Australian Broker magazine Issue 10.04

FEBRUARY 2013 ISSUE 10.04

$4.95 POST APPROVED PP255003/06906

+INSIDE NEWS

+ NEWS A look at what’s been making headlines P4

+ ANALYSIS FAIR WORK A FAIR GO?

New workplace laws could impact your business P10

+ INDUSTRY SPOTLIGHT SMSF

Sam White: A lot to learn from NZ The Loan Market believes Australia can learn from its neighbours

One of finance’s fastest-growing sectors and its opportunities for brokers P18

+ OPINION ON THE RADAR

ASIC’s Peter Kell warns brokers the regulator is watching P24

+ MARKET TALK THE FHB BLAME GAME

Who’s to blame for their departure from the market?

P26

A

ustralia may view its neighbour New Zealand with something of a big-brotherly affection, but Loan Market executive chairman Sam White reckons Australian mortgage brokers could take a few lessons from their Kiwi counterparts.

White would know, with Loan Market recently announcing its merger in New Zealand with leading brokerage Allied Kiwi. The move has created a network of 500 brokers across New Zealand, a group larger than Loan Market’s Australian operations.

FULL STORY PAGE 16

+ PEOPLE RIDE OF A LIFETIME A punishing cycle trip raises money for kids in need P29

NEWS

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2

WHAT THEY SAID...

NUMBER CRUNCHING

RANJIT THAMBYRAJAH

17%

“Most broking houses are small and are not equipped to mount a ready defence to any frivolous claim of bullying” P10

of Australians say they would struggle to find $500–$1,000 for unexpected expenses Source: Ernst & Young

JAMES CASEY

“SMSFs bring financial services together and allows them to exhibit their strengths and value-adds” P19

BANKING ON THEIR BRAND How Aussie banks rank in a survey of the world’s 500 most valuable banking brands Source: BrandFinance

WORLD AUSTRALIA RANK 2012 RANK 2013 BRAND 50

1

ANZ

42

2

Commonwealth Bank of Australia

43

3

NAB

49

4

Westpac

DID YOU KNOW?

STEVE KANE

30%

“Everything we do has to have something to improve [the] broker’s business” P23

The rise in distressed commercial properties from 2011 to 2012 Source: Colliers International

PETER KELL

52 days The average amount of time Australian businesses wait to be paid by commercial clients

Source: Dun & Bradstreet

“If brokers break the law, they will hear from us” P24

NEWS 4

brokernews.com.au brokernews.com.au

Think twice before FHBs left cold ABS figures show the number of first homebuyer lawyering up against ASIC ■commitments as a percentage of total owner-

■ Kenny Rogers had it right: you’ve got to know

when to hold ‘em and when to fold ‘em. While he probably wasn’t referring to ASIC regulations when he composed those lyrics, Dr Hillary Sway, senior lawyer at The Fold Legal, said working with ASIC after a breach may be a better, quicker way for financial services businesses to get back on track, rather than ‘lawyering up’.

“Many businesses panic when ASIC serves them with a notice. A smarter strategy may be to put themselves in ASIC’s shoes and work with them to resolve the issue. Businesses shouldn’t underestimate how helpful the regulator can be if approached the right way.”

BANKS ‘STEALING’ FROM BROKERS ■ Mortgage House managing director, Sarah Roberts,

said major banks are ‘stealing’ brokers’ clients by developing easy-to-use online loan products.

“Big banks have clearly invested significant capital into their customer engagement programs. If you go to [big banks’] websites, they’re much more sophisticated – it makes it easier to cut the middle man, the broker, out.”

Given that the majority of brokers can’t pour millions of dollars into interactive websites, Roberts said the best place to focus energy is in strengthening client relationships.

25.4 %

occupied housing finance commitments fell to 14.9% in December, 2012, down from 15.8% in November.

REIA president, Peter Bushby, said it’s important to stimulate the building market, but said he’s worried the government is putting too much emphasis on that area.

“We believe that they should be looking at doing more… FHBs as a portion of the market have dropped and that’s a serious concern.”

21.0 %

20.9 %

18.4%

18.7% 17.7%

16.6 %

15.8 % 14.9 %

December 2012

% 13.1

2011

2010

2009

2008

2007

2006

2005

2004

2003

Source: ABS

COPY & FEATURES JOURNALIST Mackenzie McCarty PRODUCTION EDITOR Carolin Wun ART & PRODUCTION SENIOR DESIGNER Rebecca Downing DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley

■ Fraudsters cost Australia

Proportion of FHBs out of total housing finance commitments

THE CHANGING STATE OF FHBS

PUBLISHER Simon Kerslake

MARKETING EXECUTIVE Anna Keane

Fraud continues in broking industry $372.7m last year and ASIC spokesperson, Daniel Wright, said the organisation’s seeing a ‘continuing’ trend of fraud within the broking industry, with the category of misconduct involving brokers that’s most reported.

But MFAA CEO, Phil Naylor, said fraud remains a rarity amongst brokers, accounting for less than a handful of finance industry cases. “From MFAA’s experience, lending fraud occurs, but based on our expulsions – three last year – it is clearly not a major issue for brokers.”

EDITOR Adam Smith

MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil

DID YOU KNOW?

40%

In a recent study by the National Association of Information Destruction, nearly half (40%) of bank branches were found to have dumped confidential documents into non-secure rubbish bins

Editorial enquiries Adam Smith tel: +61 2 8437 4792 adam.smith@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8437 4731 fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Toronto, New Zealand brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss.

Australian Broker is the most-often read industry publication, according to independent research carried out by the EhrenbergBass Institute for Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS brokernews.com.au

6

Balance Banking takes on big four

THE STRANGER SIDE OF NEWS

INDUSTRY AWARENESS

■ Abacus Australian Mutuals

has launched an online campaign aimed at getting politicians to support enhanced banking competition in the lead-up to this year’s federal elections.

Abacus CEO, Louise Petschler, said Australians are angry about the ‘dominance’ of the major banks.

“The Balance Banking campaign will lobby for change to address the imbalance in banking.”

Petschler said Balance Banking will focus on a number of particular policy areas.

“We have some specific issues we want addressed, like recognition of the mutual model in prudential rules, review of tax incentives and funding options.

“But Balance Banking aims to bring more voices to the debate and allow a structured, long-term look at bringing greater competitive pressure into our highly concentrated banking market.”

COME AND KNOCK ON OUR DOOR

■ In a tight rental market, landlords can afford

to be picky. A landlord in the UK, though, may have taken it a bit far. A Twitter user recently posted a list of bizarre and insanely pedantic rules handed out at a flat viewing in north London, and the list quickly went viral. Among the 31 (yes, 31) directives: No pork products in the house, no visitors without approval two weeks in advance, no more than two visitors a month and no hanging out in the living room.

The dictatorial landlord also threatens to charge exorbitant add-ons for violations such as not cleaning adequately or eating food in the bedroom, and says any entry into someone else’s bedroom will result in a call to the police.

36%

know CBA owns Bankwest

21%

are aware NAB owns UBank

RESEARCH ALSO SHOWED...

■

Almost 80% believe the big

■

65% say there is not enough

banks make ‘excessive’ profits

competition in the country’s banking system ■ 71% agree the big four have an unfair advantage in the mortgage market

LOTTO LUCK RUNS OUT

■ A pair of brothers in the US may have taken

their celebrations a bit too far following a recent lottery win. The Wichita brothers decided to party following their $75,000 win, and they partied hard. Toasting their good fortune with marijuana and meth, their raucous evening ended in a trip to hospital for one of the brothers and a trip to jail for the other. While refilling the butane lighter they were using to smoke meth, butane vapour reached the pilot light in the furnace of their house, with unsurprising results. The explosion left one of the pair with second-degree burns. He happened to be wearing a lotto t-shirt during the explosion.

53%

of Australians are aware that Westpac took over St.George bank in 2008

14%

know RAMS is controlled

by Westpac Source: Abacus

FAST FACT Variable rates have been an average of 29bps cheaper than fixed rates over the last 20 years Source: RateCity

BROKERS BREAK $100 BILLION MARK ■ Mortgage brokers have slashed through the $100bn barrier of home loans

written during the 2012 calendar year, according to research of the top 16 aggregators in the industry by research group Comparator.

The research also showed mortgage brokers originated more than 40% of all new residential lending during 2012.

Brokers experienced a surge in lending volumes during the December quarter of 2012, with 5.5% growth from $25.6bn to $27.2bn. The average value of home loans originated by brokers totalled $337,000.

NEWS brokernews.com.au

8

Beach bums in arrears ■ Borrowers living in coastal

regions are more likely to default on their home loans, according to Fitch Ratings.

The company’s report showed the Sunshine Coast and Gold Coast are among the areas with the highest number of home loans more than 90 days in arrears.

Fitch said coastal regions that rely on tourism are less affected by monetary policy and more by the high Australian dollar.

Thankfully, the number of people failing to meet their repayments dropped by 1.2% nationally.

Pepper continues European invasion

WORLD NEWS

■ Pepper has acquired the Spanish

CANADA

loan business of Celeris, with the newly acquired business to trade as Pepper Finance Corporation (Spain).

The buy sees the non-bank lender take on around 164,000 performing loans and a small non-performing book. The total book represents around €290m in receivables, the company said.

Pepper CEO Patrick Tuttle said the buy was a continuation of the lender’s strategy to expand its footprint in Europe.

The move comes after Pepper earlier this year made further forays into the Irish market, with its appointment to provide servicing for the €380m (A$482m) Pittsburg portfolio of Irish loans. Last year, the company acquired GE Capital’s Irish residential mortgage book.

BROKER SURVEY First homebuyers

29% Investors

6%

59%

An Alberta man on parole for mortgage fraud is going back to prison – proof of the court’s toughening stance on that kind of crime.

Mortgage fraud has become big business in Canada, with a 150% rise in criminal transactions detected in the last year, according to the credit reporting agency Equifax. “The schemes are getting so increasingly complex, there is no doubt that organised crime is involved,” said John Russo, chief legal counsel and privacy officer for Equifax Canada.

“They are working with individuals, even from jail, to come up with schemes that are bigger and better.”

Proof positive is 49-year-old Alberta resident James Steinhubl, who had been on parole for a 10-year-old $4m mortgage fraud conviction, but was sent back to jail this month.

Steinhubl had been convicted with two others – realtor Eugene Chamczuk and lawyer Robert Wilson Lee – of luring gullible investors into providing names and credit information for $5,000. Steinhubl and Chamczuk were the owners of Canadian Best Homes. The fraud involved 31 residential lots.

UK

What market segment has been most active in 2013?

Refinancing

TAKING A HARD LINE ON MORTGAGE FRAUD

6%

Self-employed

Source: Finsure

BROKERS PLEAD FOR REGISTRATION The FTAdviser in the UK reported that hundreds of advisers have urged the country’s peak broker body, the FSA, to press on with a registration scheme for approved brokers. In an open letter to the Financial Conduct Authority, financial intermediaries claimed “after consulting with brokers, the FSA has failed to launch an individual registration scheme for mortgage advisers… even though the FSA had announced plans to extend the ‘approved persons’ regime to include all those who advise on mortgages.” Brokers claim the lack of registration is hurting the industry’s reputation and allowing rogues to operate.

ANALYSIS 10

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Is Fair Work a fair go?

Mooted changes to the Fair Work Act are intended to help families, but could they hurt small businesses like yours?

A

s small businesses and self-employed outfits, many brokers may not give much thought to industrial relations laws. But for those brokers who have employees, changes to the Fair Work Act could have unintended consequences. One top broker fears the mooted changes could hit small businesses where it hurts.

Minister for employment and workplace relations, Bill Shorten, has confirmed the government’s next set of changes to the Fair Work Act, saying it will largely focus on ‘flexibility for modern families’.

“Helping families with work and family balance, changes to parental leave to provide more flexibility to new parents, and a requirement for employers to consider the impact of major change on employees’ family and care responsibilities – these are the signature changes we will soon bring before Parliament.”

UNREALISTIC EXPECTATIONS?

But Acuity Funding managing director Ranjit Thambyrajah says that while, for the most part, he’s happy with the ideologies behind the new regulations, he’s

concerned they may not be realistic for brokers and other small business owners.

Thambyrajah stresses that no employee should be exposed to bullying in the workplace.

However, he’s worried that the amendments leaves it ‘very open’ as to what qualifies as bullying.

“Most broking houses are small and are not equipped to mount a ready defence to any frivolous claim of bullying. Any such initiative needs to be well defined so as not to lead to frivolous claims.”

Similarly, he says the extension of unpaid parental leave ‘sounds very good’ – so long as the government takes into account the size of the employer and the number of employees an organisation might have.

“In our industry, the number of staff per organisation may not allow for permitting this level of flexibility while ensuring proper service being delivered to the end client.”

Furthermore, Thambyrajah says he dislikes the use of the term ‘right to…’

“It is very finite and leaves the employer very exposed to having to comply with uneconomical outcomes. It is my personal

Changes to the Fair Work Act include, among other things:

Providing a worker who has suffered bullying at work a right of recourse through the Fair Work Commission

Improving entitlements for workers who are pregnant, including changes to special maternity leave and the right to transfer to a safe job

Provide flexibility in parental leave, eg, extending the time parents can take unpaid parental leave together from 3 to 8 weeks and allowing a choice of when the leave is taken.

An express right to request a return to work on a part-time basis after taking unpaid parental leave

I’M BLESSED WITH STAFF THAT TAKE THEIR RESPONSIBILITIES SERIOUSLY - R ANJIT THAMBYRAJAH

experience that in a good workplace there is sufficient opportunities for employers and employees to work together to deliver a good working environment, whereby the employees needs are well considered and where possible accommodated.”

TREATING STAFF RIGHT

Ultimately, Thambyrajah believes small businesses are already doing the right thing by their employees. After all, they can’t afford not to. He says it’s in every good business person’s best interest to ensure that their staff are well catered for.

“Time lost through staff changes and recruitments have a great impact on the productivity of the business and it is in the business’ interest to ensure that they minimise staff turnover. At Acuity, all our staff have been with us for many years – including both mothers and single dads. At no time have we had to say ‘no’ to their preferred working hours or their request for parental leave. Having said this, I’m blessed with staff that take their responsibilities seriously and have not exploited the freedom we offer them.”

NEWS

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CONTINUED FROM PAGE 1

Sam White: A lot to learn from NZ

T

he Kiwi merger will deliver some fringe benefits for brokers in the company’s New Zealand network, with its brokers gaining access to insurance products and financial advice. And with the business now accounting for 55% of the New Zealand mortgage broking market by White’s estimation, he said brokers in Australia should take a cue from the integration of financial services that’s become the norm in New Zealand.

“New Zealand is more focused on financial services businesses generally speaking,” White said.

White commented that brokers in New Zealand tend to focus harder on integrating other areas of financial service, particularly insurance, which he said “they drive quite hard”. With trail commissions now a thing of the past in New Zealand, White said brokers in the country have had to find new opportunities and sources of revenue.

Regardless of the fate of commissions in Australia, White believes the integration of financial services is a must for brokers on both sides of the Tasman.

Insurance in particular, White said, should be a bare

FACT FAST Allied Kiwi and Loan Market New Zealand will come together under the umbrella of NZ Financial Services Group

minimum standard for brokers in Australia.

“How would you feel if one of your clients who you’ve spent time helping into a home has some tragedy befall them and they lose everything? You’ve got the potential to put a stop to that.

It’s part of your obligation to make your clients aware of what their options are,” he said.

MORE THAN A TICKET TO PLAY

Imagining such a scenario, White suggested, it’s easy to see why brokers should care about insurance. But having a successful conversation with a client around insurance requires a mental shift from being a transactional broker to taking a holistic view of a client’s legitimate needs.

“There are people out there who genuinely believe that insurance is a fundamental part of the way brokers should do business. If that belief isn’t there, it’s always going to feel like you’re just selling something else,” he said.

Increasingly, White said, consumers will come to expect this holistic point of view from brokers. This expectation means the value proposition put forth by the industry must continue to evolve.

“In this phase, for us as brokers, it’s about continuing to enhance the value proposition to the customer. It used to be the case that brokers offered choice.

Then it was about ease, that they’d come to you. That’s commodity now. It’s a ticket to play,” he said.

And transactional mortgage broking, White suggested, is no longer a commodity that’s in demand.

“Now it’s around how we differentiate our service offering to the customer and become more relevant. How do we make sure

IT USED TO BE THE CASE THAT BROKERS OFFERED CHOICE. THEN IT WAS ABOUT EASE, THAT THEY’D COME TO YOU. THAT’S COMMODITY NOW. IT’S A TICKET TO PLAY –S AM WHITE

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IT’S PART OF YOUR OBLIGATION TO MAKE YOUR CLIENTS AWARE OF WHAT THEIR OPTIONS ARE –S AM WHITE

we’re constantly looking for ways to improve what we do?

“Increasingly, being a monoline provider – not necessarily as an individual but as a business – is going to be very challenging.”

STRIVING FOR STREAMLINING

But this doesn’t mean White is advocating that brokers become jacks of all trades.

“We’ve seen that model be very difficult, even for really talented individuals. There’s double the amount of compliance.”

Rather, he said brokers must look to begin integrating a seamless financial services offering into their business, whether it be through referrals or the ‘one-stop shop’ model.

“That’s always been a term that’s been thrown around. All the services might be handled by different people, but people need to come together to provide a seamless solution for consumers.

That’s a very efficient and powerful proposition,” he said.

Seamlessness is the key, White said. It’s offering a seamlessly integrated financial services solution that will set brokers apart from their peers.

“If you’re a broker going in against a streamlined and efficient process, the process is going to win more times than not,” he said.

AXE TO GRIND

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GOOD NEWS FOR ‘HONOURABLE’ BORROWERS Clean Credit’s John Dickinson says debt agreements unduly punish people trying to honour their commitments, but that new credit proposals could change this

I

t is widely accepted that the Australian credit reporting platform is far from perfect.

In fact, the CRAA (Credit Reference Association of Australia) has described credit reporting in Australia as the most restrictive in the western world. I, for one, would not argue with this viewpoint.

The good news is there are significant steps being taken to improve things and although there are no firm policy changes as yet, there are a number of positive reforms currently under consideration.

While there are many recommendations under consideration, I would like to reflect on debt agreements.

Given the right circumstances, a debt agreement can be a good solution for people in financial difficulty as they can help protect secured assets such as a home while alleviating the need to deal directly with credit providers trying to recover money from them.

While a generalisation, a person entering into a debt agreement may be seen as attempting to do the right thing by their creditors and while they may be experiencing challenging

times, it is their intention to honour their debts as best they can. This can be quite different to someone who attempts to evade their responsibilities and uses bankruptcy as a vehicle to achieve this.

I’m not suggesting that all people who enter into a debt agreement are honourable and all people who enter a bankruptcy aren’t; however, I feel there should be a clear distinction between the two. Unfortunately, Australia’s current credit reporting system does not allow for this distinction as both a debt agreement and a bankruptcy are recorded for a seven-year period and both are deemed equally serious by credit providers.

There is currently a significant mismatch between the term of a

A PERSON ENTERING INTO A DEBT AGREEMENT MAY BE SEEN AS ATTEMPTING TO DO THE RIGHT THING

typical debt agreement (being five years) and the time the listing is recorded on a credit file (being seven years) which is the same recording period as a bankruptcy. Even after the debt agreement has ended and the creditors have been paid, the listing will continue to severely inhibit the person’s ability to secure credit for a further two years. This provides little motivation to choose to honour commitments as opposed to walking away from them.

One of the suggested changes is to reduce the recording period of a debt agreement to five years in order to line up with a typical administration period, while a bankruptcy listing would remain as a seven-year recording.

For a person in or about to enter into a debt agreement, these changes could be life changing and a genuine incentive to enter a debt agreement over a bankruptcy, as following a five-year administration period the debt agreement listing would be removed from the credit file which would assist with the individual’s financial recovery.

THE COALFACE brokernews.com.au

15

Separating the GOOD from the GREAT Melbourne broker Marios Rokka is coaching other brokers to success, and says the secret is staking your claim

ONCE SOMEONE’S COMING FROM A PLACE OF CONVICTION AND VALUE, IT’S MUCH EASIER TO APPROACH POTENTIAL CLIENTS – BECAUSE YOU’RE NOT SELLING SOMEONE A STEAK KNIFE MARIOS ROKKA

M

elbourne-based broker Marios Rokka’s friendly voice and selfdeprecating tone lends itself well to his role as a mentor and career coach for other brokers.

Rokka, 39, says one of the key things many brokers need to avoid is getting too ‘transactional’ and focused on output.

“I do a lot of coaching on getting people away from thinking like a standard broker – getting [brokers] to think more as a holistic professional who’s there to support and grow clients through the entire process. The coaching is all about moving mindsets into positioning themselves into dominating entire areas.”

Essentially, Rokka says it comes down to staking a claim within a particular geographical or professional location – whether that be one suburb, or targeted marketing at, for example, doctors and dentists.

“That’s one of the things that separates ‘great’ brokers from ‘good’ brokers. There are a dozen brokers in my local area, but not one of them is prominent or yells that they’re around. Unless you go searching, you won’t find them.

It’s about being known for how and why you do something – you end up positioning yourself in a certain way. It also stops people from coming to you who don’t align with your message.”

Social media is a great way to do this, says Rokka, who suggests setting up a Facebook page and posting messages and stories targeted at your preferred audience. Furthermore, Rokka says too many brokers are still

failing to manage their client relationships well.

“Everyone can write a loan – it’s not very difficult to write a loan unless you’re playing in a complex space like SMSFs – but everyone should be good at managing client relationships, yet many people aren’t.”

Rokka says even brokers with the best of intentions can forget to focus on clients rather than transactions, and that simply defining what it is you’re trying to achieve can make a huge difference.

“There’s one broker that I have inadvertently been mentoring, and he was struggling with a way to build his business. Instead of telling him ‘just do this,’ it was more about understanding the message of what he was trying to provide. Once someone’s coming from a place of conviction and value, it’s much easier to approach potential clients – because you’re not selling someone a steak knife.”

By solidifying his core values and what he had to offer borrowers, Rokka says this broker developed an ‘amazing’ relationship with a local real estate agent, which has, in turn, helped him grow his business.

“Because he’s always looking to provide value more than anything else, he’s increasing his business significantly. A client of his was having financial issues, but rather than make the deal work and get a commission for refinancing them, he realised the best position for them was to sell.

He used his relationship with the real estate agent to help the client do that – and the client is thrilled with him.”

WORKSHOP 16

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Are you a leader, or just a manager?

THE GURU

Walter Bellin from Corporate Crossroads consulting explains how only a leader can motivate employees and make them want to contribute to your desired business outcomes

I

n modern workplaces when someone is hired or promoted into a supervisory, management or executive position, they play two very different but complementary roles: a management role and a leadership role. While both roles are important, the leadership role is the ultimate key to consistently high levels of business performance, and to having happy customers and motivated employees. This applies whatever the size of your business – from large multinationals and professional firms to small businesses.

What exactly is the management role? Basically it is about organising the business processes of a company to be efficient and effective in achieving its desired business outcomes. This involves creating and maintaining an organisational structure, various business systems, introducing or creating new business technologies, creating and enforcing company policies, organising the workforce – and so forth. Above all, managers rely upon their positional authority in an organisational hierarchy for directing staff to undertake various tasks or responsibilities.

So, what then is the leadership role and why is it of such overriding importance? An important difference between management and leadership is that a good leader inspires people to want to undertake the workplace activities or responsibilities they are assigned – whereas someone only

exercising the management role simply directs the employee to do so. A good leader achieves this outcome through two integrated methods: firstly, through communicating the organisation’s mission (its fundamental purpose), its vision (what it intends to achieve) and the values that are intended to be the foundation of the organisation’s culture; and secondly, by showing how the task or responsibility the employee is asked to undertake will contribute to the realisation of the organisation’s vision and mission. Good leaders understand that what makes our work meaningful is being able to see and understand how what we do contributes to a larger purpose that we believe to be of real value.

MISSION IS TO INSPIRE

The important caveat, of course, is that a business’ mission and vision must represent an intrinsically inspiring purpose.

This is true whatever the size or nature of your business. To be truly inspiring, the company or firm’s leaders must create and pursue a purpose that is inclusive. It must mandate that the business contributes something of real value to all its stakeholders: its customers, its suppliers, its employees, the communities in which it operates – as well as its shareholders if it is a publicly-traded company.

The quality of a company or firm’s mission and vision will, in turn, be a function of the values its leaders espouse and the organisational culture those values are intended to create.

MICHAEL GRIFFITHS There are plenty of ways to market your business, from social media, pay-per-click marketing and internet banner ads, to spots on regional radio, says My Small Business Marketing Guru CEO Michael Griffiths. But there are four key points you need to follow in order for your marketing to be successful:

Walter Bellin is chairman and CEO of Corporate Crossroads, a consulting, training and coaching firm, focused on creating positive and permanent changes for both individuals and organisations

 Know your target audience and focus on them

Griffiths says you’re throwing money away if your marketing isn’t focused. “There are a lot of people, but you’ve got to understand your target audience and where they are,” he says. You can find your target audience through market research, surveying current clients, or even by looking up your competitors online and seeing who their clients are.

Most companies will be able to identify their target audience by the majority of clients they already have, says Griffiths.

 Understand that your profile has to be seen everywhere

When you “Google” your company’s name, you don’t just want the top spot, but all nine spots on the first page, says Griffiths. You can do this by writing articles, blogs, having social media and having your own website. If people see you, they think you are an expert; if they don’t see you, you don’t exist, he says.

 Allocate a marketing budget Don’t just market when your business hits a lull; marketing is a 12-month cycle, says Griffiths.

“Whether you’re quiet or you’re busy, marketing should take place,” he says.

 Don’t try to do

everything yourself

Many businesses try to take care of their own marketing, but don’t have the knowledge, expertise, or time. As soon as something more important comes along, you won’t have time for marketing and it will go out the window, says Griffiths. He says marketing campaigns are all about the groundwork; once that is in place, campaigns are easy to run.

INDUSTRY SPOTLIGHT 18

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Demystifying

SMSFs

INDUSTRY SPOTLIGHT 19

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WHY SHOULD BROKERS CARE ABOUT SMSF? TROY MCLACHLAN, FUTURE FINANCIAL

Superannuation is a $1.3tr market, and SMSF is its fastest growing segment. SMSF experts share how – and why – you should get involved

“Self managed super is one of the largest and fastest growing segments in the superannuation industry and SMSF lending allows brokers to diversify their product offering, provide a valueadd to their customers and provide some security around their trailing income long term. Gearing to levels (ie, 80% LVR) available by borrowing within your SMSF provides an opportunity that has never been seen before and allows savvy customers to diversify their investment strategy outside the traditional measures.”

IAIN FORBES, AUSTRALIAN FIRST MORTGAGE

H

ead of mortgages product for Macquarie, James Casey, describes the opportunity presented by SMSFs by way of a vivid analogy. Imagine a number of individuals – a mortgage broker, an accountant, a financial planner and an attorney – are separately making their way through the forest, minding their own business.

Suddenly, they converge in a clearing. That clearing that brings the disparate individuals together, Casey says, is SMSF. “It really quite nicely brings the professions together and allows them to exhibit their strengths and their value-add.

And, there’s no sense anyone is going to steal anyone else’s client,” Casey says.

And for mortgage brokers, he argues, SMSF is merely a logical extension of what they’re already doing.

“It’s not even a question of diversification. Mortgage brokers have dealt with trust borrowers – whether incorporated or unincorporated – for decades.

That’s what SMSF is.”

But brokers can be put off by the complexity of SMSF loans. So if you’re weighing up whether or not to venture into the space, here are some reasons why you should give it a look and what you need to know about SMSFs.

“I am aware in one instance where a borrower bought two properties, one in their own name and the other in the name of the super fund. A perfect example of super funds being put to use as a result of a broker investigating and advising his client accordingly. What an opportunity.”

DID YOU KNOW?

$450bn The amount held in SMSF structures exceeds $450bn Source: SPAA and Russell Investments

BRYCE PATTERSON, LOOK PROPERTY “It’s probably one of the biggest sectors, and brokers are going to be dealing in this space more and more as clients come through to do SMSF. I was chatting to Stephen Moore the other day, and he said there’s a dramatic increase in the number of SMSF applications coming through Choice Aggregation Services. If it were me, I’d want to get ready for it.”

CONSUMER CLIMATE FOR SMSFs: How likely are you to establish an SMSF?

7.9%

The total number of SMSFs grew by 7.9% to 478,263 over the past year

6.4%

This outstripped the five-year per annum growth of 6.4%

80%

The number of SMSF wind ups over the past year fell by 80%

2004

This is the lowest number of SMSF wind ups since 2004

Source: ATO

INDUSTRY SPOTLIGHT 20

brokernews.com.au

SOME SMSF DO’S

FOUR SMSF TRAPS TO AVOID

S

MSF trustees will show even stronger interest in borrowing for direct property in their portfolios in 2013, according to Peter Townsend of Townsends Business & Corporate Lawyers.

Demand for advice on SMSF borrowing grew in 2012 but should grow further this year as investors look to move out of cash and are wary of the share market. Plus, he sees greater confidence by trustees in pursuing property plans inside superannuation portfolios rather than being personally held.

“We continue to notice a number of mistakes or poorly developed approaches commonly being made in the borrowing process by trustees," says Townsend.

Watch out for these four traps:

deposit is paid from their own pocket and not quickly reimbursed by the SMSF. All the money must come from the fund or its lender. Further, there must be a clear documentary trail showing this to be the case.

If you suddenly realise that the purchase has been completed without complying with this rule, you must seek advice immediately.

A solution may be possible but time is of the essence.

Monies provided by the lender pursuant to the loan agreement with the SMSF trustee are treated as being provided by the SMSF trustee.

TRAP #1 – FAILING TO

The holding trust deed must be stamped to ensure that any ultimate transfer from the holding trustee to the SMSF trustee attracts only nominal stamp duty. Further, it must be stamped within the period allowed for stamping (generally either two or three months after first execution).

And even though the amount of duty may be nominal, tempting the fund to delay paying that duty, it makes sound, practical sense to have all documents stamped when the people and the financial records relating to the documents are readily available.

The documentary evidence could be very difficult, if not impossible, to find in, say, 10 years’ time when the loan is being repaid. Double stamp duty could result.

Note that the holding trust deed cannot be stamped until after settlement of the purchase.

The duties authorities need confirmation that the settlement money only came from the fund (and its lender) and this confirmation cannot be provided until after settlement.

UNDERSTAND A LENDER’S REQUIREMENTS

Because SMSF lending is functionally different from ordinary property lending, SMSF advisers and their trustee clients cannot make any assumptions about what lenders are looking for from them.

Carefully check with the lender as to what requirements they have for SMSF limited recourse loans.

Remember that banks and brokers are learning just as fast as everyone else is in this area. Trustees should expect closer scrutiny than ordinary property loans because the lender is offering limited recourse terms.

Will the lender require the member to agree to a particular contribution program to ensure sufficient money in the fund to meet any shortfall in income from the property? If so, has the trustee considered whether that program will be possible and advisable?

Will the lender require signoff by the fund’s accountant, financial planner and lawyer before proceeding? Will the lender require personal guarantees? Can the members provide guarantees and remain compliant?

Will the bank require that the SMSF trustee and/or the holding trustee be companies? Where the fund is buying business real estate from a related party, will the bank expect to see a full contract – arguing s.109 of the Superannuation Industry (Supervision) Act 1993 – rather than simply a transfer document.

TRAP #2 – NOT PAYING THE ENTIRE PURCHASE PRICE FROM THE SMSF

Buying property sometimes requires quick responses and these can be fatal for SMSFs buying and using a loan. The stamp duties legislation in the various states and territories can catch trustees if the good faith

Bryce Patterson of LOOK Property advises some of the peculiarities of SMSFs that brokers need to be aware of.

This is a specialised area and it needs to be carefully managed on a case-by-case basis for each individual fund, as the clients’ circumstances are always different from one another.

Some of the steps that you need for the SMSF to borrow to invest into an investment property are: ✔ Establish the SMSF ✔ Incorporate a custodian company ✔ Set up a Bare Trust

DID YOU KNOW?

TRAP #3 – NOT ARRANGING THE STAMPING OF THE HOLDING TRUST DEED

24.6% of SMSF trustees say they’ll look to invest in residential property in 2013 Source: SPAA and Russell Investments

Some of the points you need to be aware of are: ✔ SMSFs need to be established on the same date as the contract of sale date or after the SMSF establishment date. ✔ It is preferable that the contract of sale is in the name of the custodian company. Also, the SMSF trust deed must allow for an instalment warrant structure to be implemented otherwise it will have to be updated. ✔ Property deposits must be paid by the SMSF – not the individual or a company or trust that is not part of the super fund. ✔ A separate trust must be set up to own the property if the SMSF is borrowing. Each trust can only own one property.

SOME SMSF DONT’S Bryce Patterson clues brokers in on some of the SMSF areas to steer clear of: Some SMSF don’ts: ✘ When financing in a SMSF, the borrower must discuss their investment strategy with their accountant (or financial adviser). ✘ The broker cannot advise on the investment strategy unless they are one of the above. ✘ The broker cannot give structure and investment advice to clients on SMSF. ✘ It is not possible to borrow for construction in a SMSF.

36.9%

TRAP #4 – RELATED PARTY LOANS THAT BREACH S.109

S.67A does not prohibit the trustee of the SMSF from borrowing from a related party. However, it is important the lending arrangement does not breach other provisions of the SIS Act. The calculation of the amount of the interest rate, the term of the loan, the frequency of interest payments, the obligation and timing of principal repayments and the security offered for the loan must all therefore meet the test in s.109.

Our advice usually is for the client to ensure that the terms can be obtained elsewhere in the market. Keeping a record of that could prove useful if a suggestion of a breach is made.

For borrowers who don’t have an SMSF, 36.9% cite lack of knowledge as the main deterrent

Source: SPAA and Russell Investments

INDUSTRY SPOTLIGHT 21

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WHAT PARTICULARS DO BROKERS NEED TO KEEP IN MIND WHEN DEALING WITH SMSFs?

HOW DO BROKERS HAVE TO UP-SKILL FOR SMSFs?

TROY MCLACHLAN, FUTURE FINANCIAL

GREG WILLIAMS, HOMELOANS LTD

“Brokers need to take the time to fully understand the product, processes and potential benefits to their customers. If then they feel that SMSF lending can be a part of their strategy, they should invest the time necessary to understand the products in the market to meet their customers’ needs and requirements.”

“We can and do train brokers to be able to complete applications. What is also drawn into our training is involving accountants, financial planners and solicitors so the broker understands the complete process.”

JAMES CASEY, MACQUARIE “It is very document heavy. Brokers need to learn a new set of documents and have to deal with a new set of checklists. They need to understand the requirements of the lenders that work in this space.”

IAIN FORBES, AUSTRALIAN FIRST MORTGAGE

“A broker should not undertake this type of lending unless they understand what is required of them. Therefore, it is of paramount importance that all brokers be educated in the type of funding, and that they understand the legal requirements as set out under the Act. If they do not understand what is required they should obtain the services of a financial planner.”

NOW? DID YOU K

10.5%

Mortgage brokers account for 10.5% of the SMSF referrals to financial advisors Source: SPAA and Russell Investments

JAMES CASEY, MACQUARIE “Most lenders, including Macquarie, have education that brokers have to go through to get accredited for the products.”

TROY MCLACHLAN, FUTURE FINANCIAL

“Take the time to attend training and events held by lenders to gain an overview of the entire processes and requirements and understand when it is applicable for you to redirect your clients’ questions for specific investment advice from a financial planner.”

“I’M SURE MANY BROKERS ALREADY HAVE A FORMAL OR INFORMAL REFERRAL RELATIONSHIP WITH ACCOUNTANTS IN THEIR OWN NEIGHBOURHOOD. SOMETIMES THE ACCOUNTANT IS VERY ACCOUNTANT-LIKE, AND THEY’RE CHURNING OUT TRUSTEES AND SETTING UP SMSFS AND DON’T UNDERSTAND THE OPPORTUNITY THAT THE PERSON SITTING ON THAT STRUCTURE HAS THE ABILITY TO BORROW” – J AMES CASEY, MACQUARIE, ON HOW BROKERS CAN GET INVOLVED IN SMSF

OPINION 24

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Mortgage broking on ASIC’s radar ASIC’s Peter Kell explains how the watchdog will keep its eye on brokers

S

ince the start of the National Credit Act, ASIC has been actively regulating the mortgage broking industry. Our aim is to raise standards and increase consumer confidence, and where possible to work with the industry to drive out poor practices.

Our regulatory activity has several elements: • LICENSING AND REGISTRY where we assess Australian credit licence applications and scrutinise annual compliance certificates • SURVEILLANCE where we regularly review the activities of individual entities and undertake project-based compliance reviews of significant sections of the industry • GUIDANCE where we publish reports and guidance on current industry practise, compliance risks and good practice

FRAUD BY BROKERS WILL NOT BE TOLERATED AND TAKING ACTION FOR BREACHES OF THE NATIONAL CREDIT REMAINS A PRIORITY FOR ASIC As a regulator we take a balanced approach and have sought to assist brokers in their efforts to comply with the new laws.

However, where we encounter deliberate breaches of the law, serious misconduct, or significant

risk of consumer detriment we will generally take enforcement action which can result in disciplinary or civil action against individuals and licensees.

Civil action can lead to severe fines against an offender and disciplinary action can see a broker’s credit licence cancelled and the person banned from the industry.

ASIC will take enforcement action where brokers engage in fraud or other misconduct regarding information provided in loan applications. This is clearly in the interest of all reputable brokers, as well as lenders and consumers. Since 1 July 2010, ASIC has banned four people from engaging in credit activities for such conduct.

We have 18 other current investigations of this type underway. In the majority of cases, these matters concern suspicious loan applications that were submitted by brokers to ADIs. We have had good support from industry in identifying and reporting these matters to ASIC, and ASIC also works with other regulators to help identify offenders.

In the most serious cases, ASIC will take criminal action against an individual. The recent conviction of former mortgage broker Daniel Nguyen on 10 offences is an example of such a case. Nguyen was charged with providing false information and documents to banks in order to secure approvals for home loans totalling more than $3m, and with breaching his responsible lending obligations. Nguyen pleaded guilty to the charges, was found by the court to have behaved in a “blatantly dishonest” manner and was sentenced to a two-year good behaviour bond.

IF BROKERS BREAK THE LAW, THEY WILL HEAR FROM US

FURTHER INFORMATION More information on our approach to enforcement and why we respond to different breaches of the law in different ways is available on the ASIC website

ASIC’s inquiries into Nguyen’s conduct are continuing and further action may be taken.

In criminal proceedings, the court determines a sentence after taking into account a range of factors including ‘discounts’ in cases where there is an early guilty plea or where an offender cooperates with authorities.

Our message is clear: if brokers break the law, they will hear from us. In particular, fraud by brokers will not be tolerated and taking action for breaches of the National Credit Act, including the responsible lending obligations, remains a priority for ASIC.

Peter Kell is a Commissioner at the Australian Securities and Investments Commission

FORUM 22

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MFAA sides with ASIC on broker discipline ASIC has recently stepped up its activity in the mortgage broking sector. The regulator has made it clear it won’t tolerate brokers who intentionally skirt the law, and won’t hesitate to turf out dodgy brokers. The MFAA lauded ASIC’s move to crack down on cowboys

I

n applauding ASIC’s efforts to take aim at unscrupulous operators, the MFAA managed to draw the ire of Terry, who said lenders were the real culprits.

“Let the broker bashing begin. Seriously, let’s compare these figures to other parts of the industry such as bank lenders and see who are really the dodgy operators. The bank will keep these figures well hidden I’m sure. Truth be known the incidence within the banks is probably considerably higher. These figures should be lodged with the MFAA and recorded to provide transparency in the industry and a true measure of the incidence of fraud within the industry. We would see a lot less broker bashing I’m sure.”

DeanP echoed the sentiment, accusing the MFAA of unfairly maligning brokers.

“Here we go again. So typical of the MFAA attacking brokers whilst all this time saying nothing about lenders.”

But Larz leapt to the association’s defence, saying brokers should be glad to see shady characters purged from the industry.

“I would have thought anything that rids our industry of crooks should be supported. Not sure why it is broker bashing to say that brokers who commit fraud should be identified and

thrown out of the industry. I don’t think anyone really cares if it is ASIC, MFAA, FBAA or someone who does the deed, as long as these people are gone!”

Meanwhile, AaronG claimed that increased regulations are tackling problems that don’t actually exist.

“What are the incidences of fraud?

Naught point zero zero one per cent of loans from brokers? Current legislation, regulation, and industry practices act like we have some sort of widespread epidemic.

What evidence is there of this? None, so we make new criteria to make brokers look bad.”

I DON’T THINK ANYONE REALLY CARES... AS LONG AS THESE PEOPLE ARE GONE!

REGULATION REPRIEVE

Each issue, Australian Broker will publish the best online comment from the previous fortnight – along with your other feedback.

So get online, and get participating!

BROKERNEWS. COM.AU

It’s the job of the MFAA to attack rogue brokers and that is what I, as a member, expect of them. There are still many cowboys around and I don’t want them in my profession and in my professional body as their conduct reflects on the rest of us.

It’s a must if we are to be viewed as true professionals.

The government recently decided to put off proposed regulation of commercial credit, saying it wanted to make sure it got the details right before moving forward (Commercial lending regulation off the table ... for now, 18/02/2013).

Brokers were pleased with the outcome.

Country Broker on 19/02/2013 11:17:28 AM Commonsense has prevailed here. The proposed reforms were not suited to small business credit requirements and more consultation is needed.

Lyn Turner on 19/02/2013 10:48:56AM It’s a shame the government didn’t put the same careful effort into consumer lending legislation and regulation – it’s incredibly ill considered and poorly constructed.

Nikosau on 12/02/2013 11:35:35 AM

TO CATCH A THIEF

Mortgage House’s Sarah Roberts brought up the spectre of channel

conflict when she urged brokers to hold their clients close to ensure banks didn’t steal them away (Banks ‘stealing’ from brokers, 8/2/2013).

SunnyCoastBroker on 18/02/2013 10:49:05 AM Why doesn’t the MFAA spend some of our hard-earned membership fees on a prime time TV advertising campaign, highlighting the advantages of using brokers?

Ray-Perth on 8/02/2013 11:22:35 AM This is a free market and lenders have the right to sell themselves, in the same way we do.

SteveL on 8/02/2013 9:01:17 AM Individual brokers who provide a truly diversified product offering have very little to no risk of this happening. You don’t need to be a huge player to be able to do this, just great with relationships and having the client’s true financial interests at heart.

What do you think? Leave your comments at brokernews.com.au

ONE YEAR ON 23

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ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and influential trends that made headlines 12 months ago Australian Broker Issue 9.04

ASIC: We’ve got some small fish to fry

Innovation legacy sees Weston nabbed by Barclays

ASIC senior executive Greg Kirk conceded that the regulator had limited resources with which to seek enforcement action. While Kirk said larger players tended to be mildly in breach or have the occasional questionable practice “at the margins”, he argued that small, rogue operators had a more detrimental impact on consumers and would be the focus of ASIC’s enforcement.

Mortgage industry stalwart Steve Weston dealt a shock last year when he revealed he would leave his role as Advantedge head of broker platforms. Weston said he was approached by Barclays UK for a role that would oversee mortgage broker distribution. Looking back on his career in the Australian mortgage market, Weston said he was proudest of having helped guide Challenger through the GFC.

What’s happened since?

What’s happened since?

True to their word, ASIC has been extremely active in policing mortgage broking. They’ve cancelled 14 licences, banned 12 people from the industry and had criminal charges laid against a broker. ASIC commissioner Peter Kell has told the industry to expect the regulator to be keeping a keen eye on brokers in 2013.

Former FAST head Steve Kane was appointed ‘caretaker’ of Advantedge as Weston moved on. Kane was confirmed in the role a few months later, and has been vocal about his belief that aggregators have to up their game to cater to the needs of a more professional mortgage broking market. To fill Kane’s role, FAST turned to former general manager of distribution for NAB Small Business, Brendan Wright.

Aggregator competition heating up Steve Kane says aggregators are upping their game in their bid for brokers

A

ggregators are being put through the pressure test as banks move to entice more broker business, Advantage’s Steve Kane tells Broker TV – and competition between banks and aggregators is getting fierce.

“I think when you look at the depressed credit market situation we’re in, which is likely to be continuing for quite some time, everyone is trying to make the best possible opportunity they can in relation to the lower level of credit rates. So we’re seeing banks [and] aggregators really come to the fore in terms of the service propositions they’re offering.”

Kane tells Broker TV competition between the banks for new business is intense – and competition between aggregators

to recruit brokers and provide them with the service they require is also heightened.

He says aggregators need to constantly evolve their service proposition to satisfy their clients’ changing needs.

“Very clearly, brokers are looking to expand their businesses through diversification; they’re looking to hone the way in which they manage their relationships with their customers; they’re looking to make sure that everything they do adds value to their customer relationships. So the aggregators have got to make sure things they provide, such as software platforms, support around NCCP, support around business management and how to run a business, is continually developed for the broker experience. Everything we do as

an aggregator has to have, in the end game, something to improve that broker’s business.”

While lenders are ramping up their service to brokers with improved PD days and events, Kane says it’s up to aggregators to ensure learning and development initiatives are relevant and accessible.

“I think the PD days are very good, depending on what it is that you’re trying to achieve…

Across the Fast, Plan and Choice broking networks, we try to deliver product and services that will enhance their business – it’s not just about the lending products… It’s really now about developing brokers as a business.”

Kane says it’s also good to run things like webinars that are

topical to brokers’ needs.

“It’s about continuing to canvas about ‘what it is in your business that you require us to help you with’ – and there are many ways to deliver that.”

STEVE KANE

BROKERS ARE LOOKING TO EXPAND THEIR BUSINESSES THROUGH DIVERSIFICATION –S TEVE KANE, ADVANTEDGE

MARKET TALK 26

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THE FHB BLAME GAME There’s plenty of finger pointing over the departure of first homebuyers, but Mackenzie McCarty takes a look at who’s really to blame

A

statement issued by the Treasury Department in NSW – the state which experienced the most significant slump in first homebuyer (FHB) investment at the end of 2012 – plates up the core issue of housing affordability currently facing Australia. Get ready to chew.

In the release, NSW Treasurer, Mike Baird, points the finger at opposition leader John Robertson when confronted with a recent ABS data release.

“It is clear that… John Robertson has failed to do his homework on the important issue of housing affordability in NSW… Since the introduction of the NSW Government’s Building the State package last year, we have already seen a significant increase in the construction and purchase of new properties across the state, and housing affordability has improved.”

Baird argues that previous incentives to FHBs for existing dwellings simply increased mortgage sizes, as they inflated

demand without any boost to housing supply.

“This government wants to ensure that incentives actually encourage building activity, not simply push up house prices.

That is why our housing package unashamedly targets those purchasing newly constructed homes or apartments.”

THE REAL PROBLEM

These sorts of arguments make Professor Terry Burke, director of Swinburne AHURI research centre and housing market consultant for the state and territory housing agency FaCSHIA, want to tear his hair out. He says that dwelling prices in most of the nation’s inner and middle-ring suburbs and many coastal towns have been pushed to unsustainable limits for FHBs – and while houses on the fringe (including new construction) are relatively affordable, he suspects that many homebuyers are increasingly conscious of the lack of infrastructure and accessibility issues with such dwellings.

GOVERNMENT CAN DO SOMETHING ABOUT IT BUT THEY WILL NOT –P ROFESSOR TERRY BURKE

MISLEADING FIGURES Baird says the 30% affordability measure is skewed as it assumes a constant budget for all households

“They may represent affordable housing but not affordable living.

In addition, the rent increases of recent years has reduced the capacity of many households to transition to purchase by virtue of rents taking such a large share of the household budget (often 50% or more) and preclude the creation of a 20% deposit that many financial institutions now want.”

Burke says the government’s reluctance to get better performance out of existing levers, like negative gearing, social housing, and Commonwealth rent assistance, or to recognise the unintended side effects of short- and longterm migration on the housing market, is disappointing.

“Government can do something about it but they will not. What they should not do is increase the first homebuyer grant which may, at worst, increase house prices and, at best, bring forward first homebuyer demand creating spikes of activity but not increasing long-term demand.”

On the other hand, he says, given a ‘misplaced willingness’ to subscribe to the ‘overdone and little-evidenced’ argument that ‘it’s all about planning reform’, perhaps the best they can do is, well, nothing.

“Hopefully what this would produce is static growth of house prices and rents for a decade so that affordability was progressively improved. More desirably, they would actually make reforms to the policy levers in a way which subdue demand and increase supply of social and affordable housing.”

SHORT-TERM FIXES

Sadly, Burke says, in a political environment ‘obsessed’ with government debt and short-term electoral gain, such reforms are not on the radar.

He says that while there’s an abundance of national and international research groups identifying the scale of the problem, there are nuances and complexities that are sometimes missed or ignored.

In the meantime, Baird is still yelling at Robertson.

“Unlike Labor, the O’Farrell Government is committed to increasing housing supply across the state, which puts downward pressure on prices. We are taking action to bring forward investment for critical infrastructure to get the state’s housing construction industry back on track, to boost housing supply, and to get more people into new homes sooner.”

Wouldn’t that be nice?

MARKET TALK 27

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Will the Commonwealth Games give the Gold Coast a fair go?

Big events should bring in big money, but it’s not all fun and games for the Gold Coast

T

he Commonwealth Games may prove the elixir of life for the Gold Coast’s feeble property market, but whether the effects will be felt by the local population as a whole or merely a select few housing prospectors is up for debate.

Using information garnered before, during and after the 2000 Sydney Olympic Games, Residex founder and analyst John Edwards says there’s significant evidence to show that major international sporting events have a positive impact on local housing markets, if only temporarily.

Before the Sydney Games were announced, Edwards says around

64% of the suburbs in the Olympic Corridor outperformed the median growth rate for Sydney, with waterfront established suburbs performing best. However, he says, once the games were announced and development of the precinct got underway, the position changed very quickly and all but a very small handful of suburbs failed to grow rapidly and outdo Sydney generally.

“The majority of higher growth rates occurred in the first 1–3 years. The relationship between these suburbs and the Sydney median has changed forever.”

Yet, almost all suburbs for a period of two years after 2002 failed to perform – and, in fact,

under-performed – which he argues is likely the result of overpricing in the lead-up to the Games.

LEAVING LOCALS BEHIND

Regardless, he says there can be ‘little argument’ that the Olympic Games were anything but a ‘significant’ benefit to homeowners in the area surrounding the event.

But Gold Coast broker, Rebekah Gould, says she’s worried that any positive impact the Commonwealth Games may have on the local housing market will primarily be felt by prospectors uninterested in long-term investment.

“My initial reaction when I heard the Games were coming to the Coast was I couldn’t see it making a huge impact on property values, as we are already a transient population with our economy based on tourism. So, the Games will be great for our economy and anyone in the tourism industry, but not so much for other locals.”

Gould says many of her clients are tradies who have been forced to enter the mining industry on a fly in,fly out basis, due to lack of local job prospects.

“I can’t see the Games improving things sufficiently for them to be able to give up that income and rely on local employment. There could possibly be a small increase in activity from investors hoping to pick up some capital gain and good rental yields during the Games period, but I’m not sure if it will be anything more than that.”

Edwards say units are more likely to serve as rental properties for the Games and are probably the most solid investment.

“If I were to take a guess, the answer would be to go off and buy old rundown blocks of flats, sit on them for a few years, remodel them and rent them out during the Games and sell immediately following the completion of the Games.”

APPLES AND ORANGES

DID YOU KNOW? Lawn bowls is the only sport on the Commonwealth Games program that isn’t included in the Olympic Games

However, Edwards warns that there are significant differences between Sydney and the Gold Coast and says the effects of the Commonwealth Games are likely to be more subdued.

“Given the above points, it is important to note that the Gold Coast is already very developed with reasonably good infrastructure.”

He says that, while the Gold Coast boasts good air access, and a good road system and general amenities, its rail services are ‘poor’ – and that is one area where the Commonwealth Games may have a positive impact.

“All of the above leads me to the view that we cannot expect the same level of benefit for property owners as we saw from the 2000 Sydney Olympic Games. Benefits will more likely come via an economic boost via a surge in tourism before the Games and for some time after.”

FINANCIAL SERVICES 28

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Swan won’t rule out raid on super

M

ining tax earnings, which are supposed to pay for the increase in the superannuation guarantee, are way down, raising only $126m in the first six months. In the budget, it was forecast to make $2bn during 2012–13.

Talking to Fran Kelly on the ABC, Treasurer Wayne Swan admitted that revenue was down, not only from Mining tax but also from superannuation. He refused to rule out increasing taxes on either income tax or super, but later in the day he issued a statement ruling out an increase to income tax. So what does this mean for superannuation contributors?

Shorten reassured Kelly that in terms of paying for superannuation changes, they had factored it into their budget papers and Mid-Year Economic and Fiscal Outlook (MYEFO).

When asked directly if they were going to increase the superannuation tax paid by wealthy Australians, Shorten dodged the question: “Fran, we will be able to pay for this. We have a policy – we’ve already introduced the tax cut. We’ve done it from 1 July last year

when we introduced that tax cut.”

He then changed the topic to the Liberals’ suggested tax on the 3.6 million low-income earners.

Shadow Treasurer Joe Hockey declared the government’s budget was in “total chaos”, with no policy direction, when he spoke to reporters in Canberra yesterday.

He said the government was “creating uncertainty for businesses and consumers with its attack on superannuation and household income through personal income tax”.

“At the end of the day, everyone’s just wondering how much extra tax the government’s going to take from their pockets.”

AFA CEO Brad Fox said the constant changes proposed by political parties were causing consumers to lose faith and confidence in superannuation as a way of investing for their retirement.

“When we’re battling changes in rules and needing to change processes within our businesses, which is very expensive to do, and at the same time you’ve got the consumer questioning whether or not they can trust the system, it’s like burning the candle at both ends. The wick’s getting taken away far too fast,” said Fox.

AT THE END OF THE DAY, EVERYONE’S JUST WONDERING HOW MUCH EXTRA TAX THE GOVERNMENT’S GOING TO TAKE FROM THEIR POCKETS

Ponzi operators get just desserts Brian Wood, of Davistown, Jimmy Truong of St Johns Park, and Con Koutsoukos of Wiley Park, all pleaded guilty to various offences related to operating the scheme called the Integrity Plus Fund, including making false statements to investors.

Between December 2004 and December 2007 the Integrity Plus scheme raised more than $30m from about 270 investors. ASIC obtained injunctions from the Supreme Court of NSW against Wood in December 2007, and Truong, Koutsoukos and others in February 2008, preventing the operation of Integrity Plus and securing funds for investors.

Appearing in the Sydney District Court recently, Wood was sentenced to three years, 11 months imprisonment, to serve a minimum term of two years, six months. Truong and Koutsoukos were both sentenced to two years, eight months imprisonment, to serve minimum terms of two years.

“The motive for the actions of each offender is clearly greed … the offences occurred over an extended period. Significant planning was involved to present the business as a legitimate and profitable one and to entice investors into the scheme via seminars,” Judge Syme said.

Prior to their sentencing, all three men entered into separate enforceable undertakings with ASIC not to provide financial services and to manage companies, for a combined total of 45 years.

ASIC Commissioner Greg Tanzer said, “this outcome sends a very clear message that those who misuse funds entrusted to them by others face serious consequences.”

AGEING INSURANCE INDUSTRY LOOKING FOR FRESH FACES

T

he insurance industry must invest in future leaders who not only understand today’s insurance market but can also address the widening old-versus-young gap, the Underwriting Agencies Council has stated.

UAC general manager William Legge said underwriting agencies are often established by skilled, experienced insurance practitioners who wish to run their own businesses and specialise in insurance products.

“At the same time, this means they are more mature people and are faced with the issue of attracting and keeping younger people to be trained to take over the work they do,” Legge said.

According to Legge, the talent shortage is a problem throughout the insurance industry, not just for underwriting agencies, and agencies need to create their own succession plans.

The comments come as the UAC said it is taking a proactive approach in assisting members to train existing employees for when they will need practitioners to continue and expand the agencies they’ve created.

The council has announced it will hold its inaugural leader’s training course in Sydney next month over two days, with sessions on financial management for agencies, developing business plans, marketing and human resources compliance.

PEOPLE 29

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RIDE OF A LIFETIME LOOK Property’s Michael Robinson says riding in the Chain Reaction bike trek is not for the fainthearted

S

elf-professed “cycling nut” Michael Robinson one day hopes to ride the Great Ocean Road.

That may seem like a fairly lofty ambition, but Robinson – the managing director of LOOK Property Group – will be getting some good practise in soon.

On 9 March, Robinson will set out on a 1,000km trek to tackle Victoria’s seven peaks in seven days. He’ll be joined by fellow cycling devotees.

“It’s all cycling nuts, basically.

We get up at 5:30 every morning and cycle for an hour-and-a-half [before work], and eight hours on Saturdays,” he said.

The epic journey will see a group of property professionals riding in the sixth annual Chain Reaction corporate bike challenge to raise money for children’s charities.

Chain Reaction was formed by KordaMentha partner Berrick

THE COURSE …

Wilson in 2007 after his daughter was rushed to hospital with a brain haemorrhage at just two days old. After her recovery, Wilson set out to raise money to assist other sick and hospitalised children through charities such as Starlight, Victor Chang, the Children’s Health Foundation and the AEIOU Foundation.

Robinson, who is involved in the event for the first time this year, said the group of riders was limited to those in the property sector.

“It’s not an event you can just ring up and pay money to get in.

You almost have to be invited. It’s quite an exclusive group of property guys,” he said.

As well as being an exclusive and targeted group, Robinson said the ride is set apart by its difficulty. “It’s not like one of those ‘around the bay in a day’ rides. It’s a full, Tour de France experience,” Robinson said.

IT’S A FULL, TOUR DE FRANCE EXPERIENCE

This includes support vehicles, mechanics, masseuses and sports nutritionists. And while only hard-core cycling enthusiasts are involved, Robinson said the event still draws a diverse range.

“We’ve probably got blokes as young as 30 and guys as old as 65. One guy is a grandfather.”

Robinson said he had built “amazing friendships” through the event, and had also had the opportunity to meet others in the property industry.

“It’s great networking with guys from solicitors, to funds managers, to property developers to real estate agents,” he said.

But in spite of the fringe benefits, Robinson said he’s focused on the meaning behind the ride.

“It’s not just about the ride.

It’s great to ride and have a lot of fun, but it’s about making sure the charities get the funds they need.”

And thus far, Chain Reaction has delivered. Over the years since its inception, the charity ride has raised more than $7.3m for children’s charities.

OVER SEVEN DAYS, RIDERS IN THE CHAIN REACTION CHARITY RIDE WILL TACKLE VICTORIA’S SEVEN PEAKS DAY 5: Milawa to Mt Buller

DAY 3: Bright to Falls Creek

169km

131km

1,814 metres

1,824 metres

START...

BRIGHT DAY 6: Mt Buller to Lake Mountain 175km 1,697 metres

DAY 1: Bright to Mt Buffalo to Bright 65km

DAY 1

1,228 metres DAY 7: Healesville to Melbourne Town Hall 145km 1,802 metres

DAY 2 DAY 2: Bright to Mt Hotham to Bright 109km 1,724 metres

DAY 3 DAY 4 DAY 5 DAY 6

DAY 4: Falls Creek to Milawa 245km

FINISH...

MELBOURNE

2,047 metres

DAY 7 DISTANCE METRES CLIMBED

INSIDER

brokernews.com.au

30

L

HEY BIG SPENDER

ooking to target a specific market sector? Go for single men in mining towns and other locations where ladies are few and far between. The perception that women are scarce leads men to become impulsive, save less, and increase borrowing, according to new research from the University of Minnesota’s Carlson School of Management.

The school’s assistant professor of marketing, and the study’s lead author, Vladas Griskevicius, says that when females are outnumbered by males among animals in the wild, males become more competitive – and the same holds true for humans.

“How do humans compete for access to mates? What you find across cultures is that men often do it through money, through status and through products.”

To test their theory that the sex ratio affects economic decisions, the researchers had participants read news articles that described their local population as having more men or more women. They were then asked to indicate how much money they would save each month from a pay check, as well as how much they would borrow with credit cards for immediate expenditures.

When led to believe women were scarce, the savings rates for men decreased by 42% – and they were also willing to borrow a whopping 84% more money each month.

According to Griskevicius, participants were unaware that

IT’S ABOUT MORE THAN JUST MONEY. IT’S ABOUT VIOLENCE AND SURVIVAL sex ratios were having any effect on their behaviour.

“Economics tells us that humans make decisions by carefully thinking through their choices; that we’re not like animals. [But] it turns out we have a lot in common with other animals. Some of our behaviours are much more reflexive and subconscious. We see that there are more men than women in our environment and it automatically changes our desires, our behaviours, and our entire psychology.”

On the other hand, the study found that sex ratios don’t influence the financial choices women make – but they do shape women’s expectations of how men should spend their money when courting.

After reading a news article informing women that there are more men than women, women expected men to spend more on dinner dates, Valentine’s gifts, and engagement rings.

In addition to conducting laboratory experiments, the researchers reviewed archival data and calculated the sex ratios of more than 120 US cities.

Consistent with their hypothesis, communities with an abundance of single men showed greater

ownership of credit cards and had higher debt levels.

One striking example was found in two communities located less than 100 miles apart. In Columbus, Georgia, where there are 1.18 single men for every single woman, the average consumer debt was $3,479 higher than it was in Macon, Georgia, where there were 0.78 single men for every woman.

Griskevicius says the research is, at this point, only scratching the tip of the iceberg when it comes to financial behaviour – but says there are implications of a more sinister element.

“One of the troubling implications of sex ratios for the world in general is that it’s about more than just money. It’s about violence and survival.”

WHEN WOMEN ARE SCARCE...

42% 84%

MEN SAVE 42% LESS AND

ARE WILLING TO BORROW 84% MORE

DIRECTORY brokernews.com.au

AGGREGATOR / WHOLESALE BROKER Choice Home Loans 1800 188 288 www.choicehomeloans.com.au Page 5 Loan Market 13 LOAN (56 26) www.loanmarket.com.au Page 9

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Look Property Group - Residential Project Sales & Marketing 03 9827 8288 www.lookpropertygroup.com.au Page 31

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Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4

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