An attack on the Big Four’s market dominance is what’s needed to see the broker channel thrive again, says Liberty Financial COO James Boyle.
While there has been much publicity of late of the falling market share of the major banks, these gains need to be taken in historical context, says Boyle.
“Several years ago, when the broker industry was at its peak, non-major lenders had double their current market share. So while recent trends are promising, we still have a long way to go before we return to market conditions when the broker industry was last thriving.”
The majors have shown strong competition of late with regard to commission hikes and rate cuts, but Boyle says Liberty won’t get drawn into the fray.
“I don’t feel compelled and I don’t think we’re behind the eight-ball to need to compete on that front,” says Boyle.
“We have one of the most generous commission programs in the market and we’ve maintained that level really throughout the last few years.”
Despite this, Boyle says Liberty has a “never say never” attitude.
“Whilst economists are forecasting a relatively stable rate environment for the coming period we’ve heard that before and seen the opposite.”
Non-majors have a greater dedication to the broker channel, and fight harder for broker business, he says.
“By contrast, major banks can be fair weather friends of brokers with lots of competing issues like channel conflicts, customer ownership and share of wallet. So the big advantage of non-majors I would say is clarity and focus on the things that matter most to brokers.
“We’re very proud of our long history with the broking industry, which has been built on the core focus of providing excellent service and innovative, appealing products.”
This includes recent innovation in the LMI space, and Boyle says Liberty’s recent release of a 95%, LMI-free loan helps to cover “discrepancies” in the market.
“In a market where lenders mortgage insurers stand behind lenders there are different arrangements in place both between the lenders mortgage insurers and the lenders and then between the lenders and the brokers,” says Boyle.
While Boyle says he can understand this from a structural perspective, it can be a source of frustration for both borrowers and customers.
“Technology being what it is today we should be more able as an industry to be able to provide constant and fast and certain service for brokers who are in turn providing customers with a solution.
“I think as technology becomes more and more prevalent in our these discrepancies will become less common, but to the extent that any part of the process remains exposed to either double handling or non-straight-through processing then you will get challenges when it comes to service and turnaround and sometimes even solutions.”
Liberty is looking to roll out further innovations in both the SMSF
and standard loan spaces towards the second quarter, says Boyle, but he doesn’t expect the majors to follow suit.
“I think they have had a fantastic run where they’ve built their market share up and they’ve done that through good service and superior pricing, and there’s no question it is hot competition out there at the moment and the majors are very much the drivers of that competition, but that competition is around the generic needs for customers with price.
"I think innovation is cert coming from outside the banks - from the non-banks and smaller lenders who in a market where there is such competition lenders have to innovate in order to be relevant.”