By Jill Fraser for Lending Central

Last week we ran Part One of an interview with the Commonwealth Bank’s Executive General Manager, Third Party Banking, Kathy Cummings in which she expressed her opinion about the bank’s relationship with brokers.

Today we run the conclusion of the interview.

KC: What needs to be emphasized is that many of the changes are being driven by regulation. Regulation is going to dictate that brokers have to do a certain amount of professional development. Every year they will have to do about 30 hours of training. They’ll have to be licensed and if they’re under an aggregator and the aggregator holds a license that’s another line of accountability and the shifting of commitment back to the broker.

The whole industry is shifting.

LC: How do you see it changing?

KC: I think there will be some rationalization. Brokers will have to work out if they’re committed to the industry and if they want it to be their profession.

Much of the work the MFAA is doing is about trying to ensure that there is enough rigor around to help brokers become professional. The MFAA wants mortgage broking to be a profession.

That means ongoing education (Minimum Certificate 4), meeting minimum requirements around strong internal dispute resolution processes and being part of an external dispute resolution body like COSL (Credit Ombudsman Service Limited).

A lot of obligation is going to shift back to the broker to ensure they’re at a specified standard.

LC: Lending Central received a record number of comments on an article that referred to a comment you made to finance and business commentator, Peter Switzer on Sky News about your concept of a perfect broker.

(Cummings told Switzer that she would like brokers to have a “holistic approach” to their relationship with the CBA “so that they introduce the customer for life for their total banking needs not just the mortgage product”. The story quoted an unidentified broker who took Cummings to task for making this remark suggesting it indicated that the CBA favours brokers who are prepared to push CBA products. The official response from Cummings’ office was “Respect broker’s proposition of choice and therefore CBA supports an opportunity to offer customers total financial needs, but understands brokers may refer to other providers who they have relationships with.”)

KC: There may have been one or two who objected. Most people were fine with it and understood what I was saying. I was referring to a holistic approach to clients.

Research shows that the old days of simply doing a home loan for someone is over. Customers want to deal with a professional who can handle their total financial position.

There’s a lot of diversification happening in the brokers’ space and I was referring to brokers understanding and catering to the various life cycle stages of clients and the different things they need.

LC: I hear what you’re saying but we received a lot of comments from brokers who objected to what you said.

KC: With all due respect it’s the lower element of brokers that makes the noise. They probably aren’t busy enough! The good ones are very busy and they’re the ones I deal with.

LC: What would you like to come across in this article?

KC: That we are in this for the long-term haul. We’re not a ‘Johnny Come Lately’ to this industry. We’ve never been in and out like a lot of the other banks.

It’s nice to know that NAB is finally committed. For a while no one knew whether they were in or not whereas we’ve been partnering the broker industry since the Commonwealth Bank took over Colonial, and we’ve built it up to a very strong proposition.

Everything we do is based on a platform of partnership and we will help brokers become more professional as regulation dictates.

LC: Have you needed to cultivate a thick skin?

KC: I’m very straight to brokers about the quality of business that’s sent in. They need to know that substandard business blocks the process for someone who has a good deal. But some brokers don’t like hearing that message and take offense and say, “the Commonwealth Bank doesn’t understand brokers”.

Brokers need to understand that we’re in a cycle where if necessary they need to be able to tell their customers, as I did many years ago when I was a branch leader, I’m sorry but at this point you can’t afford this loan so I suggest you save more money before we talk about it again”.

Sometimes the best advice you can give someone is that they’re not in a position to borrow the amount they’re requesting.

LC: How are processing times going?

KC: They’re improving.

As I mentioned previously, we ended up doing one in two loans earlier this year. That is an awful lot of volume. We handle more than most because we’ve got five processing shops around the country but..

We’re getting back to where we want to be but because there’s been so much change in the credit policies of banks (I’m very empathetic to brokers here) brokers are trying to get their heads around new policies so there’s a lot of rework happening.

This means that our credit managers are spending longer to try to make deals.

I think we’re the only bank that actually rings brokers and tells them why we’ve had to decline a loan.

We’re in the middle of piloting new processing systems for brokers. But this nonsense about branches deals processing faster than brokers: Branches are on staff so we’re accountable for what they do therefore they’re able to verify documents whereas brokers have to send the documents in. That accounts for the difference in timing.

We’re in the process now of putting together a system that will enable our good brokers to print documents.

We’re also in the process of going paperless so brokers will scan everything in and will no longer have to fax. This means that approval will be much faster.

These will be big improvements and when they come into effect it will then be exactly the same for brokers as it is for the branches.

At the moment we have absolute channel parity with everything except for printing those documents.

I’m very passionate about the industry, I always have been, and we keep trying to move it to different areas. Right now we’re heavily involved in charity events to interface brokers and the community.

LC: What are your thoughts on the survival of non-bank lenders.

KC: It’s going to take some time for that market to come back in any real force. We have nothing against competition. What I think is that borrowers are gravitating to the stronger brands because they want consistency. There were a lot of burnt borrowers so now they only trust institutions they know will be responsible.

Customer satisfaction is what we’re chasing and happy customers are profitable customers.

LC: In conclusion..?

KC: Regulation is coming. We need to work together to be in the right space for that. Right now we’re very conscious that while unemployment is starting to settle it’s still an issue and causing hardship. So we will keep tightening and implementing a strong responsible lending approach.

That coupled with regulation means that our focus in on professionalism in brokers.

It’s about quality but that’s not new for us. We’ve been measuring quality and paying off quality metrics and commission for about five years. And we pay for cross-sell so brokers get referral fees on all the cross-sell products that go through the branches. No one else is doing that.

LC: You said you love the industry. Why?

KC: I love dealing with people who make a difference and I think good brokers are passionate people who get out there, build successful businesses and recognize that broking is where the rubber hits the road.

In case you missed Part one of our interview, you can read it here.