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McGrath told TMMOnline a key driver of its move to end trail commission came about after the Commerce Commission’s investigation into retail banking and making sure “that we lined up consumer interests with our own."
"There was a bit of a discussion happening at the time about whether trail commission was fully aligned in terms of making sure that everybody was incentivised to make sure that individuals got the best deal for themselves.”
She says there were other factors behind the decision too, but would not elaborate. When asked what these were she says: “(I) haven't got the full list of other considerations that we took into account at the time.”
“A primary driver was about making sure that incentives were all lined up for freedom, freedom of movement. And haven't got the full list of other considerations that we took into account at the time.”
She acknowledges that “it's been tricky in terms of the conversation with advisers, but they were really clear with us on their feedback, and we amended our approach based on that feedback.”
”I think we did do a good job at listening to the feedback that we were given, and we did change our approach as a consequence of that. And what I see now, and we've been pretty thoughtful about making sure that it's highly competitive moving forward, and aligning with industry standards.”
She does not think it will impact the amount of business mortgage advisers send to Westpac.
At September 30, 56.7% of the bank's overall book had been orginated by advisers, and in the six-month reporting period advisers accounted for 66% of flows.
She says; “What I'm seeing now is good flow coming through from the brokers.”
“My reflection on that is that the listening that we did, and the change of approach was really important in terms of our relationship with the brokers moving forward.”
“I know that brokers have their customers best interests at heart, and so if we're offering great price and a good service turnaround, then I expect that we will continue to be at that will continue to be reflected in our relationships with brokers.”
"What we've done is we've aligned broadly the way that we remunerate brokers in the same way that two other providers have done in the market. And I think that the pricing that we've put in place is very competitive and reinforces the importance that we see in the broker channel."
She denies it is a move by the bank to try and increase flows through its proprietary channels (branches) as many have suggested.
“No, it was about making sure that we had a pricing structure that we think is resilient for the longer term and completely aligns brokers interests with those of their customers,” she says.
McGrath says the bank has done well in the home loan space as it’s “doing some really smart things on pricing.”
“We were the first bank to drop rates below 5% ,” she says. “We're the first bank to put a total spread across the terms below 5% as well.”
“The other thing that we've been working quite hard on is our service levels, so the speed at which people can get Yes. And so I think service has been good and pricing has been good in market.”
“We certainly looked at key terms where we thought we could price quite assertively in the market, and chose to do that, which is why you'll have seen us pricing differently to some of the other banks, and leading some of that pricing at times as well.”
Despite that Westpac has been slightly under in terms of market share.
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Consumer interests? Sorry but Westpac are essentially thumbing their nose at the Commerce Commission by not having changed to a 24-month clawback model on the 15th of October when they elected to axe trail commission and increase upfront commissions to 90 basis points. Westpac have so far only said to advisers that they will be changing to a 24-month claw back model early next year, but no definite date has been provided.
Current Westpac clawback policy remains 100% at 0-15 months and 50% at 16-26 months following settlement. The Commerce Commission has stated the existing lengthy clawback periods are an anti-competitive practice that deters borrowers from refinancing, so it's a terrible look for both Westpac (and BNZ) that these main banks still haven’t followed ANZ’s decision over 248 days ago to move to 24 months with clawbacks now diminishing on a pro-rata basis every 30 days.
It took ASB an agonising 213 days to bring their own clawback policy in-line with ANZ’s but Westpac and BNZ are now setting a new low standard for the banking industry in terms of acting in the best interests of consumers whilst also demonstrating with their delay that they do not value the business they receive from mortgage advisers.
As for Westpac chief executive’s denial that the bank is trying to increase flows through its proprietary channels why is Westpac cancelling trail to mortgage advisers but still continuing to pay trail to customers who source a home loan directly from Westpac via Dosh?