Australian Broker 13.11

NEWS Macquarie dials back LVR Stricter lending criteria introduced P8

ANALYSIS 2016 Federal Budget round-up What the new budget means for brokers P10

OPINION The allure of rentvesting The investment strategy borrowers are loving P14

JUNE 2016 ISSUE 13.11

BEST PRACTICE How to bolster your brand

Seven steps to kick-starting your brand presence P16

INDUSTRY SPOTLIGHT The regional rundown

Regional brokers in the spotlight P20

RICHARD BRANSON The entrepreneur’s entry into the Australian mortgage market, and what brokers can expect from Virgin Money’s first home loan product P18

MARKET TALK Banks underestimate foreign property purchases Lenders and economy at risk P26

BORROWER SNAPSHOT 2

NEWS

ASSOCIATIONS MFAA welcomes ASIC’s review parameters P4

REGULATION

LENDERS

BBSW case against ANZ and Westpac strengthens P6

Macquarie clamps down on lending for high-density housing P8

BROKERNEWS.COM.AU

‘BEING FRUGAL’ IS AUSSIES’ BEST SAVINGS STRATEGY

EDITORIAL

The strategy used by Australian first home buyers to save for their first property

Editor Madelin Tomelty News Editor Julia Corderoy Journalist Maya Breen

29%

55%

living with family

Production Editors Roslyn Meredith Hayley Barnett

Sales Manager Simon Kerslake Account Manager Rajan Khatak Marketing and Communications Manager Lisa Narroway

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Designer Martin Cosme

cutting back on eating out/entertainment/ shopping and holidays

SALES & MARKETING

Traffic Coordinator Lou Gonzales

Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

60%

EDITORIAL ENQUIRIES

Madelin Tomelty +61 2 8437 4792 Madelin.Tomelty@keymedia.com.au

SUBSCRIPTION ENQUIRIES

tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

being frugal with household expenses

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au

Source: St.George Bank

tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com

SAVERS SUFFER DUE TO RATE CUT Following the slashing of rates by many lenders after the RBA’s unexpected rate cut of 25 basis points, Sally Tindall, money editor at RateCity.com.au, has said this may not be the best news for Aussies trying to save.

This round of cuts, and the projection of further RBA cuts in coming months, she said, would hit savers hard.

“For people who rely on their

savings, such as retirees, this news is going to hurt,” Tindall said. “They’re already finding it hard enough to make ends meet, so the prospect of earning less than inflation is a pretty bleak one.

“Young Australians saving up for their first home or their first car will also find this news hard to swallow, particularly if their bank has chosen to cut rates further

Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia

than the RBA. RateCity.com.au research shows that, unlike most home loan rate cuts, the majority of savings rate cuts are effective immediately.

“While most mortgage holders won’t get any relief from their home loan repayments for a few weeks, many of the cuts to savings rates came into effect the same day they were announced,” Tindall said.

Offices in Sydney, Auckland, Denver, London, Toronto, Manila This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry 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 Ehrenberg-Bass 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.

ASSOCIATION HAPPENINGS 4

DATES TO WATCH

MFAA WELCOMES ASIC’S REVIEW PARAMETERS The MFAA has announced its full support of ASIC’s review into broker remuneration. This follows the release of the regulator’s final scoping paper, which sets out the review’s parameters and has been informed by industry feedback, including responses by the MFAA, which issued a submission in March this year.

In a statement released to the media, the MFAA said, “The MFAA supports this final scope, as it aligns closely with the majority of the recommendations in the MFAA’s March 2016 submission. The MFAA has worked closely with ASIC during the development of the scope both directly and with engaging brokers for the two roundtables in Sydney and Melbourne.”

MFAA chief executive Siobhan Hayden added that the association was pleased that ASIC would be extending its review far beyond only mortgage brokers’ remuneration structure, to include remuneration arrangements of “all industry participants forming part of the value distribution chain”. This includes lending institutions, aggregation and broking entities, and associated mortgage businesses – such as comparison websites and market-based lending websites – and referral and introducer businesses.

ASIC also confirmed the review would extend to non-monetary benefits that relate to the distribution of residential loan products.

However, it will not extend to

loan products outside of residential mortgages, such as reverse mortgages or construction loans, which do not comprise a predominant proportion of the home lending mortgage market.

Hayden announced that all of these decision by the regulator were welcomed by the MFAA. “We also endorse the inclusion of referral and introducer businesses as part of this review, as they are sometimes involved in remuneration outcomes which may be considered as unregulated and may involve receipt of a benefit without proper disclosure,” she said.

“The exclusion of less significant products such as reverse mortgages and construction loans is also welcome,” she added.

WHAT THEY SAID...

Steven Munchenberg “We are not saying there are no problems, but we think that a royal commission is the wrong solution” P6

A rundown of the next fortnight’s events

JUNE

8-10 What: Darwin & Beyond Where: Darwin, location TBC The particulars: This inaugural event is for finance brokers, lenders and service providers who have an interest in discovering new business opportunities in new markets.

Darwin & Beyond will reveal opportunities to gain knowledge and networks that can aid international growth.

JUNE

John Flavell “At the end of the day, we need a structural overhaul of our taxation system to promote corporate investment on our shores. We need an environment that encourages Australians to invest in themselves and their future worth in the workplace” P12

Nancy Papos “Overall it’s a budget that benefited more than hampered the mortgage industry” P12

15 What: FBAA ‘Build Your Vision’ national tour Where: Sydney The particulars: At this PD Day, speakers include international CEO Steve Weston, talking about the differences in the marketplaces, marketing guru Deena Janes on digital disruptions, and the FBAA’s Top Industry Performers will share knowledge gained on their roads to success.

JUNE

16 What: Australian Customer Experience Workshop Where: Doltone House, Hyde Park, Sydney The particulars: RFi Group’s Australian Customer Experience Workshop will bring together leaders across a variety of industries to present and host workshops on best customer experience in today’s market.

REGULATORY ROUNDUP 6

WORLD NEWS

BANK LENDING GROWTH DOWN TO 5.7% YEAR-ON-YEAR

The effect of APRA’s crackdown on banks’ investment property lending growth 100% 90% 80% 70% 60% 50% 40% 30% UNITED KINGDOM UK WATCHDOG RULES OUT BANKING SHAKE-UP AustralianBankingFinance.com has reported that the UK’s competition watchdog has set out a series of reforms to encourage competition in the lending market, following a two-year investigation into the UK banking sector.

In a 400-page report on the competitiveness of the retail banking market, the Competition and Markets Authority (CMA) reveals a list of “remedies” to help the £16bn personal current account and SME lending markets and make it easier for customers to compare accounts and switch lenders if they can get a better deal elsewhere.

But the CMA has ruled out a radical shake-up of the UK banking oligopoly, stating in the report that it did not believe that breaking up the big banks would solve the fundamental problems.

“Some people think that there is too little competition in UK retail banking because the market is dominated by a small number of big banks, and that the way to put that right is to bring more competitors into the market by ‘breaking up’ the big banks,” said Alasdair Smith, chair of the retail banking investigation.

“We have looked carefully at this, but have come to the view that it is not the size of the banks or the number of banks that is the problem.”

However, he admitted that banks had been getting away with doing too little for their personal and small business customers for too long.

The investigation was sparked by concerns that customers were getting a bad deal in a market dominated by the big four banks – Lloyds, HSBC, Barclays and Royal Bank of Scotland – which collectively hold 77% of the personal current account market and 85% of business accounts.

20% 10% 0% -10% -20%

08/14 ANZ

11/14 CBA

02/15 NAB

05/15 SUN

08/15

WBC

MAC

11/15 BIG 6 (RHS)

02/16 Source: Macrobusiness.com.au/APRA

ANZ AND WESTPAC BBSW SCANDALS HEAT UP, ROYAL COMMISSION SEEMS LIKELY With the latest poll results showing Labor’s increased popularity leading up to the federal election on 2 July, the Australian Bankers Association (ABA) is bracing for the increased likelihood of a Royal Commission into banking and financial services.

According to reports by The Australian, new court documents have emerged from the cases

by ASIC against ANZ and Westpac for alleged manipulation of the bank bill swap rate (BBSW).

The new court documents provide fresh detail on the separate cases, with one recording revealing that two Westpac traders openly discussed how “f------ with the rate set” could hurt some customers and ultimately and “deservedly” harm the bank’s reputation if an inquiry into the bank bill market was ever conducted.

Other evidence has also come to light regarding ASIC’s case against ANZ, with transcripts of conversations between traders showing how they openly talked about accumulating and selling bank bills with the apparent intention of shifting the setting of the BBSW. The transcripts reveal the traders joking about how they were “good blokes” and how “legit” the Australian financial system was.

Scandals such as these have been the impetus for the Opposition’s push for a Royal Commission into the banking industry, with cases such as

ASIC v ANZ and ASIC v Westpac proving that there are “systematic problems in our banking and financial services ­industry”, according to Opposition Leader Bill Shorten.

However, ABA chief executive Steven Munchenberg does not think a Royal Commission is the right strategy.

“We are not saying there are no problems, but we think that a royal commission is the wrong solution,” he told The Australian.

“Where there have been issues (with the banking system), which have been identified, we are working to fix them. But if Labor is elected there will be a royal commission and we will see what comes of it.”

Munchenberg believes the Murray inquiry into the financial system, which reported in 2014, has already addressed the structure of the financial system, including the vertical integration of the banks and their wealth management arms, and said the ABA had also recently announced plans to improve protections for corporate whistle­blowers in the banking system.

He added that the ABA was working with ASIC on the development of a last-resort compensation scheme that would operate if people suffered as a result of misconduct in the ­financial system.

“We get the concerns that have been raised,” Munchenberg said. “But there are things already in place to fix all of them.”

LENDER UPDATE 8

MACQUARIE DIALS BACK LVR AMID APARTMENT OVERSUPPLY FEARS

Westpac and St.George have lifted the maximum LVR for investment loans to 90%, up from 80%.

As the bank with the largest share of investment loans, the major bank had introduced a lower LVR than the other banks last year in order to get under the regulator’s 10% investment lending growth limit.

Now, with refinance growth beginning to ease, many banks are looking at the investment lending space once again and beginning to implement measures to benefit the sector, such as increasing their LVRs for investment loans and offering more competitive interest rates in an attempt to boost growth.

According to Digital Finance Analytics’ household survey, demand from investors is on the rise. Last month there was an increase in investment loans as investors gained renewed confidence in home price growth, and saw the prospect of negative gearing changes dissipate and the RBA cut interest rates.

Digital Finance Analytics’ Martin North weighed in on the comeback of this borrower segment recently, saying, “Given that household lending appears to be the only game in town to force economic growth, it will be interesting to see how the RBA and APRA react to a resurgence in the more risky investment lending sector.

They seem happy with a 7% annual growth in credit, a rate way higher than real incomes or inflation, meaning high household debt will go higher still.”

capital growth being reassessed.

Also under the new Macquarie rules, stricter lending conditions have been introduced for borrowers seeking multiple properties on separate titles located within a concentrated area, or using security that consists of multiple private properties. “Independent employment and income verification checks, including phone calls to employers, are undertaken on a risk assessed basis,” Lee told mortgage brokers in the memo.”This means that any or all loan applications can be subjected to employment and income checks.”

Up to 120 postcodes are considered high-density and are affected by the new measures, including Melbourne’s World Trade Centre precinct, South Wharf, Southbank, Docklands, parts of South Yarra and South Melbourne, and Chapel Street North. In Sydney the listings include The Rocks, Dawes Point, Haymarket, Sydney South and Millers Point. Inner-suburban postcodes in Adelaide, Perth and North Hobart are also affected, as well as more than 40 Queensland postcodes in the CBD, inner-suburban and Gold Coast areas.

Property valuer Gavin Hegney has since warned that a 20% fall in Perth apartment values and rents was triggered by the same mix of demand, supply and pricing now happening in Sydney, Melbourne and Brisbane.

UP TO 25% OF MAJOR BANKS’ CUSTOMERS DISSATISFIED

Satisfaction of home loan customers 100% 94.3%

93.3% 91.2%

Percentage ‘fairly’ or ‘very’ satisfied

WESTPAC LIFTS INVESTMENT LOAN LVR TO 90%

Macquarie has announced that, effective immediately, it is tightening lending criteria on postcodes where there are a number of new high-rise apartments being built.

In a note to brokers, Doug Lee, head of sales and distribution at Macquarie, wrote about “important changes to credit policy” on lending to single and multiple apartment buyers in popular high-rise postcodes, saying the LVR ceiling would be dialled back to 70%. This measure comes amid growing fears about falling demand for apartments and oversupply.

The number of apartments available in Sydney alone has doubled in the past four years, and the latest approval data shows that at least 200,000 units will come on to the market in the coming months, which is equivalent to the existing number of apartments for sale, according to a report by CoreLogic RP Data, which analyses property sales and rents.

However, the Australian Financial Review has reported that the actual figure is likely to fall short of that as projects are cancelled because of falling local and overseas demand, particularly thanks to the major banks’ recent clampdown on lending to overseas borrowers.

According to the AFR, prices on central business apartment sales in Melbourne are already being squeezed because of overly optimistic expectations of rental income and

90%

87.6%

85.7%

85.0% 83.0% 79.4%

80%

78.8%

78.6% 76.4%

76.0%

NAB

ANZ

70%

60%

ING Direct

Bendigo Bank

ME

Bankwest BankSA

Bank of Suncorp Queensland

Westpac St.George

CBA

Source: Roy Morgan

10

ANALYSIS 2016 FEDERAL BUDGET ROUND-UP The Federal Budget has been announced and the industry has weighed in. So, what does the new budget mean for brokers, their clients and the market in 2016?

WHEN THE TREASURER , Scott Morrison, handed down the 2016 Federal Budget on 3 May, he hailed it as “not just another budget” but an “economic plan” for our post-mining boom transition.

“Australians know that our future depends on how well we continue to grow and shape our economy as we transition from the unprecedented mining investment boom to a stronger, more diverse, new economy,” he says.

“Australians have clearly said we must have an economic plan to make this economic transition a success.”

The Federal Government’s “economic plan” centres around two key pillars: jobs and growth. To achieve this, the budget promises to boost new investment, create and support new jobs, and decrease the tax burden on Australian families.

Australian Broker investigates how the budget plans to deliver on these promises, and how its delivery will affect mortgage brokers, their clients and the property market.

Boosting business investment Measures announced in the budget

mean that from 1 July this year the small business tax rate will be lowered to 27.5%, with Morrison also confirming the budget will keep the $20,000 asset write-off incentive for SMEs announced in last year’s budget.

The annual turnover threshold for both of these incentives will be increased to $10m.

These measures have received widespread praise from the industry.

The head of debtor finance at Scottish Pacific, Greg Charlwood, said the budget would help SMEs across the country

11

deliver broad economic growth.

“Having supported SMEs in working capital since 1988, we are pleased to see the benefits for companies with a turnover of $2m being extended to a sensible level of $10m turnover, where we see it will have greater impact in terms of business investment and boosting job growth and employment,” Charlwood said.

“We support the reduction in the company tax rate for SMEs … as it should energise SMEs, encourage business investment and drive growth and innovation.”

This boost in business investment will also have positive f low-on effects for brokers. As more small businesses go out and invest in their growth, brokers can expect a higher volume of small business clients requiring loans to fund their growth plans.

However, it won’t just affect commercial brokers or commercial lending, according to the FBAA. Peter White said these measures would ensure mortgages remained well within the grasp of working Australians.

“The tax cuts to small and medium-sized businesses will go a long way to creating more jobs, while the overall tax package for individuals should help lift the burden on the household budget and relieve pressure on mortgage repayments.”

Boosting the housing market As anticipated, Morrison announced that the Federal Budget would not remove or limit negative gearing, claiming its removal would “increase the tax burden on Australians just trying to invest and provide a future for their families”.

The Real Estate Institute of Australia (REIA) has welcomed this confirmation, saying it supports the role housing plays in a transitional economy.

“This recognises that the current arrangements increase the supply of housing for our growing population, keep rents affordable,

A SEA OF SMES

2,025,066 Number of SMEs in Australia

4.5 million

Number of people employed by Australian SMEs

97

of Australian businesses are SMEs

68 Male SME operators

32 Female SME operators Source: Australian Government

12

ANALYSIS WHAT DO BROKERS THINK?

Nancy Papos, Key Loans

Reece Hogan, Mortgage Choice

Theo Chambers, Shore Financial

David Ryman, 1st Street

“Overall it’s a budget that benefited more than hampered the mortgage industry, with the government’s mantra of growth, jobs and their focus on the SME space. If all of these are achieved, then of course it is good for our industry as it will lead to the ability to borrow for a home, which then leads to us providing the finance!”

”The budget was deafening in its silence when compared to the reaction of Abbott and Hockey’s 2014 budget… [M]ost of the heavy lifting in the economy was left to the Reserve Bank, who entered stage left beautifully the day prior to announce a 25 basis point interest rate cut. It was this decision, far more so than the budget, that will hopefully give fence-sitters the confidence required to transact in the housing market.”

“The budget announcement and RBA cut were both positive movements for the broking industry. We should see more buyers enter the property market, with more investors, due to the lower funding costs. Additionally, we are likely to see individuals planning for retirement due to their superannuation limitation.

This means those looking to build wealth to retire will now look at other ways of investing with tax concessions, instead of super, and are likely to look at purchasing property in their personal name with negative gearing and capital gains concessions.”

“Superannuation has been targeted for some pretty significant changes while negative gearing and capital gains has been left off the table – which property investors would have to be happy about. Small/mediumsized businesses are the clear winners, with a lower tax rate, which should help their bottom lines. As a whole, however, borrowers have not been greatly affected.”

“The tax cuts to small and medium-sized businesses will go a long way to creating more jobs, while the overall tax package for individuals should help lift the burden on the household budget and relieve pressure on mortgage repayments” Peter White, FBAA and ease the burden on social housing,” REIA president Neville Sanders said.

Property research and investment firm Aviate Group disagrees with REIA’s view on housing supply, saying investors in established housing do not contribute to the flow-on economic effects that investors in new developments do. However, managing director Neil Smoli says leaving it unchanged still remains the safest option.

“Some of the negative gearing discussion leading up to the budget did not properly take a long-term view of any potential policy changes,

so it was perhaps the safest option to leave the current arrangements in place,” he said.

“At the end of the day, investors make a strong and undeniable contribution to housing options by way of rental stock. This provides direct housing options for those that do not have the means or have not yet sought the right advice that would allow them to enter the property market.”

But no boost to the bottom line While the 2016 Federal Budget has been welcomed and praised by many in the mortgage

and property industries, CEO of Mortgage Choice John Flavell has labelled it as “somewhat frightening”.

“At a time when we require a structural overhaul of our taxation system, we get the usual show bag of ‘fiddles at the fringe’ to ensure no one (other than smokers and cashed-up retirees) is offended in the lead-up to the election,” he said.

“At the end of the day, we need a structural overhaul of our taxation system to promote corporate investment on our shores. We need an environment that encourages Australians to invest in themselves and their future worth in the workplace.”

The budget fails to address Australia’s increasing levels of indebtedness, Flavell says.

“Since we fell into the red in 2009, the shortfall between what the government earns and spends has risen to an amazing 21.5% of gross domestic product. This is an inordinately large sum of money – something the government doesn’t seem to care too much about.”

The Mortgage Choice head did, however, praise the budget for its incentives offered to small businesses, but ultimately labelled it as “benign” and a “clever PR stunt”.

14

OPINION THE ALLURE OF RENTVESTING ‘Rentvesting’ is rapidly growing in popularity among consumers. Chris Gray explains why brokers should consider recommending this investment strategy to their clients in 2016

WITH HOUSING affordability an ongoing barrier to home ownership in many Australian postcodes, 2016 could be the perfect year to recommend ‘rentvesting’ as an option for your customers.

Rentvesting is the practice of renting in a desirable area while buying in a more affordable one, and is a great long-term wealth creation strategy with several merits for both seasoned property investors and market newcomers alike.

As an investment plan, and if implemented correctly, rentvesting offers strong financial returns and works well in the vast majority of market conditions. In many cases, renting out a number of low-value properties extends better protection during recessions and market downturns than investing all wealth in a single, high-value property.

a week – a total of $1,800 in monthly income.

That $1,800 a week rental income could then be used to rent a $3–4m property for the buyer to live in themselves.

There is also a common belief among consumers that rent money is dead money, and this is true only to some extent. If the equivalent amount is invested into property, shares, or business, this could actually provide a greater profit than investing in a single property.

As an investment strategy, rentvesting is not limited to property – it can also be used as a strategy for other investments, which is something that should be relayed to your clients.

The same mentality can be used to buy assets like cars and boats. Through implementing a rentvesting strategy, I own a Lamborghini that has appreciated by $100k rather than

As an investment plan, and if implemented correctly, rentvesting offers strong financial returns and works well in the vast majority of market conditions Furthermore, with recent data suggesting that rental rates may fall over the coming months, rentvesting is becoming extremely appealing to consumers.

Rent money doesn’t have to be dead money For first home buyers and new market entrants especially, property prices will likely increase faster than the ability to save, and it makes sense to enter the market in an affordable area while renting elsewhere. It’s formed an integral part of my personal property investment strategy for many years because the financial and lifestyle benefits to be gained through rentvesting are too great to be overlooked.

Another reason why rentvesting is so appealing is that it can often provide buyers with better financial returns than living in the property they own.

For example, instead of paying to live in a $2m home, it would make more sense to purchase two $1m properties and rent them out. This would roughly return $800 or $900

depreciating $100k. Likewise, I have a share in a $1.5m motor yacht that costs me $22k instead of $345k per year. There is a strong misperception among consumers that rent money is dead money, but this is only true if the equivalent funds are not reinvested elsewhere.

Focus on the figures It’s important that the correct advice is given to those considering rentvesting in order to build a property portfolio. For rentvesting to be effective, it is essential to examine the rental returns and capital growth predictions for a median-priced typical investment property, and then compare them with the relative rental returns and capital growth of more expensive property. It will work if there is a favourable difference.

As with any investment, it’s also important to reiterate that rentvesters need to concentrate on the numbers and remove fixed mindsets or emotions associated with renting from purchase decisions.

While investments aren’t free of capital gains tax, if a property is never sold the tax never has to be paid. Forget about the debate; renting and having investments instead of a home affords the negative gearing benefit of everyday ownership, and that’s what helps the everyday Australian.

A change in attitude In Australia, there is a misperception that renting is for those who can’t afford to buy a property. This is unlike other countries, such as Germany and many other European countries, where only 50% of the population own their homes.

Few high-income earners want to go into their office and admit they rent, which is

15

Chris Gray Chris Gray is CEO of buyers’ agency Your Empire

TECHNOLOGY UPDATE

‘DO YOURSELF A FAVOUR’ - INVEST IN TRAINING, SAYS NEXTGEN.NET

Deniz Ertem

understandable; however, the stigma associated with renting is a small price to pay to rent at a quarter of the price others are paying to live in the same area.

For rentvesting to work, tolerance of change is a necessity. A fear of being unable to rent a property for a long period of time is a factor that holds many consumers back from renting.

In most cases, though, landlords are unlikely to evict good tenants, and even if this does happen, it doesn’t necessarily have to be a negative – it can be an opportunity to upgrade to a better property.

At the end of the day, the beauty of rentvesting is that it doesn’t have to be forever.

It offers a better lifestyle, while setting up a profitable future.

NextGen.Net has borrowed Molly Meldrum’s signature phrase to issue a call-out to brokers, lenders and BDMs. “Do yourself a favour” and devote an hour to becoming proficient in ApplyOnline’s efficiency-driving features, urges a NextGen.Net training manager, Deniz Ertem.

The trade-off will be the maximisation of efficiencies and significantly reduced turnaround times. The value of the rewards resulting from a training session is far greater than the time invested, Ertem says.

NextGen.Net is focusing heavily on the worth of training, because some ApplyOnline features, including the new ApplyOnline App, are underutilised due to a lack of awareness and understanding of the technology’s capabilities.

“I regularly get feedback from brokers who say they are unaware of tools they can access within ApplyOnline,” Ertem says.

“Small things can make a vast difference. For instance, being able to validate an address or look up business details.”

Being better acquainted with ApplyOnline’s features, such as address file look-up and verification, ACN and ABN search and the ApplyOnline Supporting Documents service, is a huge advantage to both lenders and brokers.

ApplyOnline efficiency-driving tools are designed to make straight-through processing (STP) achievable, which is reason enough to become conversant with them, Ertem says.

But Ertem admits he understands why he and fellow NextGen.Net training manager Michael Tong have to sell the value of training to time-poor brokers.

“Taking an hour out of a busy schedule might seem like a big deal. But without exception, everyone who participates in a training session says how beneficial it was,” he says.

NextGen.Net director of sales Tony Carn believes the problem is that most people are familiar with ApplyOnline and therefore often assume they know how it all works.

“But there’s a lot of ApplyOnline functionality, and if you don’t know it’s there, you don’t even consider using it,” Carn says.

Tony Carn

“For instance, brokers need to know how to maximise tools, such as address verification, ABN details, the metric service (serviceability calculations embedded in lender applications) and the supporting documents service.

“All of these tools were designed to eliminates reworks. Brokers need to understand that reworks are all preventable.”

Ertem and Tong engage with users on a one-on-one basis, in face-to-face groups and in webinar training sessions.

All up the two of them have worked with over 600 ApplyOnline users in the past 12 months.

“One of the most satisfying things about my job is walking out of a session knowing that brokers now possess the knowledge to make their jobs easier and more productive,” Ertem says.

“They’ve got access to really cool tools to make their jobs easier. It makes sense that they know how to use them.”

Carn, who has sat in on many training sessions, describes it as “eye-opening” watching people’s reactions when they realise how much more value they can get out of the ApplyOnline lodgement, and how many more efficiencies they can build into their business.

Ertem generally begins his sessions by getting a handle on current behaviour and finding out what problems people are experiencing.

“I’ll then highlight the quality driving tools and show them how to do things such as split files, redact tax file numbers and so on – all things that help them with their day-to-day processes.

“Many brokers are unaware that they can upload supporting documents in a multipage PDF file through ApplyOnline.

When I show them that function I almost always hear a ‘wow’ from someone when they realise how much time they can save,” Ertem adds.

Carn points out that it’s not just brokers who benefit from training.

“Lender BDMs, who constantly receive calls from brokers asking for assistance, can save themselves a lot of work by instituting a process that includes training.

“Prevention is better than cure when it comes to reworks,” Carn says.

16

BEST PRACTICE YOU ARE YOUR BUSINESS William S Wooditch, author, keynote speaker and CEO, on the importance of self-discipline in business

HOW TO BOLSTER YOUR BRAND Business and branding expert Pamela J Green offers seven steps to kick-starting an improved brand presence in 2016 PERHAPS more than at any other time in history, in 2016 your name is your brand, according to Pamela J Green, a business executive, leadership consultant, keynote speaker and published author based in the United States.

“I think most of us get this concept – we live in a celebrity-obsessed society, so we understand how a person’s name can also be their brand,” she says.

“Social media also reinforces this idea. Our names are usually one of an infinite chorus of brands.

People can see who liked a New York Times article, who criticised a political position and who recently became engaged to whom. Most people today meet our name/brand before actually – or ever – meeting us in person.”

While many may see this as cold and impersonal, Green says this could actually be an opportunity to more objectively improve who we are – whether on a personal or business basis.

Referencing her book Think Like a Brand, (www.pamelajgreen.com), Green offers a summary of her seven steps to improving your brand in 2016.

1. Begin by writing your mission What drives you? To know this will help you determine what success means in your life. American football hall-offamer Michael Strahan, for example, knew that he didn’t want to disappoint his parents. Whatever drives you, Green says, a clear mission for achieving it will act as a discernible path on a reliable map.

2. Identify your business’s brand, needs and priorities This is for those who want to better bond their own name/brand to their business’s brand. What’s the connection? There

needs to be a mission connect between your personal brand and company brand – make sure they align fully.

3. Conduct your brand research Determine the future skills needed for what you want to do, and research the industry and businesses in the industry that have success in your ideal future. For the more personal branding perspective, ask yourself, “What are the long-term habits I need to adopt in order to be the person I want to be five years from now?”

That could be learning a new way of presenting yourself to clients or a different interview process.

4. Create your brand template If your brand were a can on a shelf, would it be dented, dishevelled and would the label be torn? If you ignore, reject or skip this step, Green says, then you’ve volunteered to live the life you have instead of the life you want.

5. Grow strategic visibility In a room or a business meeting, would you describe yourself as a church mouse or a brave eagle? Even if your brand emphasises a sort of low-key class and subtlety that already features an enviable client who’s who list, you don’t want your image to be diminished.

6. Identify your brand adjacencies While building your brand today, do not dismiss what it could be a decade down the line. You likely have unidentified talents. Or your brand/business may be utilised in a way you haven’t yet considered.

You work for yourself. The more skills and talents you acquire, hone and refine, the more value you can create for yourself. Even if you are in the employ of another, you are the CEO of your own business. It is up to you to build value and move your personal and business platform forward.

‘The business of you’ is supported by four pillars: your mind, body, spirit and emotional field. These spheres of energy support the platform that determines the value, health, growth and stability of your franchise.

For your business to succeed, you must adopt the mindset “If it is to be, it is up to me”.

Find a way or make a way. Those determined to create the very best in their careers and lives know the price of success and are willing to pay the cost every day. When others find your offering to be of value, you begin to build a recession-proof business.

The quality of your work will become your signature style, so make a disciplined habit one of your guidelines for success.

Be resilient, be adaptable, be willing to risk intelligently, and be ready to do those things that make a difference for people.

You are in business for yourself. You work for yourself. Think about it. There is no way around or out of this arrangement. You work for your freedom, your security, or your illusion of your security, your necessities, your luxuries, and all that emanates from the business of YOU. Your body must be able to cash the cheques your mind writes. Realise that your work is your personal portrait. It is created from the canvas of every email you type, every letter you write, every conversation you have, every thought that crosses your mind, and every action that emanates from that thought. Your work paints and frames you as not only a brand but a singular corporation.

It is your future; treat it with respect in the present.

7. Scale your brand Every brand needs to remain relevant in order to remain sustainable. To be sustainable, your brand needs to be scalable. Your ability to deliver consistent performance at a high level is what leads to brand sustainability. Assess who will help you be accountable for the achievement of your goals and the continued sustainability of your brand. On a personal level, that person may be a personal trainer; businesswise, it could be a promising employee.

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COVER STORY GOING ALL THE WAY Virgin founder Richard Branson and Virgin Money Australia CEO Greg Boyle reveal how the brand’s first home loan offering will fill a gap in the Australian mortgage market

WHEN FORMIDABLE entrepreneur and rebel Sir Richard Branson launched the Reward Me Home Loan to an intimate gathering of industry figures, brokers and media recently, expectations were high, and this couldn’t be helped. Why? Because every product the Virgin name is attached to seems to carry with it an air of excitement, an obvious uniqueness and an evident edginess that can’t be denied. The brand is known for two things: doing things differently, and putting the customer at the centre of every Virgin product experience it creates.

When it comes to Virgin Money’s first mortgage product then, it’s probably no coincidence that the company put the word ‘me’ quite literally in the middle of the product’s name. And it’s strategies like this that are quintessentially Virgin – adding a personal element, and striving to create a human connection, no matter what the brand is selling.

Greg Boyle, CEO of Virgin Money Australia (VMA) explains that keeping the average customer’s knowledge of the financial services industry at front of mind was what led to a product that is all about transparency and simplicity.

“When we did the research, the customers were really clear that what they expect from a brand like Virgin is a simple proposition that breaks down that complexity and is very transparent, and also something that rewards them for being a loyal customer,” he told Australian Broker following the launch of the Reward Me Home Loan on 26 May. At the launch, Branson himself told the room that his own confusing experience with a mortgage broker 30 years ago had made it apparent to him that financial services products were often conveyed in a way that made it hard for customers to grasp.

“That, plus a number of other experiences, made me think that the financial services industry was not transparent,” he said.

“When we talk about innovation, we can get caught up in all the bells and whistles and complexity,” added Boyle. “However, sometimes the greatest innovation is simplicity with some great value and benefits attached. That is what we are trying to do with this product — address that simplicity and value our customers.”

“Staying on-theme, VMA has also made the distribution side of the Reward Me Home Loan as unfussy and streamlined as possible by entering

into the thriving Australian market exclusively through a strong, nationwide network of mortgage brokers facilitated by innovation-focused aggregator PLAN Australia.

And given that recent consumer research conducted by VMA shows that mortgage borrowers often feel undervalued, unappreciated and disempowered in their relationships with lenders, launching the new product through the industry’s third-party channel makes sense. This is not only from a business perspective but also because it reinforces VMA’s focus on forging a customer connection.

“Virgin’s heritage is actually through a direct distribution channel. However, the research illustrated that it was clear that customers want a face-to-face proposition, or at least value that … The broker channel provides a great way for us

“Sometimes the greatest innovation is simplicity with some great value and benefits attached. That is what we are trying to do with this product” Greg Boyle to pick strategic partners who are consistent with our customer proposition and deliver that with a face-to-face experience,” Boyle said.

And while PLAN brokers are lucky enough to have access to the Reward Me Home Loan first, they won’t be the last, with VMA planning to open up access to other aggregators’ brokers in the near future.

As for the product portfolio, which for the time being is limited to a solo offering, Boyle is clear this is just the beginning for Virgin Money.

“The plan is to roll out a full range of banking products, starting with home loans and building out transaction accounts and deposits,” said Boyle, later adding, “It is not just a one-off. It is a key part of our broader strategy.”

Product power Speaking at the World Business Forum in Sydney on the day of the Reward Me Home Loan launch, Branson said he was already putting the wheels in

motion for other mortgage products.

“When we launched the mortgage product this morning I asked a lot of these mortgage brokers, did they like the product? And every one of them said they thought it was fantastic. But then I said, ‘Can you give me one thing you don’t like about it?’ and somebody said to me, ‘Well, self-employed people – you’re not taking on self-employed people; you wouldn’t be able to sign up to it!’ And I immediately got that changed,” he said.

Listening to those on the ground, he added, is the most important thing a business can do when rolling out new products and ensuring their success.

“You’ve just got to listen,” said Branson.

Boyle, however, was less specific when asked about the future range of products that brokers can expect to be able to offer their clients.

“In terms of the home loans space in particular, this is just the beginning. We have strong feedback from brokers and customers that they want to do

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[self-employed loans] with us. That is great, but we will be building out pragmatically and making sure the product is right for the segment rather than just rolling out products for products’ sake,” he said.

However, Boyle did tell Australian Broker that consumers and brokers could expect direct home loans in the near term, as well as broker home loan products.

“The Virgin brand does attract very successful entrepreneurs and small business owners as well, so your comment around self-employed does resonate with our target segment,” he said.

Value equals competitive rate plus rewards But aside from the brand power that the Virgin name naturally brings with it wherever it goes, Boyle suggests that you only need to, again, look at the name of the product to get a clear picture of exactly how much of a difference the Reward Me Home Loan strikes from other lenders’ home loan offerings. As it suggests, borrowers taking out a Virgin Money home loan will be rewarded with Velocity points on settlement and throughout the life of the loan.

Of the cross-collaboration between Virgin Australia and Virgin Money, Branson said: “Utilising the other Virgin companies makes

a lot of sense. Velocity is something that everybody can enjoy. If you can get that on top, so you are not just paying your mortgage, why not?”

Boyle believes that giving consumers reward incentives such as those on offer is one way that Virgin Money is filling a gap in the market.

“It fills a gap because I don’t think there is anyone out there that rewards anyone on an enduring basis whilst providing very competitive rates. That was what really resonated with customer research, so we wanted to try and address that,” he said.

As for what those responsible for distributing and pushing the new product think of the Reward Me Home Loan, Boyle confirms that broker feedback has been “very strong”.

“For the brokers, their feedback is that it really does fill a gap in their product offering,” said Boyle.

However, this is not the first time the industry has witnessed the mega-company launch mortgages in Australia. In 2013, Virgin Money withdrew from the mortgage market following the volatile post-GFC market. So, as the Boeing representative who sold Branson his first second-hand airplane to launch Virgin Australia said, this time, let’s hope it goes all the way.

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INDUSTRY SPOTLIGHT THE REGIONAL RUNDOWN The nation’s capital cities have stolen the spotlight for far too long. Here, some of Australia’s best regional mortgage brokers share their stories and divulge the unique opportunities and challenges that exist outside of the concrete jungle

Legend: Population

Median monthly mortgage repayments

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EOFY15 settlements

SPONSOR MESSAGE

Australia’s regional brokers play a pivotal role in the third-party lending market, not just as trusted advisers but as business owners and integral parts of their local communities.

Regional brokers stand out for their customer service and productivity, and time and again we hear testimonials from customers applauding regional brokers for going above and beyond to provide the best financial outcome.

In small communities, customers often have less access to expert loan

guidance. This makes the role of the regional broker even more important, as their customers depend on their experience and in-depth knowledge of the industry.

Broking is about more than just a series of deals; it is about real-life people achieving real-life goals, and regional brokers should be applauded for helping their local communities.

NAB Broker is proud to sponsor this feature, and I congratulate the brokers featured in the following pages, and all regional brokers.

Steve Kane, general manager, NAB Broker

JOHN KENNEDY Mortgage Choice $68,235,826

John Kennedy

MUDGEERABA, QLD

13,204

4,879

$2,056 Source: ABS

A mere 25-minute drive inland from the Gold Coast’s Surfers Paradise, the market John Kennedy services as a mortgage broker could be considered halfway between a regional area and a populous urban pocket, placing him in an ideal geographical position. No matter what their location, though, he believes the most valuable thing for a client is the same: relationships.

“I think clients value the personal relationship most highly. They appreciate dealing with the same person year after year and not having to explain their circumstances over and over to a new ‘personal banker’. This relationship fosters loyalty, which leads to referrals and repeat business,” he says.

Kennedy has been acutely aware of the importance of relationship building from the beginning, and not only with clients but also with other businesses in the area that offer services he doesn’t. In this way he has solidified a number of partnerships that facilitate cross-referrals, which works brilliantly for his business.

“Most of my business comes from repeat clients and client referrals. I also have a shopfront in a busy local shopping centre where I have been for almost 10 years, so a lot of people know where I am. And over the years I’ve built some great relationships with local agents and solicitors,” he says.

As for getting your foot in the door as a new regional broker, he believes that going to your existing network of friends, family and work colleagues is the best strategy.

“Then as you start to build your client base, try and grow your network of agents, solicitors, etc. The most important one, though, is the way you service your clients – word-of-mouth and client referrals are a great source of business as you grow your book.”

But Kennedy wasn’t always in the mortgage industry. He started his ‘second life’ as a broker 14 years ago when he was working as an accountant and was after a change.

“A work colleague of mine referred me to a Mortgage Choice broker when I was looking at purchasing an investment property, and I thought the concept was brilliant. I made further enquiries into mortgage broking and got to the point where I had to give it a go, and I haven’t looked back.”

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ANTHONY CLOUGH Aussie

$40,951,000

Anthony Clough

HORSHAM, VIC

14,285

6,660

$1,170 Source: ABS

For Anthony Clough, being based in Horsham in Victoria has given him ample opportunities as a mortgage broker. He has been able to leverage the town’s huge construction growth, using the boom to offer his customers a greater variety of lenders to choose from. But, like many, Clough began his finance career working in banking, not mortgages.

“After working in the CBA as assistant manager and Bank of Melbourne as manager I wanted to be able to provide more options for people in regional areas,” he says.

He adds that he likes the idea of being able to build a business based on solid relationships, and working in a regional area is the ideal environment to facilitate this, given that his business is built entirely on referrals from friends and family.

According to Clough, client retention and loyalty is simply a by-product of doing good work and getting your clients results, so if you’re a regional broker and you’re good at your job, holding on to clients and getting referrals will come naturally.

TRACEY BLORE

On Trac Mortgage Brokers

Tracey Blore

SALE, VIC

13,186

6,041

$1,300 Source: ABS

Top 11 nMB broker Tracey Blore says working outside of the nation’s capital cities gives whole new meaning to the phrase ‘Everyone knows everyone’. As a mortgage broker, however, this is a massive advantage.

“There really is no anonymity,” she says. “It has taken me 13 years in business to develop the reputation I have today, and now I have a strong base of clients and referral network. As a result, I barely have to advertise. The majority of my business is local and predominantly referral based, [and] this would be much harder to achieve in a metropolitan area.

“Within our regional area we have a huge networking system … so you become extremely well known for your abilities, character, knowledge, and trustworthiness or lack thereof.

There is nowhere to hide, therefore your reputation, once earned, will be the strength or downfall of your business,” Blore says.

However, Blore pinpoints the trade-off that comes with the benefits of the regional broking market, adding that loan sizes are a lot lower than in the cities.

“We have to write three to four times more deals to make the same income as a city broker,” says Blore.

There are also the postcode restrictions by mortgage insurers to overcome, and the less common nature of employment of her clients, which means a lot more time needs to be spent on loan structure.

“Shearers who get paid by the sheep … try working their wage out!” Blore adds.

“Often after [clients] were declined from their bank we were able to help them out and get them a loan,” he says. “Delivering results and therefore having a good reputation helps to drive business and referrals.”

Being flexible with working hours also helps instil trust in his customers, and show his understanding of and dedication to each individual’s situation.

“We also see the majority of our clients outside of normal business hours, which means we can get in front of more customers and help more people.

Most people work 9 to 5, and we are only too happy to see people after work.”

Surprisingly, though, Clough describes the biggest challenge he faces working in a regional area as the lack of awareness of the role of a mortgage broker.

“The biggest challenge for us is people understanding what a mortgage broker actually does, and that we don’t charge for our services.”

As a final piece of advice, Clough’s motto is simple.

“Be brilliant at your job,” he says. “Always deliver above a customer’s expectations of you. Realise that you can’t build a business working the normal 38-hour week. You have to work hard.”

“There is nowhere to hide, therefore your reputation, once earned, will be the strength or downfall of your business” Tracey Blore, Sale, Vic “We work really hard at being involved in the whole process from beginning to end.”

With running a small brokerage like On Trac, there is also the challenge of not having any support staff to take the administration side of the business off Blore and her colleague’s shoulders, which takes away from the time that could be dedicated to bringing in new business.

These challenges mean that technology plays a massive role in the success of the business.

“There is barely anything we touch that does not require technology, from the phone system to the cloud where we upload all our client files.

We submit our application to the bank via a very clever software program; we order valuations via the same [program]. We have a special program provided by our aggregator in which we keep all our client details and tracking of each file on a day-to-day basis. Without these facilities it would be impossible to provide the privacy required for our clients, to monitor and keep up with each stage of the application and to prevent our offices turning into one big storage facility!”

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INDUSTRY SPOTLIGHT TROY O’KEEFE TOKA Finance $21,566,530

Troy O’Keefe

POTTSVILLE, NSW

5,735

2,420

$2,167 Source: ABS

Persistence, ethics and hard work are the most vital ingredients for achieving success as a regional broker, according to Troy O’Keefe, managing director of TOKA Finance in Pottsville, located in the Northern Rivers region of NSW. These are traits he has had to learn, operating in a town with a population just shy of 6,000 residents.

Unlike larger urban cities where the housing market reigns supreme and dominates headlines, and you can find a mortgage broker franchise in every suburb, regional towns still often hold that traditional mindset – even in a town where the median age is just 38.

“Customers still believe that brokers charge hidden fees. People aren’t aware that they can get loans outside bank locations,” O’Keefe tells Australian Broker.

There are also fewer opportunities to diversify in a regional town with not as much development. This is why he says his business is primarily focused on providing residential loans.

“Generally speaking, TOKA provides residential lending as it fits into the local niche market better.

“The conversion rate for residential loans is much higher as general commercial properties are few and far between and quite often are family-owned – and hence handed down with little or no debt level.”

However, O’Keefe says Pottsville is about to have its own housing boom, which will provide his business with a big opportunity this year.

“Pottsville and Northern NSW is a high-growth area in regard to the development of new houses, hence new home loans.

MARK COLLINS Aussie

$72,732,000

Mark Collins

PORT MACQUARIE, NSW

41,491

19,889

$1,733 Source: ABS

The biggest opportunity for mortgage brokers in the coastal town of Port Macquarie in NSW is the plethora of new developments coming to fruition, according to Mark Collins, Aussie Port Macquarie franchisee.

“Port Macquarie is undergoing a construction boom at the moment, with a huge amount of land scheduled to be released in 2016 on the mid-north coast and surrounding areas,” he tells Australian Broker.

This is an opportunity that Collins says the brokerage will be actively targeting this year.

“The key is for us, as a team, to market effectively to new home builders and to keep up with the changing credit policies from the banks. We have already put a number of measures in place to build relationships with developers and builders, and to provide ongoing and easier access to information for those looking to build. The aim is to position Aussie Port Macquarie as the experts in this space.

“This does not take away from the ongoing work

“I find within the regional demographics the ordinary customer still rates owning their own property as very high in their ‘bucket list’ of lifelong goals” Troy O’Keefe, Pottsville, NSW “Interest rates are also at a record low, so this will help the local demographics to more easily qualify in regard to servicing.”

Outside of the unique challenges and opportunities regional markets may present, O’Keefe says there is no secret to finding success as a broker – you just have to learn from experience and keep yourself honest.

“Make sure all costs are disclosed to your customers so there are no surprises,” he advises.

“Also, if possible, aligning yourself with a successful mentor is extremely important. Being able to bounce ideas off someone else who is in the industry is always an added bonus.”

At the end of the day, however, O’Keefe says the great Australian dream is still very much alive across regional Australia.

“I find within the regional demographics the ordinary customer still rates owning their own property as very high in their ‘bucket list’ of lifelong goals.”

we do with existing homebuyers, investors or those looking for a better deal, but given the changing market this year we will focus a larger portion of our resources into the highest growth area, which for us is construction.”

Aussie Port Macquarie is a two-man operation, with Collins joined by fellow broker Craig Smith.

Collins says their business is primarily residential; however, the two specialise in different areas of residential lending.

“Craig owns multiple investment properties and is currently developing a block of townhouses. He fits in really well and will be helping investors no matter what stage they are at, as this is his passion and is very much his area of expertise and one he is continually learning about,” Collins says.

“I focus mainly on construction deals, as I have just built a house myself so I understand the dynamics of construction finance, grants, costings, etc., very well. This is very much my passion and an industry I am becoming more and more involved with.

“We both assist with refinances and we certainly do a portion of commercial but this is not our primary focus.”

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SONNY SINGH

North Coast Financial Solutions $45,000,000

Sonny Singh

BYRON BAY, NSW

4,959

3,092

$1,733 Source: ABS

For Sonny Singh, living and working in NSW’s beautiful beachside town of Byron Bay has been a blessing over the past two years, as the area has been experiencing significant growth in property prices and very quick sale periods.

However, history has shown him that Byron Bay’s market has severe peaks and valleys, and this can present challenges for mortgage brokers in the area.

“Byron Bay is known for its market volatility, and as such we often experience issues with valuations for the higher-end properties. Sometimes people will purchase a beachfront property during a ‘boom’ period for several hundred thousand dollars more than we get the bank valuation for,” says Singh.

But despite this, Singh says he is still in an extremely unique position as a broker.

“The main benefit of being a broker in Byron Bay is that we live in a regional area yet our average loan size is similar to a broker writing loans in Sydney or Melbourne. With median house prices relatively high for a regional area we can rest assured that the majority of the loans we write are decent in size.”

While Singh says he focuses on residential lending, over the years he has made sure to partner

PEITA DAVIES

Choice Home Loans $42,066,328

Peita Davies

BLUE MOUNTAINS, NSW

67,639

30,185

$1,820 Source: ABS

Peita Davies started her career in mortgage broking in 2002 writing loans at her kitchen table. Now she occupies two office spaces, oversees five staff and contracts out two brokers. For her, the best thing about broking in a regional market is also the thing that holds the most opportunity – the community.

“I get an opportunity to be really involved in our community as I work here, live here, my children went to school here – everything is built around a personal relationship. I now even have clients that I went to primary school and high school with as I still live and work in the region that I grew up in, and Facebook now keeps everyone up to date on what people are doing, even career wise!

“This in turn builds lifelong relationships with clients, not just one transaction, as we are well known, trusted and respected,” she says.

Being open and communicative and even vocal about what you do for a living, says Davies, is the best piece of advice she can impart to new regional brokers.

“Be present in your community and tell everyone what you do. Like I mentioned earlier, get on board with social media; you will be surprised at how many people you know.”

However, working in a regional area is not without its headwinds.

“I need to remember that every interaction that I have with people is a reflection of my business.

I hold my integrity very close to my heart, so there is no room for laziness in a small community.”

with other professional service providers to expand and diversify his offering in the most seamless way possible.

“We have set our goals to focus on residential lending as we feel that it is our area of expertise and that we can offer the client the most professional service when we focus on what we are good at.

However, we do have alliances and partnerships so when we come across commercial lending, financial planning and other needs the client can be looked after under one banner,” Singh says.

While many mortgage brokers have backgrounds in banking, Singh’s personal experiences as a banking customer were what prompted him to become a mortgage broker.

“I was inspired to be a broker by the many experiences I have had in retail banking as a customer. I had gone into my bank three times to get a home loan and could not see the same person twice as they had now moved on to a different role or no longer worked in the branch. I ended up going to a broker where I genuinely felt that he cared about my purchase and had a vested interest in me successfully purchasing my first family home. This level of service and genuine care for my transaction motivated me to get into the industry.

Within three weeks I was employed by the broker that did my transaction,” Singh explains.

“I can often work with a client for months and months to educate them on preparing themselves for home ownership” Peita Davies, Blue Mountains, NSW In addition, she adds, from a business point of view, a challenge she faces is the lower social demographic region that she services.

“This means lower loan sizes and often clients coming from a smaller income base. I can often work with a client for months and months to educate them on preparing themselves for home ownership.”

Business growth, then, is one of the more difficult aspects of broking in a regional area, especially given the fact that the Blue Mountains is heritage listed, meaning there is no opportunity for new infrastructure or building developments.

Diversifying your product portfolio is one way to face these obstacles head-on, in her opinion.

“I think offering a diverse product range is absolutely vital to the ongoing strength and growth of my business. So much so that this is my focus for the next year, but not only offering new products to my client base but by building a mentoring and training business that will support other brokers in this region,” Davies says.

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INDUSTRY SPOTLIGHT ANTONY MUIR Mortgage Choice $67,216,847

Antony Muir

BUNDALL, QLD

4,188

1,774

$2,409 Source: ABS

Antony Muir, principal of Mortgage Choice in Bundall – a small town in the Gold Coast, west of Surfers Paradise – recalls one of his most memorable client experiences and one of the reasons he enjoys being a broker in his local community.

“I was assisting a client with the purchase of a beachfront property that their existing bank would not provide finance for,” he says.

“The client was settling 16 days from the date he met with me, and we arranged approval and settlement within the existing contract terms to avoid default.

“Since this experience, my client has referred three more prospects that have converted to new business.

“I get great satisfaction in getting the tough transactions through under pressure.”

Muir says this sense of really helping the people in his community is important to him as a regional broker. In this small town of about 4,200 people, Mortgage Choice is a “strong supporter” of locally based charity groups and also heavily involved in local school events.

When it comes to his business, Muir expects a lucrative few years. Not only does he predict

TRAVIS HOLE Zobel

$36,400,000

Travis Hole

MOUNT GAMBIER, SA

24,905

11,511

$1,250 Source: ABS

The biggest challenge for regional brokers, according to Travis Hole, lending manager of Zobel in Mount Gambier, is the smaller average loan sizes. A regional broker can’t rely on big home loans paying them more commission.

“As I presume is the case with a lot of regional brokers around Australia, particularly in South Australia, we’re consistently challenged by a low average loan size given the medians in the area in which we’re based,” he tells Australian Broker.

“Hence there’s a real focus on not only ensuring we have a substantial market share of lending in our region directly, but also to provide a greater range of services to those clients and utilising technology to best service clients out of the region.”

Community engagement is often touted by regional brokers as the lifeblood of their business, and Hole agrees. He says smaller loan sizes plus a smaller population mean community involvement equals survival.

“Being a relatively small city of only 25,000, our engagement with sporting and community groups as well as local charity and other fundraising initiatives is a key component of our business.

low interest rates to hang around and entice consumers, but he says Bundall should expect major flow-on benefits from the Commonwealth Games to be held in the Gold Coast.

“Brokers are experiencing stronger market share as continued low interest rates are on offer.

Consumers are very aware of interest rates and brokers can expect increased lead volumes from people looking to ensure they have the best offering for their finance needs.

“However, commercial finance opportunities will also create more business over the next few years. As the Gold Coast expands leading into the Commonwealth Games in 2018, I expect commercial opportunities will increase as businesses relocate and set up in our area.

“Residential is our primary source of business, but I am targeting more commercial opportunities as I really see this as a massive area of growth in the future.”

In order to capture these new opportunities, Muir says it is important to continually look for ways to promote his service in everyday life – a piece of advice all regional brokers can learn from.

“Whether it be when you’re ordering coffee or having lunch at your regular venues, you will be surprised by how much your discussions impact others, which can in turn create more business.

“If you are doing it tough, remember that you control your outcome.”

“Either through direct involvement on committees or in clubs, as well as involvement with community events, it plays a big part in our ongoing marketing or business development plans.”

But Mount Gambier, located to the southeast of Adelaide on the Victorian border, has a few tricks of its own up its sleeve for 2016, which will see big opportunities for brokers.

“After several years of some uncertainty due to the forestry forward-selling by state government, there appears to be some genuine confidence amongst small business and consumers in our region, from which we’ve certainly seen an increase in the amount of transactions locally in terms of property sales,” Hole says.

“On top of that, we see a real opportunity for first home buyers to come back into the market moving forward, after being somewhat quieter over the past few years also.”

To take advantage of these opportunities, Hole says diversification will be front of mind for Zobel this year.

“Our group has always had diversification front of mind in our business plans, which will continue this year with further recruitment in the commercial lending and asset finance space, as well as an expansion of our service offering overall under a full and comprehensive financial services banner.”

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COMMERCIAL LENDING UPDATE

HOW TO SAVE GOOD DEALS FROM GOING BAD Chifley Securities knows exactly what a good property development deal looks like. That’s why it is working with brokers to save good deals from going bad

Bryan Coleman

TAMWORTH, NSW

36,131

15,570

$1,408 Source: ABS

BRYAN COLEMAN Priority Home Loans

Typical clients of Bryan Coleman, director of Priority Home Loans in Tamworth – a major regional city located midway between Brisbane and Sydney – are just as diverse as their counterparts in the big urban cities.

This husband and wife team services first home buyers, investors, business owners and existing customers wanting to upgrade or renovate, and have two credit advisers and a loan assistant working for them at Priority Home Loans.

Being from a larger regional centre with a population of almost 39,000, Coleman says he is lucky to have a diverse referral base, including solicitors, accountants and real estate agents. However, the biggest opportunity he sees for brokers in the ‘country music capital of Australia’ are the referrals from existing clients in a market brimming with opportunities that Sydney, Brisbane and Melbourne don’t have.

“Our referral base is extensive due to being involved in the Tamworth area for 15 years,” he tells Australian Broker.

“An example being customers that we helped in the early years who have siblings who are now looking for their first home or are referring their children to our office for experienced advice.

“Due to homes being cheaper in the country, using the First Home Owner Grant and, if needed, the parents’ own home, they are able to move into a new home earlier.”

However, Tamworth does have its own unique challenges – the drought being the most significant challenge this year.

“Tamworth and the surrounding areas are in drought, so lack of water will influence a lot of people,” Coleman says.

“But it also gives businesses a feeling of uncertainty with regard to the economy, where some people may not want to enter into more debt at this uneasy time.”

Coleman is coming prepared, though. To overcome these challenges and grow his business this year, he announces that he will be launching TV advertising for the first time.

“We have being doing radio advertising for 15 years, so people recognise our brand and our people,” he says.

“We are just organising an advertisement to be shown on the television as well, which is a new way of generating business for Priority Home Loans. This means not only will people in Tamworth and surrounding areas know our name and voices, but they will be able to see our faces as well.”

When a large, proven property developer ran out of finance before completing a promising new $85m residential development in Sydney’s Hills District earlier this year, the situation could easily have ended badly for the mortgagor.

Though there were already $70m in pre-sold units and the development was 80% complete, the mortgagor’s private lender had run out of money, leaving a need for $7m that no bank could ever be flexible enough to meet.

That’s when one finance broker called Chifley Securities. With a total of $1.1bn in capital available from its new property development arm, the non-bank finance group had the flexibility, know-how and capital to save the project.

“We were able to help the mortgagor with a second mortgage on the asset, giving them the $7m they needed,” Chifley Securities director Joe Morello says.

However, Chifley Securities went further. With a new development opportunity on the horizon, Chifley Securities was able to provide the developer with an extra $22m in cash out so it could purchase more Hills District properties.

“The developer wanted to take some equity out now rather than waiting a full six months until the development was finally exchanged and finished,” Morello says. “We put some of our best people in to help manage how that was done, and now when they finish the first one, they can just go straight on to the next one.”

A good deal done Deals like this have become typical for Chifley Securities. Having only recently launched Chifley Property Development, the business has allocated $300m to finance construction and acquire equity in Sydney and Melbourne projects.

Bringing together a portfolio of sophisticated and experienced high net worth investors, Morello says Chifley Securities is able to see to the profitable heart of a potential development and take a more entrepreneurial approach to deals.

“We have a unique attitude to property development deals,” Morello says. “Not only can we finance quality deals that may lie outside the strict criteria of a bank, we can also get involved in projects that interest us and we think are unique.”

It’s an approach that saved another Chifley client at the last minute. Having agreed to purchase a potential future development site in Campbelltown for $8m, the client thought the deal was all but done just three weeks out from settlement. However, his bank changed

Joe Morello

that. Suddenly unhappy with the quality of the tenant and the condition of the property, the bank informed the client that it would pull back his LVR, leaving him with little time to make the deal work.

“There was a tenant, but there was no tenure on the lease, and it was a little bit rundown. The bank decided it wouldn’t lend as much as it had originally promised,” Morello says.

“A broker introduced him to us, and we were able to do the valuation, all the checks, and the mortgage documentation in eight days.”

Commercially minded The tightening of major lender criteria in the property development market, historically low interest rates and strong buyer demand have given Chifley Securities a chance to expand its focus on property development finance.

Providing first mortgages, mezzanine finance and LVRs of up to 90%, Morello says the business has been working with brokers to identify quality development projects it can support with responsive, pragmatic finance. It is offering brokers an average of 1% commission on deals after settlement.

“Our broker partners like us because they know they are providing developer clients with a creative team of finance professionals that actually understand these deals, and who have the creativity and risk appetite to get them done.”

Chifley Securities first launched its commercial finance business in 2015. With 2000 established broker partnerships, it completed $400m in deals from 270 applications last year, and has had a strong pipeline throughout 2016.

Morello says brokers with an interest in commercial lending can add to that through development deals.

“Financing property developments can be complex, and the deal size can be large.

But for brokers working with a finance group like Chifley Securities, that adds up to building their business a lot faster.”

26

MARKET WRAP MARKET TALK

BANKS UNDERESTIMATE FOREIGN PROPERTY PURCHASES Up to 80% of some apartment developments are being sold directly to offshore buyers

the NAB quarterly property survey of 300 real estate professionals, which notes that foreign buyers account for around 12% of demand for new dwellings and 7% of demand for existing dwellings.

These concerns also come following warnings by the global regulator, the Paris-based Financial Action Task Force, that Australian homes are a haven for laundered funds, particularly from China. It recommended that the Australian

FOREIGN BUYERS REMAIN ACTIVE

16 14 12 10 8 6 4 2

Q4 ’15

Q2 ’15

Q4 ’14

Q2 ’14

Q4 ’13

Established properties

Q2 ’13

Q4 ’12

Q2 ’12

Q2 ’11

Q4 ’11

New properties

0

Government implement countermeasures to ensure that real estate agents, lawyers and accountants facilitating real estate transactions are captured by the regulatory net.

In response to fears that foreign buyers are pushing up property prices, regulators and banks have restricted lending for investment properties.

This has led to dwindling Chinese investors, and yet around 250,000 new apartments are scheduled to hit the market over the next two years.

BROKER MARKET SHARE CONTINUES TO SURGE

Share of demand for new and existing properties from overseas buyers % 18

Q4 ’10

the number of sales of new residential property to foreign buyers could be much higher than what local banks estimate, which could raise risk for lenders and the economy.

This news comes amid evidence that the property market is slowing faster than usual in the lead-up to winter, despite the Reserve Bank’s surprise decision to cut interest rates.

It has previously been estimated that around one in every four developments are being bought by foreigners; however, foreign buying in some pockets of Sydney and Melbourne is believed to be much higher than this, with up to 80% of some apartment developments sold directly to offshore buyers.

Fitch Ratings’ Andrea Jaehne claims there has been an increase in foreign buyers since 2010, with data from the Foreign Investment Review Board (FIRB) showing an eightfold increase in approvals up to 2015. However, it is difficult to know the true number of properties sold offshore because there is no required approval for foreigners buying apartments off the plan.

“It is worth pointing out that this data likely significantly understates the true level of foreign investment into Australian real estate, particularly into existing dwellings,” stated Leith Van Onselen, economist and co-founder of Macrobusiness.com.au, in an online article responding to the FIRB’s findings. He also referenced the fact that last year the chair of the parliamentary inquiry into foreign real estate investment, Kelly O’Dwyer, regarded the systems and data on foreign transactions as “inadequate”.

“The data on foreign purchases of Australian houses and apartments is inadequate, making policy evaluations very difficult,” O’Dwyer had said.

At a Sydney conference recently, Jaehne agreed that the assessment of the overseas buyers’ market was unclear.

“The condition is they have to market the property into the local market, but often you find them selling it off in Hong Kong, Singapore, and Shanghai,” she said. “We don’t have a full picture of who is buying this property.”

According to Van Onselen, the only data that is publicly available and up to date comes from

Q2 ’10

ACCORDING to ratings agency Fitch Ratings,

Source: NAB

Research group Comparator, a branch of CoreLogic, has revealed that 53.7% of new residential loans settled during the March quarter were written by mortgage brokers. This makes the March 2016 quarter the highest-ever result for broker market share.

According to the research group, finance brokers originated at least $43.4bn worth of new home loans during the quarter, a big increase on the $40.6bn originated in the March 2015 quarter. The new data, sourced from 17 leading brokers and aggregators, represents a year-on-year uplift of 1.8% and is the highest percentage ever recorded by Comparator.

“This broker market share record represents a milestone achievement that our members have worked hard for,” stated MFAA CEO Siobhan Hayden. “This growth is especially significant given that this research was conducted during a traditionally quieter period of the year.

Homebuyers are realising the benefits of working with an accredited finance broker more than ever before, which strengthens the credibility and increases the profile of our profession.”

Comparator provides the quarterly figure by calculating the value of loans transacted by 17 of the leading aggregator groups as a percentage of the ABS Housing Finance commitments.

28

COALFACE THE DUO WHO DO IT ALL Two Canberra-based brokers are paving the way for more women to enter the mortgage industry, their careers exemplifying the work-life balance the broker channel can provide “I NEVER FEEL like I’m working, ever. I love my job. I would never do anything else,” says Melita Beilicz. “I totally agree,” Suzanne O’Connor adds.

Needless to say, this love for their profession has played an integral part in the success of their brokerage.

Both Beilicz and O’Connor are mortgage brokers and directors at Dominion Finance in Canberra, which they founded in 2002. Each with a background in banking, they have worked together in the financial services industry for 30 years and today their partnership is as strong as ever.

The duo is proof that the ideal but often elusive idea of work-life balance can in fact be a reality, and that broking in particular is a profession that can give anybody, but in particular women, the opportunity to thrive in a career while also raising a family.

The Dominion Finance team is an all-female cast, and this was a conscious and proud choice made by its directors.

“We really want to promote broking to women because it’s a fantastic industry to be in when you are a young woman and out there trying to make your way,” says O’Connor. “And then it’s a fantastic industry when you have children and to be able to work around having those kids.”

As for why the pair went into business together rather than venturing out on their own, Beilicz and O’Connor explain that working as a team has always been the right route for them, given they had made such a strong team during their time working in banking.

An added benefit of working as a duo, they add, is the flexibility the partnership allows you when it comes to taking time off.

“We totally have each other’s backs with each

other’s clients,” says Beilicz. “My clients know Suzanne and Suzanne’s clients know me, so everyone is very comfortable when one of us goes away. We both like to travel and do things and you just can’t do that if you don’t have someone you absolutely trust to take care of things.”

O’Connor points out that being of a similar age and having similar values also helps the partnership, and therefore the business, a great deal, and that communication is crucial.

“You’ve got to communicate. You have to basically give the other person your absolute truth. So if something doesn’t feel right or you don’t agree, you’ve got to say it. Everyone’s got to have really clear, open communication.”

When it comes to clients, Dominion Finance spans a broad demographic, with a large number of ongoing customer referrals, and both brokers have similarsized client bases, as Beilicz grew her business early on before she had children and O’Connor has grown hers since her children have got older.

The brokerage has evolved over the years alongside their aggregator eChoice, which offers them access to great technology and service support.

“The biggest tool for me is the technology and the CRM,” says Beilicz, adding that she and O’Connor use it to work smarter, keep their database up to date, and maintain regular contact with clients.

They both agree that clients are the number one referrers and that being organised while also being flexible is the key to a thriving service business.

Case in point: Dominion Finance is now expanding, with Beilicz and O’Connor having recently brought two other brokers and one loan processor on board. A new office space is also on the horizon to help cater to their clients throughout

“We really want to promote broking to women because it’s a fantastic industry to be in” Suzanne O’Connor the Canberra region and beyond.

But while the success these two women have achieved is undeniable, Beilicz and O’Connor are also frank about the gender inequality in the sector, stating that their success was not without its challenges. When it comes to breaking into the finance industry, Beilicz says, it’s definitely harder for women.

“We learnt that very early on working for the banks,” she says, noting that in her experience women have to work twice as hard to get half the recognition men get. But, she adds, this ended up being an unlikely gift because it made them even more determined to become the success story they are today.

“We’ll go to a PD day and in a room of a couple of hundred people we’ll be the only two women in the room – it’s that male-dominated in Canberra,” says Beilicz.

For this very reason, looking ahead, they say their biggest goal is to contribute to bringing about the change that will bring more women into the mortgage industry, through supporting and promoting the women already in the industry.

“It is quite male-dominated,” says O’Connor. “But it is definitely getting better.”

29

PEOPLE CAUGHT ON CAMERA Australian Broker was lucky enough to attend the annual National Mortgage Brokers conference from 4 to 6 May in tropical Hamilton Island, Whitsundays. Brokers, BDMs and partners were spoiled with keynotes by social researcher Michael McQueen, celebrated ex-military Major Matina Jewell, and humanitarian and author Lucy Perry. Emceed

by Toby Travanner, the three-day conference finished with a festive, nautical-themed awards night recognising the best-performing nMB brokers of the past 12 months.

30

PEOPLE HOT SEAT

SIMON ORBELL Director and senior mortgage adviser of Smartmove, Simon Orbell, on how fate led him to mortgage broking and how a client ended up sleeping on his couch What is your most memorable client experience?

One client experience that stands out was early on in my broking career. I had a young couple purchasing their first property and they A were all set to go for the settlement and had given notice to vacate their existing rental property.

Unfortunately, a day before settlement the vendor advised the client’s solicitor that they would not be in a position to settle the next day as their bank hadn’t processed the discharge appropriately. The settlement would be delayed by a day.

This particular young couple had no family in Sydney and put pretty much every dollar into the property purchase and didn’t have anywhere to stay the night before the settlement. I was living in a shared house with some friends at the time and, after checking with my room-mates, we offered for them to sleep on our sofa bed in the living room the night before the settlement. Talk about service with a smile!

Q

What will be the biggest disruptor in the mortgage industry in 2016?

I think mortgage brokers will continue to be the biggest disruptor to the A mortgage industry in 2016. All of the changes introduced by the lenders as a result of APRA have meant that clients need our expertise more than ever. With all of the compliance and manual process and legislation around mortgages, technological disruption appears a very difficult proposition.

In saying this, I do believe that brokers need to continue to evolve their customer interactions, and the client experience, through using the latest technologies, whilst at the same time streamlining processes at the back end.

Q

What are your property market predictions for 2016?

Smartmove operates on the lower North Shore of Sydney, in Neutral Bay, and we are still seeing very low stock levels in our A marketplace at the moment. We have also seen unprecedented changes in the lending marketplace with restrictions introduced by the banks as a result of APRA’s intervention.

Due to these two things, I believe we will still see a strong property market this year, but with much slower levels of growth than we have seen in the past couple of years.

Q

What is the most memorable piece of advice you have ever received and who was it from?

The most life-changing moment or piece of advice A I have ever received was when I was just finishing university and it came from a good friend of mine. We were working at a courier company at the time and one day during a shift my friend’s brother’s business card fell out of his wallet onto his desk. As I had no idea what career path I was going to take, I asked my friend what his brother did and he replied: “He just started a mortgage broking business. He is super busy, you should give him a call and see if it is of interest to you.” The business card was that of my now business partner, David Brell.

Q

When you were a child, what did you want to be when you grew up?

As is the case with most young kids, I oscillated A a lot around what I wanted to do when I grew up but the two occupations that stood out the most were geologist and marine biologist!

Q