Australian Broker magazine Issue 10.09

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John Mohnacheff:

The changing face of competition Liberty’s John Mohnacheff says the future of competition will come from unexpected sources, and brokers and lenders must be ready

T

he future of competition in the mortgage market is going to look very different, Liberty national sales manager John Mohnacheff has said. While major lenders, non-majors and non-banks will continue to battle it out, everyone must be prepared for new, seemingly unlikely entrants to the market.

FULL STORY PAGE 14

MAY 2013 ISSUE 10.09

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

+ ANALYSIS THE LMI FIGHT

Peter White’s battle for ‘a fair go’ P10

WHERE ARE THE YOUNG GUNS? The mistakes we make attracting young brokers P12

+ WORKSHOP MCGRATH’S TOP TIPS

John McGrath tells you how to double your business P22

+ SPOTLIGHT BAD HABITS HOLDING YOU BACK

How bad habits can limit lead generation P27

+ CAUGHT ON CAMERA Loan Market steps up for OzHarvest P28

NEWS

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WHAT THEY SAID...

NUMBER CRUNCHING RED HOT REGIONS Best performing regional markets by state to March 2013 Country NSW

Country WA

GROWTH COOLAH HOUSES

GROWTH TOM PRICE HOUSES

26.84%

22.96%

Country QLD

28.65

DID YOU KNOW?

“We do not want to see SMSFs become the vehicle of choice for property spruikers” P8

Country SA

18.44%

%

GROWTH LAURA HOUSES

GROWTH WANDOAN HOUSES

Country VIC

Country TAS

GROWTH LETHBRIDGE HOUSES

GROWTH GREENS BEACH HOUSES

22.72

PETER KELL

10.04

%

Source: Residex

65 cents/$

%

$399k*

*The average loan size nationally in April, down from $402k in March

PETER WHITE

“APRA needs not be an impost for greater competition in the market place from new [LMI] suppliers” P11

Source: AFG

Investors in the collapsed Banksia Securities are expected to receive 65c/$1 after the company’s loan book was sold to Deutsche Bank

JOHN MCGRATH

“You must focus on things that create revenue for your business” P22

Source: AFG

FIXING FRENZY UNABATED Mortgage demand for April 2013 Basic variable rate

13.06%

Standard variable rate

13.97%

Ongoing discount rate

37.94%

Line of credit

3.17%

Introductory rate

3.82%

Fixed rate

28.04%

Source: Mortgage Choice

JAMES VEIGLI

“The most dangerous number in business is ‘one’: one source of leads” P27

NEWS 4

brokernews.com.au brokernews.com.au EDITOR Adam Smith

Distressed sales figures distressing

LMI TRANSFERABLE?

■ Nearly a quarter of all properties advertised in

Australia are distressed sales, according to figures released by valuation group LandMark White.

The research shows Queensland accounted for a massive 54% of properties advertised by a mortgagee, receiver or liquidator during the March quarter – and the Gold Coast recorded the highest number of distressed property advertisements in the country, with 74% of its listings made by a mortgagee, receiver or liquidator in the three months to March 31 – despite recent claims the region’s housing market is back on its feet.

Nationally, most receiver sales were in regional areas, with residential property falling just ahead of the agricultural sector.

LandMark White found almost 23% of properties advertised in Australia during the quarter were listed by a mortgagee, receiver or liquidator.

Of those, 19% were in the residential sector, 16% in industrial and 15% in retail.

NSW saw the most positive change, as only 7% of all properties advertised in that state were listed by a receiver or mortgagee – a record low. By comparison, the proportion in the same quarter of 2012 was 31%, according to a News Ltd report.

Although the distressed ratio in Queensland dropped by 6%, it remains high at 39% of all property advertisements in the state. Victoria saw the smallest improvement in the distressed ratio, with a drop from 20% to 19%, which meant that for the first time in the series, Victoria had a higher ratio than NSW.

PERCENTAGE OF TOTAL DISTRESSED SALES BY STATE

QLD

VIC

54%

15%

TAS 6%

3%

Source: LandMark White

NT

NSW 9%

WA

ACT 0%

1%

The number of brokers who responded to our recent poll question, “Should LMI policies be made fully transferable?”

93%

said yes

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

$115

million According to newly-released ABS figures, investment housing commitments rose 1.5% ($115m) in February Source: ABS

SA

12%

137

PUBLISHER SIMON KERSLAKE

ASIC WARNS OF OFFSHORE IMPERSONATOR SCAM ■ ASIC has issued a warning,

saying the industry regulator has received reports of cold-calling scammers pretending to represent the organisation.

Based offshore, the callers claim to be able to assist victims in retrieving money lost in an earlier software scam. They may quote an ABN, claim to also represent Microsoft and in order to receive any funds, recipients are asked to provide access to their computer and complete an online form.

ASIC said anyone who is contacted should simply hang up and contact their bank or financial institution immediately.

“We ask the public to be wary of calls like these and we encourage them to conduct some basic checks before acting on an email or phone call out of the blue,” ASIC commissioner Peter Kell said.

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, 1–9 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

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RBA interest rate adjustment a ‘blunt tool’, says analyst

THE STRANGER SIDE OF NEWS

■ Potential home loan interest

rate reductions could spell disaster for some states’ housing markets, while simultaneously providing a much-needed hand to others, said Residex consultant and founder, John Edwards – and it’s not the RBA’s job to come to the rescue.

Edwards said he believes the RBA is ‘stuck between a rock and a hard place’ when it comes to dealing with the nuances of various regional housing dilemmas.

“They don’t have the right tools to manage the outcome.

Some states definitely need to have the outcome managed and don’t need an interest rate

LOCH, STOCK AND BARREL

■ For brokers looking to diversify into

insurance, a new risk product has opened up.

You can now insure people against attacks by mythical creatures. A cruise company in Scotland recently took out a $1.5m policy on its boats to protect them in the event of an attack by the Loch Ness Monster. The policy was really a bit of publicity, of course, as the company was celebrating the 80th anniversary of Nessie’s first alleged sighting.

But the cruise line’s owner took a “better safe than sorry” approach. She told The Scottish Sun that she realised the chances of the mythical beast attacking one of its ships were slim, but added, “how silly would we look if it did [attack] and we weren’t covered for it?”

STARS AND BARS

■ We all know that social networking is

becoming increasingly important, and that digitally savvy clients are likely to refer good service experiences via their web connections, but the age of online reviews may be going a bit far.

Popular review site Yelp has recently seen a new phenomenon among its usual slate of restaurant of retail reviews: prison reviews. Lawyers and inmates have been posting reviews of penal institutions, some of which have actually led to internal reviews.

reduction – and others definitely do.”

It’s up to the federal government, he said, to come in and do something.

“A state government can’t do anything quickly enough because it’s all about land supply and creating an incentive for people to do something and [state governments] potentially would just make things worse if they did that, because it would bring forward growth and create over-supply. I mean, basically the federal government had a need – and still has a need – to do something to stimulate the industry so that there is no need to actually reduce interest rates.

“Basically, the Reserve Bank is being asked to do the federal government’s job.”

BASICALLY, THE RESERVE BANK IS BEING ASKED TO DO THE FEDERAL GOVERNMENT’S JOB – J OHN EDWARDS DID YOU KNOW?

28.04%

The proportion of new loans in April that were fixed rates

MFAA CHALLENGES NCCP ON LENDER LOAN VARIATION TREATMENT

Source: Mortgage Choice

■ The MFAA has made a submission to the Department of Treasury seeking

a resolution to the potential breach by brokers of NCCP, as some lenders treat loan variations as just that, while others require a new loan contract.

MFAA CEO, Phil Naylor, said the problem this creates for brokers is that, if a broker initiates a variation to the loan contract on behalf of a client, where the lender treats this as a new contract, NCCP requires the broker to go through the whole responsible lending obligations under the NCCP, as if the variation was a new loan.

“The regulations should make it clear that if it is a variation which does not involve an increase in the amount of the credit, it should be regarded under NCCP as a variation irrespective of the lender’s treatment of the transaction.

Thus, the whole responsible lending obligations process will not be triggered.”

NEWS

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Property spruiker Star broker ‘over-reaction’ signs with real estate firm ■ In response to ASIC’s announcement that it will be cracking down on SMSF spruikers, the SMSF Professionals’ Association of Australia (SPAA) has cautioned against any possible overreaction in the industry.

SPAA CEO Andrea Slattery said the organisation welcomes the report, as it will “help to ensure higher professional standards of advice” in the SMSF sector.

“The research is based on only 100 pieces of advice to low-balance SMSFs, plus those advisers that are prolific spruikers of property and borrowing and those that have had consumer complaints made against them. This is a very small subset of SMSF advice – only addressing the really risking [sic] end of advice to the SMSF industry.”

“What has to be remembered,” said Slattery, “is that there are nearly half-a-million SMSFs in Australia, so this research should not be regarded as defining all professional advice in the SMSF space.

“But it will be useful in determining what the regulator sees as risks to watch out for, and provide SMSF advisers with an example of what ASIC expects of them.”

WORLD NEWS CANADA BANK OF CANADA LOOKS FOR MORE GROWTH BEFORE RATE HIKE

■ Century 21 Home Loans has

partnered with leading finance broker, Peter Ellis, in a move that will see Ellis service home loan leads for customers across the Century 21 brand.

The deal will allow Century 21 to offer its clients access to lower interest rates, faster loan approval times and all financial broking products through Ellis’ preferential lender offerings.

Ellis last year settled $97m in home loans and was regularly a finalist in the Australian Mortgage Awards and Australian Broker Awards. He has also won numerous AFG awards and won MFAA broker of the Year in 2006.

Charles Tarbey, chairman and owner of Century 21 Australasia, said home loans and insurances within the Century 21 network have grown significantly in recent months.

“Century 21 recorded the highest number of mortgage applications in March 2013, since inception of the business in 2007. Demand for a convenient and quality mortgage broking services has continued to grow.

A growing number of customers are demanding real estate agents assist them and make buying the property as affordable and convenient as possible.”

SMSF PROPERTY PIMPS IN THE FIRING LINE ■ ASIC has announced plans to heavily focus on SMSF property investment

professionals in coming months, in an effort to thwart ‘spruikers’ in the industry.

ASIC Commissioner, Peter Kell, said there is a certain level of market confusion when it comes to operators recommending that investors purchase a property through an SMSF, with some mistakenly thinking they don’t require an AFS licence.

“We do not want to see SMSFs become the vehicle of choice for property spruikers,” said Kell.

DID YOU KNOW?

$2.9

BILLION ANZ Bank’s half-year profit as of March 2013 Source: ANZ

Bank of Canada Governor Mark Carney is looking for more substantial economic growth before hiking his overnight rate, but he is also factoring in the housing market and personal debt before making any decision.

In a flurry of online, television and newspaper interviews recently, Carney initially hinted that rates could rise if personal debt isn’t adjusted in a more timely way – interest rates “could be higher sooner if this isn’t addressed.”

However, Carney later stated that any rate increase would be predicated on several factors, including a minimum rate of economic growth and a stronger housing market.

“First, the economy needs to grow above its so-called potential rate of growth; so it needs to grow more than two percentage points,” said Carney. “Secondly, you need to see a continuation of what is becoming a positive evolution of household debt and aspects of the housing market. They’re both moving – moving in the right direction toward more sustainable levels. So we need to see those aspects and also inflation picking up a little bit before we would move.”

UK PAYDAY LENDERS PILING UP COMPLAINTS It seems payday lenders are feeling the same scrutiny in the UK that they are in Australia. A recent report by the country’s Financial Ombudsman Service found complaints against payday lenders increased 75% year-on-year. The UK’s FOS said it received 30 to 40 complaints a month about payday lenders, many concerning the lenders unexpectedly taking payments from borrowers’ bank accounts.

ANALYSIS 10

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The LMI battle

FBAA president Peter White has taken up the banner of LMI transportability, and has said he won’t give up the fight

F

BAA national president, Peter White, is frustrated with lenders mortgage insurance (LMI) providers in Australia, whom he argues regularly exhibit a distinct lack of fairness and transparency and, in fact, should not be termed ‘insurers’ at all – and it appears many brokers agree.

A recent poll on the Australian Broker website asked, ‘Should LMI policies be made fully transportable?’ – and a convincing 91% of the 145 respondents said they believe it should.

“LMI is a very important part of our sector,” says White, “especially with off-balance sheet lending, but historically there was little or no discourse about the product and who, if anyone, benefited from it – ie, no disclosure at all.”

White, who claims the FBAA has been the sole public voice pushing for disclosures that will come into effect under the NCCP with the key fact sheet modifications, says LMI needs to live up to its name.

“LMI should be what it states it is – insurance – but it has never complied with the Insurance Act, otherwise it would have had…PDS [product disclosure statement] documents and proper, fair rebates if the policy was terminated early.

At this point in time, the only time you might get a rebate on LMI is if you terminate the policy inside of one year (sometimes two) – and only if you ask for it. How can one ask for something they don’t know exists?”

A COMPETITIVE VOID

Competition – or lack thereof – is another issue for White, who says the FBAA has been talking to parliamentary ministers about allowing overseas LMI competition to exist in Australia, expanding on a model that exists today.

“Australia has had companies from overseas look

at coming into the marketplace with new…products, as they have seen it as a viable market space, but have withdrawn from doing so mainly due to the entry process brought upon them [by APRA].

This means we are missing out on better and more competitive LMI products than what we have today, as it is basically controlled by two companies.

“We are continuing to engage [the government] on this. APRA needs not be an impost for greater competition in the market place from new suppliers and at the moment they appear to be one of the last barriers.”

As for premium fairness, White says competition is definitely key, but that market claims ratios also play a part – and he’s not buying the excuse that LMI providers can look at past data to determine likely default rate spikes amongst particular market segments.

“Sorry, but that doesn’t wash and is yet another example as to why this isn’t insurance as we would know it. Insurance premiums react to claims losses, which we see every year in the market with our cars and home insurance. [They’re] not based on would-be, hypothetical, magical figures starting 50-odd years ago, which are predicting with reasonable certainty that there will be more defaults ‘in the future’.”

Furthermore, he says, it doesn’t take ‘Einstein’ to work out that with more people borrowing money – and therefore paying LMI – that there will be more people making claims. However, the ratio of borrowers to claims is something that will only be known when the time comes.

“I bet if the ratio is no different, they won’t reduce the premiums to where they were before the 12% increase.

“One thing that is very important to understand is that, whilst this is called ‘insurance’ and we talk

DID YOU KNOW?

91%

The proportion of Australian Broker readers who believe LMI should be fully transportable

ANALYSIS 11

brokernews.com.au

[LMI IS] A VERY IMPORTANT NECESSITY FOR OUR INDUSTRY; IT JUST NEEDS FAIR PLAY AND FULL DISCLOSURE

about ‘premiums’, LMI is not a true insurance product; hence why there have never been PDS documents and normal rebates one would imagine would be in place.

And LMI is not written under the Insurance Act, which is why they have never had to comply with these normal disclosure requirements and rebates by law.”

A WORTHWHILE SERVICE

PETER WHITE

White says the FBAA (and he, personally) will not give up on the fight for full disclosure of LMI to borrowers, the need for portability of LMI policies, fair and reasonable rebates on premiums when terminated in a proactive manner and for greater competition in the Australian marketplace – one that isn’t impeded

by APRA or “other bodies”.

However, White is quick to stress that he sees the inherent value in LMI. “I’m not against LMI. It’s a very important necessity for our industry; it just needs fair play and full disclosure.”

ANALYSIS 12

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Where are the

young guns?

Mortgage broking is an ageing industry, so where has the profession gone wrong in recruiting new talent?

A

ccording to demographer Bernard Salt of KPMG, from 2005 to 2020 the proportion of the Australian population aged 60-79 will increase by nearly 60%. The impact of this will not be lost on the mortgage broking industry, as brokers continue to head toward retirement and leave the industry. And because of the increasing barriers to entry in the industry, attracting new talent to replace those who are leaving is a difficult task, according to Daniel Paci of Vault Mortgage Corporation.

Paci mentors young brokers, and said 10 out of 25 would-be brokers have dropped out of his mentoring program.

“Obviously they’ve got to be up to it – it’s not an industry you can just jump into and expect to make a lot of money; they need to put a lot of hard work into it. What we find is a lot of people give up when it gets too hard,” he said.

WHERE ARE WE GOING WRONG?

Mortgage broking isn’t alone in its struggle to attract young talent. In a recent Credit Suisse report, Professor Simon J. Evenett and Project Firefly representative Daniel Garraty say that while millions of students graduate annually from the world’s universities, companies – including those in Australia – nevertheless continue to report difficulty in finding and holding on to top talent.

“Much of the industrialised world may still be in recession but there is no end to the war for talent.

Companies, governments, in fact every organisation, know that having excellent employees makes a substantial difference. Hiring the right people in the first place is much better than dealing with any later problems with underperformance.

Yet finding good matches is becoming harder and harder, especially for university graduates. The strategies of talent seekers and providers are going to have to evolve,” say Evenett and Garraty. Here’s how:

FEAR OF DEBT DISCOURAGES POORER STUDENTS

“Even though a university education can yield tremendous payoffs both financially and otherwise, it would be naive to suppose that students from

poorer backgrounds won’t shy away from the longer-established and better-known universities that tend to charge more tuition. For all the talk about scholarships and financial assistance, deepseated fears about getting into debt will persist. More talent will shy away from the most expensive universities and recruitment strategies should reflect this reality.”

TRADITIONAL RECRUITMENT STRATEGIES INEFFECTIVE

“Students have become more jaded about frequentlyused employer recruitment strategies. They are no longer impressed by one-off presentations by human resource management personnel on campus visits.

Smart employers are learning that they need to offer students more than a sales pitch and an apero.

Providing workshops on career-relevant skills increases the motivation and payoffs for students to attend and gives employers an opportunity to observe potential employees for several hours, sometimes even for a day or two. Some forward-looking companies have joined forces with academic programs to offer content that meets multiple objectives.”

CREATIVE NETWORKING ATTRACTS YOUNG TALENT

“Some cutting-edge companies stay in touch with former employees, deliberately creating networks that have paid off in terms of contracts, information flow and innovation. Why confine such networks to former employees? Why not create a network of interesting, potential future employees, tailored to the needs and career challenges faced by young talent? The network’s activities need not be purely about recruitment, in fact sustaining the interest of young talent almost requires that any network operate on a different basis. Nothing prevents such networks being organised by associations of firms. Therefore, this option is just as relevant to small and medium sized enterprises as it is to large multinational companies.”

INITIATE DIALOGUE TO WIN YOUNG TALENT

“There aren’t any short cuts. It might be tempting to widen the reach for hiring new talent through

IT’S NOT AN INDUSTRY YOU CAN JUST JUMP INTO AND EXPECT TO MAKE A LOT OF MONEY - D ANIEL PACI

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organisational websites and the like. A fancy website isn’t enough, though. Young talent doesn’t want another one-way vehicle that neither elicits their contributions nor responds to them. The current state of information technology allows for many forms of dialogue with and between young talent, going well beyond blogging and low quality interactions. Providing a sequence of opportunities and interactions with young talent would allow an organisation to stand apart from its rivals.”

FLAWED PROCESS NOT LACK OF TALENT

“It is paradoxical that at a time when millions graduate annually from the world’s universities, organisations of every type report they have difficulty finding and retaining top talent. This problem is not confined to the public or private sector, nor to organisations in certain countries.

Something has gone wrong with the sorting process for young talent. Forward-looking organisations are not powerless to react and those that adjust to the new reality will be quickly recognised for doing so by tomorrow’s leaders.”

EXIT STRATEGY A MUST

Stephen Moore, Choice When it comes time to leave the broking industry, planning is everything, says Choice CEO Stephen Moore.

“Part of any good business plan must include a plan for exiting the business. Choice is committed to supporting brokers throughout all stages of their career, from entering the industry to expanding and diversifying an established business, to assisting broker’s transition into retirement.”

Moore says his aggregation business aims to “marry up” brokers looking to exit their business with a broker who has similar philosophies and business acumen to ensure a smooth transaction for their clients.

“We do occasionally see extreme age gaps that may not resonate. For instance, if a client is in their 60s and is working with a broker in their 20s, then this relationship may need more work from the broker; however, this is not a strict rule of thumb.”

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CONTINUED FROM PAGE 1

John Mohnacheff:

The changing face of competition

A

lready, Mohnacheff said, some of these major corporations are beginning to dip their toes in areas of financial services previously considered the domain of traditional lenders. And the trend is set to continue.

“The other day when I was in the CBD, I saw a 20-foot by 10-foot billboard advertising Cole’s home and contents insurance. I assure you, they’re going to be looking very heavily at getting into the residential mortgage and car finance space,” he said.

This could be a major shakeup to the market. As Mohnacheff explained, these large multi-nationals have market power that would be difficult to match.

“We also know that Australia Post is looking at getting into the mortgage space. These are companies with incredible databases, and they don’t compete on a one-to-one basis. They’re mass market players,” Mohnacheff said.

PLAYING IN ALL AREAS

With this in mind, Mohnacheff believes lenders and brokers alike have to prepare for changing

customer preferences and a dynamic competitive landscape. He used the example of Liberty’s own evolution as a lender, and its determination to move beyond being a mono-line service provider.

“If we can look at Liberty as an example, last century when we started in 1997, we started as a non-conforming lender. That’s still one of our flagship products, but through innovation and diversification we’ve moved very heavily into the prime space with some very competitive products. We’ve also launched a great SMSF product, as well as commercial, chattel and asset finance.”

As Mohnacheff explains, the company looked to grow beyond residential mortgages into the full suite of financial services.

“If we’re going to be players in financial services, let’s play in all areas,” he said.

As such, Mohnacheff said the company would look to expand brokers’ perception of its offering. He pointed to new marketing from Liberty meant to communicate the diversity of its offering to brokers,

IF WE’RE GOING TO BE PLAYERS IN FINANCIAL SERVICES, LET’S PLAY IN ALL AREAS – J OHN MOHNACHEFF

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with buzzwords like “FlexibiLiberty,” “AccessibiLiberty,” “CapabiLiberty” and “LikeabiLiberty”.

BROKERS THINKING BIGGER

This kind of thinking applies to the entire industry, and particularly to brokers, Mohnacheff said. With a fast-changing market, increasing competition and a changing consumer, lenders and brokers will have to think creatively to compete.

“The industry needs to be very innovative and really tap into the imagination of consumers, and doing things the way we did them last century – which was only 14 years ago, by the way – just no longer washes,” he said.

And as Liberty expands its own offering into a broader suite of financial services, Mohnacheff urged brokers to do the same.

“If you’re just saying to the market, ‘I’m a home loan expert,’ I’m sorry, but there’s no such thing.

The consumer of the future wants flexibility. If you can do the one-stop shop model, mate, you’re onto a winner,” Mohnacheff said.

The expansion beyond being a mono-line service provider into looking after every aspect of a client’s financial needs means the broker-customer relationship can move beyond the transactional, Mohnacheff said. While some brokers may chafe at the idea of the one-stop shop model, Mohnacheff said many are beginning to embrace it. And offering a broad range of financial services will mean a more loyal customer, he argued.

“If you have one transaction with a customer, that does not make a customer for life. You’re just someone who facilitates their home loan. They have multiple product providers and they won’t have any loyalty to you. But if you’re a person who takes them on a journey, who not only does their home loan but their home and contents, their risk, asks if they plan to buy an investment property, asks how their super is. It doesn’t mean you have to do all this, but you show a keen interest in every facet of the client’s financial life.”

COMPETITION IS RAMPANT, AND MORE AND MORE COMPETITION IS GOING TO BE COMING FROM THE PLACES YOU LEAST EXPECT; PLACES LIKE COLES AND WOOLWORTHS AND TELSTRA, WHO ARE INTERNATIONAL GIANTS – J OHN MOHNACHEFF OLD-FASHIONED FRIENDSHIP

FAST FACT Liberty took out top honours in MPA’s 2012 Brokers on Non-Banks survey..

In forging a more loyal customer base, Mohnacheff said lenders and brokers will set themselves apart from new mass-market entrants with an appeal that – in spite of all the innovation – seems decidedly old-fashioned and time-tested: relationships.

“When you look at human behaviour, we are a very gregarious animal. We like to be looked after.

It’s about having that one-to-one connection with a person that makes that person feel special, and wanted and valued. This is where real business relationships flourish and grow. It goes from being transactional to being a trusted and loyal friendship, and that can never be understated,” he said.

And while Liberty looks to expand its offering to the broker market, Mohnacheff said the key to remaining relevant to brokers remains forging a close relationship. It’s for this reason, he said, that the lender offers all brokers full access to BDMs, credit assessors and all its support team.

“We’re very much cognisant of the fact that for us to remain relevant to brokers, we have to have a one-to-one relationship with them. We have to be a trusted adviser as well as a service provider. If we have sensational products and crappy service and don’t engage in relationships, our products will wither and die on the vine.”

MARKET TALK 18

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THE $115m QUESTION

MARKET FORCES ARE CURRENTLY ALIGNING TO PRODUCE WHAT ARE ARGUABLY THE BEST PROPERTY INVESTMENT CONDITIONS WE HAVE SEEN FOR SOME TIME –B EN KINGSLEY, PIPA

A property professional says a new wave of investment could see major opportunities for brokers in property advice, but only if the market is regulated

F

irst, the $115 million question: According to newly-released ABS figures, investment housing commitments rose 1.5% ($115m) in February, a positive sign for the property market. So, is now the time for brokers to start offering property advice and, if the answer is yes, how should they become accredited to do so?

Property Investment Professionals of Australia (PIPA) chair, Ben Kingsley, says signs of a ‘renaissance’ in the Australian property investment market point to strong opportunities for brokers interested in expanding their service offering.

“Market forces are currently aligning to produce what are arguably the best property investment conditions we have seen for some time,” he says, “bringing with them investment activity and opportunities for financial services professionals, including brokers.”

Kingsley goes on to encourage brokers to undertake PIPA’s Qualified Property Investment Adviser (QPIA®) course in order to gain some kind of accreditation in the industry.

But Sydney-based broker and property investment adviser Kevin Lee says he’s concerned brokers may be rushing into an area they know little about and which is largely unregulated compared to other branches of the financial services industry.

Given the lack of federal government-initiated regulation, he says, how can brokers be sure that the education they receive in the area is valid?

“It looks like [PIPA] are holding themselves out as an organisation qualified to provide credentials to brokers… If so, who accredits the accreditors?”

Kingsley says the QPIA® course, originally developed by a division of Deakin University as an accreditation program to achieve a professional industry

“WHILE OUR INDUSTRY IS RAISING ITS PROFESSIONAL STATUS, ANY WIDESPREAD INDUSTRY MOVE INTO PROPERTY ‘ADVICE’ COULD SEE THAT COMPROMISED WITHOUT LEGISLATION TO OVERSEE REAL ESTATE INVESTMENT ADVICE” – PETER FAST

“BROKERS GIVING ADVICE ON WHICH PROPERTY TO BUY SUGGESTS CONFLICT OF INTEREST ISSUES” – WAYNE

BROKERS NOT SO SURE

“WE ARE FINANCE AND MORTGAGE BROKERS, NOT PROPERTY INVESTMENT ADVISERS. MY PI POLICY DOES NOT COVER ME FOR THIS TYPE OF BUSINESS” – COUNTRY BROKER

Commenters on the popular Australian Broker forums were sceptical of the idea of brokers taking on property advice.

DID YOU KNOW?

1.5%

The amount investment housing commitments rose in February Source: ABS

award, consists of content devised by “highly skilled industry professionals with vast experience and expertise within their specialist disciplines within the property, financial services and training fields”.

A QPIA®, he says, is a formally educated, qualified property investment specialist who can advise investors on individual property selection, as well as develop a long-term property investment strategy that meets the client’s needs.

Lee remains sceptical, but says it essentially comes down to the following: “Free advice is worth the price you pay; if you’re going to provide professional advice and charge for it, then that’s a whole new ball game.”

But he and Kingsley can agree on one thing: both believe ASIC should eventually be charged with regulating the property investment industry.

“Too much money is at stake for [the government] to continue to turn a blind eye to the crooks and thieves in the industry,” argues Lee. “Just 10% of investors have more than two investment properties. What role has a property adviser already played in the life and fate of the other 90%?

“Most, if not all, of [property investors] would probably have one negatively geared investment property. And after they were convinced, conned or sold into that property by their adviser, accountant, financial planner, real estate agent or the bloke in the pub, they figured there was no way to go forward.”

Kingsley agrees, saying the federal government needs to introduce legislation to regulate property investment advice.

“ASIC is the natural fit to enforce this legislation. They (ASIC) are being introduced to the property investment industry via the growing promotion of property investing via an SMSF, which is regulated as a licensed investment product, but more needs to be done in protecting consumers who buy outside of super, with is the vast majority of people.”

MARKET TALK 19

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BROKERS UNSURE over FHB boosts

RP Data’s revelation that it is possible to get 16% rental yields in one of Australia’s emerging housing markets has some commentators urging investors to get active, while others are not so sure

T

he Real Estate Institute of New South Wales (REINSW) is calling on the NSW Treasurer to reinstate first homebuyers’ incentives for the purchase of existing properties in the 2013 Budget, due to be released on 18 June 2013, but the state’s broker network isn’t quite so sure.

REINSW president, Christian Payne, says the organisation is calling for not just a reinstatement of the first homebuyer incentives that were removed in 2012, but for additional opportunities to assist first homebuyers.

“It is not too late for the NSW government to reverse its decision to abolish from January 1, 2012 the stamp duty exemption/concession and from October 1, 2012, the $7,000 grant for those buying existing properties. The new grant of $15,000 (which will drop to $10,000 from January 1, 2014)

BRINGING IN THE FIRST HOME OWNERS GRANT RIGHT NOW…IS NOT APPROPRIATE –O TTO DARGAN

for first homebuyers who purchase or build a new home for not more than $650,000 that was introduced on October 1, 2012, has clearly failed.

First homebuyers are sitting on their hands.”

However, Home Loan Experts director, Otto Dargan, says the reinstatement of first homebuyer incentives for existing properties would be an ill-considered move.

“Housing isn’t in extremely dire straits at the moment and with interest rates so low, there’s already quite a big incentive for people to buy houses. So I don’t believe that bringing in the first

home owners grant right now… is appropriate; maybe later, at another time when the economy really needs it.”

That being said, Dargan would like to see stamp duty waived for first homebuyers, as he believes it’s a ‘major barrier’ for many people entering the property market.

But not all broking channels oppose the proposition. Citigroup head of marketing, product and strategy, mortgages, Belen Lopez Denis, says the reintroduction of first home owner grants can contribute to growth.

Lopez Denis also says the current scheme has created an inflationary impact on new dwellings, making them even more unaffordable than before.

“Expanding the grant to existing properties will expand the choices for this segment and permit access to more affordable options to enter into the property market. Although a first home owners grant will not be enough for this segment to enter into the market, it’ll definitely be a key contributor to stimulate this segment.”

Finsure CEO, John Kolenda, goes one step further, saying first homebuyers looking at purchasing new properties also need additional help.

“We need to reinstate packages for both existing and new, with a bigger incentive for new homes.

That segment of the market has been in the doldrums for a few years and any worthwhile incentive would be welcome to support a struggling economy.”

SYDNEY PRICES GLIMMER OUT OF REACH

MELBOURNE DELIVERS WORST RENTAL YIELDS

With a median house price of $627,500, Sydney house prices are not only significantly higher than the rest of Australia – they’re higher than just about every city in the world, according to multiple reports.

RP Data February figures show that Sydney’s median house price is a good $77,000 more expensive than the overall Australian market, with the second most expensive housing in Canberra – and close to $140,000 more expensive than Melbourne.

This comes after the Economist Intelligence Unit ranked Sydney third in its 2013 list of the most expensive cities worldwide. The only cities deemed more expensive were Osaka and Tokyo in Japan.

The study looked at multiple measures of cost of living, including property prices, to arrive at its results.

Another report by Demographia ranked Sydney property prices the third most unaffordable after only Hong Kong and Vancouver in its International Housing Affordability Survey, a study of 337 major cities around the world.

The latest figures from RP Data show that Melbourne investment properties as a whole are heavily negatively geared, with the city-wide median rental yield for houses a whimsical 3.8%.

This figure is the lowest among all Australian capital cities, despite Melbourne rents being higher than the national average.

Median rental yields in the unit market are not much better, with Melbourne also the lowest yielding unit market among capital cities.

At a more local level, roughly a third of Melbourne suburbs with detached housing have a yield of 3% or lower on houses, with 8% of unit markets fitting the same description.

The city’s lowest yielding market is currently East Melbourne, where the median yield for houses -is just 1.9%.

More affordable Melbourne areas with poor yields include the Banyule and White Horse areas.

TOOLBOX 20

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Digging for gold: prospecting that works Sales and marketing strategist Clifton Warren shares time-tested strategies for successful prospecting

Y

3. Direct mail

our attitude towards prospecting plays an important role in your success. Prospecting is the most important part of the sales process.

Depending on your attitude, prospecting can either be your biggest problem and headache... or your greatest sales-building opportunity.

Build structured networks by joining membership organisations that make sense to you and/or your personal development and enjoyment.

Ideas include Rotary, Toastmasters and golf clubs.

The right networks will provide a sustainable source of new leads.

IMPORTANCE OF PROSPECTING

Endless chain prospecting is a reminder to always ask for names; it simply involves getting the names of prospects from the people whom you try to sell to. In turn, these new prospects can refer you to others, so this process is actually comparable to an “endless chain”. The goal is to never break the chain by forgetting to obtain new names.

There are several top producers who use this method exclusively and trace the source of every piece of new business. View it as an ongoing game; the longer you play it, the more likely you’ll never forget to ask for prospect names.

When you meet with a prospect, one of three things happen: • You make the sale.

• You don’t make the sale, but you establish a relationship with the buyer.

• You don’t make the sale

The Life Insurance and Market Research Association (LIMRA) surveyed individuals who had failed as independent financial services professionals within the first 18 months of being in the industry. They asked each person, “What did you find most difficult about selling?”

Prospecting was the most common answer.

Prospecting for new business is a job that you’ll have to do; as long as you are in business, it will be its lifeblood. And it’s the one activity you should never delegate.

THREE PROVEN PROSPECTING SYSTEMS

Instead of reinventing the wheel, here are three time-tested prospecting systems that have stood the test of time and will keep you supplied with endless high quality prospects.

2. Endless chain prospecting

1. Networking

Clifton Warren, CMC, principal of Corporate Eye Consulting, is a marketing and sales strategist, coach and speaker who works with banking, insurance and financial services professionals.

Contact him on (03) 9808 1136 or Clifton@ corporateeye.com.au

Networking is one of the most talked about but seldom realised activities in selling. When done correctly networking can provide you with insights that can turn into qualified leads.

However, when done poorly, it can become a huge waste of time. You need to establish the right networks.

There are two types of networks: personal and membership (ie, built around structures such as associations or membership clubs).

You should include both types.

For example, build your personal networks around people that you already know such as past clients, friends, family, previous employers etc.

and you don’t connect with the buyer.

Each of these situations is an opportunity to ask for names and introductions.

If you persist, you will quickly develop the habit of continually asking for new names and will build a solid client list that will serve you well during your career.

TOP PRODUCERS ARE EXCELLENT PROSPECTORS

Even in the internet and social media age, targeted direct mail is an effective means of reaching out directly to prospects – and when followed by a phone call, is even more powerful. It’s one of the quickest ways to generate high quality leads.

The more clearly you have identified your target market, the more you can tailor your approach. With direct mail your goal is to simply obtain an interview with the prospect.

TOP TECHNIQUE Expanding your network:

Set a goal of the number of new people you want to meet and add to your network and set aside time each week to do it; this can be done by phone, in-person or email. The actual communication can be brief; the secret is doing it on a regular basis.

SUMMARY

Top producers are excellent prospectors. The sources and methods that you develop for acquiring new clients will become your most valuable asset and with the help of the law of averages, prospecting will eliminate the peaks and valleys by delivering predicable revenue streams to your business.

THE COALFACE

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21

A taste for adventure Otto Dargan balances broking with living life on the edge

B

urwood-based broker, Otto Dargan, is possibly a little messed up in the head (we say that with the utmost affection).

He’s gone paragliding with no training, “which was great fun until I face-planted into some thistles”. He once broke his spine snowboarding in Japan, only to set out for Everest Base Camp as soon as the brace came off. He’s competed in three 100km hikes, and he’s eaten “every bizarre food you can imagine”, from stillbeating snake heart to balut (Google it if you’ve got a strong

stomach). But Dargan, who jumped into broking straight out of university, says he loves his less-than-spine-tingling (though arguably no less stressful) occupation.

The general manager of brokerage firm Home Loan Experts says he’s seen the industry change for the better since he started out back in 2003.

“When I started, Sydney was going through a property boom, our industry was unregulated and credit guidelines were very loose. Everything has reversed since then. However, I am really

happy about the changes. A stable property market with reasonable regulation and reasonable credit guidelines is sustainable in the long term – which benefits everyone. Many of the part-time brokers and cowboys have left. Whenever I go to industry functions now, I’m really impressed with the quality of the brokers.”

But not everything’s coming up roses, he says.

“We’re in an environment now where we’re paid significantly less for each loan than we were a few years ago. In addition to this, we’re also doing more work due to compliance, lodging loans online and tighter credit guidelines. It’s a big squeeze on our margins. If we want to

attract quality people to our industry, then something has to change.”

At the end of the day though, broking provides a nice balance for Dargan, who spends most of his down-time as far from a desk as physically possible.

“I love nature so I like to spend a lot of time hiking… I’m a big fan of fishing, except that I never seem to catch anything. My girlfriend hates fishing and I have to help her set up her rod; however, she always catches the fish. I really enjoy travelling and trying bizarre foods from all over the world. I was born to live outside of my comfort zone.

“Life,” he says, “should be something worth writing home about.”

WORKSHOP 22

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Double your income with less work No matter how well your business is going, real estate guru John McGrath says you can reach higher while working less

J

ohn McGrath of McGrath Estate Agents believes any broker – no matter how successful – can aim even higher. While many brokers may feel they’re already working to capacity, McGrath says following a few important tips can double your business while simultaneously decreasing your work burden.

JOHN MCGRATH

 Personal audit McGrath urges brokers to perform a personal audit on their effectiveness.

He says brokers should rate themselves from 0–10 in each category, making sure they rate themselves honestly. Having performed the audit a number of times, McGrath says even the best brokers average around 5.5–6.25 out of 10, leaving vast room for improvement. Take some time to rate yourself in the following areas, and discover where you can strive to do more. Add up your total score and divide by eight to get an overall average score.

Goal clarity SUCCESS PLAN

PERSISTENCE

DAILY EXECUTION OF PRIORITIES

PRODUCT KNOWLEDGE

ENERGY AND PASSION

PROSPECTING ACTIVITIES

POSITIVE ATTITUDE

CLOSING SKILLS

Total score

12 LIFE CHANGING IDEAS 1. PREPARATION IS FREE

McGrath says one of the keys to success is preparation, which costs you nothing.

“It’s attention to detail. It’s giving yourself half-an-hour before a meeting and half-anhour after a meeting.”

2. SPEED OF TRUST

When Berkshire Hathaway closed a multi-billion dollar deal with Microsoft, the deal moved at lightning speed, closing in months rather than the years analysts expected. McGrath says Berkshire Hathaway head Warren Buffett was asked how the deal was able to move so quickly, and answered, “because we trust each other.” Building trust will greatly increase the speed at which you’re able to do business.

3. HYPER PRODUCT KNOWLEDGE

McGrath tells of a personal coach to top real estate agents, who argued that one of the primary reasons clients hire agents is hyper-local knowledge.

“You must study your industry like a Harvard Business School course,” McGrath says.

4. DOLLAR PRODUCTIVE ACTIVITIES

“You must focus on things that create revenue for your business and not stuff.

Moving paper from one side of your desk to another and getting yourself a coffee and going out and personally couriering your documents into Westpac ain’t gonna grow your business.”

5. IDEAL WEEK AND MORNING RITUAL

When you decide what your dollar productive activities are, McGrath says it’s important to decide when to do those things.

“Every morning between 8am and 9am, I used to ring every client I had. Then I would spend an hour prospecting. I made sure the things that were important to my business were getting done before other stuff.”

6. SUCCESS SYSTEMS

McGrath recommends not only systemising your business, but also

23

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MCGRATH’S CONCEPTS TO CHANGE YOUR THINKING INNER MARKET

“The outer market is what the Dow Jones did last night, what the weather did, what political party holds sway. You have no control over it. The inner market, which is the other 95% of success, is what you have 100% control over. These are the critical things that change business forever.”

SHIFT YOUR PARADIGM

“Change your thinking. If you think the market is tough, go talk to someone who’s just doubled their business and they’ll tell you the market isn’t tough. If you think the best you can do is $10m a month, go talk to someone who’s doing $20m a month and ask how they do it.”

THINK BIGGER

“If I started my business and said I just wanted to survive, it would have been a very different outcome.”

REMOVE MOORING LINES

“Get rid of the things you say about

systemising your life. “When I’m travelling, I have a checklist for travelling. It’s all seamless.”

7. FIVE FACE-TO-FACE QUALIFIED MEETINGS DAILY

This may seem like a lot, but McGrath said it was the success secret of the US’ top real estate agent. And assuming around an 80% conversion rate, 25 clients a week could yield some atmospheric settlements.

8. BUILD A BIG PIPELINE

“You need to build a big pipeline because there’s going to be a dozen plates in the air spinning and a few of them are going to fall over. If you only have six potential clients and have three fall over, it’s pending a disaster. If you have 27 in the pipeline and three fall over, you don’t even blink.”

9. OUT-LISTEN THE COMPETITION

A lot of brokers are very good at talking, but the real key to building client relationships is listening, McGrath says.

“If you’re meeting for an hour, you should spend 45 minutes listening to the client’s needs and concerns, and

your industry or your life or your business that hold you back.”

RUTHLESSLY ELIMINATE EXCUSES

“There are no excuses that stop you from achieving whatever you believe.”

PASSION AND PROCESS

“You can be passionate and do well, but you’ll never reach your potential until you bolt on some high-level processes that allow your passion to be channelled intelligently into unique and world-changing outcomes.”

RAISE YOUR STANDARDS

“Expect more of your people productivity-wise and customer servicewise, and expect more of yourself.”

PAY IT FORWARD

“I was having lunch with John Symond one day, and he said, ‘you have to lead with generosity’. You have to give to get.”

maybe 15 minutes prescribing and advising.”

10. DELIVER +1%

McGrath tells the story of a bicycle repairman who found a way to over-deliver for his customers. The repairman knew it generally took around 45 minutes to fix a bike, but he told his customers that each repair would take an entire hour.

In the additional 15 minutes, he would perform simple tasks like cleaning the bicycle chain, polishing the chrome or adding accessories. By taking just a little longer, he was able to give his customers more than they’d asked for.

11. MANAGING EXPECTATIONS

“People come in, and they don’t take loans every day.

You need to let them know where delays occur and that if they have concerns they can call you.”

12. RAVING FANS

“When you do business with someone, I want them to leave that transaction and say to themselves and all their friends and family, ‘that was the best service experience I ever had’. ”

FINANCIAL SERVICES 24

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ASIC wins fight to close unlicensed operators

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SIC has won the fight to get three South East Queensland-based companies wound up, alleging that the firms operated an unlicensed and fraudulent financial services business – defrauding investors of approximately $1m.

The regulator carried out an investigation into Secured Collateral Pty Ltd, Diversified Collateral Pty Ltd and Intra Management Pty Ltd, and alleged that the companies used cold calling and a website to persuade investors to deposit funds into accounts held in the names of the three firms.

Investors were promised that the funds would be used to buy shares on their behalf, which would generate returns well above market returns.

ASIC alleged that directors of the companies – Keiron Michael Weertman, Dylan Robson and Shane Rodney Hasell – withdrew the money from bank accounts in cash. The Court noted that each director must have been aware that they were involved in some form of “unlawful exercise”.

ASIC’s inquiries to date have not been able to substantiate that shares were purchased on behalf of investors.

ASIC obtained Supreme Court orders against the three companies, ordering that they be wound up, that liquidators be appointed and that the firms and the individuals involved would pay ASIC’s costs.

The court would not make declarations of contravention by the companies of carrying on a financial services business without an Australian financial services (AFS) licence or declarations that the directors were knowingly involved in such contraventions.

The Court also declined to grant injunctions to prevent the companies or directors carrying on a financial services business, and from operating any internet websites promoting, advertising or offering financial services, without holding an AFS licence.

ASIC commissioner Greg Tanzer says, “while there are still funds not accounted for, today’s orders increase the likelihood that investors will see some of their investment funds returned to them.

“Unfortunately, with many schemes of this nature there are no returns.”

UNFORTUNATELY, WITH MANY SCHEMES OF THIS NATURE THERE ARE NO RETURNS

CBA SHUTTERS ADVICE FIRM

A

fter reviewing its operations, Commonwealth Bank Wealth Management Advice has decided to close one of its Queensland-based advice businesses – Whittaker Macnaught.

Whittaker Macnaught was acquired by CBA in 2008 and has 28 advisers, serving approximately 9,600 clients and managing $1.1bn in FUA. The firm operates under its own AFSL, which “requires discrete management, governance and operational structures”, said CBA WM Advice head of specialist licensees Pauline McFarlane.

“When this model was viewed in the context of all of CBA WM Advice Licensees, it was clear this was not the most commercially viable way to deliver quality advice to Whittaker Macnaught customers in the long term.”

Given the size of the business, McFarlane said it made better commercial sense to move existing customers from the licence to practices authorised under the Financial Wisdom AFSL. Existing Financial Wisdom practices will be able to expand their business to manage the needs of current Whittaker Macnaught customers. Whittaker Macnaught advisers can also look into establishing their own Financial Wisdom practice, using the Whittaker Macnaught brand while they set up.

“After 30 June 2013, all Whittaker Macnaught clients will be serviced either through their existing Whittaker Macnaught adviser authorised under the Financial Wisdom AFSL or through an existing Financial Wisdom practice,” said McFarlane.

Broker raises concerns over QBE hike

DID YOU KNOW?

$3.5bn

The amount of half-year profit recently announced by Westpac

A mortgage broker has raised concerns that insurance giant QBE may hike up premiums by as much as 12%.

Claims paid from QBE’s mortgage insurance arm more than doubled to $60.8m last year, up from $27.6m in 2011, according to The Age, due to “unfavourable economic and housing market conditions”.

Underwriting profits were $76m, and net profit rose by 20% to $154.5m. It also reported higher investment income and earnings but added that the higher claim costs were due to weak conditions faced by the providers of lenders mortgage insurance.

Kevin Lee, mortgage insurance broker at Smartline personal mortgage advisers, fears QBE will push up premiums, as its only other competitor in the mortgage insurance space is Genworth.

Genworth recently increased lenders mortgage insurance premiums for self-employed and investment property owners.

Genworth, which has delayed an IPO three times in 12 months, would not reveal to Australian Broker what the rate rise is, but sources suggest it would be as much as 12%.

Lee spoke of concerns that QBE would so the same.

“Reading between the lines, QBE may have to put premiums up possibly by as much as 12% like Genworth,” he said. “It seems to be another way to get more money.”

Kevin Lee

$60.8m

QBE’s mortgage insurance arm more than doubled to $60.8m last year, up from $27.6m in 2011

FORUM 26

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CLEAR AS MUD:

Denovan wades through the employment verification quagmire

Brokers and property advice

Property Investment Professionals of Australia (PIPA) chair Ben Kingsley recently said signs of a ‘renaissance’ in the Australian property investment market pointed to strong opportunities for brokers interested in expanding their service offering to include property advice. One commenter had some particularly pointed advice to offer.

“My advice: Property is transactionally expensive especially short term, doesn’t perform over the long term as well as shares, doesn’t have the concessional benefits of super as a vehicle, and if invested in super needs to be done through SMSF which is prohibitively expensive and complex. Oh, and I forgot, ask anyone today giving advice on property and they are invariably in the real estate industry as salespeople working for sales firms selling their own stock or properties they are agents for. Buyers’ agents are also unregulated. So let’s redraft the question shall we?

Property prices are on the up again, and people think they can make a buck investing in property. Let’s turn our attention to these often illinformed investors and get our share. ” Moonae 1/5/13 at 9:55AM

Brokers agree: Regulations call for a common sense approach and a stiff drink

A

recent broker banning over employment verification left brokers in a quandary, asking ASIC to outline what constituted acceptable verification. ASIC’s response was deemed less than satisfactory by brokers, and by Gadens Lawyers’ Jon Denovan, who deemed it “clear as mud”. He advised brokers to use common sense, and to drink more heavily.

Macca argued that brokers were making a mountain out of a molehill, saying that income verification wasn’t that difficult.

“I find it hard to believe that anyone sees that there are grey areas in any lending practices.

The borrower can either afford the loan or can’t and it is up to the final lender, not the broker, by law to verify income.

“If they don’t follow these steps then they deserve whatever comes their way. ASIC is only there to police the industry. If you follow the correct path of collecting all the right information then there is nothing to fear.”

FAIR PLAY FOR LMI

FBAA president Peter White has called for “fair play and full disclosure” on LMI policies. He called for regulation of the sector, and for LMI portability.

Positive Broker 23/04/2013 2:35PM “Be careful what you wish for. I see three problems here. 1) We don’t need more regulation and paperwork; 2) The policy covers the lender. I don’t see how this could be portable if the insured is changing; and 3) If there were no LMI, there would be NO loans above 80% LVR and NO non-bank lenders.”

Stephen Dinte 23/04/2013 11:35AM “For all those who knock our associations, here is another example of what is being

NoTimeLikeTheFuture raised a glass to Denovan, and said brokers ultimately had to get on with business. “Fantastically frank and practical advice there.

It sums up where I think most brokers are: ‘It’s clear but unclear and we suspect we’re probably breaching something somewhere but we don’t know where and we try our best not to.’ In the end we have a drink and get on with it.”

But Chris C said that even common sense could run afoul of legal complexities.

“Thanks for your common sense approach Mr Denovan, but to use common sense and the law in one sentence is a contradiction in its own right. We all know common sense plays a major role in everyday life but it plays a very minor role in any court’s deliberation on the law. We brokers are best off just doing everything possible and practicable to best meet the terms of reference.”

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

done to help make our industry better. The FBAA, led by Peter, is chipping away at an issue that has been a barrier for too long, and it is hoped that real change will be achieved in the near future.”

FLAVELL ON THE MOVE

NAB recently announced that industry stalwart John Flavell would be promoted out of the third party and into an executive role.

Katrina Rowlands 22/04/2013 10:38AM “He put PR back into Homeside: People and Relationship. Then naturally the profit followed. He gave our industry the utmost respect and it is reciprocated. Good luck in your new role John, but you will miss us.”

ONE YEAR ON 27

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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 9.09 JAMES VEIGLI

New ‘unfair’ liability as NCCP enhanced Gadens Lawyers’ Jon Denovan last year slammed slated amendments to the NCCP, saying they had the potential to scare brokers away from non-conforming deals. Denovan said unclear language regarding “unfair or dishonest conduct” by brokers could see non-prime lenders struggle and borrowers potentially locked out of credit.

What’s happened since?

Denovan’s predictions seem to have at least partially come true. With NCCP regulations making many brokers nervous about low-doc loans, an ASIC study recently found the volume of credit assistance for home loans promoted as low-doc in the three months after 1 January 2011 – when the responsible lending obligations commenced for most home loan lenders – was nearly half that of the three months before.

MFAA closely watching commissions The Future of Financial Advice legislation governing the financial planning industry made commissions for planners a thing of the past. MFAA CEO Phil Naylor last year said the association was closely watching to ensure broker commissions didn’t follow a similar path. He indicated that there was a danger that future governments may see it as an area of further regulation.

What’s happened since?

So far, so good. Broker commissions have yet to see any encroachment from government, and with industry associations closely liaising with the likely future government, it seems unlikely that the current remuneration structure is slated for the dust bin. While the fee for service debate continues to rage, with proponents claiming the model is a safeguard against commission regulation, it appears that banks – for now – are content to continue to pay brokers for their efforts.

Bad habits limit new lead generation

L

ead generation may be the bread and butter of broking, but bad habits can mean brokers aren’t getting the best return for the time and money invested in lead generation, according to Broker Profits Vault founder, James Veigli.

“The most dangerous number in business is ‘one’: one source of leads, relying on one single source.

You want to use lots of different approaches, lots of different mediums and keep doing it consistently.”

Veigli says in designing a lead-generation strategy, there’s no need to reinvent the wheel.

“Your existing database is your gold mine, so make sure you’re consistently in front of your existing database – and that doesn’t necessarily mean sending a newsletter once a month. That means actually being in front of them and asking for repeat business. It’s not good just sort of putting yourself out there, you want to be able to generate repeat business and leads and referrals from that existing asset.”

Referrals needn’t be overlooked either and this remains an integral lead generation strategy.

“One of the things brokers forget is jointventures; approaching people where you can add some value to their client base, in exchange for them promoting you in a third party endorsement.”

But casting the net too wide can be equally as unhelpful. Veigli says keeping your strategy on target is key.

“Using a broad-based medium, untargeted, is a big waste of time and money because, let’s say I’m a mortgage broker and I want to find property investors – I want to go direct to where property investors are, whereas if I put an ad in the local paper, it’s going to be very hit and miss.”

CAUGHT ON CAMERA 28

IN FOCUS

L

oan Market’s Queensland team recently lent a hand to the hungry, spearheading an OzHarvest donation drive.

The food drive saw the team pack up an amazing 145kg of food to help the charity’s recipients, and raise money for an additional 219 meals.

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CAUGHT ON CAMERA 29

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IN FOCUS

T

echnology provider NextGen.net recently unveiled its new document upload service at an A-list, invitation-only event in Sydney. The service is touted as a way to reduce rework, speed up processing and improve conversions.

3.

1.

2.

4.

5.

1 2

Adam Fulepp, Hana McKell – NextGen.Net

6.

7.

Michael Russell – Choice, Simon Elwig – CBA, Andrew Morrison – NextGen.Net

3 4 5 6

Stephen Moore – Choice, Phil Naylor – MFAA Phil Quin-Conroy – Choice, Tony Carn – NextGen.Net

Brett Stanford – NextGen.Net

9.

8.

Neil Rose-Innes – Mortgage Choice, Ralph Galilee – Galilee, Richard Galilee – Genworth

7 8 9 10 11 12

Martin Glover – ING, William Ryan – Veda Advantage Tony Carn – NextGen.Net Adrian Macleod – NextGen.Net, Alice Del Vecchio – HSBC

10.

Gary O’Sullivan – St.George, Terry Neve – Westpac

Greg Phillips – NextGen.Net, Andrew Maynard – AMP

Stephen Moore – Choice, Vibha Coburn – Citibank, Alice Del Vecchio – HSBC

11.

12.

View more photos from this event at brokernews.com.au/industry-events

INSIDER

brokernews.com.au

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Something to drink to

A

recent article on the Australian Broker website claiming that the simplest solution to brokers’ problems ‘might be to drink more’ – and the overwhelmingly positive response it received – got us a little worried: Are all our readers alcoholics?

Thankfully, some not-so-extensive research shows that brokers are no more likely than most other members of – *hiccup – society to overindulge. In case you were wondering, here are the 17 jobs most likely to be held by alcoholics (one = the most likely):

17. Rubbish collector

13. Surveyor

9. Musician

5. Chef/cook

16. Advertiser

12. Farmer

8. Drywall installer

4. Painter

15. Carpet installer

11. Amusement park attendant

7. Construction labourer

3. Roofer

14 . Gardener

10. Concrete finisher

6. Sailor

2. Show machine operator

1. Bartender

So, as you can see, no mention of brokers (or *hiccup – journalists!).

Now that’s something to celebrate. Cheers, guys!

Source: Business Insider Report

NEWSFLASH: MORTGAGE BROKING IS NOT ‘SEXY’ – BUT IT’S HOTTER THAN FINANCIAL PLANNING How sexy is mortgage broking as a profession? Not very, according to a new survey.

A national survey by dating site VictoriaMilan.com.au has asked Australians for the sexiest professions, and brokers may be disheartened to learn they’re pretty low on the list. The sexiest profession, according to Australian women surveyed, is the defence force, with 14.1% ranking it as the most attractive sector. Men, meanwhile, were keen on women in healthcare, hospitality and sports & recreation.

Sadly, it seems brokers will have to fall back on their glowing personalities and natural charm rather than rely on the draw of their vocation. Real estate and property professionals were ranked sexiest by just 1% of women and 0.6% of men. But mortgage brokers can still lord their position over their peers in insurance and advice, as insurance and superannuation was ranked as the sexiest profession by a whopping 0% of men and women.

In the interest of fairness, journalists also failed to rank particularly highly, with just 2.7% of women and 3.5% of men tipping media as an attractive profession.

AND YOU THOUGHT YOUR BOSS WAS WEIRD… One quarter of employees receive requests from their bosses to do non work-related tasks, according to a recent CareerBuilder survey.

Respondents to the questionnaire were asked to provide real-life examples of some of the things that their bosses asked them to do – and they ranged from the dodgy to the downright uncomfortable.

HERE ARE 10 OF THE ODDEST ASSIGNMENTS:

Prepare to delete all emails and computer files at a moment’s notice Act as a surrogate mother for the boss (the employee in question was asked more than once, which begs the question – did she agree in the first instance?!)

Spy on senior management Purchase a rifle for the boss (who would then reimburse the employee) Think of a science fair project for the boss’ daughter Fire the boss’ brother Scour an abandoned office building for furniture and supplies they could use Bail another co-worker out of jail Trim the boss’ dog’s nails Plan the boss’ wedding The same study showed that two-thirds of workers awarded their bosses an above-average grade (‘A’/’B’) when asked to assess them, and that almost the same percentage (64%) respected their bosses. “The study shows the majority of workers have a good relationship with their bosses, where they feel supported and valued,” says Rosemary Haefner, vice president of HR at CareerBuilder.

However, some of the employees appear to be a little too obliging. “If your boss is asking you to do something outside of your scope of work responsibilities, it’s important to have open communications around what is appropriate,” Haefner suggests.

Has your employer ever asked you to do something beyond the call of duty? Or, if you’re the employer, what’s the oddest thing you’ve ever asked a staff member to do? *The CareerBuilder survey was conducted online by Harris Interactive in February/March of this year. More than 3,600 US workers employed full-time in the private sector participated.

DIRECTORY brokernews.com.au

AGGREGATOR / WHOLESALE BROKER FAST 02 9233 8222 www.fastgroup.com.au Page 16 & 17

FINANCE

ARAP NSW & VIC 0415 210 434 QLD, WA & SA 0434 254 798 Page 8 Semper Capital Pty Ltd 1800 SEMPER (1800 736 737) enquiries@semper.com.au www.semper.com.au Page 21

LEGAL SERVICES

Bransgroves Lawyers 02 9221 9522 info@bransgroves.com.au www.bransgroves.com.au Page 15

LENDER

ING DIRECT 1300 656 226 introducer.ingdirect.com.au Page 5

31

Liberty Financial 13 11 33 www.liberty.com.au Page 3

Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

ME Bank 03 9708 3994 mebank.com.au Page 9

Rapid Capital 07 5562 2485 www.rapidcapital.com.au Page 6

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 4

WHOLESALE

Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 13

NON BANK LENDER

Australian First Mortgage 02 9643 4300 www.australianfm.com.au Page 11

SHORT TERM LENDER

Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2

Resimac 1300 764 447 www.resimac.com.au Page 32

OTHER SERVICES RP Data 1300 734 318 Page 23

Trail Book Buyers 1300 742 306 or 0434 742 306 info@trailbookbuyers.com.au www.trailbookbuyers.com.au Page 10 Trailerhomes 0417 392 132 Page 27

To advertise in Australian Broker call Simon Kerslake on 02 8437 4786