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David Holmes:

Re-enfranchising borrowers

JUNE 2013 ISSUE 10.12

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

+ ANALYSIS HOUSE CALLS

Brokers are divided on where to visit clients P10

REVERSAL OF FORTUNE

Are reverse mortgages the answer for older borrowers? P12

The Pepper COO explains how the lender is finding niches the big banks abandoned

+ TOOLBOX

A

+ WORKSHOP

few years ago, Pepper Home Loans was practically synonymous with low-docs. The lender has made a name for itself helping self-employed or credit impaired borrowers to secure home finance. A few years ago, of course, low-docs were something entirely different. But now, Pepper COO David Holmes believes specialist lending has changed. And specialist borrowers may be a larger market segment than many brokers believe. FULL STORY PAGE 14

HEAD IN THE CLOUDS

Why emerging technology is vital for your business P18

SOCIAL SUCCESS

Six tips to make social media work for you P20

+ PEOPLE METEORIC RISE

A top broker cracks a major milestone P28


NEWS

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WHAT THEY SAID...

NUMBER CRUNCHING AUSSIES LOOK TO INVEST

MARK BOURIS

More than one-quarter of Australians are looking to buy an investment property.

“The average couple will need a million dollars to retire comfortably, and most people simply aren’t going to get there” P4

Q. Are you considering buying either your first or another investment property?

NO

73.6%

YES

26.4% Source: Mortgage Choice

FAST FACT

17.9%

The year-on-year growth for owneroccupier housing finance in April

50%

Source: ABS

The proportion of Australians estimated to have lost superannuation funds

BRENTON HARRIS

“The worst problem with reverse mortgages is the misuse of funds” P12

STEPHEN MOORE

“It’s very difficult to break through the clutter in the marketplace unless you have a strong brand behind you” P27

Source: Westpac

FIXING STILL IN FASHION Rate cuts haven’t stopped borrowers hedging their bets National

May-2013

April 2013

6 month average

12 month average

Variable Rate

69.90%

71.96%

76.57%

78.54%

Basic Variable

12.92%

13.06%

15.81%

17.43%

Standard Variable

13.02%

13.97%

15.97%

16.65%

Ongoing Discount

37.94%

37.94%

39.55%

39.92%

Line Of Credit

2.57%

3.17%

2.85%

3.04%

Introductory Rate

3.46%

3.82%

2.38%

1.49%

Fixed Rate

30.10%

28.04%

23.43%

21.46%

Source: Mortgage Choice

MARK DAVIS

“If a client thinks you’re important enough, they come see you” P28


NEWS 4

brokernews.com.au brokernews.com.au

Big bank satisfaction rate lowest among home loan customers ■ Consumers’ satisfaction with the majors

remained unchanged on a 17-year high of 78.9% in April, but home loan customers remain much less satisfied, with an average of just 75.3% (compared to non-home loan customers with 79.9% satisfaction), according to Roy Morgan Research Consumer Banking in Australia Customer Satisfaction Report for April 2013. In April, CBA continued to lead the majors in customer satisfaction overall with 80.5% (up 0.1 points from March), followed by NAB (79.3%, no change), ANZ (77.6%, up 0.3 points) and Westpac (76.7%, down 0.4 points).

EDITOR Adam Smith

Dramatic regional disparity in property market confidence ■ Fifty per cent of Australians believe house prices will

increase over the coming months and 41% believe they will rise in the next six months specifically – but there are massive disparities between states, according to the RP Data Nine Rewards consumer sentiment survey. RP Data researcher, Tim Lawless, says the survey found a ‘substantial upward shift’ in overall consumer expectations for housing market conditions. But this was largely led by high expectations in concentrated regional markets. “We’ve seen distinctive differences from region-to-region where, as an example, 59% of respondents in Perth expected values to rise over the next six months, and 56% of respondents located in Sydney expect values to rise over the next half year. “In contrast,” says Lawless, “survey participants in Tasmania delivered a much more sedate reaction with no local respondents expecting values to rise over the next six months.”

BIG BANK HOME LOAN CUSTOMER SATISFACTION RATES MARK BOURIS LAUNCHES SUPERANNUATION PRODUCT

81

■ YBR founder, Mark Bouris,

80

DID YOU KNOW?

3–7%

78

of Australians over the age of 65 will suffer abuse, with financial abuse the fastest growing type

77 76

Source: ABA

March 2013

Source: Roy Morgan

April 2013

COPY & FEATURES JOURNALISTS Mackenzie McCarty, Chinwe Akomah PRODUCTION EDITORS Roslyn Meredith, Moira Daniels ART & PRODUCTION SENIOR DESIGNER Rebecca Downing DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Farah TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil

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79

PUBLISHER Simon Kerslake

has launched a new superannuation fund – dubbed ‘RetireRight’ – saying he believes most Aussies are failing to take control of their superannuation due to “a lack of understanding of how the system works”. “Australians have two big financial goals in life: to own their own home and to retire comfortably. For Australians who are working hard today whilst raising a family and paying off their mortgage, retirement seems like a long way off. The average couple will need a million dollars to retire comfortably, and most people simply aren’t going to get there.”

Editorial enquiries Adam Smith tel: +61 2 8437 4792 adam.smith@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8437 4731 fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Toronto, New Zealand brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the EhrenbergBass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.


NEWS brokernews.com.au

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Age discrimination in broking – has ASIC got it wrong?

THE STRANGER SIDE OF NEWS

■ If your client is over the age of

DROP TAX OR WE’LL DROP TROU

■ Some Italian businessmen have found a

pretty creative way to protest what they believe to be unfair taxation: they dropped their pants. The business lobby, Cobas Imprese, is demanding the abolition of Equitalia, an agency that collects back-taxes and fines. They say the agency has made the country’s economic crisis worse by overtaxing already indebted owners of failing businesses. A group of five businessmen from the group appeared outside parliament, sans pants, demanding a referendum to abolish the agency. We’re not sure what the connection might be between taxation and pantslessness. Maybe it was just hot outside.

HOW DARE YOU!

■ Brokers here or there may have gotten

indignant when their settlement figures had been mis-reported, but very few have taken the aggressive action of one of the world’s richest men. Forbes recently released its list of the world’s richest people, but the list wasn’t pleasing to everyone. Saudi billionaire Prince Alwaleed bin Talal is now suing the magazine for libel, alleging that Forbes’ valuation of his net worth at $20bn was off by $9.6bn. Being obscenely wealthy is one thing. Getting indignant because your obscene wealth is slightly more obscene than reported is quite another.

DID YOU KNOW?

$880 Spending power after the average monthly loan repayment in Sydney is just $880

50 and their main asset is a house, good luck finding them a loan that ASIC deems ‘suitable’, says broker Graham CouperSmith, co-author of Pay Off Your Mortgage Fast. “If you are 25, nothing is stopping you from taking 2–3 years off and travelling around the world and not earning anything… That’s your choice and you sell the house before you go if you have to. Why is it,” he asks, “that if you’re over 50 that becomes ASIC’s decision?” While he says he understands that it’s ASIC’s role to ensure

that brokers aren’t offering clients unsuitable loans, Couper-Smith believes the current legislation is too general. “What they’re trying to do is make sure that brokers don’t lend money to people who can’t afford it and that’s great, I’m all good with that, but unfortunately they’ve thrown out some babies with this bathwater.” However, an ASIC spokesperson says CouperSmith’s allegations are unfounded and that it doesn’t have power to set rules about age limits or any other aspect of responsible lending.

IF YOU ARE 25, NOTHING IS STOPPING YOU FROM TAKING 2–3 YEARS OFF AND TRAVELLING AROUND THE WORLD AND NOT EARNING ANYTHING. WHY IS IT THAT IF YOU’RE OVER 50, THAT BECOMES ASIC’S DECISION? - G RAHAM COUPER-SMITH

Source: Adelaide Bank/ REIA

BROKING ICON TAKES FLAVELL’S PLACE ■ NAB has announced that Advantedge general manager, Steve Kane, will take

John Flavell’s place as general manager, NAB Broker Distribution. Anthony Waldron, the major bank’s executive general manager, Growth Partnerships, says Kane was selected due to his extensive experience in the industry. “Steve has more than 30 years’ experience in financial services and is a longstanding industry professional who will continue our work to cement NAB as the preferred lender for brokers. [He] is highly experienced in the third party market and I am confident he will deliver this key strategic priority for our business and take NAB Broker to the next level,” says Waldron.


NEWS

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WORLD NEWS

GOVERNMENTS ABANDONING FIRST HOMEBUYERS ■ More first homebuyers will be left out in the cold as state governments ignore a

UNITED STATES OF AMERICA

promise made over a decade ago, according to REIA, following the announcement by the Tasmanian Government to end the $7,000 First Home Buyer Grant. REIA claims that, in 2000, an Intergovernmental Agreement (IGA) was made that states’ assistance to first homebuyers would be “uniform” and that “an eligible home will be new or established”. The group’s president, Peter Bushby, says the governments of Queensland, NSW, South Australia, Victoria and now Tasmania have either ceased providing assistance to first homebuyers purchasing established housing, or have indicated that they will be ceasing to do so by July 2014.

FAST FACT %

80

Thinktank welcomes new third party head

The proportion of first homebuyers who prefer established housing to new construction

■ Specialist commercial lender

Thinktank has announced the appointment of its newest senior member and a “refreshed brand identity”. Thinktank CEO, Jonathan Street, says the lender is pleased to welcome Peter Vala into the newly-created role of head of sales and distribution. “This key appointment has arrived at a transformative time for our business as we build on the back of a significant expansion in our funding lines, as well as the introduction of a number of key initiatives based around technology, product development and brand-reach.” Vala comes to Thinktank following six years as a senior manager and executive at ANZ, where he held roles ranging from regional industry specialisation manager to his most recent position as district executive in business banking. His experience

FRAUDSTER GETS LIGHT SENTENCE FOR INFORMING ON FRIEND

An attorney and former broker in the US has received a substantially lesser sentence than his partner for a multimillion dollar mortgage fraud scheme, in part because he helped the government in its discovery. Joseph Kriz was sentenced at the end of May to only 30 months, while his partner and lifetime friend, William A Trudeau, was sentenced to 188 months in February. A memo from the District Court of Connecticut indicated that the category of Kriz’s offense normally carries an imprisonment range of 78-97 months. Court documents indicated that Kriz agreed to provide evidence against his co-conspirators, including agreeing to wear a recording device to catch out fellow participants in the fraud scheme.

Source: REIA

CANADA HOMEBUYERS SHUNNING BROKERS PETER VALA

spans residential, commercial and development finance, including ‘highly specialised’ skills in strategic plan implementation. “Peter’s very strong financial services background and proven experience working with brokers and aggregators will be invaluable as he shapes this high profile, senior position within Thinktank,” says Street. “He will be a very visible face and presence for Thinktank in an exciting and challenging period ahead.”

A growing number of Canadian homebuyers say they simply don’t need the advice of a broker, according to a new survey, suggesting those cock-sure consumers are prepared to go it alone with help from the Internet. Some 41% of those respondents indicated that they “Did not need the advice” of a broker – that’s up from the 24% who answered the same way the previous autumn. Perhaps of even more concern was the number who doubted whether a mortgage broker could in fact get them a better deal. That percentage came in at 28% for the spring survey, up from 11% in late 2012.

41%

of respondents indicated that they ‘Did not need the advice’ of a broker


ANALYSIS 10

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House rules:

Has the age of the house call Considerate business offering or professional pitfall? We look into whether the house call is on the way out

O

ne of the most powerful tools in business is the ability to say yes to please your client base. But Jason Back, managing director of the Australian Lending & Investment Centre, says that sometimes ‘no’ can be just as powerful. Back’s co-director, Mark Davis, had tongues wagging earlier this month after claiming that he refused to do house calls for clients. In fact, both men believe this is one of the key reasons for their company’s success. “If a client thinks you’re important enough, they come see you,” says Davis. “You build up the client’s mindset that they have to come and see you. We set the expectation that ‘this is a planning process; Mark’s diary is full and there is a wait time’.” Davis says his schedule has occasionally been booked as many as five weeks in advance, and clients know they need to plan ahead if they want to see him. Part of the reason why he can afford to do this, he says, is because he seeks out ‘the right type’ of clients. “We look for clients that have an investment belief, clients that have an appetite to borrow, clients who borrow money. We don’t want to deal with rate shoppers. We won’t even talk about rates in the first hour-and-a-half meeting. It’s really just getting specific clients who really value progression.” But Michael Clarke, lending and finance manager at Compass Lending and Finance, says

there will always be situations when brokers should visit clients, and that, while he can see why the office-only model might work for some businesses, it’s not a case of one size fits all. “There are several reasons for that,” says Clarke. “[Home visits] can help brokers better understand a client’s needs relevant to their environment, strengthen a relationship by showing genuine interest in the clients by bothering to visit their home or business – and they can help confirm factual information necessary to ensure NCCP legislation.” Clarke also believes house calls can identify problems that may not be apparent without a site visit, particularly when dealing with SME or corporate clients.

WE’RE NOT DOOR-TO-DOOR SALESMEN… YOU WOULDN’T GET A GP TO COME OUT TO YOUR HOUSE – J ASON BACK


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come and gone? “A bit of due diligence is a worthy attribute to have. We are not salespeople; our role can involve a value-add position to the client, and if that value-add comes free of charge, then that also strengthens the relationship. A lot can be learnt from observation when visiting the client in their surroundings.” However, Back says the fact that many brokers continue to perform regular house calls denotes an underlying lack of professionalism, rather than a sense of simply wanting to meet clients’ needs. “The finance industry needs to get a degree of self-worth. We’re not door-to-door salesmen… You wouldn’t get a GP to come out to your house to do a ‘female test’,” he laughs. “Imagine getting them to come out to your house and you’ve got dogs barking and you’re getting dinner ready! It’s just not the right environment. “We need to recognise the skills and the value that we add to our clients, and that means meeting in a place like an office space, which can be much more beneficial for the client experience.” But, as an ex-business banker, Clarke says it’s possible to maintain a degree of professionalism even without a traditional office, and it can be as simple as deciding on the appropriate clothes to wear to a client meeting. “Image and presentation is a subject of its own. If I were visiting a motor mechanic, I might consider an open-necked collared shirt and be more casual. If I were attending a legal practice, I might wear a suit and tie. The idea is to make the clients comfortable with you so that frank and transparent discussions will ensue.” Clarke also doesn’t buy the argument that, if clients are willing to take time out of their work day to visit the GP or their legal adviser, they should do so to visit their broker. “Visiting a GP may have the underlying benefit of curing something that may be life threatening. Visiting a mortgage broker may not be so ‘life threatening’ – unless perhaps the sheriff is on the doorstep looking to foreclose on the mortgage!” The amount of time it takes to make house calls, however, is a major concern for both parties, particularly when it comes to urban brokers. Back says the time spent on out-calls takes away from valuable client engagement. Initial client conversations can go on for a few hours, he notes, and there may be more than one meeting, so it’s important to be in an environment that generates great ideas, allows free discussion and holds the client’s attention – and this, at least, is something he and Clarke appear to agree on. “I know that working in a ‘regional location’ makes the client somewhat more accessible,” says Clarke. “In a metropolitan area, where traffic congestion is not good, then a broker would need to plan those client visits very carefully. We, of course, have remotely located clients, but they would generally visit our office because they know that they have to travel to the main centres for other services. Therefore, it’s they that are doing the planning, not the broker!”

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ANALYSIS 12

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Time to put reverse mortgages in

POPI GM Brenton Harris and HouseNet.com.au creator Darren Moffatt discuss whether reverse mortgages are the best option for your clients

T

housands of Australian retirees have taken out reverse mortgages on their homes, but is it the best option for your older clients? POPI general manager Brenton Harris doesn’t think so. He believes the majority of reverse mortgage holders start off with the best of intentions, only to find themselves in financial ruin later on down the track. “The worst problem with reverse mortgages is the misuse of funds. Everyone starts out with all the best intentions of only drawing out a little bit, and they end up drawing the thing down to its limit within, what we’re seeing, a couple of years. And then they’re on the slippery slope really, because the capitalising interest starts to get away from them.” Harris says he’s even come across one older client who had a drawer filled with unopened monthly envelopes from the bank, because she couldn’t bear to see the interest going on top of the loan each month. “From what we’ve seen, people get very stressed about them,” he adds. “The government has legislated no negative equity guarantee, and that kind of says something, in my opinion – that even the government thinks that retirees are at extreme risk of ending up with nothing in their home, hence they have to legislate it. “Australia is ageing, and the cold, harsh reality is that more and more are aged pension-reliant and either without any superannuation at all or limited funds at best. They are struggling to meet the costs of living, let alone have money for the nicer things in life.” But Darren Moffatt, creator of mortgage sites housenet.com.au and reversemortgagewatch.com.

DID YOU KNOW?

$3bn

Australia’s reverse mortgage market is worth more than $3bn Source: Deloitte

au, says the idea that most reverse mortgage holders end up financially ruined is “completely incorrect”. “I can tell you I’ve done a very, very large number of these transactions over the years, and the vast majority of people choose to boost their pension and they use most of the money gradually over time. Obviously, there are a small minority who take out lump sums or spend the money to repay existing debt.” Moffatt says a ‘typical’ reverse mortgage holder will use a small sum to buy a car or do urgent repairs. “By doing it this way, the cost is extremely modest, but it also doesn’t have any implications for their pension, which can be the difference between this and other equity-release schemes.” However, Moffatt acknowledges the validity of reversion schemes or equity products, like POPI. “Generally, as a rule, these… have a place in the market; I’m not disputing that. My experience is that those schemes are better where someone has a need for a larger lump sum, like to extinguish an existing mortgage debt. For those types of clients, home reversion or pure equity work well. But my experience is the vast majority of seniors want

their money gradually over time. So, on that basis, the reverse mortgage is a good option.” Yet Harris maintains that these situations are actually few and far between. “[Reverse mortgages work] where someone has only taken a very small percentage, usually of a property that is in a very high-growth area and is of reasonably significant value. So someone may have a $700k property and they’ve taken a $50k reverse mortgage to do some repairs on the property, which in fact helps its value. That’s generally where you can say, ‘Well, the reverse mortgage, yes, it’s going to increase in value, but as a percentage of the overall property value, it’s not too bad’.” One of the key differences between a POPI and a reverse mortgage, he says, is that there’s no loan with a POPI, so there’s no risk of capitalising interest ‘eating away’ at equity. “The other key difference in a POPI is a transfer of risk. With a reverse mortgage, the property owner takes on the risk of what the property market’s performance is going to do, whereas with a POPI they’re transferring that risk to an investor. They’re still benefiting

REVERSE MORTGAGE RISK LIST

 Interest rates for reverse mortgages are generally higher than average home loans

 The debt can rise quickly as the interest compounds over the term of the

loan – this is the effect of compound interest and is something borrowers need to be aware of before making any decisions

 The loan may affect the borrower’s pension eligibility  Borrowers may not have enough money left for aged care or other needs  If the borrower is the sole owner and someone lives with them, that person may not be able to stay when the owner dies

Source: moneysmart.gov.au


brokernews.com.au

EVERYONE STARTS OUT WITH ALL THE BEST INTENTIONS OF ONLY DRAWING OUT A LITTLE BIT, AND THEY END UP DRAWING THE THING DOWN TO ITS LIMIT – B RENTON HARRIS

from it from a cash-flow perspective, but not taking on the risk that property markets fall or… stay flat.” Both agree the final decision comes down to the individual borrower, but what should be done with the majority of clients remains up for discussion. “It all depends on the client… under NCCP we have to make individual assessments,” notes Moffatt. “There is a fairly typical reverse mortgage profile, and that’s someone who owns a property of roughly average value for their area and has very little other assets or superannuations – your typical retired person in Australia. Those people are using a small lump sum, like less than $30–40k, but then they want additional monies available to supplement their pension over 10 to 20 years. That’s where the reverse mortgage product works very, very well.” However, Harris remains convinced that reverse mortgages are only successful in a minority of cases and must be investigated with caution. “I’m a financial planner and mortgage broker by profession, and I have done reverse mortgages in the past as a broker, which kind of led myself and my business partner Sean to create POPI. We’re in the business of building a happy client base, and I think a reverse mortgage is actually the opposite. You’re actually building a client base that’s going to end up very unhappy and, for me, that’s just not good business.”


NEWS 14

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CONTINUED FROM PAGE 1

David Holmes:

Re-enfranchising borrowers The Pepper COO explains how the lender is finding niches the big banks abandoned

H

olmes said specialist lenders have moved far beyond low-doc, and that the average specialist borrower looks very different from what many may anticipate. “In terms of the customers Pepper is helping, our average customer would be a PAYG who has had maybe two jobs, or a self-employed person who has been self-employed for maybe three years. Our average loan-tovalue is probably around 70%, and only 30% of our customers would have had any impaired credit. The vast majority of those who have had impaired credit, it would be over two years ago, and would have been a significant, one-time life event. Pepper believes these are people who do deserve a second chance,” he said. Much of this, Holmes said, is because Australians’ employment profiles are changing. Many people no longer work standard 38-hour weeks, casual employment is on the rise, temporary contracts are more prevalent and many more Australians are looking to make a go of self-employment. But as the average borrower has moved away from traditional employment profiles, Holmes said the average bank has moved away from borrowers. “Obtaining credit is considerably more difficult than in past years. Customers who were prime borrowers before are now unable to obtain home loans, and are almost disenfranchised. It’s up to lenders like Pepper to educate brokers and give them the tools to help obtain finance for this ever-widening group of borrowers,” he said. “Brokers are starting to recognise that if banks can’t help, there are a lot of specialist lenders who can. The rates are

now down in the 6% range, so they’re affordable to borrowers, and it helps them get the start they want.”

FILLING A NICHE

Holmes said the goal of Pepper, in addition to educating brokers, is analysing the market itself to find segments of borrowers who have been left behind by the big lenders. “The thought process for us is to look at opportunities where banks’ credit policies have tightened, and now people are falling outside the bank and mortgage insurer guidelines. It has nothing to do with low-doc or impaired credit. They’ve fallen outside of that scorecard, commoditised approach to mortgages.” And this niche has expanded beyond mortgages, Holmes said. The lender last year picked up a $150m auto and equipment finance book from Suncorp, and earlier this year acquired a $250m small balance commercial portfolio from Citibank. Holmes said both moves were part of Pepper’s strategy to expand its offering and fill new niches. “We bought some leases and equipment finance books, and we continue to service those, but we’ve also launched our own auto

CUSTOMERS WHO WERE PRIME BORROWERS BEFORE ARE NOW UNABLE TO OBTAIN HOME LOANS, AND ARE ALMOST DISENFRANCHISED - D AVID HOLMES


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PEPPER HAS REALLY BEEN WELCOMED IN THOSE [HARD HIT OVERSEAS] MARKETS FOR WHAT WE’VE DONE IN AUSTRALIA - D AVID HOLMES

DID YOU KNOW Having already made moves into Ireland and Spain, Holmes says Pepper has plans to launch into the UK and Korea later this year.

product in April and that’s going well. We also bought a commercial loan book off Citibank, and we’ll be looking to find a niche in the commercial space where Pepper can fit and serve the community, so hopefully later this year we’ll look to come to market in the commercial mortgage space,” he said. The search for new niches left open by the departure of major lenders has also led the company abroad, as it has also acquired servicing businesses in Ireland and Spain. Holmes said Pepper has found a welcome reception in those markets, hard hit by the GFC and spiralling arrears. “Pepper has really been welcomed in those markets for what we’ve done in Australia, bringing our quality underwriting and servicing technology to those markets. From the regulators’ side, we’re really welcomed into those jurisdictions for providing what they see as the gold standard in servicing.” Holmes said the company would continue to push into new areas and new markets, expanding its reputation beyond low-doc, and he urged brokers to follow, saying specialist lenders fulfilled a vital role in providing options for brokers’ clients. “Pepper is about learning the market, analysing it and finding the niche where we can fit. We look for a space that’s underserviced today, but perhaps was serviced well a few years ago. We then step into that space and fulfill that need.”

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Developing

success Tracie Palmer of Cornerstone Sales Consulting says even the most experienced brokers can benefit from continued professional development

TRACIE PALMER

T

he drive toward further education in the broker market has often been a contentious one. Some experienced brokers have argued that the push for upskilling has been unnecessary. But Tracie Palmer, director of Cornerstone Sales Consulting, believes everyone can benefit from further education and continuing professional development.

WITH BROKERS NOW REQUIRED BY THE MFAA TO COMPLETE THEIR DIPLOMA, WHY IS CONTINUING EDUCATION AND PROFESSIONAL DEVELOPMENT BEYOND THE DIPLOMA IMPORTANT?

The Diploma and the Cert IV only go so far in brokers’ education. A mentoring program is designed for the new broker to have a buddy to call on if they get stuck. In my program, it also includes further training; help with marketing their business; and completing a business plan to help grow the business amongst others. Existing brokers can engage a coach like me to help them take their business to the next level. Often a broker on their own needs to have someone to talk to about their business and just simply keep them accountable. Many brokers want to grow their team and we assist with that.

The Cornerstone mentoring program Palmer says the mentoring program assists new-to-industry brokers in:

Interviewing techniques

gathering information; building rapport; setting the scene; handling objections; closing the sale and follow up.

Writing home loans

LVRs; LMI; industry bodies; servicing calculators; winning loan submissions

Exploring self-employed lending

reading financials; add backs; low-doc lending

Setting achievable goals

creating a business plan; activities and goal setting

Creating a marketing plan

help to set up a marketing plan; activities that work

Build a database of customers forever

CRM; activities to keep clients coming back, client referrals

Effective networking

groups; clubs; reciprocal referrals; what to say and do at these events

OFTEN A BROKER ON THEIR OWN NEEDS TO HAVE SOMEONE TO TALK TO ABOUT THEIR BUSINESS

Building lasting business relationships behaviours; attitude; work ethics; leads

Cross-sales

general insurance; life insurance; banking accounts; financial planning


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The Cornerstone coaching program Palmer says the coaching program can help brokers of all experience levels in: Creating a unique service proposition Business planning Creating winning marketing plans KPIs for brokers with a team Customer segmentation Diversification Offering more to your customers Effective networking

MOST BROKERS I TALK TO DO NOT HAVE A BUSINESS PLAN OR A MARKETING PLAN - T RACIE PALMER

Time management Goal setting and action plans Accountability Mentoring brokers for improved results Getting back to the basics of good business Sales skills for brokers Putting together winning award submissions

I help them to bring on new brokers or PAs, helping with writing job ads, position descriptions, KPIs etc. It really is limitless what we do to help. Our main focus is to help brokers become business owners, not just going out and writing loans. We share our systems and other secrets to our past success.

WHAT BUSINESS STRATEGIES AND SKILLS DO MANY BROKERS LACK THAT COULD BE ADDRESSED BY CONTINUING EDUCATION?

The biggest issue is lack of leads so we help brokers to network and market themselves better to build strong referral partnerships. This is not easy and many brokers find it really hard to market themselves. Most brokers I talk to do not have a business plan or a marketing plan, so I help them to do this. I also look at their process and make suggestions to streamline things better for them.

MANY BROKERS HAVE RESISTED THE IDEA OF UPSKILLING AS EDUCATIONAL REQUIREMENTS IN THE INDUSTRY HAVE INCREASED. WHY DO YOU THINK BROKERS ARE SOMETIMES RESISTANT TO THE IDEA OF CONTINUING EDUCATION? Time and money. If they are busy writing loans they don’t have time and if they are quiet due to market conditions they usually don’t have the funds to pay for it.

HOW WOULD YOU COMMUNICATE THE VALUE OF CONTINUING EDUCATION TO BROKERS WHO ARE DUBIOUS ABOUT ITS VALUE TO THEIR BUSINESS? Every broker that I coach is doing very well. Their business has improved significantly. The cost of coaching becomes irrelevant when you see the results. Most of my coaching clients are now in the Top 200 for their aggregator. Personally for the broker it is that they have a deeper understanding of their business as a business owner. So I encourage them to work on their business not just in it.

IT’S EASY TO SEE THE VALUE OF PROFESSIONAL DEVELOPMENT FOR BROKERS WHO ARE NEW TO THE INDUSTRY, BUT WHAT VITAL SKILLS CAN EXPERIENCED BROKERS GAIN FROM CONTINUING PROFESSIONAL DEVELOPMENT?

Becoming more of a business owner; learning how to market your business; seeing how you can do things differently or better. One key thing here is that I have been and still am a mortgage broker, so it’s not just another business coach trying to understand the business. I can add real value from having experienced mortgage broking myself.

YOU RUN BOTH A TWO-YEAR MENTORING PROGRAM FOR BROKERS NEW TO THE INDUSTRY AND A COACHING PROGRAM FOR BROKERS OF ANY EXPERIENCE LEVEL. WHAT SETS THEM APART FROM OTHER COURSES?

In basic terms, [with the mentoring program] we hold their hand throughout the entire two years. We share all our systems and processes with the new brokers. It is very hands on and face to face, so we can make sure our mentees are learning what they need to at a level that is comfortable for them. Again [with the coaching program], it is hands on and face to face coaching. I do encourage the brokers to call or email me regularly to keep me in the loop about their business achievements and any changes they plan to make – we discuss first.


TOOLBOX 18

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Head in the clouds Cloud technology has become a common term in IT jargon, but what exactly is it and how can it be used by your broking business? Aaron Murden from HLB Mann Judd explains

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he idea of ‘cloud computing’ is to use the internet to access software rather than physically installing it on a computer. It is sometimes also called ‘Software as a Service’ (SaaS). Many people have used cloud computing without realising it. For example, anyone with a Hotmail or Gmail account is already ‘in the cloud’, as the software and data are stored remotely and are accessible from any computer, not just the user’s. Cloud-based software or applications offer a number of potential benefits for small to medium-sized businesses (SMEs). For example, the cloud alleviates the need for businesses to store and manage data and maintain computer hardware. With cloud-based applications, an SME could in theory operate from a single computer with a standard modem providing an internet connection, without being connected to a server or

SOME EXAMPLES OF CLOUD-BASED BUSINESS SOLUTIONS INCLUDE: SME BUSINESS SOFTWARE NEEDS Cloud-based solutions CUSTOMER RELATIONSHIP MANAGEMENT Salesforce, Affinity

EMAIL Gmail, Hotmail, Microsoft Exchange online

having specific software installed on the computer. The cloud also offers access to data storage, email systems, customer relationship management applications, accounting and finance solutions and productivity tools. Models allowing a user to pay a monthly fee for access to a cloud-based application are becoming more prevalent. Recently, there have been major developments in accounting and bookkeeping applications, with software providers such as Xero, MYOB, and Reckon (QuickBooks) developing products that allow SMEs access to their accounting packages online. This means SMEs can manage their bookkeeping, accounting and financial needs without the IT infrastructure that would have been necessary in the past. In most cases these applications allow remote access from any smartphone or tablet with an internet connection,

COMMUNICATION AND DECISION-MAKING BECOME FAR MORE EFFICIENT, AND AT A REDUCED COST

WORKFLOW/ PRODUCTIVITY Workflow Max, Affinity PAYROLL Xero, ADP, ePayroll, CloudPayroll ACCOUNTING Xero, MYOB LiveAccounts, QuickBooks

SPREADSHEET/WORD PROCESSING, PRESENTATION SOFTWARE Microsoft Office 365, Google Apps INTERNET BANKING Online applications by big four banks, eg NetBank (CBA), NAB Connect (NAB)

not just a PC or laptop. One advantage of this approach is that communication and decision-making become far more efficient, and at a reduced cost. Gone are the days of reconciliation and data entry before financial decisions can be made. Now the banks feed electronic banking information directly into software, and transactions are identified, matched and reconciled in real time. This enables business owners and managers to better focus on their businesses’ performance and financial metrics rather than the processing of entries and collation of data. However, the potential benefits of cloud applications need to be balanced and assessed against the risks they present. The most obvious issues include: Where is my data stored and who can access it? Does the software provider have data recovery and backup procedures? In which country is the provider’s servers located and under whose law is the data protected? What security measures have been put in place by the software provider, including firewalls, virus protection, and hacking protection? These areas must be considered before any decision is made to move sensitive business and financial information into the cloud. SMEs should carefully consider their use of cloud-based applications to take into account the risks and benefits as part of their overall IT and business strategies.


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Broking in the blood

THE COALFACE 19

knowledge with young, up-and-coming talent. “I have two support staff and Corey – he’s my junior broker. Corey was a real estate agent. He heard I was employing, so he called and pretty much convinced me over the phone – with his excellent sales technique – to employ him. He’s been with me now for two years, and he will be an up-and-coming broker to watch over the next three years.” For now though, Gielnik says her focus is on growing Smart Lending as a business. “I’ve been looking at the different types of models for growth. Growth is something that’s very much at the forefront of what I’m doing at the moment, and I’ve been looking at either growing my brand or going into more of a lead-generation type brand. I’d like to be at double or triple the amount of work that Smart Lending currently writes – but not necessarily for myself! I still think I’ll write, because that keeps you tapped into the industry, but I’d like to be managing a lot more than I’m writing. I just want what everyone wants – to do less and make more! At the moment, it’s really about looking at the vehicle that’s going to take me where I want to go, and then it’s going to be three or four years of really hard work to get there.

Smart Lending director Melissa Gielnik was born to be a broker

I

t almost feels like Smart Lending director Melissa Gielnik was destined to be a broker from the get-go. The vivacious economics and accounting graduate took on a job at her father’s loan writing business following a ‘career break’ at the ripe old age of 22, and hasn’t looked back. “My dad was a broker, so I definitely learned lots of the tricks of the trade from him. And would you believe my mum’s a conveyancer? So it wasn’t a hard transition for me – I really grew up in finance. When I came back [from my OE], my dad was looking for staff so I thought I’d work for him until I got a ‘real job’ – and here I am today! I worked for him for a couple of years before he sold his company, and I started Smart Lending in 2006.” Gielnik says all of her staff are under 30 and she prides herself on being able to share her own

MY DAD WAS LOOKING FOR STAFF SO I THOUGHT I’D WORK FOR HIM UNTIL I GOT A ‘REAL JOB’ – AND HERE I AM TODAY! – M ELISSA GIELNIK


WORKSHOP 20

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Six tips for social Social media expert Stewart Dawes takes us through the possibilities and pitfalls of social media

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ocial media is one of the most powerful forms of communication in modern-day society. In its early days, it was a tool to connect with family and distant friends. However, it has fast become a hugely influential device, arming the regular person with a public voice that can reach millions in a matter of seconds. Rather than subjecting themselves to long, costly and arduous phone conversations with major multinational companies, consumers are contacting corporates through Facebook and Twitter and receiving responses within minutes. The benefits of this are mutual – the customer’s problem is resolved quickly, and the company scores public points for its quick competency. But, while companies such as Virgin and Vodafone can use social media to their marketing advantage, could it be too risky for brokers? The director of Australia’s Atomic Social Media, Stewart Dawes, weighs up the pros and cons. “Social media can create a huge PR factor for a broker, but only if it is done well and the company commits to it at an advanced level,” he says. “But the company has to be willing to step ahead of its competitors.” As the Australian public increasingly use social media to gauge opinion on companies and issues, Dawes believes companies that devise a comprehensive social media strategy can easily score brownie points with customers. “There is potential for clients to look in touch with the trends and social media-savvy customers,” he explains. “If a broker fixes a customer’s problem and is seen to be doing so in social media, that can be hugely positive. “You can ask customers what they want from your business and how you can improve customer service. This way the company is perceived as having a culture of customer engagement and

THE COMPANY IS PERCEIVED AS HAVING A CULTURE OF CUSTOMER ENGAGEMENT, AND PERHAPS THAT PERCEIVED CULTURE IS MORE IMPORTANT THAN THE ACTUAL SERVICE PROVIDED – S TEWART DAWES

6 TOP TIPS FOR ENGAGING IN SOCIAL MEDIA

1

DON’T SELL SOCIAL “SOCIAL MEDIA IS A PR AND BRANDING EXERCISE,”

Dawessays. “IF THE SALES DEPARTMENT HANDLES YOUR SOCIAL MEDIA, YOU HAVE A SERIOUS

PROBLEM.”

2 HUMANISE YOUR PROFILE “IF YOU STICK YOUR LOGO ON TWITTER OR FACEBOOK, YOUR SOCIAL MEDIA STRATEGY IS LIKELY TO FAIL. IF YOU HUMANISE IT BY MAKING A PERSON THE FACE OF THE COMPANY, IT’S LIKELY TO SUCCEED. RICHARD BRANSON, FOR EXAMPLE, IS CLEARLY THE FACE OF VIRGIN. THE BROKER NEEDS SOMEONE TO BE THE JOHN NEWTON OF INSURANCE.”

STRIVE FOR 3 CRITICAL MASS

“Get an expert in to help you build up your audience; otherwise you will be stumbling along wondering

HOW EVERYBODY ELSE DOES IT.”

4

Appearance is important “You need to look good very early on. You cannot go into social media

half-baked.”

6

PARED BE PREEST TO INV

rces. f resou o t o l up a eturn on l take “It wil y notion of r e suspended An ld b t shou to a year.” n e m t inves 18 months for

“THINK OF THE BIGGER PICTURE.”

5 FORMULATE

BEST PRACTICE FOR YOUR COMPANY

“HAVE SOCIAL MEDIA

POLICIES FOR YOUR STAFF.

PLAN YOUR STRATEGY CAREFULLY.”

5


WORKSHOP 21

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media success SOCIAL MEDIA CAN CREATE A HUGE PR FACTOR FOR A BROKER, BUT ONLY IF IT IS DONE WELL AND A COMPANY COMMITS TO IT AT AN ADVANCED LEVEL – S TEWART DAWES

STEWART DAWES STARTED HIS SOCIAL MEDIA COMPANY, ATOMIC DIGITAL MARKETING, AFTER 15 YEARS IN MAGAZINE PUBLISHING. HIS INSTAGRAM FEED, @THESEOGUY, HAS MORE THAN 5,000 FOLLOWERS perhaps that perceived culture is more important than the actual service provided,” he says. Dawes points out that brokers can also save on staff costs. “It is much cheaper to interact with customers via Twitter or Facebook than via a phone call or face-to-face,” he explains. “It can save you money on staff costs over time.” But he warns against brokers using social media

to market products and services. “If you have sales-driven pursuit and use social media to broadcast your message or flog your products and services, people will turn off,” he says. “By doing that you are not being very social. People do not use social media to be spammed.” However, social media, for all its benefits, can potentially cause reputational damage. In the run-up to Sydney’s mayoral elections, candidate Clover Moore took to Twitter to ramp up her campaign, using (hashtag) #teamclover. However, a number of social commentators hijacked the hashtag and used it to verbally abuse Moore. “Every third or fourth tweet was negative,” Dawes says, “but she had enough support to not let the negative social media affect her campaign. I’m not sure small brokers will. They might find there is a definite risk in engaging in social media. It can open them up to community backlash that they did not think was possible.” While social media can be extremely beneficial, Dawes says, “there is also the potential to look like a laughing stock if the strategy is ill-thought-out”.

Stewart Dawes is the director of Atomic Digital Marketing, a boutique SEO and social media agency he started after a 15-year career in magazine publishing. Apart from managing and developing clients’ online presence across everything from Google rankings to Facebook, Twitter, Instagram and Pinterest, he delivers social media training to government organisations, businesses and universities. His main passion is continuing to live up to the adage that small businesses can be giant killers online.


MARKET TALK 22

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HEATING UP: Australia’s growing towns Victoria and WA are the standout performers in the latest residential hotspots report

V

ictoria and WA have swept the boards in the latest league table of the nation’s residential ‘hotspots’, with the ACT also putting in a strong performance, according to the annual HIA Population and Residential Building Hotspots report. The report provides an overview of Australia’s fastest-growing metropolitan and regional areas in 2011/12. A ‘hotspot’ is defined as a local area where population growth exceeds the national rate (which was 1.6% in the year to June 2012) and where the value of residential building work approved is in excess of $100m. For the second consecutive year, Victoria dominated the hotspots rankings, with the state accounting for 10 of the national top 20. WA also had a strong year, with the state represented four times in the national top 20 ranking. The ACT punched well above its weight, providing two hotspots in the national top 20. NSW also had two hotspots in the same category, a welcome development following no entries in last year’s list, while Queensland and the NT each made one contribution. “Residential building activity is in decline in Victoria and the ACT, but is heading south from record levels. It is no surprise these two regions still

10

DID YOU KNOW?

Victoria accounted for 10 of the top 20 fastest-growing areas in the HIA’s population report Source: HIA

feature prominently in the top 20 list,” says HIA chief economist Harley Dale. “WA, meanwhile, is seeing a recovery in new home building this year, and four spots in the top 20 list provide an indication of the potential in the west.” Bonner in the ACT was Australia’s top building and population hotspot in 2011/12 with $171m worth of residential building work approved and a population growth rate of 100%, reflecting the relatively new history of this area. The second-placed hotspot was ForrestdaleHarrisdale-Piara Waters in WA with $143m worth of residential building work approved and a population growth rate of 23.5%. Yanchep in WA, where in 2011/12 the value of residential building work approved was over $102m and the population growth rate was 18.8%, ranked third. The top-five list was rounded out by Baldivis in WA, followed by Tarneit in Victoria. “In total there are 68 hotspots identified and many more areas where population growth is relatively fast or where the value of approvals for new homes or larger alterations and additions is quite healthy,” says Dale. “There is clearly considerable potential for residential construction work in Australia – for a start, six of Australia’s eight states and territories feature in the national top 20 hotspots list. “The ‘disconnect’ comes from an insufficient amount of this potential being realised this year in terms of actual residential construction activity. With interest rates falling significantly we would normally be seeing far healthier levels of activity and compelling evidence of a sustainable recovery, but neither of these outcomes is forthcoming in mid-2013.” Dale says policymakers other than the Reserve Bank of Australia have a role to play in ensuring residential construction activity is aligned with the need to rebalance Australia’s economic growth. “Success in such policy action would also necessarily be reflected in a more efficient and productive Australian economy,” he says.

AUSSIE PROPERTY HEAT MAP

NT

QLD

Top hotspot: Rosebery – Bellamack

Top hotspot: Deeragun

National ranking: 15

National ranking: 10

Annual population growth rate (%):

Annual population growth rate (%):

9.6

11.8

NSW

WA

Top hotspot: Parklea – Kellyville Ridge

Top hotspot: Forrestdale – Harrisdale – Piara Waters National ranking: 2 Annual population growth rate (%):

23.5

Source: HIA

National ranking: 13

VIC

Annual population growth rate (%):

Top hotspot: Tarneit National ranking: 5

10.2

ACT

Annual population growth rate (%):

Top hotspot: Bonner

15.8

National ranking: 1 Annual population growth rate (%):

99.7

Hotspot ranking from the highest (dark red) to the lowest (yellow)


MARKET TALK 23

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Labor? Liberals?

Housing will suffer either way CBRE senior research manager Sam Reilly says there will be belt tightening regardless of who wins the election

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ow interest rates and population growth have stimulated buyer activity in most residential markets, according to new research, but the elections are likely to have a negative impact on house prices regardless of who wins. According to the CBRE’s Australian Residential MarketView Q1, 2013 report, the current fiscal environment is contributing to a rise in consumer sentiment that is prompting more people to enter the property market. Resource-rich states like Queensland and WA saw the most improved levels of buyer demand over the first three months of the year; however, CBRE anticipates the gap in the two-speed economy will narrow as mining investment contracts over 2013/14. Nationally, house sales

increased 6.1% over the 12 months to March 2013, while unit sales jumped 6.9% during the same period. CBRE senior research manager Sam Reilly said that the low interest rate environment has helped build consumer confidence and this is translating into sales volume growth. This is more evident in affordably priced property markets, where investors are becoming more active on the back of sustained levels of rental growth. “Rising population levels are also likely to drive more activity in the housing sector, with some markets experiencing a supply shortfall in the short term,” Reilly said. Despite an improvement in buyer confidence levels and an upward trend in sales volumes, capital values have experienced nominal growth over the past 12 months.

REGARDLESS OF WHAT PARTY IS IN POWER FOLLOWING THE ELECTION, FISCAL CONTRACTION WILL OCCUR – S AM REILLY Reilly said that as Australia’s mining investment activity reaches its peak and business investment slows over 2013/14, capital growth prospects will be constrained when viewed in combination with expected levels of budget tightening from Canberra. “Regardless of what party is in power following the election, fiscal contraction will occur which will limit any major recovery in house prices as it is likely to impact on buyer sentiment levels,” he says. NO BUBBLE, CLAIMS RESIDEX

Rents forcing families out of Sydney High rents in the Sydney area are prompting many families to move out of the city in search of more affordable homes, according to PRDnationwide research. The popularity of three-bedroom houses in Wyong and Port Stephens has risen steeply in the last two years, with strong demand for family homes driving up rental yields. Port Stephens, a two-and-a-half-hour drive north of Sydney, has seen a 14% increase in new bonds lodged with Housing NSW as renters flock to the seaside town to take advantage of cheaper accommodation. PRDnationwide research analyst Oded Reuveni-Etzioni says the price difference between Sydney and more affordable areas to the north and south is significant and is causing families to start looking elsewhere. “The research shows that the top five regions for rental price growth in family homes are all outside metropolitan Sydney,” he says. He adds that the family drift has also come about partly because the cityscape has changed. “Large-scale one- and two-bedroom unit developments in Sydney [cater] for young professionals and the student population, as shown by an increase in residential tenancies in areas like Canada Bay, Marrickville and Ku-Ring-Gai.” PRDnationwide Leichhardt principal Danny Harb agrees. “In recent times, we have noticed that families have struggled to enter the inner-city market due to price hikes and greater competition at auctions,” Harb says.

FAST FACT

29.9% The average proportion of homeowner income spent on mortgage payments

Source: REIA/Adelaide Bank

Recent interest rate reductions have not been drastic enough to allow significant house price growth or, worse, inflate a housing market bubble, claims Residex founder John Edwards. He says affordability is keeping the industry in check because many families are likely to still think they are better off renting. Residex figures show the amount of money that a family has left over to spend after monthly loan repayments ranges between $880 (Sydney) and $1,457 (ACT). Disposable income after rent is paid ranges from $1,057 (Hobart) to $1,537 (ACT). “I’m sure that most of us with a small family would consider living on $1,000 per month somewhat difficult,” Edwards says. “When looking at the table in this light, the median family buying the median home is very constrained by affordability… they’re better off renting.” Edwards says the realisation that renting is a better option will take hold, but the lack of security of tenure will cause many people to accept the more difficult option. “Ownership of house and land assets is going to become less prevalent and ownership of units will become more of the norm in time. Additionally, renting will become more prevalent in city areas,” he says. Edwards adds that if demand is limited due to affordability, there will also be a limit on the rate of capital growth. “Given the view that interest rates are unlikely to fall much further and house prices probably won’t fall in value by any significant amount, properties that are most likely to see growth are those located in areas with better affordability.”


FINANCIAL SERVICES 24

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Former CEO slapped with ASIC ban

A

SIC has continued its crackdown on financial service providers that are providing unlicensed financial advice. The latest to be caught is Queensland-based Murray John Priestley, former CEO of the Lifestyle Group. Priestley has been banned from providing financial services for three years, after ASIC found he had made misleading statements about ‘Aussie Rob Lifestyle Trader’ when in fact he did not know how the software worked. The regulator found that Priestley did not have a proper understanding of financial services laws and that he was not competent to provide financial services. Priestley claimed that Lifestyle Private Wealth (LPW) was a licensed financial adviser – when it wasn’t – and that an individual financial adviser was part of LPW and had the authorisations to determine the suitability of the product named ‘Elite Investor’ for potential investors, when

that was not the case. Priestley was personally involved in the development and marketing of Elite Investor, and ASIC found that he had:

B

FAST FACT

claimed Elite Investor would ✘ provide clients with personalised

trade recommendations, when the trade recommendations sent were the same for all clients, and claimed Elite Investor would provide profits in excess of 5% per month, when he had no reasonable grounds for making the representation

The proportion of superannuation assets owned by retirees is expected to rise from 30.3% in 2011 to 42.1% by 30 June 2026 Source: Deloitte

ASIC also found that Priestley had authorised inadequate, conflicting and confusing information about Elite Investor to be given to potential investors.

PRIESTLEY HAS BEEN BANNED FROM PROVIDING FINANCIAL SERVICES FOR THREE YEARS

LENDER AND INSURER PARTNER FOR CROSS-SELL

I

Planners ‘shy’ about mortgages

nsurer Auto & General has partnered with Macquarie Mortgages to incorporate general insurance into home loans with a three-year price cap. Borrowers will now be able to include building, building and contents, and landlord insurance in their mortgage applications. Premium costs will be capped for the first three years of a loan if the borrower doesn't claim on their policy and their situation remains unchanged (no changes to policy details and no claim made on the policy). In addition to the cap, the insured value will be indexed in line with rising building and contents replacement costs. Only one application process is involved, no additional paperwork is required, and the risk of delayed settlement due to an outstanding Certificate of Currency is reduced. The approval process for the mortgage and general insurance package is streamlined for both brokers and consumers, with one central point of contact. Borrowers will be able to choose from monthly or annual payments for increased flexibility. The deal builds on the relationship between the two companies, in which Macquarie is an authorised representative of Auto & General.

rokers aren’t the only ones dubious about diversification. With Future of Financial Advice looming, planners are still a bit ‘shy’ of looking at mortgages, according to Mark Woolnough of ING Direct. But he says that this could be positive for clients. “We’re seeing a lot of brokers potentially having some chances and opportunities to create networks and connect with financial planners, and I think that spells good news ahead for consumers. “What you’re starting to see now is the professional networks actually starting to move closer together and preparing to talk to one another... For the consumer it’s a holistic advice, but it’s more strategic partnerships and joint ventures behind the scenes. So I think that works quite well when a trusted adviser on either side can forward a referral to their trusted colleague and partner to look after the customer.” ING Direct has recently integrated its adviser and broker divisions into a third-party distribution model, and Woolnough says they have been able to learn a lot on both sides.

LLOYD’S TAKES BIG STAKE IN AUSSIE INSURER

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loyd’s insurance broker Besso Insurance Group has bought a “significant minority investment” in Sterling Insurance. The investment is in line with its ambitious plans to expand internationally and acquire interests in businesses complementary to Besso’s growth strategy. The investment has been made following the recent additional growth capital from its main shareholder, B.P. Marsh & Partners. Sterling Insurance resumed independent operations in 2008 following a management buyout from IUS Holdings, which was partly funded by Besso. Besso has a long relationship with Sterling, which has placed its Lloyd’s binding authorities through Besso since 2004. Anthony Parington will remain as CEO. “Sterling Insurance has an enviable reputation in their markets, and we are extremely pleased to be cementing our relationship with this investment,” said Colin Bird, CEO and chairman of Besso.

STERLING INSURANCE HAS AN ENVIABLE REPUTATION IN THEIR MARKETS – COLIN BIRD


FORUM 26

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REVERSE MORTGAGES A BAD MOVE

POPI general manager Brenton Harris argued that reverse mortgages often left elderly clients in financial ruin when they drew out too much equity. One commenter disagreed.

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

“Do what is in the best interests of the client. The people I've seen and set up with reverse mortgages get all the information prior to applying, I do charts based on current growth and on zero growth so they can be fully aware of where they will be in the future or what will be left for any inheritance. I've found the ones who are really against the elderly having equity release are those who think they should be inheriting it, not see it going to the lender years down the track. Personally I would rather see my parents reverse mortgage their home, get the money to use now, stay in the home they are used to and have some fun while they still can if they want, I don't want or need to inherit their home, they worked for it, and it's up to them to decide if they want to use the equity or not. Well informed client, full transparency and good service, make the RM a good product to have in your tool kit.” Rastafarian on 7/6/2013 1:47PM

Brokers split on house calls A top broker’s decision not to make house calls has the industry divided on the best way to meet with clients

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hen Mark Davis and Jason Back of the Australian Lending and Investment Centre said their business didn’t visit clients’ homes, opting instead to schedule interviews at their office, brokers were divided. Some argued for the old-fashioned house call, saying it relayed a more personal touch, while others said office appointments increased the industry’s professionalism. Garry agreed with Davis’s approach, having tried client appointments both ways. “Couldn’t agree more with this sentiment. In the early days I was at clients’ homes at night and did the loans during the day and wasted so much time with clients shopping and travelling. Now the clients come to me and they know they are there to do business. We cover all facets of their finances at

BROKER CRACKS HALF-BILLION

When MPA Top 100 Broker Mark Davis cracked half-a-billion dollars in settlements, his peers were effusive in their praise. Wilko on 5/6/2013 12:06PM “Let’s hear more of these stories! I know Mark is not the only one like this across the country and it is good to hear from all of the brokers who are doing well.”

the meeting and the deal is done in one meeting. With longer term clients, I just email and express mail docs back and forth and it works perfectly for everyone.” Mike Clarke, however, said visits to a client’s home or business could provide valuable insight. “It enables a deeper feel for their operations. As an example, one might visit a business where the principals have business and resi lending needs. A site visit enables you to check on things like staff contentment, stock obsoletion, organisation and production, etc. It also shows a genuine interest in the client.” Jason Back stepped in to remind everyone that “what has driven Mark Davis’ success ... is not a one size fits all approach. ALIC has other managers with different service offerings that will see a client at a time and place that works for them.”

Andrew Hetherington on 5/6/2013 11:45AM “A phenomenal effort Mark, but not surprising given your work ethic and client service focus.” Melissa Huynh on 5/6/2013 12:40PM “Well done Mark! Congratulations. It's great to see such passion still exists with company directors. Truly, hats off to you!”

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


ONE YEAR ON 27

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ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and influential trends that made headlines 12 months ago Australian Broker Issue 9.12 Kane to champion Advantedge enhancement

ING Direct ramps up BDM presence

RBA can stop playing catch-up

Upon succeeding Steve Weston as Advantedge general manager of broker platforms, former FAST head Steve Kane said the business would not undergo a major strategy shift but would continue to focus on its white label products and software platform and enhance its diversification offerings. Overall, Kane promised to continue the aggregation group’s previous drive under Weston.

Following the launch of its Broker Partner Program, ING Direct said its BDM visits were up 120%. The bank’s then head of broker distribution, Mark Woolnough, said the enhanced BDM presence was in direct response to feedback from brokers. As a result of the ramped-up BDM visits, Woolnough said the lender saw a clear increase in broker satisfaction.

Following its 25bp cash rate cut in June last year, 1300 Home Loans founder John Kolenda said the Reserve Bank could finally stop playing “catch-up” with the economy. While Kolenda conceded that the rate cut would not be a panacea for consumer sentiment, he said it would provide a much-needed boost. He argued that the RBA had finally “grasped the severity” of Australia’s economic situation.

What’s happened since?

What’s happened since?

What’s happened since?

Under Kane, Advantedge’s white label offering continued to grow, while the group rolled out enhancements to its Podium software. Kane must have impressed, as he was recently named as replacement for NAB general manager of broker distribution John Flavell. Kane’s Advantedge position has been left vacant, as the heads of PLAN, Choice and FAST now form a NAB growth partnership team.

Last year, Woolnough was promoted to head up the lender’s entire third-party distribution network, including wealth management, super and banking. The move saw ING Direct combine its BDM teams across Australia, training teams in both wealth and mortgage products in order for them to be able to provide sales and support for all of these products to third-party businesses.

It appears the RBA wasn’t quite done playing catch-up. Since Kolenda’s pronouncement, the Reserve Bank has cut the cash rate an additional 75bps, most recently dealing a shock rate cut in May. The cuts have now brought the official cash rate to a record low, and some major banks have predicted the RBA could have one more cut left in its easing cycle before the year’s end.

Service the key to success amidst gloomy credit growth Choice Aggregation’s Stephen Moore and Westpac’s Tony MacRae offer tips for thriving in a tough economic environment

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n the current economic climate, many brokerages are faced with the challenge of how to substantially grow their businesses. Stephen Moore of Choice Aggregation says it’s a key challenge for the industry. “I think the main challenge for brokers, in the current environment, is ‘how do I successfully grow my business when the market’s tracking at 5%, not 15% like it was a number of years ago?’ For me, the challenge for brokers is to grow their business as a business, and for me there hasn’t been the level of focus, for some brokers, on business efficiency and effectiveness. So I think that’s probably a key trend that we’re going to see over the next period: working closely with brokers to help them grow

their business as a business.” Tony MacRae of Westpac says that in order to transition into a business growth environment brokers need to ensure that all opportunities are maximised. “In a low-growth environment, really nailing the delivery of turnaround, of service, getting it right the first time for customers, for brokers and the lender is absolutely critical. So in Westpac we’ve called this out as one of our four key strategic themes for the second half, focusing on service quality, and we’ve got a program running that we term ‘first to write’, which is all about ‘how do we get an answer to the customer far quicker, with less conditions, less complications?’” Online marketing is a key avenue for growth that can’t be overestimated. However, Stephen Moore warns that it’s a noisy

marketplace and brokers must work hard to differentiate their brands. “Technology is really a key enabler, and the challenge there is to take the power of online, the efficiency that comes with online, and marry that to the face-to-face proposition that brokers have. There’s some real power in that. But what that means, given that we’re now in the digital age, is it does focus on

THE CHALLENGE FOR BROKERS IS TO GROW THEIR BUSINESS AS A BUSINESS –S  TEPHEN MOORE

the importance of brand. It’s very difficult to break through the clutter in the marketplace unless you have strong brand behind you. There’s some macro-level trends that will play out over the next period for brokers.”


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Davis cracks half billion mark MPA Top Broker Mark Davis has hit a major milestone

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elbourne-based broker, Mark Davis, has reached an extraordinary – and possibly record-breaking – milestone: he’s written more than $507m in FUM since starting out at the Australian Lending & Investment Centre (ALIC) less than three and a half years ago. “We’ve won the AMA Australia’s Top Broker award for the past few years and hopefully we’ll do ok this year – we’ll see what happens,” says Davis, who started at ALIC after 21 years at ANZ. Davis believes the reason he’s been so successful is due to his constant dedication to the role. “We live and breathe what we do; it’s a 24/7 role. It’s the ability to actually handle and manage 200 relationships, all at the same time and actually make the customers feel important. “The other secret is dealing with the right type of clients who are going to be with you for a long period of time – our runoff is really, really low. If you go after those types of clients, you actually don’t have to manage those clients. We don’t market or advertise. Until a month ago, we only had a one-page website.” Furthermore, unlike many brokers, Davis has a strict ‘no out-calls’ policy. “We don’t go see clients. If a client thinks you’re important enough, they come see you. You build up the client’s mind-set that they have to come and see you. We set the expectation that, ‘this is a planning process,

Mark’s diary is full and there is a wait-time’.” Davis says his schedule has occasionally been booked as much as five weeks in advance and clients know they need to plan ahead if they want to see him. However, when they do, the service is top-of-the-line. “We look for clients that have an investment belief, clients that have an appetite to borrow, clients who borrow money. We don’t want to deal with rate shoppers. We won’t even talk about rates in the first hour-and-a-half meeting. It’s really just getting specific clients who really value progression.” Davis says he hopes his story might inspire younger people into the broking industry, which is often perceived as ‘dying’ – and possibly even pull a few more people away from working at the major banks. “This story shows that [broking] is an industry that people can succeed at… It also proves that moving from banking to the broking industry can be successful.” While he says he’s not planning any celebrations for reaching a personal sum total of $500m, Davis says ALIC is planning something to ring in its $1bn mark, as a company. “For a billion, we will [celebrate]. Our aim is to write $1bn a year in 2017. We are currently on track at $400m for 2013.”

OUR AIM IS TO WRITE $1BN A YEAR IN 2017. WE ARE CURRENTLY ON TRACK AT $400M FOR 2013

MOVERS & SHAKERS ■ HERRON TODD WHITE MAKES

MAJOR APPOINTMENT

Property advisor Herron Todd White has announced the appointment of Andrew Robertson as its first non-executive director on its board. Herron Todd White chairman, Gavin Hulcombe, says the appointment is significant as the group approached the major milestone of $100m in turnover this financial year. “After five years of successful growth in which Herron Todd White has doubled in size, despite a challenging market environment, we have decided to strengthen our board through the additional governance, business vision and specialised skill sets of two non-executive directors,” says Hulcombe. “We are delighted to announce Andrew Robertson as our first NED appointment. Andrew is a Fellow of the Australian Institute of Company Directors and brings to Herron Todd White a diverse range of business experience, including management consulting, advertising and marketing, business development and specific valuation industry experience through his previous role as CEO of Valuation Exchange (ValEx).”


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IN FOCUS

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a Trobe Financial recently hosted its 2013 National Achievement Awards for Chief Investment Officer of the Year and Chief Operating Officer of the Year for Australian superannuation funds and other fiduciary investor organisations. The awards were held in Melbourne, and winners received a cheque for $10,000 towards an educational program incentive.

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


INSIDER

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JOB OPPORTUNITIES FOR BEAUTIFUL BROKERS

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What brokers can learn from Star Trek

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hink Star Trek is all about daring adventure and on-board drama? There may be plenty of both, but that’s not all the show had to offer, according to writer Alex Knapp of Forbes magazine. And brokers could also learn a thing or two about managing a busy, blissful business.

1. FIND THE RIGHT LEADER

From James T. Kirk to Jean-Luc Picard, any company could covet the leadership of the starship Enterprise. Kirk may have been hot-headed and a bit of a Lothario, but he was also known for his dedication to fairness, education and strategy. Picard was a gentler leader who focused on understanding and compassion but who wasn’t afraid to draw a hard line when necessary.

2. AVOID GROUPTHINK

Kirk’s main advisers were Dr Leonard McCoy and Commander Spock, and, according to Knapp, that gives him a major advantage over leaders who surround themselves with ‘yes men’. “However, the very fact that Kirk has advisers who have a different worldview not only from each other, but also from himself, is a clear demonstration of Kirk’s confidence in himself as a leader,” Knapp writes. “Organisations that allow for differences of opinion are better at developing innovation, better at solving problems, and better at avoiding groupthink.”

3. KNOW YOUR EXPERTS

From Uhura’s language skills to Troi’s empathic abilities, every team member had

their area of expertise and they took the lead in situations where they had the best chance of success. This can be a tough lesson for the micro-managers and control freaks among us, but sometimes stepping back and letting the experts in your organisation do their jobs will get you the best results.

4. DIVERSITY MATTERS

In a show that started in the 1960s, when TV wasn’t known for its diversity, the bridge team on the Enterprise hailed from all parts of the planet, and later from all parts of the universe. This diversity made it easier for the ship to connect with and understand different species they met on their journey – much like today’s companies that are serving an increasingly diverse client base.

5. CHALLENGE EMPLOYEES TO HELP THEM GROW

No one becomes a good leader simply by being promoted. It takes experience and obstacles to learn how to think strategically and to understand how to lead a team. Both captains frequently sent their employees on difficult and challenging missions to help them improve their skills and confidence. “When you have someone on your team who’s doing their job, and doing it well, it can be hard to assign them new or more difficult tasks in a way that shakes up your organization,” Knapp writes. “But to be an effective leader, you need to shake them up, so that when your team faces harder crises, they’ll be more resilient and effective.”

n case you’re searching for a new staff member, and you want someone who’s not just talented and competent but easy on the eyes as well, we’ve got just the recruitment website for you. The controversial online dating website whose exclusively attractive membership decides whether other members are beautiful enough to remain, BeautifulPeople.com, recently expanded its services. The website now offers a free recruitment feature for employers seeking attractive staff, and attractive people wanting jobs. Managing director Greg Hodge said in a statement that most of his members were in lucrative professions. “But, for those who aren’t, giving them access to potential employers is an added benefit to their membership, especially in these economic tough times,” Hodge added. Individuals and companies looking to hire have a dedicated business profile and access to 750,000 beautiful people. They are able to pursue members who indicate they are looking for a job, while members have the opportunity to browse job listings and apply directly to companies. “An honest employer will tell you that it pays to hire good-looking staff,” Hodge said. “Attractive people tend to make a better first impression on clients, win more business and earn more.” Hodge insisted that he wanted the service to be taken seriously, and not to be used as an excuse to ogle beautiful men and women. He said the site’s staff validated each business to ensure that the job opportunities posted were “safe and legitimate”. Employment lawyer Blair Scotland, principal at Dundas Street, said it was not unlawful to refuse to hire someone on the basis of their physical appearance. “There’s 13 prohibited grounds under the Human Rights Act, and appearance isn’t one of them, so on that basis it’s not a prohibited grounds of unlawful discrimination,” he said. Looking around the Australian Broker office, we’re fairly convinced our own HR department hasn’t discovered the site yet. Let’s hope it stays that way.


DIRECTORY brokernews.com.au

EDUCATION/TRAINING

Cornerstone Sales Consulting 07 3264 7100 www.cornerstonesalesconsulting.com.au tracie@cornerstoneslaesconsulting.com.au Page 7

FINANCE

Semper Capital Pty Ltd 1800 SEMPER (1800 736 737) enquiries@semper.com.au www.semper.com.au Page 21

LEGAL SERVICES

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National Australia Bank www.nabbroker.com.au Page 5 Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4

NON BANK LENDER

Rent4Keeps 1300 763 020 www.rent4keeps.com.au Page 19

Bransgroves Lawyers 02 9221 9522 info@bransgroves.com.au www.bransgroves.com.au Page 6

SHORT TERM LENDER

LENDER

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

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 11 Liberty Financial 13 11 33 www.liberty.com.au Page 3

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

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

Deposit Power 1800 678 979 www.depositpower.com.au Page 10 RP Data 1300 734 318 Page 15 Trailerhomes 0417 392 132 Page 26

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 8

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


Australian Broker magazine Issue 10.12  

The no. 1 news magazine for Australian Broker.