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Broker Channels and Banks

Big-Banks Dow Jones ran a story Friday on how different banks view brokers.  As those in our industry know, CIBC, Scotia, National Bank, and TD embrace broker business.  BMO and RBC do their own thing.

Last year, BMO lost market share because of their decision to close their broker channel.  Now it says it’s got that share back. As for RBC, according to Dow Jones, it has a mortgage book that’s growing at 17% a year (there was no mention on the profitability of this book however).

RBC’s banking head Dave McKay, was quoted as saying the broker model “just doesn’t work for us.” He says it causes the bank to “lose control” of the customer. 

(Of course, that begs the question: Do customers really want to be “controlled?”  Moreover, do they even realize they’re being controlled?)

BMO VP, Lynne Kilpatrick, says, “When [a] mortgage comes up” for renewal, broker-referred customers “tend to chase the next best rate.”  She says clients now come to BMO “with a warm handoff to the banker, where they can then have a conversation about other banking needs…We do find our ability to cross-sell products that come through the [branch] mortgage specialist is exceptional.”

In short, RBC and BMO deem it critical to manage the client because they want to sell more to the customer than just mortgages.  The last thing they want is for homeowners to build a relationship with a broker (who can suggest any of several other lenders).  We’ve talked about this many times before, so readers probably know our position.

Thankfully, CIBC and others have a far more progressive view of mortgage brokers. CIBC Executive VP, Rick Lunny, says, “We see a tremendous advantage in attracting customers through brokers.”  Scotiabank agrees.  In fact, 53% of Scotiabank’s mortgages were originated by brokers in 2007.

Desjardins analyst Michael Goldberg says Scotia can cross-sell products to broker-clients just as well as it can for branch-originated clients.  (That’s probably because Scotia mortgages are always closed at the branch.)