AUGUST 2017 ISSUE 14.16
Broker behind bars Judge’s sentencing decision reveals details of broker’s $1.9m fraud scheme /12
A natural alignment Liberty’s broker footprint expands with the addition of a 400-strong network /18
BRENDAN WRIGHT FAST’s CEO on how its commitment to diversity and empowering brokers leads to sustainable growth /14
CBA’s unknown game plan Major bank’s proprietary channel shows strong growth, raises questions /20
ALSO IN THIS ISSUE … Take back time Three industry leaders share their tips on maximising productivity /17 Kaitlin Kenney Finding a solution for credit-impaired clients /22 Virginia Graham A broker’s surreal experience with a client dripping in diamonds /30
NEWS
IN THIS SECTION
Lenders Pepper agrees to $675m takeover bid /04
Aggregators RE/MAX Australia partners with Connective /06
Technology Brokers face shortage of quality leads, says survey /10
Regulators Broker sentenced to eight years in $1.9m fraud case /12
Consumers Property investors more at risk in a downturn /08
www.brokernews.com.au AUGUST 2O17 EDITORIAL Editor Otiena Ellwand News Editor Miklos Bolza Production Editor Roslyn Meredith
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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.
NEWS
LENDERS NAB: ADJUSTMENTS TO COMMISSION NEEDED EGM of broker partnerships, Anthony Waldron, says “the industry needs to make adjustments” to the standard commission model by paying upfront commissions based on the drawn-down amount, not the total facility amount, and by paying upfront commission net of offset balances. “We don’t believe that the current standard commission model has resulted in poor consumer outcomes, but we believe it is essential to manage not only actual conflicts but also the potential for perceived conflicts of interest,” he said. NAB’S
NON-MAJOR GROWS RESI MORTGAGES BY 18% Bank has reported growth in its residential loan book of 17.8% between the first half of 2016 and the first half of 2017. In the AMP Group’s half-yearly financial results released 10 August, residential mortgages in the company’s banking division rose from $15.4bn to $18.2bn in the 12 months prior to 30 June this year. The lender’s total loan book stood at $18.8bn. AMP Bank originates home loans through both the broker channel and its AMP-aligned adviser network. AMP
“There will be no change to the name, no change to the people, and no change to the way we operate. [KKR is] 100% supportive of what we’re doing, how we’re doing it.” Michael Culhane Group CEO, Pepper Money
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FOREIGN INVESTORS PAY UP TO FOUR TIMES AS MUCH STAMP DUTY AS LOCAL BUYERS Source: Housing Industry Association Stamp Duty Watch report
Stamp duty paid on capital city apartments $100,000
$93,865
Domestic investors Foreign investors
$90,000 $80,000 $68,970 $70,000 $60,000 $50,000 $40,000 $29,105 $30,000
$28,905
$26,870
$20,000
$12,145
$10,000 $0 Sydney
Melbourne
GLOBAL INVESTMENT FIRM SET TO ACQUIRE PEPPER IN $675M TAKEOVER BID If the deal is approved, Pepper’s CEO says it will hopefully help the non-bank lender grow even bigger lender Pepper Money has accepted a $675.9m takeover bid by global investment firm KKR Credit Advisors. The scheme will go to a shareholder vote in early November and, if approved, will see Red Hot Australia Bidco – an entity owned by KKR – purchase the shares, with the deal being finalised later that month. Shareholders will be given the option of rolling their shares over to Bidco or selling them at $3.60 per share. Pepper Chairman Seumas Dawes, CEO Michael Culhane and CFO Cameron Small together hold 35.5% of the total shares. They have each indicated they intend to vote in favour of the scheme. NON-BANK
Despite the change in ownership, Culhane said the business would remain the same. “There will be no change to the name, no change to the people, and no change to the way we operate. They are 100% supportive of what we’re doing, how we’re doing it and how Mario [Rehayem] is running the mortgage business in Australia.” Discussions around a takeover started in 2016 when Pepper’s stock prices were not where the firm wanted them to be, Culhane said. “The market thought that they were pretty cheap, so we had a number of inbound enquiries from private equity firms, Chinese corporates, etc. All manner of firms were interested in starting a
Brisbane
conversation about taking a position or the sorts of transactions which could be done.” The board got involved, confidentiality agreements were written up, and information was shared about the company, he said. “As we went through that process, it became clear that KKR was a potentially good partner for the business going forwards.” KKR was 100% supportive of the business, would continue to back the company’s goals, and would hopefully make Pepper even bigger, Culhane said. KKR was also ready to pay the highest price and was able to close the deal. “We were able to check all those boxes,” he said. “We created an independent board committee where non-executive directors considered the deal, negotiated the price, and became happy that this was a deal to recommend to shareholders.” If the deal goes ahead, a select number of KKR people will join the Pepper board.
NEWS
A G G R E G AT O R S AGGREGATOR FOCUSES ON ASSET FINANCE Loanstoday will concentrate on the asset finance space as the business evolves to meet broker and consumer needs. “Previously it was really more about personal assets – so car loans and personal loans in an individual’s name. Now, the asset is purchased through the company,” said Loanstoday director Craig O’Shannessy. Loanstoday has 13 lenders on its panel and is working at bringing on more. The new focus will also see the company utilise the asset finance capabilities of its existing panel of lenders on a more regular basis. AGGREGATOR
AGGREGATOR PARTNERS WITH VIRGIN MONEY Money has announced a new partnership with Choice Aggregation Services, continuing its broker-centric approach to home loans. “One hundred per cent of our home loans are sold through mortgage brokers, so our strategy is very much to continue working closely with our broking partners. We’re excited to be partnering with Choice Aggregation in the next phase of Virgin Money’s expansion,” said Virgin Money CEO Greg Boyle. Choice CEO Stephen Moore said the aggregator was pleased to be adding Virgin Money to its panel. VIRGIN
GLOBAL PROPERTY GIANT REBRANDS FINANCE ARM Newly rebranded RE/MAX brokerage Pivotal Finance is partnering with one of the country’s leading aggregators and will be looking to take on more brokers in the future Australia has announced the rebranding of its financial arm and a new partnership with Connective. Formerly known as Australian Property Finance, the RE/MAX brokerage has been rebranded as Pivotal Financial, and will leverage the real estate company’s national network as well as its new relationship with Connective as its aggregator. Matthew Andrews, the recently appointed general manager of Pivotal Financial, said his division would offer RE/MAX customers a full suite of financial offerings, with the value-add of enjoying the same ownership as RE/MAX Australia. “The rebranding of Australian Property Finance brings a new RE/MAX
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era in full financial service for the RE/MAX network,” he said. Andrews said the company would be looking to expand its team to up to 15 brokers in the near future. While Pivotal is currently focused on the Queensland market, it is interested in serving a broader national audience, he said. As for the brokerage’s relationship with Connective, Andrews said it would complement Pivotal’s growth plan. “Connective is a dynamic and relatively young aggregator that leads industry competitors in innovation, technology and diversification, and is a good pairing with Pivotal Financial where we are embracing technology to drive growth and
performance,” he said. Andrews said the company was looking to capitalise on what Connective offers, including “productivity, quality, conversion, training, education and technology via their Mercury platform”. RE/MAX Australia managing director Michael Davoren said this “strategic move brings Pivotal Financial much closer to the RE/MAX organisation, and the greatest beneficiary is the customer dealing with our network”. The real estate company is now the sole owner of Pivotal. However, how the brokerage works with RE/MAX will remain generally the same, Andrews told Australian Broker. “Together with RE/MAX, we are creating a selling/buying experience within the real estate industry that is an all-inclusive experience. Accountability is driving our business forward, and agents, brokers and real estate consumers will share the positive outcomes,” Andrews said.
“Accountability is driving our business forward, and agents, brokers and real estate consumers will share the positive outcomes.” Matthew Andrews General manager, Pivotal Financial
NEWS
CONSUMERS FOREIGN INVESTORS PAY QUADRUPLE STAMP DUTY investors purchasing property in Sydney are paying almost four times as much stamp duty as locals, according to the Housing Industry Association’s Stamp Duty Watch. Foreign investors paid $93,865 in transaction taxes for a median priced Sydney unit compared to $29,105 paid by domestic investors. “Foreign investors are a vital component of rental supply in cities like Sydney and Melbourne ... Should we really be placing more barriers?” said HIA senior economist Shane Garrett. FOREIGN
HOUSING FINANCE FIGURES ON THE UP AND UP demand for residential home loans has increased for the second month in a row, according to the latest finance figures from the ABS. The data shows just over 54,400 home loans were approved over the month of June, an increase of 0.5% from the previous month. The value of all dwelling commitments increased by 0.8% to $33.3bn in June, including an increase in the value of both owner-occupier and investment loans. THE
INVESTORS MORE VULNERABLE TO ECONOMIC DOWNTURN Those with investment loans are at higher risk than owner-occupiers of defaulting in the event of a recession investors will be more vulnerable than owner-occupiers if a national economic downturn occurs in the future, analysts from Moody’s Investors Service have found. Analysts looked at investor trends in Western Australia and concluded that a similar scenario could play out across the country to what has been seen in WA over the last few years, if the economy hits troubled waters. “A significant increase in housing investment loan defaults in Western Australia over the past four years demonstrates what we believe would happen to the performance of such loans in other Australian states in the event of an economic downturn,” they said. PROPERTY
“Recent changes to stamp duty in NSW mean that foreign investors now pay almost $100,000 in transaction taxes to acquire a standard apartment in Sydney – almost four times as much as local buyers.” Shane Garrett Senior economist, Housing Industry Association
Levels of investment defaults are higher than for owner-occupiers, which reverses the trend found before WA started deteriorating economically in 2013. “In the event of an economic downturn in other Australian states, we expect that housing investment loans will incur higher defaults and losses than owneroccupier mortgages, in a reversal of the current trend.” Investors are particularly vulnerable to a change in economic conditions due to a reliance on rental income and house price appreciation to generate a return on income, Moody’s analysts said. “Moreover, loan repayment and property management costs exceed the rental revenue generated by
many Australian residential property investments, meaning that investors incur ‘cashflow losses’. “Such investors rely on property price appreciation to offset their cashflow losses and provide a return on their investment, which increases their exposure to house price volatility.” In contrast, owner-occupiers do not rely on rental income to meet loan repayments and will not be exposed to a downturn in the rental market. They are also less reliant on house price appreciation since the property is seen as a residence first and an investment second. As a result, owner-occupiers are more likely to see out a housing market downturn and are less likely to have to sell at a loss. While new regulatory measures have slowed the growth in and improved the credit quality of new housing investment loans, outstanding investment mortgages are becoming riskier because of rising interest rates and dwindling refinancing options.
VV RESIDENTIAL INVESTMENT LOAN DEFAULTS IN WA HAVE INCREASED SINCE 2013 Source: Moody’s Investors Service
1.6% 1.4% 1.2%
Housing investment loans Owner-occupier mortgages
1.0% 0.8% 0.6% 0.4% 0.2% 0.0% May 13
Nov 13
May-14
Nov-14
May-15
Note: Default rates are for variable-rate full-doc owner-occupier mortgages and housing investment loans
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Nov-15
May-16
May-16
NEWS
TECHNOLOGY
SUNCORP ROLLS OUT NEW BANKING PLATFORM has created and implemented a “single digital experience” to enhance the mortgage process for brokers and customers. CEO Michael Cameron said Suncorp was the first company globally to roll out and operate Oracle’s end-to-end loan origination, servicing and collections system. “What we are going to be doing is putting in the hands of our intermediaries the skills, capabilities and, more importantly, the platform to be able to broaden that service that they provide to their ultimate customer,” he said. SUNCORP
BROKER COMMUNITY FACING A LEAD ‘EPIDEMIC’
alternative methods,” Moffatt said. An aversion to technology and change in general was behind these latent trends running throughout the broker industry, he told Australian Broker. “Plus, a lot of people are technophobic – they don’t understand technology and it makes them feel a bit anxious,” he said. “The other key driver here is very basic: it’s money. Referrals don’t cost anything or, at the most, brokers might have to do a revenue share with the referral source, which they only have to pay after the loan is settled.” Even those who invest time and money into online campaigns such as Facebook ads are struggling to convert the spend into leads and then convert these leads into appointments and applications, Moffatt said. Aggregators and industry groups need to be doing more to educate brokers, he said, so traditional brokers don’t lose market share to emerging online players.
New survey results suggest that the number of brokers with an adequate number of leads is shockingly low across the industry 5% of mortgage brokers say that they’re bringing in enough leads for their business, according to new industry research. Conducted by independent mortgage lead generator Wealthify.com.au, the Wealthify Broker Digital Pulse looked at how brokers were generating leads and growing sales in the digital era. Wealthify CEO Darren Moffatt admitted he was shocked by the results. “Lead generation is an ongoing challenge for any business of course, but I wasn’t prepared for the scale of this issue. Both franchise-group brokers and independents across the country overwhelmingly reported lead shortage as a problem,” he said. “It’s an industry-wide epidemic.” The survey found that 56% of JUST
brokers were “not receiving enough leads” while 39% could “do with more”. Only 5% were satisfied with the number of leads they were receiving. The industry’s heavy reliance on referrals to generate leads was a cause for concern, Moffatt said, especially with the new wave of online brokers and lenders emerging. Of those polled, 92% said they received leads from referrals. Facebook advertising came next at 34%, followed by offline partnerships (31%) and social media (30%). “Referrals are great, and they’ll always be a big lead source. But in an environment where most brokers say leads are scarce, it’s worrying that more aren’t experimenting with
VV BROKERS NOT RECEIVING ENOUGH LEADS MOST Source: Wealthify Broker Digital Pulse 2017, courtesy of Wealthify.com.au
39%
Yes No
56%
Maybe – could do with more
5%
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MFAA AND NON-BANK OFFER BROKER WORKSHOPS MFAA has teamed up with non-bank lender Pepper Money to deliver a series of workshops to new-to-industry brokers. These sessions will be free for MFAA member brokers and will provide realistic insights, planning tools, and profit and loss skills so participants can create an action plan for their individual business success. Pepper has stepped forward to support new-toindustry brokers as a way to create a more sustainable future in the broker channel. THE
TECHNOLOGY UPDATE
WHERE BROKERS’ LEADS COME FROM Source: Wealthify Broker Digital Pulse 2017, courtesy of Wealthify.com.au
Other
24%
(please specify)
External lead
s
SMART TECHNOLOGY FACILITATES QUDOS BANK’S GROWTH SPURT
19%
generation Telemarketing
9%
(in-house) TV
Rob Maloney Radio
13%
Direct mail Print
11%
advertising Offline
31%
partnerships
30%
Social media Google AdWords Facebook
34%
advertising Website or
25%
Google search
92%
Referrals
0
20
40
60
80
100
120
ONLINE LENDER SECURES $20M DEBT FACILITY online lender Prospa has secured a $20m debt facility from the Australian arm of a Silicon Valley-based commercial finance provider, Partners for Growth (PFG). The company specialises in lending to growing technology companies and has recently made headlines in Australia for providing funds to Sydney fashion start-up GlamCorner. PFG’s funding follows the strategic approach that the fintech has taken since its launch back in 2011. “Like our small business customers, Prospa requires funding to grow. PFG plays an important role in the market by filling the gap left by the traditional banking industry,” said Prospa CFO Ed Bigazzi. DIGITAL
A rebranding exercise has been an outstanding success for Qudos Bank, with strong volume growth corresponding with a name change (previously Qantas Credit Union) and a cleverly executed transition into the broker channel. “Entering the broker space has been vital to our growth,” said Qudos Bank broker relationship manager Rob Maloney. “Underpinning this growth has been our partnership with NextGen.Net and the ApplyOnline platform, which has been key for us to scale for the volume.” Qudos Bank, which despite its name change remains a customer-owned bank with profits going back to its members, has embarked on a technology enhancement phase. NextGen.Net’s ApplyOnline, the industry standard for electronic lodgement of loan applications, is the foundation into which Qudos’s technology expansions are anchored. “When I came on board here in January 2015 I took on the role of preparing the broker channel,” said Maloney. “A big part of that was ensuring the ApplyOnline platform was up and running in time for the launch, because a number of the groups I approached hit me up front with the same question about offering brokers online lodgement. Invariably they wanted to know if we had ApplyOnline. “When I had my first meeting with techsavvy Finsure and LoanKit, one of the first remarks from their national sales manager, Simon Bednar, was, ‘We’ll only come on board with you if you have ApplyOnline’.” Previously, applications along with their supporting documents were retrieved from Qudos Bank’s ApplyOnline Application Centre Viewer and rekeyed into their existing loan processing system. Qudos Bank wanted to eliminate this rekeying. This meant replacing their existing loan processing system. Qudos Bank implemented ApplyOnline, along with a suite of tools for more efficient processing, including the ApplyOnline Supporting Documents service. Today close to 100% of Finsure’s applications come to Qudos via ApplyOnline. Over 70% of all applications coming into Qudos Bank utilise the ApplyOnline Supporting Docs service, which Maloney says “makes the whole process far more efficient and secure”. “Some brokers still don’t realise that emailing a customer’s documentation
Steven Hudson
is an unsafe practice. The ApplyOnline Supporting Docs service not only allows the broker to easily and efficiently adhere to a lender’s verification requirements, it also maximises efficiencies at the lender’s end,” says NextGen.Net customer account manager, Steven Hudson. “Receiving, reviewing and confirming all supporting documents securely on-screen without touching paper is best practice, and Qudos are really seeing the efficiencies created internally.” Using the ApplyOnline Supporting Documents service (the identification of supporting document requirements at POS and validation against lender policy requirements), brokers can submit applications electronically for all Qudos Bank loans and include all required supporting documents. Qudos Bank is also able to verify internally all supporting docs online, significantly speeding up the process and decreasing time to approval. Maloney credits ApplyOnline with helping Qudos Bank scale its business “without having to bring new people on board”. “The feedback I’m getting from a lot of brokers is that they are very pleased with our offering,” said Maloney. “Finsure and LoanKit consistently sees us as one of their Top 10 lenders and we were recently awarded Mozo’s Experts Choice Award for Home Loan Bank of the Year and three Outstanding Value Canstar awards.” Maloney is particularly enamoured with a recent ApplyOnline Supporting Documents service upgrade, which offers a number of new functionalities and gives more power to lenders to better configure the service to gain additional efficiencies. The update delivers a refreshed state-ofthe-art, condition-driven UI (user interface) that allows brokers to review lender requirements, then bulk upload documents to meet the specific requirements. The new UI means lenders can move to a situation in which all documents are uploaded securely. “We are heavily promoting the new bulk document upload function,” Maloney said. “With this new feature brokers can upload documents into the application and submit them all as one.” Complimenting Qudos Bank on its “reinvention”, Hudson said: “NextGen.Net recognises the value mutual lenders provide to the broker channel, and we’re delighted to be able to support Qudos Bank during their growth journey”.
NEWS
R E G U L AT O R S
RBA REMAINS CONCERNED OVER HOUSEHOLD DEBT RBA reiterated the need to carefully monitor housing market conditions and household debt levels at its August board meeting. While residential property investors are now facing higher interest rates, and the growth in credit to investors has eased, overall housing credit growth has continued to outpace the relatively slow growth in household incomes, the board said. The cash rate remained unchanged in August at 1.5%, with the regulator noting “the need to balance the risks associated with high household debt in a lowinflation environment”. THE
JUDGE’S DECISION CRACKS OPEN $1.9M FRAUD CASE A district court’s sentencing has revealed the devastating consequences of one broker’s desperate scheme district court judge who handed down an eight-year, nine-month jail sentence to former broker Michael Samra has described the $1.9m case as “a consistent and persistent demonstration of fraud” through actions that were “premeditated, deliberate and repetitive”. In the final ruling, Judge Geraldine Davison described the circumstances that led to Samra pleading guilty to six counts of deception and explained the reasoning behind the lengthy sentence. ASIC had alleged that between 1 January 2009 and 31 July 2009, Samra, through his broking business, Adelaide Lending Centre (ALC Group), had deceived investors to lend money to be on-lent to builders and property developers. He said these would pay high interest rates (30% for 30 days) for quick access to short-term funds. But the money was never actually on-lent to builders or developers and was instead paid to other investors dealing with the firm. “Contrary to the representations that had been made by you in January 2009, the amount of $150,000 and the amounts of $50,000 and $70,000 were not lent to builders or developers but THE
APRA REDUCES BARRIERS FOR NEW ADIS has proposed a phased approach to licensing new ADIs that seeks to reduce barriers for new entrants while maintaining adequate safeguards. This includes the introduction of a restricted ADI licence for certain applicants, which would allow applicants to obtain a licence while still developing their resources to meet the prudential framework. Treasurer Scott Morrison said the government welcomed APRA’s approach. “A more competitive and innovative financial sector means more choice, lower prices and better service for Australian customers,” he said. APRA
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instead were paid to other investors in the ALC Group,” Davison said of one case. ALC Group collapsed in 2009 with liabilities of approximately $40m. The ASIC investigation found that approximately $66m came into the ALC Group bank account over a seven-month period, with the majority of funds paid to investors. Samra himself became bankrupt on 3 March 2010. He was discharged from bankruptcy on 30 October 2013. “ASIC investigated the collapse of your group and conducted a reconstruction in relation to the invested deposits through your group for the period from 1 January to 31 July 2009. That reconstruction shows that in that period there were deposits into your bank account totalling over $66m. Investor deposits totalled $58m and there were further miscellaneous deposits of over $7m,” Davison said. Twelve charges were laid in 2015, but six were discontinued. Samra ended up pleading guilty to six charges of deception totalling $1.9m. In determining the sentence, Davison took into account the impact these actions had had on investors with ALC Group. “These people have been
generally hard-working individuals who have been striving to do their best to provide for their families and their own retirements,” she said. “Each of them has been significantly financially disadvantaged by your behaviour. Beyond that, of course, they have the devastation and stress that comes from financial difficulties and the effect of having so badly judged the situation as they see it.” The fact that funds were immediately sent out to various investors meant that Samra was effectively “robbing Peter to pay Paul”, she said. “You knew that you had this significant financial difficulty that was unlikely to be resolved when you sought and obtained the funds that were used to prop up the business, knowing at the time when you obtained them that there was little, perhaps no prospect that they would be repaid.” However, Davison also acknowledged Samra’s personal circumstances, noting that he had no ability to make reparations for his actions. She also recognised the stress Samra would have been under while trying to keep his business afloat. This eventually led to two suicide attempts, hospitalisation and psychiatric treatment in July 2009. “However, these factors, whilst they would have impaired your judgment significantly, do not mean that you were unaware of the nature and quality of your actions.”
GROWTH AND DECLINE OF OFFSET BALANCES MATCHES INTEREST-ONLY TREND Source: RBA
Year-end growth
%
30
$277.3
20
10
0 2009
2011
Interest-only loans
2013
2015
2017
Offset
Note: The latest observation may be affected by existing borrowers switching from interest-only to principal and interest repayments.
LEGAL DECISION BOOSTS FRAUD PROTECTION FOR BANKS recent legal case has clarified when banks are liable for mortgage fraud in a decision that may see the victim worse off in certain scenarios. The decision will also remove liability from the bank in certain fraudulent transactions even if the proper loan processing procedures were not followed. The case, Spiliotopoulos v National Australia Bank Limited and Ors, saw the borrower allege that the individual who witnessed their signature on the mortgage did not in fact meet them and that their signature was forged, Louise Massey, partner at Dentons, told Australian Broker. The ruling by the Supreme Court of NSW found that an individual’s claim to be a registered proprietor at Land and Property Information can be challenged in the event that a bank had knowledge of or participated in the fraud in the first place, Massey explained. A
FE AT URES
COVER STORY
DIVERSE PEOPLE, DIVERSE THINKING Promoting and supporting gender diversity and equality in mortgage broking has long been one of FAST’s core principals, explains CEO Brendan Wright, because it brings in fresh perspectives and approaches that improve business and strengthen the industry the landscape at industry events is still largely a sea of dark suits, the number of women in broking is growing, injecting some much-needed diversity into a traditionally male-dominated field. The industry’s changing make-up was clear at FAST’s fifth annual Women in Business series, where women led at the podium and filled the majority of the seats, reflecting the aggregator’s flourishing female demographic. In the last two and a half years, FAST has added 187 women brokers to its ranks, representing almost a third of the aggregator’s population. Eighty-three women were onboarded in the last 12 months alone. This mirrors the trend across the industry. According to the MFAA’s Industry Intelligence Service report, the number of female brokers grew by 8.7% to 32% during the reporting period from April to September 2016. At the same time, the number of male brokers grew by 5.7% to 68% of the industry. The report says this suggests that women are entering the industry, or remaining in the industry, at stronger rates than men. “Gender diversity just makes sense,” says FAST CEO Brendan Wright. “What diversity can bring to you personally in your life and also in business is something that drives really sustainable business success. “The concept of diversity in thinking as leaders – and you are leaders in the businesses that you run – can make all the difference when you let go and know that you don’t have to come up with all the answers.” Creating an environment in which people of different genders, WHILE
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races, ages and experience can work together fosters diverse thinking, leading to better business outcomes, Wright explains. Shortly after he became CEO of
had to build awareness and provide women with opportunities. There was no event or workshop in the market at the time specifically geared towards women, so FAST
“Gender diversity just makes sense. What diversity can bring to you personally in your life and also in business is something that drives really sustainable business success” Brendan Wright, FAST FAST in October 2012, Wright went about making this happen. There was a growing desire to make the business more diverse, and in order to support and encourage women to join broking and finance, FAST
established and launched its first Women in Business event in 2013. It was a huge success, with 100% of delegates saying they’d attend again. The event has since expanded to five states, providing women with
a forum where they can openly discuss how to turn challenges into opportunities and how to make their mark, and where they can connect and build community with other women going through the same things. This year’s series attracted 350 women from across the industry, including brokers, lenders, service providers, loan writers, assistants and industry body members. Wright says there are practical and tangible benefits to having more women in the industry, including that it promotes “diversity in thinking”, which in turn can help people and businesses solve problems more effectively. As a result of increased gender and ethnic diversity, and having a mix of people with different experiences and skills, the culture at FAST has evolved, becoming more inclusive internally, more comprehensive strategically, and more representative of its customer base at large. Cracking the ceiling When Carol Curtis, director of Curtis Property Investments, started her broking career back in 2004, it was perceived to be a ‘‘hobby job” for stay-at-home mums. This perception has evolved as more women have entered the profession and lending space, she says, but there is still a shortage of women, especially on the lending side. One of the hurdles that Curtis’s daughters have had to deal with as credit representatives for her company is being perceived
GENDER DIVERSITY AT FAST
20 women
83 women
onboarded in FY17 YTD
onboarded in the last 12 months
53 women
187 women brokers
onboarded in FY15
joined in the last 2.5 years
114 women
onboarded in FY16
1/3
of all FAST brokers are women
THE NUMBER OF WOMEN ENTERING BROKING IS GROWING Source: MFAA Industry Intelligence Survey, 2016
Reporting period: April–September 2016 From left: Kathy Tracey, Mortgage Link; Sal Bazzi, BDM, Westpac; Brendan Wright, CEO, FAST; Megan Moss, BDM, Westpac; Effie Zahos, editor, Money magazine
as “too young”, despite their qualifications, knowledge and previous corporate experience. While this is one such obstacle to being a woman in broking, there are also some advantages. One of the upsides is that it provides flexibility around which women can build their families. Also, a lot of the work revolves around building and maintaining relationships, which Curtis believes women are particularly adept at. For a longterm client-broker relationship to succeed, it is important to build trust and empathy, she says. “It is not just a financial transaction with the client, but a goal or dream we aim to fulfil, which is why connecting with them on a personal level becomes important. I believe clients are more open to dealing with female brokers, due to these reasons – which further creates opportunities for female brokers to succeed in this industry,” she says. Not only are there more women in the industry nowadays, but there are also more female clients looking for trusted advisers. Nearly 50% of Australian women
are the key decision-makers regarding their own and their families’ finances, while 89% of women are at least jointly responsible for financial decisions, according to data from the March 2017 BT Australian Financial Health Index, which surveyed more than 4,000 people. Curtis has noticed this as well. “Over the past few years, a lot more females are purchasing properties themselves and are obtaining advice from their own financial planners in regard to SMSF structures and purchasing property through this. “I also feel that more female clients are approaching brokers because they feel more comfortable approaching other females in regard to their finances.” Regardless of whether a broker is male or female, owning a business and juggling the personal and professional demands is difficult and stressful, which is why Curtis really appreciates the support, training opportunities and events FAST hosts for its brokers. “It was great to see so many women attending [Women in Business] and how the number of
32%
68%
Number of men recruited during period
28%
72%
Number of men at end of period
Of the brokers who were recruited during the six-month period, what proportion were men and what proportion were women?
Number of women recruited during period
What proportion of brokers were men and what proportion were women, at the end of the six-month period?
Number of women at end of period
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female brokers is growing. I was also glad that there was some attendance from our male counterparts – to show tangible support for women in the industry,” she says. Curtis is of the mind that the more knowledgeable and up to date you can be, the more credible you’ll become. Working in a maledominated environment has not set her back. Instead, it’s motivated her to perform better and stay at the top of her game, she says. “I have always overcome challenges by learning more and being solution-oriented,” she says. Expanding your reach Megan Mouradian, director of Lighthouse Finance Group, has been a mortgage broker for 13 years and previously worked for a major bank for a decade. She believes that with greater diversity in the industry brokers can have a wider reach across the community and potential clients. “Consumers want brokers to be invested in their requirements, and not every broker will suit every consumer. Without being too general, female brokers may have a different approach, which may better suit some consumers. Also, with
Carol Curtis, director, Curtis Property Investments
as loan writers, administrative assistants, or as aggregator BDMs and lenders. “The mortgage broking industry has a range of opportunities for women, and I believe success is driven by individual effort and education, not gender. The current challenges in the industry are universal and not gender-related,” Mouradian says. Curtis and Mouradian, both FAST
“The mortgage broking industry has a range of opportunities for women, and I believe success is driven by individual effort and education, not gender” Megan Mouradian, Lighthouse Finance Group more female brokers in the industry, this may encourage more females to explore mortgage broking as a career,” she says. While there are still more men working as brokers, the industry doesn’t feel dominated by them because there are so many highperforming women brokers, she says. Furthermore, there are many women in the industry supporting brokers in various roles, whether 16
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brokers, say they appreciate events like the Women in Business series because they provide women with an intimate format in which to hear from inspiring speakers and further their learning and training, swap stories and experiences. “Mortgage broking can be stressful and lonely at times, so these events are a great way to touch base with others facing the same challenges,” Mouradian says. AB
Megan Mouradian, director, Lighthouse Finance Group
FIVE LEARNINGS ON WORK-LIFE BALANCE FROM EFFIE ZAHOS
1
Learn to say no
Say ‘no’ more. This has been one of the hardest skills for me to learn. I always took ‘no’ as an insult to the person who was asking for something to be done, when in fact it was quite the opposite. It shows you have direction, focus and a plan. Make ’em wait – and set ‘unplug’ times I’m still learning this, but the idea is to not be accessible 24/7 and to be proactive rather than reactive when it comes to emails and voice calls. Just because an email lands in my inbox at 7pm doesn’t mean I have to respond then and there. Sunday afternoon now is strictly family time!
2
Use just one calendar I’ve never really understood the concept of having a personal calendar and a work one. There’s only one of me, so I run just one calendar. By scheduling everything into the one diary I have a better picture of what my personal and work commitments are.
3
Never underestimate yourself Be proud of your achievements and don’t be afraid to take on risks. I moved from banking to TV and then from TV into magazines. I had no experience in either of these fields, but that didn’t stop me from applying. Women are often their own harshest critics. Don’t let your insecurities get in the way of moving forward. So long as you know you can get the results, go for it!
4
Bust the myth on work-life balance You can have it all: a full-time job, kids, a husband and a home, so long as you accept that it will come at a price. Learn to let go of perfectionism. As a working mum who chooses to juggle all of this, I have to accept the trade-off for doing what I love, because only then will I be able to live guilt-free.
5
Effie Zahos is the editor of Money magazine; a regular personal finance commentator; and was a keynote speaker at the FAST Women in Business series.
OPINION
TAKE BACK YOUR TIME Broking businesses are constantly seeking ways to improve efficiencies and boost their bottom line, says PLAN’s Tim Ford. Three industry leaders share their tips for streamlining processes and maximising productivity Matt Gatt of MLC Mortgage Solutions works with financial advisers to create debt solutions for the company’s clients. He uses the web-to-lead feature within the broker portal Podium, available to brokers under NAB’s aggregators, to gather key client information from advisers. “By the time the customer gets to us they
an hour off each loan application could save brokers a week every year in their calendars, giving them more time to focus on innovation, relationship-building and upskilling to develop their businesses. This was discussed at the recent PLAN Australia Digital PD Day, where three industry leaders shared their tips on leveraging technology and relationships to improve business efficiencies. SLASHING
Early fact-finding As a first step, getting clients to fill in a questionnaire on their income, expenses and product requirements can often shave an hour off the process, saving valuable time for both the broker and client. Having access to detailed client information before the first meeting also facilitates richer client conversations and potentially allows the broker to make a product recommendation up front. Brendan Lowbridge, a finance strategist at Investor Loans Network, said his business had implemented a detailed fact-find for clients to complete. “As a specialist, we want to add as much value as we can in that initial consult. For the customer, the benefit of getting all their information up front is that we can come into that meeting with a lot more information and get straight into meaningful recommendations,” he said. Phoebe Blamey, director of Clover Financial Solutions, agreed that conducting a fact-find early in the process could deliver efficiencies. “We provide new clients with an Excel spreadsheet and a list of questions, and they email us all their core information before the initial meeting so we can let them know what is missing on the day,” she said. Referral partners such as financial advisers can assist with the information-gathering process as well, by sharing information about the client’s financial situation and goals.
loan applications at any one time. STP also reduces the need for ‘multiple touch’ manual intervention, improving data integrity and loan quality. Blamey said STP had significantly improved turnaround times for her clients. “We always ensure we have everything on the lender checklist before we submit the application, because if we don’t, the application will often return to the back of the queue. We find this system much more efficient than email as it gets looked at more quickly by the lenders,” she said. Choosing the right communication channels Effective communication ranks highly for both clients and referral partners, enabling brokers to improve the client experience and build better relationships. Lowbridge, who sources most of his business through referrals, recommends asking clients and referral partners about their preferred communication methods. “Real estate partners might want a short, sharp voice message or text to update them on the application, whereas a financial
Making small incremental process improvements can not only save a precious week per year in the calendar but can also push your business to new heights have already met with their financial planner and are part way through the process. The adviser can provide the background to what the customer needs from their broker,” he said. “From there we send an automated email to the customer so they can fill in their details. This provides us with a basis to make a recommendation at the first meeting.”
Tim Ford Strategic partnerships manager, PLAN Australia
Building lender relationships Not all client situations are straightforward enough to be able to provide an immediate recommendation. Therefore maintaining good relationships with lenders can help brokers find solutions for more complex loan requirements. “The biggest thing for us is our relationship with those lenders,” Gatt said. “It is good to know the basic policy, and if something is out-of-the-box we tend to lean on the [lender] business development manager to help us place that.” In addition to fact-finding tools, straightthrough processing (STP) has been popular in the broking industry for some time, with many lenders investing in technology that allows them to process higher volumes of
planner would generally want a more detailed update,” he said. Lowbridge uses the eClient function within the Podium platform to trigger the main client communication tasks and send reminders when a follow-up call or email is required. “I use a hired processor who does a fantastic job of looking after all the client communication on my behalf,” he said. As a national business, Gatt said the focus for MLC was on streamlining and automating communications to keep clients informed at every step of the application process, including lodgement, conditional approval, unconditional approval and settlement. “Our advisers are very customer-centric and want to be kept up to date with everything, so we ensure they are copied into all communications with their clients,” Gatt said. What is clear is that no matter how productive and efficient your business, making small incremental process improvements can not only save a precious week per year in the calendar but can also push your business to new heights. AB www.brokernews.com.au
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NE WS ANALYSIS
A COMPLEMENTARY ALIGNMENT Liberty has taken over nMB from Aussie Home Loans in a deal described as a “strong alignment of vision and values” that will help the non-bank lender expand its broker distribution capabilities even further. Liberty CEO James Boyle and nMB managing director Gerald Foley explain why their companies are the right partners non-bank lender Liberty Financial has acquired wholesale aggregator National Mortgage Brokers (nMB) from Aussie Home Loans in a move lauded as a natural fit for two companies with strong entrepreneurial roots and whose business strategies rely significantly on brokers. “When we presented our three year plan to Liberty, it was very clear that the things we were looking to do to grow our business were so in alignment with Liberty’s approach to dealing with brokers, helping them build better businesses and be more successful,” says nMB managing director Gerald Foley, who will continue to lead the aggregator. As the two companies discussed nMB’s three-year business plan during the acquisition process, Foley says there was no debate or scepticism about the 10 actions nMB’s wants to implement. “It was just an automatic understanding of strategy and a total alignment of business philosophy and broker support,” he says. Liberty CEO James Boyle agrees that the lender was absolutely supportive of nMB’s business plan, which will in turn help the lender expand its distribution capabilities and provide both organisations with opportunities for growth. “We think it’s a terrific plan. It’s exciting and we’ll be throwing our resources behind Gerald to go and execute that plan, which was in place before we started these discussions,” Boyle says. “The consequence, we believe, will be growth in the nMB network and even better services for the nMB LEADING
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“By working more closely together with nMB, we are excited at the opportunity to even better understand the challenges that brokers face every day” James Boyle, Liberty
make processes easier, faster and more responsive, Boyle explains. “We think we’re really on the cusp of significant change in the way that products are brought to market and decisions are made. We have always been a non-bank that has very conscientiously monitored and managed risk and doing that in the future requires more data and more analytical power. We have invested to make that transition,” Boyle says. In late July, Liberty introduced its Liberty IQ online portal, which can be used by any of its third-party brokers, including nMB, to get updates on any loans in the pipeline, find out how applications are progressing, and talk to underwriters and settlement offices. Boyle says the lender is making big investments in virtual image capture in regards to assessment and risk decisions with the vision being to reduce the burden on customers and brokers by doing the “heavy lifting” on assessing verification through independent data.
helping its existing brokers add loan writers to assist with their companies’ individual development. While both Foley and Boyle were reserved about revealing other
From Aussie to Liberty There’s no question that nMB did well under Aussie’s ownership. Its team expanded from 170 brokers in 2012 to 403 this July, and its loan
network going forward.” That plan includes growing nMB’s broker head count beyond its current 400-strong network by bringing on new suitable broker businesses and
strategy details, Foley says they have a number of ambitious new to broker market strategies in the works. Liberty has already invested heavily in technology and data and now has
seven data scientists in-house. With the ability to better observe customer and broker behaviour through technology, the idea is that the company will be able to find ways to
LIBERTY’S MARKET SHARE ACROSS ALL MORTGAGES WRITTEN BY AFG BROKERS Source: AFG Competition Index, June 2017
3.0% 2.74%
2.79%
2.61% 2.46% 2.5%
2.36%
2.27% 2.17% 2.02% 1.89%
2.0%
1.98%
2.18%
1.86% 1.5% Jun-16
Jul-16
Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17
Feb-17
Mar-17
Apr-17 May-17
James Boyle, CEO, Liberty
book nearly doubled over that time from $8.5bn to $14bn. So why would Aussie go ahead with this deal? “While nMB has been a very positive contributor to the success of the Aussie Group, the future of Aussie’s long-term strategy is to concentrate solely on our own branded distribution footprint,” Aussie CEO James Symond said in a statement when the acquisition was announced on 2 August. “Liberty is a long term partner of both Aussie and nMB and I am confident that it is the right business and leadership team to facilitate nMB’s next phase of growth.” Boyle says it was not without reluctance that Aussie approached Liberty with the idea of selling off
Gerald Foley, managing director, nMB
nMB. “When Aussie did their strategic review and the opportunity came up for us to work more closely
understands why, in such a highly competitive marketplace, it decided to focus on its own brand.
“We have built a very strong and well-regarded brand in the broker space over the last nearly 16 years and that will continue to be the way we approach brokers” Gerald Foley, nMB together [with nMB] going forward, we were very excited by the prospect,” he says. Foley says nMB’s five years under Aussie were “fantastic”, but he
“To have a big branded business and a smaller wholesale business was not as natural a fit with where Liberty is looking to take its business into the future. It’s not a matter really of one
better or one worse, it’s a matter of the alignment going forward,” Foley says. “Changing strategy at an ownership level was very opportunistic with the strategy that Liberty was working on and we fit nicely into that play.” Aussie and nMB will maintain a relationship from a referral sense, Foley says. So if a broker is looking to join the business and doesn’t fit with the Aussie model, they will be referred across to nMB. NMB brokers will also still have access to Aussie’s loan products. As experienced when Aussie purchased the aggregator five years ago, Foley says nMB brokers will not be affected in any way on a day-to-day basis. Brokers will maintain their personal branded businesses and their independence to decide on lender and product. “From our brokers’ perspective, it is very much business as usual. It’s still early days in the transaction, so nMB and Liberty will work together to work through where we can bring value that Liberty has available to our broker network,” Foley says. Liberty’s own proprietary broker channel Liberty Network Services (LNS) and nMB will exist as separate entities. NMB remains an independent wholesale aggregator that allows brokers to run their own business under their own brand in a highly professional way, while LNS is a branded distribution network where advisers join and represent themselves under the Liberty brand. Both entities give brokers more choice and demonstrate Liberty’s commitment to building up the broker channel, Boyle says. Brokers can now decide between the branded proposition offered through LNS or choose the strong support and vibrant professional network offered by nMB. “The pace of change in the industry is certainly not going to slow and by working more closely together with nMB we are excited at the opportunity to even better understand the challenges that brokers face every day and come up with innovative solutions that help overcome them,” Boyle says. AB www.brokernews.com.au
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NE WS ANALYSIS
REINING IN BROKERS CBA’s proprietary channel showed strong growth this past financial year, while broker originations lagged to 2015 lows, signalling a potentially concerning trend ahead. But the major bank’s CEO says it’s still committed to the third party channel been a “significant decay” in the number of CBA loans originated through brokers versus the bank’s proprietary channels, suggesting its strategy to bolster its branch network is working, one industry analyst says. Six months ago, CBA explained that it would reinvest in its branch network to develop it as a sales channel, and it appears that’s come to fruition, says Digital Finance Analytics principal Martin North. “At a superficial level at least, it looks as though CBA’s strategy is to drive the branches really hard and therefore curtail the momentum of brokers, but of course you have to overlay the mix of business change; effectively there’s been a downplaying of investor loans and that’s something that I think is part of the picture as well,” North explains. CBA has multiple channels through which borrowers can access lending, including the bank’s home-buying website, branches, direct lenders at its call centres, its mobile lender workforce and brokers. CBA brought in $197bn in new lending, including around 330,000 new home loans, during the 2017 financial year. Brokers originated 43% of the bank’s home loans, a drop of 7% from the year before, while 62% of home loans were brought in through the lender’s proprietary channels, an increase of 8% from the year before. This is contrary to industry trends that show brokers’ market share is increasing. Brokers brought in $49.4bn worth of residential home loans in the June 2017 quarter, an increase of $3.4bn since the March quarter. The MFAA’s latest quarterly industry survey, which compiles data THERE’S
20
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from 19 brokers and aggregators, found that brokers settled 51.5% of all new residential home loans in Australia between April and June, an increase of 1.4% from the same time period in 2016.
“We remain believers in the broker channel. We remain committed to the broker channel,” he said. A bank spokesperson told Australian Broker that CBA had made a number of enhancements to
“At a superficial level at least, it looks as though CBA’s strategy is to drive the branches really hard and therefore curtail the momentum of brokers” Martin North, Digital Finance Analytics Despite the picture the numbers paint, CBA CEO Ian Narev stressed, during an investor briefing in August, the importance brokers play in helping the bank’s customers meet their home-buying needs.
the right support to meet their customers’ needs. Narev also highlighted the acquisition of Aussie Home Loans as an example of the bank’s commitment to the broker channel. The acquisition was kick-started on 4 August when Aussie founder John Symond exercised his put option, requiring CBA to buy up the remaining 20% share in the company.
simplify and streamline its broker processes over the last 12 months, including continuing to invest in broker relationship management teams and online tools and calculators to ensure brokers have
A positive sign, according to some UBS Bank also chimed in on the shift at CBA, with analysts Jonathan Mott and Rachel Bentvelzen noting that they had “long been concerned with
MORE MORTGAGES COMING THROUGH CBA’S RETAIL CHANNELS Source: UBS Bank
A$bn 35 28.6
30 25.5
25
24.4 21.1
20.0
20 15
16.4 12.8
14.1
21.3
22.9
23.6 21.6
24.0
25.5
22.0
18.0
14.4
10 5 0
CBA broker flow (A$bn) 2H13
1H14
2H14
CBA proprietary flow (A$bn) 1H15
2H15
1H16
2H16
1H17
2H17
27.9
CBA’S MORTGAGE SALES VIA BROKER CHANNEL SLOWING Source: UBS Bank
CBA broker flow (%)
43%
2H17
CBA’s increased reliance on mortgage brokers”. Broker-originated loans at CBA rose to 50% in 2016, up from 31% in 2012. As a major financial institution serving about a third of the Australian population, CBA’s proprietary network was mostly flat during those years, with much of its sales growth being reliant on the broker channel. UBS sees the bank’s reining in of its broker originations as a “positive sign” because it suggests the bank is leveraging its large customer base, distribution strength and analytics, and because it places CBA in a strong position to negotiate materially lower broker commissions, which UBS said it expected the bank to announce “imminently”. “Mortgage broker commissions have been spiralling upwards for many years and mortgage commissions are the one part of the financial services value chain that have not seen margin pressure,” the analysts wrote. “We see a reduction in excessive broker commissions as an area of upside for CBA and the broader banking industry.” CBA has told Australian Broker it is consulting with brokers to work through the Sedgwick recommendations, which it is committed to implementing. “We are working with the broker community and are engaging very deeply with the broker community –
and I know the ABA is doing work on this as well – to find out what is the best way for the spirit behind the Sedgwick recommendations to be reflected in broker commissions,” Narev said. Responding with optimism Most remain optimistic, however, that the doors aren’t closing on brokers, and their market share will continue to increase in step with the financial needs of their customers. MoneyQuest managing director
in terms of their contribution to the bottom line, it could become harder on brokers, he says. “Down the track, the question then becomes if lenders are less reliant on brokers, as UBS said, can you then negotiate your commissions down? And there is perhaps a scenario that says that’s possible, but I’d also make the point that other lenders are very reliant on brokers and therefore wouldn’t want to play that game.” Instead of overreacting, North says brokers can use this as an
“We remain believers in the broker channel. We remain committed to the broker channel” Ian Narev, CBA Michael Russell says there are plenty of banks and non-bank lenders who want and need brokers to act as their distribution network. “Banks understand they must respect the consumers’ channel of choice. To do otherwise will simply fuel their competitors who operate genuine omni-channel businesses,” he says. While CBA’s branches have clearly had success in selling mortgages, North doesn’t think CBA is going to abandon its third party origination. But if other banks go down a similar path because they too have branches that are under-represented
opportunity to strengthen their value proposition to owner-occupier, principal and interest borrowers, who may be less inclined to shop around and go to brokers because they have long-standing relationships with their banks. “Brokers will have to work really hard to continue to drive their business to be able to meet customer expectations. I think that some lenders will continue to consider their position in terms of distribution strategy and may dial back, and that does leave the door open for some commission changes later perhaps.” AB
46%
1H17
50%
2H16
46%
1H16
45%
2H15
1H15
41%
2H14
40%
1H14
38%
2H13
38%
36%
1H13
2H12
25%
31%
35%
45%
55%
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
Otiena.Ellwand@keymedia.com.au
A BIG DEAL
How Iconic Home Loans finance broker Kaitlin Kenney worked with a referrer and a specialist government-assisted lender to help a client who had fallen into debt get out of their rental rut and into a new home
THE FACTS
Loan size $468,100
Loan term 30 years
Client First home buyers; couple
Goal To purchase first home and stop renting
Location Meadow Springs, WA
Lender Keystart Home Loans
payment history had been satisfied. This meant that the earliest date for lodgment would be in 12 months’ time (March 2017). My customers were excited to know they had a finance option available to them, even if they had to wait to submit their application. The next challenge we faced was to find a house and land package where the land developer was willing to allow us 12 months plus finance term. I explained the scenario and reasoning to my referral partner and he used his industry contacts to find land that was pre-released by a developer and would not be titled until November 2016. The developer was willing to let the customer sign for the land. My customers were excited to be able to secure a house and land package a year ahead of being able to apply for finance as it gave them a goal to work towards, and finally an end date was in sight when they could finally stop renting. My referral partner was thrilled as he had succeeded in securing the sale and taking the customers out of the market. THE TAKEAWAY
THE SCENARIO
I received a referral from a home building consultant back in February 2016. The male applicant had had some major health concerns and had run into trouble with his finances as he had been out of work for some time, dealing with complications from diabetes, which resulted in him having his leg amputated. The customer was in a Part IX debt agreement, which started in March 2015, and he had three unpaid defaults on his credit file. I discussed the results of the credit check with the customer, who advised that he was unaware of the defaults. He was under the impression that all his debts had been consolidated by the Part IX arrangement. After reviewing his debt agreement and comparing the debtors listed to the unpaid defaults on his credit file, it was clear that the three unpaid defaults were for accounts that would be paid out via the Part IX agreement. The credit providers were within their rights to leave the defaults listed as unpaid on the credit file until the Part IX was paid in full, and we had little to no chance of using credit repair services to remove the defaults. The customer was disheartened and felt like he would be stuck renting forever. I reassured him and his wife that I would investigate their options to find a suitable solution. 22
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THE SOLUTION
Kaitlin Kenney Finance broker, Iconic Home Loans
In Western Australia, we have access to specialist low-deposit, governmentassisted lending options through Keystart Home Loans. Keystart was established in 1989 to help Western Australians who are unable to meet the deposit requirements of mainstream lenders. I am fortunate to be platinumaccredited with Keystart, who have a flexible policy when it comes to credit impairment. I discussed the scenario with my relationship manager at Keystart. Their lending policy accepts applicants who are in a Part IX agreement, provided they have no other defaults or poor credit history, and they can meet the required minimum payment history. In this case, my customer would require two years of clear payment history with his Part IX agreement before we could lodge for approval. As per the lending policy, a customer with a Part IX agreement must not have any other defaults or poor credit history. My customer did have outstanding defaults on his credit file; however, as I was able to clearly demonstrate to the lender that these unpaid defaults were debts that were being cleared by the Part IX, they were willing to accept the application once the requirement of two years’ clear
From this experience, I learnt to never take written lender policy as the be all and end all – and that workshopping potential customers with lenders’ credit teams and BDMs is an essential part of the finance process, especially in the credit impairment space. I have learnt that negotiating finance terms that are longer than the general 30-, 60- or even 90-day standard finance clauses imposed by some developers is a key aspect of working well with referral partners and selling agents in the market. Rather than me dismissing the clients because they had a poor credit history, I embraced the challenge to find a solution. These customers had spent a large portion of their adult lives believing they had little to no chance of ever escaping their landlord and annoying rent inspections to purchase a home of their own. My customers were beyond excited to receive their formal finance approval in early June 2017. Their loan was settled on 27 June 2017. They are now eagerly awaiting construction on their first home. By going the extra mile to find a solution for these customers, I solidified an even stronger relationship with my referral partner and he went on to be one of my top referrers from this building company. AB
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23
PEOPLE
CAUGHT ON CAMERA FAST’s fifth annual Women in Business series attracted another strong turnout from brokers and lenders across the country. More than 300 people attended the events held in Sydney, Melbourne, Adelaide, Perth and Brisbane from 18 July to 3 August. Speakers shared insights from their own personal experiences, addressing issues such as how to transform challenges into opportunities, and how women brokers can make their mark. FAST CEO Brendan Wright said the event series reinforced FAST’s commitment to empowering women in the broking industry. FAST has long been a leader in diversity, with a third of all FAST brokers now being women.
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Effie Zahos, editor of Money magazine, and Brendan Wright, CEO of FAST
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FROM THE FORUM
Top comments from trending stories on brokernews.com.au
ADJUSTMENTS TO COMMISSION NEEDED, SAYS NAB NAB’s executive general manager of broker partnerships, Anthony Waldron, has said the industry “needs to make adjustments” to the standard commission model by paying upfront commissions based on the drawn-down amount, not the total facility amount, and by paying upfront commission net of offset balances. “We don’t believe that the current standard commission model has resulted in poor consumer outcomes, but we believe it is essential to manage not only actual conflicts but also the potential for perceived conflicts of interest,” he said.
So if you base the upfront on the amount drawn down and not the total facility, will the balance of the upfront be paid when the funds are drawn down? We often set up clients with a loan where the undrawn funds are applied for but not used until clients finalise their next investment property or the property renovations. This sounds like the banks are looking for yet another way to reduce the commissions they pay, which is incredibly hard to calculate even on the simplest loans. Serious penny-pinching by lenders making billions in profit. Awesome Albert on 11/08/17 at 8:48 AM
Paying the net balance/not paying offset amounts is a moot discussion. This already happens in the form of a clawback from most banks at the end of a period of time. … It’s unfair to ask the banks to further complicate the industry by tracking this, and it’s unfair to brokers if they don’t get paid the full amount for what they have introduced. As far as the appearance of impropriety goes… Nobody is talking about this in the consumer world. They don’t care and wouldn’t care if you spelled the process out to them. There is no aid to competition in this policy and consumers would just stop listening if you had to discuss or make them read about net amounts and offsets this or that. They assume that brokers get paid and aren’t nearly as interested in the topic as ASIC seems to think. AaronG on 11/08/17 at 8:59 AM
I agree with the general consensus here. Sometimes we set clients up in a loan with surplus funds as they are looking to either complete home renovations or invest in another property and use those funds as a deposit, which is often set up as a separate facility but not drawn at the first settlement. I understand that some brokers do this unnecessarily to increase their upfront commission, but they are the minority and the banks will be punishing the honest brokers who do this for the right reasons. No name on 11/08/17 at 12:04 PM
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DATA
QUEENSLAND
WA SPOTLIGHT
The Sunshine State records a spotty performance as it works to mitigate oversupply in the inner city Brisbane enjoys the status of being a cheaper alternative to Sydney, but too much supply has been slowing the market down. According to the Residential Property Prospects 2017–2020 report released by BIS Oxford Economics, the growth rate of the median house price in Brisbane has been inconsistent. Following a season of increases during 2015/16, values fell in 2016/17. Vacancy rates also increased by over 3% in the year to March 2017, following declining levels of migration into Queensland. This decline has been spurred by the weakness of the economy and the job market. “On balance, the soft economic environment in Queensland and the emerging oversupply of dwelling stock is having the greater impact in containing house price growth,” says Angie Zigomanis, senior manager at BIS Oxford Economics. Area
Type Median value
Quarterly
12-month
growth
growth
Brisbane
H
$520,000
-0.8%
4.0%
QLD Country
H
$435,000
1.4%
1.4%
Brisbane
U
$405,000
0.0%
-2.4%
QLD Country
U
$379,000
1.1%
3.6%
NEW SOUTH WALES
With investor demand falling, Sydney may experience flat – or even declining – price growth in the near future Bank restrictions are weighing on investors, and the resultant decline in demand is influencing predictions regarding the Sydney house market. The Residential Property Prospects 2017–2020 report published by BIS Oxford Economics indicates that the median house price in Sydney is forecast to be lower in 2020. Investors have been the primary driver of the state property market since 2013, accounting for over 50% of residential loans. They placed significant upward pressure on values as the loosening of lending restrictions saw price growth resurge in the period 2016/17, making affordability a major issue for Sydneysiders. “As investor expectations of capital gains are reduced, investor demand is expected to weaken further, creating additional downward pressure on prices,” says Angie Zigomanis, senior manager at BIS Oxford Economics. Area
Type Median value
Quarterly
12-month
growth
growth
PERTH’S ‘FRAGILE’ MARKET Residents exit Western Australia as the market tries to anticipate the bottom of the cycle
is not expected to bottom out any time this year, as economic conditions remain poor and mortgage interest rates are beginning to climb. “Perth would certainly be affected because it’s a fragile market. Prices have come off already just because of the end of the investment mining boom, and now that interest rates are going up they will suffer some more,” says Philippe Brach, CEO of Multifocus Properties & Finance. The state has over eight months’ worth of established housing on the market, which is contributing to falling values. “The Perth property market is still in its slump, with a significant oversupply of properties for sale,” comments Michael Yardney, CEO of Metropole Property Strategists. He says Perth also lost over 4,000 jobs in 2016, in contrast to the eastern states reporting job creation. This has factored into the state’s inability to unload dwellings on buyers. “Price growth in the weaker markets is being stymied by a combination of excess stock and/or a weak local economic environment,” explains Angie Zigomanis, senior manager at BIS Oxford Economics, in the company’s Residential Property Prospects 2017–2020 report. The report suggests this trend will continue in Perth in the near future due to slow population growth and excessive supply. As investment in the resources sector continues to go downhill, employment prospects are limited. “Demand has weakened across all buyer segments, including first home buyers, changeover buyers, and investors,” says Zigomanis. AB PERTH
H
$984,000
4.1%
4.7%
Median price (houses)
NSW Country
H
$450,000
2.3%
6.6%
$533,330
Sydney
U
$730,000
3.5%
3.5%
NSW Country
U
$369,000
0.3%
3.1%
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It is no secret that the Perth housing market has seen some tough times over the past 12 months A change in government, a reduction in the first home buyer’s grant, along with a decline in all our key economic indicators, has contributed to our current state of affairs. I, like many others, think our housing market has bottomed out. But we are in recovery and are headed for a prosperous 2018. In January there were over 14,000 properties up for sale compared to 13,000 in July. Sales activity increased by over 1,000 homes sold during this period and traffic through display homes increased, suggesting a shift is taking place. The reality is that the Perth housing market represents tremendous value right now. With a median house price of $515,000 and an average weekly rent of $350, investment opportunities for astute buyers, both locally and from the eastern states, have never been more attractive. We have noticed increased activity and appetite from regional and Tier 2 lenders starting to ease the recent regulatory pressure on investment lending. Combined with aggressive pricing, cash rebates and other incentives for owner-occupiers, the planets are aligning. Dean LaFrenais General manager, InReach Finance
SUBURB TO WATCH: RIVERVALE
Sydney
26
BROKER PERSPECTIVE
Median price (units) $387,961
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-16.2%
-15.0%
4.1%
3.7%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-7.6%
-17.0%
7.3%
3.7%
AUSTRALIAN CAPITAL TERRITORY
Canberra may be a strong investment location if you’re looking for ongoing growth potential over the next three years OPPORTUNITIES AND KEY INFRASTRUCTURE
Get schooled
Council’s vision
Perth Plus
Tunnelling begins
CQUniversity, Perth’s first vertical CBD university campus, opened in July
Perth’s city budget promises investment and capital works in the East End
A world-class tower design for Elizabeth Quay could become the skyline’s pearl
New rail line will link Perth with the airport and growing foothills area
HIGHEST-YIELD SUBURBS IN WESTERN AUSTRALIA Suburb
Type
Median price
Quarterly growth
12-month growth
Newman
H
$161,500
4%
-33%
Kambalda West
H
$105,000
11%
-16%
Utakarra
H
$139,000
-16%
-35%
Cable Beach
U
$196,500
-24%
-24%
Rangeway
H
$124,000
-3%
-8%
BIS Oxford Economics’ Residential Property Prospects 2017–2020 report notes that the population of the ACT is increasing and the house market is currently in undersupply since roughly 1,000 houses containing asbestos were taken off the market. This ensures that competition in the property market is hot, even if unit stock flowing onto the market is expected to be high. The ability of residents to earn high salaries in Canberra should also sustain the value growth of houses. “Canberra has the highest incomes of the capital cities and affordability is not as strained as in the other cities,” comments Angie Zigomanis, senior manager at BIS Oxford Economics. “Further upside is expected in house prices. Recent net interstate migration outflows are now a net inflow, while solid net overseas migration inflows have emerged largely due to the recovery in overseas student growth that has coincided with the lower Australian dollar.” Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$673,750
5.3%
5.8%
Canberra
U
$438,500
-0.3%
2.8%
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27
DATA
SOUTH AUSTRALIA
CAPITAL CITY AUCTION CLEARANCE RATES
Bad news on the industry front spells troubled times for Adelaide as job prospects go down
WEEK ENDING 13 AUGUST 2017
Adelaide has not been in good shape for some time, and this is not expected to change much in the next couple of years. “The Adelaide property market is likely to underperform again this year. There are few growth drivers, with fewer than 8,000 new jobs created there last year,” says Michael Yardney, CEO of Metropole Property Strategists. The significant unemployment rate is a major issue that has been causing many residents to leave the state for greener pastures like Sydney and Melbourne. Young South Australians comprise a considerable proportion of the outgoing population, intensifying the existing brain drain issue. Angie Zigomanis, senior manager at BIS Oxford Economics, says net interstate migration outflow is at its highest level since the mid-1990s. At the same time, dwelling values have not increased much since late 2008. Quarterly
12-month
growth
growth
Adelaide
H
$450,000
0.0%
3.3%
SA Country
H
$300,000
2.7%
0.9%
Adelaide
U
$365,000
1.9%
4.3%
SA Country
U
$176,000
-16.2%
1.1%
VICTORIA
MEDIAN HOUSE AND UNIT PRICES
With its strong economy, Melbourne remains one of the steadiest markets in the country
$1,000,000
Type Median value
Quarterly
12-month
growth
growth
H
$690,000
4.5%
7.8%
VIC Country
H
$334,000
1.5%
2.9%
Melbourne
U
$507,000
3.5%
1.0%
VIC Country
U
$262,000
-0.6%
1.0%
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87
Sold
43
Not sold
16
Clearance rate
72.9%
PERTH Total auctions
32
Sold
4
Not sold
6 40.0%
Houses
Units
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
Darwin
$401,000
$620,000
$371,000
$520,000
$276,400
$360,000
$390,000
$0
$490,000
$100,000
$311,000
$200,000
$429,750
$300,000
$529,500
$500,000 $400,000
$665,000
$700,000 $600,000
$880,000
$800,000
$699,000
$900,000
Melbourne
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Total auctions
$1,100,000
“It has been the most consistently performing property market over the last two decades and is likely to retain that title in 2017, when again we’re likely to see the Melbourne property market outperform most other capital cities,” says Michael Yardney, CEO of Metropole Property Strategists. Steady population growth of around 2% per annum and a strong economy creating around 72,786 jobs, representing almost half the new jobs in the country, have underpinned the Melbourne property market. An active auction market with high clearance rates also highlights the popularity of Melbourne. However, as in Sydney, tightening restrictions on investor lending are putting the brakes on demand. “In terms of the value of lending to investors, New South Wales and Victoria account for a substantial majority of overall lending. This is partly a function of higher housing costs,” explains Cameron Kusher, research analyst at CoreLogic. Area
ADELAIDE
Clearance rate
$374,000
Type Median value
$525,000
Area
Across the combined capital cities for the week ending 13 August, the number of homes taken to auction rose to 2,011, compared with 1,857 over the previous week. This was the largest number of auctions held since the last week of June and approximately one third higher compared with the same week a year ago. The preliminary auction clearance rate of 70.5% has increased relative to the previous week’s final clearance rate of 68.2%. However, as more results are collected, it is expected that the final auction clearance rate will remain within the high 60% range where it has tracked since the first week of June. Over the corresponding week last year, the clearance rate was 75.0% and 1,471 auctions were held. In Sydney, the preliminary clearance rate rose to 72.0%, which was higher than Melbourne’s preliminary clearance rate of 71.0%. Melbourne has remained the stronger performer of the two for many weeks, although it is possible that Melbourne’s final clearance rate could drop below the 70% mark for the first time since July last year.
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
0.5%
0.4%
8.0%
12.7%
Melbourne
0.1%
0.6%
9.7%
15.8%
Brisbane
0.2%
-1.0%
1.0%
3.2%
Adelaide
0.6%
1.8%
3.6%
3.2%
-0.4%
-0.9%
-2.8%
-1.7%
0.3%
0.3%
6.5%
10.6%
Perth Combined 5 capitals
*Brisbane results are for the combined Brisbane and Gold Coast region. The monthly change is the change over the past 28 days.
BRISBANE CANBERRA Total auctions
57
Sold
40
Not sold
Total auctions
100
Sold
34
Not sold
29
Clearance rate
54.0%
6
Clearance rate
87.0%
SYDNEY Total auctions
782
Sold
450
Not sold
175
Clearance rate
72.0%
TASMANIA
MELBOURNE Total auctions
948
Total auctions
5
Sold
602
Sold
1
Not sold
246
Not sold
1
Clearance rate
Clearance rate
71.0%
TASMANIA
Hobart has quickly shot to the top as one of the strongest performers in the country, but its dream run may not last For many experts, Hobart is a great place to invest in, especially following its strong performance over the past 12 months. This city has been defined by its affordability, and many investors are looking to the burgeoning tourism industry as a sign of things to come. However, Metropole Property Strategists CEO Michael Yardney warns buyers to be careful. “While Hobart property prices look cheap when compared to other mainland capitals, I would be wary about buying Hobart property as the price differential between Hobart and the mainland capitals has always been significant,� he says.
Area
50.0%
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$387,000
-1.3%
6.5%
TAS Country
H
$262,000
-3.0%
1.2%
Hobart
U
$315,000
5.0%
3.4%
TAS Country
U
$245,000
6.5%
0.9%
All data sourced from CoreLogic.com.au
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29
PEOPLE
IN THE HOT SEAT Virginia Graham, director of Model Mortgages, talks about a strange interaction she had in her early broking days with a client dripping in diamonds, how best to handle jarring situations, and one of the biggest misconceptions about the business
What was your most memorable deal? I was working at Aussie Home Loans at Westfield Bondi A Junction when a tanned woman dripping in diamonds came into the office requesting a loan for $8–$10m. She said she could only talk to me because we both had blonde hair and she thought I would be more reasonable. She said she needed a loan for the next day. When I asked her what she wanted the money for and how she planned to pay it back, she told me to mind my own business. I told her it wasn’t possible to do what she was asking and she became enraged, saying, “Do you think I’m poor? I’m rich. Of course I can pay back the loan; $8m is nothing to me.”
Q
What did you learn from this experience? I’ve never had such an unreasonable customer. It made me A appreciate how wonderful and reasonable most of my customers are. I have also worked with many wealthy individuals and none of them have ever gone on about how rich they are. Any broker in this position needs to try not to laugh or wonder if they’re on some kind of surprise ‘you’ve been had’ television show. Just remain calm. I think it is one of the highlights of my early broking years as it was so surreal.
Q
What do you think is one of the biggest misconceptions people have about the industry? I don’t think most people understand the amount of work that A goes into structuring loans and getting them approved and settled. The idea of a self-service online loan is almost laughable because it shows that the people who think this is a good idea clearly don’t understand what brokers do. The other common fallacy is that customers somehow pay more by using brokers. Lenders pay us instead of their loan departments, and we cost less. That’s why we make even more sense. Why would you do something yourself when someone else who is more experienced can do a better job for free for the customer?
Q
What’s something different, unique or innovative that you bring to your broking business? Definitely our technology. Our process is partially automated A and it saves us a lot of time and data entry. It also makes things easier for our customers. AB
Q
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