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General manager of third party mortgages Damian Percy assures brokers Adelaide Bank ‘has not left the building’. The former Elvis impersonator talks to MPA about Bendigo and Adelaide Bank’s renewed focus on the broker channel.

Nobody makes a comeback like the King.

And who better to steer Bendigo and Adelaide Bank’s return to the third-party channel than former Elvis-impersonator Damian Percy.

Adelaide Bank’s general manager of third party mortgages was appointed to the leadership role late last year, and is currently responsible for the broker business, the white label wholesale business and the National Mortgage Market Corporation (NMMC), which is a legacy Bendigo enterprise.

It’s been a challenging period in Percy’s professional career – although the difficulties he’s faced in his present role are not unique. The economic downturn and subsequent funding freeze badly injured the legacy Adelaide bank business which was very reliant on global capital market and securitization.

As a result, Percy says the bank was faced with two options – walk away, or batten down the hatches and do what they could to keep their partners, reputation and key staff.

“So we chose the second path.”

Unfortunately that required the bank to significantly restrain its volumes which meant “there were a lot of difficult conversations, particularly with white label partners”, he adds.

Adelaide Bank was forced to structure its pricing slightly differently, but Percy says, the bank was not comfortable with “picking businesses to die”.

“So we provided limited support to everybody in the view that we were very keen to see those partners who had viable business get through. And I think it’s difficult and sometimes even arrogant of an institution to pick the ones that are going to survive. The market will decide who will survive.”

As a result of their decision, Percy says its partner relationships are very strong.

Adelaide bank was outspoken at the outset of the credit crunch that the crisis would have long lasting effects on Australia, a position that was borne out over the following months.

“We were always of the view from the outset that we call it as we see it, not as we’d like it to be. And I think today that probably holds us in good stead – we don’t simply gild the lily if we can avoid it.”

Bendigo announced the merger with Adelaide Bank in early August 2007, which presented a challenge in its own right – but the lasting result is now Adelaide bank is 90% retail deposit funded “as good as any bank in Australia”, Percy says.

The bank now has the opportunity to grow the business again, which is exactly what they’re doing.

“I’m talking to brokers and there’s a real need for a competitive and committed player in the space and we’ll be doing that under the Adelaide Bank brand,” he says.

Prior to the GFC and merger with Bendigo Bank, the Adelaide Bank’s percentage of home loan business coming through the third party channel was “well north of 80%”. While it dropped over the last 12 months, Percy says they expect the split between third party and direct to mirror that of the market more generally.

“We look at the dominance of a relatively small group of funders and we don’t think that’s a good thing. And for a bank like ourselves, a strong retail deposit base, 400 odd branches through our partner retail businesses, a long history under the Adelaide bank brand and third party mortgage business and broker centric processes and thinking, we think we can provide a serious alternative to the majors.”

Percy insists the bank will not sacrifice sustainability for pricing, but rather it plans to focus on reliability.

“We recognize that if a broker makes a promise to a customer and deadlines are missed then it reflects poorly on them and their reputation is ultimately all they’re going to be able to trade on over time. So if we say we’re going to turn a deal around in three days or four days that we’ll do that like a metronome.”

Another point of difference the lender can to trade on is its stance on re-accreditation fees. Bendigo and Adelaide Bank have chosen not to institute a re-accreditation policy and according to Percy, the bank has some deep philosophical issues with the practice.

“I have some real problems with some of the advertent or inadvertent implications of requiring a broker to supply x number of deals to a bank. I don’t think that there’s been a sufficient case made that that’s a proxy to professionalism or knowledge. I worry about the issues for brokers taking time out, particularly maternity leave. I find it somewhat ironic that some of the banks that are more supportive of women in the industry aren’t recognizing that.

“My broad view is that at the end of the day a mortgage transaction is a fairly simple one, if as a bank your processes and products and the data you supply your introducers is such that unless they’re using it constantly, they can’t use it well, then that probably is more a reflection on the clarity of your processes and the clarity of your communication then it is the efforts of the broker. And we’ve seen many examples of brokers who submit very regularly and the paperwork is still crap. And we’ve got examples of brokers who submit irregularly and their paperwork is great.”

However, Percy adds he doesn’t see the re-accreditation policies as being a bully tactic of the banks.

“The nature of things is that when you get that much influence, whether you intend to bully or not, the extent of your influence means perhaps you might be less inclined to consider the impact on others than if you didn’t have that degree of influence.”

Future of broking
The mortgage industry is undergoing vast change at the moment and Percy, who’s been involved with the third-party channel since 2001, has a keen perception of where it’s going.

He predicts that regulation will result in a reduction of the overall number of brokers, while an attempt to find economies of scale, driven by aggregators’ need for efficiency will fuel further consolidation in that space.

With regard to the prospect of a ‘fee for service’ model ever taking root in Australia, Percy is quite convinced it’s an appropriate direction for brokers to move in.

“I’m very open to the notion of fee for service, to the point where the leader of the odd broker group has given me a clip across the back of the head for raising it too often. But my issue for many years and even prior to commission adjustments last year, is that if brokers rely exclusively on the commission paid by a bank then ultimately the economics of the bank will determine the value of the work they do.

“You can’t get a plumber to come to your house for free, financial planners charge fees and I think as long as they’re appropriate and transparent then I think a borrower that receives good service would be happy to pay.”

On the issue of competition in home lending, Percy would like to a restoration of balance, but doesn’t believe further investment by the AOFM into RMBS will be the ticket.

“To be honest the scale of the contributions that you get out of the AOFM is not enough to run a business. It was useful from a balance sheet management point of view. But it’s certainly not a solution. Our view is that it isn’t sufficient to drive the business forward."

Adelaide Bank’s future vision is to build its brand and volumes over the next three years.

Rise through the ranks
Damian Percy is Darwin-born, but raised in Adelaide. He graduated high school and joined the State Government Insurance Commission as an underwriting clerk where he stayed for 14 years.

“So I did commercial accounts and had been through a number of takeovers and mergers and was getting a bit bored and a friend of mine mentioned an ad in the paper to run the bank’s insurance business.”

So he joined Adelaide Bank as the insurance manager. After two years he was approached by CEO Jamie McPhee in 2001 to run the white label mortgage business.

Percy says he resisted at first “because I didn’t know anything about mortgages”, but says it was partner-based which was very similar to his background working with insurance brokers and agents.

He also says he enjoys the B2B relationships.

“The characters are interesting – the people element of it I enjoy and in a strange and nerdy way I enjoy the legislative and risk part of it.”

He’s been working on the third-party channel in various forms ever since.

Percy took two years out of the business to look at a mortgage strategy for the bank in 2007.  He spent five months producing a very large and comprehensive document, went overseas for four weeks and came back to the GFC.

“So very little of that lateral thinking was possible.”

Shortly thereafter he took up a strategy and products role in the mortgage business for about 18 months and then late last year he was reappointed to a leadership role in the third party business as general manager.

In addition to his professional career, Percy studied 12 years part-time to earn both a psychology degree and a law degree.

“I did the psych degree because I was interested in bringing that behavioural psychology thing into the work, and then came to the view that I thought people were nuts and geared back towards animal behaviour and history. And the law degree – well, I was just interested in the law. And I enjoyed the thinking behind the law, it’s a great degree to teach you to think, but by the end of it I realized I knew no happy lawyers. So I decided that going out to get my certificate to practice probably wasn’t going to make me any happier. They don’t pay you well for the stuff that’s fun and the stuff that pays well is boring."