“If I hadn’t got a work experience opportunity in a bank, there is no way I would be sitting here today,” is Barclays managing director of retail lending Steve Weston’s frank career assessment, as we gaze out over London’s financial centre from the 30th floor of Barclays’ Canary Wharf HQ.
It was just over a year ago that Weston emigrated from Australia to the UK to take up his role at Barclays, after just under three decades working at some of the biggest banks and lenders Down Under.
But sitting down with Mortgage Strategy for his first UK interview, he says the penny dropped about how vital his formative placement at a bank had been when he became involved over the last year with Barclays’ own work experience, money skills and apprenticeship programme.
“These people are cool, they never thought they would get the chance,” he says of the teenagers involved in Barclays’ Life Skills programme.
“For them they never dreamt of having an opportunity like this and they are succeeding.”
It was a similar position for Weston when he was given a work experience placement at Commonwealth Bank of Australia in 1983 at the age of 14.
Born in 1968 in the small town of Bowen in north east Queensland he describes himself as having been born “on the other side of the tracks”.
“It’s something that people don’t normally talk about,” he says. “But it is what I am and you can understand the things that are important to me because of where I came from.”
But that also applies to his attitude towards service and equally importantly, to dealing with brokers.
As well as working for some of the biggest retail banks in Australia, he also has a track record as a strong advocate of intermediary distribution, as can be attested by the response from Australian brokers when it was announced in February last year that he was leaving National Australia Bank to take up his role at Barclays.
On Aussie mortgage and property website Mortgage Mix one broker described him as “one of the very few great thinkers in the industry” with another stating that his emigration to the UK a “very great loss indeed”.
High praise indeed – so what does he have planned for UK intermediary market over the next 12 months?
He says the reason why he chose a bank for his work experience placement as a 14 year old back in 1983 was simple. He came from a hot town – the average maximum temperature in January is 31 degrees – and the bank branch had air conditioning.
But while he was enticed by the bank’s cooled environment, as somebody who had not thrived at school he also found it an attractive working environment as well.
“I loved it – it was interesting and that was for a person who was non-academic and went to school to play up and to do sport,” he says.
But it was a revelation to him, especially as in the appraisal the assistant manager at the Commonwealth Bank provided on Weston’s week in the branch, he was invited to complete its entrance examination. He passed and at the age of 15 he never went back to school.
“I moved out of home as a 15 year old and started work,” he says.
While this may sound extreme, he says that he had already been working in some form from a young age and had a strong working ethic.
But he says when he went to work at the bank the light went on for two reasons.
Firstly he became fascinated about how the banking system worked and started to take home thick policy books every night to educate himself.
“This is a kid who had never studied, never read a book, suddenly this stuff was interesting,” he says.
The second reason was he wanted to help people with their problems.
“I found that as I became quite expert about the banking processes, people who were in difficulties would end up getting referred to me even when I was only 15 or 16,” he says.
“To this day I love helping out customers that have some sort of dilemma. The more senior in terms of role that I have become I consider it a privilege that I can help more people rather than serving individuals. But I still take customer complaints to this day, get on the phone to people to find out what I can learn and what could we have done better.”
Back to school
After a couple of years in the Bowen branch of Commonwealth Bank he was then recommended that in order to gain promotion further studying would be helpful.
But his memories of school continued to haunt him and his response he remembers to the person who told him this was, “you might as well have sworn at me, you know I was no good at school”.
Despite his rebuttal his friend persevered and filled out a form on Weston’s behalf to complete an associate diploma by correspondence.
Initially he continued to hate studying but when the mark from his first exam for the diploma was better than he had been used to getting at school, from that time on he says his own internal bar as to what he could achieve grew.
Over the next 13 years he completed by correspondence an increasing number of courses and qualification, finishing with a masters in business administration, with most of the marks distinctions or high distinctions.
Not bad for a boy who hated school.
“If I had taken some of those marks back to my high school teachers they would have said cheat, fraud, it just cannot be,” he says.
“But for the first time ever I was in an encouraging environment, which hadn’t been the case at school because I was a pest. And the second thing was, I had built self confidence so I actually has set the bar and tested myself all the time.”
Confidence he argues is the crucial element in most successful people he argues whether it be in sports or in business.
And that underpins ultimately his attitude to recruiting people to this day.
“We need to identify people who just because of the fact of where they were raised haven’t been given the opportunity to do well,” he says.
“We need to work with them because sometimes their career potential will be at a lot higher level than what they are thinking today, and I am a perfect example.
“I look at myself and say If I hadn’t been given that opportunity by the guy who filled out my application form, that first nice reference by the assistant manager in the branch, been given encouragement to do well, I certainly wouldn’t be here.”
Knowing what needs to be fixed
He worked at Commonwealth Bank for 12 years, working his way up first through branch roles, then personal lending, mortgages before graduating up to business banking. He relocated down to Sydney and ended up being a business banking manager at Commonwealth Bank.
He then left to join Australia’s fifth biggest bank St.George Bank in 1995 where he set up business banking unit about an hour’s drive north of Sydney.
And then went to work for one of St.George Bank’s biggest customers at the time, an Indonesian and Malaysian firm that was mainly involved in corporate doctoring but he was also involved in buying and selling businesses that they had.
So he would go into firms that weren’t performing well, work out what needed to be done – sometimes it would need to be restructured, other times closed down, or handed back to the individual management.
He says that three-year period, from 1998 to 2000, was the biggest three years of learning that he has done, covering everything from how businesses function to strategy.
“More importantly I learnt that more often than not the staff that work in the businesses will know what is right and what is wrong and what needs to be fixed,” he says.
“So while I may have crafted the strategy it was only after talking to the teams and finding out what’s happening and what works.”
In his last role he salvaged a nut and cereal bar manufacturer that was ready for the scrap heap. Instead of the company going under with the loss of 100 jobs in an area of high unemployment, he was able to turn it around and sell it to Kellogg’s and as part of the deal he then worked for the cereal manufacturer for six months.
It was at this point in 1999 that St.George Bank got in touch again asked him whether he would be interested in getting back into banking.
“I replied, ‘hell will freeze over before I ever get back into banking’,” he says.
So why had this career banker suddenly hardened his heart to the world of finance?
“I said to them, ‘it’s the way that you treat your customers, it’s all about fees and profits, you are treating staff as second class citizens, I’m over that’.”
Beginnings of springboard
Despite his hostile reaction, it did manage to convince him on the second attempt to return to St.George Bank in 2000, with a contract to become its general manager of mortgages and its personal lending business.
Some 70 per cent of St.George Bank’s assets were mortgages so this was a massive job managing 1,100 staff.
But St.George Bank was going through a tough period. While mortgages were a high profile part of St.George he says it wasn’t an area that was not in particularly good shape.
Part of his solution was to innovate and bring to market a number of products targeting specific consumer markets, like small business people, the elderly and first-time buyers.
“We brought products to market that helped borrowers that would not have been able to either attain home ownership or wouldn’t have been able to remain in their homes, if we hadn’t brought those products to market,” he says, which sounds exactly like the current market in the UK.
And the springboard mortgage, which was launched by Barclays in January, is based on a product design that was developed by Weston’s team while he was at St.George Bank and is now commonplace in Australia.
“It was my team that developed that,” he says. “We got that from, as I do to this day, talking to our customers, talking to our staff, helping people solve their financial dilemmas.”
The springboard mortgage was launched by Barclays in January this year and is available to borrowers with a 5 per cent deposit.
But pivotally a family member must also deposit 10 per cent of the purchase price in a specific Barclays savings account.
The family member will get their savings back after three years, if all of the mortgage payments are met, and receives interest at an annual equivalent rate of base rate plus 1.5 per cent. Missed payments could put some of the capital at risk. Unlike a traditional guarantor mortgage, the family member only has their 10 per cent savings at risk if the borrower misses payments and they are not named on the mortgage.
“We hear it all the time, ‘I’m stuck in the rental trap, I can afford the mortgage but I can’t get the start’ – that’s a financial dilemma for first-time buyers so bringing springboard to market where parents put up a deposit, it’s done in a way that is sensible for both the parents and the children,” he says.
Lloyds Banking Group has offered a similar product for a number of years but has limited distribution as it is only available direct via Lloyds TSB’s branches.
By contrast Barclays has put a major TV campaign behind the springboard mortgage to promote it and take-up of the product he says has been in line with the business case made for it.
He argues that it does not just tick the boxes for parents and children frustrated at the latter being unable to get on the housing ladder, but also makes sense from a lending point of view as well.
“If I think about the parental assisted lending that we did in Australia, from a risk perspective it performs really well,” he says.
“It performs better than your normal first-time buyer higher LTV mortgages, which are higher risk.”
And the reason he argues is this – once children know that mum or dad have some skin in the game they wll try harder than ever.
“The best judge of a young person’s character and ability to repay is their mum and dad,” he says. “If the parents think their child is a high risk and a bit of a rat bag, they are certainly not going to put their money with the child.”
Getting on brokers’ good side
But it is not just developing products that Weston has a track record with but also effectively using intermediated distribution.
And this stems from his period working for non-bank lender Challenger Financial Services which he joined from St.George Bank in late 2005.
The non-bank’s biggest shareholder was the Packer family and the plan was to raise funding via securitisation to leverage a large intermediated distribution force it had grown to compete against the four major banks in Australia.
It acquired 40 per cent of the Australian clubs and networks – which are similar to how we would understand them in the UK – so a large chunk of Australian mortgage brokers were quickly distributing Weston’s products.
Things went well until late 2007, when the securitisation markets froze.
As a result it had to slow down lending and increase interest rates as the cost of funds had gone up – which wasn’t the case for the major banks Challenger had originally aimed to compete against, who had deeper pockets.
The solution was found in 2009 when Challenger’s mortgage division was sold to NAB, with Weston also moving across to work for the bank.
“NAB was underweight in terms of mortgages but it had great access to funding,” he says.
But it also had a negative attitude towards broker distribution and did not have a good reputation dealing with brokers.
“NAB had got poor quality business from brokers – but that is because when you are not particularly friendly to brokers they don’t want to use you unless no one else will deal with you,” he says.
“So you get adverse selection and are the lender of last resort,” he says.
“If you start treating brokers friendly it is amazing what will happen.”
Over time he was able to change this attitude and he says four years on brokers are now a vital part of NAB’s distribution in Australia. Such a turnaround also goes some way to explain the comments praising him when Weston left to join Barclays in 2012.
Coming to the UK
The relationship between lenders and brokers in Australia is more harmonious than it is in the UK he argues because he says it is more of a partnership relationship.
Clearly that is something he is looking to emphasise in the UK with what he describes as “proof points” of Barclays is treating brokers better.
One of those he says is the approach his managing director for intermediaries David Finlay has taken with a channel agnostic approach, with the same products available both in branch and via brokers.
Even with its recent marketing campaign for springboard it emphasises that products are available via brokers.
And that will also be the case with its tablet app which has been launched in conjunction with Zoopla and allows would-be borrowers to use a Barclays calculator to determine their how much they can borrow, and then use that information with a property search. As it develops it will also have a find a broker function on it as well.
The ethos behind this is that by providing access to brokers it is essentially respecting the customers’ choice.
“Brokers have such a strong value proposition in terms of the range of products that they offer it is greater than going to just one lender,” he says.
“Their service model is often superior than single lenders – they will see customers at night, in their workplace or on the weekend if needed which single lenders often don’t.”
While any bank could argue that the prudent course of action is to favour its own channel, he argues the exact opposite.
“It’s respecting the customer’s choice, we are all out in the market competing, and it is also acknowledging that 60 per cent of our mortgage volume comes from mortgage brokers,” he says.
“So you can decide to have a relationship that is a little adversarial. When we need brokers we can put out a nice interest rate and hope you use us. Or you can have a longer term relationship that says, intermediary channel we want to partner with you.
“We want to truly understand what is important to you and we will build our proposition to meet those things that are important.”
The go-to bank
To that end, making Barclays’ service and processes for brokers world class is Weston’s focus over the next year.
“Product and price will always be fundamental but we need to do a lot better job at our processing and application processing,” he says.
Little improvements he says that have been made include helping brokers and customers to track the progress of their applications online.
It has also just increased the hours its phone contact centre for brokers is open – instead of 9am to 5pm, it is now open from 8.30am to 6pm.
Brokers will have a named contact when they phone up who will look after the application rather than going into a call centre as Barclays, like many lenders, has done in the past.
“I know what works for brokers, and they are happy to tell you, but typically we have built operations centres as an example, for scale and not for case management,” he says.
“In theory that might seem like the most efficient way to operate – history tells you something completely different.
“I’ve run these operations centres since 2000 and I have third degree burns on third degree burns from getting it wrong.”
His philosophy is to limit the number of hand-offs to ensure errors don’t creep in that require rework and keep both the broker and customer fully informed.
“If we can keep brokers informed and the customer comes back to them at the end of the day and says that was a good experience, that validates the brokers’ recommendation in the eyes of customers,” he says.
“Everyone has got a lot of work to do but that is our end game. Our aspiration is for us to become the go-to bank in the intermediary channel.”