Mortgage Brokers: How Can You and The Banks Bridge the Profit Gap?

In today's Adviser, the group executive for retail banking at ANZ unpacked the profitability gap between proprietary channels and brokers revealing that the underlying issues go beyond commissions. No doubt these are competing channels but what if banks and brokers could trust each other to work together to enhance client retention, strengthen client engagement and drive profitability? The major fears at the back of every brokers mind is that of losing out on client relationships to the banks direct lending platforms and the risk of banks sidelining them once they build their digital platforms and capabilities that will reduce their operations cost.

With brokers now owing 75% market share, brokers should be in a position to discuss the terms of this deal. Here are some safeguards to protect brokers' interests if this were to happen:

• Insist on co-branded offerings with specific banks where brokers introduce clients to insurance/investment services while retaining ownership of the lending relationship.
• Request partnership agreements with banks that protect your role as the client’s primary mortgage contact and prevent banks from directly marketing other brokers/internal channels to these clients.
• Consider clauses that guarantee client ownership rights for any referrals to other bank services.

• Actively partner with banks committed to competitive channel-neutral pricing policies to brokers.
• Advocate for transparency from banks about their pricing policies across channels.
• Have Banks provide clear communication with their clients reinforcing that they won’t be disadvantaged because they chose the broker channel.

• Work with banks that offer customized solutions such as rate review programs or exclusive packages for broker-originated clients.
• Negotiate with banks to dedicate an account manager who exclusively handles your clients and prevents them from being redirected to direct bank channels/products.
• Have banks provide their clients with a quarterly service summary report/ follow up email that recaps the broker's actions such as negotiating better rates, securing tailored options and facilitating finance for them.

• Propose loan review programs to banking partners that let brokers maintain ownership of the client relationship while providing client retention benefits to the bank.
• Negotiate for rate discounts offered exclusively through broker-driven reviews.
• Use your aggregator's CRM tracking reports to manage these regular check-ins proving to banks and their clients the ongoing value of the broker relationship.

Conclusion

The broker-bank relationship should be a partnership that respects the expertise and unique role brokers play in the lending process. By implementing transparent policies, mutual incentives and clear client protections brokers will be more willing and open to collaborate with banks. Only then is when the proposition will be truly profitable to both parties.

References:

The Adviser - ANZ unpacks why broking is a less profitable channel