Where to Now? June 11, 2009

So Mark. Finally we have agreement from an agregator that volume based accreditation AND COMMISSIONS goes against the concept of Broker Agregation.

SO…. WHAT ARE YOU GOING TO DO ABOUT IT????

Bill June 11, 2009

I’m glad no to be with AFG as they are as useless as my current aggregator. How can he justify clients getting fill approval within a week and the broker channel takes two, three, four…. six weeks for them to just pick up a file. Not only that ask for the same things four times. Not read the electronic lodgement file and ask for stupid confirmation like clients maiden names etc. No they are not doing enough and Banks should be suspended from our lender panels until they get their act together. I dont give a shit if they are coming in on weekends, its their problem. We are interviewing the client, selling their product, doing the data entry, fielding abuse from purchasers, vendors, real estate agents and conveyancers. On top of this they refer us to broker web sites for file update information - NEVER F*CKING UPDATED !!!
Electronic Lodgement in a one way street with Banks never updating sites, never sending emails/sms with requests or status updates. LIXI/Piscies is only used by us it should be updated by each bank that uses it. Why should we still be ringing and logging onto 10 different websites still when we have a uniform platform??? Its just another layer of Bull*hit between getting the file done.

Daniel June 11, 2009

This is a reasonable summation by Mark of where we are at but a few points need highlighting.
Firstly this is not the first time we have had severe processing problems with lenders. Everytime a lender puts out the best rate(witness Heritage Building Society at the moment)they should expect that of the approx 20,000 brokers operating Aust. wide they could possibly get 10,000 applications next week. This is brokers doing what brokers should do - giving their client the best deal all other things being equal. And yet every time the same thing happens - processing centre breakdown. So much for Bank Planning. This time of course all lenders have been hit at once rather than just the “market leader”. It is of course exacerbated by Banks policy of paying bonuses to decision makers on the basis of cost cutting. Short term decisions are made to the detriment of long term stability and growth. So lets not let the Banks off so easily - they have stuffed up big time but don’t want to pay the price.
Secondly the very good point made that at the same time Lenders can’t handle the volumes they have they are changing agreements to put volume targets for accreditation on individual brokers. On any level this is farcical and if Aggregators seriously believe they have influence then they should be able to get these decision reversed and quickly. It certainly makes brokers question the role of the Aggregator in the broker distibution channel if we are being kicked outside the umbrella we thought was supposed to keep us dry.
Which leads to the big question of do brokers think that Aggregators are really representing their best interests or as appears to be the case,only looking at brokers best interest though the filter of Aggregator interests first.
There is a good litmus test here. The practise of Aggregators that retain any of the Brokers trail payments if they leave the industry or swap aggregators should be condemned by the MFAA, Lenders and the rest of the industry. It is very difficult for a broker to believe that an Aggregator is acting in the brokers best long term interest when the Aggregator stands to make money by forcing the broker from the industry. Commission cuts, volume targets for accreditations, lousy processing times, lost business through channel degradation, increased costs of staying in the industry are some of the factors forcing brokers out. And many Aggregators are quite happy with this as they pocket the brokers trail and then go and find more cannon fodder.
So Mark, I don;t think the average broker really believes their best interests are being met by Aggregators or for that matter the MFAA (98% of whose members are brokers).
When the industry adopts as a standard broker retention of trails, free broker movement between Aggregators and transfer of broker loan books between aggregators (blocked by many lenders) and this free trade for their majority membership is supported as MFAA policy, then brokers just might accept that their best interests are being looked after.
Paternalistic comments won’t cut it, action will.

Paul June 11, 2009

The Aggegators still don’t realise their big mistake - any corporate banker will tell you that large corporations lock in their source of funds (and related pricing) up to 3 - 5 years in advance. This is to ensure that they don’t get caught out during periods of tight liquidity

When the broking industry was flying high the aggregators controlled billions of dollars worth of home loan inflow and at that time had the clout to negotiate term funding arrangments, commission structures and servicing standards with the Banks which would remain fixed well into the future.

All aggregators were simply just too stupid to do this - as of course the Banks were there “business partners” and would never let them down.

Now that liquidity has tightened the Banks have done to the broking industry what they do to all customers - withdraw loan moneys - and improve their own margins (ie reduce our commissions).

The smart corporate is unaffected by this as they are still enjoying the same availability of funding and same pricing as negotiated via their loan contract a year or two ago.

Lets hope the lesson has been learnt and when next the broking industry is in a position of strength viz a viz the banks, that the aggregators actually contract in funding, commissions and servicing for a medium term period. Unfortunately I suspect it will be many years before this opportunity will come along again.

John June 11, 2009

The question that has to be asked of all the aggregators is where is their income derived from? From us brokers, plain and simple.

I pay my aggregator a very significant amount of money each year and essentially get nothing for it. Sure, they supply software, which I pay extra for and a few other bits of helpful technology, which I pay extra for, but other than that they do absolutely nothing for me.

The very least that I expect from my aggregator is that they will go into bat for me when banks do unscrupulous things like cut our commissions and engage in despicable anti competitive behaviour. No such luck unfortunately. They just become apologists for the banks.

When our comms were first cut I remember my aggregator telling us that CBA would be coming to them cap in hand in twelve months asking where all the business had gone. What a sour joke that has turned out to be.

Aggregators need to start licking the hand that feeds them, instead of licking the backside of the banks that crap on them.

Richard Hicks June 11, 2009

Mmmhhh!!

So if one extends the logic of volume requirements to any or all lenders; two things stick out in my mind.

Must a broker place a deal with any lender that demands volume for accreditation & if so, does this mean a broker ‘must’ select a possible substandard loan product, that may not be appropriate for a clients needs, just to ensure one retains accreditation.

I would think that post national licencing, ASIC (and the ACCC now) may want to discuss this with lenders who enforce volume requirements on brokers, as not being a policy that is conducive to the protection of consumer needs.

Product accreditation should be based on broker product and policy knowledge, both initially & ongoing. Whether this product/policy knowledge is provided by third party education providers, lenders or aggregators, well that’s another matter.

The other issue that just doesn’t ring right with me is Mark’s assertion that the banks are not squeezing out brokers in favour of their proprietry sales channels (or words to that effect)

Well I’d say the evidence to the contrary challenges that. By gearing up branded national franchise and licencee networks and mobile lending staffers who are provided with front end loan origination technology (providing a two tiered origination interface, with brokers getting the poor alternative) up to 35% reductions in commissions, discretionary rem filters and combined with the anecdotal evidence of significant broker dissatisfaction, I’d say there’s a case to argue.

The real changes for brokers & consumers necessary to remove the current banking oligarchy, is non bank & product competition again.

Hopefully the day when a comprehensive non bank presence comes to the market will be a good one.

Oh yeah…..the banks have the ABA, the finance boys & girls have the AFC, so I think brokers should have an interest group for themselves as well.

OK is it believable ? June 11, 2009

Oh Boy ,
This bloke simply does not get it their customer is BROKERS , they pay the bills for AGGREGATORS , Oh sure the bankers throw in crumbs called sponsorship for the conferences .

Aggregators did not lock in commissions and trailers when it was possible to do so. THEY are at fault. No questions they failed the very customers they have , the brokers .

Thew answer is simple , support NON BANK LENDERS whewn ever it is possible

Richard Hicks June 11, 2009

Daniel,

You’re spot on. The early aggregation model was founded on limited competition and broker ignorance in regards to the punitive terms in aggregation agreements for brokers. Interstingly, in the Financial Planning industry, it’s now accepted best practice that dealer groups allow their ‘authorised representatives’ to move to other dealer groups without financial handcuffs or penalties.

If the dealer group(read aggregator) doesn’t provide a competitive and satisfactory service offer and can only retain representatives (read brokers) by punitive means, then the model is broken and the service offer is sub standard.

If an aggregator believed their service offer is a worth the cost to the broker, why not ‘walk the walk’ and let your offer stand on it’s own merits without the restrictive terms in your agreements.

Because they know what would happen.

There’s that elephant in the room again.

Xerxes June 11, 2009

Thanks again Jill. You seem to do the best interviews.

Some very well informed comments posted already from Daniel, Paul & Richard particularly

Hewitts comments on the surface seem reasonable. However I can’t help but always smell a wiff of subservience to the banks every time I hear an aggregator rep speak in regards to current crisis matters such as industry damaging service times, industry destroying commission cuts, & anti-competitive loan volume demands from lenders (I’m glad Hewitt spoke out on this matter at least - but were his words strong enough? - I think not).

I’m not surprised that Hewitt is not a fan of a broker industry body. To admit the need for it is an admission that aggregators are failing brokers (which they clearly are).

Erik Fenna June 11, 2009

I agree with Mark (and no doubt many other aggregators) that there are several perspectives to this story. While these issues are frustrating for the brokers and their customers, there are industry standard solutions that can be implemented to address some of the issues concerning processing and application quality.

Current or future LIXI standards have a role in improving application quality, benefiting both brokers and lenders, and of course the consumers. However the current standards are only partly implemented, which I believe is a consequence of the project approval process and prioritization and funding requirements of the lenders.

In order to address the project approval process, LIXI commissioned a Whitepaper in 2008, Enabling Efficiency, to provide the industry with a better understanding of the cost efficiencies available from implementing standards.

The findings show that almost a billion dollars was spent on the loan approval process last year in Australia, almost $200 million of it on rework. The adoption of LIXI standards would halve the cost of rework in the industry and would play an important part in delivering an $80 million saving to the industry each year.

In addition, there is another $800 million dollars in loan processing costs that can be reviewed for efficiency gains if standards are used to improve the overall process.

The MFAA plays an important role in arranging forums and meetings to allow these issues to be aired and discussed. LIXI has a similarly important facilitation role bringing together industry participants to deliver solutions to address application quality issues.

Moving forward, LIXI will continue to work with its members to improve electronic integration solutions, as well as educating the industry in the value of standards through research papers and LIXI hosted events.

Erik Fenna
CEO LIXI Limited
ceo@lixi.org.au

Where to Now? June 11, 2009

Who or what is a LIXI…….????

Get to the point Son, I suspect you have designed a system to ease the load of the lazy credit managers of the banking system so they don’t have to employ data entry staff.
AHAH more profit to thesuck holes who never have to eyeball a customer!!!!!

Keith June 12, 2009

Hi Guys,
I was of the understanding that the MFAA WAS a “broker industry body”. We certainly don’t need another one.

I find it very difficult to believe that Mr Hewitt and AFG and other aggregators and the MFAA & FBAA honestly believe what the banks are telling them. The bank representatives in direct communication with the aggregators are only going to “cry poor” in order to hide the REAL reason why the broker channels are under pressure. The lenders will continue to “go slow” simply because it suits them to do so. They want the client to go back to their branch networks.

Help me to understand why “ALL” lenders seem to be struggling with their turn around times. (Might I also add that I personnaly have not had the time difficulties that many brokers on this forum seem to have experienced.) Credit policies have tightened to the extent where new clients call our office and we simply can’t help them. 12 months ago we could get a loan for just about anyone.

We can talk all day about the problems effecting the lenders approval processes. Thats what Erik is doing. But it is not the problem. The problem is that the current driver of this issue (the banks) have their big foot very hard on the brakes.

I would also suggest that our esteemed leaders ie. the senior management of such entities as the MFAA & FBAA & AFG and all of the aggregators are all “very cosy” in their jobs at the moment and it would be very easy for them simply to throw their hands in the air and say “what can I do about it?” I think there is way too much support from and representation from the wrong people on our industry bodies. The MFAA can’t represent the broker network when they have a strong representaion from the major banks on their boards.

What’s the answer? The answer is “TO BRING PRESSURE AT THE HIGHEST LEVEL OF GOVERNMENT TO PROMOTE COMPETITION AMONGST THE LENDERS”. Without competition, then the major players in ANY given industry or market place will take advantage of that situation and try to reduce their costs and increase their profit.

What doesn’t seem to be happening is that it is now time for OUR representatives ie. the MFAA & FBAA and to a lesser extent the aggregators (because their income comes solely from the broker channel and without the brokers they would have nothing) to take our fight with our full support to the powers who can bring about change.

I don’t like to name names here because my bitch is not a personal one and I have no doubt that Mr Hewitt & Mr Naylor are good honorable men. However, these men are also in a position at a time when we need them to stand up and support their members. Both the MFAA & AFG have a great deal to loose if the broker network that they so heavily rely upon, is decimated by the banks. The MFAA & FBAA are totally reliant on member numbers. I have heard industry leaders state that they expect mortgage broker numbers to reduce by 5,000 over the next couple of years. I wonder what that will do to the income of the MFAA & FBAA?

And I would be very dissappointed if both these men were so naive as to not realise what is happening here. To accept that this is just a “processing problem”.

There is nothing sinister about this, the banks are just reducing their costs and increasing their profits. And “a company” is a book of regulations and does not care about you and your family. They care about profits, end of story.

With the reintroduction of competition, if the lenders want you to write their loans, they will increase the commissions paid and loans will be approved on time. Simple as that.

Have a great day
Keith

Howard June 12, 2009

Mark, you’re a disappointment to us. Your talk of their commitment to the broker channel is laughable, just look at their actions. Sitting on the fence gets us nowhere.
When is someone going to talk openly about the restriction of trade we are experiencing from the banks?

Daniel June 12, 2009

Howard

That someone certainly won’t be aggregators who engage wholesale in restrictions of trade with the their Brokers

Keith

A good summation but as I have already pointed out many aggregators won’t lose if current Brokers are forced from the industry - they will just keep a trail book that has a half life of about 5 years (time it takes for income to halve), plenty of time to start again with new models.

Bottom line is that Brokers, as individual small businees people in the main, the oft touted backbone of the economy, get run over every time by special interest groups be they Lenders, Aggregators, Governments, suppliers to the industry (hello LIXI)and worst of all “our” body the MFAA.
If we make a genuine complaint we are just bitching, we are not organised and are being treated paternalistically by all the above bodies. We even get criticised by other brokers who see themselves as up and coming tycoons and firmly attach themselves to the power groups in the fond belief that will save them.
The only answer is to keep fighting through these forums, through your aggregators and hopefully through the MFAA if it can get some spine and a sense of purpose.
There are lots of changes to come and surely our experience so far teaches us that we will get shafted every time unless we make a stand somewhere.

Where to Now? June 12, 2009

Daniel.

You have put it beautifully.

As one of those Hobby Brokers or “On the Way Out” brokers, I am finding it difficult to articulate what I am feeling without seeming to be winging or having too much time on my hands. With some 36 years in this financial services industry I am ashamed, hurt and angry at just how quickly people forget. People that I helped to build this industry and are just so dammend ready to throw me on the woodheap.

Money walks a most powerful walk doesn’t it. Don’t worry about the experience, forget the mentoring we have done over the years, entertaining the hot rods at conference until the wee hours of the morning and watching them fall over in a pool of greed and fast bucks.

Mentoring the younger and newer entrants used to be a passion of mine, until now, I see them in charge of the banks, lenders and Aggregation companies long since derrived of any sense of loyalty or tradition or just good old fashioned fair dinkum passion and ownership of their heritage.

Yes times change… but history doesn’t…. It just keeps repeating itself, like the clock on the wall, what goes around comes around!!!!

You could be forgiven for thinking that I should just retire gracefully, but even with that amount of time in the financial industry, I am not yet 60 years old. I still have a good 10 to 15 years in me and here is my dilemma. Do I just walk away from my little business and just leave it to the dingo’s or do I try and hang in there knowing that my peers and the people I used to respect are still going to find some way to sweep me away in their CLEAN OUT.

It seems you just don’t have any room for me in your big house any more……..

I am just waiting now to read the next interview by Jill from the head of my own aggregator. I will make my decision then and let you know what I do.

Savvy Investor June 12, 2009

I agree with Marks statement on volume based accreditation, because it places the emphasis on the Lender at the expense of the Client - and clearly demonstrates that it is quantity, not quality, they are really looking for at the end of the day (regardless of what they keep telling us). However, I can not agree that brokers’ interests are adequately represented by any party at the moment (but who has the time and funds to fix this until things get really bad if not the aggregators?). If they were representing broker interests, then commissions would not be dropping during a time when loan volumes are so high the Banks are forced to put on extra staff to meet demand! You would think they would be increasing commissions to get a bigger slice of the pie sent their way and keep us working for them. If this is what they do during the ‘good’ times, how will they treat us during the worse times?

Brokers have traditionally been seen by lenders as an overflow staff solution. They don’t get the perks of permanent employees (super, sick leave, training e.t.c.) and you don’t have to pay for their offices and overheads. More importantly you can keep minimal Bank Lending staff on hand so there is no need to fire staff when times are leaner (just favour internal loans over the external parties and watch the weaker Brokers die off). Thus they end up keeping only the stronger Brokers in business and incidentally those that send them the most business. We are a low cost solution (though the Banks try hard to deny this) and that is why we are tolerated.

Not enough to convince you that we are cheaper? Well how about this… from one of the aggregator sites (who often state that they do approximately 50% of the broker loans) and that they did $20 Billion in loans last year from 90,000 loans written - I have determined that the Broker written loans business is worth approximately $40 Billion annually. Given upfront is around 0.5% this represents total commissions of approximately $200 Million PA paid to about 13,000 MFAA brokers. i.e an average of $15,385 per broker annually. Assuming established brokers have several years of trail to add to that and are up-selling other services or products I will allow roughly a doubling of this for a “best case” scenario. This means that to keep 13,000 overflow staff “loan writer ready” costs the banks a maximum of around $30,000 per broker - and - they only have to keep paying those that actually write loans for them! Non-performers leave with no retrenchment packages or entitlements and new ones have to pay for their own training and set up costs! Compare that with the average cost of employing a Banker and you will quickly see why they want us around and should in fact be favoring us!

Where to Now? June 12, 2009

I meant to say “Money talks a most powerful walk……..

Richard Hicks June 12, 2009

Erik,

I agree!There are certainly varying perpectives to this story. And LIXI should be congratulated for it’s work to bring common efficiencies and operating standards into the mortgage lending framework.

Sure, a significant sum has been spent on systems development but the evidence suggests the spend is more for the benefit of proprietry sales channels and further, to reduce back office head count for product manufacturers. Has this work translated into a more cost efficient process for brokers now?

I would say the jury is still out there!

Will LIXI cater to issues regarding reduced commissions, punitive aggregator agreements, volume requirements, arrears management disincentives etc?

I don’t think so.

The capture & processing of loan data is an issue, but in my opinion it’s only issue number 21 on a list of 30.

Vince June 12, 2009

Howard,

Well done on your comments and “finally” someone who mentions the dirty term “A Restriction of Trade / Monopoly” ? Dont any of us as Brokers / Finance profesionals get th@ the BANKS are now in breach ? There is enough evdience to not only imply third line forcing to say the least with comments as per above but ASIC and the ACCC would have a field day if they just wanted to dig a little deeper ? So who us a collective mollecular group of highly intelligent creatures is going to take thsese half baked lunatics on ? Who of u have read the article written in the The Australian dated June the 8th Titled “ANZ BOSS ATTACKS STRUGGLING REGIONAL BANKS” ?? Mike Smith u need your head read u r where u are because of the Fed Gov and the tax payer so shut up ???

Concerned Average Joe June 12, 2009

My name says it all, i wouldn’t dare use a Broker if this was the sort of childish behaviour and lack common understanding in a market downturn, if you are working in this market as a lender, financial advisor or BROKER then surely you should have a better understanding of the cause/reasoning that has created a flow on effect to our own doorstep from a global scale. it’s like the Flu, it has a contagion effect. Get your own shop in order before you look who to blame, if you would listen then maybe you would understand, but if you behave like a child or arrogant ‘know all’ then you will end up chasing your own tail and not have any customers. If you think you can do a better Job then show us all, but you might need a bit more of an education…..

Vince June 12, 2009

Erik,

You have way too much to lose your conflict of interest based on comment is absurd ???

Vince June 12, 2009

So who are you really concerned average Joe ??

Daniel June 12, 2009

Dear Average Joe

Please go and get an education in basic written English before you ask the rest of us to get an education on matters that are clearly well beyond your obviously less than average mental capacity.

Joe Blow June 12, 2009

Mark - while no broker, banker or aggregator is enjoying the situation at the moment, good on you for commenting and giving a reasonable perspective on the market.

You were always on a hiding to nothing by commenting and I am sure there were plenty of people around you who told you not to bother as brokers (and your competitors)would be lining up to have an anonymous cheap shot.

You have my respect for standing your ground and telling things as they are.

The fact is brokers distribute a product, they do not design it, fund it, or for the most part, manage or invest in the systems that allow management of the client so there was always the chance when this industry started that it could happen one day.

You can bet the majority of brokers crying weren’t around when only a handful of banks were in the game and they paid brokers $300 for a loan, which was written on their terms in their timeframe.

While brokers are quite rightly frustrated with current service levels (who wouldn’t be), the reality is they (nor aggregators) can control what is going on in the market. All we can ask is the banks work to correct the problem and I think they are getting there (some faster than others).

People forget that banks incur fixed costs to process loans but only get income on a variable basis, so they will always be flirting with service levels, if you are a broker worth any salt you would understand that, we have been seeing this for years because it is a problem that will never be fixed.

The banks in Australia did not create the credit crisis but obviouly the table of power has changed.

The sooner brokers and aggregators accept this fact and learn to work with banks to ensure that the future of the industry is sustainable the better. As brokers we need to be seen as a distribution channel the bansk want to deal with.

There are a lot of people in Australia who would love to earn the monies brokers do (despite a reduced margin) and we should not forget this fact.

My advice is if you love the business your ride the good times with the bad - congratulations Mark on providing a balanced view. You cannot worry about what you should have done, you can only work to get the best outcome you can for your brokers in the current moment and I believe as an AFG member you are doing that.

JH June 12, 2009

Hey Joe,

You’re an idiot and obviously a lender to gutless to show his name.

Joe Blow June 12, 2009

Not a lender JH - but I understand why you would think that anyone who doesn’t want to shoot off insults would be a banker.

Just an informed broker who is trying his best to understand the market and move forward realistically.

I am not happy about the service levels but they are getting better, they were a lot worse two months ago.

Derek Miles June 12, 2009

This question of transfer of trail from aggregator to aggretator is obviously an important issue for brokers. Whilst I am a strong supporter of some system where brokers can change aggregators without financial penalty, one aspect of this that has been forgotten is the cost. Could you imagine that if 10,000 brokers change aggregators each year, and this is only 25% of the total broker population, the enormous cost and work required by the lenders is transferring loans from one aggregator to another? Let’s say that on average each broker has 500 loans on their books, that equates to changing the trail domicile of 5 million loans every year. And we all know how ficle brokers are with their aggregators.

So I think the answer lies in some other method of trail accounting rather than the answer being looked for in anti aggregator frustration. Given that we are to experience a new licensing regime going forward, why not the lenders, aggregators and MFAA come up with an industry based system for remuneration payment and licence administration that is more flexible for all parties and of course leading to reduction of costs - afterall, the reduction of costs is what will sustain our commission levels.

Food for thought. Stop the MFAA and Aggregator bashing and think outside the square and find a real solution to these problems rather than find a home for blame.

Ex Aussie broker June 12, 2009

“The practise of Aggregators that retain any of the Brokers trail payments if they leave the industry or swap aggregators should be condemned by the MFAA”

I agree totally with these sentiments Daniel.

However, as one of the many brokers who has suffered at the hands of Mr James Symond, MFAA President and one of the worst offenders, I can’t see it changing any time soon…….

Steven June 12, 2009

brokers should form their own finance business, call it “Brokers Bank” for example we source our own funds as a lending Co+Op and take on the banks at their own game. we can use Australia post network for transactions etc

you would need minimalstaff to rn the show we wouldn’t have the overheads, rent etc that the banks have. with some 20,000 loan writers arount the country writing loan some 30 basis points below the banks. that would get their attention.

who would be in the drivers seat then.

BROKERS being our own aggregators thats who.

food for thought boys and girls.

Xerxes June 12, 2009

Come on Joe Blow. Insinuating you are also a broker. Your comments sound a little bank executive’ish to me.

Your comment below is laughable:
“There are a lot of people in Australia who would love to earn the monies brokers do (despite a reduced margin) and we should not forget this fact.”

The brokers I am in regular contact with & know well advise me that they have expences in the order of 50% of gross commissions. As a long term broker myself I can certainly personally attest to this reality.

I would estimate the average well established broker is earning an after expence income of between $60K-$80K. That’s with no super, no long service leave, no sick pay, no holiday pay & only after 5-6 years of hard work setting up a business (during the first 2-3 years net income levels hardly register above pensioner levels). Why do you think so few new brokers are entering the industry?

This myth of the mega rich broker rolling in money needs to be dispelled. There are a small number of very successful brokers (good on them). But the vast majority of brokers have worked very hard over many years to build a business and we only earn modest net incomes.

Savvy Investor June 12, 2009

Hi the 2 Jo Curs,

Jo Average - Customers are transactional like in Coles, our Clients are long term and meaningful ongoing relationships - not just numbers going through a checkout.
Down turns are when you lack customers (which brokers do) not when you have to hire extra staff to deal with inflows (which the Banks have at our expense and those of other lenders driven from the market).
The global financial crisis was created by Bank greed (mostly in the US and UK) lending to people that could not afford and should not have been given credit. Last time I looked it was a Bank Credit officer and not a broker who made the decisions regarding loans getting approved i.e. They caused it, so are hardly in a position to teach anyone how to get other peoples houses in order…

Jo Blow - I feel that I have already refuted most of your arguments in my last post and above. Whilst it was not mainly Australian Banks that caused this they were certainly party to the problems…
As for “brokers distribute a product”, that is a Bankers attitude. I feel we provide a service matching client requirement to products currently available in the market and we are there to solve a clients problems and not to flog Bank product. The days of $300 for a loan are still here as many accountant and fin planner send a prospect direct to a bank and get their fixed $ kick backs - but is that in the best interest of their client or them? Also at that time $300 represented 2 or more weeks wages which would be a decent loan commission in todays dollars. Finally, let me just say that fixed costs are just that - fixed. Whether brokers existed or not would not change these cost as they are a cost of doing business, so please let us know what relevance this has to the debate.

Joe Blow June 12, 2009

Savvy,

Good points and well made. Not sure the industry is going to allow part-timers - a lot of brokers agree (as do I) we need to have minimum standards.

Have a good weekend…..

Xerzes - if a broker who earns $80K (settling $1.5m per month - 5 deals)spends $40K on expenses he is in the wrong business…..

Perspective Check June 12, 2009

I have read, with interest, all of the above diversity of comments, all mainly stemming from Mark Hewitt’s comments. Some I agree with, most I disagree with.

I am a broker of 13 years, and 20 years Banker before that, and have experienced 3 different aggregator groups in those 13 years.

The significant changes over that time, and soon to come, have and will be inevitable. Some are short term, and others far-reaching.

There is no industry that I can think of that has not experienced similar continuing change, upturns and downturns.

One point that fails to get a mention, and a controversial one that I will throw in the mix. At a recent training session, I asked the guest speaker from the country’s largest mortgage insurer what the percentage of loans approved-to-submitted ratio was. To my absolute astonishment and that of the others present, he replied “about 50%”. I then asked why he though that was the case, and did it have anything to do with the quality of the loan submissions and possibly the brokers submitting them. He responded cautiously so as not to offend our precious egos. he said that the poor quality of applications was part of it, and there was a clear trend that indicated that the submitting broker and Bank lenders were struggling with policy definitions and changes. He would not comment further on the quality of the brokers, as he was too much of a gentlemen, but the message was pretty clear.

On another occasion, I have asked a prominent lender’s BDM about the quality of loans going through their Bank. The reply was something like that there were problems with a very high proportion of loans submitted and that many brokers are submitting poor quality applications and therefore wasting a pile of resources.

I cannot for the life of me understand why there are so many declinable applications being submitted. What a waste!!

I’m really annoyed that one of the reasons my vanilla flavoured, easily approvable loan is taking many days (maybe weeks) to approve, is that 50% or more loans should not have been submitted in the first place.

Don’t brokers know how to say “No”? I suppose, cynically, it’s easier to pass on the news that the Bank knocked it back, rather than doing it themselves. That’s a cop out in my book.

For goodness sake, if it doesn’t tick all the policy boxes, and you can’t provide all the evidence the lenders require to approve the loan, then don’t clog up the system by submitting a loan that has the inevitable fate.

I get a little bit jack of many of my industry colleagues’ eagerness to point the finger at everyone but themselves.

We, as a broker industry, has the responsibility to our so-called lender partners, our aggregators, our clients and our own businesses to be efficient and effective. No one can afford to be this wasteful in any industry.

Many authors above are blaming the Banks for slow turnaround times. Maybe if they only had to process approvable loans, then the turnaround times would be halved, and the relationship between the processing staff and ourselves will be greatly improved.

I couldn’t blame any of those poor buggers that have to work late and on weekends, to process our applications, if they had the shits with us, especially when half the stuff they see is rubbish.

So, in conslusion, everyone should place all of this in perspective, and current context. We all need each other to survive this industry over the next 12-24 months, and sniping at each other is SOOOOO unproductive and negative.

Take on a positive attitude and show tolerance, empathy and respect, and your day might become that little bit brighter.

Those of us that can last out the next 12 months will have a bright future. Those that can’t will find a way in life, but I hope they don’t become bitter and twisted over their broker experience. Maybe they should not have been there in the first place!!

Finally, if you can’t stand the heat, get out of the fire! Chances are that you may have actually poured some fuel on it yourself.

Like a wise and hairy bloke once said, “Let those among you who have not sinned, throw the first stone” No, it wasn’t Monty Python.

By the way, I’m just as annoyed as anyone else about the turnaround times, etc, but, guess what, there is always a nice bottle or red in the cupboard when I knock off at night, and I “get over it”. There’s a sh..load of people out there that ain’t as fortunate as us.

Have a good weekend.
Perspective Check.

Xerxes June 12, 2009

Blow,

I’m not going to start listing expences. But if you think $40K is overkill to run a mortgage broking business I am even more certain about my initial impressions that you are not a broker.

Oz Boy June 12, 2009

Aahh the passion is great. The one thing that constantly surprised me is all the finger pointing and talking, when will there be action? We just need some minor changes for our industry to take the next step;
- One application form for all lenders. This should be a no brainer.
- Aggregators responsible for lender updates, interest rates, lender forms, policy changes, quality matrix, licensing, PI etc. Lenders will never take responsibility for this as it is not in their interest, however it should be the aggregators number one priority. The generation of volume business has gone and is now all about quality and our industry needs to adjust and quickly.
- No volume requirements for brokers. Quality requirements or aggregator sponsored training.
- Brokers should be able to transfer their ongoing income as they change aggregators. This ensures the top brokers, ones that submit quality, hold the customer for long periods and expand their offerings to these customers will be sought out. Another no brainer.
- While I think LIXI is great on paper as we have seen it’s just not happening for various reasons. While Pisces maintains that it will sort itself out of the comings months there is no real alternative to the lender powered online submission and tracking engines. Ok NextGen I can hear you but again it’s not a fully integrated solution into a brokers back end. Frustrating to say the least. So long as the lender gives you a way to input online they aren’t that concerned about getting messages back to you let alone into your CRM. And this is just not something the aggregators can do individually let alone getting it together collectively.
- Part timers and I am talking about the ones who have been in the industry for decades should be utilised far more and encouraged to stay, there is a business model to integrate this knowledge into smaller operations it just means that the income to them will be lower however I don’t believe this will worry the ones who genuinely want to stay.
- Brokers need to stop relying on others and start taking ownership of the issues facing the industry. Don’t blame your aggregator for the agreement you signed. You signed it, you know how a contract works. If you made a mistake learn and move forward. The MFAA is not your whipping boy. While the vast majority of brokers and aggregators I speak with are very disappointed, it can’t force the lenders to do anything, it can’t nullify the agreements you signed, warn you about every lead scam out there. Your running a business they will help but at the end of the day it’s your business. Yes I know you are forced to join by the lenders and this helps perpetuate the myth that they are lender biased, they’re not. In fact it’s the complete opposite you as a broker can elect up to 70% of the boards with other brokers. If you’re expecting the lenders on the MFAA boards or the aggregators to do your bidding well it’s just not going to happen . Once licensing comes in next year one of the first things the aggregators should do is lobby every lender ensuring MFAA is no longer compulsory. This will rebirth the MFAA into what it should be, whatever that may be.

Let’s get rid of the us and them attitude and see what we can do together to make the customer experience everything it should be.

It’s interesting to see the growth in market share of people using brokers over the last 12 months. Lenders have consolidated the majors have grown bigger and bigger but clients choose our channel for delivery. Just sensational and it will keep growing, everyone knows we are here to stay, even the lenders, but how we operate together (can we operate together?) over the next 12 months will give us the opportunity to move to the next phase of the industry’s growth.

Just think in 5 years time we will be introducing over 65% of the loans to lenders, the markets will be back (not like they were but that’s a good thing) and our deals will be sailing through electronically……obviously I have had one glass of wine too many!

Maria Rigoni June 12, 2009

Hello

Brokers do have an Industry Representative Body it is called the Australian Institute of Professional Brokers (AIPB)www.aipb.com.au

The AIPB is determined and assertive and its directors are prepared to stand firm and address all the issues that affect the professional stance of a Finance Broker and the demise of our reputation, remuneration and industry.

The big question is - are finance brokers prepared to back themselves and become a member of an industry body whereby no lender or no aggregator, gets to vote on broker issues.

10 lenders to date, even though they have been requested to have not recognized the AIPB as an industry body for broker accreditation purposes. Realistically why should they - it is a finance broker member organisation that they have no power within. Could it be that they believe the AIPB will fail without their “recognition” - that brokers will not support the AIPB without their “recognition”.

I personally do not accept that the MFAA or the FBAA are the appropriate body to represent broker issues to lenders, government, media, aggregators and consumer groups. Independence is required - the AIPB deliberately has no commercial reliance on lenders or aggregators.

If you want to see positive action for the finance broker profession then become an active member of an organisation that is determined to see those who rely on the finance broker channel be made accountable for their performance.

I am not a “conspiracy theorist” - I live in the real world and I respect many of the people who work very hard for lenders in their role in the non proprietary channel - the issues brokers face currently are not relationship issues they are lack of system efficiency, lack of respect for the broker value proposition and the need to have a real representative voice issues.

VINCE June 12, 2009

Why are u all so full of bullshit ??

The BANKS are the crooks and are in breach they are breaking the LAW / LEGISLATION?

ACCC & ASIC get ur shite together, and everyone else for that fact start f…… lobbying !! As I have started my campaign directly with the Honorable Treasurer Mr Wayne Swann and let me tell you all there will be a response !!!

This is outrageous !!!

Daniel June 13, 2009

Derek Miles was doing well until he accused those of raising issues of MFAA & Aggregator blaming. Its not a matter of blaming but identifying who are the repsonsible parties that need to change their attitudes before any substantive changes can be made.
On the matter of switching aggregators derek you make a statement that it is happening all the time. This is far from the truth and fairly typical of the miss-information spread by those trying to deflect criticisms from themselves and avoid chaging anything.
The Lenders could change the commission payment methodology very easily - its called simple computer programming and works on the basis of saying what was A is now B. Not even a little bit costly derek in the scheme of things.
It is a pity you had to drag all these red herrings across your otherwise good suggestions.
On another matter in all the debate no one has mentioned the customer. The fact is 40% of home lending business is now directed through the broking distribution channel. Brokers source the customers who obviously like the service the broker provides. The customer has been totally forgotten by lenders and aggregators in the present poor service debate. Reality is the only person in the whole chain who cares about the customer is the Broker and lettingcustomers down plays a very large part in the current angst and frustration shown by Brokers.

Keith June 15, 2009

Hi Guys,
Thank you Maria, I will be happy to support the AIPB.

Remember guys, this is not a personal issue, this is simply an issue of business. The major lenders are in a position to take advantage of a current lack of competition amongst Australian lenders. Without competetion, then normal business practices say that now is a good time for them to increase their profits. They are doing that by buying their competition (WBC & RAMS & St G, CBA & BW, etc) in order to create synergies/efficiencies to minimise costs and therefore increase profit.

I have no problem with that. And I am not going home at night crying into my beer.

We simply have a situation where one of those costs for the major lenders is the commission that they pay to brokers. If they can claw back 30% of clients who go to brokers back to their branch networks, then that is simply lower cost for them.

What my issue is, is that the broker network needs to pull together in order to preserve our incomes. And I believe we need to call on the “senior” parties in our industry, those who are in a far better position than me, the likes of Mark Hewitt and Phil Naylor and the FBAA etc, because they are in charge or represent a large group of people and can bring a lot more pressure to bear on policy makers.

I can join the AIPB and try to convey to them a valid argument about why I need their assistance. I am a member of the MFAA and work through AFG. And I need all of those groups to bring as much pressure as possible to create more competition within the finance industry.

Many of the comments above are very well intentioned and some great ideas. However, there are also comments that seem to be “directed at a personal level”. We are all entitled to our opinion regardless of how ignorant or misguided. But even those comments help us to shape our own thoughts and strategies into more productive directions.

We, as brokers, need to pull together and call on those in our industry who should have our interests at heart and call on them to assist us in our endeavours to protect our industry.

In times of strong competition, lenders will be vying for your business and will increase commissions accordingly. But due to a current lack of competition the opposite is happening. Naturally.

So, lets not call one another names or challenge their ideas, but let us all write to those people in your industry who you think can help you to get what you want and if we all do that then mabye some people in higher authority will hear us. Individually we are doomed, as a group we can certainly promote what is in the best interests for the consumers of our products.

We also need to educate the public that the service offered by mortgage brokers is a fantastic service that allows the prospective borrower to get a home loan that offers lower fees, lower interest rates and better facilities without having to spend hours in 20 different lenders who are not competitive.

But we as brokers must be 100% ethical and have strong education backgrounds (whether by formal or informal means) I don’t have a degree but I have 21 years experience in finance and banking, to be able to show the client why they would be better off with 1 lender or product over another.

We offer a great service and should be looking to protect that service because it is in the best interests of clients.

Just as an aside, I would like to make a quick point about “fee for service” type brokers. I would like to ask the question that: do you honestly believe that this company who offers this service and CAN provide lending to customers at a 100 or 50 or 30 basis point saving to the client, would they actually pass on the FULL saving to the client or will it just be another cover with the right slogan covering another way to profit from an uneducated consumer?

If I believed that I could make a “good” living from a particular model and that the consumer would benefit greatly by reduced costs and rates, I would happily promote it.

So let us all start writing letters to the people that you think can help you.

Good luck

Keith

Blake June 15, 2009

Hmmmmm Choice is far better than AFG anyways.

Swan can’t handle, manage, instruct the big banks like the Howard Costello Govt did.

I love the threats though.

As for the brokers wasting processing times due to poor submission quality. Whilst this might be the case for a percentage, I highly doubt it is 50% and blame might also be attributed to funders changing the goal posts on, during or after submission.

Zodiac June 15, 2009

Re the switching aggs… years ago when I started and didnt know anything (not that I do now lol) I started with PLAN. That was on a 80/20 split.

Six months into broking, and after changes with my Plan BDM who wasnt my cup of tea, I switched aggregators over to Fast. This was mainly due to Plan wouldnt negotiate due to volume hurdles etc and Fast only charged the flat fee of around 150 or so per deal, the rest was paid to the broker.

About a year after swapping to Fast this we entered into aggregation agreements with other aggregators. This was done to spread the books and income being received - so we wouldnt rely on just any one aggregator and we get more than one pay a month, which then diffuses the clawbacks and massive hits to the income streams.

I say to any broker who is beholden to just one aggregator and on a 20/30 comm split with them that you’re getting shafted, and that money is better in your pocket than in that of your aggregators. Honestly I dont know how you’d be able to keep the doors open, and you should seriously consider your options.

And I would encourage you to do some research on the various commission and handcuff structures that the aggregators offer.

BTW, the plan trails still continue to be paid

Daniel June 15, 2009

Maria, Happy to join AIPB. Brokers for brokers is what we need.

Keith pretty good summation. We need to get all of the issues out in the open and deal with the lot, not just the ones that have been raised so far although God knows the list is already long. It is important we don’t solve some at the expense of others - nothing should be in the too hard basket.
Those who believe that the MFAA, Lenders, Governments et al are sacred cows, not to be criticised need to understand that 50% is not a passmark. A half- full glass is also a half empty glass. What it is not is a full glass and that should be our aim.
For instance on MFAA attitude. Read P31 of the latest Mortgage and Finance brief on shadow shopping. “Naylor takes the shadow shopping very seriously, making the full report available to members”
That is precisely the type of paternalistic attitude that we need to get rid of. Brokers paid for it, it’s about Brokers and our leader boasts about making it available to us. Wow. It should be an absolute given, not worth talking about. Same as the boasting about representing us on the new Credit Code discussions. So What. That is what you are paid for.

Read P 22 of the magazine where Andrew Inwood of brand management ( a paid consultant of MFAA - don’t know how much, it has never been disclosed). “Our numbers are about (13000) brokers in the industry, two and a half thousand of those are really switched on, happy to do it, they’re professional and accredited ‘ He said “And then you get another four or five percent who used to be that person, but they are on their way out of the undustry. Then you get another group who want to get into it, they’re trying to get there and doing the training. And then there are those who are the part-time brokers”.

Now really read that statement. 13,000 brokers,less than 20% who are “professional and accredited”. Another 4/5% who USED TO BE THAT PERSON. Which then leaves 75% who”are the part-time brokers”. And by implication, neither professional nor accredited.

If that is the quality of thinking, and arithmetical skill, that we are paying for then no wonder the MFAA remains apparently clueless about the real state of the industry.

Looking foward to the spin doctors defense.