Australian Broker 13.23

NEWS MyState appoints new head of broker channel Bank works to expand its geographical footprint P8

OPINION Treading carefully Why brokers should learn all there is to know about property investment P16

TECH FOCUS Sydney named Australia’s fintech hub

The city home to eight hot financial disruptors P18

NOVEMBER 2016 ISSUE 13.23

MARKET WRAP Hot property has its risks

RBA warns of oversupply ramifications P22

COMMERCIAL Australian SME lender start-up launches

DAMIEN ROYLANCE Entourage Finance’s director tells Australian Broker how his Australian Mortgage Award-winning brokerage is using social media to stand out in the competitive Melbourne market P10

Offering competitive broker incentives P24

CONSUMER INSIGHTS Broker clients’ satisfaction high 32% rank experience with a broker 9/10

P26

AGGREGATOR SNAPSHOT 2

NEWS

ASSOCIATIONS

REGULATION

LENDERS

FBAA criticises MFAA over report P4

Supreme Court dismisses spruikers’ appeal P6

MyState appoints new head of broker channel P8

BROKERNEWS.COM.AU

ALL ABOUT BROKERS

EDITORIAL

From 1 October 2015 to 31 March 2016

Editor Madelin Tomelty

The number of mortgage brokers has increased by Broker-originated home loans

decreased by

1.5%

750

people

17%

22%

21.1% On average, brokers lodged about 20 new loan applications each during the period

6%

Journalist Maya Breen

since September 2015

of new brokers

did not settle a new loan during the six-month period

or

News Editor Miklos Bolza

of brokers are ‘low performers’ and originated less than $1m of new loans during the period

of brokers are ‘high performers’ and settled more than $10m during the period

4.6%

of these writers settled more than $25m

Production Editor Roslyn Meredith

White label lending increased, but remains a small minority of brokers’ settlements

More women entered the industry

Traffic Coordinator Freya Demegilio

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

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

The national average value of home loan portfolio per broker is around $38m

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

ADVERTISING ENQUIRIES

AUSSIE ADDS VIRGIN MONEY TO ITS LENDER PANEL members in Australia.

Aussie chief executive James Symond said: “Our link with the Virgin Money brand in Australia brings together two leading challenger brands, both focused on delivering greater competition to the home loan market, together with strong customer service.

“This partnership will bring greater choice for the thousands of Australians our brokers connect with every month, access to a vast number of potential new customers, and the ability to offer rewards to our existing customers who are also Velocity Frequent Flyer members.”

Greg Boyle, chief executive of Virgin Money, added that the lender was excited by the

Design Manager Daniel Williams Designer Martin Cosme

Source: MFAA IIS Report

The country’s largest mortgage franchise, Aussie Home Loans, recently partnered with Virgin Money Australia, bringing Aussie’s panel of lenders to 21. In May, Virgin Money relaunched into the Australian mortgage market with its Reward Me Home Loan after exiting in 2013.

In a market first, Virgin Money’s Reward Me Home Loan offers 10,000 Velocity Frequent Flyer points for every $100,000 borrowed at settlement, and customers earn 1,000 points per month for each loan split, plus 30,000 bonus points every three years, together with a range of exclusive Virgin-branded benefits. The unique offering is expected to appeal strongly to Velocity’s more than 6.4 million

ART & PRODUCTION

SALES & MARKETING

opportunities offered by Aussie.

“We’re excited to be partnering with Aussie, a giant in mortgage broking that has shaken up a big sector of the Australian economy by being bold and offering fantastic customer service.

“There are many similarities between these two great brands, not least our strong desire to deliver simplicity, greater choice and better value for our customers. We’re looking forward to demonstrating how the partnership with Aussie will bring some exciting new opportunities for Australian borrowers,” he said.

The Aussie loan book, including its wholesale mortgage aggregator nMB, is currently worth over $70bn.

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore 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

FBAA CRITICISES MFAA OVER REPORT The FBAA has questioned the results of a survey released by the MFAA in partnership with Deloitte, accusing the association of letting brokers down.

The study, Customer Experiences of Using Mortgage Brokers, surveyed 1,000 borrowers who had taken out a residential mortgage over the past two years. One of the questions asked was hypothetical – “If you used a broker and they were not paid commission, would you be prepared to pay a fee for their services?” – and more than six out of 10 broker clients responded in the affirmative.

FBAA executive director Peter White has criticised the MFAA, saying the report undermines the entire broking sector and sends mixed messages to regulators and

legislators. “Firstly, the survey is not credible because the question asked was, in their own words, ‘hypothetical’, and I believe misleading.

“People can say anything to a survey question, but when it comes to the crunch I question whether people will be willing to pay, particularly if it meant higher interest rates, less competition for banks, and other factors that would result from such a shift.”

He also said the FBAA had researched the way brokers were paid across the world and had confirmed that the current commission structure was consistent with global standards – in some cases Australian brokers were paid less – but remained viable and competitive.

White also disagreed with the information being released by the MFAA about customers’ loyalty to banks, calling the survey and subsequent publicity “bizarre”.

“That the MFAA would not only decide to ask these ridiculous questions but then release flawed results to the Australian media that cut across the good work we and the rest of the industry have been doing with regulators and MPs is beyond comprehension.”

He said the leadership of the MFAA needed to take a “good look at their priorities” if they wanted to retain the goodwill of their members.

“Industry associations exist to advocate for our members and work in their best interest, not smack them across the mouth, which this survey does.”

WHAT THEY SAID...

Ben Kingsley “Lending is a fundamental component of most property investment actions, so there is undoubtedly a huge opportunity for brokers with multiple skill sets to expand their services in the property investment space” P16

Martin North “Some borrowers on an interest-only loan may get a rude shock when next they try to roll their interest-only loan if they do not have a clear repayment plan” P22

James Hickey “Some 32% of mortgage broker customers rated their experience of using a broker at 9 or 10 out of 10 (where 10 ‘exceeded expectations’), compared with 20% of lender customers giving a similar ranking” P26

A rundown of the next fortnight’s events

NOVEMBER

23 What: MFAA webinar: Commercial Finance: Innovations, Trends and the Future?

Where: At your computer Details: In this webinar, the MFAA will explore how current levels of disruption will affect brokers and their clients and what can be done to ensure the relevance of brokers into the future.

NOVEMBER

25 What: MFAA Golf Day & Christmas Sundowner Where: North Adelaide Golf Course Details: This year’s MFAA Golf Day will be an afternoon game, concluding with prize presentations and a combined Christmas dinner.

REGULATORY ROUNDUP 6

WORLD NEWS

ASIC RELEASES ANNUAL REPORT

ASIC surveillance and enforcement outcomes, 2015–16

1,441 HIGH-INTENSITY SURVEILLANCES UNDERTAKEN

NEW ZEALAND RESERVE BANK CUTS CASH RATE The New Zealand Reserve Bank has lowered its cash rate by 25 basis points to 1.75%. In its November Monetary Statement, Governor Graeme Wheeler cited global inflation that “remains weak”, heightened “political uncertainty”, and elevated “market volatility” as factors that have led to the bank’s decision.

“Weak global conditions and low interest rates relative to New Zealand are keeping upward pressure on the New Zealand dollar exchange rate. The exchange rate remains higher than is sustainable for balanced economic growth and, together with low global inflation, continues to generate negative inflation in the tradables sector,” Governor Wheeler said. “A decline in the exchange rate is needed.”

The statement added that house price inflation continued to be “excessive” and was posing concerns for financial stability in New Zealand.

“Although house price inflation has moderated in Auckland, it is uncertain whether this will be sustained given the continuing imbalance between supply and demand,” Wheeler said.

The New Zealand Reserve Bank hopes that cutting the cash rate will contribute to strong growth, enough to settle the country’s inflation, but the statement warned that there were still “numerous uncertainties”, particularly regarding New Zealand’s international outlook. As a result, Governor Wheeler has not ruled out cutting the cash rate further in the future, but rather stated that the bank would continue to adjust policy accordingly.

175 INVESTIGATIONS COMPLETED

CRIMINAL ACTIONS 22 criminal conviction 13 people jailed

COMPENSATION AND REMEDIATION $210.5m compensation and remediation for investors and consumers

CIVIL ACTIONS $1.3m in civil penalties

INFRINGEMENT NOTICES 109 infringement notices issued $2.3m dollar value of infringement notices

BANNINGS, DISQUALIFICATIONS AND LICENCE CONDITIONS 136 people/companies removed or restricted from providing financial services or credit 39 people disqualified or removed from directing companies 24 actions taken against auditors and liquidators

INDUSTRY REPORTS

29 industry reports promoting

changes in industry behavior and informing government policy and law reform ENFORCEABLE UNDERTAKINGS 22 enforceable undertakings secured Source: ASIC

SUPREME COURT DISMISSES SPRUIKERS’ APPEAL An appeal by Wollongong-based property advice firm Park Trent Properties Group has been dismissed by the Supreme Court after the consultancy attempted to overrule an earlier decision banning it from providing unlicensed financial advice.

The dismissal ends a lengthy legal case launched in November 2014 by ASIC. At the time, the court found that Park Trent had provided unlicensed advice to more than 860 members of the public, recommending they establish and switch funds to an SMSF. The trial spanned from June to October 2015, when the Supreme Court of NSW pronounced its judgment against Park Trent, giving a permanent injunction restraining the firm from offering any unlicensed financial advice regarding SMSFs. Park Trent was also ordered to post a notice on its website outlining the orders made against it.

The appeal was taken before the court on 11 October this year, when Park Trent contested the refusal by Justice Ronald Sackville on 11 June 2015 to allow the firm to amend its defence.

“I have concluded that there is no appealable error in the decision to refuse an amendment on the sixth day of the trial,” said Justice Mark Leeming when dismissing the appeal on 3 November.

He also concluded that if the amendment had been granted, the final decision of Justice Sackville to order the permanent injunction would not have changed.

“Even if Park Trent had been permitted to amend, there would have been no different outcome to the litigation, save that it would have taken longer and been more expensive,” Leeming said. Park Trent has also been ordered to pay ASIC’s costs for the appeal.

LENDER UPDATE 8

BANKS’ BALANCE SHEET MOMENTUM SLOWS

Slowing balance sheet momentum

116bps

MYSTATE APPOINTS NEW HEAD OF BROKER CHANNEL MyState Bank has appointed experienced banking industry executive Paul Herbert as head of its broker channel. Herbert has been CEO of The Rock in Central Queensland, a division of MyState Limited, for the past two years and will continue in this role while assuming his new national broker relationship responsibilities at MyState Bank.

MyState’s general manager – sales and distribution, Huw Bough, said Herbert was well qualified, with more than 23 years’ experience in the financial services sector. “Paul knows MyState Bank well, has extensive experience in the mortgage broker industry, previously as state sales manager for Queensland and NSW with GE, and most importantly he understands brokers’ needs.

“This will help Paul to hit the ground running, quickly establish key relationships and maintain our mortgage business growth momentum.

“To assist him, we have recently almost doubled our number of broker relationship managers around the country and are looking at other ways to strengthen broker relationships and enhance the way we work with them,” Bough said.

Brokers contributed to MyState’s increase in its home loan book from $2.8bn to $3.7bn in the two years to 30 June 2016 – a jump of 30% – and the lender is currently working to diversify its loan book. In particular, the bank is actively trying to expand its geographic footprint, accelerating its lending outside of Tasmania, which currently makes up around 40% of its loan book.

Herbert added that he was looking forward to working with and supporting MyState’s broker network. “Brokers are a very important part of our business, and our partnership with them is the key to our growth. Our goal is to make a difference to our partners, customers and communities every day. With brokers we will do this by being accessible, being exceptional communicators and having a shared passion to serve and make things happen,” he said.

0.2% Non-housing credit

Average cost to income ratio increased by 116bps to 44.1%

3.8%

4.2% Housing Credit

Deposits

Source: KPMG

BLUESTONE MORTGAGES ANNOUNCES OUT-OF-CYCLE RATE REDUCTION Non-bank lender Bluestone Mortgages has announced an out-of-cycle rate reduction of up to 50 basis points for segments of its product range, with the discounts applying to home loans targeted at self-employed and PAYG borrowers. “We expect the rate cuts, and the corresponding opportunity to secure a lower-rate loan, will be well received by borrowers at this ‘expense heavy’ Christmas period,” said Campbell Smyth, CEO of Bluestone Mortgages.

Royden D’Vaz, head of sales and marketing, said the non-bank remained focused on providing brokers with products and features which would benefit more customers. “This rate cut will help more borrowers and make it easier for brokers to help their customers,” he said. “We understand the challenges that brokers face on a daily basis, and we continue to look for ways to help our broker partners help their customers.”

Bluestone’s rate cuts come at a time when the lender has expanded its team of BDMs and credit assessors to help brokers find a loan solution for self-employed and small business clients. These greater resources will help tackle brokers’ number one priority, quick turnaround time, D’Vaz told Australian Broker.

Comparing the second and third quarters of 2016, the non-bank has also seen a surge in the take-up volume of loan products targeted at self-employed borrowers. “We’re solely

focused on specialist lending, and channel our efforts exclusively on providing brokers with solutions designed to assist and benefit more customers – especially for self-employed borrowers,” said D’Vaz. “We continue to receive positive feedback about the accessibility and flexibility of our self-employed products that are designed to resonate with the millions of Aussies who traditionally have found it difficult to source finance.”

Bluestone also recently unveiled a new creative campaign that shows off its focus on the development and enhancement of its SME-targeted products. “We’ve developed a marketing communications platform that actively encourages brokers to help self-employed clients more often, and in the process improve their value proposition, broaden their customer base, and benefit from a new revenue stream,” D’Vaz said.

The campaign uses a slice of watermelon to prompt brokers to ask what slice of the $4bn specialist lending market they are tapping into, showing the opportunities that brokers may be missing. “Rather than telling them, we want to show them,” he said.

“We’re saying, ‘Here’s the market. Here are the stats. We’ve seen an increase in self-employed borrowers,’ and that’s where we’re trying to get their buy-in.”

10

COVER STORY

THE SECRET SAUCE

Entourage Finance’s Damien Roylance and Brett Gavaghan tell Australian Broker how the one-year-old brokerage is using social media to attract – and retain – clients

WHEN MELBOURNE-BASED brokerage Entourage Finance attended the Australian Mortgage Awards in Sydney on 21 October, the team of six heard the presenter call out the recipient of an award for Most Effective Internet Presence. It wasn’t Entourage Finance, and the team thought they had missed out on an AMA. What they didn’t realise was that the award was for Highly Commended, and when the winner was announced a moment later, director Damien Roylance found himself accepting the trophy in front of a crowd of 600 of his industry peers.

Roylance and Entourage director of operations Brett Gavaghan spoke to Australian Broker at the media wall straight after the win, and their shock – and excitement – was palpable. And yet, looking at how the small brokerage has used the digital space to benefit its business, it’s no shock at all that Entourage was named the industry’s most digitally savvy brokerage in Australia.

11

No suit and tie here Since Entourage threw open its doors a mere year ago following four years under a different brand, Roylance and Gavaghan have been using the power of social media to both attract and retain clients. Their use of Facebook, LinkedIn and Instagram has broadened their reach to a niche clientele – namely digitally savvy, high net worth Melbournian millennials – and as a result, the brokerage has just finished its first 11 months of operations with a loan settlement volume of over $69m.

Of the 89 loans lodged between 1 December 2015 and 30 June 2016, the brokerage’s conversion rate was 95.5%. “One of our rules in here is ‘a client for life’,” Roylance tells Australian Broker. “We’re there for them all the time … we just try and go that extra mile to serve them and be their actual ‘entourage’.”

Gavaghan adds that, surprisingly, part of

this exemplary service is managing the clients’ expectations. “We try and manage expectations from day one,” he explains. “And we do that by being as clear as possible. When you start managing expectations you can actually start exceeding them, and that’s how you secure them for the long run.”

Roylance believes that part of what makes Entourage so appealing to its clients is the accessibility of the brokerage. “I think we’re trying to be a little bit less ‘financey’,” he says.

“If you come into our office we’re not suit-and-tie boys … there’s a table tennis table there, we are a bit more relaxed. It doesn’t take away from the hard work and advice we give, but it breaks down those barriers.”

In their application for the AMAs, Gavaghan wrote, “We maintain a frequent, albeit casually toned, level of contact with our clients to ensure they are happy at all times. This keeps us top of

mind for any conversations they have with family or friends about real estate or finance in the short-term future. For clients that consistently refer business to us, we may send them a bottle of wine, take them out for lunch or invite them to an Entourage Finance function.

“We’ve sort of concentrated on emphasising the human experience that’s involved in getting finance,” Gavaghan says. “To get away, like Damien said, from the daunting experience, making it something that people can see themselves doing with ease. Getting away from that factory feel in favour of human interaction.

Yes, it’s a big deal [getting a mortgage] but we’re partners in it rather than us providing a service and them paying us. I think they feel like we’re invested in it as well.”

Knowing your target demographic Social media is an ideal tool to reflect and enhance

12

COVER STORY this warm, human touch that the brokerage clearly exudes, and Entourage encourages as much interaction with clients through its Facebook page as possible, such as running campaigns that have a call to action for users to reach out via direct message. As Gavaghan points out, Facebook is a network of people built on the premise of ‘liking’ things and showing people your personal interests.

“They share their achievements; they want all their friends to be a part of it,” he says.

Something as simple as posting a photo of Entourage’s existing clients and tagging their friends can instantly put the brokerage on the radar of a new network of potential home buyers.

“I don’t know of any other brokerage that would have the amount of clients photos [on their Facebook page] that we do,” Roylance says. “… And that’s one way we’ve been really able to entrench ourselves into Melbourne.”

Property purchases in particular are celebrated in this country, with the ‘great Australian dream’ of owning your own home still ringing true for the majority of people. Leveraging off this inclination of people to celebrate property purchases via social media, and the brand awareness that comes with that, should not be underestimated, according to Roylance and Gavaghan.

As Gen Ys, along with the rest of the team at Entourage, they have developed a social mediaheavy marketing strategy that reflects the team’s understanding of how they – and therefore other millennials – operate, and that leveraging the reach of social media is a natural and seamless way to attract fellow Gen Ys. “We’ve got a particular type of demographic, and all their eyes are on social at the moment, so it’s sort of going where their eyes are and replicating what people do naturally on social media,” Gavaghan says. “I just see [social media] as this incredible resource that’s completely untapped, and a massive opportunity that no one’s really taking advantage of.”

Standing out from the crowd New-to-industry brokers in particular would be silly not to use social media, according to Roylance. “If you’re the established guy who’s been doing [broking] for 20 years and you’ve got your loyal clients, I’m sure you can still survive without it. [But] I think for someone new to the industry, especially if you’re in that younger age bracket, it’s really important for them to have some kind of online presence to build themselves up,” he says.

This is particularly true in light of the ever-increasing competitiveness of the market, and entering the industry now would be particularly challenging, Roylance says. New brokers not only have to compete with other established brokers, but now they also have the extra challenge of the online mortgage fintechs and robo-advice websites that threaten the very service brokers offer – advice. “I think you’ve got to stand out somehow. And that’s how we’re trying to do it – through our online presence.”

To stand out in such a dog-eat-dog market, Roylance adds, new brokers need to find creative ways to make their mark, and using social media is one (almost free) avenue for doing this. Content is king, as they say, even for mortgage brokers.

ALL ABOUT ENTOURAGE

Loan volumes 1 Dec 2015–31 Oct 2016

Settled

Lodged

111 records valued at

169 records valued at

$69,468,306.88

$112,937,304.00 95.5% conversion rate

based on 1 Dec 2015–30 June 2016 results

Clientele

42.5%

36%

of settlements in 1 Dec 2015 –30 June 2016 period were from existing clients

of settled clients were referred by existing clients

making up almost 80% of all loans

“Everyone’s got a Facebook page now … but I just think you’ve got to think outside the square with social media and try and see how you can get people getting engaged with content.”

But it’s not just a matter of starting a company Facebook page and posting every now and then,

Forging a digital footprint in the future For Roylance, while winning the AMA for Most Effective Internet Presence was a massive achievement and a nod to the brokerage’s success so far, this is just the beginning. “I think we haven’t even scratched the surface yet. We’re in

“I think for someone new to the industry, especially if you’re in that younger age bracket, it’s really important for them to have some kind of online presence to build themselves up” Damien Roylance, director, Entourage Finance according to Gavaghan. Having a strong human element is vital, he says, and brokerages need to show their human – not just their business – side.

“I think you need to be real. And you have to tell a story as well. It’s marrying up those two but also leveraging off your strengths … Content is really important, but the best content is the stuff that evokes emotion in the reader or the viewer.

I think that increases relatability tenfold. That’s the secret sauce.”

that first year and it takes time, so it was really good to win that award, but we’ve got a long way to go,” he says.

As for which direction Entourage will in fact go in, there’s no doubt its journey will involve a strong digital strategy that plays on the human impulse to be a part of a social ‘tribe’, while offering a solid business proposition.

And that seems worthy of more than a handful of ‘likes’.

14

BEST PRACTICE TAKE CHARGE IN THE DIGITAL ERA Dushyant Sukhija (DushyantSukhija.com), author of The Cisco Way: Leadership Lessons Learned from One of the World’s Greatest Technology Services Companies (TheCiscoWay.com), on how to lead in a digital era:

1

Build and execute a compelling vision Focus on developing a vision that is disruptive to your industry, and think three to five years out. Engage your customers and partners in the process. Clarify and articulate the value to your stakeholders.

Ensure that your entire organisation and ecosystem internalises and drives information towards that vision. Build robust execution plans to work towards it, review your performance regularly, and make course corrections when needed.

2

Adopt a partner-centric model to deliver Collaboration is core to delivering superior competitive advantage with speed in the new digital world. Pick the right partners to build unique and sustainable value for your customers. Convince them of your vision and strategy. Show them how you innovate and create new markets.

GETTING GEN Y ON SIDE

With robo-advice gaining traction in the mortgage space, are brokers’ businesses at risk? HomeStart Finance’s Deb Dickson offers advice on how brokers can appeal to that online generation of home buyers known as Gen Y

3

Reinvent yourself A nimble organisation that can read market transitions and adapt itself to refocus on cheaper and faster ways to deliver new customer value is best suited to leading through the digital disruption.

Deploy a governance process to listen, learn, execute, lead and adjust to changing market dynamics and competitiveness.

4

Turn people into your secret weapon Employees are the true intellectual capital of every company, and that means businesses must invest in their people to enable them to become the catalysts that help them navigate the digital transformation. Align employees to a common goal and create a nurturing environment. Harness their intellectual horsepower to drive exceptional thought leadership and repeatability of proven leading practices.

5

Accelerate the speed of innovation Innovation is not just about the technology but also about how you organise yourself, how you engage your customers, and how you drive cultural change through your organisation. Resource-sharing and clustering talent should come into laser-sharp focus to get you closer to your customers and streamline your business.

Learn from your customers by engaging them in your innovation cycles. Become nimble to react to changing market needs and adapt to them.

BROKERS HAVE long held a unique position in the home finance sector. The fact that brokers provide multiple home loan options in one place, at no cost and with advice that is largely independent means they’ve long been a valued resource for home buyers. This has been reaffirmed by recent statistics from APRA, which reveal that new residential home loans originated through the broker third party channel increased by 25% in the June 2106 quarter. But with the rise of technology and a multitude of online services, such as home loan comparison websites, online calculators and lending platforms, are brokers at risk of becoming irrelevant to today’s younger home buyers?

In a recent survey by HomeStart Finance, first home buyers were asked what their first step would be when thinking about how to finance a home. Only 8% of respondents said they would talk to a broker as their initial step – the lowest-ranked action, and overwhelmingly behind the 20% who said they would visit a home loan comparison site.

Speaking with their current bank was the most

popular first step (26%), while 15% responded that they would seek advice from their parents, 14% said they would chat with someone who had recently bought a home, and another 14% confirmed they would use an online calculator.

The results highlight that mortgage brokers are not high on the radar for the current generation of first home buyers as a first point of contact; they are instead opting for the ease and familiarity of talking to their current bank, seeking trusted and unbiased advice from family and friends, or using online tools such as comparison websites and calculators.

Current first home buyers are generally those born between the 1980s and early 1990s, known as Gen Y, the internet generation or millennials.

While they were growing up, they had constant access to technology – the internet in particular – meaning that as adults they now regularly carry out their own online research.

This generation knows full well the amount of information that is at their fingertips, and they are also generally sceptical, meaning they want to evaluate home loans, fees and services themselves before making a decision. All of

15

their friends and family. There’s no getting away from the fact that a home loan is a significant financial commitment. As a first home buyer, the value of having someone help you understand your needs and options, and take the hassle out of completing the loan, shouldn’t be underestimated.

And neither should the importance of face-to-face contact and being able to pick up the phone.

The service a broker provides is their key differentiator. Make it work for you.

2

Fish where the fish are – focus on your online presence

Social media platforms such as LinkedIn and Facebook are an opportunity for brokers to connect with clients and peers and position themselves as thought leaders. Writing and publishing your own informed (and wellresearched) blog, and sharing it with a targeted audience on social media, is the best way to become a thought leader. And this will drive traffic back to your website. Brokers can also share news from their business or the latest information pertaining to their sector on social media.

Having a good Web presence to compete with the other online services is paramount. People are looking for information quickly on the Web, so it is important to communicate clearly and make the information easy to find and digest.

Key information to include is contact details, the breadth of alternative lenders you can offer, the process the home buyer is taken on with a broker, and testimonials from clients.

3

Advertising – but maybe not as you’re used to

Think about where your audience is spending their time before you begin advertising. Are they listening to the radio, reading the local newspaper, watching TV or scrolling through their Facebook feeds? Facebook is the largest-growing advertising platform in the world and offers targeted marketing to specific groups – it’s also cost-effective. these factors have contributed to the rise of online home loan services.

Online lending platforms are also disrupting the home loan space, bringing fresh competition

a reputation for being good at what you do, coupled with low-cost marketing tools, can build your brand so it’s front of mind with younger home buyers.

First home buyers were asked what their first step would be when thinking about how to finance a home. Only 8% of respondents said they would talk to a broker as their initial step and challenging the traditional offerings from banks and brokers. These platforms, which are generally free, see lenders bid for home loans in real time, allowing customers to watch as lenders drive down each other’s rates.

However, none of these online services can offer the face-to-face customer service of a broker. In the growing online world, building

Here are four tips to ensure you stay relevant to today’s generation:

1

Build a reputation for being good at what you do

Word of mouth can never be overrated. Being trustworthy and offering a good service to your clients will result in them recommending you to

4

Be involved in your local community

Building your name in your local community is a great way to start working up a client database and gaining referrals. Consider sponsoring a local community or sporting club.

Make sure you go out of your way to meet with the club’s members at events. When you’re out and about, remember to treat every social engagement as a business opportunity.

Local networking groups, service clubs and other organisations are always in need of interesting speakers. Find a local networking group that you can join and attend on a regular basis. Face-to-face interaction will build strong relationships and allow you to share your knowledge.

While online services may be easy to research from the comfort of home, face-to-face customer service and the on-call advice brokers offer shouldn’t be underestimated. It is your key strength, so work it as hard as you can.

Deb Dickson is head of retail at HomeStart Finance.

16

OPINION TREADING CAREFULLY

If you’re a broker looking to incorporate property investment advice into your service proposition, make sure you are equipped to do so, writes Ben Kingsley, chair of Property Investment Professionals of Australia (PIPA)

WHILE INVESTMENT activity may ebb and flow, property investment has become a part of the Australian culture. There will always be active investors, even when the broader market may quieten, and brokers know this better than most.

PIPA’s 2016 Investor Sentiment Survey showed that 65% of investors secured their last investment loan through a broker, and 71% plan on securing their next investment loan through a broker. This is welcome news to brokers’ ears, even if it is hardly surprising given over half of all mortgages are now written by mortgage brokers.

In today’s complex borrowing environment, brokers have clearly become a firm favourite with investors, offering greater choice and valuable advice on navigating the changing lending landscape. And with investor activity remaining strong, more and more brokers are starting to look at how they can better service this borrower segment and create further opportunity within their businesses.

The value of investors In running my own business, I’m a big advocate of cultivating investor relationships to drive future business opportunities as investors are a major component of my own client base. This is because investor clients can be very ‘sticky’. Usually, if successful in their strategy – and pleased with the service you provide – an investor will become a repeat client as they build a portfolio of properties that will generate the passive income they’re looking for for their retirement.

Incorporating property investment advice is clearly an effective way to expand your service offering as a broker and meet your investor clients’ broader needs. However, being an unregulated domain, this territory can raise a few red flags.

Unlike other asset classes, property is not recognised as a financial product under the Corporations Act. This means that anyone is free to potentially provide property investment advice

Ben Kingsley is the chair of Property Investment Professionals of Australia

without any qualifications, credentials, or even genuine experience, and ASIC can’t stop them.

But despite the lack of specific regulation, poor advice can still get you into trouble in other areas of the law. We’ve all seen the property spruiker headlines, which unfortunately still appear too frequently as a result of poor advice being given to investors.

In many cases, those in trouble have been deliberately misleading consumers. The industry is littered with people claiming they’re so-called experts in one type of strategy over another, when really they’re product-pushing. But there is also the occasional situation where the adviser involved is well-intentioned but unfortunately underqualified and underprepared.

I’ve seen many successful cases of brokers expanding their service offering to meet their clients’ broader needs, but a real danger for those brokers who want to play in the property investment space can be around their true level of knowledge and understanding of property as an investment. Just because you have helped 50 households secure loans for their investment properties doesn’t mean you are an expert on all things property investing. Brokers can destroy their reputations and potentially their whole business by trying to be property investment experts when they aren’t.

Diversifying into property investment But don’t let this scare you off! There’s no doubt that property investment advice sits nicely alongside mortgage broking. Lending is a fundamental component of most property investment actions, so there is undoubtedly a huge opportunity for brokers with multiple skill sets to expand their services in the property investment space – it just has to be done in the right way.

So the question is, which way is the right way?

The first step brokers should take is to formalise their property knowledge. My own career trajectory is proof of the value of this, as I first worked as a mortgage broker and then undertook further formal education to become qualified in the property investment space.

There are several courses you can take to become formally educated like I did, including PIPA’s Qualified Property Investment Adviser (QPIA) qualification. Completing a relevant course to build your knowledge is a great way to become appropriately skilled and to be financially remunerated for your advice.

The second critical factor for ensuring success in the investment advice space is full disclosure. When wearing two hats, one thing you should be aware of as brokers is how to make sure you are working in the best interests of your clients, across all areas of your business. If there are any conflicts of interest between yourself and your client, for example you’ve got a relationship with a developer or a builder and you’re receiving commissions rather than charging a fee for service, you should be disclosing those (this is also a rule under the PIPA code of conduct).

Lastly, remember: property investment is not transactional – it’s a long-term wealth creation strategy. So by maintaining close contact with your investor clients you’ll help ensure their investment journey stays on track, and ensure any new business opportunities come your way.

18

TECH FOCUS SYDNEY NAMED AUSTRALIA’S FINTECH HUB A report by H2 Ventures and KPMG released at the recent 20/20 conference has rated the world’s leading fintech innovators for 2016 and found that Sydney is home to eight Australian disruptors in the global top 100

NSW IS undisputedly Australia’s hub for fintech, according to a prestigious list of the world’s leading 100 fintechs announced in Las Vegas in October. Eight of the nine Australian companies that made the Fintech 100 list are based in Sydney. NSW Minister for Trade, Tourism and Major Events Stuart Ayres says the results have shown once again that Sydney is a key Asian fintech hub.

Online small business lender Prospa, EFTPOS provider Tyro, and investor-funded personal loan provider SocietyOne were all listed in the top 50, with online mortgage marketplace HashChing at number 76.

According to Ayres, the NSW Government has made it its mission to attract foreign fintechs to expand to Australia. “This sort of global recognition of Sydney’s booming fintech scene highlights our city is the best launching pad into Asia,” Ayres said. “In the last 12 months we have funded Chinese fintechs to operate out of Sydney fintech hub Stone & Chalk, we were the first state to send start-ups to Austrade’s landing pad in Tel Aviv, and brought out a delegation from the US who are considering expansion in the Asia Pacific.”

“Sydney fintechs, including the ones recognised, … are doing the hard yards and demonstrating what a world-class fintech ecosystem we have

here in Sydney,” he concluded.

Prospa and HashChing are two fintechs that are gaining more traction in the third party channel, offering small business loans and home loans respectively. HashChing already has 1,200 mortgage brokers registered, and the firm has received over $2bn in loan applications since launching the business. Of this, $1bn was processed within the last three months.

“HashChing was included in the top 100 due to its unique business model, innovative use of technology, and first-mover advantage in the fintech space,” Atul Narang, co-founder and COO of HashChing, told Australian Broker.

“It is the first and most successful online mortgage marketplace in Australia, and this industry recognition gives brokers greater confidence that they are working with a trusted and well-respected platform.”

Narang said that HashChing would continue to improve both service levels and productivity tools for its brokers by working to further streamline the loan application process. “The feedback we have received from HashChing users thus far has been incredibly positive, but we know there is further innovation to be done in this space, and we’re excited about what lies ahead,” he said.

For joint founder and CEO of Prospa Beau Bertoli, being ranked 31 out of 50 in this year’s Fintech 100 isn’t the only cause for celebration.

Since this achievement Prospa has also taken out first place at the Smart50 Awards in Melbourne, solidifying its reputation as an Australian fintech to watch. The awards recognise Australia’s top 50 fastest-growing SMEs, and Prospa, which has experienced incredible growth of more than 1,000% over the past three years, was awarded first place.

“Winning demonstrates that we understand the finance needs of small businesses,” said Bertoli. “However, this is just the beginning of our journey. We’ll continue to innovate and create groundbreaking finance experiences to help Australian small businesses succeed.

“We’re the leading online lender to small business in Australia and determined to stay there … Greg [Moshal, joint CEO] and I have very big goals – to change the way small businesses experience finance,” Bertoli said.

This award announcement caps off an outstanding quarter for Prospa, which also recently announced it had hit the $200m mark in loan originations and secured an additional $50m debt funding from a large institutional investor.

19

FINTECHS POSE LITTLE THREAT TO BIG FOUR, SAYS SURVEY A new survey by specialist financial services marketing agency Yell Creative has revealed that over two thirds of key operators in financial services believe fintech start-ups pose little threat to established players such as the big four banks.

The survey, State of Financial Marketing 2016, is Australia’s first survey focusing on financial marketers. It found that 98% of marketers believe fintech is positive, while only 32% think it’s a threat.

Nigel Roberts, managing director of Yell, said: “While there is a thriving fintech community in Australia, we feel their impact will likely be more limited than in other global markets.

“Australia has one of the strongest established financial sectors in the world.

The big four banks are resisting any challenge to their market share through a strategy of buying start-ups or partnering with them well before they can truly disrupt the industry,” Roberts said.

The survey covered all sectors of the financial services industry, including retail banking, insurance, fintech, fund managers and superannuation funds. It asked marketing managers where they were focusing their investment, and found a huge emphasis on digital marketing, while traditional print and TV advertising channels were becoming far less popular.

Social media, surprisingly, was not as much of a priority as other streams.

“Financial services marketers have long had concerns about how to use social media,

given the risks with managing reputation and around giving general financial advice, and many remain unsure how to use social media to maximise their brands and interact with consumers,” Roberts said.

Given the increasing importance of delivering financial services online, Roberts said it was essential for all financial services companies to be more consumer-centric.

“The financial services establishment faces a real challenge to become truly customercentric. This can only be met through massive investment in data management and platforms, yet very few organisations have the resources to undertake such investment.

“In contrast, fintechs are dedicated to improving the customer experience by building systems that deliver more holistic service, giving them a significant competitive advantage, hence our prediction that bigger organisations will inevitably swallow up fintechs,” Roberts said.

He predicts there will be slight disruption in the industry as a result of niche services like peer-to-peer lender SocietyOne. However, the trend suggests that these start-ups may also be bought before they get to a size where they are a significant threat to established organisations. “By contrast, the real fintech threat may come from established tech giants such as Apple, Google and Amazon and their payments systems,” Roberts said. “These organisations are so large and well funded that they cannot be acquired, [and] could be the real threat to traditional financial services companies.”

ONLINE HOME LOANS HAVE A WAY TO GO

30 of customers would ‘consider’ obtaining a home loan online end-to-end

5

but less than

said they would actually go ahead and obtain one

James Hickey Partner – consulting, Deloitte

Chris McRostie MFAA interim CEO

“Both broker and direct-to-lender customers are less positive about using online only for the home loan process. Instead they said they valued the ability to have a personal relationship and contact with the broker or lender representative.”

“While this supports the value that a broker adds through their personal role with the customer, brokers still do need to adapt and integrate better the various evolving digital technologies to continue to provide a personal service in a digital world.”

Source: Deloitte

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21

INDUSTRY SPOTLIGHT HELPING GEN Y

One in three first home buyers are turning to family for a handout to help secure their first property. But there is a better – and safer – option, according to La Trobe Financial’s Cory Bannister

THE P2C LOAN

Parents invest

5–105%

of the property price (for borrowing by the child)

The child

IS NOT REQUIRED to pay LMI premiums (which can run to several thousand dollars)

CAN BORROW at better rates than those offered by the bank

The parents’

CONTRIBUTION is secured by lodging a registered mortgage

LA TROBE FINANCIAL

collects monthly repayments and a return on investment on the parents’ behalf

WITH PROPERTY prices in Sydney and Melbourne stubbornly high and the housing affordability gap continuing to widen, it’s no surprise that ‘the bank of Mum and Dad’ is becoming the go-to lender for an increasing number of millennials struggling to get a foot on the property ladder. According to Chris Andrews, chief investment officer at La Trobe Financial, “at least one third of first home applicants are currently being assisted by parents and grandparents”, and with potential interest rate rises in 2017, that number will only grow.

But with these parental payouts, which often cover the housing deposit to obtain a mortgage, come risks not just for the parents but for the child as well. “The challenges faced by our ageing population are not enviable ones, with the responsibility of intergenerational transfer of hard-earned wealth to their heirs, all while maintaining or building an adequate retirement savings,” Cory Bannister, chief lending officer at La Trobe Financial, tells Australian Broker.

“The younger members of our country – who believe that it is their right to own property – are at the forefront of the housing affordability crisis.

Therefore it comes as no surprise that they would turn to their parents for help to get their foot on to the property ladder.”

La Trobe Financial has created a parent-to-child mortgage product (P2C®) that aims to address

some of the issues facing parents and their Gen Y children. A P2C® mortgage formally documents a lending arrangement between parents and their child, registering a mortgage on the security property that the child is purchasing, and then independently managing the assistance to ensure it is repaid in accordance with the agreed terms.

The P2C® product is designed to protect the parents’ investment without exposing their assets or credit file profile to any risks associated with their child running into difficulty with repayments.

There is no dollar limit on the P2C® amount, which is also good news for the child.

“Prior to this option, parents who wanted to help their children with purchasing a property had to guarantee the child’s loan or co-purchase the home with the child and in essence place their own home and retirement savings at risk. This also meant that that the child missed out on the First Home Owner Grant or stamp duty concessions,” Bannister tells Australian Broker. “Our product benefits those who cannot afford permanently to tie their money into their children’s property.

It also allows first-time buyers to purchase a property with a minimum deposit without lenders mortgage insurance.”

And there are more benefits for the child. Unlike other ‘profit share’ options, the child’s current and future equity in the property is not shared with their parents. The home is 100% theirs, giving

the child the full benefit of any future growth in value, says Bannister. “Finally, the child cannot be capriciously evicted, nor can their rate be hiked by the parents following a family feud, as the P2C® loan is independently managed and is subject to agreed terms by both parties.”

The parents can ‘invest’ as little as 5% or as much as 105% of the property’s purchase price, as well as determine the term of the investment – up to 25 years – and the interest rate on the P2C® loan, which starts at 3%. Once the loan is settled (using the parents’ funds), the parents receive a monthly return on their investment, as any other bank or financier would expect.

As families are forced to look for alternative products such as the P2C® loan to edge their way into an overheated market, Bannister tells Australian Broker that this is not likely to change dramatically any time soon. “Over the long term we believe property valuations close to major cities will remain well supported, albeit with likely more moderate growth than recent years,” he says.

As for affordability, Bannister believes interest rates will continue to be lower for longer, which will help those trying to purchase their first home. “With a P2C® loan, parents can assist with this by setting their own low interest rate and economically transfer wealth to their children, therefore helping with affordability in a protected way.”

22

MARKET WRAP MARKET TALK

HOT PROPERTY HAS ITS RISKS

While the property market nationally has eased, Sydney and Melbourne continue to have sky-high demand. But the RBA has warned that if demand doesn’t keep up with supply, there will be downward pressure on housing prices and rents and an increased risk of off-the-plan purchases failing to settle

IN ITS QUARTERLY statement of monetary policy released recently, the Reserve Bank has stated that although Sydney and Melbourne’s property markets have strengthened once again, “overall conditions in the established housing market have eased relative to mid last year”.

CoreLogic’s recent data for auction clearances for the week ending 6 November has shown that auction activity has continued to rise in the final month of spring; however, the number of auctions remains well below the highs recorded a year ago. The preliminary clearance rate was 77.5% across 2,490 reported auction results – higher than the previous week’s final clearance rate of 74.4%, and auction volumes increased compared to the 2,253 capital city auctions reported the week before.

Over the corresponding week last year, auction volumes were significantly higher, with 2,947 auctions reported; however, at the same time, there was a significantly lower clearance rate of 61.4%.

For the nation’s most in-demand cities – Sydney and Melbourne – clearance rates were well up on the same time last year, at 82.1% and 80.5% respectively.

“Demand is effervescent,” Christopher Koren, a buyer’s agent specialising in high-end properties around Melbourne’s inner suburbs, told the Australian Financial Review.

“I wish it would slow down so that I could buy some houses,” he said. “Strength of demand is palpable. It is coming to the end of the year and a lot of buyers and sellers are hitting the panic button because they are concerned the market will shut down for Christmas and they won’t be able to sell until next March.”

Nick Lower, manager of CBRE city sales, told the AFR that the demand was particularly strong in Melbourne and Sydney as a result of high-earning private investors buying commercial property – often their work premises.

In its quarterly statement of monetary policy, the RBA has warned that if growth in housing demand does not continue to keep pace with the scheduled large increases in supply, it will place downward pressure on housing prices and rents

and increase the risk of off-the-plan apartment purchases failing to settle.

Furthermore, if the broader housing market was to weaken substantially, the RBA has said, consumption growth could be lower than currently expected in response to wealth and income effects. Consumer price inflation would also be affected as housing costs comprise a significant share of household expenditure.

The RBA, APRA and ASIC have been attempting to cool property speculation by pressuring lenders to clamp down on interest-only loans. More specifically, APRA has set strict new guidelines for lenders to make it tougher for borrowers to roll over their interest-only loans without repaying the principal. The RBA’s and regulators’ concern is that lower repayment rates are encouraging borrowers to take on more debt without regard for how they will eventually repay the principal.

If interest rates were to rise, this could prove catastrophic for property buyers who have borrowed right up to the limit.

“APRA expects interest-only periods offered on residential mortgage loans to be of limited duration,” the corporate watchdog said in a recent letter to lenders.

Digital Finance Analytics principal Martin North’s recent analysis also found that, on average, only 43% of households with interest-only loans have had an explicit discussion with lenders regarding plans to repay the principal amount.

North said that interest-only loans could become a “debt trap” as many hoped to simply pay the loan out by selling the property at a higher price in the future, or by selling another property or using money from another source such as an inheritance. His analysis found that a shocking 83% of existing loan holders plan on rolling over to another interest-only loan in the future, while 26% have no firm plans for how they will repay the capital at all.

“Some borrowers on an interest-only loan may get a rude shock when next they try to roll their interest-only loan if they do not have a clear repayment plan,” North said.

23

FOREIGN INVESTMENT DECLINES IN SEPTEMBER QUARTER National Australia Bank’s latest Residential Property Report has shown that the proportion of Australian residential properties being snapped up by foreign investors has continued to decline in the September quarter. “During Q3, the overall market share of foreign buyers in new and established property markets fell to their lowest levels since 2012, with foreign buyers less prominent in Victoria, NSW and Queensland,” stated the report.

NAB indicates that the decline is broadbased and applies to houses and apartments, both new and existing. Foreign investors in the property sector accounted for just 10.2% and 6.4%, respectively, of new and existing property purchases during the September quarter, continuing the slide first discerned in mid-2015.

NAB, citing feedback from survey respondents, said the influence of foreign buyers was waning due to the tighter lending conditions imposed

by banks. Earlier this year, all four major banks clamped down on foreign lending, and the state governments have also applied a surcharge on stamp duty for properties purchased by nonresidents, which may have deterred investments.

The renewed strength of the Australian dollar, along with the continued rapid house price growth in Sydney and Melbourne, could also be contributing to the slowdown in foreign investment. In terms of new property purchases, NAB said foreign investors were less prominent in Australia’s biggest cities. “In Victoria, their market share fell to 15% in Q3. This followed a sharp jump in foreign buying activity in Q2 to 21.7% of sales ahead of an increase in the stamp duty surcharge on foreign buyers of Victorian property,” stated the report.

“Foreign buyers were also less influential in New South Wales, where they accounted for just 8% of total demand – the lowest level since Q1 2012.”

SYDNEY AND MELBOURNE THE PICK OF THE LITTER

Weekly clearance rate, city-by-city breakdown

Weighted average clearance

77.5%

1,956 auction results

Sydney

82.1%

840 auction results

Perth

31.8%

22 auction results

Melbourne

80.5%

820 auction results

Brisbane

54.1%

133 auction results

Adelaide

68.1%

91 auction results

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% Source: CoreLogic

24

COMMERCIAL NEW SMALL BUSINESS LENDER SETS SAIL Australian SME lender start-up Sail Funding has just launched, offering unsecured loans of up to $100,000 and attractive incentives for brokers referring their small business clients

SAIL FUNDING is the latest fintech SME lender to launch in Australia, bringing top-tier biometric security and real-time big data decision-making to small business loans. According to founder and CEO Yanir Yakutiel, the new SME lender will appeal to business owners and entrepreneurs who are currently underserviced by banks and traditional lenders.

Businesses can apply for loans valued at between $5,000 and $100,000, with weekly repayments over loan terms that can range from three to 12 months. “Often what small businesses need most is cash flow at the right time.

Sometimes it’s the difference between staying afloat or going out of business,” Yakutiel said.

“Being rejected for a loan can be catastrophic, but

having to put up your home or car as collateral also causes significant personal challenges.”

The fintech’s algorithm harnesses data in real time to offer fully customised lending decisions, allowing business owners to apply and receive a loan offer that is tailored to meet their needs, with funds often available in their bank account the next day. “Our application is fully automated and takes no longer than three to five minutes [and] our biometric ID verification and cyber security are best in class. Our clients can feel secure their private data is safe with us,” Yakutiel told Australian Broker.

“Furthermore, we believe that Sail’s risk and underwriting algorithms provide the most accurate and predictable lending decisions,

and this will be translated to a fairer and more customised price.”

Sail is the first Australian business to utilise AU10TIX BOS technology, an online ID verification solution that automates the authentication and conversion to digital records of images of ID documents. This enables forensiclevel detection of forgery and counterfeiting – similar to airport-grade ID security, meaning the strength of security is “second to none”.

The SME fintech is now actively recruiting and onboarding finance brokers, and Yakutiel told Australian Broker that the company did not underestimate the value of the distribution channel. “Sail is committed to building a network of finance brokers across Australia. We understand the crucial role that brokers play in the Australian market and the position of trust that they hold with their clients,” he said.

“Brokers are a vital part of our origination and distribution strategy. We’re looking forward to working together with brokers to provide a simple, secure and superior lending solution.”

According to Yakutiel, brokers who become accredited with Sail can look forward to “a very competitive commission structure that keeps rolling with consequent refinancings by the borrowers”, as well as a strict no-clawback policy and bonuses on top of a base commission.

“We believe that Sail’s value proposition, for both customers and brokers, is a very attractive one,” Yakutiel said. “Sail deposits the full commission as soon as the loan principal is transmitted into the borrower’s account.

There are no clawbacks or offsets for bad loans.

Moreover, brokers that meet pre-agreed targets will receive additional rebates and incentives on top of the base commission.”

He added that brokers would also receive training as well as marketing collateral for their professional development.

While the fintech only launched officially on 4 November, Yakutiel said the fintech’s broker network was already gaining momentum. “Given our very recent launch, our broker network is surprisingly large, and growing. We have seen quite a lot of traction with brokers as our value proposition is very compelling.”

The strength of security, speed of the application process and user experience, according to the CEO, are obvious drawcards for clients. However, there are added bonuses for broker-serviced clientele when it comes to loan applications. “Given our ability to assess risk on the entire risk spectrum, we don’t focus on a specific segment of the market,” Yakutiel said.

“This is both a benefit for the broker and their clients as it won’t require several applications.

At the end of the day, we believe the best partnerships are built on trust and transparency.

Brokers can feel confident their clients are being fully supported, not just throughout the loan process itself but for the entire journey of realising their business vision.”

Sail was one of eight fintech and cybersecurity start-ups selected to participate in the Tel Aviv Landing Pad program established by the Australian Trade Investment Commission in collaboration with the NSW Government.

25

THINKTANK ANNOUNCES FOLLOW-UP CMBS ASX-listed non-bank Thinktank has announced its first public commercial mortgage-backed securitisation (CMBS) transaction of $280m.

Increased from its $200m figure at its launch as a result of strong demand, the transaction marks the opening of Thinktank’s initial capital markets term issue to institutional investors and now represents the second pure small-ticket CMBS transaction in Australia since 2007.

“The interest registered by investors has genuinely exceeded our expectations and is indicative of the broad-based demand that has developed for alternate assets and the associated yield they can offer,” said Jonathan Street, CEO of Thinktank.

Commonwealth Bank of Australia acted as arranger and was also joint lead manager, along with Deutsche Bank, on the transaction. Deutsche Bank’s head of Pacific ABS Tim Richardson said the specialist commercial property lender was perfectly positioned to handle securitisation funding.

“The nature of Thinktank’s conservative SME commercial mortgage collateral naturally lends itself to securitisation funding. The success of the upsized transaction and extent of investor

engagement, both domestically and offshore, was certainly pleasing and positions the Thinktank SME CMBS program well for further issuance in 2017 and beyond as the business grows.”

The Thinktank portfolio of first mortgage commercial property advances supporting the CMBS transaction comprises 513 loans, with an average size of $545,804 and a weighted loan-to-value ratio of 64.2%. Distribution by location shows 58% in NSW, 14.8% in Victoria and 11.8% in Queensland over a traditional mix of commercial security property types, including retail, industrial and office.

The loan advances, predominantly to self-employed SME borrowers with clean credit histories, comprise 77.3% full-documentation, including 15.2% loans to SMSF borrowers and 22.7% carrying alternative verification requirements. Loans to property investors make up 53.6%, and no loans were in arrears on settlement date.

The specialist commercial lender has offices in Sydney and Melbourne and will soon surpass $1bn in loans.

THINKTANKING ABOUT THE FIGURES

Thinktank’s portfolio of first mortgage commercial property advances comprises:

513 loans an average loan size of

$545,805

a weighted average LVR of

64.2%

53.6% property investment loans Source: Thinktank

26

CONSUMER INSIGHTS CLIENTS SATISFIED WITH BROKERS Deloitte Financial Services’ most recent survey has shown some encouraging findings for brokers, including the fact that the majority of clients have been satisfied with the service provided by their brokers

A SURVEY conducted by Deloitte Financial Services has revealed that customers who use mortgage brokers to take out a loan tend to be more satisfied with their experience than direct-to-lender customers. The online survey of more than 1,000 borrowers who took out a home loan in the last two years was undertaken by the research company on behalf of the MFAA. The survey asked consumers why they decided to go to a mortgage broker or directly to a lender when taking out a home loan; about their experience during and after the process; and whether they would use the same channel next time.

“A key finding was that while overall satisfaction levels were high for both channels, with more than 90% of borrowers satisfied with the service provided through either a mortgage broker or direct to a lender, mortgage broker customers were most satisfied,” said Deloitte financial services partner James Hickey, who led the research. “Some 32% of mortgage broker customers rated their experience of using a broker at 9 or 10 out of 10 (where 10 ‘exceeded expectations’), compared with 20% of lender

customers giving a similar ranking.”

“It was apparent from the focus groups that the expectation going into the process had an impact on the satisfaction outcomes. Broker customers were largely after a relationship and support through the process. There was high satisfaction when this was provided.

“Direct to lender customers, on the other hand, had largely made up their minds as to what they wanted. They tended to be seeking best price and product features from their lender, so it was harder to exceed their expectations.”

Of particular interest for brokers is that 30% of surveyed customers were unclear about how brokers were remunerated. Furthermore, 63% of brokers customers indicated that they were prepared to consider paying a fee to the broker for their service: 22% said they would pay up to $500 for a broker’s services; 18% said they would pay between $500 and $1,000; and 23% said they would pay between $1,000 and $2,000.

However, Stephen Hale, head of marketing and communications at the MFAA, said a fee-for-service model would not be healthy for consumers or brokers. “I think it would have an

impact and I think it would reduce the number of brokers,” he told the media at a briefing on 3 November. “That would reduce consumer access to lending, particularly in regional areas.”

When asked whether brokers could survive on what the Deloitte report said people were willing to pay, Hale didn’t mince words.

“I would say that a lot of brokers would not be able to operate within those figures and run a business and employ people. That’s just being frank.”

Of the competition between brokers and direct-to-lender channels, Deloitte’s Hickey said the research suggested something different entirely. “Our view is that the research indicates that broker and direct to lender channels, rather than being seen as competing against each other, can actually be viewed as complementary to each other. Customers are choosing to go to either a broker or direct to a lender for quite different and distinct reasons. Broker customers want and value the relationship and support through the process, while direct to lender customers have already settled on their choice and are largely seeking best price and features,” he said.

27

BROKERS VS LENDERS

Customers choose brokers…

Of the customers who went to a broker:

34%

32%

19%

18%

had an existing relationship with their broker

were personally recommended to the broker by family or friends

were looking for support through the mortgage process

were looking for the best price

Customers choose lenders…

Customers trust brokers…

Of the customers who went direct to a lender:

A number of the focus group participants also said it was simpler and easier to go through a broker as they perceived that mortgage brokers ‘could get things done faster than a banker in a branch’, said Jenny Wilson, customer practice lead partner at Deloitte. “Many also felt it was ‘more efficient’ through a broker, as they know which banks are likely to approve their specific loan application circumstances.”

MFAA interim CEO Chris McRostie said he was pleased with the survey’s results, which reaffirmed the value of brokers in the mortgage industry. “It was pleasing to receive independent affirmation that customers are more than 90% satisfied with the service provided by brokers when taking out a home loan,” he said. “When we commissioned the survey, we wanted an independent understanding of the channels customers preferred and why. We also wanted to know what customers valued most and what providers could do to improve their services.”

Deloitte found that 82% of broker customers felt that brokers generally acted in their best interests – while 40% said brokers acted in their best interests ‘all of the time’. Although this was vastly better than the direct-to-lender result of 22%, McRostie said there was still room for improvement. “However we do want to continue to build on our personal relationships with our customers, and make sure that those customers who feel brokers act in their interest to a limited extent change to be absolutely certain that they do so ‘at all times’. This is an area we will focus on,” he said.

“In addition our broker community can continue to improve its after-sales service.

Although 45% of those surveyed rated brokers as providing ongoing advice when they needed it, with 22% noting they had proactive interactions about their mortgages, almost 20% said they no longer had contact with their broker. This is an area where we would like to see improvement,” McRostie said.

82%

58%

of broker customers agreed that the broker generally acted ‘in their best interest’ direct-to-lender 73% ofcustomers said the lender acted ‘in their best interest’

were most influenced by their existing banking relationship with the lender

However...

29%

of broker customers felt the broker acted in ‘their best interest’ at all times, compared with 22% for direct-to-lender customers

40% were looking for the best price

Customers are loyal …

BROKER 73% OFCUSTOMERS

12%

OF BROKER CUSTOMERS

DIRECT-TO-LENDER 65% OFCUSTOMERS

20%

OF DIRECT-TO-LENDER CUSTOMERS

would use the same broker again

would use a different broker the next time

would go direct to the same lender again

would go direct to a different lender next time

Customers favour commissions…

30%

of surveyed customers were unclear about how brokers were remunerated

63% 37% 0%

10%

20%

30%

of broker customers were prepared to consider paying the broker for their service

of broker customers would either go direct to the lender if they were asked to pay or would still not want to pay anything explicitly to the broker for the service

40%

50%

60%

70%

80%

90%

100%

28

PEOPLE CARVING OUT A NICHE Award-winning Allfin Financial Services tells Australian Broker how it became a leading financial brokerage in its niche of pharmacists, dentists and veterinarians

WHEN HE established Allfin Financial Services in 2010, founder and managing director Mark Churchill was intent on targeting a very specific type of client. “From the outset I wanted to only focus on pharmacy lending,” says Churchill. “I had a strong and loyal client base and a reputation in the market across multiple states, allowing me to be able to assess a new transaction quickly.

“Specialising also allowed me to find the one point where you can make the biggest impact as possible with your clients.”

those offered only to pharmacists, and its team provides specialist advice in areas including medical, health care, dental, veterinary and legal finance, with clients ranging from surgeons and anaesthetists to barristers and vets.

But working within this niche has its challenges. “Being heavily weighted to this industry has, of course, brought its own challenges as the industry moves through one of its toughest periods,” Churchill says.

However, there are plenty of plus sides to this

“Specialising also allowed me to find the one point where you can make the biggest impact as possible with your clients” Six years later and Allfin Financial has offices in NSW, Victoria and South Australia, and the brokerage took out eighth spot in MPA’s 2015 Top 10 Commercial Brokers list.

A focus on pharmacists Churchill tells Australian Broker he chose to focus his business on servicing pharmacists because he knew the value of building a long-term commercial book, and that a pharmaceutical business would fit the bill. “The credit profile of a pharmacist is very strong, always allowing for cross-selling for home loan and investment property lending, motor vehicle finance and asset finance for store fit-outs,” he explains.

Allfin’s services have now expanded beyond

competitive market. “I like competition,” he says.

“It allows Allfin to demonstrate how well we do things. Allfin has a process, which is outlined to the client, which we follow implicitly.” He says the staff ’s consistent, open approach with clients sets them apart from their competitors as well as gives them an edge when dealing with lenders.

Early connections Churchill has always had a foot in the financial and insurance industries. He started his working life as an auctioneer in Port Melbourne/West Footscray, where he specialised in plant, equipment and accident-damaged vehicle sales.

“I then wanted to expand my horizon so used my residual and insurance knowledge to land a

job with a fleet management company, spending seven years working my way through the ranks. In leasing I learnt to understand the basic principles of finance, which have been key to my ability to structure deals even to this day,” he says.

“I then moved to an asset broker and then back to a corporate [DaimlerChrysler Financial] before doing a stint overseas in Guernsey [in the British Channel Islands] and then moving back to Melbourne, working with a small firm doing novated leasing.”

Driven to learn about commercial lending, Churchill joined NAB in its Specialised Industry Group and picked up a healthcare portfolio, which consisted predominantly of pharmacy lending. “I immersed myself in the pharmacy industry, made a lot of connections and was one of NAB’s top writers. I then moved to CBA to run their healthcare division for the southern region,” he explains.

“After leaving CBA, I had the capital to start my own business. Most of my career had been built on strong relationships, so I had built a solid list of loyal clients when initially starting Allfin.”

Never standing still With the finance industry going through a time of change thanks not only to regulatory changes but also fintechs disrupting traditional finance, Churchill is making sure Allfin is embracing – not ignoring – this time of transition.

“We recently announced the launch of Kubio with Macquarie Business Banking and three other top-tier commercial broking firms, providing a cloud-based software platform that we believe is set to transform the way commercial broking is done in Australia.”

He says the platform will be central to their expansion plans for diversifying business away from traditional lending markets.

“The commercial lending platform will allow us to create an easy referral portal for our referral partners and also allow us to grow through acquisition and give Allfin a speed-to-market capability in the general healthcare segment, driven by the new software,” Churchill says.

“In the last six years since I started Allfin, there’s been an obvious change in the regulatory side of the industry. I think this is good thing and we need to see more, ensuring we as a community are self-regulating. There seem to be a lot of brokers joining the market and a lot of younger people seeing this as a true career option, and I would like to see more support for women in the industry.”

For brokers starting out, Churchill thinks there is a lot to be said for the expression, ‘Stick to your knitting’. “When you are starting out you need to know your limitations,” he says. “You will see deals from time to time that you want to get involved in; however, it may not be in your true skill set. You spend hours trying to work through the situation, only to find it wasn’t what you thought it was.”

For Churchill, attitude is something that can’t be ignored when assessing new brokers at Allfin.

“Without the right attitude people will struggle, as we have already instilled the right mindset within the organisation. We will look at people outside the industry, and more often than not this has worked to our benefit.”

29

CAUGHT ON CAMERA FAST held its annual Business Excellence Conference in Singapore from 30 August to 1 September to recognise and reward the success of their top brokers.

The conference included presentations from FAST CEO Brendan Wright, Bruce Debenham (Perks Finance), and Bill Constantinidis (Lending Association), who spoke about what it takes to be a top broker.

Ita Buttrose (media editor, businesswoman and Australian of the Year 2013) shared her secrets to success and Nicole Devine (GM performance and operations, broker partnerships, NAB) spoke on incorporating diversity in business and starting small.

Lt. David Morrison (Australian of the Year 2016) shared his three tips for being a successful leader, and Anthony Waldron (executive GM, broker partnerships, NAB) spoke on what lies ahead for the broking industry.

Almost 200 brokers attended the event.

The three-day conference concluded with the FAST Gala Awards, at which FAST’s award winners were announced and celebrated.

See more industry photos by going to the Australian Broker Facebook page

30

PEOPLE HOT SEAT

JUSTIN DOOBOV Intelligent Finance managing director Justin Doobov talks about spreading awareness of the benefits of using brokers, and why he wants to have dinner with Elon Musk

Who or what inspired you to become a mortgage broker?

I was a qualified engineer and saw that A manufacturing was dying in Australia. I went back to university to study finance and accounting and was lucky to be offered a job as a mortgage broker. My clients inspire me to be the best mortgage broker I can be. I have always had a passion for helping people. Being a mortgage broker has enabled me to help thousands of clients achieve their dreams of owning a home, while saving them money by getting them the right structured loan.

Q

What has been your most memorable client experience?

Several years ago, I was approached by a person A who had been knocked back by two lenders and was about to lose his home. By presenting and structuring his application using our proprietary methodology, I came up with a loan structure that enabled him to refinance his existing home loans and pay out his credit card and personal debts. This saved his home and his marriage and he and his family have been good clients of mine ever since.

Q

What do you think is your point of difference as a broker?

I put my clients’ best interests at the top of any A decision I make. I don’t try to sell the client the cheapest interest rate; instead I spend a lot of time analysing what my client is looking to achieve by having the new loan. I then choose the right loan structure that ensures my clients win in the long term by having a better-suited loan that archives all of their objectives.

Q

If you were the head of the MFAA or FBAA, what would be your first priority?

Prepare a media campaign that reminds A consumers of the benefits they have enjoyed by using a broker. I would also remind consumers that the reason interest rates in the market are now so competitive is due to the work brokers have done over the years to keep the lenders honest.

Q

If you could have dinner with any three people (dead or alive), who would you invite and why?

Elon Musk because he always pushes the A boundaries with ideas and challenges the status quo; Warren Buffet because he’s able to pick strong winners and he’d have some good investment advice; and Michael Jackson because I’ve always liked his songs.

Q

THE CHOICE IS YOURS

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