Calls raised for more transparency on banks’ lending strategies
The topics of channel conflict and resurgent proprietary lending strategies were in focus when Anja Pannek, chief executive of the Mortgage and Finance Association of Australia (MFAA) took to the stage at the SFG National Conference, held last week at the iconic Sydney Cricket Ground.
“It’s fair to say that the market is getting more competitive,” said Pannek in a one-on-one chat with SFG managing director William Lockett, highlighting the reemergence of cashback policies “in different forms” (take Commonwealth Bank’s 300,000 Qantas Points deal, for instance).
Banks have also been criticsed for reportedly undercutting brokers at the branch level, leading to painful clawback situations for brokers.
Pannek touched on this point in an open letter published last week, when she wrote: “Members tell us of ‘under-the-counter’ branch pricing and cases where a borrower’s application by a broker is declined but then approved in-branch, which raises legitimate concerns in my mind of lender bias in credit assessment.
“These practices undermine the foundation of our industry – trust. Brokers and lenders are trusted partners to each other. The unchecked actions of individuals motivated by sales targets doesn't help anyone, let alone who we should be focused on – and that is the customer.
“Allowing channel conflict to persist undermines the trust and respect we should always have for one another. It wastes effort, it perversely destroys lender margin (especially when price undercutting and cashbacks come into play) and often results in a very poor customer experience.”
Returning to the matter at the SFG conference, Pannek called out the “tired” narrative around channel conflict, saying it “takes our eye off the ball as an industry in terms of what is most important… the client”.
Brokers, Pannek reminded, generate substantial value for lenders.
“You introduce clients that they otherwise would not have,” she told the audience. “All the work you do in terms of pre-qualifying those clients and guiding them… that is enormous.”
Pannek called on the banking industry to be transparent about their lending strategies.
“Saying one thing and then getting underhanded behaviours coming through, it's incredibly poor and I think it undoes the trust we should all have amongst each other in an industry that is very customer centric.”
Clients are ‘voting with the feet’
Matt Spears (pictured, below), managing director of Sydney-based brokerage Evoke Capital, has witnessed the increasingly bullish nature of banks in pushing proprietary lending, but he believes consumers are setting the agenda.
“Banks have been trying to push and expand their first-party channels for some time, however have continued to lose market share to brokers,” Spears told MPA.
“Clients are voting with their feet and see the value of working with a broker that has no alignment with any specific institution. The benefits to the customer are huge, providing clients real choice and options from a product, policy, terms and turnaround perspective.”
Spears finds that his clients appreciate Evoke’s “bank-agnostic relationship because we can help them execute a strategy to achieve their goals that a direct to bank relationship cannot”.
He continued: “Our clients are mainly business owners and investors who require a multi-bank strategy and do not want to work with the revolving door of bank relationship managers.
“The best banks are ones who embrace the broker channel and accept our role in the market to enhance client outcomes.
“The ones that do not often create channel conflict which ultimately end in poor client and broker outcomes. These institutions are well known and have lost a lot of broker volume.”
