Broker vs Banker Thread [Split from $100K passive income thread]

[see_change]

Hi Brady

You're not going to convince any of the long term members to stay with one bank .

I know some one who lost everything after he had a disagreement with his new loans officer . Multi million dollar commercial portfolio. Had never missed a payment . Was asked to lower his LVR and about three years later he was bankrupt.

We have our loans speed through , CBA , Westpac ( st George ) and the latest one with NAB. Nothing X-collat

On the two occasions we have dealt with banks directly we have been stuffed around . We were told by one that in order to get a loan for a super IP we had to have a financial plan drawn up by their financial adviser . This is incorrect but we didn't find out until we had paid several thousand for something that was a waste of time and money. Then.. prior to settlement ( after the initial 90 day approval ) the bank told us they wouldn't lend us as much so we ended up with an LVR of 65 % ) .

We bought a property using our LOC and refinanced it with CBA . Very long drawn out process . documents lost . kept on wanting new information ... which they'd already been given . Drawn out long process . No one seemed to know what was going on . oh and this was going through a " relationship managers "

My experience with brokers has been completely the opposite . They know all about the various products available from the different banks and they listen to what we want .

They usually deal with one person ( or team ) at each bank and because they are dealing with the same person / team on an ongoing basis , the banks seem to listen to the brokers more than they listen to an individual as there is more at stake in terms of ongoing business I think this is the key issue as to why brokers seem to work better for many people here .

We have had relationship managers with all the banks we've dealt with and our experience with most is that it's a relatively low level within the bank heirachy and something that they do until they've worked out how to do it , then they move on .

Brandy , it sounds like you are the exception .

Cliff

 

[china]

Hi Brady

.

I know some one who lost everything after he had a disagreement with his new loans officer . Multi million dollar commercial portfolio. Had never missed a payment . Was asked to lower his LVR and about three years later he was bankrupt.

We have our loans speed through , CBA , Westpac ( st George ) and the latest one with NAB. Nothing X-collat



Cliff

This must be a good risk managment tool - to have a different lender for every different loan.

I have LOC against my ppor with one lender. This LOC will be used to draw the 20% deposit on IP. When I find the IP, I will organise loan for the remaining 80% + costs from a different lender.

This avoids x-coll and means that I am not at risk of one lender pulling the plug on the entire enterprise.

 

[see_change]

This must be a good risk managment tool - to have a different lender for every different loan.

I have LOC against my ppor with one lender. This LOC will be used to draw the 20% deposit on IP. When I find the IP, I will organise loan for the remaining 80% + costs from a different lender.

This avoids x-coll and means that I am not at risk of one lender pulling the plug on the entire enterprise.

Sensible approach . This was one thing I picked up during my year of analysis paralysis.

Cliff

 

[Brady]

Hi Brady

You're not going to convince any of the long term members to stay with one bank .

I know some one who lost everything after he had a disagreement with his new loans officer . Multi million dollar commercial portfolio. Had never missed a payment . Was asked to lower his LVR and about three years later he was bankrupt.

We have our loans speed through , CBA , Westpac ( st George ) and the latest one with NAB. Nothing X-collat

On the two occasions we have dealt with banks directly we have been stuffed around . We were told by one that in order to get a loan for a super IP we had to have a financial plan drawn up by their financial adviser . This is incorrect but we didn't find out until we had paid several thousand for something that was a waste of time and money. Then.. prior to settlement ( after the initial 90 day approval ) the bank told us they wouldn't lend us as much so we ended up with an LVR of 65 % ) .

We bought a property using our LOC and refinanced it with CBA . Very long drawn out process . documents lost . kept on wanting new information ... which they'd already been given . Drawn out long process . No one seemed to know what was going on . oh and this was going through a " relationship managers "

My experience with brokers has been completely the opposite . They know all about the various products available from the different banks and they listen to what we want .

They usually deal with one person ( or team ) at each bank and because they are dealing with the same person / team on an ongoing basis , the banks seem to listen to the brokers more than they listen to an individual as there is more at stake in terms of ongoing business I think this is the key issue as to why brokers seem to work better for many people here .

We have had relationship managers with all the banks we've dealt with and our experience with most is that it's a relatively low level within the bank heirachy and something that they do until they've worked out how to do it , then they move on .

Brandy , it sounds like you are the exception .

Cliff

Not trying to convince anyone to go one way or another, providing some information that others might not know.

Everyone knows what a good broker can provide there are many on this forum who contribute very regularly. But it's not too often that they will tell you what a banker can do better then them

Not sure where you think that they listen to brokers more? I can tell you I deal with the same people every day, not every time I puts loan through a particular bank. You won't be able to convince me that a broker has better ability to go a loan through rather then a banker at the bankers bank.. A broker may convince you of this, but its far from the truth

I believe you must have faith in the person you're dealing with banker, broker.. Anyone you're doing business with.

 

[Brady]

This must be a good risk managment tool - to have a different lender for every different loan.

I have LOC against my ppor with one lender. This LOC will be used to draw the 20% deposit on IP. When I find the IP, I will organise loan for the remaining 80% + costs from a different lender.

This avoids x-coll and means that I am not at risk of one lender pulling the plug on the entire enterprise.

Would interest me to hear... Anyone know of someone personally who has had their loans 'pulled' from a major bank?

I understand the risk mitigating for keeping under certain limits, mainly for LMI purposes... But for pure risk mitigating for fear of bank calling loans...

 

[Peter_Tersteeg]

Would interest me to hear... Anyone know of someone personally who has had their loans 'pulled' from a major bank?

I understand the risk mitigating for keeping under certain limits, mainly for LMI purposes... But for pure risk mitigating for fear of bank calling loans...

I am personally aware of several instances where a lender demanded funds be used to reduce loans simply for the purpose of the lenders risk mitigation (had nothing to do with servicing limits). The loans weren't called in, but on several occasions when borrowers have sold a property, the lender withheld the profits and demanded it be applied to other debts rather then held in reserve. This is more likely to occur when the borrower has loans cross collateralized but not always.

There are arguments for and against diversification of lenders. Personally I think it's possible to strike a workable balance.

 

[Brady]

I am personally aware of several instances where a lender demanded funds be used to reduce loans simply for the purpose of the lenders risk mitigation (had nothing to do with servicing limits). The loans weren't called in, but on several occasions when borrowers have sold a property, the lender withheld the profits and demanded it be applied to other debts rather then held in reserve. This is more likely to occur when the borrower has loans cross collateralized but not always.

There are arguments for and against diversification of lenders. Personally I think it's possible to strike a workable balance.

Peter well aware of the scenario of this happening when loans are x-Coll which is why I advise clients of best way to structure.

But are you saying you have personally seen it happen when the loans weren't crossed as well? Which lender?

 

[Peter_Tersteeg]

I've seen loans with all of the big 4 have conditions be dictated to the borrowers for no reason other than the banks risk management, all in cases of large portfolios with a single bank. In most cases I expect the portfolios would have been cross collateralized to some degree.

This is also one of the primary reasons I don't like x-coll.

The specific example I previously gave was with CBA. The borrower ended up solving the problem by refinancing most of the portfolio across two alternate lenders. It almost cost them the deal that ultimately gave them financial independence. In this case however, I don't believe x-coll had much to do with it.

There's no denying that there's a lot of benefits in putting lots of properties with a single lender, but at some point it can become a problem. If the properties are crossed, it quickly goes from a problem that takes work to solve, to one that is a nightmare to solve.

 

[Rolf Latham]

There's no denying that there's a lot of benefits in putting lots of properties with a single lender, but at some point it can become a problem. If the properties are crossed, it quickly goes from a problem that takes work to solve, to one that is a nightmare to solve.

And throw some fixed rates into that mess and what was a tightly wrapped grip like the rubber in a golf ball, turns into cement.

Most brokers have had circumstances where their potential clients had to either sell down the portfolio to a point where a "restart" was possible, OR simply sit on their hands till day x when values incomes or other fortune came their way.

Neither of these is a palatable outcome for someone wishing to grow- but you make your bed, and then you have to sleep in it.

I have alluded to it before, that I believe the non-disclosure to borrowers of the potential risks of Xcoll is a Professional Indemnity time bomb, and I fully expect that as we get into the next stages of the NCCP that more light will come onto this much misused control tool.

ta

rolf

 

[MarkB]

You need to go with someone who you can trust to structure the loans correctly and be honest with you.

Trust a large bank?

Please....

 

[see_change]

I know of one person who has been bankrupt recently as a result of this and there is a former high profile member who in his words went from " millionaire to bankrupt " overnight in the late 80's as a result of Cross X. He might have still gone under , but the fact that everything was linked up didn't give him time to try and find alternative finance or sell properties.

cliff

 

[Rolf Latham]

but the fact that everything was linked up didn't give him time to try and find alternative finance or sell properties.

cliff

its that wiggle room and extra 90 days that "split banking" buys, that can often make the difference to either lengthening the rope or crystallising a bunch of losses, in some cases with CGT and other extended liabilities.

This stuff is SOOOOOO important for small biz owners, probably as much as other more obvious forms of risk management

I often get the "deer in the headlights" followed by Simpsons DOH face palm when we sit with a business owner that has their business banking, their home mortgage, their equipment finance, their premises commercial mortgage and their Ips all with the one financier.....................

Its so obvious,but folks often dont think about it. Most folks working finance in this sphere are clueless, and in many cases complicit for their own, or their employers reasons.

ta
rolf

 

[Aaron_C]

All the bad stories I've seen/heard have been due to x-coll. NAB and CBA being the big culprits....but it can happen with any lender.

 

[wylie]

I believe you must have faith in the person you're dealing with banker, broker.. Anyone you're doing business with.

Perhaps it comes down to my experience with the banks we deal with. I have trouble every time I deal with Westpac, staff getting things wrong over and over, and my broker having to fix it.

And my ex-employer CBA giving slow service in the branch, you could play bowls in the branch and not knock any staff over. People come into a branch and want to be served, not walk in and have three people in a line and one staff member, who "should" look embarrassed at not being able to look after the customers, but who, in my experience, is taking their sweet time and not really worried at all about the growing queue.

Compare that with my broker, who I know will be the one who answers the phone any time I call. He will be there in six months, unlike a branch where the good staffers seem to be moved on just when you start building a rapport.

I spent 20 years in CBA and customer service was so much better. Nowadays it seems everybody is cut to minimum staff levels and those staff who are there are so busy trying to reach some sort of target that the customers just get in the way.

 

[alexlee]

I believe you must have faith in the person you're dealing with banker, broker.. Anyone you're doing business with.

You trust in your assessment of their abilities and experience, and that their interests are aligned with yours. That requires a certain level of experience and knowledge on your own part.

I don't base my business relationships on faith. I don't have to, because I assess their abilities, experience and motivations objectively.

Faith is the sort of 'he's a good guy and wouldn't let me down' thinking that leads to tragedy when dealing with money. Because it ignores the possibility that 'doing your best' sometimes just isn't enough.

From my point of view, an independent broker wants to get you as much as they can. That aligns with my objectives as an investor.

A single bank broker wants to get you as many of THEIR bank's loans as they can, not maximise the loan amount. This does NOT align with my objectives as an investor.

 

[Rolf Latham]

All the bad stories I've seen/heard have been due to x-coll. NAB and CBA being the big culprits....but it can happen with any lender.

Having said that, often there are things that happen that act as catalyst, and Xcoll is Part B of the reaction. It the Xcoll wasnt there would be no reaction.

Maybe thats why some peops that love their xcoll call me an "antagonist".

The xcoll in and of itself isnt a killer problem 98 % of the time, and so therefore people dont give it the attention it deserves

But most of us dont drive on bald tyres or refuse to wear our seatbelt.............

ta
rolf

 

[Rolf Latham]

Faith is the sort of 'he's a good guy and wouldn't let me down' thinking that leads to tragedy when dealing with money.

Nothing to do with anyone here, but isnt that exactly how the confidence tricksters gain what they want ?

ta
rolf

 

[Peter_Tersteeg]

Having said that, often there are things that happen that act as catalyst, and Xcoll is Part B of the reaction. It the Xcoll wasnt there would be no reaction.

Maybe thats why some peops that love their xcoll call me an "antagonist".

The xcoll in and of itself isnt a killer problem 98 % of the time, and so therefore people dont give it the attention it deserves

But most of us dont drive on bald tyres or refuse to wear our seatbelt.............

I agree with the sentiment. Most bad things with banks don't happen because of x-coll, but the x-coll is a big barrier to the problem being fixed.

 

[Brady]

All the bad stories I've seen/heard have been due to x-coll. NAB and CBA being the big culprits....but it can happen with any lender.

This is the same as me.

Every bad story has been due to a portion being x-coll, doesnt even have to be big... Just a small amount not set up right and its like a nasty chain reaction.

Don't get me wrong I haven't seen 1 banker yet that I know personally set up loans in what I deem to be the correct struture, although speaking to some of the credit guys there are some that do. At the same time excluding SS brokers I also have only seen very very very few existing clients set up the correct way through brokers also...

The brokers/bankers doing this makes it easier to show the clients what I can offer, but I feel for how many customers a week I see that have no idea of the risk they are putting themselves into and the possible financial loss through IO/offset they are missing out on.

I had one client last week, went to 4 different banks and 2 brokers shopping for rate after feeling hard done by when she fixed in her IP Loan, now that she has a PPOR as well and they are variable she wants to see what people can offer her.

Out of the 6 brokers/bankers not one of them asked her what her long term goals were, not one discussed interest only with offset (she had paid down largerly on both and in convo mentioned that existing ppor was to become ip in 2-3 years) and looked extremely confused when I mentioned x-coll (her existing loans were crossed)...

They all just focussed on what the customer asked for rather then actually putting it back onto the customer and identifying the clients actual needs.

The money she was looking to save on interest rates would be hundreds of $$$ each year, the loss of incorrect structuring will costs her thousands of $$$

 

[Spectre]

The comment I'll make is simple. Brady I kind of see your comments similar to my old view when I worked in the bank - so I can kind of see both sides.

I did my time at CBA running as one of the top lenders nationally a few years ago. Won rewarding success, qantas points all this kind of stuff.

Years ago the bank and I made the decision to part ways but still keep civil.

Probably the key message I have is this -when you're at the bank, you'll pull your $100k + a year writing loans, get your shares, have a bit of fun but the day that you walk out that door your entire client base isnt yours. The bank owns it, not you (and they let you know it - or at least my old boss did well and truly). And your income stops and you need to get it moving again, find a new job, not contact your old customers to get them to the new bank etc.

The broker side on the other hand - overall the bank cant really tell you to stay away from your client, generally speaking you control their loan which is why the trail component is there. So the broker side you "own" the asset as well as the bank (which is why banks will lend money to you to buy broker books) and with the recurring income you've started to make that Kiyosakian shift from Employee to Business owner (E to B)
You also can write more stuff off on your tax than what you could as an employee.

So people can rant on about service and what you can and cant do - everyone has their wins and losses in the game. War stories are great to tell.

But when the axe falls on you on retirement day - or more likely the day that your employer decides you're no longer needed - every person on this forum knows its about having the assets in the bank to cover you to the end. BTW that date is usually around 57. I'd suggest that might be actually lower.

Now me, If I continued to work for the bank I dont know if I'd achieve this. I wasnt exactly hanging out with Ralph Norris a lot although I did help him get a few million bonus.

But on the broker side, I think I have a bit more control - a bit more skin in the game.

So can you achieve great things on both sides - yes - no argument.

I think theres also an end game here that needs to be looked at.