Hope deferred makes the heart sick, but a longing fulfilled is a tree of life. Proverbs 13:12
I think I may have named this article incorrectly. It should probably be called “Why You Need Mortgage Brokers Now More Than Ever”. You may have read a little about mortgage brokers in the press this week. As is always the case there’s more to this story than meets the eye. ASIC recently conducted a very long investigation into our little market and concluded “brokers deliver great consumer outcomes”. Ok, they produced a 243 page report which you can access here if you wish.
The point is that ASIC was largely complimentary about the way brokers go about finding loans for most people.
Of course, this is not the case for every broker. Like most industries there are good and bad players in our industry. Reading comments from consumer groups this week, you could be forgiven for thinking that we’re all bad.
Here’s some fun facts. Brokers originate around 54% of all home loans written in this country. We get paid an up-front commission by the lenders of between 0.45% – 0.70%. We also receive a trailing commission of between 0.10% to 0.25%.
ASIC’s inquiry suggested that these variances encouraged brokers to place loans with the banks that paid them the most. To that extent, ASIC recommended a standardised up-front and trail commission structure and not (as has been suggested by “consumer groups”) to eliminate them altogether.
On another matter, you’ve read articles from me banging on about the lack of talent being kept by banks these days and how I wouldn’t even line a budgie cage with some of the “talent” left behind and promoted to senior levels. Well, we had a first-hand lesson on that very topic this past month.
We decided that one of our largest retail clients was deserving of a private banker. To that end, we chose one of the four major banks. To cut a long story short, the client was complicated but had no existing debt and lots of assets and income. The private banker was clearly out of their depth and sat on the transaction for two weeks – ignoring our calls to action. We escalated to their boss and got an immediate response. This is the problem these days when you have a solid (but complicated) client.
Bankers are so ingrained in internal processes that when a wonderful client such as ours is placed before them, they immediately panic because the client will not neatly fit into their processes. Some banks even have an expression for this – inefficiency of process or bespoke process.
Banks used to allow bankers with experience to make exceptions to the system as a banking system cannot take into account all scenarios. This was usually called a banker’s delegated credit authority (or “DCA”). In recent times these DCAs have all but been revoked and bank’s systems have become the default decision makers.
Needless to say we will not be dealing with that banker again. Clearly, he is in the wrong industry. I bet he’ll make General Manager in no time.