 of the 5 lenders in question. Analysing the responses of the broker community has been extremely interesting and has thrown up some insights that I had not necessarily anticipated going into the project.

Loan volume and service level are not correlated?

Firstly, I expected that when I looked at the brokers responses broken down by their monthly settlement amounts, that there would be some clear differences in opinions. My reasoning was that the lenders would be better servicing the larger brokers. However, what I actually found was that there was almost no difference (statistically) in the score awarded to each of the lenders by those brokers that settle less than $2.5m in loans per month, versus those that settled more than $2.5m per month.

There are 2 reasons why this might be the case. The first and most obvious one is that the expectations of higher volume brokers are that much greater and therefore the scores they attribute to lenders are lower. The second– and less intuitive - reason may simply be that the lenders are not necessarily servicing larger brokers at a higher level than smaller brokers.

Broker segments are seeing variable impact across indicators

So if overall loan volume makes no difference to the level of service received then I began to ask myself, ”what would make a difference?” Fortunately, we had asked the respondents to record whether they were in each of the lender’s preferred broker segments – CBA Diamond, NAB/ Homeside 4 Star, Westpac Advantage Plus or St George Flame – so I was able to work out the impact. The answer to this question is that these preferred broker segments did tend to be a bit happier with the overall performance of the lenders – I say ‘tend’, because it was certainly not the case that they were always happier.

I was also able to ascertain the aspects of the relationship where we saw the biggest gap between the preferred segments and the ‘other’ brokers - the ranking of which can be seen in the table below. The results are perhaps revealing in that they show that difference in service comes down to the interaction and support rather than the technology, products, pricing and commission, which is where a lot of attention is focussed.

Table: Ranking of attributes having the biggest impact on preferred broker segments
Rank	Attribute	Description
1	BDMs	Access to BDMs, BDM proactivity and effectiveness in solving any problems
2	Turnaround times	Level of servicing times over the last 6 months
3	Business support	Commitment to helping you build your business
4	Channel conflict	Overall approach to the 3rd party channel compared with their branch network
5	Credit assessment staff	Access to and ease in dealing/ communicating with credit assessment staff
6	Broker interaction	Effectiveness of communication with brokers when dealing with issues
7	Structure	Simplicity of commission structure to qualify for available remuneration
8	Remuneration	Overall amount of commission paid
9	Training & education	Provision of training, whether product specific, compliance or other
10	Policy & pricing	Competitiveness of products across key market segments
11	Broker communication	Quality of newsletters, updates and other resources
12	Product range	Overall quality and comprehensiveness of residential mortgage products
13	Cross sell	Availability, quality and support to provide other products
14	Client support	Effectiveness in servicing your clients post settlement
15	Web presence	Effectiveness of broker web portal
16	Online lodgements	Efficiencies, usability, functionality etc.

Source: Retail Finance Intelligence (RFI)

Picking your battles

It is clear that the lenders have chosen to reward certain preferred brokers by allocating them to segments in the hope that these brokers write more of their business. However, the ranking above tells us that this relationship is by no means simple - there are many attributes to a broker-lender relationship and what is more, some attributes more impactful than others in driving perception or preference.

When we break down the impact attributes have on perception and the performance of the lenders against each of these attributes it becomes even more obvious that there are attributes, which lenders need to focus on in order to win a greater share of their preferred brokers’ business.

Lenders really need to understand individually how they stack up on each of these attributes and respond accordingly. Taking the average across the big lenders, we can see below that the core areas of focus all revolve around interaction, support and people. Ultimately, it is the right people with the right support behind them that will be a winning combination for the right lender in servicing the broker market and winning broker share.