Nat. Bank aims to grow road rep 'contribution'

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Brokers may represent too much of a good thing for National Bank, its president suggesting the lender will ease up on their use as it focuses on growing originations through, ahem, road reps and branches.

“In Ontario, we’ve seen good volume growth,” President and CEO Louis Vachon told analysts during a conference call Thursday. “A lot of that is coming – 40, 45 per cent – from brokers.

“Clearly, for the next few quarters we are going to look at net margins in that business … and we’re going to look at hopefully increasing the branch and mobile sales force contribution in Ontario and (although) we’re not pulling out of the mortgage brokers market, on a relative basis we’d like to reduce it a little bit.”

The comments came with the release of second quarter results pointing to a 13 per cent rise in the funded volume of residential mortgages, compared to the year-ago period.

Brokers, outside of Quebec, have contributed a disproportionately large share of that business to the bank, at the same time National has focused on cross-selling to those broker clients, according to bank officials.

Still, despite those cross-selling opportunities, profit margins attached to broker sales have hemmed in profit, suggested bank execs during Thursday’s conference call. The lender is now looking to transfer a greater share of originations outside its home province of Quebec to its proprietary branch network and mobile mortgage specialist teams.

That formula would better mirror the model used with La Belle Province, suggested Vachon, quick to reaffirm the bank’s commitment to the continued use of brokers.

Mortgage professionals have grown their reliance on National Bank, pointing to varied product line and broker services. At the same time the lender has also worked on building relationships with Realtors as a way of winning direct client referrals.

Some brokers have objected, arguing it effectively circumvents the broker channel and may limit client options.
 

  • Bill Nugent on 2012-06-06 5:16:14 AM

    We have mentioned for years when we have had the opportunity to address officials of the different lenders that brokers are more than willing to work with the financial institutions to cross sell their products. We are able to have the client approved for a $1,000,000 mortgage but unable to sell them a unsecured credit line, visa or bank account. Brokers know that cross selling is important but the lenders have to trust them to do the job if they are given the tools to do this for them. at the end of the day it is in our interest to have the financial institutions healty as we do not need any more exits from the broker channel.

  • No Cross Selling on 2012-06-06 5:28:01 AM

    I have no interest in cross selling for the fi. Thats their job whether they can keep their clients. Dont wanna be bog down over selling an anxilary service. Thats watch they have branches for.

  • Ron Butler on 2012-06-06 5:41:13 AM

    It's funny when you see someone puts their on name on the post like Bill did it's usually a thoughtful insight.

    When it's a "too heck with the lender post" it's always No Cross Selling.

    I respect the fact some of us may not wish to cross sell the FI products; but can't we see that if we are relentlessly non-supportive of lender profits we run the risk of losing the lender. Competitive rate mortgages are a slim margin business and we should all listen to ideas that keep quality lenders on side.

  • Angela Wong-Liao, Invis Inc on 2012-06-06 5:50:03 AM

    Writing is on the wall that we have to revise our strategy if we are counting on the support of banks. Monolines is a good alternative, however, I am concerned about monolines who relied heavily on CMHC because our Finance Minister has indicated that he will not increase CMHC limit and he may consider of removing CMHC from a crown corporation.

  • Jim T.....Advent mortgage on 2012-06-06 6:20:57 AM

    I totally agree with Bill - our channel has to make sense for the lender and if it doesn't you cannot blame them for shutting us down. Like us, they too are a profit seeking business and they should adjust their business as necessary to maximize returns to their shareholders. We need to do what is necessary to make sure the banks value our channel. That means efficiency ratios and funding ratios. Also, don't discount revised compensation plans. Don't be surprised if you see broker compensation adjusting downwards in then near future. It's coming.

  • Bank Lender on 2012-06-06 6:24:32 AM

    I agree 100% with the idea of allowing brokers to cross sell... however, here is the inherent problem -- COMP ! Most brokers will say suuuure, i'll cross sell your product... for how much ? What will I make to sell it ? This is the problem. The banks don't want to PAY COMP (which would be miniscule to the broker for this type of product referral -- there is very little $$ that a lender would be willing to pay for this... they need that line of credit to beef up their profit (if thats the reason they are allowing you to sell it)... if you have to pay a commission to "get it"... the banks won't be interested. Also, you have the various risks and legal chances that a bank takes to allow its products to be sold by brokers. The broker won't be able to actually process the deal, but simply refer the lead to the branch.

    Bottom line is, it may not be worth it to "sell" this ancillary product as a sales person.

    After all... look at the sale of 3rd party mortgage insurance as opposed to bank offered insurance... brokers send the insurance wherever the money is (or to their favorite insurance agent for a referral)...

    I know... I know... many of you who sell the 3rd party insurance do it NOT for the comp -- but because its the better choice for the client... but honestly... if you were getting paid nothing (or next to nothing) to sell that $300/month premium, how passionate would you be spending 30mins selling the mortgage and 3hrs selling insurance ? It just doesnt make sense that it would catch on.

    I could be a bit nuts and cynical, but these days, it helps !

  • Branch Relationship on 2012-06-06 7:24:20 AM

    If the lender and broker is serious about cross selling, then the simplest way to do this is for the lender branches and brokers to establish working relationships for making the referral and proper hand off. But here is the dilemma. Brokers worry about completely losing the client because come renewal time it'll be harder to move that customer. So be careful what you wish for.

  • Jerry on 2012-06-06 8:14:07 AM

    I agree it would be nice to offer some of the other products that the Banks have. I know why they don't. I personally would rather see a slight decrease in the amount they pay us to bring the client and more volume then have the banks leave the broker channel as they don't see it as profitable. I would also like our "partners"( banks and mono ) to stop competing with us if they would do a reduced commission. This seems like the best plan of action instead of hiring road reps and having benefits, pensions and overhead, severances, insurance etc all the costs of having employees of the bank. Is it at the end of the day when the lenders factor in the costs of hiring internal sales force is it any cheaper? Paying them 50bps on a deal but having all the extras? I think the solution is to cut commissions slightly and work with us not against us.

  • Sua Truong on 2012-06-09 4:59:18 AM

    Maybe some of you cynical brokers have been in the money game too long that you actually need additonal compensation to promote/cross sell your clients other products to support/enhance relationship with your lender and your client. I have on countless occasion directed & prepped clients and relayed to the FI about other products client would be interested in applying for. Clients have taken RRSP loans/mutual funds/LOC/CC at the branch because of me but I didn't ask or required compensation. Why? I believe in Karma. What goes around comes around.

  • Been There on 2012-06-09 6:47:21 AM

    The Banks are consistently reducing the comissions to its mobile specialists. Often these specialists are paid as low as 15 basis points for a deal. They are looking for various ways to leverage these sales forces to cross sell a host of other bank products most notably creditor insurance. They don't want to pay for these products at all. They are moving in the direction of converting their comissioned mobile mortgage reps to becoming salaried/comissioned mobile bankers. The industry is changing my friends. The days of big money are over. Be prepared to take a serious haircut on your entire commission structure from these FI's.

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