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Speaking to these lenders, the responses are generally the same.
“At CommBank, we’re committed to supporting our brokers as we understand the pivotal role they play in helping Australians achieve their home ownership dreams,” said Dr Michael Baumann, executive general manager, home buying at CBA.
“We know many Australians are choosing to partner with a broker, which is why we’re investing in initiatives to support brokers and their customers, such as reducing the time to decision on applications to below five days,” said Damien MacRae, Westpac’s managing director, mortgages.
NAB executive, broker distribution, Adam Brown, said: “NAB continues to invest in both our broker and proprietary channels to drive growth, ensuring a balanced focus on both. Brokers are essential to bringing the best of NAB to our customers and we’re committed to strengthening these relationships.”
And ANZ’s general manager, retail broker, Natalie Smith, commented: “We understand each of our customers have different needs when it comes to discussing their home lending requirements, whether it be to renovate, upsize, downsize or purchase their first home. And importantly, we want to ensure that we are there for them when they need us and through their preferred avenue, whether that means coming into branch to talk to a home loan specialist, via an ANZ mobile lender, or through a mortgage broker, who will help them to understand the market and what’s on offer.”
As the months go by, it seems more and more concern stifles around banks’ proprietary channels, and every time, broker commitment is reinforced.
Cause for concern
Despite this, there are persistent issues building distrust between brokers and the majors. While some banks seem to treat brokers worse than others, the headlines of late paint a somewhat grim picture.
Just last year, Bank of Queensland dropped 12,000 brokers and has since moved to prioritise digital and business banking.
The major lenders have been placing added emphasis on this channel, with the tail end of 2024 seeing NAB broker flows drop and proprietary attention increase.
“You will have also probably heard there around our renewed focus on our proprietary channel. And I wanted to, I just wanted to clarify some things there for you all today, our focus on our proprietary channel is important for us because we want to be a great bank for those customers that choose to come to us directly,” Brown said.
CBA reported similar trends, with broker flows shrinking and a proprietary channel focus becoming priority.
“We have focused on proprietary distribution with new proprietary home loan fundings in the quarter broadly flat on the prior comparative period at $18 billion, while lower margin new broker fundings declined [by around] $5 billion over the same period,” CBA said.
So, while the persistent pandering to brokers from the big banks is nice, it isn’t enough to put them at ease as the actions taken contradict what’s being said.
What brokers are saying
Brokers see through the façade and aren’t happy. Shore Financial CEO Theo Chambers said that proprietary channels are “a detriment to the industry.”
“We shouldn’t be battling over the same client, especially when sometimes we’ve put the client in touch with that bank. We’ve recommended a bank and then that clients popped into the branch to get a check or something and then that client is being told to do an application with the branch lender or relationship manager when they’ve already got an application in progress with that bank. That just seems very inefficient and backward especially when the brokers recommended that bank in the first place,” Chambers said.
“The person that you’re recommending is then trying to take the business off you and cut you out of transaction. It’s definitely wrong. I think it’s unethical if anything. And policy, sometimes when a lender is saying that they can’t do something for us and then we find out that they do it through a different channel direct, how frustrating is that?”
Pricing discrepancies can undermine brokers. Chambers believes it “discredits the industry”.
“When we negotiate a rate on behalf of a bank and then the client’s told a different rate by that bank, it just creates distrust with the consumer. Who do I believe here? Why is the broker telling me a different story to what the bank’s telling me direct? Are they adding a commission on top or something?
“It’s damaging the industry as a whole when the consumer walks into a branch and the staff are trying to poach the consumer off the bank that they’ve already got an application with.”
However, Chambers noted that not all banks operate like this, and not even all the majors do. It’s just the actions of a few that is having an impact.
“For example, something I commend about St George and Westpac is in their private banking divisions, they somewhat take over the relationships and when a repeat client comes back to them, they reach out to us and let us know and keep us in the loop. And that is really appreciated especially because we can help in the transaction,” he said.
Darren Little, CEO of Smartmove, agrees that the pricing disparity is damaging to the broking industry.
“[For] close to a decade, there has been pricing parity that has been pretty much been the same between banks and broker. So, if a bank’s going to give a certain rate, they’ve generally honoured that in the proprietary channel, the mobile channels. The broker channel, obviously that has now changed for some of our business partners who are doing differential pricing between first and third party. That does create a bit of conflict,” Little said.
However, Little also believes that proprietary is inevitable, as those who want direct to lender solutions will find a way to do so regardless.
“A consumer, if they want to jump online and do a digital application, there is a segment of the market that would be more than happy to do so if it’s going to mean different price. I look at the advice and structuring that we do provide, it’s a lot more than, ‘Here is an interest rate and a product’. It’s about having the client’s best interest at heart,” he said.
“It’s such a big choice to go on and buy a house and then have finance for it. Are they looking for professional, independent advice? Absolutely, people are. Seventy-four per cent of the marketplace are using a broker at the moment. Yes, digital is going to take their share but I still think people want to deal with trusted advisors.”
He continued: “With some of our business partners starting to do different pricing, that will create a gap potentially for a consumer, but as mentioned, there’s an alternate bank always around the corner as well.”
Who’s going to come out on top?
With tensions still high and the back and forth on the matter seemingly never ending, what does the endgame look like? According to Chambers, brokers will always come out on top.
“Banks continue to invest in building proprietary channels, but the market landscape has evolved. Today’s consumers are more informed than ever and increasingly value the choice and tailored advice that brokers provide. As a result, the broker channel remains a critical and growing part of the industry,” he said.
Working previously for a bank dealing with direct customers, Chambers said the difference between service is “chalk and cheese”.
“We understand the intricacies of lending and the nuances between policies. Which is not something a banking representative needs to know because they don’t learn policies amongst other banks. They don’t know the sweet spots to dictate one lender being a more suitable option than another. They just need to know one language in the policy of their own bank,” Chambers said.
“And the average consumer’s knowledge has developed significantly the past decade as broker market share has hit 74 per cent. The average consumer now has done at least one, potentially two or more transactions with a broker and has been privy to the experience of options, been explained various policy niches, and has essentially been privy to how a broker lands on a recommended solution.”
Consumers are getting smarter, and likely due to a higher cost of living and inflated interest rates, has to be more informed when borrowing.
“I remember when I first joined the industry, we were still explaining what offset accounts were. We were still explaining that we don’t have to charge fees for our service and that the banks pay us. Consumers 15 years ago thought that, I’m going to send them an invoice at some point.”
“Nowadays, the average consumer knows all these things. They understand also how to position themselves to have the most optimal borrowing capacity by closing credit cards or paying out car loans. And that is because of the education journey brokers have done with consumers. And now I don’t think a consumer will forever lean on one bank. And that’s what the banks are hoping. Some banks are hoping that you’ll deal with a relationship manager or a mobile lender and stick with them for life,” Chambers said.
“Sure, there might be the odd customer that does that, but because buying a property is such a challenge and because the affordability issue is worse than ever, and people are borrowing at higher multiples compared to the average income than they ever have before, they need to find options to make purchasing the home feasible. And they just can’t rely on one bank telling them the one answer.”
So, even if one day the majors decided to pull out of third party altogether, brokers would be okay. At least that’s what Chambers and Little believe.
“We need all of our business partners on the panel, the broker market needs choice. That’s what we’re about. So not having one organisation, that’s not good for the consumer. We need those consumers having access to the choice. That’s what our value proposition is. And if we if we don’t have that choice, that does make it quite difficult,” Little said.
“But for me, the beautiful thing with the broker channel is we’ve got so much choice and generally, we can do that right with some other bank … If you rewind 10–15 years, you wanted everything in the one place. Your savings account and your credit card. Whereas now, a client’s looking for a solution, and that solution may be their everyday banking account might be at a major, their salary, direct debits, their credit card might be somewhere where there’s points attached that they like, but in their home loan, it’s not going to be a forever location.
“What we are seeing is clients more open to different solutions and that solution may be price-driven, it could be product-driven, it could be policy-driven. A lot of the time, with maximum lending now and affordability after 13, 14 rate hikes, it’s created where clients have had to explore other things to get the solutions they want. It’s very much not about we want to stay at a major, we want a solution to our needs,” Little added.
What the future holds
Is the push for proprietary an annoyance for brokers? Yes. Will it end? Probably not. However, brokers shouldn’t dwell on it.
Australia’s banking landscape has been ruled by the big four for some time now. In this time, so too has channel conflict remained an issue.
Despite this, broker market share sits at a record 74.6 per cent, and some estimates point to reaching 80 per cent by the end of the year.
Market share sat at 55.3 per cent as of March 2018, showing a substantial increase despite channel conflict.
So, while this issue could persist, it shouldn’t affect brokers as the vast majority of borrowers continue to see the value in brokers.
The proprietary proposition isn’t the surefire success tactic the majors may think it is. Macquarie shows consistently stronger loan book growth, often three times larger month-on-month than the majors. This is all done without a proprietary channel, with brokers bringing in all of this growth.
So, while the broker versus proprietary debate may come with some concern for the third-party channel, all in all, it may not make too much of a difference. Borrowers are increasingly turning to brokers and are likely to continue to do so.
