NAB to steer evolution of brokers

National Australia Bank may finally be getting serious about addressing its poor performance in the home loan market. Yesterday it confirmed that it would acquire the Challenger Financial Service's mortgage management division.

For an outlay of  $385 million NAB takes over three mortgage aggregators - Plan, Fast and Choice - that service a total of 5700 brokers who wrote $33 billion of business in the 2008/09 financial year and have $110 billion of loans under administration.

It also gets Challenger's 17.5 per cent of lender Homeloans Ltd, which will increase to 41 per cent.

And it gets the Challenger mortgage management business, a white label funding and servicing operation.

NAB will acquire $4 billion of loans in the mortgage management warehouse and will service the highly profitable back book, which remains with Challenger.

Plan, Fast and Choice will come under the wing of NAB Broker, a division of the personal banking group that looks after the broker distribution.

NAB Broker executive general manager, Matt Lawler, said the broker market was evolving and the bank was keen to play a role beyond its current involvement as a product supplier.

New national consumer credit law, to take effect next year, includes principles of responsible lending that will require lenders and their intermediaries to make a much more thorough assessment of the suitability of a loan product for the borrower.

Lawler said: "The industry is moving beyond product sales and heading towards the advice model. It will also involve a broader product mix, as brokers talk to their clients about insurance and deposit products."

Lawler said the transition to the new law, and regulation by the Australian Securities and Investments Commission, had some parallels with the changes that affected financial planners when the Financial Services Reform Act took effect in 2004.  

Lawler said: "NAB's ownership of MLC gives us experience in that broader advice space."

As the product manufacturer and owner of the third party distribution, NAB will have to manage the difficult balancing act of allowing its brokers to be independent while promoting its own products through the channel.

Lawler said: "No broker will be remunerated differently because they are part of the NAB group.

"There will be no quotas, no incentives to write our product. We will be very clear about that."