Direct’s head of third party distribution on the changing needs of customers, and how brokers must adapt
Change is a constant in any market, and the pace of change in the mortgage market is accelerating. What’s more, where change used to be driven by suppliers, it’s now largely driven by consumer demand. All of this can seem dizzying to brokers just trying to do business, but ING
Direct’s Mark Woolnough says brokers must adapt to customer needs.
Woolnough, the bank’s head of third-party distribution, has pointed to rapidly-changing consumer trends. Technology is driving an evolution of consumer expectations, and brokers must evolve with this, he said.
“Customers now have access to more information, and they’re much more educated and accountable for the decisions they make. I think we’re seeing a change in paradigm in terms of the extent to which the customer is happy for the broker to make the decision for them rather than to validate the decision,” Woolnough said.
As home buyers increasingly become digital natives, the expectations they bring into the home loan process will change, Woolnough suggested. And these changes are already occurring. There’s a trend, Woolnough said, toward customers taking greater control of the buying process. It’s a trend Woolnough believes will only become more dominant in the future.
“My view is that the customer will be given even greater access to much more technology to put them in more control. They’ll have an abundant array of online utilities to self-equip and power their selection and decision making. Social media engagement will continue to climb as customers will be provided with ‘people like you’ comparisons. Like for like people on the same journey or path that your customer is on.”
This means that the role brokers plan in the home loan transaction is evolving.
“The challenge for the third party is to become more of a financial coach or mentor for their customers, an endorser or a proof point for the borrower. The broker will never be redundant as long as the customer sees value in the service, but part of the traditional steps that brokers used to take with customers will become less important as technology allows customers to take those steps themselves,” Woolnough said.
COMPETING WITH DIRECT CHANNELS
As Woolnough said, brokers will remain relevant to consumers as long as they continue to see value in the service the channel provides. That value seems self-evident, with brokers providing an abundance of choice, a simplification of the home loan process and outsourcing the legwork of putting together the relevant documentation needed to secure a home loan. Woolnough argued, though, that brokers still must not discount the competition provided by direct channels, particularly as consumers show a desire to take greater control of the home loan process.
“Customers with more control will want greater reward for the steps they take to find solutions. They’ll take ownership and accountability for their decisions and will want to educate themselves through online research, and take on board the opinions of friends. The third party is going to have to make sure their systems and processes are equal to or in advance of what the customer is able to achieve by going direct,” he said.
Traditionally, one of the only true drawcards available to direct channels was the perception of offering a cheaper deal. But Woolnough said this is no longer the case.
“Way too often the very thought or comment of customers choosing to go direct quickly leads to debate and conversation around a cheaper price, however this is certainly not what the research suggests. Whilst there has, and always been a segment that sought a more favourable price point by going direct the majority do so as they believe they will enjoy a better and quicker experience,”
And online channels are becoming easier and easier for consumers to utilise as technology makes the process more streamlined.
“Right now the customer can go to any bank site, they can apply now and get an indication of approval or an estimate of borrowing capacity within two minutes. They can upload payslips and tax returns, and in time they’ll be able to provide consent where the bank can jump onto a government portal and get those tax returns. The valuations are ordered online. You’ve got solicitors working on B2C communications that they can press a button to send it to the customer. The customer sends it back and then you’ve got PEXA [Property Exchange Australia]. This isn’t in the future, this is now,” Woolnough said.
This means that brokers will have to look for ways to integrate technology into their business in order to provide a smooth, seamless and quick experience for customers who come to them armed with more information and a greater sense of self-determination.
“The traditional broker role worked because you had complicated products. Couple this with the fact that mortgage transactions can be complex, and there were so many lenders customers didn’t have time to go to every branch manager to find out more about that particular offer. They outsourced that work to a professional and expert. But if the customer is able to get this information far more quickly and efficiently at a time that suits them with a device that suits them, the third party is going to have to find a way to integrate this into their business,” Woolnough said.
THE DECISION TO EVOLVE
For some brokers, integrating technology into their business to address these trends can seem overwhelming. But Woolnough has said brokers who don’t feel comfortable with keeping abreast of technological trends driven by consumer behaviour don’t have to throw in the towel. Instead, he said they can look to bring savvy young people into their business who bring with them the expertise to deal with a new type of borrower.
“Brokers have got some big decisions to make. The broker of the future and the broker that looks at ensuring their business is set up for success needs a planning and recruitment strategy that recruits specialists in the areas their business needs to develop. They don’t just need to go and recruit four or five more loan writers. If you think you’re going to build your business by getting four more of you, you’re not going to build your business. You almost need a reverse mentoring situation where you have a young, savvy digital native mentoring you on the evolving trends of dealing with customers. Knowing what is important to the younger and future generations and delivering will be critical to the sustainability of your business regardless of the industry,” Woolnough said.
This is all well and good for brokers who run a multi-staff business, but many brokers simply can’t afford to bring on board more employees for the express purpose of utilising new technology. For them, Woolnough said their aggregation group can provide this expertise.
“The sole operators have to surround themselves with strong and professional networks that can provide solutions around technology systems and help them understand the data at their disposal.”
This means that the onus is largely on aggregators to help brokers evolve along with a changing marketplace, Woolnough argued.
“An aggregator has no business without productive members. If their members aren’t as productive or are less relevant, what is the future of that aggregator? We have to make sure that professional development events and the education being offered communicates, develops and educates in these areas,” he said.
But Woolnough’s primary message to brokers isn’t to fear online competition. It’s to embrace the ways technology can improve the customer experience and make business more efficient for the broker. Any technology solutions should be driven to meet the needs of the end customer, Woolnough said. Consumers aren’t looking for an online mortgage, he said. They’re looking for a home. Moreover, they’re looking for an experience buying a home that fits their demands.
“Never be concerned about online mortgage solutions, because that’s not what the customer is looking for. They’re looking for a way to integrate technology into their property-buying experience.”
This feature is from Issue 11.14 of Australian Broker. Download the issue to read more!