AB 10.19

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Glenn Lees:

Running our own race As competition among aggregators remains fierce, Connective principal Glenn Lees says the company will continue to chart its own course

I

t’s a fierce market out there, and with the credit pie shrinking, brokers have to fight even harder for a piece of it.

Connective principal Glenn Lees said issues of scale, coming to terms with regulation and dealing with the encroachment of other sectors on the mortgage broking industry are all presenting difficult challenges for brokers.

FULL STORY PAGE 18

SEPTEMBER 2013 ISSUE 10.19

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

+ SPECIAL REPORT SMSF GUIDE

The how, what and why behind a growing sector P12

+ MARKET TALK CULLING THE SPRUIKERS

How to identify property pushers P20

+ BEST PRACTICE FIVE SIMPLE RULES The new rules brokers should live by P22

+ PEOPLE OVER THE MOUNTAINS

An ACT broker’s race for charity P28

+ OPINION A WATCHFUL EYE

RP Data’s Craig Mackenzie on potential housing pitfalls P23

NEWS

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2

WHAT THEY SAID...

NUMBER CRUNCHING GIANT LEAP

CLIVE KIRKPATRICK

Suburbs with the biggest gap in median prices between houses and units Difference between houses and units

State

Suburb

NSW

Centennial Park

VIC

Toorak

290%

QLD

Ascot

238%

SA

Joslin

252%

WA

Peppermint Grove

669%

TAS

Mount Nelson

NT

Brinkin

180%

ACT

Forrest

284%

1002%

FAST FACT

18,056*

*The number of loans refinanced in July, the highest since April 2008

95%

Source: ABS

Source: RP Data

HOW THE CITIES ARE TRACKING

SINCLAIR TAYLOR

“Australia’s love of property is well documented, so it is not surprising that the number of people using SMSF to invest directly in commercial and residential property is growing steadily” P14

CRAIG MACKENZIE $679,500

$700,000 $632,750

SHANE OLIVER

$275,000 $245,000

$200,000

“I’d be loath to call this a bull market or a boom or a bubble. If you get a bubble, we all know how they end” P26 ra nb er Ca

in Da rw

rt Ho ba

Pe rth

de ela i Ad

sba Bri

e lbo urn Me

dn ey Sy

ne

$100,000 $0

“There is no doubt that APRA will, in the coming months, keep a close eye on overall credit growth” P23

$492,500 $415,000

Source: RP Data

$465,000

$490,000 $397,500

$300,000

$410,000 $330,000

$400,000

$446,000 $360,000

Units $519,750

$500,000

Houses

$450,000 $440,000

$600,000

“We will continue to invest in the broker channel, and will continue with our process improvement initiatives, product innovation and service enhancements” P4

NEWS 4

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What’s in a name: Credit adviser or mortgage broker?

Non-major spikes broker commissions by 0.65% ■ St.George Banking Group has announced a

Peter White

■ The MFAA has launched a consumer

advertising campaign, referring to its members as ‘MFAA approved credit advisers’, rather than ‘brokers’ – a move the group said reflected the new accreditation and value provided by its members.

However, FBAA president Peter White said the move could simply lead to borrower confusion and inaccurate generalisations.

“All brokers are credit advisers as such and I think it’s sort of creating [the impression] that others in the industry are not … I think it causes confusion for the consumer. And the reality is that, at the end of the day … we talk about mortgage brokers, but they’re finance brokers. A mortgage broker is, in actual fact, somebody who has a very limited scope and knowledge because all they know is mortgages. A finance broker is someone who should be able to deal with any sort of finance; it’s what the greater industry is.”

Naylor admitted that the switch would take time and said the organisation is providing assistance to those interested in rebranding themselves as credit advisers.

“We recognise that the shift from ‘broker’ to ‘credit adviser’ will not happen overnight and will require some education to ensure that property investors and businesses clearly understand what a credit adviser does.”

In the meantime, White hopes the term doesn’t stick.

“I think it’s a dangerous thing to categorise yourself as being one thing … in a marketplace that’s become highly competitive. If you want to be there as a broader practitioner … then you really want to be known as a finance broker.”

temporary commission hike for brokers working across its three brands: St.George, Bank of Melbourne and BankSA, for loans settled from 1 October 2013.

The change gives all brokers 0.65% up-front commission and removes the current conversion incentive during the promotional period. Trail in year one will continue at 0.15% pa.

“We will continue to invest in the broker channel, and will continue with our process improvement initiatives, product innovation and service enhancements to support our broker partners and create great outcomes for customers,” said St.George mortgage broking general manager, Clive Kirkpatrick.

Housing affordability highest in the sunshine state ■ Queensland recorded the largest improvement

in housing affordability in the country over the June quarter, according to the Adelaide Bank/ REIA Housing Affordability Report.

The proportion of income required to meet home loan repayments decreased 1.9 percentage points during the June quarter to 26%, down 4.5 percentage points from the June quarter 2012.

New South Wales remained the least affordable with the proportion of income required to meet loan repayments 5.6 percentage points higher than the nation’s average, followed by South Australia.

According to the report, affordability improved in all states and territories when compared to the same time last year. However, first home buyers continued to lag behind, making up just 14.6% of the owner-occupier market nation-wide, a persistently low number compared to the average proportion of 20%.

Victoria had the largest jump in the number of loans to first home buyers over the quarter and Western Australia the largest over the year.

Australia-wide rental affordability improved with the proportion of income required to meet rent payments decreasing slightly to 23.7%.

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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.

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WORLD NEWS

Major extends commission incentive as competition heats up

UNITED STATES OF AMERICA JUDGE IGNORES FRAUDSTER’S PLEAS

■ Westpac will extend a commission incentive that has seen brokers

receiving an extra 10bps upfront, according to general manager of broker distribution, Tony MacRae. MacRae told Australian Broker that the bank will extend a program it launched in June to offer volume incentives to aggregators. The program has seen members of aggregators who hit the targets receive an extra 10bps of upfront commission on Westpac deals, regardless of their individual volumes through the bank.

Originally slated to run through the end of September, MacRae said the program will now be extended through the end of March.

“The program has been received exceptionally well, and I think it’s a testament to how it’s been received and its success is that the reaction to it is this extension,” MacRae said.

He added that the program has already proven valuable to the bank as it operates in an increasingly competitive home loan market.

“We’ve seen a 14% uplift in applications, and we’ve seen most of the aggregators take part, particularly the tier one top aggregators.”

A U.S. judge has skewered a participant in a mortgage fraud scheme who pleaded for probation rather than a jail sentence.

Judge Ann Aiken has ignored pleas for leniency in sentencing a former Eugene, Oregon, real estate broker over a mortgage fraud scheme. Laura Snyder, who pleaded guilty to eight counts of wire fraud in a scheme that generated bad loans costing banks $260,000, asked Aiken for probation rather than prison as she is the main caregiver for her eightyear-old daughter.

But Aiken, who last week sentenced Bend mortgage broker Peter Wilkinson to 57 months for his role in a mortgage fraud scheme, handed Snyder a 21-month prison sentence, The RegisterGuard reported.

According to Assistant U.S. Attorney Scott Bradford, Snyder brokered loans for herself by using straw buyers and forging signatures.

In handing down the 21-month sentence, Aiken said Snyder, a licensed broker and CPA, had betrayed a position of trust.

“You knew better. You’re trained,” Aiken said.

NSW BROKERAGE SLAMMED BY MEDIA FOR OFFERING ‘TOO GOOD TO BE TRUE’ HOLIDAYS ■ A Wollongong-based financial advisory and mortgage broking group was

slammed recently by the Australian Financial Review (AFR ) for potentially enticing clients into breaching tax laws and undermining investor protection.

Laura Dean Financial Solutions offers luxury international holidays to investors who take out a mortgage and buy a house using their SMSF. The company’s online and television ads depict an investor on holiday in Hawaii, encouraging his father to take up the offer and receive a ‘free gift’ by using his superannuation fund for a limited-recourse loan to buy a house.

Furthermore, AFR claims laws intended to stop financial advisers from receiving commissions and replace them with fees are likely being ‘undermined’ by products and services where they don’t apply, such as property sales.

Australian Broker attempted to contact directors at Laura Dean but were told no one was available to offer media comment.

Encouraging investors to set up self-managed super for a holiday could also breach the ‘sole-purpose test’ – that a scheme should only be providing benefits to members on their retirement (or their dependants in the case of the member’s death before retirement).

The SMSF area is one of the country’s fastest growing financial sectors, accounting for around $500bn of about $1.6trn in retirement savings – the world’s fourth-largest pool of managed funds.

The AFR said many financial advisers are being offered incentives to put their clients in SMSF property investments, with promises of generous fee and commission hikes by recommending property companies.

UNDERWATER HOMES BREAK ABOVE THE SURFACE

More than 2 million residential properties in the U.S. have returned to positive equity in the second quarter, leaving 14.5% of all mortgaged residential properties underwater.

According to analysis by CoreLogic, about 2.5 million residential properties returned to positive equity in Q2, bringing the total number of mortgaged residential properties up to 41.5 million. According to CoreLogic’s report, 7.1 million residential properties remained underwater in Q2 – 14.5% of all mortgaged homes in the country. That’s down from 9.6 million, or 19.7% of all mortgaged homes, in the first quarter.

The aggregate value of negative equity in the U.S. also dropped, from $576bn in Q1 to $428bn in Q2.

According to CoreLogic, improving home prices drove the decrease.

CANADA PERKS NOT WINNING OVER BROKERS

Recent commission incentives from Australian lenders have left Aussie brokers less than impressed, and it appears to be a sentiment shared by their Canadian brethren. A top broker has said lender perks don’t sway brokers.

“They make no bearing on our decisions at all,” Paul Mangion, principal broker and partner at the Mortgage Centre M.O.S. MortgageOne Solutions Ltd., said.

“We focus on business, not perks; we work with lenders who are the most reasonable when it comes to conditions and are the most commonsensical.”

Although he admits it would be nice to reap the rewards of such loyalty programs, Mangion argues that their appeal is limited.

“I just saw this today: Sell 30 life insurance policies by March and they’ll send you to Mexico for four days,” Mangion said. “It would nice to hit it, but we don’t go out of our way to.”

Residex reveals top performing suburbs ■ Property research group Residex

recently released its results for the top performing country suburbs in each state for July 2013.

Looking at the country housing markets for each state as a whole, Victoria, New South Wales and South Australia were the top performers, with each market experiencing growth in the

house and land markets, as well as the unit markets.

Tasmania was the worst country performer for the month, recording negative growth in both the house and land market and the unit market.

For the year ending July 2013, the top performing suburbs in each country property market were:

TOP PERFORMING COUNTRY SUBURBS BY STATE

NSW

Queensland

Victoria

Western Australia

South Australia

Tasmania

Coolah Houses: 24.97% growth

Wandoan Houses: 23.71% growth

Marong Houses: 20.76% growth

Abbey Houses: 19.94% growth

Bicheno Houses: 8.94% growth

Bar Beach Units: 14.95% growth

Mulambin Units: 18.69% growth

California Gully Units: 14.95% growth

California Beresford Units: 15.27% growth

Kingston SE Houses: 21.63% growth Nairne Units: 3.65% growth

Riverside Units: 2.08% growth

NEWS

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Make sure borrowers are able to handle rate hikes: APRA

FOUR YEARS IN JAIL FOR PROPERTY DEVELOPMENT GROUP DIRECTOR

■ Home loan lenders are being warned by APRA to carefully

■ A former director of property development group

monitor the debt serviceability capacity of their customers over the duration of home loans – not just at origination – to ensure borrowers are able to manage the transition to higher interest rates.

APRA’s Loan Serviceability Standards in Housing Lending Report said interest rate hikes are “inevitable” and that a strong focus on debt serviceability is “critical” in the current low interest rate environment.

“In particular, low interest rates can mask debt serviceability assessments, creating opportunities for borrowers to increase their leverage. The resulting growth in demand for housing loans can also put pressure on housing lending standards as ADIs [authorised deposit-taking institutions] compete to maintain or increase their market share,” reads the report.

APRA’s analysis looked at 27 lenders, including major banks, regional banks, credit unions and building societies representing 97% of total home loans as at March 2013.

Dollarforce Financial Services, Clestus Weerappah, has been jailed for four years over his role in the collapse of the company.

A second director, of a related entity, James Stephen Lewis of Kew Victoria, has been convicted by jury of one charge over the collapse. Lewis pleaded not guilty to five charges.

Dollarforce collapsed in 2009 with a deficiency of $24m and investors losing more than $8m.

Weerappah pleaded guilty to five charges relating to the raising of more than $4m from investors.

ASIC Commissioner Greg Tanzer said the actions of the two men were ‘reprehensible’.

DID YOU KNOW

4 years • Serviceability assessments: “It is important for ADIs to ensure that borrowers approved at the limits of NIS or DSR models can continue to service their loans in the face of even modest adverse changes in circumstances. Hence, APRA expects these models to contain appropriate interest rate buffers and/or margins on living expenses when used to make serviceability assessments.”

• Interest risk buffers: “APRA would expect ADIs to use an interest rate floor, based on the average mortgage interest rate over an appropriately long time period, being at least one cycle in interest rates, in their serviceability assessment.”

• Living expenses: “All ADIs surveyed used either the Household Expenditure Measure (HEM) or the Henderson Poverty Index (HPI)…Their wide use reflects their simplicity in application but they do not necessarily reflect an applicant’s actual living expenses, which can be considerably higher…APRA would highlight two areas for improvement. One is to add a margin linked to the borrower’s income to the relevant index. The other is to update the HEM or HPI used in loan calculators on a frequent basis, particularly given that updated figures for these indices are published each quarter.”

• Verification of income and other debt obligations: “The majority of ADIs had detailed policies requiring a borrower’s employment and other income sources to be verified against third-party evidence. However, it was not common practice to extend this to the verification of a borrower’s other declared debt agreements, unless the borrower was refinancing. Moreover, there was no indication that ADIs had appropriate policies and procedures for ensuring that borrowers do not have undeclared debt obligations.”

Length of the jail sentence awarded to a Victorian property development director over his role in the collapse of Dollarforce Financial Services

Aggregator ‘poaching’ brokers not productive ■ Vow Financial has launched a mentorship program saying it is no longer enough for aggregators to poach brokers from each other’s networks.

The two-year mentorship program will help to train new entrants to the industry in both the practise and philosophy of mortgage broking, according to Vow CEO Tim Brown.

“For us, it’s a huge investment in both time and money, and we’re keen to see it grow and develop. The main reason for introducing this is that aggregators can’t continue to go around and poach brokers from other networks. Eventually that comes to a point where you don’t make money from the exercise.”

Brown said the first step in launching the mentorship program would be to identify trainers in each state.

“THE MAIN REASON FOR INTRODUCING THIS IS THAT AGGREGATORS CAN’T CONTINUE TO GO AROUND AND POACH BROKERS FROM OTHER NETWORKS” - TIM BROWN

NEWS

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Consumers fear brokers ‘have own interests at heart’: ASIC ■ ASIC’s 2013 Stakeholder Survey report indicates that stakeholders, including

New home loan allows borrowers FAST FACT to earn flight points with major 26.1% The proportion airline of new home ■ Macquarie Mortgages has

launched a product allowing borrowers to earn Qantas Points directly through their mortgage.

Borrowers can earn Qantas Points at the time of settlement and each month for the entire duration of the loan period under Macquarie Bank Flyer Home Loans.

They’ll earn 10,000 Qantas Points for every $100,000 drawn down at settlement as an ‘introductory gift’, with an additional 25,000 bonus Qantas Points at both the third and fifth year anniversaries (as long as the outstanding loan balance is at least $150,000), plus 1,000 Qantas Points for each month for the life of the loan (as long as the outstanding loan balance is at least $150,000).

loans fixed rates accounted for in August, down from 30.7% in April of this year.

Source: AFG

brokers and aggregators, hold a generally positive view of the regulator – but that warmth doesn’t necessarily transfer from consumers to brokers themselves.

One area where consumers and regulated stakeholders showed a particularly marked difference was when it came to the following questions: “Do investors and consumers have access to the advice and information they need?”

Half (50%) of the regulated population agreed that consumers have access to advice that meets their needs, while only 40% of consumers agreed.

ASIC said concerns about the reliability of advice and information from industry gatekeepers, including mortgage brokers, is a key factor behind the latter figures.

“For example, one consumer was offered three options for a mortgage by a mortgage broker and felt that vested interests influenced the information she was given.”

“It was through the broker but they are tied in and gave me three options and kept pushing [brand].” (Investor/consumer) The survey was conducted in three stages between February and June 2013.

The primary quantitative stage (a questionnaire) yielded a total sample of 1,468 stakeholders.

State breaks new records for investor activity – but why?

■ Almost half (49.5%) of all home loans

processed by mortgage broker AFG in New South Wales in August were for investors – the highest level of investor activity the company has ever recorded for any state.

Furthermore, investor participation was unusually high in other states as well, comprising 36.7% of new home loans processed in Victoria, 35.8% in Queensland, 32.9% in South Australia and 28.4% in Western Australia.

28.4% Meanwhile, enthusiasm for fixed home loans fell 32.9% for the fourth month in a row – comprising 26.1% of all new home loans.

While below the 30.7% Investor high water mark of April activity this year, this figure is still relatively high, suggesting that many borrowers are locking in part or all of their loans in anticipation of the rate cycle turning.

35.8%

49.5% 36.7%

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NEWS 11

SPECIAL REPORT 12

the g n i SMSF d i R wave

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Industry experts share their insight on why and how to get involved in SMSF lending

S

MSF is becoming too large to ignore. It’s the fastest growing segment of superannuation, and accounts for hundreds of billions of dollars worth of assets. While SMSFs can cover a range of investments, many SMSF trustees want to sink at least a portion of their funds into property. This is where mortgage brokers come in. Few brokers would argue that SMSF lending presents a massive opportunity, but grabbing hold of this opportunity can seem daunting. We’ve asked SMSF experts to share their wisdom on how brokers can ride the SMSF wave.

THE EXPERTS

GREG MITCHELL, GENERAL MANAGER, HOMELOANS

ALLAN SAVINS, COO, RESIMAC

SURESH PILLAI, GENERAL MANAGER OF COMMERCIAL LENDING, LIBERTY FINANCIAL

PER AMUNDSEN, DIRECTOR, THINKTANK

CLIVE KIRKPATRICK, GENERAL MANAGER MORTGAGE BROKING, ST.GEORGE BANKING GROUP

SINCLAIR TAYLOR, HEAD OF SMSF, WESTPAC

Source: ATO

SPECIAL REPORT 14

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SMSF LENDING: WHY YOU SHOULD CARE MSF Brokers are constantly hearing about the opportunity presented by the SMSF sector. Why should you take notice?

GETTING STARTED Here’s a look at the best entry points for getting involved in the SMSF market

PER AMUNDSEN, THINKTANK

PER AMUNDSEN, THINKTANK “The growth seen over the past few years in both the size of the superannuation savings pool and that part of the pool that is invested through SMSFs is expected to accelerate, and part of the impact of that is the renewed attention being paid to the sector by major players in the financial services industry such as AMP.”

“For a broker who has had no previous exposure to this type of lending, we would recommend they invest in some formal training as a first step.

The MFAA training is a good example of what is available and completing it results in a formal accreditation that will be widely recognised.

You also need to recognise that lending proposals outside of SMSF’s residential and commercial lending has different aspects to each and if you are going to be successful you need to have experience and skills that relate to that specific sector.”

SURESH PILLAI, LIBERTY SINCLAIR TAYLOR, WESTPAC “Australia’s love of property is well documented, so it is not surprising that the number of people using a self-managed super fund (SMSF) to invest directly in commercial and residential property is growing steadily, with real property investment accounting for $70bn or 15% of total assets invested in SMSF.”

“A good entry point for brokers is to look at their existing client bases.

There is no reason why a traditional home loan client would not be interested in learning more about SMSF loans. Therefore, surveying and segmenting current and past clients and making these clients aware of SMSF lending products will be a great starting point to expanding your business.”

ALLAN SAVINS, RESIMAC

GREG MITCHELL, HOMELOANS “It’s a great niche sector and for brokers with strong affiliations with financial planners, accountants or lawyers, it’s a healthy addition to their business. But obviously it has to be done properly. We’ve noticed a significant increase in demand from brokers wanting to get into this sector, and as a result of demand Homeloans introduced an SMSF product with an 80% LVR. Since then demand has further increased.”

“[Brokers should] speak to their lenders about what training is available. Lenders will have programs and BDMs to assist with training needs. Establish strong referral relationships with financial planners, accountants and solicitors to support you and your clients’ SMSF requirements. Be proactive in the management of the loan process and client relationship.”

BIG AND GROWING SMSFs are a rapidly growing sector

478,763

500000 400000

NUMBER OF SMSFs

300000

271,515

200000 100000 0

2004

2012

Source: CMHC Rental Market Report Spring 2012

$439bn The amount held in SMSFs

Source: APRA

15

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THE PROCESS Clive Kirkpatrick walks us through the SMSF property investment process, and how the broker enters the picture

1

A SMSF is set up by the customer with the appropriate powers to borrow and invest.

2

3

The customer checks that the investment being considered is an appropriate and permitted investment for their superannuation fund.

4

5

The customer checks that the investment being considered is an appropriate and permitted investment for their superannuation fund.

This is where the broker comes in, to assist with the loan application and ensure that the customer has had the appropriate independent financial advice from a planner or accountant.

The broker completes the application and provides supporting documents on behalf of the SMSF.

Certified copies of the SMSF Trust Deed and Custodian Trust Deed are required for the Bank’s panel solicitor to review and certify compliance.

6

On approval, the Loan Offer Document and security documents are produced and sent to customer’s solicitor for execution.

INDUSTRY SPOTLIGHT 16

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ACCOUNTANTS, PLANNERS AND BROKERS: A MATCH MADE IN HEAVEN

SMSF MYTHS Industry leaders blow up some of the common misconceptions surrounding SMSFs.

SMSF lending is the perfect convergence of financial services. It brings together brokers, accountants, planners and solicitors all working toward the common goal of client interest.

PER AMUNDSEN, THINKTANK “A Super Fund Home Loan is a little more tricky than a standard home loan but it’s definitely not too complex for a broker to write if they take the time to educate themselves.”

SINCLAIR TAYLOR, WESTPAC “Building referral relationships with accountants and financial planners is key to tapping into this affluent group of consumers, as those professionals are often very involved in establishing the SMSF and advising on the investment strategy of the fund, including which asset classes should be considered.”

SMSF lending is too difficult and complex

✘

SINCLAIR TAYLOR, WESTPAC

SMSF property investment is “It’s worth considering that an the right call SMSF isn’t right for everyone; for everyone it best suits investors with sufficient superannuation assets (at least $200,000), the time, investment skill and willingness to take on the responsibility of managing their retirement savings. Likewise, borrowing to buy an investment property, within an SMSF, isn’t right for everyone. It requires careful consideration, good advice, and shouldn’t be rushed into.”

CLIVE KIRKPATRICK, ST.GEORGE

✘

“If handled well this can be a very profitable relationship for both parties – so it’s a good combination for a broker to be writing the loans and the right planners and accountants providing the advice.”

THROUGH THE ROOF: RESIMAC SEES 150% SMSF INCREASE

ALLAN SAVINS, RESIMAC

Resimac experienced a record month in July for new SMSF applications, with an increase of 150% over the previous month. This is on the back of continued growth within this sector.

The group’s COO, Allan Savins, said Resimac has seen “strong growth” month on month since launching their SMSF product in December last year.

“These results support our decision to enter this sector of the market and back up recent reports that SMSF lending will only continue to grow.

The Resimac sales team has undergone extensive training in SMSF lending and has been out in the field working closely with brokers to educate them on not only how to write and assess these loans but, more importantly, how to identify SMSF opportunities.”

The only difference “Brokers who haven’t between an received any specific SMSF loan and training in this area don’t a standard realise that the SMSF is loan is that the actually the mortgagor applicant is an and not the entity noted on SMSF the contract of sale. As a separate property trust must be the legal owner of the property and noted as the purchaser on the contract, brokers need to advise their clients about the importance of establishing the correct property trust prior to contract exchange.”

✘

SKILLING UP What are some of the special skills brokers need to get involved in SMSF?

DID YOU KNOW?

1/3 The proportion of the superannuation market represented

by SMSFs Source: APRA

GREG WILLIAMS, HOMELOANS

SURESH PILLAI, LIBERTY

PER AMUNDSEN, THINK TANK

“They need to have a reasonable understanding of what an SMSF looks like, how they’re structured and the responsibility of the trustees. To help navigate the maze, Homeloans conducts regular seminars for brokers interested in offering Homeloans’ SMSF products and wanting to learn more about this sector.”

“Brokers can leverage on-the-job training and the support infrastructure that lenders such as Liberty have built. For example, our support ranges from training sessions as part of our accreditation process, through to having a dedicated underwriting team to address day-to-day issues relating to SMSF loans. We also have access to specialist resources to help brokers with the most complex of scenarios.”

“The most important part of contributing effectively to satisfying their clients’ needs in this regard is understanding that it is not their role to give advice, but at the same time ensuring that their clients are getting the professional advice they need and then working with lenders who also understand SMSF – LRBA lending.”

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CONTINUED FROM PAGE 1

Glenn Lees:

Running our own race

As competition among aggregators remains fierce, Connective principal Glenn Lees says the company will continue to chart its own course MOVING IN ON THE TERRITORY

GLENN LEES

It’s not just other brokers that present tough competition, Lees said. Other players in the financial services sector are seeing the opportunity present in the mortgage market, and are beginning to make inroads.

“When you hear diversification talked about in the market, it’s always in terms of the broker diversifying outward. By far the bigger trend – and we have a lot of evidence to support this – is other allied financial services diversifying into the mortgage market. Diversification is happening, but it’s happening in the other direction.”

The movement of planners and other financial services professionals into the mortgage sector is a trend that brokers cannot ignore, Lees said.

“That’s a big issue for brokers, and it needs to be recognised. They can’t take an insular view and think, ‘Mortgage broking is territory that belongs to us’.”

But that doesn’t mean brokers should hit the panic button just yet. And it also doesn’t mean brokers should feel the pressure to expand into other areas of financial services, Lees said. Despite the fact that much of the industry has touted a converged financial services model as the future of the industry, Lees argued that there is still room for traditional mortgage broking. The important thing, he said, is for brokers to have a clear plan.

“The solution is to have a clear strategy of where your business is heading. And it doesn’t have to be diversification. I still believe you can specialise quite happily in mortgages and be very good at it.

But someone who dithers around without a clear strategy risks being marginalised,” he said.

Another challenge brokers face is the scale afforded some of their competitors by the brands they’ve aligned themselves with, Lees said.

Independence has long been a hallmark trait of the mortgage broking profession, but as the market becomes more competitive the attraction of

NEWS 19

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affiliation with a large brand becomes greater, Lees suggested.

“The environment is getting competitive for brokers, and to be able to maintain a competitive edge when there’s so much scale developing among the competition out there is difficult.

That sense of affiliation is quite important, and whether it’s real or not it’s certainly attractive to brokers.”

To this end, Lees touted Connective’s software platform, which he said gave the company’s brokers the tools to compete with larger players.

“The challenge for smaller players is to remain competitive, and that’s why we built tools into our software platform that allow brokers to present themselves as a much larger brand than they may be.”

RUNNING THEIR OWN RACE

Brokers aren’t the only ones facing stiff competition for business. Aggregators are also fighting hard to attract talented brokers. While the number of players continues to shrink, Lees said aggregators remain as competitive as ever for business.

“I wouldn’t say it’s becoming fiercer, I’d say it remains fierce. We kind of run our own race and we focus on what we do and our value proposition. Our aim and our goal is getting brokers to the best aggregator in the market. That’s our self-centred view,” he said.

In spite of the competition, Lees said Connective endeavours to stay focused on its own business rather than look to the strategies of its competitors.

“We’re not too fussed about what others do.

We respect all our competitors, but we do look at some of the other aggregators in the market and get the feeling they’re treated as a lending business rather than a service business. We see ourselves as a service business, and if you see your role in the value chain as that it gives great clarity as to what you give the customer, and that is the broker,” he said.

GROWING THE PIE

Aggregator competition can be particularly fierce when companies are all jockeying for the same pool of brokers. Lees said he recognises that the industry needs to do more to bring new entrants into the field.

“IT CAN BE A VERY INTROSPECTIVE INDUSTRY, AND YOU’RE NOT GROWING THE PIE”

“It’s a zero sum game, because if there are only 10,000 brokers in the market, then your market is capped. Tim Brown mentioned a development program they’ve started for new-to-industry brokers. I think that is a great initiative. It’s very forward-looking, very smart and it’s to be congratulated.”

And just stripping brokers off one another isn’t a long-term strategy for aggregators, Lees said.

“It can be a very introspective industry, and you’re not growing the pie.”

But Lees said Connective still believes there are many brokers in the existing market who would be a good fit for the aggregator.

“It’s not really a concern for us. We believe we have plenty of scope for growth from the existing population. The simple fact is that there are many brokers out there who are ideal candidates to join Connective, simply because of their business metrics,” he said.

Regardless of the competitive landscape, Lees sees a bright future for Connective. He pointed to the aggregator’s longevity, a trait he said some people in the market fail to recognise.

“This is our 10th year of being in business, but some people still think of Connective as being a new aggregator that’s some small boutique.

We’re the second biggest aggregator in terms of volume by a long shot. So we’re always a bit bemused when we still hear the story about Connective being small or new when we’ve been around so long. We’ve been here for a while, and we’re not going anywhere soon.”

MARKET TALK

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20

Sifting through the spruikers Property spruikers seem rife nowadays. Aidan Devine investigates how to help your clients steer clear of dodgy operators

themselves. Crawford sums it up as an easy red flag: “If they are not taking up their own advice there should be cause for concern.”

COMMISSIONS

ith the SMSF market heating up, property spruikers have been making the news quite a bit lately. ASIC has warned they plan to crack down on the practice, but what warnings can brokers give to their clients to help them avoid unscrupulous operators?

Property Investment Professionals of Australia (PIPA) chair Ben Kingsley says the property industry has been a magnet for spruikers in the past. He says the classic spruiker is one who hosts an event that ordinary people attend, free of charge, but which normally turns into a sales drive.

“There may be a lot of hype, maybe some quotation about exponential returns or how people have made lots and lots of money, and then there’s an ‘act now’ component,” Kingsley says.

He says the difference between that and a legitimate property company is stark.

“A professional would deliver good education content. The information would be balanced and there would be no call to act now.”

Perhaps the most obvious way of gauging the reliability of a property service provider’s advice is to find out how they make their money. As James Freudigmann, national manager of Propell Buyers Advocates, points out, a significant portion of the people recommending specific clusters of properties generally don’t get their money from buyers – they get it from developers.

“The aim is to ‘sell’ you something,” he says.

“They generally use sales tactics to pressure you into purchasing something without it even necessarily being in the same state or area that they are located.”

Freudigmann says a lot of these property service providers operate under the guise of being buyers’ advocates or investment advisers, when in reality they are simply project marketers.

“A project marketer [sells] a particular development, unit complex or has a stock list of properties at their disposal that they will recommend you purchase,” he says.

“They will never be recommending you purchase established properties; instead they will all be brand new properties. We’re not saying don’t buy new property, but don’t purchase from a project marketer that makes themselves out to be a buyer’s advocate or agent.”

QUALIFICATIONS

PAST CUSTOMERS

W

Kingsley says that a few simple checks can easily reveal who is a spruiker and who is providing a reliable service.

The first thing you should be checking, he claims, is whether anyone you deal with has the relevant qualifications to be giving you advice.

With accountants, mortgage brokers and financial planners this is normally fairly easy, because these professionals require strict qualifications.

In the realm of property investment advice, which remains largely unregulated, Kingsley believes prospective customers should still lean towards providers with some form of qualification.

For Kingsley, this falls to a simple question: “Do they have a formal qualification to be giving out property investment advice, such as a qualified property investment adviser qualification?”

EXPERIENCE

It stands to reason that anyone dishing out advice should be practising what they preach. Crawford Real Estate’s Ryan Crawford says this highlights another thing that investors should be looking for in any service provider they deal with – property investment experience.

“Take advice from those who have already walked your desired path,” Crawford says. “Ask them how long they have been in the market, what their portfolio looks like and where they had successes and failures.”

There’s also the fact that anyone encouraging borrowers to dive into an opportunity should conceivably have bought something similar

Another easy way to determine the reliability of a property service provider is by speaking to their past or present customers. Many companies may have testimonials on their websites or marketing material, but take these with a pinch of salt.

Testimonials can easily be made up, and even if they feature pictures and seemingly real names, think of how easy it is to acquire random people’s photographs from social media sites.

Ryan Crawford says it is a good idea to follow up testimonials and big claims about customers’ success. He suggests asking the company if they can provide contact details for some of their long-term clients who have successfully created wealth with their help.

“Many [companies] will have case studies and success stories to refer you to but it is also extremely valuable to speak direct to other investors who can tell you one-to-one what their experiences have been like. Positive client references are a reliable indication of the credibility and capabilities of your strategist,” he says.

Crawford adds that the same applies equally to the claims that any supposed ‘mentor’ may be making about their own property successes.

“Your strategist should have the ability and confidence to share their own investment strategy with you and the growth and cash flow they are achieving. This includes how they have structured and financed their investments, techniques for maximising equity and cash flow, where they have bought and why, and where professional services are required.”

MARKET TALK brokernews.com.au

21

Offshore love affair with Aussie property rekindled Overseas investors are showing a growing appetite for commercial property in Australia

M

oney from more than 50 offshore firms – totalling $18.5bn – is making its way to the Australian commercial property market, according to research by Cushman & Wakefield. Tony Dixon, a spokesperson for the commercial real estate group, said money from Singaporebased investment firms is leading the charge to our shores,

with other Asia-Pacific countries, as well as European and US firms, following suit.

“The appetite for Australian assets runs deep and wide across the globe. We are receiving new enquiries from high-profile investors on a weekly basis, and in many instances these firms are demonstrating a willingness to pay a premium, especially those who are taking a trophyhunter approach with their

FAST FACT

$18.5bn The amount of offshore investment in the Australian commercial property market Source: Cushman & Wakefield

acquisition strategy,” said Dixon.

He said existing asset owners were reaching a critical stage, as the intense weight of international money, coupled with the growing investment capacity of domestic superannuation firms, creates a situation in which it may be attractive not to take assets to market.

Cushman & Wakefield research shows Singaporean firms have the largest allocation for Australian investment, totalling an estimated US$4.1bn (A$4.46bn), with firms out of the US, Malaysia and China next in line in terms of weight of money.

“Unsurprisingly, there is a uniform preference among offshore investors for prime grade properties in core CBD markets with long-term leases in place. However, due to the limited availability of stock, there is also a growing recognition that secondary assets are worthy of consideration,” Dixon said.

At the moment, Cushman & Wakefield associate director, research and consultancy, Peter Ainge believes the major international investors have merely ‘dipped their toes in the water’ when it comes to Australian acquisitions – but a more direct and aggressive move is on the short-term cards.

“There are a few key indicators suggesting a wealth of money is headed our way. Over the past three years, five out of the 10 largest property purchasers in the world have bought property within Australia,” Ainge said.

“Our research has identified over 50 offshore firms that have a definite mandate for Australian investment. Then there are the many other firms who may not have a direct mandate but would be willing to invest in Australia if the right opportunity presents itself.”

BEST PRACTICE

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22

The five new cardinal rules for mortgage brokers Business strategist Michael Harrison shares five tips for keeping your business at the cutting edge

B

eing a mortgage broker today means succeeding online and having a digital brand that clients want to work with.

Business strategist Michael Harrison of Strategies Plus Concepts asks: are you playing by the new rules of broking?

The world has changed. The internet has had a huge impact on the business of mortgage broking. It has changed the way we think and, more importantly, it has changed the way our clients think and act.

This change is accelerating for three main reasons. Firstly, the internet offers instant access.

Snail mail has been replaced by email for 90% of transactions. Digital tools let us share videos, send claims updates by SMS and ‘auto-respond’ to enquiries. We do not want to wait anymore.

Secondly, the internet is interactive.

Communication is more immediate and effective. A Skype video call lets you talk face-to-face with clients and share documents at the same time.

Social media sites have become the new frontiers for prospecting, and QR codes instantly connect people to our websites.

Finally, this is all inexpensive. Once you have an internet connection, you are in touch with the entire world. This necessitates some new rules for insurance brokers…

1

OUT OF SIGHT IS OUT OF BUSINESS

Where is the first place you go to look for information? Google. We are all the same. If you cannot find a person or company on Google you think they either do not exist or, if they do, they are not too relevant. A Google search proves that they exist and have some currency. When was the last time you used the Yellow Pages, except perhaps as a doorstop? Why would you? Everything you need to know, from contact details to a satellite view of a building, is on the internet, so make sure you are there too.

2

BEING A SUPPLIER IS NO LONGER ENOUGH

If you are going to feature prominently, you have to be an authority and not just a supplier.

It is not enough anymore just to say, “Here I am – I am an mortgage broker”. You have to be recognised for knowing something about mortgages. Seth Godin is a marketing authority. He’s regarded as an expert, not just because he knows about marketing but because he speaks about it, blogs about it, makes videos about it and writes books

about it. In fact, there are more online searches for Seth Godin than there are for ‘marketing’. In the digital world you need a footprint in multiple channels.

3

YOU HAVE TO GIVE TO GET

Billboards, telemarketing and the constant barrage of advertisements on television have made us cynical and suspicious. If all you see is someone’s website or Google advertisement on the internet, you lose interest. If, on the other hand, you offer something worthwhile up front, then the client is more likely to interact with you. It might be a free guide to investment properties or an e-book about buying your first home. Give something first to attract interest in what you have to say.

4

DELIVER AN EXPERIENCE

It is not enough anymore to say, “I sell this”.

You have got to make people feel part of your community. Are they welcomed like friends? Do they have special status; an after-hours number to call in an emergency; an invitation to your business insurance update webinar; a seat at your private economic update briefing held in your boardroom each quarter (which of course you record and webcast for those who couldn’t make it)?

5

THINK DIGITAL, ACT ANALOGUE

The internet is an enabler; it provides a plethora of digital tools. But relationships are analogue events and mortgage brokers are in the relationships business. The key to growth and credibility is to use the power of the digital world to enhance your client relationships. Salesforce.com allows you to track client contact details; shoeboxed.com allows you to photograph all those business cards you collected over the years for automatic inclusion in your newsletter list; simplebooklet.com lets you create compelling and engaging content on the web and across mobile devices to engage your clients and prospects; and newspaper websites let you email articles of specific interest to selected clients. All of these are accessible from your smartphone.

Polaroid cameras went out of business because they missed the digital photography revolution.

Encyclopaedia Britannica missed the digital tsunami that created Wikipedia. Microsoft missed the tablet revolution started by Apple’s iPad and is left trying to catch up. The digital revolution for mortgage brokers is here now.

OPINION brokernews.com.au

23

Keeping a watchful eye on a warming market RP Data’s Craig Mackenzie says APRA will be vigilant to make sure lenders aren’t loosening their standards as housing heats up

T

here have been two recent key developments in Australia’s mortgage market.

The first was the release of the Australian Prudential Regulation Authority’s (APRA’s) bi-annual publication APRA Insight. The overall theme of this publication was the key risks facing authorised deposit-taking institutions (ADIs) in a low interest rate environment. In particular, APRA identified certain key risks with respect to the residential mortgage sector, which is a particularly important asset class to the ADI sector, making up between 55% and 60% of the total assets of the sector.

Firstly, APRA noted recent international experience indicating that a prolonged period of low interest rates can lead to rising household leverage and housing market pressures, with potential flow-on impacts on the credit quality of housing loan portfolios.

APRA commented that due to the consequences of the GFC and increased financial conservatism on the part of consumers, household credit growth remains low by historical standards, as evidenced by higher savings rates and the fact that many borrowers are repaying their debt more quickly than required.

This Insight article was a very public statement

by APRA to the market and regulated institutions that they are keeping a close eye on ADIs to ensure they do not inappropriately relax lending standards so as to counter this slow credit growth environment.

APRA typically communicates this message to ADIs behind closed doors. It was a noticeable change in APRA’s strategy to use such clear and unequivocal language in a public document, the natural consequence of which was widespread media coverage, a core part of the objective.

The article contained an interesting statement: One indicator that APRA monitors closely is the value of new lending at high loan-to-valuation ratios (LVRs). Since 2010, there has been an increase in new lending at LVRs above 90%, particularly in the recent the quarter.

RESIDENTIAL MORTGAGES WITH LVR >90% (% of mortgages approved) % 30 25 20

Industry range (25th to 75th percentile)

15 10 5

Industry median 0 Mar 2008

Sept 2008

Mar 2009

Sept 2009

Mar 2010

Sept 2010

Mar 2011

Sept 2011

Mar 2012

Sept 2012

Mar 2013

Source: APRA

This comment follows a separate recent APRA publication in which they noted that in the June quarter of 2013 approximately 32% of lending activity was for LVRs greater than 80%. That publication also revealed that approximately 38% of all residential loans approved in the June 2013 quarter were on an interest-only basis. This figure reflects the strong level of investor activity in the residential property market at the present time, given the low interest rate environment and strong rental yields in most capital cities.

The other key point made in the APRA Insight article was the risk associated with an erosion of lending standards associated with a low interest rate environment, and the need to ensure that new borrowers are able to service debt and afford higher repayments when interest rates rise from current low levels. APRA completed a targeted review of loan serviceability standards in 2012.

While the review generally produced a positive assessment, it also identified a number of possible areas for improvement, most notably the need for ADIs to develop consistent serviceability criteria across all mortgage products.

There is no doubt that APRA will, in the coming months, keep a close eye on overall credit growth and the level and composition of new lending activity at each ADI, so as to ensure that sound lending practices are maintained and Australia does not produce a credit-fuelled housing bubble. It seems a logical conclusion to draw from their article that there currently exists a level of exuberance in the residential lending market that APRA is not entirely comfortable with at present.

The second piece of key economic data released last week, which is pivotal to Australia’s long-term mortgage and housing market performances, was the August unemployment data. Australia’s seasonally adjusted unemployment rate increased by 0.1% to 5.8% in August. This result was particularly interesting because the increase in the unemployment rate was also associated with a decrease of 0.1 percentage points in the participation rate, which measures the percentage of the labour force seeking work.

While interest rates, rental yields and movements in home values are always key drivers of the short-term activity and health of Australia’s mortgage market, in the long term continued strong employment growth will be critical to Australia’s ongoing economic prosperity, as the ability of Australian consumers to repay their mortgage is always strongly linked with continued full employment and income stability.

FINANCIAL SERVICES 24

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Aussies eager for advice

R

esults from the 13th annual Financial Planning Week indicate that the need for access to quality financial advice is stronger than ever, with more than 90 questions submitted to the FPA experts and more than 10,000 visits to the Ask an Expert webpage.

Superannuation and retirement planning emerged as key areas of concern for Australians during Financial Planning Week, attracting the highest number of questions and engagement online.

Another major demographic seeking financial advice was young people planning for their first home or kicking off a savings plan.

Research commissioned by the FPA in August revealed that only one in three Australians (34%) know where to find a financial planner they can trust.

Yet the results of the week showed that, when it is made available, financial advice is highly valued by Australians of every demographic.

Mark Rantall, CEO of the FPA, said the interest from people of all ages showed that

quality financial advice is universally beneficial.

“FPA research shows that 61% of Australians do not receive financial advice, despite the massive impact it can have in consumers’ lives. Access to quality financial advice is truly a national issue, which is why we are so pleased to see Financial Planning Week achieved its goal of engaging Australians in benefiting their financial futures through trusted advice.”

More than 70 financial planners volunteered to answer queries for the Ask an Expert site, while topic experts blogged on key issues related to retirement, saving, superannuation, debt and life insurance.

“FP Week benefited not only consumers but our members as well, with a 200% increase to the FPA’s Find a Planner page during Financial Planning week, as compared to the weekly average. In fact, half of the FPA’s 10,000 member practitioners received page views of their Find a Planner profile during Financial Planning Week,” Rantall said.

ASIC BANS BANKRUPT DIRECTOR

A

SIC has banned Bradley Thomas Sherwin, the chairman of collapsed lender Wickham Securities.

On 1 May, Sherwin filed for bankruptcy and Official Trustees were appointed as his trustee in bankruptcy. This has resulted in ASIC banning Sherwin from financial services for two years and seven months, the period remaining of his bankruptcy, unless the trustee extends the period.

ASIC is continuing its investigation into the collapse of Wickham and Sherwin Financial Planners and other related entities.

Sherwin was the director of eight companies that formed part of a group of companies known as the Sherwin Group, which collapsed in early 2013: • Wickham Securities Ltd

• Sherwin Financial Planners Pty Ltd • DIY Superannuation Services Pty Ltd • Wickham Capital Pty Ltd • Astor Funds Pty Ltd • Reacroft Pty Ltd • Blue Diamond Investments Pty Ltd • SP Property Pty Ltd Those companies are now in liquidation and their assets are in the control of the appointed liquidators Stefan Dopking, Quentin Olde and Michael Ryan of FTI Consulting.

In July, ASIC added five defendants to the proceedings brought against Wickham Securities, freezing the assets of all five in an attempt to compensate victims.

There are now 15 defendants involved in the proceedings.

The Coalition’s FoFA fix list

W DID YOU KNOW?

23%

The proportion of respondents to an ASIC survey who believed financial advisers have integrity Source: ASIC

hile in Opposition, the Coalition showed a strong understanding of the financial advice industry, and the Association of Financial Advisers (AFA) is counting on this to continue.

The association has congratulated the incoming prime minister and the Federal Coalition on their success, but has cut straight to the point about what they want the new powers to work on.

“We will be particularly interested in the Government’s approach to improving the effect of the Future of Financial Advice (FoFA), Stronger Super and Default Super reforms,” said AFA CEO Brad Fox. “The AFA strongly supports the consumer benefits associated with FoFA and we are looking forward to the Coalition’s promised roll-back and amendment of parts of the legislation which will eliminate much of the red tape associated with the reforms, improve the effectiveness of the financial advice industry and help advisers deliver quality, cost-effective advice to Australians,” Fox said.

At the top of the FoFA fix list are the problems associated with the grandfathering rules, which have reduced competition in the advice market and the ability of advisers to change licensees.

The AFA is looking to solve this as soon as possible, and will also seek a solution to allow corporate super advisers to both recommend a fund and continue to service the fund.

The Corporate Super Specialist Alliance has already raised concerns to the former financial services minister regarding corporate advisers’ restriction under new Stronger Super reforms, but will have to renew its plea.

FPA CEO Mark Rantall has also congratulated the Coalition on its significant win and is looking forward to working with a new government.

A key focus for Rantall first of all will be the removal of opt-in provisions. “The opt-in provisions will come into effect 1 July, 2015, so changes need to be made before that date,” he said. The FPA will also be pushing for simplification of fee disclosure statements, which are currently causing members a great deal of concern.

In April, Senator Mathias Cormann said he already had about 50 amendments to the legislation drafted and ready to implement. The Coalition also made public 16 recommendations on how FoFA could be improved.

Since the naming of the new ministry, it will now fall to treasurer Joe Hockey, assistant treasurer Arthur Sinodinos and parliamentary secretary to the treasurer Steven Ciobo to implement the proposed changes.

ONE YEAR ON 26

ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago Australian Broker Online, Oct 2012

Competition prompts commission increase As competition between lenders heated up last year, Macquarie announced it would sweeten the deal for brokers. The bank lifted its upfront from 0.6% to 0.65%, and increased its trail to 0.2%.

What’s happened since?

The move seems to have gained Macquarie some followers. The bank blew away competition to be ranked number one in AB’s Brokers on Non-majors survey.

Meanwhile, several lenders this year have tweaked commission offerings to woo brokers. But brokers thus far have seemed unimpressed, taking to the AB Online forums to slam the moves.

Foreclosures to dramatically increase A report last year from Digital Finance Analytics claimed 16% of households were experiencing severe mortgage stress, and were in danger of losing their homes. The report predicted that the number of homes in severe stress would continue to rise.

What’s happened since?

So far, so good. Rather than seeing mass defaults, as predicted by Digital Finance Analytics, the market has actually seen arrears tumble. The overall rate of arrears fell to 1.52% in June, down from 1.67% in the previous quarter. Even low-doc arrears dropped off, falling to a nine-month low of 5.26% in June. Easing interest rates have most likely helped.

brokernews.com.au

Blowing bubbles: Shane Oliver on the Australian property market

W

ith the housing market on the upswing, everyone’s eager to know exactly what will happen over the next 12 months. We caught up with AMP’s chief economist, Shane Oliver, for his insights into where the market is at and where it’s headed.

“My feeling is that this current upswing is largely being driven by lower interest rates and that’s often the key driver…I think low interest rates are going to be with us for a while yet as the economy adjusts to a slower growth pace after the mining boom slows down,” Oliver said. “So we really need to try and stimulate the economy. One of the best ways to do that – though it doesn’t always work smoothly – is to cut interest rates. That’s what the RBA has been doing and I don’t see them raising rates for some time yet.”

Oliver said one problem is that Australian house prices are already high relative to average earnings.

“We pay at least double, relative to our incomes, what an average American would pay to buy a house. That, I think, will put a bit of a limit on how far house prices can go up from here.”

However, on the flip side, Oliver said that as a nation, we still haven’t built enough houses.

“So I think the most likely scenario is that we spend several years where prices [move] in a bit of a range. At the moment, we’re going through…an upswing; in a few years’ time interest rates will start going up again and then might come off a little bit.”

While he indicated the current upswing has further to go, Oliver wouldn’t go as far as to call it a bubble.

“Over the next year we’ll probably see average house prices around Australia rise – I’d say somewhere around 5%, possibly as much as 10%. I wouldn’t get overly excited though; I’d be loath to call this a bull market or a boom or a bubble. If you get a bubble, we all know how they end.”

Should a bubble in fact be brewing, Oliver said that at the very least, the RBA would quickly be raising interest rates.

“So my feeling is that, with housing affordability, house prices are still quite high compared to people’s incomes…and the rate of growth will be capped. We’re not going to see the sort of surges we’ve seen in the past. But by the same take, I do see more upside over the course of the next year or so.”

FORUM 27

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What’s in a name?

FBAA president Peter White has expressed concern over the MFAA move to rebrand brokers credit advisers

Conflict of philosophy?

This issue’s winning comment comes from ‘MCC’ and relates to a piece on brokerage group Shore Financial, who lodged over $60m in home loan applications in August 2013 – a feat they largely put down to positive working relationships with Richardson & Wrench real estate.

Many brokers expressed concerns around real estate/brokerage partnerships, but we thought MCC brought up a particularly interesting point:

‘“In-house relationships will work well because the operation becomes seamless. The only issue I have is more from the point of the ‘Chinese wall’ position. Estate agents are very driven by the transactional sales culture and constantly wrestle with whose interests they really act on behalf of (vendor, self, purchaser etc.). The industry is not heavily regulated. Whereas the mortgage broking industry is moving more towards fiduciary duty of care via legislative change. Therefore this internal conflict could bring such alliances unstuck?”

MCC on 4/09/2013 9:45AM

SHOULD READERS BE REQUIRED TO PROVIDE THEIR FULL NAME WHEN COMMENTING ON ONLINE STORIES?

10 % 90 % YES

What do you think?

Leave your comments at brokernews. com.au

NO

T

he MFAA has announced the launch of a consumer advertising campaign which advocates referring to its members as ‘MFAA approved credit advisers’, rather than ‘brokers’ – a move the group says reflects the new accreditation and value provided by its members.

However, FBAA president Peter White has claimed the move could simply lead to borrower confusion and inaccurate generalisations.

Darryl Benn agreed that the title could create confusion, not just for borrowers but for brokers as well.

“My concern is that this title will imply brokers provide advice.

I have trained brokers for a number of years and a large percentage say they don’t give advice, or they can’t give advice, or they don’t know what they can give advice on. By moving to this form of identity you are implying you are able to provide advice to clients. I believe brokers need to be educated to understand their limitations regarding advice and the range of advice and advice services they are able to provide first before identifying oneself as an ‘adviser’.”

Scott Beattie said the title given to brokers was not as important as the consumer recognition of the MFAA brand.

“In my opinion, the MFAA should be getting their name to be on par with the CPA (ie, use a CPA

PRAISE FOR MACQUARIE

Macquarie took out the top honours in Australian Broker’s inaugural Brokers on Non-Majors survey. Brokers said the result was a good reflection of the lender’s performance.

Phil on 8/09/2013 9:19PM “Great result and a big wake up call to the other non-majors who have been promising a change but have delivered nothing.”

branded/affiliated accountant).

Whether we are credit advisors or not makes almost no difference to the average consumer who has almost no knowledge of what the MFAA is and/or does.”

Coast Broker, meanwhile, said it was time to retire the term “broker” “On my business cards I call myself a finance consultant which I feel truly reflects what I do.

Happy with the MFAA term of credit adviser. Actually the term broker to me is old-fashioned.

Plus I feel the term broker sounds like you are a dodgy insurance broker from the 60s that would rip clients off.”

BROKERS NEED TO BE EDUCATED TO UNDERSTAND THEIR LIMITATIONS REGARDING ADVICE AND THE RANGE OF ADVICE SERVICES THEY CAN PROVIDE

Broker on 6/09/2013 11:21AM “Outstanding BDM in Glen too.”

M C on 6/09/2013 9:08AM “Can’t argue with the results. Good support for this lender.”

PEOPLE

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28

RRR Racing towards thefuture future future A Canberra broker is taking on the Snowy Mountains to raise funds for disadvantaged young people

M

ortgage broking business Tiffen & Co managing director and MPA Top 100 Broker Gerard Tiffen will join financial planners in a cycle marathon from Melbourne to Sydney in October, raising funds for disadvantaged young people.

Tiffen has taken up the challenge for a second year to join the Bravien Financial team in the Future2 Wheel Classic, a charity ride that aims to raise funds to help disadvantaged young Australians through Future2, the foundation of the Australian Financial Planning Association.

He’s joining a group of 31 cyclists, nine of them riding the whole route from Sydney to Melbourne, and his teammates include Jeremy Gillman-Wells, managing director of Bravien Financial, and a third yet to be named. They join the ride in Albury-Wodonga on Monday 7 October for the “toughest six days of the ride” over the Snowy Mountains to Canberra and on to Sydney via the Southern Highlands and Wollongong.

“I am an avid cyclist, adventure racer and team member of the VO3Max sports team,” says Tiffen. “I have always been a great supporter of the Canberra community but decided to get more involved with a wider range of charities and events two years ago.”

The Future2 Wheel Classic is sponsored by AMP Financial Planning and Matrix Planning Solutions. The cyclists set off from outside the Old Treasury Building in Melbourne at 7.30am on Saturday 5 October, with their first stop in Bendigo. They arrive in Sydney on Sunday 13 October.

TEAMMATES: TIFFEN (AT RIGHT) AND GILLMAN-WELLS

This is the fourth year of the Wheel Classic, the main fundraising event of Future2.

The money raised is granted to community organisations around Australia, giving a second chance and hope for a better future to young people who are struggling with social exclusion, financial disadvantages, addictions and lack of job opportunities.

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IN FOCUS

I

NG Direct recently held its broker roadshow in Sydney, featuring CEO Vaugh Richtor and Victoria Cross recipient Corporal Ben Roberts-Smith.

CAUGHT ON CAMERA 29

INSIDER 30

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Why brokers shouldn’t become tree loppers or truckers

M

ortgage broking can be hazardous. Keeping up with constantly changing compliance regulations, for instance, has the very real potential to make one’s head explode.

However, aside from the odd paper cut or hangover following last week’s aggregator conference, the physical risks are relatively slim, at least when compared to the top 10 most dangerous jobs in Australia.

Life insurance website lifeinsurancefinder.com.au recently released its updated list of the riskiest career paths. Perhaps unsurprisingly, broking isn’t in the top 10, but in case you’re considering a change in workplace scenery, it’s probably best to avoid the following options:

TOP 10 MOST DANGEROUS JOBS IN AUSTRALIA 1. COMMERCIAL FISHERS

Working out at sea is widely known as the most dangerous job in the world, and is 17 times more dangerous than mining.

2. TRUCKERS

In 2011, 200 fatal crashes involving truck drivers were reported, making up 15% of road fatalities that year. According to the federal government, truckers are 10 times more likely to die on the job than workers in any other occupation.

3. FARMERS

In 2008, being a farmer would’ve landed you in the top three most dangerous jobs in the world.

4. MINERS

In the mining industry, 50 to 60 Australians die each year from toxic gases and explosions.

5. CONSTRUCTION WORKERS

So far this year, 13 construction workers have died. Leighton Holdings averages that 40 to 50 die each year on Australian construction sites.

6. TREE LOPPERS

Between 2010 and 2012, five tree loppers were reported dead in Sydney alone. They face the threat of overhead electric wires, unsteady branches and working with chainsaws.

7. DEFENCE FORCE

About one police officer is murdered every year in Australia. They deal with the risk of infectious diseases, abuse, injury, assault and death on a daily basis.

8. FIREFIGHTERS

Unruly bush-fire seasons, coupled with day-to-day accidents, put firefighters in high demand.

Most firefighters die from heart attacks (44%), followed by trauma-related deaths (27%), crashes (20–25%) and burns and asphyxiation (20%).

9. PILOTS

Even experienced commercial pilots are no match for adverse weather conditions and possible mechanical failures, among other hazards, making the job high risk.

10. GARBAGE COLLECTORS

Exposure to toxins and chemicals on a daily basis can lead garbage collectors to experience long-term damage. There is also the threat of accidents on the road.

‘HOT PROPERTY’ MELTS CARS, STARTS FIRES A newly constructed building in central London has caused some ‘heated’ controversy, after being blamed for starting fires and melting nearby cars.

The Huffington Post reports that the not-yet-complete 37-storey skyscraper at 20 Fenchurch Street, locally referred to as the ‘Walkie Talkie’ due to its shape, has now been renamed the ‘Walkie Scorchie’ due to its apparent ability to reflect heat from the sun onto buildings and vehicles on the next street.

The £200m construction has reportedly ‘blistered paintwork, caused tiles to smash and singed fabric’, according to angry nearby business owners – but it gets worse for poor motorist Martin Lindsay, who claims the intense heat reflected off the building’s windows melted part of his Jaguar when it was parked on the street outside.

Developers Land Securities and Canary Wharf have agreed to pay for the repair work and have erected a large temporary screen to reduce the likelihood of further damage.

“We have liaised extensively with local businesses to keep them informed throughout. We have decided on this course of action with their input and agreement, says a company spokesperson.

And, luckily for Lindsay – who can obviously do with some financial assistance – they’ve offered to foot the bill on his car as well, as “a gesture of goodwill”.

Now that’s what you call ‘hot property’.

THE £200M CONSTRUCTION HAS REPORTEDLY BLISTERED PAINTWORK, CAUSED TILES TO SMASH AND SINGED FABRIC

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AGGREGATOR/WHOLESALE BROKER PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 5

BANK

Commonwealth Bank 13 20 15 www.commbank.com.au Page 7

COMMERCIAL

Think Tank 1300 781 043 www.thinktank.net.au deal@thinktank.net.au Page 17

FINANCE

Rhino Money 1300 781 043 www.rhinomoney.com.au 1300 654355 Page 8 Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) www.semper.com.au enquiries@semper.com.au Page 19

LENDER

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 15

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

Macquarie 13 62 27 macquarie.com.au/mortgages Page 11 ME Bank (03) 9708 3994 mebank.com.au Page 9

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

Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 21

TECHNOLOGY PROVIDER NextGen.Net 02 9929 5999 sales@nextgen.net www.nextgen.net Page 13

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

OTHER SERVICES

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 26

SHORT-TERM LENDER

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

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

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