Ross Greenwood speaks to ANZ boss Shayne Elliott who says
“there’s still a really powerful role for mortgage brokers,” and he’s eager to “figure a solution” to keep mortgage brokers despite recommendations from the Banking Royal Commission.
Ross Greenwood: Welcome back to money news right around Australia. It was last Monday evening from Parliament House in Canberra that I told you about the final report from the royal commission. The misconduct in the banking, financial services, and superannuation. Inside those final recommendations from Kenneth Hayne QC, included some key lines. In fact, it was Page 411 of Volume one that was the key.
It basically went to, if you like the behavior and indeed Kenneth Hayne QC’s expectations of the senior executives inside our banks. This is the key one that then subsequently saw not only Andrew Thorburn and Dr. Ken Henry resign from the National Australia Bank late last week, but on top of that also looking at the expectations of what might happen inside the banks.
Well, one I can tell you is a little paragraph and that is Kenneth Hayne QC wrote, “I have little doubt that Mr. Elliott, Shayne Elliott chief executive of ANZ is also well aware of the size and nature of the tasks that lie ahead at the ANZ Bank.” He said a similar thing about Matt Coleman, the Chief Executive of the Commonwealth Bank that we spoke to last week. He indicated at the time that Brian Hartzer Chief Executive of Westpac.
He said he does not doubt when he says Westpac has sought to reset its relationship with ASIC, but he does note that Westpac stands apart from the other three major banks by seeking to maintain some aspects of its wealth business. I wondered whether Shane Elliott Chief Executive of ANZ was a little relieved at hearing that paragraph that he is well aware of the size and nature of the tasks that lie ahead of the ANZ. Let’s find out. He is with me in the studio Shane Elliot many thanks for your time.
Interview with: Shayne Elliot, CEO, ANZ
Shane Elliott: Very welcome, thank you.
Ross Greenwood: Okay. Was that some final report even that paragraph when you could read the others around it? Was at least something personally of a relief to you?
Shane Elliott: I don’t think relief’s the right word. I wasn’t really focused. I didn’t see it as a report card on me. We’re really focused on what it meant for the industry and where we thought the changes would come. It’s good to know that there is something that the industry are doing that are getting reinforced, but the overwhelming report is about the things that we still need to do and so here’s a lot to get done.
Ross Greenwood: There’s plenty in this report, plenty that will change in the future. Clearly, there is potential action that still comes from the corporate regulators ASIC and APA and they have been put on notice that they’ve got to be beefed up and there’s got to be action as a result of this royal commission. Is that something your bank stands ready to adjust towards in the future?
Shane Elliott: Absolutely. There’s no doubt that there is a big part of the theme of this report and we saw that through the actual royal commission itself. Yes, we are ready for it in the sense we know it’s coming. We have to do our best, but our focus is on doing the right thing for customers. Getting the right culture going in our bank so that we can avoid making mistakes that we don’t have to deal with that in the future.
Ross Greenwood: Okay, but you are the chief executive of the bank and you can talk until the day is in the end. It’s actually the people at the bottom end of your bank who are actually servicing the customers face to face that they’re the ones who have got to get this culture. They’re the ones who have got through every single day do the right thing or know that they’ll be snuffed out of the bank themselves.
Shane Elliott: Absolutely and that’s why it’s an enormous task. we’re 40,000 people at ANZ. Not all of them work here in Australia, but it’s an enormous task. That’s why this perhaps overused word, but it is about the culture. I can write all the right rules, I can send all the right memos to people, I can set policies. It’s really about what is the spirit with which our people come to work every day? What are they thinking about? What’s motivating them? What do they want to do? What do they not want to do? That takes a lot of time. It is not something that you can turn on a dime.
The good news for ANZ and I believe that many of the industry is that we’re not starting from zero. We’ve already been making changes. We’ve made changes to remuneration. We’ve made changes to how we reward people, what we recognize, the kind of people we hire. We’ve also made changes to holding people to account. We agreed and admitted that at ANZ we had not done a good job of that in the past. We were too tolerant of people who were not living up to the standards that we wanted and we’ve taken stronger action and we’ve got a lot more to do.
Ross Greenwood: Have you take action on executive remuneration?
Shane Elliott: Yes and you will have seen that executive remuneration from my job, the most senior people in the company is lower than it was in the past. It’s more deferred, it’s more at risk and we’ve actually implemented what’s known as clawbacks so some people that we may have we’ve paid in the past and headed to sell and receive the money, we took it off.
Ross Greenwood: Do bank chief executives get paid too much money in this country?
Shane Elliott: Well, it’s not a matter for me to answer that.
Ross Greenwood: Well it’s got to be. You’ve got a salary.
Shane Elliott: Well, yes, but I don’t employ one. Our board and our shareholders get to vote on that every year and they did just recently at the AGM.
Ross Greenwood: The did?
Shane Elliott: Yes.
Ross Greenwood: Yes. Tell me about that because clearly, the shareholders are putting banks on notice that if they’re not happy with the way the bank is behaving or indeed the level of remuneration. They’re prepared to quite clearly vote against or vote down that executive remuneration.
Shane Elliott: Absolutely and they express their views intended the remuneration report which is not just about you asked about chief executives. It’s not just about me. My own compensation with my performance rights, the long term peace. I could think I’ve got I don’t know it was 94%t voted in favor of that. That’s really for them.
Ross Greenwood: Okay. One interesting thing about this is world class executives to do a world-class job here in Australia. If you suddenly weren’t at the ANZ, if you go to market value elsewhere in the world you believe in it?
Shane Elliott: Never thought about it. No, I don’t think about being anywhere else. I’m quite happy at ANZ. This is the job I want.
Ross Greenwood: I understand that, but you understand what I’m saying. It’s something that if you weren’t there, they would have to go and replace you. Look at the global market as say, for example, a National Australia Bank something to do right.
Shane Elliott: That’s true. I would say best places to find people who know a little bit about what they’re doing, whether that’s the industry and I’ve got a great experience and also know a little bit about this market. I think that does matter.
Shane Elliott: I thought they’ll go from New Zealand.
Shane Elliott: Well, it’s been a bit of a track record.
Ross Greenwood: It has been a track record there. Okay. I want to go to a couple of other bits and pieces. One other recommendation in there which is controversial because there are differences of opinions from the various banks as we’ve seen it so far is mortgage brokers where the Royal Commission simply says straight out that mortgage brokers should not be remunerated by way of commission into the future. What’s your own view on this?
Shane Elliott: Well, I think this is probably the most profound kind of immediate change that’s coming out that really restructure the industry. It’s a bit too early to say where it’ll go because we’ve got the government suggesting they’re going to take one path and the opposition another, but it’s undoubted that the intention here is to remove the potential conflict. Are brokers acting in the best interest of their customers or is the way they get paid today by the banks that’s influencing them? That’s a really big question and so the commissioners recommended we remove that potential for conflict and make the borrower pay.
Ross Greenwood: Is that fear or is that the right system? Is it the right way to improve the market?
Shane Elliott: Well that’s a different question. He would have to look at that.
Ross Greenwood: The ANZ gets 55% of its loans through mortgage brokers.
Shane Elliott: That’s right.
Ross Greenwood: 1f that changed tomorrow, do you even have the people in your own in-house capabilities to be able to well assess all of the people walking through the door?
Shane Elliott: No, we do. We already assess them. Every single one of those loans that comes through a broker, we still assess those with ourselves. You’re right. It would change the structure absolutely. I don’t think anybody’s intention including the commissioner here is trying to decimate the brokerage industry.
The brokers provide a great service to customers. Customers have voted with their feet and decided that’s a service they like. They get great value from it. It’s pro competition. I think the change will come, but it’s still a really powerful role for brokers in this market.
Ross Greenwood: Okay. Who’s right here? The Productivity Commission came down with one recommendation and then on the other side you had Kenneth Hayne come down with a completely opposite recommendation.
Shane Elliott: Well, my view is that brokers play an important role. People want to have that service. They find it easier to deal with the brokers. They find they get a lot of price transparency. We support that. The question about how they should get paid is a really good one. We’re completely open to work with the industry. Funny enough tomorrow night I’ll be Rossing a dinner with some of the leading brokers just coincidence in terms of timing. Our commitment is to work with them to figure a solution that is in the best interests of our joint customers and I’m confident we can do so. This has been a really innovative sector.
Mortgage broking is growing because they’re good at what they do. My experience is that the vast bulk of brokers are decent hardworking and do the right thing by their customers.
Ross Greenwood: Okay, then how is it that we have people ringing us up who say that they’ve been to a bank, they get knocked back for a loan, they turn up to the mortgage broker, they suddenly get the loan may be from the same bank. How could that possibly happen if the credit sort of process is as robust and rigorous through the broker channel as it is through of the bank?
Shane Elliott: There’ll always be anecdotes of things that have happened and I’m not doubting their truthfulness, but the reality is that that has not been the norm. The bank process as I said we assess our loans irrespective of which channel they come through, goes through exactly the same checks and balances. I think it’s fair to say again, with brokers, when it works really well, they’re good at having a really close personal relationship with their customer and making sure that all the facts are on the table for the assessor to assess.
Ross Greenwood: Okay. We’re going to take a break because when I come back and take the calls on 131873 is your chance to talk to the boss of the ANZ Bank, Shayne Elliott who’s happy to take your calls. One last thing, you said it’s all about or should I say the bank changing? This whole thing about culture profit versus the customer’s interest. To me, at least one example of where the ANZ today compared with the past is putting the customer’s interest ahead of the shareholders’ interest.
Shane Elliott: Well, one, when we eradicated all the ATM fees. We have eradicated well over 100 million dollars worth of fees over the last year. In fact, it may even stretch a lot more than that. That clearly is not in shareholders’ interests. That is clearly putting the customers’ needs first.
Ross Greenwood: Okay, I’ll ask you supplementary question to that. Then how much of taking items out there?
Shane Elliott: Well, we haven’t taken any [crosstalk] nothing more than we normally would.
Ross Greenwood: Yes. As a result, it’s cost you money.
Shane Elliott: Oh, absolute it has cost us money. No doubt about it.
Ross Greenwood: Okay. Shayne Elliott, we’ll be back very shortly 131873. Jump in the line if you want to ask a question. Plenty of them will no doubt and we’ll be back very shortly. Welcome back to Money News right around the country with the chief executive of the ANZ Bank Shayne Elliott taking your calls. Tell you what, quick one. Greg in Warringah ANZ and all the banks seem to chase endless improvements in returns.
This has no end, no outcome which is satisfying. Whilst this is done on my behalf it takes us nowhere. Would the ANZ take a different approach? Be bold and change the game e.g. would ANZ create a not for profit component of its book of business to support Australia directly. Maybe provide free of charge bank to farmers, emergency service workers, key workers to obtain mortgages at cost. Maybe the RBA rates run by staff that have training and processes. Is that too difficult for a bank to do?
Shane Elliott: Oh, it’s an interesting idea. We get into all areas. We do actually have some legal obligations to our shareholders in terms of our responsibility to look after their money. We do a lot of community good. The last time we hit it up was well over $130 million of work we do for the community. Let’s look at something interesting [crosstalk].
Ross Greenwood: Farmers in Townsville what happens with them?
Shane Elliott: Well, we’ve announced a package of stuff like we do when there’s many crises unfortunate in the country. We have debt relief, we put people on interest holidays, we can cut rates. We’ve done a bunch of things that we just realized when customer’s under stressed the best thing we can do is get out of the way and certainly not add to it.
Ross Greenwood: Okay, let’s take a few calls. David in Beacon Hill has been sitting there for a long time. Thank you, David.
David: Good evening Ross. Good evening Mr. Elliott.
Shane Elliott: Good evening.
David: I’ve been a mortgage broker for 15 years, 21 years in a bank before that. My family is devastated by the recommendations of the royal commission. I’d like to know how you feel about the royal commission’s recommendations to cut broker trail and upfront commissions which will force my clients, every other client to pay another large fee when buying their property, and it will effectively reduce my income by about two thirds and put me and thousands of other mortgage brokers out of business.
Ross Greenwood: There you go David, you got the question?
Shane Elliott: Yes. As I said we support the broking industry. We think most brokers like you are decent, hardworking small business owners. There does need to be change in the industry. I think the changes that have been recommended here need to be really thought through and to the impacts that you talk about. We are committed at ANZ to work with the broking industry to innovate and find solutions so that you can continue to be an active an important part of the system.
Ross Greenwood: A follow up question for me if you like, and that is if say, for example, the Labour Party got in, they were the ones who banned commissions for financial advisors for life insurance and superannuation. If say, for example, I then had to pay David three grand or five grand upfront for him to become my mortgage broker what guarantees that you as the ANZ would give me back that three to five grand in cheaper fee to set up the line.
Shane Elliott: Oh, that’s a good question. We’d have to sit through. As I said, that’s what the devil is in the detail. How are we going to make sure the new system works, is transparent and fair and doesn’t create other problems?
Ross Greenwood: That’s the problem I suspect as well. Let’s go to Brendan, who’s in Liverpool. Hello Brendan.
Brendan: Good, how are you.
Ross Greenwood: Good, thank you.
Brendan: I was just going to ask that question about giving back to the cost– the upfront cost but I’ll ask another one. I’m active in the property investment space and I’ve got mortgages originated at three banks directly and brokers. What I found with the banks is there is a much larger turnover of staff. You go back into the branch to see the person, six months later and they’re gone or they’re transferred or they’ve been promoted or whatever where their business. They’re in it for the long haul. If you want to build a relationship with someone long term, who knows your situation, I find it easier to do with a broker than it is directly with the bank.
Ross Greenwood: It’s not their point also Brendan?
Shane Elliott: You’re right. As I said brokers provide a really valuable service in them in the market. We want to work really closely to make sense of these new recommendations. I agree with you the value that brokers provide is different to banks. We do other things really well. There is a role for brokers I am really confident that that role will not disappear.
Ross Greenwood: I’ve got to be real fast here. Brian’s in Fairfield. Next Brian. Real fast from Brian.
Brian: Thank you for taking calls. I’ve got a personal loan, it’s $120 a year fees.
Shane Elliott: I don’t know the detail of that well. You’ll have to send me an email.
Ross Greenwood: Okay. Yes. Speaking of that Richard’s in Melbourne. Get on Richard.
Richard: Yes. I just want to confirm that Mr. Elliott does return his emails and that’s pretty cool from somebody in his position. [crosstalk]
Ross Greenwood: There you go. Very nice. I’ll take one final one and that is Gerard who’s in Sanford. Get on Gerard.
Gerard: My question is just if I go into the branch and I’m looking to renegotiate my mortgage, and they basically indicate to me that I’d get a better rate if I went to a mortgage broker.
Ross Greenwood: I see. That’s an interesting one Gerard, do they do that inside your bank?
Shane Elliott: I don’t know. If I don’t know-
Ross Greenwood: Should they do that?
Shane Elliott: If we don’t think we’re the best solution for you and get better service somewhere else yes, we probably should.
Ross Greenwood: That would be putting the customer first, wouldn’t it?
Shane Elliott: Yes.
Ross Greenwood: It is an interesting one. Tell you, Shayne Elliott, always good to have you in the studio with me taking those calls as well. Thank you so much for your time this evening. We’ll do it again sometime soon.
Shane Elliott: We will. Thank you.
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