Australian Broker 15.05

MARCH 2018 ISSUE 15.05

Preparing to switch The pros and cons of renegotiating 220,000 IO loans /16

The great data grab Why consumer data holds the key to platform banking /20

BRETT HALLIWELL The general manager of Advantedge talks white-label lending in a digital age and keeping brokers ahead of the game /14

Intuitive trading for beginners The Aussie start-up bringing a better deal from Wall Street /30

ALSO IN THIS ISSUE ‌ In the news Deborah Dickson’s guide to active change management /21 A big deal The broker who made a Christmas wish come true /22 Caught on camera Behind the scenes at the Women in Finsure launch /24

NEWS

IN THIS SECTION

Lenders Broker loans in decline /04

Aggregators Caution over lender-owned aggregators /06

Market Affordability down across all states /10

Regulators Debate continues on fixed fee vs commission /12

Technology NAB partnership boosts fintech start-up /08

www.brokernews.com.au MARCH 2O18 EDITORIAL Editor Melanie Mingas News Editor Manuelita Contreras Journalist Nicola Middlemiss

DATES TO WATCH

Upcoming can’t-miss events

Production Editor Bruce Pitchers

ART & PRODUCTION Designer Martin Cosme

27 MARCH

28 MARCH

31 MARCH

City economics: policy, planning, growth

MFAA Newcastle professional development afternoon

AUSFIC Annual Conference

Organised by CEDA, Nerida Conisbee, chief economist at REA Group, and Productivity Commission chairman Peter Harris are both confirmed to speak at this one-day event, exploring the pros and cons of growth.

Titled Noise-cancelling Headphones for Business, the latest development afternoon is intended to increase focus during information overload. Presented by Anna Porter, principal and property advisor at Suburbanite, and Slipstream mortgage broker mentor John Manciameli.

Taking place at Rydges World Square, the Australia Finance Conference is organised by students from universities across NSW. AUSFIC seeks to bridge the gap between theoretical concepts taught in business school and industry-practice.

Production Manager Alicia Chin Traffic Coordinator Freya Demegilio

SALES & MARKETING Sales Manager Simon Kerslake Marketing and Communications Manager Michelle Lam

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

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

3 APRIL

4 – 5 APRIL

6 APRIL

Insurance Business Awards: finalists announcement

Banking and Wealth Summit 2018

FBAA South Australia Summit

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au

Finalists in Key Media’s inaugural Insurance Business Awards are announced today ahead of the 4 May ceremony at The Westin Sydney. The awards recognise leading brokers, brokerage businesses, insurers and underwriting agencies from across Australia, in over 25 categories.

The fourth annual edition featuring policy announcements from the Treasurer and leading regulators.

Sessions will assess how the industry can reshape organisational structures to rebuild trust and anticipate the future.

During this half-day summit, executive director Peter White will present the FBAA’s CIF proposal to government, along with regulatory updates. Additional speakers include business coach and mentor David Bayne, on how to generate more leads and close more deals.

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

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2

11 APRIL

12 APRIL

16 APRIL

Global Digital Banking Conference, New Zealand

FEW Leadership Conference 2018: Perth edition

ALTFI Australasia Summit 2018

The latest instalment in the global series, the New Zealand edition of the conference follows on from events in Dubai, Sydney, London and Toronto and will cover open banking, app and IoT development, fintech and regulatory changes.

Following a sold-out 2017 conference, the Financial Executive Women Conference hits the road this year, with the second event taking place in Perth and subsequent conferences scheduled for Brisbane on 19 April, Sydney on 17 May and Melbourne on 24 May.

Taking place at Doltone House in Sydney, Noah Breslow, CEO of OnDeck, is confirmed to deliver the keynote address at this one-day summit covering the structural shift in how money is borrowed and lent.

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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 CBA DROPS ADD-ON PROTECTION will stop selling CreditCard Plus and Personal Loan Protection following a review of its consumer credit insurance products.

The bank has concerns some customers may not have been eligible to receive all of the employment related benefits offered.

In August 2017, intervention from ASIC saw CBA refund more than 65,000 CreditCard Plus customers approximately $10m.

The withdrawal process is under way with CBA expecting to complete by 30 June.

INFOGRAPHIC Source: Roy Morgan

() = % point change from December 2017

CBA

100% 90%

88.4% (-0.4%)

85.8% (-0.2%)

85.2% (+0.9%)

84.4% (+1.1%)

83.3% (+0.1%)

81.9% (-0.1%)

ING

Bankwest

St George

Suncorp Bank

80.1% (+0.5%)

79.1% (+0.5%)

78.6% (+0.5%)

77.9% (-)

CBA

NAB

ANZ

Westpac

Percentage very or fairly satisfied

80%

81.2% (+0.4%)

70% 60% 50% 40% 30% 20%

DEPOSIT POWER GOES INTO ADMINISTRATION guarantee company DEPOSIT Deposit Power is under external administration following the placement of Auckland-based CBL Insurance into interim liquidation.

External administrators from Chifley Advisory were appointed to the company in early March.

Deposit Power was an authorised manager and agent of CBL Insurance, which provided the deposit guarantee bond products sold by Deposit Power in Australia. An estimated 10,000 residential, commercial and property investors could be affected.

“The removal of the cap could put downward pressure on mortgage rates for investors and increase competition among lenders” John Kolenda managing director, HomeLoan

4

www.brokernews.com.au

10% 0%

Bendigo Bank of Bank Queensland

CHIFLEY REPORTS BROKER CHANNEL LOAN DECLINE Despite an overall year-on-year rise in loan values, non-bank lender reports 4% drop in broker-originated loans as developers go direct lender Chifley Securities reported a 4% decline in broker-originated loans in the last calendar year and has told Australian Broker that figure is likely to drop a further 4%.

While about 98% of Chifley’s loan applications arrived through the third-party channel in 2016, the proportion of broker-originated loans declined to 94% last year.

A further drop is expected “in the next couple of years”, taking the overall share to 90%. According to Chifley Securities’ principal, Joe Morello, the decline is driven by a strong trend for developers going direct to the company, rather than using the third-party channels they have in the past.

Demand is particularly strong NON-BANK

from developers holding residual apartments that have not sold or settled on completion, Morello noted.

“Many more apartment buyers are not settling on their off-the-plan purchases, and developers across the east coast have decided to hold the stock and rent out the apartments instead of selling them at a discount,” he said.

Morello said the non-bank lending sector is gaining recognition among developers and landowners – many of whom are being “neglected” by the major banks as a result of tighter credit controls.

The company said its new aggregation division is experiencing robust demand from brokers who can no longer access funding

Total banks

from the major banks and who have limited access to private lenders.

It expects to see strong demand for non-bank finance solutions as major lenders continue to tighten their lending criteria.

“There are large groups across the property sector that are now off limits to major lenders, despite the fact that many of the projects are viable and backed by strong equity and balance sheets,” Morello said.

Chifley also sees opportunity for second- and third-tier lenders to fill the void as Chinese property developers and owners continue to feel the squeeze from new foreign capital outflow restrictions imposed by the Chinese government.

Last year, Chifley received loans worth $1.87bn, up from $1.1bn in 2016. Lending to property developers and investors grew by 15% in the second half of the year over the previous corresponding period, with a $282m contribution from the recently launched Chifley Aggregation.

NEWS

A G G R E G AT O R S MAJOR BANK STARTS RESUBMISSION PROCESS has started its resubmission process for brokers as part of its responsible lending changes.

In future, brokers who make changes to a loan application that has been submitted to Westpac will have to resubmit. They will have to make their resubmission in AOL or through their aggregator software. Westpac’s subsidiary banks – Bank of Melbourne, BankSA and St George – have all made the same announcement and have started using the process.

WESTPAC

FIRSTMAC COMPLETES $600M SECURITIES ISSUE has completed a $600m residential mortgage-backed securities issue, bringing the total amount of RMBS issued to more than $20bn since 2003. The issue was priced at 1.05% over the bank bill swap rate. This follows the company’s $600m issue in November 2017, priced at 1.11% over the rate. Firstmac also made RMBS issues of $1bn in September and $1.7bn in March last year.

FIRSTMAC

BANKS CONCERNED OVER LENDER-OWNED AGGREGATORS Bank CFOs echo Productivity Commission’s concerns on impartiality of lender-owned aggregators, backing calls for greater transparency in market share data Bank of Queensland is monitoring aggregator ownership structures “with concern”, according to CFO Anthony Rose.

Addressing the Productivity Commission on his subsequent observations, Rose highlighted ownership structure and flow of business.

“We thought that those that own aggregator networks should actually be required to publish the degree of flow relative to their market share, for the public interest to understand whether there is anything to see here or not,” Rose said in reports.

A lack of publically available data has prevented the release of such information so far, a point raised by both the commission and banks.

THE

Despite this, commission chairman Peter Harris claimed in February that bank-owned aggregators control as much as 70% of the mortgage-broking market. The commission has previously referred to aggregators as an illusion of customer choice.

The commission’s draft overview, published in January, read: “Non-transparent fees and trailing commissions and clear conflicts of interest created by ownership are inherent. Lender-owned aggregators and brokers working under them should have a clear best interest duty to their clients.”

The commission’s specific recommendation is likely to see an ASIC-imposed “clear legal duty” on aggregators owned by lenders.

“Such a duty should be imposed even if these aggregators operate as independent subsidiaries of their parent lender institution, and should also apply to the mortgage brokers operating under them,” the recommendation states.

In his opening address to the commission on 1 March, Rose said, “In the past, brokers played a positive role in driving competition in the mortgage-broking sector.

However, the major banks’ ownership of broker platforms has had a profound influence in the flow of business back to the major banks.”

“We fully support the recommendation that ASIC should impose a clear legal duty on those mortgage aggregators owned by lenders to demonstrate they have acted in the customer’s best interests,” he added.

Addressing the commission on the same day, Commonwealth Bank CFO Rob Jesudason also addressed proposals related to mortgage aggregators and brokers.

“Without mortgage brokers, non-major lenders would simply not be able to compete, and the competitive nature of mortgage pricing would not exist” David Bailey chief executive, AFG

VV$40,614,829,064 AUSSIES STRESSED ABOUT OVERCOMPLICATED FINANCES Source: UBank Know Your Numbers Index

59%

say their current financial situation causes them stress or loss of sleep

6

www.brokernews.com.au

86%

1 in 5

say they have full control of their finances

of Australians don’t know their monthly expenses

82%

1 in 5

credit card holders accurately know their credit card debt

of Australians with a mortgage don’t know their exact home loan rate

NEWS

TECHNOLOGY

LOOKING FOR A HERO start-up Hero Broker has become the first mortgage company in Australia to undertake a crowd-sourced funding round. Adopting the Kickstarter model, the campaign is open until 29 March. Founder Clint Howen said, “We have had a lot of interest from people wanting to get involved in Hero Broker, many coming from the finance and mortgage broker space, and we think it’s a great way to get involvement from everyone who’s interested.”

ONLINE

NAB BACKS CO-OWNERSHIP PLATFORM KOHAB NAB’s partnership with Kohab – dubbed the “Tinder for real estate” – will include a new co-lending product, with other banks expected to follow Australia Bank has been named as one of three partners of the newly launched co-ownership platform Kohab, and is to introduce a new co-lending product in line with Kohab’s lending criteria.

The announcement came on 5 March at the launch of the digital start-up, hosted at the Sydney offices of law firm Sparke Helmore, which drafted the co-ownership agreements Kohab is built on.

Addressing the 100-strong audience of property and real estate professionals, Alister Henskens, parliamentary secretary for finance, services and property, spoke about the need to simplify property ownership for the modern age.

Core Logic and Laing + Simmons NATIONAL

START-UP LETS LENDERS BID FOR MORTGAGE platform that allows borrowers to enter a “virtual auction” for a mortgage loan has launched. Promising to empower borrowers with access, choice and competition to secure a loan from one website, Loanbid aims to connect borrowers with lenders and brokers across Australia.

Borrowers complete an online application assessed by lenders and brokers before entering a virtual auction to win the loan with their best bids.

were also confirmed as partners, joining Belle Property, Armstrong Dubois Accountants, Diamond Blue Financial Services and Austbrokers.

“We [NAB] are the enablers to help people purchase property. This will only accelerate and with that comes innovative solutions,” said NAB general manager of retail banking Paul Juergens.

Founders David Dawson and Darren Clark said at the launch that Commonwealth Bank is already confirmed to roll out a similar product and further announcements from Macquarie, ANZ and Westpac are expected.

Designed for “friends, family and like-minded buyers” to purchase a home together, the marketplace connects property, real estate agents,

legal, mortgage and insurance providers. Each buying party is legally responsible for their portion of the loan and deposits and repayments are based on the owner’s respective share.

Further development could see the introduction of an equity release agreement, allowing the part sale of property.

“The phenomenal growth of brands such as Uber and Airbnb have clearly demonstrated that the share economy is alive and thriving,” Dawson said at the launch.

“These types of concepts have created a seismic shift in how society views co-sharing in general. As such, Kohab aspires to be the global platform and marketplace for property co-ownership,” he added.

From a user perspective, the tool can assist with co-living, co-investing and co-lifestyle, where two or more parties can share a holiday or second home. While Dawson and Clark say it will tackle the growing issue of housing affordability, others have warned it could flood the market with investors.

REGULATORY BARRIERS TO INNOVATION Source: PwC Global FinTech Survey 2017

A

8

www.brokernews.com.au

Q

54%

50%

48%

40%

30%

Data storage, privacy and protection

Digital identity authentication

AML/KYC

New business models (crowdfunding, peer-to-peer lending)

E-money/ cryptocurrency

In which areas do you see regulatory barriers to innovation in fintech?

NEWS

MARKET

BIG FOUR SLASH LENDING RATES a smash and grab for profits and market share, the big four slashed lending rates in response to the March cash rate announcement. Key property rates dropped by as many as 50 basis points and weekend auctions following the announcement performed below expectations.

Further announcements saw non-bank lender Bluestone Mortgages cut its rates by 75 to 105 basis points. Australia’s cash rate hasn’t changed in 19 months.

IN

AFFORDABILITY DIPS IN ALL STATES As income-to-loan repayments reach 31.6%, REIA president Malcolm Gunning says “considerable” increase in supply required to improve affordability affordability declined across Australia in the December 2017 quarter, with the proportion of income required to meet loan repayments increasing to 31.6% – up from 30.3% the previous quarter.

But with the index 0.1 percentage point lower than the same quarter of December 2016, this means housing affordability was virtually unchanged over that period, says the latest Adelaide Bank/Real Estate Institute of Australia (REIA) Housing Affordability Report.

REIA president Malcolm Gunning said any major improvement in housing affordability must come from a considerable increase in supply. House prices in Sydney have increased 70% since 2012, however an ambitious housing construction HOUSING

strategy – expected to add 200,000 homes between 2016 and 2021 – is said to be behind February’s 0.5% decline.

Citing recent estimations of how many houses Australia could need over the coming years, Gunning commented: “This may appear an easy prescription, but the reality is that unless there is a coordinated and aligned approach by all three levels of government this will not occur.”

“We need to address this with some urgency and reform the planning and approval process. We need all tiers of government involved and implementing change,” he added.

By state, housing affordability went down in all states and territories over the quarter, with Tasmania recording the biggest decline. The proportion of income needed to

make loan repayments in the state climbed by 2.4 percentage points to 25.7% in the December quarter. On the other hand, Queensland showed the least decline in affordability, with the share of income required for loan repayments going up by 0.8 percentage points to 27.6%.

NSW remains the least affordable in terms of loan repayments: 37.8% of family income is required to pay back loans in the state, up from 36.1% in the September 2017 quarter. But the proportion is lower when compared to a year ago.

Rental affordability also went down in the December quarter, with the proportion of family income needed to meet rent payments inching up by 0.1 percentage point to 24.5% over the quarter.

While rental affordability improved in NSW and Queensland and remained steady in Western Australia, it declined in Victoria, South Australia, Tasmania, the Northern Territory and the ACT. NSW continues to be the least affordable location to rent.

GRATTAN RELEASES AFFORDABILITY ADVICE an extra 50,000 homes a year can improve affordability, said the Grattan Institute. The public policy think tank claims the move could reduce Australian house prices 5% to 20% and allay rising public anxiety about affordability.

In a recent report, it advises pairing new supply with a cut in the capital gains tax discount to 25%, getting rid of negative gearing, and including owneroccupied housing in the Age Pension assets test.

BUILDING

TIGHT CREDIT IS BIGGEST CONSTRAINT ON NEW HOUSING DEVELOPMENT Source: HIA, ABS, CoreLogic

52.1%

50 40

62.3%

60

70.6%

87.1%

70

Affordability Index

97.9%

80

92.5%

93.1%

90

20-year average

100.1%

100

109.2%

110

30

Sydney

10

www.brokernews.com.au

Melbourne

Brisbane

Adelaide

Perth

Hobart

Darwin

Canberra

Average of 8 capitals

SPECIALIST LENDING UPDATE

CHANGE IN NOMINAL HOUSE VALUES, DEC 2011- SEPT 2017 Source: ABS Cat.6416

MY VIEW ON 2018

By Mario Reyahem, chief executive officer, Pepper Money

Canberra

Darwin

Hobart

Perth

Adelaide

Brisbane

Melbourne

8% -10%

Sydney

0% 10% 20% 30% 40% 50% 60% 70% 80%

It’s fair to say that the lending industry as a whole is facing public scrutiny and, once again, is set to undergo further change.

Whether it’s the introduction of positive credit reporting, or the potential for industry reform, lenders and mortgage brokers alike will need to review and perhaps change their existing policies, procedures, systems or even customer base.

Yet, we are no different to any other industry in the world. Business models need to evolve over time in order to survive. Industries mature and learn from the past. While changing regulation may accelerate our industry’s maturity or development, we have a responsibility to our customers to evolve.

So what can brokers do to get ahead of the curve?

Define your CVP You need to create a compelling value proposition. Answer this question of yourself: why should a customer use you instead of the competitor down the street?

1

BUYERS SKIP THE INSPECTION staggering 58% of 1,000 property owners surveyed by ME Bank spent less than 60 minutes checking out the house they bought.

The survey concluded 36% bought because they chose to “overlook problems”, while 32% cited lack of experience in viewing and 11% were “impatient and tired of looking”. Unsurprisingly, more than a quarter of respondents found issues with their purchase afterwards. ME head of home loans Patrick Nolan said, “Getting the property inspected can really empower people.

They could use that bargaining power in the negotiation process.”

A

Look after your customers Your existing customer base is your best friend. Are you appropriately demonstrating how valuable your credit advice is to your clients? Focus on creating stronger, more regular engagement with your clients to engender trust and generate repeat business.

2

Get feedback Survey current and past customers.

Ask them for feedback. Does their experience match the service delivery expectation you’ve set for yourself?

3

Evaluate your data Look back over your data and learn from it. Use it to better understand where your true target market lies – it may be different from where you think you play, or it may help you better understand where it needs to move to. If it needs to change, what can you do differently to move your business in a new direction? If you aren’t strong in a particular skill set, take steps to improve it, or consider whether you need to acquire it via other methods (eg hire someone).

4

Consider the future If the industry were to enter a world of fee for service, what fee do you need to charge to sustain the economics of your business? Look at everything you do today when matching a customer with the best loan, and consider the price tag you would need to put on that.

Can you justify the fee you want to charge, or need to charge?

5

Now, this isn’t to say fee for service is happening. Even if it doesn’t happen, it’s a great exercise to run. You will uncover areas of potential improvement in your business or highlight whether the way you interact with each customer needs to change.

Ultimately, it’s about defining your brand. Every business – whether you are a sole trader, in a partnership or part of an established group – must take care of its brand.

Someone once said, “You can’t change the direction of the wind, but you can adjust your sails to reach your destination.” Remember that when faced with the many encounters that lie ahead.

NEWS

R E G U L AT O R S

APRA RECONSIDERS 10% CAP 10% annual limit on investor credit is “probably reaching the end of its useful life”, APRA chairman Wayne Byres has told a parliamentary committee.

Referring to the current quality of lending as “certainly higher and better than it was a few years ago”, Byres said, “General dynamics in the market suggest it is potentially becoming redundant, although there are some institutions still growing quite quickly.”

THE

PC CONSIDERS FIXED FEE VS COMMISSION Peter Harris pushes for fixed broker fee, while ANZ CEO says commission-based structures align with bank interests

Commission chairman Peter Harris said on 5 March that a fixed broker fee is perhaps a better proposition than commission. He raised the subject in discussing how to design a duty of care for brokers.

Harris reiterated the commission’s proposal that a duty of care be imposed on brokers belonging to bank-owned brokerages. The commission had said earlier it would prefer this route to regulation.

Calling the assertion that consumers do not pay for broker service as counter-intuitive, Harris asked ANZ representatives, including CEO Shayne Elliott, who pays their brokers and who should expect to get something PRODUCTIVITY

CYBER BREACHES “PROBABLY INEVITABLE” executive board member Geoff Summerhayes has warned that a large scale cyberattack is “probably inevitable”.

Summerhayes said Australia’s financial institutions face a growing threat from cyber criminals seeking money or customer data.

“No APRA-regulated entity has experienced a material loss due to a cyber incident, but a significant breach is probably inevitable,” he said. “In a worst-case scenario, a cyber attack could even force a company out of business.”

in return for that payment.

Elliott said that, in a sense, consumers pay for everything the bank does. He also agreed that imposing a duty of care is not unreasonable. “I imagine that a lot of people think a broker does have a duty of care to them,” he said, but added that it is important to ask consumers what they think.

Harris stressed that with consumers actually paying for broking services, it is reasonable that they expect service to be provided to them and that brokers act in their best interests. At the same time, he said there seems to be less resistance now to the notion that imposing a duty of care is reasonable.

“You know, we’ve recommended

PRIVATE SECTOR CREDIT HIGHLIGHTS

APRA

12

www.brokernews.com.au

imposing a duty of care on bank-owned brokerages, but we’ve heard at the hearings to the effect that some independent brokers don’t mind if duty of care was imposed on them as well.”

Harris said the issue now is possibly more a question of the proposal’s design.

“I have the impression that perhaps a fee is a better proposition. The question might be: should it be paid by the consumer, or should it still be paid by the bank?”

When asked by Harris if there is a movement into a fee-based structure in the market, Elliott said a commission-based structure is more aligned to banks’ interests.

“There is a merit in looking at a fee-based structure, but the reality is today, in a highly competitive market, having a commission-based structure is an understandable logic,” said Elliott.

For more on this story, turn to page 25

Source: Figures by Economic Insights 28 February

Housing credit

Up 0.5% in January

Up 0.4% in November

Annual growth down to 6.2%

Owner-occupier housing credit

Up 0.4% in December

3.5 year low

Up 0.6%

Up 0.8%

in January

YoY

Investor housing finance

Up 0.2% in January

3% annual growth

14 month low

DIVERSIFICATION UPDATE

ASIC INVESTIGATIONS AND OUTCOMES Source: ASIC

Investigation

63

61

investigations commenced

investigations completed

Bannings and disqualifications

54

28

people or companies removed or restricted from providing financial services or credit

people disqualified or removed from directing companies

JUDY LOUEY EXPLAINS WHY PROPERTY INVESTMENT REFERRAL NEEDS TO BE DONE CORRECTLY

Infringement notices, compensation and enforceable undertakings

34

$1.7M

infringement notices issued

in infringement notices paid

$21.7M

$94.4M

in civil penalties

compensation and remediation for investors and consumers

12 enforceable undertakings Prosecutions

17

235

people charged in criminal proceedings

criminal charges laid

232

476

people charged in summary prosecutions for strict liability offences

criminal charges laid in summary prosecutions for strict liability offences

Judy Louey

What first inspired you to help your clients with their investment property aspirations?

I’ve always been interested in bricks A and mortar, and I started out as a property investor before becoming a mortgage broker. I started my property portfolio at the time the global financial crisis was taking place, and I purchased seven properties within a year. People thought I was crazy, and even my sisters disliked my choice of properties. However, they quickly realised I was onto something when they saw the value of my properties increasing.

Eventually, my friends, clients and sisters were asking for my help, not just with the finance side of things, but also with property investment and the choice of property.

Q

Why did you choose to work with Slipstream?

My clients and their interests always A come first. In the past other buyer’s agents and research houses have let me down. Most of the time it was due to a lack of communication, especially when an issue arose or when the client had concerns about a particular property.

When I met John and was introduced to Slipstream at an industry event, I quickly learned he had set up an independent aggregation service to help brokers source reliable research houses or buyer’s agents for clients, whether for a first-home buyer, an investor, or for SMSF investors.

Q

CBA’S CONFIDENTIALITY BID REJECTED royal banking commission has rejected CBA’s request not to disclose parts of evidence regarding the bank’s CreditCard Plus product. The commission did agree to redact the name and policy number of the CBA consumer who lodged the complaint.

In a note, commissioner Kenneth Hayne said CBA applied for a non-publication direction regarding parts of a draft statement to be given by a CBA employee about CreditCard Plus. CBA said in its non-publication application that those communications should be treated as confidential.

THE

What are the key benefits of working with Slipstream?

Being associated with like-minded A mortgage brokers who genuinely care about their clients is a real benefit.

There are an abundance of property spruikers in Australia who are targeting vulnerable people to sign up to their get-rich-quick programs, or sell them off-the-plan properties of poor quality. It is reassuring to know that Slipstream has a rigorous vetting process when they select

Q

John Manciameli

a research house to include in their panel.

They also include recommendations for property lawyers and property management services, which provides a more convenient service for my clients.

What feedback have you received from clients you’ve worked with?

I have clients who have been A searching for the right property for a very long time. They initially felt overwhelmed with the choice of properties or disheartened when they lost out in purchasing a property they desired. In contrast, when working with Slipstream, my clients have felt a level of comfort in dealing with a genuine buyer’s agent or research houses looking after their best interests. My clients vary from mums and dads to serious investors. I’ve had good feedback about the research houses on Slipstream’s panel. This is important for the reputation of my business.

Q

How much has Slipstream impacted the bottom line of your day-to-day business?

John has helped me streamline some A of my processes, as well as provide me with the confidence to refer my clients to their selective panel of research houses, which offers a mix of new and established properties, as well as opportunities to renovate existing dwellings. I am now in a position to provide my clients with a broader range of property choices and associated services.

Q

What’s the most important piece of advice you could share with other brokers?

Establish long-term relationships A with your clients, as they are your single most valuable referral source.

People always remember when you provide them with an exceptional service, and will refer their family members and their friends to you. Investment property referral is a fantastic way to do this.

Q

FE AT URES

SPECIAL REPORT

AN ATTRACTIVE PROPOSITION Building on its reputation as a pioneer of white-label lending, Advantedge is increasing capability in the digital space to keep brokers ahead of the game. Brett Halliwell speaks to Australian Broker

ADVANTEDGE KEY NUMBERS 2018

10

mortgage aggregators partner with Advantedge

+23

overall customer net promoter score, with promoters outweighing detractors two to one

80%

of applications meeting submission quality standards are approved in two business days

40%

of home loan documents are being sent and signed digitally

14

www.brokernews.com.au

comes as little surprise that quality products at a competitive rate are enormously popular. What can come as a surprise is just how popular they are.

According to the benchmark study

by Canstar Blue, 65% of consumers select white-label grocery products over big-name brands, and 76% of consumers rate white-label products as good quality.

White label is even tipped to be the driving force behind Amazon’s next wave of growth. As the recently launched Amazon Basics does well Down Under, in the US the online retail giant projects sales of $700m on white-label Amazon groceries following its acquisition of Whole Foods. In the UK in 2011, more white-label products were launched by the major supermarkets than branded alternatives.

When it comes to white-label lending, the product is a true made-in-Australia concept.

Introduced by NAB subsidiary Advantedge Financial Services, white-label loans today enjoy a growing product footprint and, with a migration of customers away from the majors, Advantedge is in high demand.

According to Advantedge’s own white paper on the subject, the popularity is driven by three factors: the pursuit of customer satisfaction, the business benefits to brokers, and the added reach for aggregators.

“When translated to mortgages, consumers easily grasp the concept of what a white-label product is.

They can see the benefit of acquiring a mortgage white label so, all in all, I think that will continue to be a growing trend in Australian IT

mortgages, just as it is in the supermarkets,” Brett Halliwell, Advantedge general manager, says.

For Halliwell, the defining trend in the space is growth – something that goes hand in hand with popularity.

That directly translates into increased business for Advantedge – the leading white-label lender in Australia – and its partners, as well as better deals for the customer.

In 2014, only 35% of brokers in the market had access to Advantedge white-label products, today that figure is 85%.

“White-label lending is now a

Digital leader A natural pioneer, Advantedge is now building on its leading work to implement digital solutions across application, assessment and approval. For Halliwell, it is the key to improving the mechanics of the industry.

“If we look at the digitisation of the sector, which has been led

by Advantedge, it makes it more convenient and efficient for the consumer to have their information provided to the lender, but also review and sign their contract at the end of the process.”

Answering the consumer’s call, in 2017 Advantedge introduced digital document signing and digital identify verification through the apps IDme and ZipID, supplied

by DocuSign, MSA National and Equifax. Citing recent applications, Halliwell reports it’s now possible to lodge on day one, receive approval within two days and return the

“Brokers can add extraordinary value to customers by keeping abreast of developments and helping customers navigate an ever-changing landscape” Brett Halliwell, GM Advantedge well accepted and well entrenched proposition within the Australian broking market. It has developed a strong and well-known reputation accompanied by a strong market share,” Halliwell adds.

That said, he won’t be taking his foot off the pedal any time soon, adding, “We never take it for granted that we will win business other than by meeting broker, lender and customer needs. That is our ongoing commitment.”

However, keeping ahead of the current game isn’t enough – Advantedge must also position to adapt to the next wave of changes.

customer documents within three.

“That’s absolutely unparalleled in terms of both benefits for the customer and the broker,” he says, confirming approximately 40% of all documents are now signed digitally.

This innovation was part of a suite of new apps introduced to improve broker efficiency and customer service. In the coming 12 months, Advantedge will prioritise the “ongoing uptake of digital capabilities by brokers” in the name of improved satisfaction.

Naturally, customers will turn to their brokers for guidance until the new technology becomes familiar,

In partnership with

Advantedge general manager, Brett Halliwell

meaning brokers have a key role to play.

“Digitisation and the guidance provided by brokers can sit hand in hand. For example, in signing up to digital documents the broker is very much able to sit alongside the customer and walk them through, just like on paper. The difference is, when processed digitally, you don’t have to suffer the time delays imposed by post,” Halliwell explains.

Driven by satisfaction, price and product, feedback from customers has always been positive, as confirmed in the lender’s first customer satisfaction survey last year, in which it achieved an overall net promoter score (NPS) of +23.

Brokers who helped clients take out an Advantedge loan received an overall NPS of +70, according to more than 600 brokers and 530 recent residential borrowers.

The brokers are happy, too.

According to the Advantedge halfyearly broker satisfaction survey, the NPS increased from +38 in February to +50 in August.

Business booster Advantedge’s portfolio of white-label products is constantly evolving.

In 2015 alone, six bespoke whitelabel partnerships were announced, with leading aggregators Astute Financial, AFG, Connective, Loan Market, LJ Hooker Home Loans

and Smartline. Quantifying the pros from the partner perspective, the AFG pilot program initially generated $50m in application volumes. Once partnered with Advantage that figure increased by a further $150m in the pre-launch to a spike of $350m within a month of launch.

In February 2018, Advantedge rolled out special variable rates for new owner-occupier and investor borrowers. For a limited time, Advantage’s founding brands for NAB-owned aggregators – PLANLend, ChoiceLend and FASTLend – will offer new owneroccupier P&I interest variable rate lending at 3.69% pa compared to

3.83%. New residential investor interest only variable rate lending will be offered at 4.49% pa, compared to 4.63%.

Advantedge continues to offer its existing 3.99% pa special variable rate for residential investor P&I borrowers.

Helping brokers to keep one step ahead of the latest developments, online tools are available to understand each product, supported

by POS literature. However, new products and digital solutions aren’t the only developments brokers need to keep ahead of in 2018.

Because the market is built on trust as much as anything, it will be a truly industry-wide effort to buoy customer confidence throughout the investigations and hearings ahead. Halliwell welcomes the greater clarity he expects to emerge as a result and he – and Advantedge – are fully prepared to step up in a more competitive marketplace.

“Over recent times we have seen an increased share of mortgage flows going to the big four and [from that] we can dictate a level of competition. We plan to maintain and grow our share by offering brokers and customers services that can exceed those provided by our competition,” he says, concluding, “There is no magic bullet.”

Halliwell predicts mortgages – as a portion of the total loan market – will increase from a 53.6% share currently to 60% “in future years”. Proving he’s likely to be right, brokers settled $200bn in residential loans last year. Halliwell also remains upbeat about future growth prospects in white-label and digital innovations, as customers seek ever better deals.

He adds, “I think customers will increasingly look towards the entire experience rather than the raw commodity of the product. That means they will look to the service, the products, the price but also the process that is used to make the acquisition of a home loan better.” AB www.brokernews.com.au

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NE WS ANALYSIS

PREPARING FOR THE SWITCH As 220,000 IO loans expire over the coming four years, brokers have a chance to prove their worth at a critical time, but some warn clients may claim compensation when investments turn sour. Australian Broker investigates

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principal broker Louisa Sanghera.

“Combine this scenario with a slowing of the property market and clients may not have the buffer of equity to soften the blow.”

To the customer, interest-only is an attractive proposition for a

Loan Company, Ray Hair, observes that it’s a decades-long trend, one that has taken place right under the radar of regulators and banks.

To date, availability has largely driven demand for IO, but with many borrowers now preparing to

“Expect to see some very angry investors looking for a lender, broker or adviser to blame, and pay compensation” Ray Hair, The Local Loan Company number of reasons, from freeing up cash to tax incentives. Additionally, investors have widely financed rental property investments on an IO basis while paying down their owner-occupied P&I loan.

Executive director of The Local

face the consequences of their honeymoon financial planning, a mounting collection of horror stories could change that.

“Whenever regulators initiate corrective action in a market there is an initial period of over

correction, however the pendulum generally swings back to a position of equilibrium. Sadly, this is of little comfort to those caught out by the overnight changes in policy, increased interest rates and institutional disregard for the personal cost,” says Hair.

Major lenders are preparing their broker networks for further changes to lending criteria, and are actively assessing the terms of loans due to expire to 2022. But with many below the cap and borrowers looking for IO products, the call to return to business as (almost) usual has been too strong to resist.

“We have seen several major lenders loosen the reigns and cut the rates for interest-only loans again, likely because they are sitting below the cap and are looking to add more interest-only loans to their books. It will be

INTEREST ONLY LOANS (APRA) SEP 2017 Source: Digital Finance Analytics

Value of IO loans ($M)

% Portfolio IO loans by value

$700,000

45% 40%

$600,000

35%

$500,000

30%

$400,000

25%

$300,000

20% 15%

$200,000

10%

$100,000

5%

% loans

Jul 2017

Mar 2017

Nov 2016

Jul 2016

Mar 2016

Jul 2015

Nov 2015

Mar 2015

Jul 2014

Nov 2014

Mar 2014

Jul 2013

Nov 2013

Mar 2013

Jul 2012

Value of loans (stock)

Nov 2012

Mar 2012

Jul 2011

Nov 2011

Mar 2011

Jul 2010

Nov 2010

Mar 2010

Jul 2009

Nov 2009

Mar 2009

Jul 2008

0%

Nov 2008

$0

Mar 2008

only loans are rarely out of the news.

Following ASIC’s interim review the September quarter posted a knee-jerk 44.8% decline in new IO loans and lending practices are now firmly in the regulator’s crosshairs. APRA and RBA have already clamped down and further scrutiny is expected during the royal commission.

The regulators aren’t the only ones concerned. In February, assistant governor Michele Bullock delivered a speech on mortgage stress in which she highlighted a “large proportion of interest-only loans are due to expire between 2018 and 2022”.

That large proportion is, in fact, almost every IO loan written between 2013 and 2016, and subsequent analysis of IO property fixed-term lending by Digital Finance Analytics has calculated the total number at 220,000, with values upwards of $100bn.

These loans originate from before the reviews of 2015 and 2017, and in the coming year the fixed terms on 14% of them will face a reset outside of current lending criteria. By 2020, the value of loans due for renegotiation is expected to reach $27bn.

While there are many options open to these borrowers, Bullock calls it an “area to watch”, saying many could find themselves in financial stress.

“Some homeowners may not realise they are fast approaching the end of their five-year term and, if they do nothing, their lender will automatically roll them onto a P&I loan that could be challenging for them to support,” says Zippy Loans’ INTEREST

interesting to observe whether other lenders follow and how this plays out in terms of consumer behaviour,” says Uno Home Loans CEO Vincent Turner.

The mortgage crunch In January, UNSW professor of economics Richard Holden published a sobering observation of Australia’s relationship with high-LVR and IO loans. In it he reported Australian banks lend an average 25% more than their US counterparts and that these loans are poorly structured and sometimes based on falsified or inaccurate household finances.

A decade ago, US banks learned this lesson the hard way, when five-year adjustable rate mortgages could not be refinanced and the fallout triggered a chain reaction that dragged most of the globe into recession.

In Australia, IO lending has comprised as much as 40% of the loan book at the major banks, and a particularly large share of property investors choose IO. The number of new IO loans is in overall decline, from $156bn borrowed in 2015 to $135.5bn in 2017, but their share is still significant. In the owneroccupier market they count for one in four loans, and in the investor market it’s two in three.

“Interest-only loans in Australia typically have a five-year horizon and to date have often been refinanced. If this stops then repayments will soar, adding to mortgage stress, delinquencies, and eventually foreclosures,” Holden told Australian Broker at the time.

A teacher at the University of Chicago when the US housing

market crashed, he added, “The high proportion is similar to the high proportion of adjustable rate mortgages in the US circa 2007.”

So how scared should people be?

According to Hair, a lot of people “should be very afraid”, although he says dynamic lending policies, a banking sector unwilling to lose market share and strength in non-bank lenders will dampen some impact.

Quoting the DFA data, he adds, “Unfortunately, there will be pain for highly leveraged borrowers with negative equity, as there has been in the past with an oversupply of apartments, restrictions on non-resident lending and the fall in property values in mining-

is known is that brokers could find themselves very busy between now and 2022.

“It’s our professional and ethical obligation to look after the best interests of our clients and help them plan strategies that are sustainable and supportive of their personal financial goals,” says Sanghera, who predicts a “positive impact overall” for brokers.

At Zippy Loans active management of IO customers means the lender has very few of the loans on its books. Responding to the rises in interest rate charges over recent months, Zippy has contacted its IO clients to move them onto a workable P&I solution.

“Clients will need to consider a

“It’s our professional and ethical obligation to look after the best interests of our clients and help them plan strategies” Louisa Sanghera, Zippy Loans dependent regional towns.”

For Turner, the concerns are overstated on a macro level, and reasonable lead times for a switch are all most borrowers will need.

However, he warns, “The bigger concern should always be unemployment that triggers substantial hardship, very quickly across a broad group of people, which has the effect of contagion.”

Hero or villain?

While there are many unknowns in how borrowers and lenders will cope with the switch to P&I, what

broader range of lending options to find a product that works for them and brokers are ideally placed to research these options on their behalf. I believe this will result in more people turning to brokers to navigate the ever-more complex market place and secure the right solution,” she adds.

Throughout this process, transparency will be key, as Turner notes, “Brokers who continue to push expensive interest-only loans will probably lose business to those who show their customers when P&I works and when IO is the

AT A GLANCE Source: APRA

Interest only loans, share of new loans funded Benchmark 60%

50%

40%

30%

20%

10%

0% Dec 14

Dec 15

Dec 16

Dec 17

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UNSW professor of economics Richard Holden

Ray Hair, executive director of The Local Loan Company

Uno Home Loans CEO Vincent Turner

Zippy Loans’ principal broker Louisa Sanghera

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$24,895

$30,000

$18,765

$19,865

$25,000

$15,000

2018

2019

2020

2021

Investment

$1,453

2017

Owner occupied

$1,876

$5,000

$1,943

$10,000

$0

$11,673

$12,895

$20,000

$1,896

some pockets of stress are expected.

Within the industry, brokers have a chance to step up and guide customers through the uncertainties, but the watchful eyes of the regulators will be on them.

A $100bn question remains: how wealthy is the average Australian borrower? Those writing the rulebook say wealthy enough to cover higher mortgage payments.

Those who have seen the cycle play out elsewhere, say otherwise. AB

Estimated value of IO loans outside current standards by year falling due (Feb 2018)

$1,346

the resources to manage more of the IO debt burden, meaning a mass exodus of customers away from the majors is unlikely. That doesn’t mean to say the majors won’t step up to the potential competition. As Hair predicts, this could bring some attractive offers for borrowers looking to switch or refinance.

For now, it’s all eyes on the interest rate. On the one hand, no change in the cash rate for

Source: Digital Finance Analytics

$7,874

“The bigger concern should always be unemployment that triggers substantial hardship ... which has the effect of contagion” Richard Holden, UNSW

VALUE OF IO LOANS

$950

19 months has manufactured a level of stability, on the other it’s delayed the hangover. The IMF has already advised implementation of US-style signalling for potential hikes, although after the last month there is some way to go before reaching the 4% rate it expects to see by late 2019.

Regardless of what happens,

Current value of loans $bn

better option. In most cases it isn’t.”

However, brokers will also be the bearers of bad news as some are forced to sell and, according to Hair, it’s likely a lot of disgruntled borrowers will pursue their brokers in the courts, as many have done before when things have not gone their way.

Advising brokers to keep “well documented notes” of original transactions and borrower objectives, as well as subsequent attempts to refinance, he says: “Brokers will be both the heroes and the villains in this pantomime.”

“Expect to see some very angry investors looking for a lender, broker or adviser to blame, and pay compensation, for the position they find themselves in,” he adds.

Is this Australia’s sub-prime crisis? From those in the industry it’s a unanimous no. However that doesn’t mean to say a significant number of borrowers won’t receive a harsh wake-up call.

For Holden, the damage has already happened and recent measures are too little too late.

Although he refers to tighter lending standards as “comforting”, he says the 30% cap is “about all that can be done” at this point.

Australia’s smaller lenders lack

2022

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IN THE NE WS

TURNING THREATS INTO OPPORTUNITY From regulation to digitisation, employment trends and older buyers, the news is full of stories with dramatic implications for broking and finance. HomeStart head of retail and award-winning master of change, Deborah Dickson shares her tips for riding the storm “The banking and mortgage industry needs to embrace change by acknowledging the issues that exist and prevailing customer perceptions in the marketplace,” says Deborah Dickson, HomeStart Finance head of retail.

create a combination of challenge and purpose linked with stretch, and enough support that people feel comfortable to express what they really see is happening and how issues could be resolved,” Dickson explains.

The path to change may be

“The banking and mortgage industry needs to embrace change” Deborah Dickson, head of retail HomeStart Finance

HomeStart Finance head of retail, Deborah Dickson

globalisation changed the rules of business many companies, organisations and brands found themselves on the back foot, but few struggled as much as GE. Losing market share and profit, the firm turned to Jack Welch, the youngest chairman and CEO appointed in the company’s history.

At that point, Welch lacked the years of management experience most CEOs call on during crisis. But it was his experience working on the factory floor that paved the way for him to transform GE into one of the most profitable companies in the world.

The secret to his success was change management (CM), the idea of managing change for better outcomes. The crux is, events happen but change doesn’t; change occurs by management, and is essential to safeguarding company culture.

WHEN

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In the financial sector, where it has been business as usual for a number of years, a similar combination of threats lie ahead, including regulations, digitisation and changing employment and buyer trends.

The Royal Commission, ASIC’s remuneration review and online and mobile innovations, digital tools and fintech – they make globalisation look like a walk in the park.

Structural changes in the population are also a risk factor, with an ageing workforce that retires – and gets its empty nest – much later. Data from HomeStart Finance indicates the average first-time buyer will be 40 years old in the next generation.

The increasing prevalence of freelance and self-employment in the gig economy is also making itself known.

How these are managed in each organisation is make or break.

Award-winning in its approach to change, HomeStart picked up a transforming culture award last year, in recognition of its own successful change management strategies.

The socially focused non-bank lender has also appointed change champions to “live the change” throughout the business.

While acknowledging the power of self-reflection in the CM process, Dickson advocates the chance for deeper soul searching. She says, “We need to address the incentives that drive the behaviours that are now under scrutiny and take them out altogether. It may mean less profitability, but it will also mean a stronger industry, better customer outcomes and, ultimately, a stronger national economy.”

The change toolkit The mechanics of how change can be achieved are still up for debate, and while it’s clear the one-size-fits-all approach doesn’t apply, there are patterns in best-case outcomes.

“The acknowledgement of differing priorities within teams and the willingness to engage with customers and third parties to understand the issues and surface solutions is crucial to achieving change. You need to

intangible, but the tools for the journey are more clear-cut. For Dickson, there are six: clarity in direction, organisational structure, the protection of behavioural boundaries, transparency, new policies and organisational momentum to keep the pace.

The aim is to lay the foundations for a change to take hold without changing the organisation itself.

However, tools are not guarantors of success – people are.

Dickson says, “There are a lot of subtleties that are easy to miss, especially when change is fast or originates from a burning platform.

All of these are tied up in culture and leadership.”

At HomeStart Finance recent changes have increased focus on team development – not just in technical training, but in what Dickson calls “real individual growth that benefits the individual and, ultimately, the organisation”. Total training and development expenditure at HomeStart increased to 5.8% of the salary expense in 2016-17, higher than the national average of 5%.

Inspiring others to pick up the baton, Dickson’s takeaway is clear: we don’t do change to others, we do it with others. AB

OPINION

TAKING BACK CONTROL CoreLogic head of global technology, Greg Dickson, explores how a revolution in data ownership is sowing the seeds for platform banking and the AI broker the western world, regulators are pushing banks to open up access to customer data to give the consumer greater control. With the Competition and Markets Authority changes for the top nine banks in the UK, PSD2 in Europe, discussions driven by the Consumer Financial Protection Bureau in the USA and Australia’s open banking review, it won’t be long before the concept of ownership of the customer and their data becomes last century.

Instead, customers will be able to control who has access to their data, ranging from a complete list of all transactions, to their salary history, their loan and utility payments data. They will also be able to choose which financial providers, bureaus, and fintechs are allowed to see their data and offer them services. This is much more ACROSS

ways to embrace platform thinking in order to stay relevant. Rather than allowing others to disrupt them by using the customer data they store, many are looking to create platform ecosystems in which fintechs and other service providers can seamlessly interact using customer data as customers opt them into it. In Australia, Macquarie has already announced that an openbanking platform will launch soon.

When banks become open-data platforms, the world of broking will be impacted by both opportunities and threats.

Opportunities include far easier access to customer data and the associated ability to rapidly deal with paperwork; leads for new business made available through the platform ecosystem; and the ability to add on additional services that meet customers’ needs, for example insurance.

“With open data, banks are looking at ways to embrace platform thinking in order to stay relevant” Greg Dickson, CoreLogic profound than even positive credit reporting – it combines fine-grained earnings and affordability data with customers’ repayment histories and lifestyle spending.

In the tech world, the most successful businesses are platforms – the value of Apple’s App Store and devices lies in the number of third-party apps they host; the platform ecosystem becomes more valuable the more others build in it.

The same principle applies to the other technology giants, like Amazon, Microsoft, Google, Twitter and Facebook. Their platforms are built through extending their services with open application interfaces, which enable them to work with partners.

For example, I can tweet an article from inside LinkedIn, or sign into a website using my Facebook credentials, or order an Uber from inside Google Maps.

With open data, banks are looking at

Threats include the enhanced ability for AI and machine learning technologies to learn about customers and make offers to them through digital brokerages; existing digital offerings accelerating their customer acquisition with more data and ease of use; and more rapid integration to unified service offerings, such as combined property listings and brokerage portals.

To prepare, brokerages need to have access to good tools that are ready to integrate with banking platforms, and can help them scale out across new ecosystems and use new data. Brokers should also keep an eye on what is happening in the UK and what this means for Australia.

Above all, a focus on customer service – and through service retaining and growing relationships with customers – will help, regardless of the impact of new openbanking platforms. AB www.brokernews.com.au

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PEOPLE

Have an interesting deal?

Had a particularly difficult or interesting deal? Why not share it with us? Email:

Melanie.Mingas@keymedia.com

A BIG DEAL

Settling a difficult deal has its challenges at any time of year, but attempting it when everybody is closed for the holidays takes a real Christmas miracle. Entourage Finance director and broker, Damien Roylance explains

THE FACTS

However, it couldn’t happen without a final curveball – or two. Firstly, we needed a lawyer to witness, and most were enjoying the final few days of their Christmas holiday. Secondly, the doctor client was scheduled to perform surgery and had only a very narrow window in which to meet the one or two lawyers who would be available.

Calling on our contacts, we arranged for a lawyer we know to meet us in Toorak, where one of the applicants lived, within the 30-minute time frame we had that day. We were finally able to breathe easy, and settlement with the bank followed the next day.

THE TAKEAWAY

Loan size and term $4,096,000 for 30 years

Client Two male friends in their 40s and 20s

Goal Buy an investment property

Location Toorak

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Aggregator Connective

had a holiday booked over Christmas, returning on 3 January, and the other was a doctor with limited opportunity for phone calls during working hours (of which he had many).

THE SCENARIO

Traditionally, Christmas is a time to spend with family, friends and partners.

Not just because we love them, but because trying to do anything else is a logistical nightmare.

So taking on a complicated deal at this time of year is usually avoided.

However, a broker has to do what a broker has to do.

I was approached by two male friends, one in his 20s and the other in his 40s, who had bought a residential investment property in Toorak for $4m. Their bank had changed the down payment by increasing the interest rate and reducing the LVR. They needed us to get the LVR back up to 80% and present a sharp interest rate for an investment loan.

So far so good. But the clients came to us on 12 December with a settlement on 5 January.

Before giving it my full commitment, I needed theirs.

The LVR was only the start of the challenges. The next was that, on title, the owner was a company, with both applicants self-employed and the older of the two holding many entities and trusts for his business and other investments.

Naturally, this required mountains of paperwork and additional documentation – pressured further by the time frame. However, the real icing on the cake was that one client

Lender NAB

THE SOLUTION

Firstly, we needed a lending partner who would be available. Then, from that narrow pool, we needed to find one with experience of complex structures and financials. Getting off on the right foot, we collected all the necessary documents from the client, accountant and conveyancer in record time and lodged the deal on 18 December.

The fact that every bank and legal firm was closed and, that in asking them to push this through, we were essentially asking them to take time out of the biggest holiday of the year, was only one of the challenges. Faced with the headaches caused by the additional paperwork, the client’s schedules and overall completion timeline, we were up against many things.

Not only did we pull off the tricky timing, the clients will be with us for life.

We built the foundations of an excellent relationship through this deal, and we have had numerous other opportunities and referrals from them, which has been great.

I’m proud to say we made it work, with the outstanding and dedicated support of some key people. Specifically, I would like to thank Hume from our office, who worked through the break to hand deliver documents and go to the client’s house to save time, and the NAB bankers from the CBD, who missed out on some holiday time for us and this deal.

Seeing the deal come together

“With the headaches caused by the additional paperwork, the client’s schedules and overall completion timeline, we were up against many things”

Damien Roylance Director and broker, Entourage Finance

While the younger client was away, we had to liaise between his accountant and bank to sort the details of his intricate financial profile and business interests, but we kept the pace going.

The offer was unconditional on 3 January and formal loan documents were due to be signed as soon as both clients were in town the next day.

against all the odds demonstrates the commitment on all sides, and it goes to show always look after your stakeholders as you never know when you will need them. My only Christmas wish is that the next time a deal like this comes along, the clients are a little more available, we have more than 12 days to settle … and it isn’t Christmas. AB

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CAUGHT ON CAMERA On Friday 9 March, the NSW launch of Women in Finsure took place with keynote speakers NSW premier Gladys Berejiklian, COO of Better Choice Natalie Sheehan and Astute Ability Finance Group Principal Mhairi MacLeod. Created to support, celebrate, mentor and proactively promote equality within Finsure and the wider industry, the initiative was developed by Finsure and LoanKit BDM Noushig Megerditchian.

Speaking to Australian Broker at the event, Finsure managing director John Kolenda said, “Finsure has always pushed the boundaries, initially by disrupting the traditional mortgage broker industry and now by proactively promoting equality, diversity and inclusion within our industry. We are not seeking to change for the sake of change, but for the sake of the greater good. And Women in Finsure will certainly be good for all of us.�

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FROM THE FORUM Top comments from trending stories on brokernews.com.au

PC CONSIDERS BROKER FEE VERSUS COMMISSION Productivity Commission chairman Peter Harris has said a fixed broker fee is perhaps a better proposition than commission. He reiterated the commission’s proposal that a duty of care be imposed on brokers belonging to bank-owned brokerages. The commission had said earlier that it would prefer this route to regulation. Harris said, “I have the impression that perhaps a fee is a better proposition. The question might be: should it be paid by the consumer, or should it still be paid by the bank?”

A fee-based structure is ridiculous. Whose interest will this serve? Not the broker, as a client will go straight to a lender or bank to get their new loan or mortgage, and this will cut the broker out of the equation. I think the Productivity Commission needs to keep their nose out of something they know nothing about. Changing the current structure of remuneration will only benefit the banks and lenders and not the customer. The smaller lenders will also lose out as clients go straight to a major or larger lender to avoid paying a fee to a broker. Who are the Productivity Commission actually working for, the big banks?

Get Interested on 07/03/18 at 8:42 AM

What a complete hatchet job on our industry. Someone should explain to the PC commissioner what it is like to operate a small business in a highly competitive and constantly changing environment, while putting your clients first and at the same time being subjected to continuous threats to your livelihood from the ASIC reviews, Sedgwick report, PC report, Royal Commission. I have faith in those who advocate for our industry, but it would appear the powers that be simply don’t want to listen.

WA Broker on 07/03/18 at 10:12 AM

I don’t feel changing broker remuneration will give direct benefit to consumers via a lower rate. I would say there will be higher costs for the bank to facilitate the extra branches and staff. If anything, to maintain the cost margins, the cost will go up and this will be passed to the consumers.

The RBA and ASIC will not be able to say anything when the banks independently raise the rates, or do not pass the rate cuts as in the past.

Let’s try to understand the commission cuts during the GFC. Where the broker commissions were reduced, were banks still making bigger and bigger profits? Did the consumer gain anything out of the commission cuts? Banks did reverse the commission once the crisis was over, but kept the profits for their own use.

Jitesh Raniga on 07/03/18 at 10:15 AM

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DATA

WESTERN AUSTRALIA

NSW SPOTLIGHT

The dream of home ownership is alive and well

DETHRONING SYDNEY

WA may still be in a down-market phase, but its affordability is making it an attractive prospect for potential buyers. The housing affordability report published by the Real Estate Institute of Australia in January 2018 indicated that the state’s housing and rental affordability rose in the September 2017 quarter.

“While the Perth property market is showing signs of a recovery in 2018, buyers and tenants remain the beneficiaries of the current environment, with a good supply of housing and rental stock to choose from at the more affordable end of the property market,” says Hayden Groves, president of the Real Estate Institute of WA. “Overall, affordability improved across the nation as red-hot markets in Sydney and Melbourne cool. While the dream of home ownership remains a challenge on the east coast, it’s very much alive and well in WA.”

Area

Type Median value

City loses its crown as Australia’s top market as annual rate of growth falls from 17.1% seven months ago to 3.1%

Quarterly

12-month

growth

growth

Perth

H

$510,000

1.4%

-1.9%

WA country

H

$350,000

4.5%

-3.3%

Perth

U

$405,000

3.8%

-3.8%

WA country

U

$240,000

-3.8%

-1.8%

QUEENSLAND

Strong supply and interstate investment influence Brisbane Good things are on the horizon for Brisbane as 2018 rolls in. “There are great investment prospects for buying well-located houses in Brisbane’s inner- and middle-ring suburbs, where capital growth is likely to be higher this year,” says Michael Yardney, CEO of Metropole Property Strategists. Queensland’s strengthening economy is a big contributing factor – about 100,000 jobs were created in 2017. The population has swelled, and this has led to burgeoning interest from owner-occupiers and investors. However, new and off-the-plan apartments continue to flood the CBD and Brisbane’s inner ring, with another 15,000 units estimated to reach completion in 2018. The lack of demand to meet supply limits capital and rental growth potential in the unit market.

“While Queensland’s economy is still nothing to write home about, we are encouraged by the mild improvement,” says Simon Pressley, managing director of Propertyology.

Area

Type Median value

Quarterly

12-month

growth

growth

Brisbane

H

$536,000

1.1%

2.5%

QLD country

H

$435,000

1.2%

1.4%

Brisbane

U

$410,000

-0.2%

-2.1%

QLD country

U

$381,250

-1%

2.8%

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has gone from being one of the strongest property markets in Australia to one of the weakest, and this is affecting national prices. “Sydney’s housing market has become the most significant drag on the headline growth figures,” says Tim Lawless, head of research at CoreLogic.

“The city’s annual rate of growth is now tracking at just 3.1% – a stark difference to the recent cyclical peak when values were rising at the annual rate of 17.1% only seven months ago.”

The results of the recent ANZ/Property Council Survey also indicate that Victoria has overtaken NSW as the property market inspiring the highest level of confidence.

The report notes that confidence in the property industry fell by nine index points in the year leading up to March 2018.

Therefore capital growth expectations and expected construction activity are at their lowest since the survey was first conducted. While the state property market is still maintaining a strong economy with a positive future ahead, the government does need to put into effect policies that can build confidence back up.

For Michael Yardney, CEO of Metropole Property Strategists, Sydney may be experiencing a downturn, but the market is not going to collapse.

“There are still a number of growth drivers, including a strong economy, stunning jobs growth – around 140,000 jobs were created [in 2017] – and population growth supporting continued property price growth over the next few years, albeit at a slower pace,” Yardney explains. AB SYDNEY

BROKER PERSPECTIVE

The rebalancing of the Sydney market is a great opportunity for homeowners to upgrade Sydney is experiencing a very interesting phase. Auction clearance rates are stabilising at around 60% to 65% (down from 80%), but the market remains healthy due to historically low interest rates, motivated vendors cashing in, and a return of first-time buyers.

As lending conditions continue to toughen up, many investors are forced to exit. This provides great opportunities for homeowners to sell and upgrade their principal residence without facing fierce competition from the investors who drove double-digit growth in NSW. The market is now at the stage of rebalancing, therefore prices are probably more in line with the property’s true value.

There is no doubt the lending landscape remains challenging, but there are ample opportunities: from first homebuyers, homeowner upgrades or rebuilds, to small-scale property developments.

It is an appealing market to those who have strategic plans in place and are willing to hold on to their properties for longer.

Effie Nie Director, Ayers Home Loans

OPPORTUNITIES AND KEY INFRASTRUCTURE

GROWTH

CONFIDENCE

JOBS

ECOMONY

Annual growth down from 17.1% in August to 3.1%

Confidence in property industry down 9 points to March

140,000 jobs were created in Sydney in 2017

Sydney boasts a strong economy and population growth

AUSTRALIAN CAPITAL TERRITORY

Influx of new residents and rise in first home buyers driving performance

SUBURB TO WATCH: BELMONT Median price (houses) $597,677

Median price (units) $443,891

Source: CoreLogic

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

18.5%

31.1%

56.8%

3.5%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

14%

19.8%

19.8%

4.4%

HIGHEST-YIELD SUBURBS IN NSW Suburb

Type

Median price

12-month growth

Gross rental yield

Broulee

H

$538,750

17%

15%

Sussex Inlet

H

$481,250

15%

14%

Broken Hill

H

$100,000

-1%

12%

Malua Bay

H

$484,000

6%

11%

Bourke

H

$142,500

14%

9%

A significant influx of migrants is maintaining the strength of the Canberra market and feeding its economy in a positive cycle, which looks set to continue in the near future. Real Estate Institute of Australia president Malcolm Gunning noted that, as of November 2017, the number of owner-occupier finance commitments in the ACT increased by 1.2% – the largest boost among the states.

“It is pleasing to see the increased presence of first home buyers. The figures show that owner-occupiers and first home buyers are responding to more stable conditions and, in the case of first home buyers, state government incentives,” Gunning says.

The local government believes the population of Canberra will continue to grow, rising 6% from 2016 to 2020.

Area

Type Median value

Quarterly

12-month

growth

growth

Canberra

H

$698,500

7.5%

7.2%

Canberra

U

$444,000

2.1%

0.6%

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DATA

NORTHERN TERRITORY

yield

$500,000

3.1%

5.3%

NT country

H

$430,000

-4.2%

6%

Darwin

U

$370,000

-20.6%

5.4%

NT country

U

$310,000

4.2%

6.4%

60

Not sold

19

Clearance rate

75.9%

Total auctions

37

Sold

10

Not sold

9

Clearance rate

MEDIAN HOUSE AND UNIT PRICES

Infrastructure facelift spurs above average growth

$1,000,000

52.6%

Houses

Quarterly

12-month

growth

growth

H

$450,000

1.1%

3.4%

SA country

H

$284,000

-0.4%

2.7%

Adelaide

U

$380,000

1.3%

6.2%

SA country

U

$174,000

-8.4%

-4.3%

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

$450,000

$316,750

$0

$440,000

$100,000

$400,000

$200,000

$508,000

$300,000

$310,000

$500,000 $400,000

$520,000

$600,000

$705,000

$700,000

$695,000

$800,000

$865,000

$900,000

Adelaide

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Sold

PERTH

SOUTH AUSTRALIA

In the face of reduced growth and low prices, infrastructure upgrades designed to improve accessibility and transportation in Adelaide are being used to help enhance the appeal of suburbs that are further from the city. While they are causing problems for those in the vicinity of the Torrens to Torrens roadway, Darlington upgrade and O-Bahn tunnel projects, these plans are providing employment and upgrading existing facilities to improve the outlook for the state. The suburb of Nairne, located in the Adelaide Hills, is one such suburb benefiting from infrastructure investment. “Our market analysis suggests Nairne is tipped to have above average price growth in 2018,” says Gregg Harris, NAB South Australia retail general manager. “House prices in Nairne are set to benefit from nearby infrastructure investment and its close proximity to Mount Barker. Accessibility has been improved with recent South Eastern Freeway and adjoining road upgrades.”

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107

Darwin

Units

$415,000

growth

H

Type Median value

Total auctions

Gross rental

Darwin

Area

ADELAIDE

$450,000

Quarterly

$372,500

Type Median value

Auction volumes returned to higher levels this week across the combined capital cities with a total of 3,275 homes taken to auction; the higher volumes returned a strong preliminary auction clearance rate of 70.5%. Last week 1,992 auctions were held across the capitals with 66.1% clearing, while over the same week one year ago a 78.4% clearance rate was recorded across a higher volume of auctions (3,301). Results segregated into property type showed that units outperformed the house market this week, with 72.9% of units selling at auction, while 69.5% of houses sold across the combined capitals.

$520,000

Area

WEEK ENDING 25 FEBRUARY 2018

$643,000

Darwin’s capital growth prospects remain very low coming into 2018. However, the rental market is looking up. The property market continues to perform poorly, with dwelling prices decreasing by 6.5%. With no major growth drivers on the horizon, investors would do well to steer clear in the near future, warns Michael Yardney, CEO of Metropole Property Strategists.

“As opposed to the east coast capital cities where many jobs are being created, Darwin had a net loss of jobs last year, showing how its economy is languishing,” Yardney says.

For Propertyology managing director Simon Pressley, Darwin’s hope is in recognising its key economic sectors. Looking at the region's untapped reach in tourism, natural resources, military and agricultural, he says, “Darwin is a location with unique assets, but there currently isn’t any investment, public or private, into major projects.” Despite this, Darwin’s rental return is the highest across the capital cities, averaging 5.9%.

CAPITAL CITY AUCTION CLEARANCE RATES

$310,000

After job losses, attention turns to untapped economic sectors

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0%

-0.6%

-1.4%

-0.3%

Melbourne

0%

-0.1%

-0.3%

6.9%

Brisbane

0.1%

-0.1%

-0.1%

1.9%

Adelaide

0%

-0.1%

-0.2%

2.2%

Perth

0%

-0.1%

-0.5%

-2.7%

0%

-0.3%

-0.8%

2%

Combined 5 capitals

*The monthly change is the change over the past 28 days

BRISBANE CANBERRA Total auctions

125

Sold

72

Not sold

35

Clearance rate

Total auctions

120

Sold

56

Not sold

48

Clearance rate

48.9%

67.3%

SYDNEY Total auctions

1,221

Sold

640

Not sold

253

Clearance rate

71.1%

TASMANIA

MELBOURNE Total auctions

1,610

Total auctions

11

Sold

964

Sold

7

Not sold

373

Not sold

3

Clearance rate

Clearance rate

71.7%

TASMANIA

Area

Booked up builders and rising prices as inner-city growth hits double digits Last year closed with bustling activity in the Apple Isle, a trend expected to continue. According to Rob Zubin, principal at My Property Hunter, low supply in Hobart has facilitated high demand and strong buyer competition for most properties. “If you’re looking for a builder for a residential property, you’d be on a very long waiting list, as many tradespeople have been contracted to the larger commercial developments currently under construction,” Zubin says.

With the inflow of mainlanders looking to move to Tasmania for the idyllic lifestyle and affordable properties, prices are shooting up and competition is stiff.

Dwellings on the market are being sold in a matter of days, especially with the very high yields investors can gain (around 5%). The vacancy rate as of January 2018 was the lowest in 15 years and inner-city growth levels are in double digits.

70%

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$421,000

7.9%

7.7%

TAS country

H

$273,500

-0.5%

3.8%

Hobart

U

$315,500

3.8%

4.1%

TAS country

U

$245,000

6.5%

8.6%

All data sourced from CoreLogic.com.au

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29

PEOPLE

IN THE HOT SEAT Seeing that Australians pay more to get less on the NYSE, Matt Leibowitz created a solution. On a mission to bring investors a better deal, the founder and CEO of Stake shares his top trading tips

Why did you establish Stake?

We’re surrounded by so many game-changing US companies A – think Amazon, Netflix, Tesla and the like. Australians know these companies better than those on our local bourse, yet we could never access them simply and affordably. What Stake does is break down all those barriers to create the most intuitive trading experience available.

Q

The stock market can be a scary place for a beginner.

How should a first-timer ease their nerves?

Firstly, every expert was once a novice. We have removed all A the unnecessary complexity to place a trade, which makes the entire experience more seamless and intuitive. This makes getting started that much easier and removes a lot of the scary data and unnecessary clutter you see on existing platforms. Whether you’re a seasoned investor who wants better access to the US markets, or someone looking to place a first trade, it’s going to be easier than any other platform you’ve used. Everyone wants easy. The only advice I can give beginners is to start small and get in there. It’s the beginning of a great ride!

Q

What do you see as the top three investments currently?

All we have to do is look at the data. Over the past few weeks, A with a bit of volatility in the market, we’ve seen an increase in activity of inverse and volatility based ETFs, which allow customers to generate returns when markets fall. There’s always a pretty consistent trend with Australians looking to invest in some of the big tech companies listed in the US, like Amazon, Google, Alibaba and Tesla. Understandably, these are the brands we engage with on a daily basis.

Q

What do you consider to be your greatest achievement to date?

Building a great team at Stake and having an exceptional A community of users so early. Getting any business off the ground is hard, but we’re not quite patting ourselves on the back yet.

Now that we’re up and running, the real work is ahead of us, taking on some of the incumbents and taking our product global. AB

Q

30

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