Facilitator: Troy Phillips
Lee Woolf, First National Home Loans
Mario Rehayem, Pepper
Tanya White, Australian First Mortgage
Greg Ashe, QED Risk Services
Troy Phillips: What are the advantages of dealing with a non-bank lender?
Tanya White: Competition. We’re here to help and give everyone an option. our business is also very transparent. There are no layers you have to go through to talk to decision makers. So, competition and transparency, in one-word answers.
Mario Rehayem: For us, even though we’re a broad business with deep pockets, we act small, we listen to credit advisers and mortgage managers. If they tell us they need something, and we can make a buck out of it and so can they, we do it.
TP: Lee, you’re a credit adviser, why do you use smaller lenders?
Lee Woolf: I made a list, and there are more reasons than I expected. They include:
TP: And is it possible to scale business up working with non-bank lenders?
LW: Without a doubt.
TP: Licensing adds legitimacy, but where to from here? Does it need a review?
Greg Ashe: I don’t think so. Having your own licence as a broker is about having control over your own business. Working under a licensee means you do what they tell you. And they might be tied to the panel their aggregator offers.
TP: I’ve seen non-bank lenders trying to look like the big four banks in structure. Why? What does the best BDM structure look like?
TW: Today’s BDM is different to a few years ago. Whether they’re on the road or not, it’s a numbers game. Contacting as many brokers as possible and getting the message out there is essential. We need to rethink our sales force, because we don’t have the deep pockets to pay expensive BDMs in high enough quantities to reach enough brokers. The sales force is evolving and needs to evolve. Does the deskbound BDM model work? I don’t know. Does the call centre approach work? Probably not. BDMs need to be on the road, need to be accessible 24/7.
TP: With a group fighting for a small proportion of the market, how is your sales team diff to a major bank?
MR: I was a BDM and appreciate the challenges. It’s a demanding role, but credit advisers have a right to be demanding. If you want to be the best, you have to have the service. If a BDM is to manage 600-1000 people, that’s too much.
Within 12 months, a good BDM should reach the point that their workload is unmanageable, so we need to support our staff. I want my BDMs to go out and uncover opportunities, so that’s my role.
TP: Would Pepper think about buying a distribution platform?
MR: Never say never. We have to ask ourselves though, if we were to buy an aggregator, what would be the ramifications and do we really need it? In Australia, the only thing we don’t own is distribution.
TP: Do you want BDMs who have a credit background?
LW: My BDM is there to help me match clients to the right lender and the right product.
TW: They’re not just order-takers, there’s no value in that.
TP: I’m not happy with how licensing is played out. ACCC chases the wrong fish – pulling up someone who ticked the wrong box accidentally instead of the people who are ripping people off. Licensees could become advocates.
GA: The credit act we’re working from now was always going to happen, when ‘bleeding hearts’ groups started saying ‘what about serviceability?’. I don’t think the licensing system is too bad. Industry funds ASIC, and they are terribly underfunded.
They don’t have the resources to go after the big guys, so they go after the small people instead. But the issue isn’t whether you are the licensee, because they don’t necessarily go after licensees, they go after industry participants. If you do something wrong, they will come after you first, not your licensee.
TP: Are the banks hunting for the customer or marketing to the broker these days?
GA: It depends which bank. I see an awful lot of channel hunting, with banks contacting credit advisers’ clients with a better deal.
TW: They are smart enough to chase both. Not all banks though. Some are retail-focused.
TP: Non-bank lenders are chasing credit advisers as well, but need a foothold. Secondary lenders will always be part of the market, with only 12 per cent of customers wanting to go to a big bank, and the rest not caring about brands.
MR: At the end of the day, if we’re going to hang our hat purely on price, we’re going to lose. We need to focus on service.
TP: We need competition. Retail is very hard for a non-bank lender to compete in, and regional banks need to jump in with non-bank lenders, rather than being smashed by big banks.
TP: How many licenses are out there?
GA: There are approximately 6000 out there in Australia. If you cut out the big banks’ 1000, there are 5000 brokerage licensees. ASIC says there are 30,000 credit advisers out there in total, others say it’s approximately 18,000.