Australian Broker magazine Issue 10.02

JANUARY 2013 ISSUE 10.02

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS BUSINESS AS USUAL

Commercial lending is about to become regulated P10

SMSF SNARES

Steve Kane:

How safe is selfmanaged super?

P12

+ OPINION

The perils of consolidation

Consolidation may continue for aggregators, but those that neglect the fundamentals will pay the price

W

hen you mention aggregation in today’s mortgage broking market, it’s hard to do so without someone bringing up the idea of consolidation. It’s been a truth universally acknowledged in the industry that tight margins mean more aggregators will merge or be bought out by banks, a trend seemingly illustrated by Commonwealth Bank’s recent play for Aussie Home Loans.

But, while aggregators may continue to merge in the year ahead, Advantedge general manager of broker platforms Steve Kane said their success depends upon choosing the right partner.

FULL STORY PAGE 14

BROKER DNA

How brokers must evolve or die P18

+ PEOPLE A deadly mountain and a risky bet P28

+ CAUGHT ON CAMERA Port Group expands its footprint P29

NEWS

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WHAT THEY SAID...

NUMBER CRUNCHING

RANJIT THAMBYRAJAH

“I think there’s got to be a point where a person needs to be able to think for themselves and not rely on government protection…” P10

$36m The amount ‘sickies’ the Friday before Australia Day were estimated to cost the Australian economy

NIC ELLIS

WHAT ARE AUSTRALIANS SAVING FOR THIS YEAR? 10

20

30

“Lenders have done their homework in assessing serviceability for [SMSF] loans”

DID YOU KNOW? 40

A major renovation – 37%

New appliances or furniture – 18%

49%

of Australians are paying down their mortgage ahead of time

P12

Source: ING Direct

Landscaping – 23%

Retirement – 22% Source: Loan Market

30

The number of housing markets in Australia deemed ‘severely unaffordable’ by the Demographia International Housing Affordability survey

37.5%

of first homebuyers say they will be reliant on government grants to purchase a home Source: RAMS

KYM DALTON

“Broking wasn’t a particularly ‘evolved’ activity at the dawn of broking” P18

BRETT HALLIWELL

“It’s really about what brokers want and the ability to have different offerings” P26

NEWS 4

brokernews.com.au brokernews.com.au

Consumer sentiment rise dubbed ‘disappointing’ ■ The Westpac Melbourne Institute Index of

Consumer Sentiment rose by 0.6% in January, from 100.0 in December up to 100.6 – but the figure is still disappointing, says the research provider.

Westpac’s chief economist, Bill Evans, says this is the third consecutive month where the Index has been at or above the 100 level.

“That compares with 14 of the previous 16 months when the Index had registered below 100.

However, having said that, it remains disappointing that despite a total of 175bps of rate cuts from the Reserve Bank since October 2011, the Index is only 3.5% above its level at that time.”

The Index surged by 6.4% to 103.4 in November 2011, following the first rate cut in November 2011.

“Consequently, the Index remains 2.7% below the level in November 2011 despite 150bps of rate cuts from the Reserve Bank. The Reserve Bank Board did not meet in January so there has been no fresh news on the interest rate front since December.”

However, Evans says other factors which would normally have been expected to impact consumer confidence have had “little effect”.

BY THE NUMBERS In the last five years, bankruptcies have fallen by 20% in Australia, while debt agreements rose by 68%



68%



20%

Source: Insolvency and Trustee Service Australia

MFAA advocates for ‘independents’ ■ The MFAA has issued a submission to ASIC

in relation to the banning of brokers’ use of the words ‘independent’, ‘impartial’ or ‘unbiased’ in their names.

Phil Naylor, the MFAA’s CEO, says he’s concerned some brokers won’t have enough time to change their business names.

“We put a proposition to ASIC saying we told all our members this and identified a few that use the word, and is ASIC willing to provide some kind of exemption.”

ACCC’s CBA/ Aussie review ■ ACCC has issued a review of

CBA’s move to majority ownership of Aussie Home Loans.

The consumer watchdog will consider whether Aussie is a ‘’unique or a vigorous’’ competitor in the mortgage market and if CBA will have the “ability and incentive to foreclose its banking competitors from accessing”.

It will also look into whether the move to majority ownership ‘’will increase prices or profit margins or decrease the quality of products’’ on offer.

EDITOR Adam Smith COPY & FEATURES JOURNALIST Mackenzie McCarty PRODUCTION EDITOR Moira Daniels ART & PRODUCTION SENIOR DESIGNER Rebecca Downing DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley

DID YOU KNOW? Australia has once again ranked as one of the most unaffordable housing markets in the world in the annual Demographia survey.

The median house price in Australia is 5.6 times median annual income, only bested by Hong Kong.

Source: Demographia

BROKER TRAINING PROGRAMS EXPERIENCE SURGE OF INTEREST ■ Mortgage broker training providers have experienced

an increase in new recruit interest over the past month.

Loan Market QLD manager, Andrew White, says 75 applications were received by the aggregator’s broker academy over the holiday break, which was a substantial improvement on the 17 received over the same period last time.

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

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

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

NEWS brokernews.com.au

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Aussies sunny on personal finances

THE STRANGER SIDE OF NEWS

■ More than two thirds of

Australians (67%) believe the country has a strong economic outlook, according to Westpac’s Australia Day report.

Of those who claimed the outlook was strong, two thirds (66%) believed this positive trend will continue.

This positive sentiment also extends to the personal finances of respondents, with 67% optimistic about their personal situation for the next financial year, and a further 19% feeling very positive about what is to come.

Gai McGrath, GM, Westpac retail banking, says the positive economic sentiment is encouraging – and not completely unexpected.

“Australians are known for their positive attitude; however, they also understand there is more they could be doing to make their money work harder for them. It is clear that economic problems overseas are contributing to the more cautious behaviour we are seeing from our customers. Both businesses and households continue to pay down their debts and increase their savings, which is a good thing.”

SNAKES ON A PLANE

■ Qantas has had its fair share of bad publicity

over the last year or two. Waning profits, technical malfunctions and an entire shutdown have left the flying kangaroo a bit tarnished.

Now, the airline apparently has to contend with stowaways as well. On a flight from Cairns to Port Moresby in Papua New Guinea, passengers noticed a nearly three-metre python clinging to the wing. The hapless reptile was dead on arrival in PNG. No word on whether Samuel L. Jackson was involved.

RBA ‘TOO LITTLE, TOO LATE’ TO STOP HOME LOAN APPROVALS FALL ■ Australian home loan approvals

fell a seasonally adjusted 0.5% in November from October, according to newly released ABS figures, and one industry figure has placed the blame squarely on the RBA. 1300HomeLoan managing director John Kolenda has accused the RBA of failing to move quickly enough on rates. Kolenda said the shock fall in home loans after most economists predicted a 0.5% rise is due to the Reserve Bank’s reticence in moving aggressively on rates.

“The RBA has been messing around with the cash rate for the past few years and for most of that time they have got it wrong. I believe the official rate is still half a percentage point above what it should be,” Kolenda said.

In spite of the RBA’s loosening cycle since November 2011, Kolenda said the Bank had still failed to jumpstart the housing market.

“What was needed during 2012 was bold action by the RBA but what they delivered was too little, too late.”

Kolenda claimed it would be “no surprise” to see the RBA cut rates again.

THAT’S NO MOON

■ While the US continues to grapple with its

debt and unemployment problem, a group of petitioners suggested a novel idea to jumpstart the economy. More than 34,000 petitioners on the White House website have called on the government to construct a Death Star, saying the planet-destroying space station would create jobs and strengthen national security. The best part is, the White House actually replied. Paul Shawcross, chief of the White House’s Office of Management and Budget’s Science and Space Branch, pointed out that the project would cost around $850 quadrillion, further expanding the country’s deficit. Moreover, he said the administration was fundamentally opposed to blowing up other planets.

(UN)EDUCATED GUESS Research shows 75% of Australians wish they had made different choices about their tertiary education. Their main complaints are:

FAST FACT

30% of

Australian consumers tip real estate as the best “value for money” asset

37%

Not taking study more seriously

Source: Westpac

Source: Seel Learning

32%

Not trying harder

32%

Not staying in education for longer

29%

Wrong choice of subjects

21%

Not asking for more advice about study choices

NEWS brokernews.com.au

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Debt brings on the Aggregator tries to lure young guns blues, but mortgages make merrier with internship ■ A challenger aggregator has

launched a program it says will lure talented people to the mortgage industry.

Finsure’s internship program selects potential brokers from related industries and offers them scholarships to gain their Cert IV, Diploma and MFAA accreditations. Broker recruits also undergo in-house training with the company’s seasoned brokers over a period of six months. The company said its brokers will also receive training about the latest NCCP changes.

The program is set to intake its first candidates next month, and Finsure national business manager Adrian Lee said the internship would enable the aggregator to build a network of well-trained brokers.

“I’m excited by the quality of these young guns who will have fresh eyes capable of lifting the bar for the entire industry,” Lee said.

■ The Financial Security

Project at Boston University has published research saying that, for every 10% increase in the dollar amount of a person’s debt, his or her depressive symptoms increase by 14% – but home loans may be an exception.

Lawrence Berger, an associate professor of social work at the University of Wisconsin in Madison, says there’s ‘good debt and bad debt’ when it comes to psychology and emotional health.

“To be clear, having debt does not lead to full-blown clinical depression. But it does trigger the garden variety blues that most people experience. Symptoms vary from losing one’s appetite or being unable to shake the blues, to feeling lonely.”

The more severe psychological effects were shown to come from short-term debt, such as debt that comes from credit cards, overdue bills and short-term loans. Longterm debt, also described as “good debt” – such as home loans – was not found to cause a similar effect.

20

30

40

50

60

33% say they’re financially unprepared for retirement 70% have not sought any financial advice on retirement 16% say they aren’t looking forward to retirement at all Source: REST Industry Super

CANADA ING DIRECT CEASES BROKER ORIGINATIONS AFTER BUYOUT After selling its Canadian operations to Scotiabank, ING DIRECT Canada informed brokers it would cease using the third-party channel, and would concentrate on proprietary mortgage sales. Instead, it directed brokers to its new parent company.

“Following the recent acquisition of ING DIRECT

by Scotiabank we have completed a thorough evaluation of our mortgage business and have come to the decision that ING DIRECT will concentrate its origination efforts on its direct channel and transition its broker business to Scotiabank,” head of mortgage sales Kim Luxton wrote in a letter to brokers.

US NEW RULES DETER BROKERS FROM PEDDLING RISKY LOANS New legislation has been announced by the U.S. Consumer Financial Protection Bureau with the aim of removing incentives for brokers to push risky loans. The regulations prohibit brokers from being paid more for loans with higher interest rates or fees. The rules also block brokers from being paid by both the consumer and the lender.

UK

BABY BOOMERS GOING BUST 10

WORLD NEWS

70

100

LLOYDS LENDS HAND TO FHBs Lloyds has pledged £6.5bn in lending funds to help first homebuyers into the UK market.

The sum is the largest set aside by a UK bank for the express purpose of funding first homebuyer loans. First homebuyer participation is growing in the country, with the Council of Mortgage Lenders reporting that first homebuyer activity in November hit its highest point since the end of 2009.

ANALYSIS brokernews.com.au

10

Business as usual Draft legislation governing commercial credit has some peculiarities that may be cause for alarm

O

n Christmas Eve, the government quietly rolled out a raft of proposed changes to the NCCP Act that would see regulation take effect in commercial lending. Long mooted as the next area credit reformers would turn their gaze upon, it seems business credit will finally have its own regulatory regime.

The proposals themselves were a bit of a mixed bag. It turns out that commercial deals will not, as previously feared, be subject to the NCCP responsible lending guidelines in place for residential deals. In fact, the proposed guidelines governing small business credit tout themselves as “light touch”. But there are aspects of the proposed legislative changes that could be cause for concern for some brokers.

John Denovan of Gadens’

I’VE HAD A TORRENT OF PEOPLE RINGING ME UP AND SAYING THE NEW REQUIREMENTS ARE GOING TO BE DIFFICULT TO DEAL WITH – J ON DENOVAN

Lawyers said there are a few particular specifics of the draft legislation brokers should keep an eye on.

PROCURING PERMITS

One of the potential concerns, Denovan said, is the proposal to require a permit for commercial lending or broking. This permit would be in addition to an ACL. While Denovan said this could potentially weed out unscrupulous fringe lenders, he claimed it could have the side effect of shrinking the supply of business credit.

“I’ve had a torrent of people ringing me up and saying the new requirements are going to be difficult to deal with and are going to reduce the availability of business finance,” Denovan said.

The reason for this is the additional work – not to mention potential cost – required to get the mooted permit.

“There are around 10,000 brokers, and probably each one of them has occasionally done a loan for business purposes, even if it is secured by a home. They can do that at the moment,” he said.

But with the additional impost of a permit, Denovan said some brokers and lenders may decide business deals aren’t worth the effort. After all, if they’re only picking up the odd business deal here or there, an additional barrier may convince them to stop dealing with commercial loans altogether, he said.

“At the moment, they’re saying you’ve got to get a permit to be a broker or lender on top of your ACL, and there will just be a whole lot of guys who won’t bother,” he said.

Much like an ACL, the permit will require that the holder is a member of an accredited EDR scheme and has not been disqualified from providing credit advice. Other ACL provisions – such as the duty to “act efficiently, honestly and fairly” do not apply. Gadens has stated that it will be suggesting that all ACL holders be automatically accredited to provide commercial

loans. At the moment, that’s not the proposal on the table.

READING CLIENTS’ MINDS

Perhaps more worrying, Denovan said, are the assessment requirements proposed for business lending and broking.

“The test is whether the borrower is prepared to lose their home. That’s a pretty strange question to have to ask someone,” he said.

But, these conditions only apply to a new classification of loans created by the proposed legislation. Dubbed a “protected small business credit contract”, the classification refers to any loan contract secured by a mortgage over residential property, if the predominant purpose of the loan is to enable the borrower to comply with the borrower’s obligations under an existing credit contract which is in default.

Still, Denovan said the

BROKERS SOUND OFF

I think there’s got to be a point where a person needs to be able to think for themselves and not rely on government protection. Legislation that protects consumers, I’m all for. Legislation for those who want to take the risk for return, I’m against.

– RANJIT THAMBYRAJAH, ACUITY FUNDING

ANALYSIS

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I’M ALL FOR REGULATION, IT WEEDS OUT THE GUYS WHO DON’T KNOW WHAT THEY’RE DOING. BUT I’M A BIT MIFFED THAT THEY’RE THINKING ABOUT ASKING PEOPLE WHETHER THEY’RE PREPARED TO LOSE THEIR HOME – EVERYONE’S JUST GOING TO SAY NO – S COTT WOODHOUSE, HEALTHY LENDING

subjectivity of determining whether someone is prepared to lose their home is cause for concern.

“Because one’s mind-reading ability is perhaps a bit fragmented, it can be a very difficult assessment to make.

At the moment, you’ve got to assess whether they can afford the loan. That’s an objective test. But if I’ve got to assess whether they’re prepared to lose their home, that’s a bit different.”

In theory, Denovan said, the proposed regulation could lead to COSL complaints and court cases in which borrowers could argue

that their preparedness to lose their home was not properly assessed.

“In theory, that’s true. If I’m a consumer I could go to COSL and say, ‘He never asked me if I want to lose my home. Do I look like the homeless type?’” Denovan said.

In spite of some of the concerns, Denovan said the draft legislation was not cause for panic.

“It’s going to be refined. It’s early days yet,” he said.

But he urged brokers to remain vigilant in following the development of the proposed legislation.

“It’s important for brokers to watch this space.”

BROKERS SOUND OFF

There’s not a massive amount of brokers out there who do the big side of the business so I think we’re pretty much self-regulated. We’re probably more regulated by the banks than by any legislation – MARK CHURCHILL, CHURCHILL FINANCIAL SERVICES

ANALYSIS brokernews.com.au

12

Risky business?

APRA recently warned banks on the risk profile of SMSFs. Should brokers beware?

I

n late January, APRA issued a letter to ADIs informing them that SMSFs were to be viewed as riskier loans than standard residential mortgages. In the letter, the banking regulator’s executive general manager of policy, research and statistics Charles Littrell pointed to two classes of loans: standard and nonstandard. Non-standard loans, Littrell argued, carried a higher risk profile and thus different capital requirements.

Littrell classed SMSFs as non-standard, saying they are “relatively more complex” than their straightforward residential mortgage counterparts.

“For example, the borrower (an SMSF) would not ‘own’ the asset; instead, it would be a beneficiary under a trust structure,” Littrell wrote.

BANKS KNOW FULL WELL HOW TO PROTECT THEMSELVES IN RESPECT OF SUCH LOANS AND THE LOANS ARE NOT INHERENTLY MORE RISKY THAN NORMAL HOUSING LOANS - P ETER TOWNSEND

Moreover, SMSF loans give lenders no recourse rights to an SMSF’s other assets, Littrell said, and require more complex arrangements, such as personal guarantees.

“As such, SMSF loans may have a different and potentially higher loss profile in comparison to standard loans,” he wrote.

Ultimately, APRA said it is an ADI’s responsibility to ensure that “it has given detailed consideration to the particular risks of lending to a superannuation fund, and that its application process verifies all relevant compliance matters that might impact on the ability of the SMSF to service the loan”.

AN UNNECESSARY WARNING

With SMSFs becoming a major diversification opportunity for brokers, what impact could Littrell’s warning have? Should brokers shy away from the loans due to their supposed riskier nature? Not according to some in the self-managed super industry.

SMSF Loans mortgage broker Craig Morgan also disagreed with APRA’s concerns and said DIY loans with average LVRs of 65% were well secured. He said that although it was early days, if existing lending policies were maintained then APRA’s assessment of “potentially higher

loss profile” would not become a reality.

Townsends Corporate and Business Lawyers principal Peter Townsend said the concerns were “curious” because there was no reason to think a personal guarantee on an SMSF loan was less likely to be enforced than a personal guarantee in any other loan.

“Banks know full well how to protect themselves in respect of such loans and the loans are not inherently more risky than normal housing loans,” he said in a statement.

“The average and median benefit levels of members in SMSFs show them to be persons of some means and the banks will have certainly confirmed that before agreeing to accept such guarantees.”

BROKERS MUST BE EDUCATED

SuperShift Australia principal Nic Ellis agreed with Townsend and Morgan, but said the regulator’s warning should serve as a caveat to inexperienced brokers dabbling in SMSF loans: do your homework, or run the risk of drawing more regulatory attention.

Ellis says it’s important for mortgage brokers to remember those who aren’t fully trained in SMSFs should use the ‘spot and refer model’ in order to be able to participate compliantly. “[They should be] referring their clients … to the experts to have suitable advice provided in the first instance under the planner’s or their dealer group’s AFSL. In reality and practice this will lead to better and more profitable business for these brokers who choose to participate in this logical way. Failure from

ANALYSIS

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Q SMSF: WHAT BROKERS CAN DO AND CAN’T DO CAN:

Identify potential SMSF candidates

FAILURE FROM BROKERS TO GRASP THE EXTRA COMPLIANCE ISSUES ASSOCIATED WITH SMSF LOANS WILL ...

‘SPOIL THE BROTH’ FOR THE DISADVANTAGE OF THE BULK OF THE GOOD GUYS - N IC ELLIS

CAN:

Talk generally about what clients can do with their super, such as setting up an SMSF

CAN:

Inform clients of the value of property they can buy with a specific amount of super

brokers to grasp the extra compliance issues associated with SMSF loans will create extra regulatory compliance from APRA, ATO and ASIC and perhaps even ‘spoil the broth’ for the disadvantage of the bulk of the good guys.”

LENDERS UNDERSTAND THE RISK

CAN’T:

Offer advice on rollovers, setup structures or replacement insurance without further qualifications

Ellis said the higher rates charged to consumers with LRBA mean lenders receive more income for these loans, as they must hold more capital to fund them, based on the fact that they’re limited recourse.

“We all do agree with APRA on this point. Lenders have also done their homework in assessing

serviceability for these loans to ensure they are responsible by ensuring that the SMSF will not be placed in hardship after the loan is granted, considering the running costs of the structure needed. This is embedded in most/all lenders’ mechanism of servicing and understood by good SMSF/SuperShift advisors in this area.”

Ellis said this higher risk profile is already taken into account by SMSF lenders, making the APRA warning somewhat of an “overkill”.

“It should be very clear that lenders have already categorised these limited recourse loans as non-standard.”

NEWS 14

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CONTINUED FROM PAGE 1

STEPHEN KANE The perils of consolidation

K

ane doesn’t deny that tight margins mean consolidation will continue, but he warns that aggregators who fail to look before they leap may find themselves with odd bedfellows.

“The economics will drive more consolidation, but it has to be the right consolidation. Otherwise, you could be destroying your own business. We have seen examples in our marketplace where two or three aggregators consolidate and they bring all those people together, and it doesn’t work,” Kane said.

When mid-sized or small aggregators join together for scale, Kane said many fail to take into account just how different their business models and values are.

“They have cultural problems, they have systems problems and they have capital problems,” he said.

As for lenders making a play in the aggregation space, Kane said simply buying an aggregation business without taking into account its culture and systems will yield few benefits.

“There’s no point in just buying flow if you have no ability to add value to that business and it doesn’t fit into your overall strategy and direction. Just acquiring more platforms is really just getting more brokers, and you don’t just need more. You need the right ones who fit into your culture,” Kane said.

THE RIGHT FIT

Kane knows all about lenders buying into the aggregation space, with NAB’s ownership of the Advantedge group. But Kane contends that the capital backing of a major bank – when the culture is the right fit – will be a key competitive advantage in the years to come as the aggregation business becomes a tougher and tougher market.

“You’ve got to be able to actually afford to be an aggregator. When people say that we’re going to have new aggregators coming into the market, I think that’s a very tough ask because it’s a very fine

margin business. If you’re an aggregator that doesn’t have the support of a large capital base behind you, you’re going to be at a disadvantage,” he said.

Part of this, Kane said, is because brokers demand more from their aggregator. While many in the past may have been content to merely be handed a lending panel, as credit demand slows business, brokers are now demanding a significant valueadd from their broking groups.

“The economics in the aggregation business have changed. There’s very significant price competition to acquire brokers to come aggregate under your brand. The capital requirements to invest in the business and the ongoing support they have to provide in really being a business partner is seeing those aggregators who actually provide those services really benefit,” he said.

DRIVEN BY DEMAND

Advantedge general manager of distribution Brett Halliwell agrees. He said brokers’ demands of their aggregation platform are becoming more sophisticated.

“A lot of it has been driven by individuals. It’s more about what real value you’re adding to their business. I think brokers have matured as well, and are saying, ‘Here are the economics of my business, here’s my business plan, here’s where I’m going.

Does what I can get from you today support where I’m going in the future?’ Rather than, ‘You’re big and you’ve got the biggest lending panel’,” Halliwell said.

Kane believes competition for broker business has driven aggregators across the industry to lift their game.

“They’re asking better questions, and they understand the services much better. That’s really driving us and making us better. If you look back 10 or 12 years, it was all who had the biggest lending panel and what was the split. Two questions, and that’s it,” he said.

Another part of the change driving the value proposition of aggregation services is the

THERE’S NO POINT IN JUST BUYING FLOW IF YOU HAVE NO ABILITY TO ADD VALUE TO THAT BUSINESS - S TEPHEN KANE

STEPHEN KANE

maturity of the industry itself, Halliwell said.

“If you look at it from an industry maturity perspective, the industry of aggregation has only existed in Australia for 20-odd years in any fashion. At first the proposition was just that we’d give you access to a lender panel and then pay you commissions, and then it was giving access to training and development. We’re getting to a much better sense of maturity in terms of the services offered,” he said.

STAYING SEPARATE TOGETHER

Kane and Halliwell both say the sophisticated demands of the maturing broker market have driven the offerings of Advantedge’s aggregation platforms, PLAN, Choice and FAST. In a market of increasing

NEWS 15

consolidation, Halliwell argues that the three brands are determined to stand as separate propositions.

“Something we’re very often asked is if the three brands are going to consolidate. I think there was absolutely an expectation early on that the brands were going to collapse in. We’ve actually gone more the opposite way,” he said.

“Yes, we do have a common parent and utilise some common infrastructure, but it’s really about what brokers want and the ability to have different offerings.”

Kane is also adamant about the brands’ differentiation, and said they would continue to operate separately and compete vigorously in the market. Each brand, Kane said, reaches a different demographic of brokers with different demands from an aggregation platform.

A BRIGHT FUTURE

In spite of the difficulty in building a viable business model, for those who can make the margins work, Kane is convinced broking and aggregation are due for a positive year. Part of this is because of the added pressure on banks to lift their game. In an intensely competitive market,

IT’S REALLY ABOUT WHAT BROKERS WANT AND THE ABILITY TO HAVE DIFFERENT OFFERINGS - B RETT HALLIWELL Kane said brokers and aggregators will be the beneficiaries.

“It’s a depressed environment in terms of credit growth, so I think the support we’re going to receive from lenders as aggregators and brokers is going to get stronger,” he said.

This support will likely take the form of better services, Kane argued.

“If I’m a bank or a lender in this environment, I have to look at how to increase my share. It’s service, it’s products, it’s pricing.

I wouldn’t play the commissions card. I’ve seen some reports suggesting banks are going to increase commissions. I find that unlikely. What they might do is look at the way in which their processing occurs or reward on quality rather than out and out increase commissions,” he said.

But regardless of the fate for commissions, Kane is convinced

smart brokers can see their revenue grow in the year ahead.

He said the most successful brokers will be the ones who best utilise their most valuable asset: data.

“The really good broking businesses who have a good database, who really understand the customer and understand the needs of the customer from a holistic perspective and not just a mono-line mortgage, they are going to be the really best growing businesses,” Kane said.

Those who can best mine their data for opportunities will be those best prepared to protect their revenue in a down market, Kane contends.

“The key issue now is that we’re over NCCP, albeit we’re still in phase two, but we’re now moving into an area where brokers are starting to look for value creation in their businesses around diversification. Everyone talks about diversification all the time, but the reality is that it’s going to become more important.

Revenue has been impacted, costs are rising, so there’s still going to be further focus on how to improve revenue streams within the broking business, and much more focus on the data and customers they already have.”

TOOLBOX brokernews.com.au

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APP attack As mobility becomes increasingly important, industry players are ramping up their mobile offerings.

We take a look at some of the broker apps on tap

M

obility is one of the buzzwords of the evolving broker market. With tablets and smartphones increasingly becoming a way of life, brokers now have the ability to interact with their clients in entirely new ways.

As tablet computing grows toward its inevitable dominance over desktops and laptops,

consumers are increasingly coming to expect the people they do business with to utilise the latest technology.

Brokers, in particular, are uniquely suited to make use of mobile tech.

Lenders and software providers have responded by giving brokers an arsenal of apps to make their business more mobile, and to propel

St.George

BROKERS NOW HAVE THE ABILITY TO INTERACT WITH THEIR CLIENTS IN ENTIRELY NEW WAYS

Commonwealth Bank

stgeorge.com.au BROKER IPAD APP

the broking proposition into the future.

commbank.com.au CONNECT

The St.George Broker iPad app helps brokers visiting clients in their homes or workplaces by providing serviceability, repayment, stamp duty and LMI calculators, as well as a plethora of up-to-the-minute product info.

Brokers can walk customers through St.George products, and even provide savings info for those still working to build a deposit. The complete broker app toolkit includes: • A serviceability calculator • Repayment calculator • Stamp duty calculator • Lenders mortgage insurance calculator • Home loan selector • Savings selector • Links to interest rates and fees • Product information • Process information • Customer brochures • Specifications

CBA’s broker app is focused on cross-sell and diversification. The CONNECT calculator provides brokers with “what if” scenarios by selecting potential cross-sell products through the bank’s CONNECT program. The final result expresses the potential added income in terms of a dollar amount and percentage of the upfront, and shows brokers the possible revenue they could see by cross-selling CBA products to their clients.

KACHING

This consumer-facing app provides a quick and easy take on mobile banking, allowing CBA customers to see their account balances, find branches and ATMs, transfer funds and even pay friends through Facebook. It also works with NFC devices to turn the user’s smartphone into a Mastercard PayPass.

ATOMS MOBILE DEAL TRACKING

St.George rolled out its mobile deal tracking site to Flame brokers last year, and plans to make it available to the entire market in the coming weeks. The mobile site will allow brokers on the go to track the progress of all their loans with the bank.

Top: ATOMS Login Window with Remember Me function activated. Bottom: ATMOS Loans in progress

Left: Kaching. Right: CONNECT Calculator summary page, displays the dollar amount earned on each product sold, plus QR code.

brokernews.com.au

17

Just for fun...

Not all apps have to be work-related, but some could come in handy for brokers anyway. For instance, many brokers need marketing photos but can’t afford to hire a professional photographer. But with a little training and an iPhone, they can take shots like the pros.

CAMERA COURSE

cameracourseapp.com Camera Course provides users with hands-on lessons to go from shooting dodgy Facebook self-portraits to professional calibre photography using no more than a standard smartphone. Tutorial videos give iPhone users a comprehensive course in not only the functionality they didn’t know their iPhone had, but in the actual fundamental philosophy behind taking stunning photos.

Stargate

stargate.com.au EFIND

Stargate’s mobile client interview tool is set up to capture and collate all the information brokers need, and then seamlessly import it into the broker’s CRM. The app is designed to make the client interview process less interrogative and more interactive, and its forms are tailored to meet NCCP requirements.

MOBBIE

Mobbie allows brokers to perform complex policy searches through lenders’ policy and product guides to determine what lender is the best fit for their client.

MYPRODUCTGUIDE

A natural extension of eFind and Mobbie, MyProductGuide contains a near-exhaustive and up-to-date listing of lender products so brokers can help find the loan best tailored to their customers.

Left: Stargate iPad apps efind welcome screen.

Right: MortgageFinder main page.

OPINION brokernews.com.au

18

BROKER DNA The Futurosophist, Kym Dalton, takes a look at how brokers must evolve to remain a dominant species

W

Kym Dalton is the chairman of a new consumer comprehension program called CreditEC

ith a new year upon us, with fresh opportunities and challenges, some thought as to what is, or should be in ‘broker DNA’ could be of value.

DNA is genetic material that constitutes the building blocks of life. DNA strands contain genes that determine ‘what’ an organism is and how it behaves.

Gene combinations determine whether on organism is a honeybee, hippo or human.

In 2013, what genes, in what combination, should make up ‘broker DNA’ so that brokers can survive and thrive in the fittest condition possible?

As a starting point, some younger members of the broking industry may find this difficult to comprehend, but there was a time in an economy not so long ago, where loan funds were not in plentiful supply – particularly pre-1983 when ‘banking’ was deregulated in this country.

Successful brokers in this era had large lumps of DNA which enabled them to be ‘hunter gatherers’ and ‘hunting money’ was their principal survival mechanism.

When funding was occasionally scarce, brokers were adept at finding pockets of money – the so called ‘grey market’ of solicitors’ funds or funds managed by church or charitable institutions etc.

Brokers of this age were ‘middlemen’ matching those wanting funding, but having difficulty finding it, with those having available funds but only willing to lend on certain conditions to a certain class of borrower.

Broking wasn’t a particularly ‘evolved’ activity at the dawn of broking history.

Broking in 2013 however, is a highly evolved activity. The DNA required to merely ‘hunt money’

isn’t particularly necessary or useful to the modern broker – ‘money scarcity’ not being an attribute of the modern Australian finance environment.

Modern broker DNA should primarily include the genes that enable a broker to perform the role of coach and mentor whilst always putting the client’s interests before their own. An evolutionary progression from ‘hunter’ to ‘advisor’ is the key genetic modification required in modern broker DNA. Of course DNA cannot practically be controlled or determined – cloning is (so far) not possible in humans. So brokers’ DNA cannot be genetically engineered and brokers cannot all be expected to act in an identical fashion, but behaviours resulting from a brokers’ genetic makeup can be regulated by entities such as ASIC. Whilst concepts such as “independence” and the activity of providing ‘advice’ would seem to be core components of evolved broker DNA, the regulator is to varying degrees, twitchy about brokers describing themselves as possessing independent, advisory genes. Brokers could and probably should, possess these genetic attributes and act on them, but just don’t tell anyone! A very odd situation indeed, that could cause future problems where brokers’ core genetic makeup is in conflict with the way that they are expected to present themselves to the marketplace.

Should modern broker DNA include the genes that enable them to perform the role of a customers’ “trusted financial advisor?”

The era in which we live has been deemed by some to be the “PTE” (the post trust era) – there is a general loss of trust in all facets of human existence, but this loss of trust is most particularly evident in the area of financial services. Do consumers fully ‘trust’ their financial advisors in the PTE and therefore could the quest to be a customer’s broad

KYM DALTON

BROKING WASN’T A PARTICULARLY ‘EVOLVED’ ACTIVITY AT THE DAWN OF BROKING HISTORY - K YM DALTON based, ‘trusted financial advisor’ be a false quest?

It could be more relevant for brokers to focus on being the best mentor, coach and advisor they possibly can be for those that are anxious, require information, are time poor or are generally seeking the services of a focused professional to assist with an activity that constitutes most people’s largest lifetime financial undertaking.

By possessing the genetic ‘right stuff’ and evidencing behaviours that clearly demonstrate that modern broker has the right DNA, trust will be gained ‘naturally’ rather than trust having to be artificially ‘sought.’

Some last words on future broker DNA. If you have modern broker DNA that enables you to act as a professional coach, mentor and advisor, you’re on the right evolutionary path. If, however, there’s been some genetic cohabitation with another species – the genus “agent” – during the evolutionary process and a broker starts to exhibit the behaviours more indicative of acting as an agent by heavily recommending white label products or products from a limited number of suppliers, then there’s the prospect of evolutionary trouble brewing.

Species generally don’t interbreed well. Sterility and other unfortunate genetic mutations are usually the result. Something for evolved brokers to be mindful of.

Remain a broker thoroughbred – they have the genetic make-up to allow them to get to the winners post first.

brokernews.com.au

THE COALFACE 19

Bright lights, small city Peter Smith traded in the bustle of Sydney for the tight knit community of Dubbo, and hasn’t looked back

B

eing a mortgage broker in small-town NSW has its challenges, but for life-time Dubbo resident and principal of Regional Mortgage Professionals, Peter Smith, the friendly atmosphere is well worth the relative isolation and close proximity to recent bush fires in Coonabarabran.

“The broker market here is quite small, we usually have drinks on a Friday – it’s quite a tight knit community.”

Smith, who worked in Sydney for 12 years, says there are a number of significant differences between broking in the big city and doing so in Dubbo.

“It’s more an education thing here. In Sydney and Melbourne, people are used to brokers. Here the inevitable question is ‘do you charge?’ Word of mouth appears to be more prevalent here too. Also, here the client always wants to come see you – we service a lot of people who are 400-500km west, but it’s rare we have to go out.”

Though times have been difficult, especially since the GFC when the number of brokers in town effectively halved, Smith says he still thinks it’s a good time to enter the industry – so long as newbies do it right.

“I don’t see a lot of young people entering – I must say from my point of view the best way to come into it would be from an admin perspective – watch and learn and then go do your diploma, that way you’re on a salary while you learn.”

However, he admits the first homebuyer market has fizzled since the NSW government’s recent axing of FHOGs (other than those for home builders).

“The first homebuyer market has almost died here because of the grant being taken away. I don’t think first homebuyers

should build and I think [the state government’s] target market was wrong. They should have expanded it so people who want to upgrade could get the grant.”

Dubbo is located at a crossroads between two major thoroughfares, HWY 32 from Sydney to Adelaide and HWY 39 from Brisbane to Melbourne – but Smith says there are many reasons for visitors to stop – or even stay permanently – in the Orana region’s hub.

“There’s farming, light industry, retail – and the wildlife park. The average price of homes is probably $260,000, though distances here are probably a big shock to people from the city.”

He says a lot of people relocate to the coast, but come back because the people there ‘aren’t as friendly’ as those in Dubbo.

When asked if he had anything else he wanted to say to AB readers, Smith was quick to answer: “Tell them to move out here!”

WORD OF MOUTH APPEARS TO BE MORE PREVALENT HERE – P ETER SMITH

DUBBO FAST FACTS: Dubbo is home to the Taronga Western  Plains Zoo

Dubbo is the sister city of Minokamo, 

Japan, and was gifted the Shoyoen Garden by the city

The town is home to Dundullimal Homestead,  Australia’s oldest Timberslab homestead

MARKET TALK 20

brokernews.com.au

State of the States:

NSW

While resources areas have reaped the benefits, the Chinese boom has held NSW back. That’s all about to change

A

ccording to Deloitte Access Economics’ latest Business Outlook report, a booming Chinese economy had negative effects on New South Wales over the last few years, even though other states and property markets have been benefitting strongly.

One of the reasons is that the boom brought with it a rise in exchange and interest rates. “The extra national income [from China] did boost business for Sydney’s finance sector … but higher interest rates were toxic in a state with Australia’s largest residential mortgages, and the Australian dollar played merry hell with businesses in manufacturing, tourism and international education,” the report says.

Now that China’s rampant economic growth is expected to slow down a notch or two, the

EVERYONE KNOWS THAT WHEN INTEREST RATES GO DOWN THEY HAVE TO GO BACK UP AGAIN – J OHN EDWARDS

Business Outlook report adds that there will be some positive effects for the New South Wales economy and many of these could filter into the property market.

“The Reserve Bank has already moved interest rates down, and chances are there’s more good news still to be had on that score,” it says.

FLOW ON EFFECTS

Deloitte Access Economics says that some of this good news includes retail turnover growth and the fact that housing construction levels are finally starting to improve.

As a sign of this, the NSW housing sector has been slowly clawing back the share of the national residential construction market it has been losing since 1995. This should go some way in making up for the low level of housing construction that has characterised the state property market over the last 10 years.

This is great news for investors. While Sydney will likely see some eroding of the ultra-tight vacancy rate and stock on market figures that have caused a lot of rental growth over the last two or three years, a slightly increased release of housing stock could mean more buying opportunities – especially

JOHN EDWARDS

in light of government measures to boost demand from first homebuyers through subsidies and stamp duty concessions.

“There’s an awful lot of ground to make up,” says the report. “The last 10 years were a truly dire decade for the housing construction industry in particular.”

THE RESPONSE

Hurdles ahead Stamp duty changes may still hold back NSW buyers. FHB participation in the state has plummeted.

FHBs AS A PROPORTION OF THE MARKET

18.8

4.2

DECEMBER 2011

DECEMBER 2012

%

% Source: AFG

Despite the changes that are expected to come within the state property market over the immediate future, Australian Property Monitors senior economist Andrew Wilson says a bit of caution is advised.

According to Wilson, buyer sentiment still has some catching up to do. “We still have fragile buyer confidence,” he says.

“Housing markets are performing reasonably, but it’s still patchy and it’s still mixed.

We’re not out of the woods yet in terms of a general upturn in sentiment and activity.”

Residex chief John Edwards agrees. “Housing is still relatively unaffordable in Sydney. It will take a little while for that to change. The other thing is market sentiment. If the Reserve Bank put interest rates down further, people might come out of the woodwork because they decide property is more affordable again, but everyone knows that when interest rates go down they have to go back up again.”

MARKET TALK 21

brokernews.com.au

The BEST and WORST of property advice When it comes to property, a lot of self-appointed experts have advice for your clients. But not all advice is good advice

Y

our investor clients are always looking for good advice on the best properties and areas to put their money into.

But not all advice is equal.

Metropole Property Strategists director Michael Yardney shares the best – and worst – property advice he ever received: Michael Yardney, director, Metropole Property Strategists BEST ADVICE: Treat your property investments like a business WORST ADVICE: Property investment is easy

BEST ADVICE

Over the years I’ve seen a small group of property investors, those who treat their investments like a business, become very, very rich by growing a multi-million dollar investment property portfolio. They do this understanding “the system” and getting the right type of finance, setting up the correct ownership and asset protection structures and knowing how to

STAMP DUTY EXEMPTIONS THE LURE FOR FHBs

MICHAEL YARDNEY

legally use the taxation system to their advantage.

You can set up your own property investment business while you are still an employee or self-employed.

In fact, that’s what I did and what almost every wealthy property investor I know has done.

WORST ADVICE

I was told that property investment is easy. This was clearly wrong because most property investors fail!

Fifty per cent of those who get into property investment sell up in the first five years and of those who keep their properties, the vast majority never end up owning more than one or two properties. This means they don’t ever achieve the financial independence they desire.

However, over the years I found property investment is simple, but not easy.

It’s simple if you follow a proven formula but it’s really hard to become wealthy in property if you do what everyone else is doing.

Michael Yardney is director of Metropole Property Strategists

The efforts of the RBA to stimulate the home finance sector in 2012 appear to be having a mixed effect on home loan approvals dependant on state-based incentives being added and removed during the year.

Australian Bureau of Statistics (ABS) figures for November 2012 showed only a small increase of 0.6% since November 2011, despite the RBA cutting interest rates five times and 1.75% in the same time period.

Loan Market corporate spokesman, Paul Smith, says NSW showed the most significant swing in activity by dropping 11% in home loan approvals from November 2012, compared to November 2011, and Victoria and Queensland showed improvements of 6% and 8% in the same period.

“Late last year, NSW market demands were pulled forward by the removal of stamp duty concessions. The interesting consideration here is that it appears that the removal of this government concession had a far greater influence than five interest rate reductions.”

Fellow aggregator AFG’s Mortgage Index figures for December show that the mortgage market is becoming ‘a tale of two seaboards’ with investors, rather than first homebuyers, dominating the NSW and QLD markets.

Smith says the market in Victoria has been benefiting from the government increasing stamp duty deductions each year and that the extra 10% to be saved for first homebuyer purchases after January 2013 was holding back ‘savvy’ buyers looking for extra savings.

“The Victorian market picked up its pace in early 2012 and is now showing signs of slowing down in anticipation of an incentive in the form of stamp duty concessions.”

STAMP DUTY’S STAMP ON THE MARKET Stamp duty changes in NSW had a clear impact on home loan approvals compared to other states

11% NSW

6% VIC

8% QLD

COLUMN 22

brokernews.com.au

Will paying an account remove a default listing?

Clients with some bumps in their credit history may be looking to clean their file, but Clean Credit’s John Dickinson says paying the default is just part of the process

W

e are often asked if paying an account will lead to the listing being removed from a credit file. This is an interesting question.

From a purely legal standpoint there is no association between paying an account and the removal of a payment default.

The law states that there needs to be an error or fault with the listing or the process followed by the credit provider in order for a default to be removed. Paying the account will allow for the status of the listing to be amended to “paid” or “settled”; however, in today’s tough financial markets this change in status is unlikely to make a great deal of difference to the borrowing potential of a consumer.

If a consumer was to contact a credit provider and say, “I will pay the account if you remove the listing,” the answer will almost certainly be no. Even if a credit provider wanted to remove the listing on this basis, it’s still not that easy as the credit reporting agencies require a written request from the credit provider asking for the credit listing to be removed, including an explanation stating what fault occurred. Simply stating “please remove the listing as the account has been paid” will usually result in the credit reporting agencies refusing to remove the listing.

If it is found that the listing is inappropriate or was not entered correctly, then the listing must be removed regardless of the status of the account. It is important to note that the removal of a default under these circumstances does not in itself expunge the debt and the credit provider would be free to continue recovery action including the transfer of the debt

to a mercantile agent which could result in a new default listing being recorded.

NOW FOR A MORE PRACTICAL ANSWER

The reason the credit provider listed the default was because they felt they were owed money, and of course they would like to be paid.

From our perspective the payment or settlement of a debt is often a very important part of credit repair. If we are approaching a credit provider to remove a default listing for an unpaid account, it’s only natural they are going to try and resist as they feel the removal of the listing will weaken their position and reduce their chances of getting paid.

It’s only natural that when we’re talking with a credit provider where the debt has been paid they are generally far more relaxed and flexible in how they interact with our company.

The ability to pay or settle an outstanding debt at the time we are talking with the credit provider can be a very powerful tool as they often feel this may be their only chance to get paid.

I’m not saying that paying or settling an account will always lead to a positive outcome; however, doing so will give the consumer the best possible chance of success.

Different credit providers have different attitudes towards this and while some – such as major banks – may not approach the matter differently given the status of the account, to many the payment of the account is of major importance and can be a significant factor in the outcome of the matter.

For this reason we would always recommend a client either

JOHN DICKINSON

A CREDIT PROVIDER WHO IS OWED MONEY WILL MOST LIKELY TRY AND PROTECT THEIR POSITION AS STRONGLY AS POSSIBLE pay their account or allow us to negotiate the debt as a part of the credit repair process as this will give them the highest possible chance of successful outcome.

There are credit repair companies that try to bully and intimidate credit providers into submission; in our experience this approach seldom leads to a positive result and can alienate the credit provider making effective communication impossible. It is also this kind of behaviour that is drawing unwanted attention to the industry in general by organisations such as ASIC, which is a great shame, as when administered correctly credit repair is a highly valued and a needed service that has the potential to change people’s lives in a very positive way.

Honest and effective credit repair is often about reaching a positive outcome for all concerned including the credit provider.

FINANCIAL SERVICES 24

brokernews.com.au

COST OF LIFE INSURANCE ON THE RISE

T

he cost of life insurance premiums are set to rise for Australians over the next two years.

But what is causing this rise?

The hike is expected to be around 5% for the next two years, making a typical premium $265, and this is to meet the demand for stress and depression related payouts by white collar workers.

Experts claim the pricing for superannuation insurance sector is playing catch-up with

WE NOW EXPECT PREMIUMS TO RISE ANNUALLY

BY ABOUT 5% OVER THE NEXT TWO YEARS - T HIERRY BAREAU

the broader retail insurance sector as its margins are being eroded by the rise in claimants.

“Over the previous four to five years prices have fallen by about 15-20% and this has seen a flood of people sign up with almost five million super accounts now including insurance,” Rice Warner Actuaries’ Thierry Bareau told news.com.au.

“And as a result we now expect premiums to rise annually by about 5% over the next two years.”

However, chief executive of life insurance specialists TAL Australia Jim Minto estimates the yearly premium increases may be closer to 10-15% over the next three years for some funds.

“In some funds, particularly aimed at office workers, this can be as high as 50%,” added Minto.

BANNED UK BROKER LEFT ‘TRAIL OF DESTRUCTION’ Harbinder Panesar misappropriated money from his business and sold worthless policies as the director of motor breakdown insurance firm Motorcare Elite, said The Financial Services Authority (FSA). As well as the industry ban, Panesar has been fined £212,000 ($322,389).

The FSA’s director of enforcement and financial crime, Tracey McDermott, said: “Harbinder Panesar has left a trail of destruction behind him: misappropriating funds from his businesses, acting recklessly towards consumers, and taking two firms into liquidation.

“So egregious were his actions that even though he has only recently been discharged from bankruptcy, we will not reduce the fine because of financial hardship.

“Such dishonesty and recklessness not only posed a risk to consumers but also to other market participants and to confidence in the financial system as a whole. Panesar is learning the hard way that we will not stand for this kind of activity,” added McDermott.

JPMORGAN COULD HAVE AVOIDED MULTI-BILLION DOLLAR LOSS JPMorgan Chase has been ordered to correct poor risk management that led to a trading loss of more than $6bn last year.

Federal regulators are also citing the bank for lapses in control that allowed the bank to be used for money laundering.

The regulators each issued two cease-anddesist orders against the company, a sanction that requires a bank to change its practices.

The Federal Reserve found deficiencies in JPMorgan’s risk controls, loss modelling and audit functions as well as the process for alerting the board of directors to problems.

An internal report that builds on a preliminary analysis released in July, is critical of senior managers including Jamie Dimon, former chief financial officer Doug Braunstein, 51, and ex-chief investment officer Ina Drew, 56, for inadequately supervising traders in the UK unit, said a report from Bloomberg.

$6billion JPMORGAN EXPERIENCED A TRADING LOSS OF MORE THAN $6BN LAST YEAR

Basel III smartly delayed: Fitch The Basel Committee on Banking Supervision (BCBS) made the decision to loosen restrictions on what assets can be used for the liquidity capital ratio (LCR), and to postpone the implementation of the LCR until 2019.

The minimum requirement starts at 60% in 2015, rising by 10% each year to 100% when fully enforced.

Fitch Ratings described the move as practical, “in light of ongoing market and economic pressures, and reflect a pragmatic approach to changing regulation”.

“The wider range of liquid assets could help minimise any market distortions caused by more narrow regulatory definitions, as banks might swap certain assets with non-bank financial institutions to boost regulatory liquidity ratios.”

FORUM 25

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Independent ban sparks ire The deadline for the moratorium on brokers’ use of the word “independent” is fast approaching, and the MFAA has asked ASIC for more time for brokers to comply. Forum commenters had harsh words for the regulator on the issue, but one commenter pointed out that ASIC is the wrong target

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

So get online, and get participating!

BROKERNEWS. COM.AU

ASIC is the regulator, not the law maker. They are merely fulfilling their role as watchdog.

It is the law that needs changing as it is just bad, misleading legislation that offers no real protection to Australians.

The protected “financial counsellor” under this legislation is the good guy and the mortgage brokers are the bad guys.

The word commission needs to be banned as it is used to mislead the Australian public into a thought that mortgage brokers are paid “excessive” remuneration, which those that are employed in the industry know is utter crap!

Let’s compare a loan writer’s hourly remuneration rate to that of Wayne Swan, Bill Shorten or Penny Wong.

The moneys paid by the banks to the mortgage managers and loan writers is gross business turnover and not ‘happy play, bonus money’.

Maria Rigoni on 15 January 2013 10:27AM

The ACCC announced recently that it would begin a review of CBA’s proposed 80% stake in Aussie. The bank intends to eventually take 100% stake in the company, which left some brokers wary.

1martym1 compared the situation to another major bank’s takeover of a former challenger brand.

“Do you think they are looking to do a RAMS type thing with Aussie brokers selling CBA funded Aussie loans?

Me thinks so.”

But Michael pointed out that not all bank takeovers take a bite out of competition.

“Between PLAN, FAST and Choice, the Advantedge group

processes higher volumes per month than Aussie yet doesn’t have a lean toward its parent, NAB. A professional broker will always determine the right loan for their customer every time.”

And Richard claimed that brokers will keep banks competitive, regardless of ownership structures.

“I don’t see CBA charging high rates because of its size. Brokers would simply sell other products if they tried.

Brokers will always keep the big boys honest, no matter who owns their businesses.”

A PROFESSIONAL BROKER WILL ALWAYS DETERMINE THE RIGHT LOAN FOR THEIR CUSTOMER EVERY TIME – M ICHAEL

IS MORTGAGE BROKING STILL A VIABLE CAREER FOR NEW ENTRANTS? A recent Hays Recruiting report claimed mortgage broking would be a growth area for employment in 2013. Brokers weren’t so sure.

24 % 55

% YES

NO

21

%

MAYBE/IT DEPENDS

IT’S ALL PART OF A SHOW

Brokers were incredulous over the government’s draft proposals to regulate commercial credit (Government’s commercial lending regs could restrict business credit, 16/1/2013), and took to the message boards to vent their frustration.

Wes on 16 Jan 2013 11:31 AM Hopefully this Govt won’t see out the year and this legislation will be assigned to the dust bin where it belongs!

Mark on 16 Jan 2013 12:00 PM The entire concept of these proposals beggars belief and all it will do is create additional costs for brokers. At what point do these people preparing these proposals realise that the borrower must accept responsibility for borrowing and then using the money?

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

COLUMN 26

brokernews.com.au

Driven to diversify?

Check out motor finance Count Financial Group’s Chris Slack argues against brokers’ reasoning for avoiding vehicle finance

I

am sure now that we’ve all partaken in some Christmas cheer, many a broker will have a New Year’s resolution to earn more; many of you may even be looking at working smarter. It would seem that both lending and financial planning practices have really now embraced the need to consider themselves financial services businesses.

However, as brokers and aggregators alike are analysing and aligning their service models in this way, a fantastic and basic opportunity to assist more clients and earn great revenue exists under their noses and remains virtually ignored.

Mortgage broking in its most basic form links people with purchasing a (family) home – and in Australia it’s arguably the most emotive purchase we make.

The second most emotive purchase is the family car.

In Australia, according to Deloitte, roughly a million cars changed hands last year and 80% of them were financed in some way. The average car costs about $40k. Many of your clients would look to change cars every six years (being conservative). If there are 600 clients or potential clients in your database of driving age, then you are

looking at potentially 100 cars a year that you could be writing finance for.

What excuse do you have not to be writing vehicle and asset finance in your business?

I CAN’T COMPETE WITH THE CAR DEALERS? Speak to your asset finance product and aggregator BDMs. There are ridiculously low interest rates out there from dealers, but many of those rates come as a result of clients paying a lot more for the car. You can easily become a “virtual dealership” and can utilise car buying services and access all the insurances available from the car yard – this way you can quickly ascertain what parts of the transaction the client may be paying too much for and quote on all of these as well – with additional revenue for each part.

THERE’S NO MONEY IN IT? If you look at what you can charge on a vehicle, especially for commercial purposes and your touch time on the job versus what you’ll spend on a car, you may well find yourself earning two to four times what you earned per hour on the home loan you last wrote.

WHAT EXCUSE DO YOU HAVE NOT TO BE WRITING VEHICLE AND ASSET FINANCE IN YOUR BUSINESS?

Chris Slack is the national asset finance manager for Count Financial Group and its aggregator subsidiary, Finconnect

THERE’S NO ONGOING REVENUE? If you are following up with clients you can easily turn asset finance into an ongoing revenue stream simply by following up with the client. If you do asset finance and have clients who have a commitment schedule it’s an easy thing to add to your database and ensure you are front of mind for the rest of their business.

Capacity is of course something that every business needs to evaluate when looking to diversify into new services; I think gaining capability to write the business is easy with the right support from both your aggregator and product BDMs. Being efficient with your processes also means having the right people undertaking the right tasks within your business.

You can’t read a business development article without seeing the buzz words “diversification” or “efficiency”; Looking at the range of products and services you could be offering your existing clients – especially a product as simple as asset finance – is an easy way to start delivering on those words into action and income.

SPOTLIGHT 27

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ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the news that made headlines 12 months ago Australian Broker Issue 9.02

‘Get rid of mandatory MFAA memberships,’ brokers tell ACCC Brokers were pretty forthright in their stance on third-line enforcement notifications forcing MFAA membership upon Mortgage Choice and Aussie brokers. In submissions to the ACCC, they overwhelmingly rejected the idea of mandatory membership, and claimed it provided no client benefit.

What’s happened since?

Brokers’ cries of anti-competitive behaviour fell on deaf ears, as the ACCC upheld the notifications. Aussie and Mortgage Choice also stuck by their decision to require MFAA membership.

Aussies sunny about financial future The ING Direct Financial Wellbeing Index last year found that 75% of Australians had a positive outlook for their financial future. They also showed caution, with nearly 40% looking to build a bigger savings buffer over the year.

What’s happened since?

Australians are still looking to save, with the average savings goal for 2013 at around $15,000. But optimism has receded. The latest Allianz Future Optimism Index slipped to its second-lowest point in history, with senior Australians displaying the bleakest outlook for the future.

Perfect your account management Frontrunner Consulting’s Doug Mathlin says now is a great time to review your client base

N

ow is the time to start planning for the business year ahead. Doug Mathlin of Frontrunner Consulting Group says there are a number of things brokers can do to perfect their account management strategies.

“The first thing I would do would be to review their current relationships from 2012. Sit down with your accounts and say ‘What did we do well?

What’s not working well?’ before we start putting a plan into place for next year.”

Mathlin also says this is a great time for brokers to set goals and targets for relationships in 2013 and specifically identify what it is they need to work on.

However, figuring out the best way to get started can be confusing and Mathlin says there are three key things to keep in mind.

“The first one is to really ensure that your key account knows clearly and can articulate your value proposition… What are the value-adds? What are the things that you do that your clients will get that they don’t expect?”

The second thing brokers should do, according to Mathlin, is make sure that they deliver value-add for every one of their key accounts.

“That is, complete the transaction, fulfil their needs but then find something that’s going to absolutely ‘wow’ them.”

His third tip involves gaining feedback posttransaction. This is an area where Mathlin believes businesses ‘often come undone’.

“Post-transaction… it could be one month, it could be three months or even six months after you’ve delivered the service, go back to them either personally or through an independent party to say ‘hey, how did we do? Were you impressed with what we delivered in the first place? What could we have done differently?’…I think that’s a way that would really confirm for your client that you’re not there just for sales.”

He says the biggest error made in account strategies is ‘only doing the bare minimum’.

“It’s probably the notion of ‘just doing enough’ for your clients, which is never going to get them excited and never going to get them to talk about your services to somebody else. Doing ‘just enough’ is a quick way to get people not to talk about you.”

PEOPLE

brokernews.com.au

28

INTO THE WILD An offhand comment has led to a major expedition for Mortgage Choice’s Josh Foote, who will tackle Mt Kilimanjaro to raise money for charity

M

ost of us have made comments in the past that we’ve later come to regret – but spare a thought for Mortgage Choice’s Josh Foote, whose workplace banter has seen him facing the ascension of Africa’s tallest – and deadliest – mountain.

Last year, Foote, an infrastructure team leader at the broker, took part in a casual conversation which, unbeknownst to him, would dramatically change the course of his 32nd year.

“I’m not sure if you ever heard about the guy in the Star Wars suit who walked from Perth to Sydney for [Starlight Children’s Foundation]? I said to the staff that I could do something like that … and they held me to it.”

He further added that he would happily ‘climb a mountain’ in the name of charity. So, on February 2, Foote, born and bred in urban Sydney, will touch

WANT TO GET INVOLVED? You can donate to Josh’s efforts to help Ronald McDonald House by visiting http://www. everydayhero. com.au/joshua_ foote

DID YOU KNOW? MT. K ILIM

5,895 MEANJARO TRES

42%

OF CLIMBERS WHO ATTEMPT TO REACH MT. KILIMAJARO’S SUMMIT SUCCEED

MT. KOSCIU

2,228 ME SZKO TRES

down in Tanzania in order to face a 5,895-metre dormant volcano. He has no mountain-climbing experience whatsoever.

“I have hiking experience, but no mountainclimbing experience and I’ve never been to Africa. Since I don’t have any ice-climbing skills, I kind of just looked up the highest hike-able mountain in the world… I figured that would give me my best shot.”

He says supplies will include day packs, waterproof gear and many layers of clothes.

The average temperature of the base of Mt Kilimanjaro is 25 degrees in February, but that number can sink as low as -20 at the summit.

“The food will be pretty basic, fish and chips and a lot of other high-calorie stuff – and bucket-loads of water.”

Foote is climbing the mountain along with an ex co-worker and says they’ll be using a local guide. While it’s not strictly illegal to make the trek without one, doing so is generally discouraged – even though it’s considered “hike-able,” the mountain can be deceptively treacherous.

Figures from the Kilimanjaro National Park website say only 42% of trekkers actually reach the Uhuru summit. Most turn around before they reach the top due to exhaustion or cold (or are killed by falling rocks). In fact, it’s estimated that more people have died on Mt Kilimanjaro than on Everest.

Foote, however, is determined to be one of the relative few to see the sun rise over the African savannah.

“I’m going to try my very best to get to the top; I’m going to keep going until someone actually tells me to stop. We’re hoping to reach the summit on February 9.”

Yet this is anything but a young man’s demonstration of bravado. Foote, who’s funding the trek out of his own pocket, is using the experience to raise money for a charity that benefits critically ill children.

“A few months ago, I was lucky enough to visit one of the Ronald McDonald Houses and saw first-hand the kind of positive environment and huge amount of relief the charity provides to Australian families in need.”

Foote says it’s important to him that his adventure abroad makes a positive impact back home.

“The best thing about this challenge is I’ll be climbing the mountain in support of … a charity that is committed to helping seriously ill children and their families across Australia. With the donations I raise I hope to make the journey to recovery a little easier for someone.”

CAUGHT ON CAMERA 29

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IN FOCUS

P

ort Group held its end-ofyear function and Sydney opening in December, where Adam Khoury was tipped as head of the broker’s new Sydney office. “The reason we have opened a new office in Sydney is to expand further opportunities for our group,” director Voula Kotsiras said.

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

INSIDER

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30

QUALITY CONTROL

T

he Australian arm of a global bank handed out a $720,000 home loan without seeing the applicant’s driver’s licence or checking other documents – which turned out to be fakes.

HSBC made the loan to conwoman Rose Marie LoGiudice so she could buy a property in Gladesville, Sydney, after she provided a copy of an expired passport, fake payslips and a false deposit certificate from another bank.

According to News Ltd, the 41-year-old mother has been sentenced to three-and-a-half years’ jail after pleading guilty to two charges of dishonestly obtaining financial advantage by

deception and one of using a false document by deception.

When Lo-Giudice applied for the ‘Premier Residential’ loan she told a mortgage specialist she had “left her wallet at work”.

The staff member told her she could bring her identification in at a “later date”.

Two weeks later, Lo-Giudice returned to the bank with a certified copy of an expired passport, which had been altered to look valid. She also provided a fake Bendigo Bank term deposit certificate and doctored pay slips from her employer, Allianz Australia.

Lo-Giudice provided the bank with a contract for the sale of the property and HSBC issued a letter of offer to her for the loan,

ROSE MARIE LO-GI UDICE GLADESVILLE, SYDNEY which she signed on December 14, 2010. She defaulted on the mortgage four months later.

A “subsequent investigation” revealed the documents supplied

by Lo-Giudice were fraudulent.

The Bendigo Bank account number had never existed and the payslips were fake.

LO-GIUDICE RETURNED TO THE BANK WITH A CERTIFIED COPY OF AN EXPIRED PASSPORT, WHICH HAD BEEN ALTERED TO LOOK VALID.

TAKEN LEAF OF THEIR SENSES

HOT WATER FOR HERPES HUMOUR

The RBA has been embroiled in controversy over note printing over much of the last few years. Well, now the Bank of Canada is under fire for its note printing activities as well. But their scandal has nothing to do with dodgy business practices.

Instead, they’ve landed themselves in hot water with botanists. The latest batch of notes from the Bank includes – understandably – a maple leaf. But botanists say it’s the wrong maple leaf. The Canadian flag features the silhouette of a native sugar maple, while the new notes treasonously and flagrantly display the Norwegian maple. But the Bank of Canada shouldn’t be too concerned about angering the botanists. If Insider has learned one thing about tree experts, it’s that they’re all bark.

David Eades, deputy director-general at deputy premier Jeff Seeney’s office on the Gold Coast, got into a spot of trouble after making a misfired comment during a property industry players’ breakfast in December.

While giving a speech at the event, Eades reportedly asked “What's the difference between herpes and the Gold Coast property market? You can fix herpes”.

Eades has since apologised for the remark, with a spokesperson saying he ‘maintains a strong and positive attitude towards the Gold Coast’.

Of course, in addition to apologising, Eades also needs to brush up on his medical facts.

You actually can’t fix herpes.

DIRECTORY brokernews.com.au

AGGREGATOR / WHOLESALE BROKER

Choice Home Loans 1800 188 288 www.choicehomeloans.com.au Page 5

BANK

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

FINANCE

Rhino Money 1300 654 355 www.rhinomoney.com.au Page 8 Semper Capital Pty Ltd 1800 SEMPER (1800 736 737) www.semper.com.au enquiries@semper.com.au Page 21

LENDER

Homeloans Ltd 08 9261 7000 www.homeloans.com.au Page 17 Liberty Financial 13 11 33 www.liberty.com.au Page 3

31

National Australia Bank www.nabbroker.com.au Page 32 NCF Financial Services Pty Ltd. 1300 550 707 www.ncf1.com.au Page 6 Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 11 Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4

NON BANK LENDER

Rent4Keeps 1300 763 020 www.rent4keeps.com.au Page 15

REAL ESTATE

Look Property Group Residential Project Sales & Marketing 03 9827 8288 www.lookpropertygroup.com.au Page 13

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 Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 9

WHOLESALE

Resimac 1300 764 447 www.resimac.com.au Page 23

OTHER SERVICES RP Data 1300 734 318 Page 19

Trailerhomes 0417 392 132 Page 27

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