Digital threat to mortgage advisers

All three banks who have reported results recently have highlighted their push into digital tools to grow their businesses. This provides a threat and an opportunity to mortgage advisers. Philip Macalister explains.

BNZ is clearly wanting to develop digital tools to service customers and keep them within its own channels, rather than through third parties.

“The more things get digitised, the more we can deepen our relationships with our customers and continue to strengthen our proprietary channels, and proprietary relationships with our customers," out-going chief executive Anthoy Healy says.

It is a threat to mortgage advisers, he concedes, but “the brokers can digitise, too.”

“The challenge in financial services is that no one quite knows what the future looks like. What we do know is there are emerging capabilities that are going to make a difference. That’s why we’ve been investing in a digital platform, in automation, in AI (artificial intelligence), in data and analytics, all of these capabilities.

“It’s why we’re partnering with people like Apple and Google Pay and Intel. The future is much more about digital platforms and partnerships. If brokers can invest and take advantage of those trends, then they’ll continue to remain relevant and be successful.“

Over at Westpac its chief executive David McLean says: “There’s a certain segment of the market where the brokers really do provide great service to the customer, but we’re not necessarily aiming to grow it.”

He says there are a number of forces at play. On one hand the bank wants to drive customers to its digital platforms, on the other there is regulation.

"One of the things that will be interesting is the dynamic of the interface between customer needs, where our digital and data offerings to customers can provide better outcomes. On the other hand, we’ve got regulation proposing to make fees, and what customers are paying, a lot more transparent."

McLean says the digital tools will “have some effect (on distribution), "but I think it will have an effect on ordinary, vanilla transactions far more.”

“The everyday stuff you do with the bank will become completely digital, if it’s not already. People will want to do those normal transactions when it suits them, 24/7, on their mobile phone, etc.

“When it comes to a complicated decision – i.e. “How do I start thinking about how I save for my retirement?” or “How do you go about buying a first home?” – those sorts of questions will lead people to want to talk to an expert human being, at least in our lifetime.”

“That is increasingly going to be the role of the bank or the broker; you’ve got to become an expert adviser, who helps people through their difficult decisions.”

Healy says in the three and a half years he has been running BNZ: “It’s certainly (become) a more digitised bank.”

“Ninety percent of all interactions our customers have is now digital. 40% of our retail sales are digital. When I took over, three and a half years ago, those numbers were much, much lower.“

Mortgage People former director Carey Brunel believes that digital products will take up a significant part of the market in the near future. He predicts 10-15% of generic types of loans, that is simple and clean deals, will be done online in the next three years. That level will grow to 30-40% in five to 10 years time.

Mortgage advisers will need to increase this skill base in the digital area and those who do so "will do extraordinarily well."

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