With brokers’ trust in banks teetering in light of commission changes, MPA meets Matt Lawler, the man tasked with resurrecting NAB’s third party business and building a sustainable and profitable model

When Matt Lawler took on the job of regional general manager of NAB’s third party channel, NAB Broker, in February last year, his brief was simple: set the strategy that would revive the bank’s ailing broker channel.

His move from MLC (where he spent 20 years working with another group of intermediaries, financial planners) to NAB Broker was prompted by the bank’s mediocre penetration of the third party space, with Lawler identified as the person best positioned to strategise and craft the path ahead.

“The [broker] business wasn’t going the way we wanted it to go. It needed focus and attention,”he says.

Lawler, together with the NAB executive team, saw an opportunity to create something similar to MLC, which has a strong network of financial planners supporting the model, and the strategy was to replicate the MLC model with mortgage brokers.

Continuing to build and foster the existing NAB culture and philosophy was central to the planning of the broking arm.

Lawler has been able to do this by engaging and interacting with every tier of the mortgage process, from the front-end sales team to the commission team, from the service team to the processing team.

Financial planning ties

Lawler says that by far the biggest demand from brokers is the same level of service and resources as provided by other lenders. This, he interprets as building up a third party business “with a boutique feel, but with institutional grunt”.

He readily admits that previously NAB had very little resonance with brokers and was not highly regarded because of questionable operational strategies.

To remove this stigma, a decision was taken by Lawler and his team to change the name of its third party business from HomeSide to NAB Broker, and in doing so, send a clear message that it is a strong bank-backed business.

HomeSide remains the mortgage brand, but NAB Broker partners can now also access MLC and Vivid insurance products, with Lawler promising brokers that his team continues to work at integrating full NAB product functionality into its HomeSide offering.

After just one year of taking the helm and reinvigorating the channel, Lawler says things are on track with where he wants the business to be, although he is the first to admit there is still a long way to go.

Brokers, he claims, are increasingly more positive about the bank’s offering. “They’re seeing us invest in them and create opportunities for them,” he says. “The main criterion they’ll judge us on is service of the main brand, which is HomeSide, and we’ve got a way to go. We’ve made some investments over the past six months and some of those will start coming into fruition over the next couple of months.”

Market forces

With money now invested in systems, Lawler knows that the servicing of this channel will underpin its long-term viability.

It is Lawler’s objective to match and then better benchmarks set by the competition, citing Commonwealth Bank and ANZ as market leaders in the third party space.

“We’ll differentiate with our partnership philosophy and translate that into action,” he says, maintaining that this means aligning brokers’ interests with the bank’s own interests and those of its clients.

According to Lawler, this is evident in its commission structure, which favours brokers with a long-term vision, by increasing the trail commission over the life of the loan.

A vision for the future

Fundamentally, Lawler’s professional background in the intermediary space has dictated the overarching philosophy at NAB Broker.

He believes that brokers are businesspeople, and investing in succession planning initiatives and practice management presentations is just part of that philosophy. “Ultimately, we’re investing in a segment of the market that we think long term we can make good economics out of – that’s primary.”

To achieve this means measuring NAB Broker against the current best players in every area of third party lending. “CBA do some things very well, ANZ do some things very well, [as do] BankWest and St.George. Our job is to take the best of all of those and provide an offer which is that plus more,” he says.

The effects from the credit crisis have not dented Lawler’s spirit, nor does he plan to change any aspect of the current strategy or overarching vision: “The good thing about visions and strategies, if you get them right, is that they don’t change too much and you don’t have to alter them because of changing circumstances.”

The focus continues to remain on shifting away from the product and sales culture still prevalent in broking to one built on advice and service.

He is also unrepentant about the need to change commissions: “The amount of money that’s expensed on upfront commission was always going to be unsustainable.”

Lawler’s strong opinions about commissions centre on concerns over conflict of interest inherent in selling strategies that reward for volume or cross-sell targets. He laments mainstream remuneration systems that see brokers, in his view, working for the institution rather than for the client.

Lawler is not afraid to call the game as he sees it. He does not mince words.

Speaking in front of some 400 brokers at NAB Broker’s May roundtable, Lawler presented a frank and honest account (as he saw it) of the state of the mortgage market.

Rather than denying that commission cuts were on the cards, only for brokers to be told about them later, Lawler said: “We want to take a different approach to changing economic conditions and over time build trust and transparency with the broker.”

This constant interaction and transparency of information made available to its third party partners has been a hallmark of Lawler’s time in charge.

Besides instigating the six-monthly broker roadshows, he has also been responsible for initiating regular, formal discussions with advisory boards, comprising broker and aggregator representatives, to gauge feedback on internal processes and market conditions.

The aforementioned Sydney roadshow heralded an attempt to shift the prevailing mentality that banks are brokers’ fair-weather friends, impressing on brokers the idea that the bank was looking to build a sustainable model that would weather the current credit market woes.

It was certainly a clever move, coming soon after Westpac took a non-consultative approach to commission cuts, angering and alienating many in the industry.

By global comparisons, Lawler believes Australian brokers have enjoyed a healthy remuneration system to date, however he stops short of saying they have had it ‘too good for too long’, as others have suggested.

“The one thing that you know about markets and industries is that they all go through cycles and changes, so while I wouldn’t say we’ve had it too good for too long, what I will say is some of the fundamentals of this industry have shifted and if you don’t shift and adapt to cope with those changes, that’s when some people go out of business,” he says.

Competitive streak

Lawler believes that consolidation will turn the industry into a game of scale.

Larger institutions, like the four major banks, can add value in terms of scale but only if they have the right vision for the industry, including the right philosophy in dealing with intermediaries.

And here again, Lawler’s ability to draw on his experience in operating alongside MLC financial planners gives him a significant advantage in the marketplace.

Competition is great for the consumer, he says, but not to the point where people are undertaking unsustainable operations to the detriment of the broader industry.

“Look at bailouts of large banks in the US. That’s not good long term. Consolidation will mean there’s fewer than in a frenzied market when there’s a lower barrier to entry and every man and his dog would line up and lend money,” he says.

Lawler concurs a healthy array of competition should not in fact be limited to the four majors, but rather a “couple of dozen” players should be enough to sustain a healthy market long term.

In bringing the same culture and philosophy that fortified success in the MLC business across to NAB Broker, he is confident of emulating similar feats and believes it is a realistic ask.

“We’ve got good support from the executive team at the highest levels and in dealing with the brokers I see very dynamic, highly professional and motivated brokers that want to run great businesses,” he says.

“The first year has been satisfying but it’s years two and three where the really important inroads are made to get where we want to be.”

NAB Broker Valet service

May 2008 marked the inception of NAB Broker’s Valet service, one of a number of innovative schemes which have been a hallmark of Lawler’s approach since taking on the third party business a year ago.

The Valet service is designed to allow time or resource-strapped brokers to focus on high value tasks within their business, by contracting NAB’s own lending specialists to take care of broker customers.

Under the scheme, once the broker has established the relationship with the customer, the relevant NAB Broker specialist steps in, managing the process from application to completion (and taking a 0.35% cut from the upfront commission).

The broker retains ownership and responsibility for the ongoing maintenance of the customer relationship.

Explaining the genesis of the idea, Lawler says he had heard many reports from brokers who said they wanted to be working on their business, but were instead too busy working in it.

The ability for brokers to access an additional set of hands also means the bank can better comprehend the needs of its brokers.

“If you understand how the broker operates their business and if you think in the broker’s shoes, [you realise] there are times where they don’t get a break or holiday, and retaining staff is hard – they need a pair of extra hands,” explains Lawler.

“The benefit for us is if we walk in their shoes enough of the time and understand what they’re doing then we’re becoming an important part of their business.”

The bank is also able to leverage off the existing resources in the back office, which instead of being employed 80% of the time, can now dedicate 100% of its efforts to processing either mortgage or insurance products.

“There are good, logical reasons for doing it: positioning of us and our business partners; great value for the broker and for ourselves; and better utilising resources we’ve already got,” Lawler says.

According to the media release promoting the Valet service, it will provide benefits for brokers needing extra loan writing capacity, without the hassle or cost of hiring additional staff.

The bank offers a similar Valet service for its MLC insurance product, which enables brokers to outsource the provision of debt insurance advice.

The bank says the service is ideal for brokers keen to meet the insurance requirements of their mortgage clients, but takes away the need to build an advice capability into their business at this time.