Westpac drops commissions for all customer facing staff, but what about the rest?

Westpac drops commissions for all customer facing staff, but what about the rest?

Westpac has changed the way it pays staff who interact with customers, whether it’s in a branch or over the phone, choosing to drop controversial commission payments in favour of paying them a fixed salary. 

The move -- intended to eliminate the conflict between sales targets and a customer’s best interests -- was recommended to the industry after a special government inquiry, and goes one step further than CBA, NAB and ANZ.

Why does it matter if branch staff were paid commissions?

The commissions paid to frontline workers have been in the spotlight for the last few years, culminating in a series of recommendations made in a final report commissioned by the Australian Banking Association, and handed down against the backdrop of 2017’s banking Royal Commission.

“...Some current (commission) practices carry an unacceptable risk of promoting behaviour that is inconsistent with the interests of customers and should be changed,” Stephen Sedgwick wrote, in his final review of Retail Banking Remuneration. 

“... Incentives have at least appeared to drive behaviour that was not in the best interests of customers and, on occasion, scandalously so.”

The 21 recommendations of his review were mostly adopted by the banking industry, but to various degrees.

‘We’re making an industry leading move’: Westpac

Westpac announced yesterday it has eliminated incentive payments for its customer-facing employees, and instead is replacing them with a permanent fixed pay increase. 

“Introducing a fixed pay increase and removing short term variable incentives for more than 4,000 branch and customer care roles will help give our customers confidence that the service they receive is wholly focused on their banking needs,” Richard Burton said, the acting chief executive of the bank’s consumer division. 

“...This decision will provide these employees with more certainty around their remuneration and recognise the individual service they provide to customers.”

Westpac eliminated sales commissions for branch tellers in 2016, and removed all other commissions for 2300 staff in 2019, replacing them with a $500 annual increase. 

The new agreement extends the changes to other staff who deal with customers, such as phone operators, by replacing other incentives with fixed pay increases, Mr Burton said.

The changes will affect Westpac’s subsidiaries as well, including St George, Bank of Melbourne,and BankSA, when the new remuneration agreement takes effect on October 1.

Do CBA, NAB and ANZ pay their staff commissions?

All big four banks pledged to follow the recommendations of the “Sedgwick report” following its publication in April 2017. Most typically do pay commissions, but they've reworked how they are calculated and are mostly not based on sales performance. 

CBA

Commonwealth Bank stopped paying its branch and contact centre staff commissions that are purely based on financial outcomes, the bank confirmed.

“We implemented the Sedgwick review recommendations in 2017 and de-linked sales to performance for our banking tellers in branch,” a spokeswoman told RateCity.  

“This means we primarily focus on the individual’s contribution to providing exceptional customer service, rewarding them for delivering better customer outcomes, not financial outcomes.”

Other CBA branch staff have their performance evaluated based on a 'customer service' metric.  

“We have a balanced scorecard approach to performance assessment,” the spokeswoman said. “This is largely related to managers assessing employees in relation to customer service and not sales.”

NAB

NAB’s branch and contact centre staff don’t have individual targets, but they do have collective targets, a spokeswoman confirmed, and some roles receive commission payments.

The majority -- 98 per cent -- of staff performance is linked to a “group” target. The spokeswoman did not account for the remainder.

The bank measures frontline staff performance using a scorecard, and no single criteria has a weighting greater than 33 per cent, the spokeswoman said, adding this bested the recommended guidelines.

“NAB is continually reviewing its approach to performance and reward frameworks to ensure they drive the right values and behaviours and deliver positive outcomes for customers,” she said. 

ANZ

ANZ’s approach is similar to NAB’s in that it no longer sets individual sales targets for its in-store staff. Instead, it typically has team targets for branches, the bank confirmed.

But with store traffic on the decline due to the COVID-19 pandemic, the targets have been changed to cover regions.

These key performance metrics are not tied to any commissions, a spokesman told RateCity, adding they consider “all outcomes with equal weighting” during reviews. 

“ANZ moved to team based targets for generalist bankers in branch settings in 2018,” he said.

“As a result, financial performance is now assessed as a contribution to team outcomes rather than individual performance against sales goals.” 

The incentives don’t just apply to staff in a bank at ANZ. The spokesman confirmed they also apply to phone staff interacting with customers.

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How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

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Do the big four banks have guarantor home loans?

Yes, ANZ, Commonwealth Bank, NAB and Westpac all offer guarantor home loans. These mortgages are also offered by many other banks, credit unions and building societies.

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How to break up with your mortgage broker

If you find a mortgage broker giving you generic advice or trying to sell you a competitive offer from an unsuitable lender, you might be better off  breaking up with the mortgage broker and consulting someone else. Breaking up with a mortgage broker can be done over the phone, or via email. You can also raise a complaint, either with the broker’s aggregator or with the Australian Financial Complaints Authority as necessary.

As licensed industry professionals, mortgage brokers have the responsibility of giving you accurate advice so that you know what to expect when you apply for a home loan. You may have approached the mortgage broker, for instance, because you have questions about the terms of a home loan a lender offered you. 

You should remember that mortgage brokers are obliged by law to act in your best interests and as part of complying with The Australian Securities and Investments Commission’s (ASIC) regulations. If you feel you didn’t get the right advice from the mortgage broker, or that you lost money as a result of accepting the broker’s suggestions regarding a lender or home loan offer, you can file a complaint with the ASIC and seek compensation. 

When you first speak to a mortgage broker, consider asking them about their Lender Panel, which is the list of lenders they usually recommend and who may pay them a commission. This information can help you decide if the advice they give you has anything to do with the remuneration they may receive from one or more lenders.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

Do mortgage brokers need a consumer credit license?

In Australia, mortgage brokers are defined by law as being credit service or assistance providers, meaning that they help borrowers connect with lenders. Mortgage brokers may not always need a consumer credit license however if they’re operating solo they will need an Australian Credit License (ACL). Further, they may also need to comply with requirements asking them to mention their license number in full.

Some mortgage brokers can be “credit representatives”, or franchisees of a mortgage aggregator. In this case, if the aggregator has a license, the mortgage broker need not have one. The reasoning for this is that the franchise agreement usually requires mortgage brokers to comply with the laws applicable to the aggregator. If you’re speaking to a mortgage broker, you can ask them if they receive commissions from lenders, which is a good indicator that they need to be licensed. Consider requesting their license details if they don’t give you the details beforehand. 

You should remember that such a license protects you if you’re given incorrect or misleading advice that results in a home loan application rejection or any financial loss. Brokers are regulated by the Australian Securities & Investment Commission (ASIC), as per the National Consumer Credit Protection (NCCP) Act. 

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.

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Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.