$4.95 POST APPROVED PP255003/06906
ISSUE 7.16 August 2010
‘New normal’ must be faced head on
First credit union licence granted
Higher cost of
South West Slopes Credit Union is the first Australian Credit Licensee under new laws regulating consumer credit governed by ASIC
funds will challenge brokers to find greater business efficiencies: St.George Mortgage brokers will have to adapt to a “new normal” when it comes to higher cost of funding, banking sector competition and commissions. Efficiencies in their cost base must be created if they are to capitalise on a permanently changed market dynamic. St.George general manager for intermediary distribution, Steven Heavey, said brokers – just like banks – had to face up to a new market reality. “Money’s not as cheap as it used to be – and it’s never going to be that cheap again. I think the reality is that there is a ‘new normal’ in terms of funding, and cost of funding in particular,” Heavey said. The resulting environment is one where brokers will be under pressure to find efficiencies in their business operations or scale up, if they are to continue to maintain levels of profitability. “I think for brokers, in order to be effective, they need to get a reasonable return for their effort,” he said. “We all have to realise we are operating in a new environment and we all have to look at our own efficiencies – and brokers are no different to myself. “I’ve had to run this business with less FTE than previous years, so everyone has to constantly be
Page 10
>>
Licensing leverage ASIC’s new licensing regime has presented compliance headaches for some, but has raised the bar for brokers and in marketing of services Page 24
>>
Steven Heavey
looking (whether you are a broker or a bank) at your cost base and how efficient you are, and at different ways of improving that,” Heavey said. This “new normal” will not necessarily mean further commission cuts, however. “People automatically jump to the conclusion that commissions are going to be cut, but they need to understand there are many drivers that go into the profitability of
third party distribution,” he explained. Heavey singled out loan life, loan size, and products per customer. “The way I look at profitability in trying to recapture margin, is I have multiple levers to pull, and I don’t always pull the commission lever, because that’s one of many I could use to improve the profitability of this channel.” Page 20 cont.
>>
Spring into action Many commentators are predicting a post-August 21 Federal election ‘spring’ to action for the property market. How to make the most of the mini-boom Page 26
>>