04 May The best ways to deal with the banks
In today’s show Andrew Mirams, from Intuitive Finance, tells us some of his tips for dealing with the banks.
Kevin: I received an interesting e-mail from Stephen, who writes about the session I did recently with Andrew Mirams from Intuitive Finance talking about mortgage broking. What he asks in the question – and Stephen, thank you for that – is he just wants to know some tips on what Andrew thinks about the best ways to deal with the banks.
Andrew joins me. Good day, Andrew. How are you doing?
Andrew: I’m going well, Kevin. How are you?
Kevin: Do you have any advice there for Stephen and anyone else who may be thinking about the same subject?
Andrew: It’s really interesting. If you just keep it in the broader context of tips for dealing with your banks, it probably depends what you’re doing with them about – if it’s opening an account or getting your Internet banking set up or getting a credit card or actually then going in and asking for a loan. We could probably allow the context of that to run off in a whole different range of ways, but let’s keep it in the area of expertise and in the lending side.
Kevin: I think that’s pretty much where Stephen was talking. It’s a truncated e-mail, but he does actually say he’s looking at talking to the bank about future financing. What would be your advice to him?
Andrew: My first tip would be to seek independent advice, and that would be to find a good mortgage broker. Obviously, we’d love to help Stephen here at Intuitive Finance. But going in and dealing directly with the banks, often their primary goal will be selling them what they think is the best. They don’t have the range of options as mortgage brokers do.
If you know specifically what you want, etc., then you have to go in and be very open and honest with them. But it depends. If you’re really just shopping around, then I wouldn’t go into just one bank and say, “This is what I want” and “Yes, I’m happy with that.”
Kevin: I guess it’s a key point not to rely on just dealing with the one bank. Shop around at several. This is probably the reason why brokers have become so popular, because you guys actually don’t need to talk to the bank managers because you know what the current deals are.
Andrew: Absolutely, yes. Brokers now are representing more than 50% of mortgages across Australia, and for some of the banks, that’s even a higher figure. We’re experts in that field. We can generally ascertain what our client’s needs are first and then match them to the right bank and the right product.
When you go and you talk about tips on dealing with the bank, often people go in and they don’t know, they rely on the bank manager, and bank managers have a wide range of experience – from a first-timer who might be someone out of university to your long-term banker. It really depends on the relationship you have and the advice you’re getting as to what you’re going to get, whereas a broker will generally be an expert in their field and know exactly how to match the client’s requirements with the end outcome.
Kevin: If I have a good relationship with my bank manager and I’ve spoken to him and I believe I’ve driven the deal as far as I possibly can, is that a good point to still consult a broker and say, “This is what I’ve done. Is it a good deal?” – in other words, getting almost a third person’s input into the deal.
Andrew: Absolutely. Banking and finance is all about relationships, because at the end of the day, all the lenders are selling basically the same thing. They all do things a little bit differently, they all have features and niches that they all do, but in broad terms, they’re all doing the same thing. They’re looking to lend money.
If you have a great relationship with a manager in a bank, we often will say, “We don’t want to step on the toes there. Make sure you do that.” But I’m happy as a third party just to come in and say, “Yes, that’s a really good deal,” or “I think they can do a little bit better,” or “Last week, we got a better deal so go back and see if they’re willing to do that,” etc., and give them some advice.
If then the manager is not willing to do that, that’s when the ball comes back into our court and we can show the client how we can do it maybe better, maybe cheaper, maybe with access to more funds, depending on what their requirements actually are.
Kevin: Do the banks actually like having a broker in the middle of the deal? Obviously, this has been the trend. You said over 50% of loans are now done through brokers. The banks are obviously encouraging that?
Andrew: Yes, absolutely, because it’s cheaper for them to pay a third party – as in a mortgage broker – a commission rather than have to have all the infrastructure in place with a branch network and paying wages and things like that.
The approval rate is very strong with the mortgage broking industry. The loan reuse rate is very low in comparison to what the banks do in general themselves directly. The banks recognize that brokers are professionals in their field and are able to present deals in a much better fashion that gets a higher approval rate and a much lower reuse rate.
Yes, banks really enjoy dealing with brokers. But that’s not to say all the managers and branches – because they have their own sales targets – enjoy it as much as the actual CEOs might, but yes, as a rule, banks like dealing with brokers.
Kevin: Stephen, I want to thank you for sending the e-mail into us. It’s a good question. It was great to have it on the table, and it was good for Andrew to address it so directly, too.
Andrew, thanks for your time. Andrew Mirams, of course, is from Intuitive Finance. You can find them through our website on the homepage. They are one of our supporters, and we thank them for that. Andrew, we’ll talk to you again soon.
Andrew: Thanks, Kevin.