What Price Service?

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Economic ChallengesToday’s guest post comes to us via Matt Hall, from Loan Focus.

As brokers our job is to find the best deal for our client. That said, what is their best interest and how do we place an objective value on something that is inherently subjective like service?

We assume that price is the determinant factor, the decision driver for our clients. We have collectively spent millions on software that chooses for us, and no client has ever said that they want to pay more. I am yet to see a mathematical algorithm for service, there is no check box on the software for “Made in Australia” or “Answers phone within 2 hours”. Everything comes down to which bank and at what rate.

So if the cheapest rate comes with an international call centre, an assessment policy with no grey areas and no lateral perspective, then it’s a winner every time and along with every other deal from across the country it’ll sit in that queue until we’ve pulled our hair out, our clients are stressed and the vendors walk away.

One of our Big Four were slaughtered in the media for off-shoring some back-end processing from Melbourne, ironically the assessment team covering everything west of the Barossa was already set up in Bangalore. I was going to say up and running but by the evidence and grumbles from brokers- it’s not running at all. That’s only what we know about or at least have heard rumours of. I may just be suspicious but based on accents and surnames dealing with many other banks I doubt that the bank in blue is exactly unique in this exercise.

But it all comes down to price, unless we can put an objective value on something inherently subjective; “Economic well-being”, ”The greater good”, and, yes, “ Service” that will never change. To which end I suggest the following exercise.

At the end of an arduous loan approval process of stress and unknowing, heading cap in hand to the vendor to seek extension after extension, and perhaps losing the dream property thus having to start over again… Given the option would Mr and Mrs Homebuyer rather pay an extra $750 per year on their $300k mortgage to a lender who could have said Yes within a week? Would they pay that little bit extra to be with a lender that assesses and processes the loan locally?

Price has become such a driver that our lenders are cutting corners to save, to be competitive; they are cutting the payments to service providers. The lowest bidder is their choice whether that is brokers, valuers, solicitors, and even nations that employ their own staff.

Far from being a Nationalist, or blinded to the contribution that immigrants have made to make Australia what it is, but if our banks are outsourcing processing of loans offshore, and we can’t service our clients due to their service levels, and our industry loses the very skilled, compassionate, understanding and lateral thinking assessors that have made our Banking Industry amongst the most resilient in this time of Economic Crisis just to save 20 or 25bps then I ask again what price service?

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7 COMMENTS

  1. Nice thought but not practical… nobody cares and certainly not in this financial climate.
    Also, remember that most funds are sourced internationally. Do we also pay extra for a lender with locally-sourced funds?

  2. It’s always been vital to consider service standards with the customers when discussing loan and lender options. I often break down the difference in rate to a daily cost, and it can sometimes be miniscule. Always have scenarios ready to highlight the difference that service standards can make in both the approval process and in after sales service. Get feedback from your database as to who LIKES the bank they’re with – and use that information for your future customers benefit. Don’t accept shody service, or God help us it’ll become the norm – Continue to constructively criticise lenders who don’t pull their turnarounds into gear…

  3. Well said. We offer a 5 day turnoround to unconditional approval and our clients, in the main, don’t care if it costs .1% more. It is service they are looking for as they are not getting that anywhere.
    We are moving to the position that if a client insists on going to CBA we show them where the nearest branch is.
    If they want crap service, then let the bank deal with it.

  4. Matt….congratulations on a great post. I agree with you 100%. As brokers we are obliged to find the most suitable loan at the best price we can get for the client. However, the other, possibly more important issue is actually getting the application approved on time. We are ALL tearing our hair out as we remain hostage to the Big Banks pathetic and chaotic service levels and I start to wonder whether the stress is all worthwhile. I now stress to a client that if they want to go with say St George or CBA that they need to be extremely patient and tolerant. If getting the property is more important than price, then we should consider a Non Bank lender with fast turnaround. Now I know this is easier said than done particularly as many borrowers prefer to stick with known brands in the current economic conditions, but I beleive it is our duty to highlight this issue and let the client decide what is more important. I am as guilty as the majority of brokers in recommending the Big Banks as it is my perception (and fear) that the client will walk away if I don’t….this is something I and other brokers need to get over.

  5. Yes Matt, you are spot on. I have been advocating in my business to focus on the right solution for the client – not what is the cheapest. As the old saying goes, you get what you pay for. The business that focuses on service and solution and providing what works best for the client will survive, The business that focuses on price will fail – there will always be someone else to undercut them. And this goes for the lenders. They spend billions shifting the tide of market share by discounting and pricing only to lose their share again to another lender who engages in the same practice. And for what – many disgruntled customers.

  6. My experienced is that a properly informed client will, almost always, chose the lender that provides the appropriate product AND service level for their needs.

    It can be explained by the old maxim of:
    1. Quality product
    2. Lowest price
    3. Best service
    Choose which two you want, is as applicable to finance as any other service or product.

  7. Good post matt.
    My order of march in selecting a lender is:

    1. Servicability
    2. Lenders criteria matched to clients needs – LVR etc
    3. Lender can meet settlement period
    4. Type of loan required
    5. Eliminate lenders not wanted by client
    6. Elevate lenders preferred by client
    7. Rate and charges

    Revisit 4 to 7 until the client has the combination they are happy with and away you go.
    Of course this is all done after you have made sure the client can actually do what they want to do. I am continually surprised by the number of clients who have spoken to a number of brokers or lenders and yet no one has discussed anything about the buying process with them eg you will need to pay a deposit to secure the contract and no this does not come out of the loan.
    I guess that’s what service really means – making sure the client has all the information they need before they act.

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