IS WHITE THE NEW BLACK?

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1 01 IS WHITE THE NEW BLACK? How white label lending can add value to you and your customers With mortgage brokers now accounting for over 53%* of all loans generated in Australia, it is clear customers recognise the tremendous value brokers bring to the home loan journey. Of course, every customer is different with different home ownership dreams and different financial situations. Accordingly brokers need to be across the full spectrum of loan products, to ensure they can provide the best possible loan options to a diverse range of customers. White label loans have become increasingly popular in the dynamic mortgage market, and the product footprint is growing, with the vast majority of brokers now having access to a white label product to tap into as an alternative product to the major banks. So, is white the new black? White label is a win for all involved consumers get great products at sharp rates, brokers get efficient service with competitive commissions and the aggregator gets brand aligned products with healthy returns. This paper is designed to walk you through the evolution of white label lending and the value it brings to customers, brokers and aggregators alike. In section one, we explain the benefits of white label loans for customers, and demonstrate that value and customer service are now the driving factor behind the popularity of white label. In section two, we provide insights to the broker benefits and the broker s view in recommending white label to their customers. In section three, we look at the aggregator s perspective and use the case study of AFG s white label offering to show how aggregator s are driving the growth of white label for their business. *Source RBA ABS Comparator quarterly surveys

2 IT ALL STARTS WITH THE CUSTOMER 02 Great consumer products at great prices that offer value have traditionally been the fundamentals of white label. But as the market evolves, great service and faster turnaround times have become just as, if not more, important. Top performing brokers live and breathe customer service, and are committed to sourcing the best loans that suit their customers financial needs. In this sense, white label loans are a crucial tool for brokers to have under their belts. Below are some examples of how Advantedge is helping brokers secure customer satisfaction and loyalty through consistent, dedicated service while supporting the primacy of the brokercustomer relationship pre, during and post settlement. Support Sourcing a home loan can be the biggest financial decision a person ever makes. Understandably then, customers demand support from their brokers and rely on them as trusted advisers to guide them through the process. An outdated view of white label might be that, because of the lower cost, there is also a lower level of support given to broker customers. This is simply untrue, Business Development Managers, Broker Support Teams, Scenarios Team with credit authority and a dedicated customer care team are available through Advantedge. These services ensure brokers are equipped to give the right level of support to their customers. The Advantedge first-touch unconditional approval checklist Pre-order the valuation and don t submit until the valuation has been completed and the valuation report attached. Complete and sign the Broker Declaration, including file note. Customer to complete, sign and date the Privacy Consent. Identity verification documents submitted with 100 point ID form. Income documents provided and satisfactory to income verification. Submission checklist completed. Submission coversheet and document uploads using section headers or ApplyOnline. Retention Repeat business and referral business are crucial to building a broker s book, so retaining customers through quality service is a priority. Advantedge can also step in to help brokers with this process. For example, through a proactive customer retention program, Advantedge contacts a broker letting them know of customers who are rolling off their fixed rate term or interest only period within the next 45 days. This friendly reminder helps brokers build customer relationships, and step in at a critical point in time to help the customer on the next step of their loan journey. Service First touch unconditional approval is the dream for both the broker and the customer as it makes the process smooth and hassle free. To ensure white label customers receive market-leading turnaround times, Advantedge recently introduced a quality program to enable brokers to help their customers receive faster turnaround times for formal approvals. For submissions that tick all the boxes, approval can be between 24 to 48 hours which is gold for any customer. A white label success story A few years ago, my family was struggling financially. We own a small business in Sydney s South-West. Our circumstances began to change, and business income began to fall behind growing family expenses. When our broker told us about white label loans, we immediately saw their benefits and signed up to refinance from our existing loan with a major lender. We were able to pay off four credit cards and two loans. We could also put $340 dollar back into the family budget. Norm and Simone Frazer

3 ADDING VALUE TO BROKERS 03 White label has come a long way since its beginnings in the industry just a few years ago. From a new concept that brokers were curious about, to a disruptive force that s become one of the top product searches listed on many lending panels. White label loans have grown in momentum. In 2014 only 35% of brokers in the market had access to Advantedge white label products, but by the end of the year this figure had grown to around 85%! So what is it that makes white label loans so compelling for brokers? Exclusivity The fact these loans are exclusively available through the broker channel means the broker, rather than the lender, becomes the face of the loan. In a paradoxical way the lack of brand on the loan helps enhance the broker s own brand, by providing customers with something they can t access themselves anywhere else. This strengthens the broker-customer relationship and also builds loyalty. Tailored support White label loans generally come fully supported with a range of marketing collateral, including brochures and websites to help clients better understand what white label is and why it may work for them. IN 2014 ONLY 35% OF BROKERS IN THE MARKET HAD ACCESS TO ADVANTEDGE WHITE LABEL PRODUCTS, BUT BY THE END OF THE YEAR THIS FIGURE GREW TO 85% Your customers will likely feel more at ease once they are able to educate themselves on the product, and understand where it has come from. In workshopping white label loan application enquiries, brokers have access to a dedicated Scenarios Team. Unlike some other scenario lines in the market, Advantedge s team members enjoy a delegated credit authority, so a scenario yes will be a yes when the application is submitted. In addition, Credit Managers are available via direct phone or to help with complex deals. Advantedge manually underwrites every application, so you have the confidence of knowing that a real person will be making the decision. Advantedge also encourages its Credit Managers to call the broker on each and every deal, because we understand that broker access to credit is critical. Flexibility According to the Mortgage and Finance Association of Australia, and Ernst & Young s research paper, Observations on the value of mortgage broking, brokers are proficient at matching the right product to their customers needs. The research shows that nearly half (47%) of customers believe they can get access to a wider range of products through a broker versus any other channel. White label loans attest to this, as brokers are not only empowered to provide a product customers can t get through a bank or via online channels, but also to provide a tailored product with a range of features. White label customers only pay for the essential features they actually use. They can choose to have debit cards and redraw facilities, opting for a fit-for-purpose product that saves them money over the life of their loan. Interestingly, as the white label industry matures, we are seeing a shift in how these loans are used. Traditionally our target market has been the big core of lending within Australia, the mum and dad borrowers. But now we are seeing those brokers who are more familiar with the offer securing more complex transactions, involving multiple trusts and companies. Advantedge has a personalised lending team to help support and structure these more sophisticated deals, meaning you don t have to feel pigeon-holed into one segment of the market. Security While clients can be unsure about a no-name brand at first, being able to explain that their loan is funded by one of Australia s biggest banks, but often for a lower price than a bank branded loan, is a powerful card for brokers to play.

4 A BROKER S PERSPECTIVE 04 John Tindall Choice Home Loans Wattle Grove John has been in the financial services industry for 30 years. Three years ago, he started his own broking business in Sydney s South-West, helping Australians meet their home ownership goals. We spoke to John about why he uses white label, and how he sells it to his customers. Q: How do you sell white label? A: I use an analogy to help my customers understand white label. I tell them that the loan is backed by National Australia Bank, it s just a low cost-option like Jetstar is to Qantas. Once customers hear this association to two well-known, big-name brands they are immediately comfortable with the concept and keen to hear more. Q: When did you start using white label? A: I have used white label from day one, as I believe white label loans offer a competitive difference to loans offered by the majors. White label means my client can t go directly to a branch for a loan I provide exclusive access to the loan, and can take ownership of it, which removes any channel conflict. My customers also appreciate the fact that the customer care team is Australia based and this is an advantage compared to the other lenders who outsource to other countries. Q: How does providing a white label offering benefit you? A: White label benefits me by benefiting my clients! This is primarily because white label loans have a lower interest rate, which reflects in part that white label does not have the expenses associated with bricks and mortar or 50,000 staff. In addition, turnaround times from Advantedge have been very good, and the support staff are always available to assist me. My customers also appreciate the fact that the customer care team is Australia based and this is an advantage compared to the other lenders who outsource to other countries. Q: What are the main benefits to your customers? A: White label loans are low-cost, simple products ideal for customers who don t need a range of bells and whistles. A few years ago, there was a paradigm where everyone needed special features, including an offset account as there was no differentiation in the lending market. Now, however, loans without an offset may be 25 basis points, or more, cheaper than the full featured option. Not every borrower can permanently dedicate money to their offset, so it makes better financial sense for them to save money with the white label version.

5 WHAT THE AGGREGATORS SAY 05 The growth of white label can also be attributed to the support of Australia s leading aggregators. Advantedge first pioneered the white label industry by creating white label products for NAB owned aggregators PLAN Australia, Choice and FAST. The success of these products meant other aggregators were demanding access to similar white label offerings. As a result, Advantedge continued to innovate by creating a new category Partner Private Label. The Partner Private Label range is an industry first, and through this Advantedge delivers tailored white label options, ongoing marketing support, dedicated Business Development Managers and customer service to partner aggregators which is not offered by any other non-major lender. In 2015 alone Advantedge launched six new white label partnerships with leading aggregators Astute Financial, AFG, Connective, Loan Market, LJ Hooker Home Loans and Smartline. Each of these products is tailored to suit the aggregators Customer Value Proposition and master-brand. These products are both innovative and highly effective and their success is shown through strong take up rates. For example, the AFG product launched in 2015 dramatically surpassed expectations. Initially, the AFG pilot program generated $50 million in application volumes. Advantedge then organised a pre-launch which generated $150 million before conducting a full launch which saw application volumes spike to $350 million in March just one month post-launch. $150M $350M Case study: the AFG Roll Out At AFG, we made the decision to adopt a white label offering in mid-2014, and worked with Advantedge to find a tailored solution that suited our network. It was a major, strategic project that involved months of preparation, hundreds of man hours and a national roll-out with over 50 broker sessions across the country. We accredited 2,800 brokers in two months and a year later had settled over $1 billion in product. It was the fastest ever start for a product on the AFG panel in 20 years and continues to be a big part of the AFG Home Loan offer. We have seen the partnership as very successful and the teams in both businesses are proud of the result. I think white label, if done right, can add plenty of value to the customer and everyone else involved and that s why it s a growing sector. With over 40 lenders on the AFG panel, and that number growing, competition is fierce and that s great for the end consumer. The products that carry the AFG brand need to be as good as, or better than, what s out there and we need to back that up with a great service proposition. Partnering with Advantedge has enabled us to do that. I think white label, if done right, can add plenty of value to the customer and everyone else involved and that s why it s a growing sector. - Chris Slater, General Manager, AFG Home Loan $50M Before pre-launch After pre-launch One month post full-launch PCFLend Customer Satisfaction Survey: Brokers rate ownership of client without branch conflict, simple product offering and offers quality products that are easy to sell as some of the best features of white label. AFG Customer Satisfaction Survey: Brokers rate high standards of service and responsiveness as the best features of their white label products.

6 WHERE TO FROM HERE? 06 Between June 2013 and June 2015, according to the Quarterly Comparator Data, the percentage of white label loans written by brokers had doubled. Customers, brokers and aggregators are embracing white label, as the simplicity, value and competitiveness of the products is hard to beat. As an attacker brand, Advantedge and its white label loans have disrupted a mortgage market typically dominated by major lenders. While the Big Four may have the advantage of reputation and brand, Advantedge has had to prove its worth and customers, brokers and aggregators are voting with their feet by increasingly choosing white label. The lending landscape is shifting, and white label is now a dominant force that competes with products offered by the major players. Ultimately, this increased competition is a great outcome for the end customer as it pushes business to innovate, and deliver sharper rates or extra features to make their products stand out. The white label journey is by no means over, and we expect the growth of white label to continue. At Advantedge, we will continue to enhance our product and service offering to fuel this growth and stay at the top of a competitive market. In an environment where more and more customers are using brokers to source their loans, white label has an important role to play to empower brokers via their own-branded products, and to improve financial outcomes for customers. BETWEEN JUNE 2013 AND JUNE 2015, THE PERCENTAGE OF WHITE LABEL LOANS WRITTEN BY BROKERS HAS INCREASED 100% * *According to Quarterly Comparator Data