Aggregators: PLAN’s Ray Hair slams the conspiracy theory that banks are out to destroy the broker industry
By Jill Fraser for Lending Central
In our continuing series on aggregators PLAN Australia CEO Ray Hair told Lending Central that a win/win situation between banks and brokers is possible. But first the conspiracy theory that banks are working against brokers has to be debunked.
“There is clearly a perception within the broker industry that banks are either favouring the branch network and/or the direct channel over indirect,” says Hair.
“This has been born out of history - a lot of brokers are ex-bankers who worked in banks when they were less broker friendly and continue to project this historical perspective - plus the fact that the marketing arms of all banks are trying to drive customers through branches.”
But banks pushing for effective and efficient branches does not automatically mean wanting to eliminate the broker channel, he says.
Hair believes that some brokers have developed a persecution complex.
He admits it’s “tough being a broker right now” but says that the bottom line is that it serves banks to retain their broker channel and the notion that they want to cripple it is baseless.
Following a recent CBA boardroom luncheon held for the heads of aggregators Hair says he walked away “with a clear view as to the CBA’s level of optimism for the future”.
“The CBA wants to be in the broker market and grow this channel and I’m hearing this from all lenders,” he says.
“You’ve only got to look at the volumes to know that banks couldn’t cope if they didn’t have a healthy, quality, efficient broker channel.”
He notes that a year ago 90% of PLAN’s settlements were spread across 20 lenders. Today 80% goes to around nine lenders.
“This concentration of volume into players who didn’t expect it and weren’t staffed up for it has led to changed credit policies and maximum LVRs etc, which means as a broker you’re now seeing the goal posts shift.
“Even when an application is in the pipeline changes can be applied to it despite the fact that it was submitted under the ‘old rules’. All this is extremely frustrating for brokers and naturally after a while they start to feel persecuted,” says Hair.
He says aggregators need to hold lenders accountable for their internal processes, work with lenders on the technology aspect (ensure that straight-through processing is being delivered) and push lenders to acknowledge that it’s a two way street.
Brokers, he says, need to concentrate on “what they can control and influence”, which he says is all about quality and efficiency.
Asked if he thinks that aggregators hold enough power to put pressure on the majors Hair says, “a natural aspect of any commercial relationship is that the balance of power ebbs and flows”.
“Right now the banks are in a stronger position, whereas two years ago the banks were falling over themselves for the broker market”.
PLAN urges its brokers not to concentrate exclusively on the majors because the lack of competition will not only hurt consumers it will also hurt them.
“We’ve seen a flight to quality and safety,” he says. “People got burned with RAMS and GE so they don’t trust the non-bank sector in terms of its longevity and sustainability.
“That’s not to say that the nonbanks are not reliable and dependable. It’s simply the perception.”
Regarding the issue of accreditation schemes Hair maintains that the issue is not volume but quality.
He says banks claim that there is a strong correlation between poor quality applications and a level of re-work and therefore cost associated with relatively low volume brokers, and the accreditation schemes are designed to weed out sub-standard quality.
PLAN Australia is currently in discussion with the majors about this matter. Its proposition is to put together a training program to ensure that PLAN brokers retain their accreditations by keeping up to date with credit policies and processes without needing to meet the volume criteria.
“What the lenders are saying is, you’ve now got to raise the bar again,” says Hair.
“Am I supportive of lenders cutting accreditations. No, I’m not. What I am supportive of is improving quality and the efficiency of the industry because our future viability depends on this.
“If aggregators can put together a process that says that their (respective) members meet this quality criteria then there is every reason to expect that accreditations will be maintained.
“The challenge is to find a solution that works for both parties. It has to be a two way street; a win/win situation.”
Asked if he thinks that the grievances currently being directed towards aggregators are justified he muses the point before suggesting that “a lot of those making the noise are smaller players (aggregators) whose viability is at risk”.
“They’re trying to make people see that large aggregation groups are not necessarily providing the solutions.”
Regarding the issue of agreements between aggregators and lenders and the level of suspicion that abounds surrounding these, Hair calmly announces that PLAN Australia’s members are privy to all agreements that the aggregator has with lenders.
“When a broker signs with PLAN Australia they sign up to the terms of all our lender agreements therefore we make our lender agreements available to our members.
“If an agreement stipulates that the terms are confidential we go back to the lender and say that’s not acceptable, we have to disclose this to our members.
“Lenders are not saying don’t share this information. If aggregators choose not to do so that’s either because there is something to hide or there’s a belief that it’s a commercial agreement and shouldn’t be made public.”
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Ray Montey June 24, 2009
I have just read with interest Ray Hair’s comments on Banks trying to dismantle the broker network.
One only has to look at the banks actions to confirm this viewpoint. Ray Hair has his head in the sand or elsewhere. Of course he wouldn’t have a vested interest in saying otherwise (sic).
As to the brokers presenting poorly prepared proposals the banks only have themselves to blame. For years they have allowed anybody who wanted to call themselves brokers into the industry. I know of people who were car salesman, hair dressers, carpenters one day and brokers the next. It is the banks who decided that these people could become accredited - nobody else was responsible as they and they alone have the power to determine whom they will deal with.
In addition, I find that I as an ex banker with 30yrs experience constantly questioning poor processes, and being required to offer over the phone training to the banks’ processing staff because their staff simply have no idea. The CBA is the worst offender to the extent that I now decline any borrowers that wish to deal through this organisation. Simply more hassle than it is worth.
The banks can thank themselves they are a protected species because if the government removed the onerous exit fees imposed by the second tier banks and non bank lenders the market would shift significantly. KRudd has promised it so hopefully it is to arrive soon. That is of course unless the banks use the financial muscle to bury it.
I am sure we all await with interest.
Regards
Ray Montey
Regards