Australian Broker magazine Issue 9.02

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ISSUE 9.02 February 2012

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ISSUE 9.02 February 2012

Sky’s the limit as brokers skill up

David Thomas

 Bottom line to

benefit as training yields tangible growth Leading mortgage brokers are embracing a variety of ongoing training courses as key to both their own professional development and the success of their businesses this year.

As the deadline for the MFAA’s mandatory minimum Diploma qualification approaches, top brokers are prioritising training above and beyond this level to maximise their potential.

MPA Top 100 broker Nicole Seagren of Vision Finance, based in Melbourne, said a rigorous

training schedule will remain critical to her personal and business success this year.

“I’ve set up training in several areas outside of CPD,” Seagren told AB. “These are business courses, customer service courses, workshops – anything outside of day-to-day broking,” she said.

Seagren expects it to translate into new business opportunities, as well as added services for her mortgage broking client base.

Currently, Seagren is working through a Diploma in life coaching, and has completed a general business course she says will assist in developing a life coaching arm of the business.

Currently, the life coaching service

runs as an addendum to Vision Finance’s core mortgage broking offering, but has not been actively marketed or branded to clients.

However, that is about to change. Seagren said clients are looking for more, and sees an opportunity for expansion through providing advice on how clients can improve their lives, and help them move forward and feel the sense of happiness they aspire to. “My theory is that the broking part of the role is only 30% of what a client is coming to us for,” she said.

Vision Finance is not alone.

Trilogy Investment Property Funding’s David Thomas, based in the ACT, said training is key to a retention strategy that has seen no losses in staff since 2008.

Thomas said that Trilogy’s investment in training in 2012 will eclipse previous years. “This year we have recruited business and sales coaches, and have enrolled staff in various courses that appeal to them and will benefit our business, such as public speaking, customer service, Excel and computer skills.”

“Our brokers have already done their Diplomas, so we’ll target what each broker needs and wants; for example, some want to do public speaking workshops, so they can be involved in seminar presentations to give them more credibility in the market,” he said.

Thomas expects the training to contribute to 20% year-on-year growth targets.  For more on top broking business, see The coalface on page 14

Freedom fight Brokers call on ACCC to scrap mandatory memberships Page 2

Wholesale, meet brand War of words over aggregators with the right moves Page 4

Off-the-plan Advisors brought low by damning ASIC shadow shop Page 6

Inside this issue The coalface 14 Brokers report from the front line Analysis 18 Much interest rate ado about nothing Viewpoint 19 Brokers in an online age Opinion 20 Find niche in ‘abundant’ times Insight 22 The 16 principles of influence Market talk 26 Negative equity story positive People 28 Brokers give New Year’s resolutions

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News ‘Get rid of mandatory MFAA memberships’, brokers tell ACCC Brokers have sounded off on an ACCC review into compulsory MFAA membership, expressing their anger with third-line forcing notifications.

The competition watchdog is currently undertaking a review of third-line forcing notifications submitted by companies such as Mortgage Choice and Aussie Home Loans, making MFAA membership mandatory for their franchisees.

Several brokers answered the ACCC’s call for submissions into the benefits and detriments to consumers, and have rejected the idea of forcing notifications.

In a submission to the ACCC, Australian Loan Company broker Ian Dennis argued that, as a credit rep for an ACL holder, he is already provided with training and compliance tools.

“I have been broking for seven years and find it a difficult run to pay $500 a year for something I have not received any benefit from,” Dennis wrote.

Dennis said he had let his MFAA membership lapse due to “the high cost involved”, and contended that he would not use

lenders who required association membership.

“By being a member, there is no benefit as everything they offer I can get from my licence holder, and I am already paying them a fee and a split of my commission which is enough pressure on earnings without having to deal with peaks and troughs in consumer needs and confidence and paying more to join one of these bodies,” he wrote.

Dennis urged the ACCC to consider the needs of “one-man band” brokers in its review.

“We are the ones that are the backbone of the industry. We are the ones that the big players fear when it comes to their market share,” Dennis wrote.

Melinda Young of Mortgage Simplicity said there was no benefit to consumers, brokers or lenders in requiring MFAA membership.

“There are many other accredited training organisations that can satisfy training and continuing professional development programs for mortgage brokers,” Young wrote.

Young added that the advent of

licensing meant MFAA membership no longer served as an industry benchmark.

Mortgage Choice put forward its own submission, defending its forcing notification. The company claimed consistency among its franchisees was behind its decision to make MFAA membership mandatory, and said it could more effectively influence an industry association to the benefit of its franchisees if franchisees were required to belong to one industry body.

“That being the case, Mortgage Choice needs to choose which industry body it believes best serves the interests of its franchisees. In Mortgage Choice’s opinion, the MFAA remains the most appropriate such body,” the company said.

The company pointed out that its forcing notification applied only to franchisees, and that its LoanKit brokers were not required to be MFAA members.

Banks face borrower revolt in class action Any class action from disgruntled mortgage borrowers under the NCCP regime has been deemed unlikely to succeed, as Australian banks come into the firing line.

Earlier this year, it was revealed a class action involving a potential 300,000 borrowers was being levelled at major banks, amid claims their lending practices had put customers at risk.

The class action, if mounted, would focus on first homebuyers and lower income households lured into the market by lower interest

rates following the onset of the GFC. It will allege that these borrowers are now experiencing severe financial hardship through no fault of their own, through being allowed to enter a loan contract that they could not afford.

The case is being spearheaded by retired international insurance broker Roger Brown, who has been quoted as saying the way banks have been lending has been “irresponsible”.

However, MFAA CEO Phil Naylor said that while detail

remains sketchy, it would be difficult to see such an action succeed under the newly implemented NCCP regime.

Naylor said the regime itself requires lenders and brokers to only lend or recommend products that are not suitable for their clients. “I would be surprised if it could be established that either lenders or brokers involved in such a large number of loans would have not acted ‘responsibly’ as required under NCCP,” Naylor said.

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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.

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Wholesale aggregator value questioned Wholesale aggregators have been lambasted for failing to deliver on their promise of being able to successfully build and support a variety of independent mortgage broking businesses.

MoneyQuest national business development manager Michael Osborne, himself formerly the head of sales and distribution at wholesale aggregator Vow Financial, said in a statement to industry trade media last month that following almost a decade of effort by these mortgage intermediaries, they had been unsuccessful and that brand was the key.

“History will show that few mortgage broking businesses under the wholesale aggregation banner have gone on to become anything other than small boutique businesses,” he said.

“Wholesalers have demonstrated an inability to deliver the broad array of unique marketing, online

lead generation and CRM capabilities for each of their independent mortgage broker customers.”

MoneyQuest joint managing director Gill McLean said that while aggregators have a “very important place” in the industry, they are limited in what they deliver individual brokers.

She said single brokers needed support to secure new business opportunities, grow a business with trail book values greater than 1.2 times, and to provide strong marketing strategies to continue to secure new clients to their business on an ongoing basis.

However, she said aggregators were particularly relevant and important in a regulated environment. “They are better placed to manage and control the compliance role. They are also pivotal in managing a diverse lender and supplier panel,” she said.

Osborne said that business partnerships between brokers and aggregators need to be in alignment, with similar overriding motives shared by all parties.

“A myriad of independent brands will always struggle to collectively market, drive online penetration, successfully generate leads and crucially cross-sell,” he said.

While aggregators had growing importance in the new regulated environment, Osborne said that it was branded aggregators that had the ‘holy grail’ to thriving in the future of the market.

McLean added that the industry had evolved from ‘an unregulated cottage industry’ to a regulated profession, and this posed challenges to small brokers trying to remain profitable.

Hewitt hits back, as aggregators criticised AFG managing director Mark Hewitt has defended the power of wholesale aggregation.

Hewitt said AFG had invested $50m to deliver a technological advantage to its brokers, and had complemented this with business development coaching.

“AFG’s CRM system SMART has been running for several years, and right now we are running around 750 websites on behalf of our members, updating them constantly with proprietary content,” he told Australian Broker. “We are also delivering short messages for Facebook, Twitter and other online media. Plus all the usual birthday, Christmas and other customised messages you’d expect.

Research we’ve commissioned shows that customers are more than twice as likely to use brokers that opted into the SMART CRM, and that their business grew 50% more than those who didn’t use the SMART package,” he said.

ASIC sinks ‘reckless’ Melbourne broker ASIC has scrapped the credit licence of Melbourne-based brokerage Star Alliance Financial Services, and permanently banned its director, mortgage broker Prasanna Wijesekara.

In a decision that the MFAA has

The offences outlined • Submitted a false and misleading licence application • Provided false and misleading documents to AMP Bank • ‘Reckless’ over details of credit licence application

called ‘gratifying’ following its banning of the same broker last year, ASIC has barred him from ever engaging in credit activities, after he was found to have made false and misleading statements on his ACL application.

Based in South Morang on the outskirts of Melbourne, ASIC found after an investigation into the business that Star Alliance’s application was false and misleading because it did not state AMP Bank had cancelled his accreditation as a broker in 2010.

In addition, ASIC said it had

reason to believe Wijesekara had provided falsified documents and false and misleading information to AMP Bank in support of a loan application in 2010.

ASIC commissioner Peter Kell used Wijesekara’s permanent banning as an opportunity to warn brokers against falling afoul of the regulator and recently introduced NCCP legislation.

“These outcomes demonstrate ASIC’s ongoing commitment to ensuring that only those who meet requisite standards of honesty and integrity are permitted to

participate in the consumer credit industry,” he said.

Wijesekara and Star Alliance have the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decisions.

The MFAA said that it remains committed to “expelling the rogues” in the industry.

“The MFAA expelled him nine months earlier for the same conduct, in that he submitted incorrect documents,” the association told its members earlier this year. “It is gratifying that ASIC sees things the same way.”

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ASIC slams advisors for ‘woeful’ advice

Get trained up in SMSFs… or else

Financial advisors have been raked over the parliamentary coals by advice watchdog ASIC, which has released findings painting a grim picture of advice quality in Australia.

In his opening address to a parliamentary committee reviewing the Future of Financial Advice Reforms, ASIC commissioner Peter Kell revealed that a surveillance operation conducted by ASIC had found only 3% of financial plans could be considered ‘good’.

Thirty-six per cent were considered ‘poor’ by ASIC, while the remaining 61% were said to only adequately meet client needs.

The results refer to a shadow shopping exercise in which 64 plans were sought from Australian advisors, particularly for clients who were in or nearing retirement.

The full results of the shadow shopping exercise are due out in March this year.

“There was consistent failure by advisors to talk to clients about what they can realistically fund out of their retirement savings,” ASIC commissioner Peter Kell said in his statement.

“For example, only a few undertook rigorous retirement income projects and many plans contained woefully inadequate projections, with poor or unrealistic technical assumptions.”

Brokers should skill up in selfmanaged super fund lending, or risk future disputes with their clients.

AAMC Training Group’s managing director Jeff Mazzini has said that the fastest growth area of lending in Australia at the moment is self-managed super funds.

Legislation in 2007 allowed super fund borrowing for property investment. Advantages include such assets being protected from bankruptcy, as well as capital gains tax exemptions.

Commenting in response to an increasingly positive outlook for commercial property, Mazzini said brokers not considering SMSFs as an option could be at risk of a dispute.

“In today’s age where Australians are now ranked second behind the US for suing when things go wrong, I would strongly advise that everyone considers self-managed super funds as an optional area to fund the commercial or investment retail property through,” he said.

Mazzini said brokers need to understand whether SMSFs, or stand-alone commercial/investor property structures will benefit clients more. He said training can answer the ‘what, hows and whys’.

“Failure to effectively undertake this process may lead

The industry was slammed for handing out too much “generic and pro forma advice”. ASIC also noted conflict of interest as a problem, with consumers given products they did not want.

“Often a client would go to see an advisor wanting to know when they can retire, and instead leave with a new accumulation product,” Kell said.

The shadow shop was originally intended to establish from current retirement advice what ‘good practice’ was, and as a result, Kell labelled them “clearly disappointing”.

“There is a clear need for improvement in the quality of advice and a reduction in conflicts of interest in this industry,” he said.

ASIC used an expert panel, including a range of industry practitioners, to help assess many of the plans, especially where there were questions or concerns about the grading.

Kell said the FOFA reform package will help improve these outcomes. “Promoting the interests of clients through a best interests duty will drive advice that is better focused on the actual needs of the client.

“The removal of a range of conflicted forms of remuneration will also help ensure that the interests of the client are given priority,” he said.

to issues for both parties that all could do without,” he said.

Blue Wealth Property CEO Dr Tony Hayek has Jeff Mazzini previously said that SMSFs present “the biggest opportunity” for mortgage broking businesses today.

One-third of Australian superannuation funds are held in SMSFs, and SMSFs include over 850,000 members in total, with an average SMSF value of $960,636.

Hayek said brokers could assist their clients to retire better, simultaneously “changing people’s lives” while helping their own business bottom line.

Hayek said the retirement nest egg that could be achieved via SMSF borrowing and investing was 112% better than the average managed fund for a 48-year-old client, and that leveraging into property could save Australians from experiencing retirement poverty, with only 4% set to have an income over $41,000 in retirement, and 84% likely to be surviving on under $21,000 per year of their own assets.

“Mortgage brokers are the wealth creation managers of the future,” Hayek said.

No white labels in Vow’s future… for now White labelling may be en vogue amongst aggregators, but Vow Financial has no immediate plans to join the party.

White labelling has become increasingly common among aggregators and lenders, but Vow chief executive Tim Brown has said the company will eschew the strategy in favour of developing referral relationships and closer connections with its lender panel.

“We have no white label. It’s something we’ve been toying around with, but we’re not going to launch one for the sake of launching it. It has to have some point of differentiation for our brokers, and we haven’t been able to find that with funders,” he said.

To continue to drive volumes, Brown said the aggregator will focus on further developing referral relationships and upskilling brokers to diversify their client offerings.

Brown said the company’s brokers

saw a strong finish to 2011, and predicted 2012 could see “phenomenal” volumes as well.

Brown said the company’s brokers saw a 25% rise in volumes over the last quarter. Moreover, this pickup was not just due to a flood of NSW first homebuyers. While Brown said it may be too early to draw conclusions from the spike, he said it augurs well for the year ahead.

“I was talking to a couple of brokers, and asked them where the majority of that was coming from; was it coming from first homebuyers? They said no, it was coming from investors and people upgrading. It was interesting to hear that, because I would have put it down a little bit to stamp duty.

But I think we’re starting to see NSW pick up. It’s been in the doldrums for so long,” Brown said.

Brown also expressed optimism that 2012 could see the Perth and WA markets turn around, as

aggregators increasingly try to gain a foothold in the resource-driven state. CommSec’s recent State of the States report may lend credence to Brown’s claim, showing WA at the top of the pile in economic growth. “[WA has] finally seen the light in terms of growth. I think it was just a confidence thing, and now that interest rates have come off a bit I think it’s going to pick up,” he said.

Tim Brown

Vow webinars to hit broader market Vow has launched a series of webinars that will be open to all brokers via their Facebook pages – not only its member brokers.

The move, which will see professional presenter David Staughton return after hosting the group’s annual conference in Fiji, is pitched at motivating and upskilling brokers with 12 onehour webinars.

However, it will also become a new plank in branding the aggregator in the market more broadly.

Vow Financial CEO Tim Brown said the sessions would be ‘highly motivational’ in tone, and would enhance broker skill and knowledge in what is set to be a ‘challenging year’ for the industry.

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News ASIC chastises CBA for ‘misleading’ comparison rate ASIC forced the Commonwealth Bank to change its advertised comparison rate in January amid concerns the rate was ‘incorrect and potentially misleading’ for consumers.

In a statement released by the regulator, ASIC said CBA had agreed to adjust the advertised comparison rate for its Wealth Package home loan to include a $350 fee.

Originally, the major bank had neglected to calculate the fee as part of its comparison rate, a key requirement in the advertising of financial products under the National Credit Code. Prior to reaching agreement with ASIC,

CBA had previously advertised a standard three-year fixed package rate of 6.59% pa, at a comparison rate of 7.10%.

Explaining its action, ASIC said the National Credit Code requires that credit advertisements that include an annual percentage rate must also include a comparison rate.

Comparison rates must include fees, charges and interest so consumers can see the true cost of credit.

“It can be difficult for people to compare home loans with different combinations of interest rates and fees,” ASIC Commissioner Peter Kell said.

“This is why credit providers must include the comparison rate when they advertise a rate or a weekly payment for a home loan, and ASIC will be active to ensure compliance in this area,” he said.

According to ASIC, consumers are likely to be more confident if they have information that allows them to properly understand and compare financial products.

Speaking with Australian Broker, ASIC senior executive leader of deposit takers, credit and insurers, Greg Kirk recently warned that mortgage lenders would be ASIC’s next point of review, following scrutiny of the advice being provided by

One Big Switch success rate hits 1600 In the six months since One Big Switch launched its campaign to help borrowers lower their mortgages, 1,600 homeowners have secured a better deal.

One of the organisation’s co-founders, Lachlan Harris, told media early this year that many people who signed up months ago are still in the process of changing their mortgage.

The report follows a previous dispute regarding the success of the campaign. In November, One Big Switch denied media reports that only 1,000 of the 40,000 borrowers who signed up for the campaign had seen results from their involvement.

At the time, co-founder Paul Hunyor told attendees at a LIXI conference, “I’ve learned to believe nothing I read in the financial press, so no, those numbers are not quite right.”

Hunyor added that, “we’ve had over a couple of thousand introductions to lenders and their

products through the program.”

One Big Switch faced widespread criticism from the broking industry. AFG’s general manager of sales and operations Mark Hewitt said the problem is that the campaign had failed to attract major lenders to its panel.

“The proposition would be laughable if they weren’t putting people’s property on the line,” he said.

Hewitt also countered statements made by representatives of the organisation who reportedly called financial advice in Australia “crap”. According to Hewitt it was an unfair comment particularly since the group is not prepared to provide financial advice to its members.

One Big Switch is also setting its sights on electricity companies. Harris told ABC News that the group will be setting up more mortgage and electricity offers this year.

Last year, Resimac, Firstmac and Mortgage Ezy were revealed as lenders Garry Driscoll involved in assisting Choice with the switch campaign, though no majors had come on board.

Mortgage Ezy also planned to pass these leads onto its broking network.

“What we’re doing is passing on the leads to our established brokers,” Mortgage Ezy’s Garry Driscoll said at the time. “We don’t have a retail presence, we’ve never had a retail presence and that was one of the conditions of our involvement.”

mortgage brokers.

“We are doing a number of other reviews of responsible lending in various other industry sectors, and one that is coming up very shortly will be a review of the practices of home lenders in the mortgage market.” Kirk said that the review was standard operating procedure for the regulator, which was now responsible for enforcement in the area of credit.

This year, ASIC will release a consultation paper on advertising for credit products, following recently released general guidance on financial product and advice advertising.

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Bouris to Japanese banks: Use YBR to grab market share Yellow Brick Road chairman Mark Bouris has urged Japanese banks to consider the company as a distribution channel in Australia.

Following a Deloitte report indicating that Japanese banks could find a foothold in the Australian market in 2012, Bouris said he would like to see the banks distribute through Yellow Brick Road.

“The major banks have had it too good for too long and it’s about time the oligopoly got a shake-up.

Japanese banks have the ability to pick up 10% of the market with the likes of Yellow Brick Road as a primary distribution network,” Bouris said.

Bouris touted the company’s growth, and said expansion plans are set to continue in 2012. YBR has continued on an aggressive growth trajectory, recently signing its 100th branch agreement.

The company has announced it added 50 branches to its network in 2011, and will aim to add another 25 by the end of the financial year. Bouris drew a contrast between the company’s

rapid expansion and recent job cuts by the major banks.

“The banks are showing extreme sensitivity to the current climate by announcing plans to cut staff and hours in the retail banking sector. The current economic climate combined with decimated consumer confidence has changed the landscape and now is the time when people need guidance and advice the most.

That’s why we’re aggressively looking for mortgage brokers and financial planners who want to be their own boss and join the Yellow Brick Road family,” he said.

“The signing of our 100th branch is testament to our model and shows there is a market for a truly independent wealth management company that puts their clients’ needs first,” Bouris added.

The company last year signed a $13m deal with Nine Entertainment, $6.5m of which was in the form of advertising.

YBR said it would use the advertising and accompanying cash injection to expand its branch network “more aggressively”.

ANZ holds fire in first solo review ANZ decided to keep interest rates on its retail mortgages stable in the month of January, in its first review of interest rates independent of the Australian central bank.

At the time of its decision not to raise interest rates in December, ANZ promised to review rates independently of the Reserve Bank on the second Friday of every month.

In January – a month where the RBA board did not meet and no changes were made to Australia’s cash rate setting – ANZ rates for home loan and business customers were stable.

Reiterating its rationale for breaking with the RBA cycle, ANZ CEO Philip Chronican said in a statement to the market that it could now reflect sustained changes in funding costs.

He said these costs were a combination of interest paid on deposits, and money paid to investors in wholesale money markets where Australian banks raise the majority of funds.

“It helps us to contribute to an informed debate about how we fund our customers’ loans and the effects of the continuing global

financial crisis on Australia, particularly the significant economic instability which currently exists in Europe,” Chronican said.

“We want the process of setting interest rates for our customers to be simple and transparent. This includes a promise to work hard to maintain competitive interest rates that will not disadvantage customers over the term of their loan,” he said.

As part of the January review, ANZ warned that higher interest rates being paid on deposits as well as elevated prices for funding will be sustained this year due to economic volatility.  For more on the rate outlook, see Analysis on page 18

How will ANZ decide? The key factors • Ensuring attractive returns for depositors • The cost of wholesale funding • Maintaining competitive position • Customers’ ability to afford repayments • Regulatory requirements

Deceptive FHB figures inflated by buyer rush

Damian Smith

A significant increase in first homebuyers may have been inflated by a last-minute rush to beat stamp duty changes.

First homebuyer numbers shot up 18% in November compared to October, accounting for the largest volume since December 2009 and adding more than $2.86bn to the mortgage market. But the numbers may be deceptive, according to RateCity CEO Damian Smith.

This is due to a rush of NSW

first homebuyers looking to beat changes to the state’s stamp duty concessions. Smith said this rush would have inflated November’s figures, and cautioned against reading too much into the data.

“In NSW alone, close to 4,000 first homebuyers financed properties in November – a significant jump of 34% up from the previous month. By comparison, the number of first homebuyers in Victoria and Queensland rose by just 5% and 8% respectively, in the same period.

Many home purchases in NSW were effectively brought forward to meet the stamp duty concession deadline before rulings changed on January 1, 2012,” Smith said.

A similar spike in figures is expected for Queensland in the coming months as buyers try to beat a deadline for a $10,000 building boost grant in the state.

Originally set to close at the end of January, demand has pushed the deadline out to the end of April.

Smith cautioned borrowers against being wooed by government grants and stimulus

measures, saying potential buyers who save a larger deposit will find themselves in a better position than those who take advantage of government concessions.

“There may be a place for government grants and concessions, but borrowers shouldn’t let changes to rules

motivate their decision to enter the market unless they are in a good financial position,” Smith said.

“The lure of a government grant means very little over the 25–year life of a loan; it’s important that first homebuyers do their sums carefully, and buy at the right time for the right reasons.”

Flashback: Don’t rush just for ‘freebies’, FHBs urged MPA Top 100 Broker Daniel O’Brien urged NSW homebuyers to avoid rushing their purchase just to take advantage of stamp duty concessions, and said savings from stamp duty could be erased by inflated purchase prices.

“I would advise them [buyers] to do their homework to establish that they aren’t paying an inflated price, due to the current first homebuyers’ rush,” he said.

O’Brien urged first homebuyers who felt they were getting a good price to “go for it”, but said missing the stamp duty deadline would not be “the end of the world”. He predicted that a smaller pool of first homebuyers in 2012 could lead to lower prices from vendors.

Regardless of the drawbacks of rushing to beat the deadline, O’Brien said his business, PFS Financial Services, has seen a massive rush of first homebuyers as the year draws to a close.

“We haven’t seen such a first homebuyer rush since the reduction of the first homebuyers grant in 2009. The same thing happened then that is happening now: Freebies are reducing, so people are moving at 100 miles an hour to get in before the freebies end,” he said.

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WORLD US brokers write to the President The US National Association of Mortgage Brokers has written a letter direct to President Barack Obama, in an attempt to set him right on the mortgage broking profession.

In a letter beginning much as would be expected – with a “Dear Mr. President” – the association expressed its confusion with statements made by Obama that seemed to denigrate US mortgage brokers and hold them accountable for much of the US economic malaise.

The association wrote that Obama had recently said the government had put a watchdog in place to “police what mortgage brokers are able to do when it comes to consumers”.

“You have singled out mortgage brokers twice now in your comments,” the NAMB wrote in response. “There are thousands of good honest mortgage brokers in America that have never participated in sub-prime loans or have used any of the exotic products that Wall Street or the Mega Banks created. And most of these companies that did these loans were not mortgage brokers. You consistently use the term mortgage broker to relay information having to do with the housing industry and that is not fair,” the NAMB said as part of the letter.

The association concluded with the line, “We look forward to your response”.

FTBs struggle to access finance First-time buyers in the UK are having difficulties collecting enough for a home deposit.

New research from the Council of Mortgage Lenders reported by UK mortgage publication Mortgage Introducer showed the average deposit is about 20% of the property value.

However, just over a quarter of prospective first-time buyers said they would only be able to put down 5% for a deposit on a future property, while the majority of those surveyed – 28% – said they could manage to scrounge together 10% to fund their home purchase.

The Council of Mortgage Lenders said this suggested that those at the higher end of the loan to value scale had unrealistic expectations of their chances for obtaining a mortgage.

An analyst quoted by the publication said that higher LVR products were less available than in previous years, though some 95% products were on offer at building societies.

Thirty per cent of future borrowers surveyed were looking for mortgages valued between £100,001–£150,000 – which could be about their limit, according to the analyst.

“With nearly 60% of the group earning £30,000 or less per annum, saving a 20% deposit for a £175,000 property would be extremely challenging for many.”

10 minutes per lead, says Canadian A Canadian mortgage broker is advocating that cashstrapped colleagues spend only 10 minutes on any one lead – not the two or three hours some industry veterans allow for.

An admitted high-volume broker, Ontario-based Advent Mortgage Services’ Jim Tourloukis told Canadian Mortgage Professional that it was a “ridiculous waste of time” to invest one hour to get to a client, one hour with the client, and an hour to get back – with no sale guarantee. “I have a set rule that I will only ever invest 8–10 minutes with a client unless I have already secured his business. I also have them come to my office – I don’t go to them.”

The formula seems to have worked for Tourloukis – he was Canadian Mortgage Professional’s number one broker last year, having brought in more than $230m.

Tourloukis sees hours on the road or home client meetings as time wasted. “I always ask a client to go shop around first and then come back to me with the best rate they’ve been offered,” he told CMP. “That protects my time and is more productive,” he said.

B.C. brokers win Oprah spotlight

A team of Vancouver mortgage brokers is giving the industry a PR boost, at the same time helping a community get its financial act together for a new reality show on Oprah’s OWN network.

Those mortgage professionals, including top performer Jessi Johnson of the Verico Jessi Johnson Mortgage Team and Jared Dreyer, president of Dreyer Group Mortgagess at Verico, help members of the B.C. community of Aldergrove save money on their mortgages – a key part of the show’s overall goal of increasing the net worth of individuals grappling with growing debt loads.

Million Dollar Neighborhood, produced for and airing on the OWN Network, also brings together tax, investment planning and other financial services experts to help 100 families in the community meet the collective goal of saving $1 million in 10 weeks.

In the first episode, alone, an H&R Block review of tax returns in Aldergrove results in an additional $50,000 in tax refunds, with nearly a third of the real show’s participants having missed credits or deductions amounting to an average of $1,571.

The job of the Verico brokers is to look at the many ways residents can save money on their mortgages through refinancing their existing loans to get lower rates and to consolidate their debts to capture those same bargain-basement interest rates.

12 brokernews.com.au

News Refinancers shun majors, boost rate competition Lenders outside the four majors accounted for almost a quarter of all loans written by AFG brokers in December driven by a surge of borrowers refinancing their existing mortgages.

The total non-major market share in December was 24.3%, according to AFG figures for that month, on the back of their ability to capture 29% of the refinancing market.

Non-bank and regional lenders have traditionally been supported by new home owners, but capturing a large chunk of • Non-majors snare a quarter of December mortgages • Refinancers break with majors to embrace non-majors • Market set for increased rate competition in 2012

refinancers indicates that a new battlefront has been drawn.

AFG recorded an average of 19.1% for non-major lenders during the previous 12 months.

AFG general manager Mark Hewitt said the surge in popularity of the smaller lenders would keep the pressure on the majors to maintain aggressive pricing.

“This trend will help keep rates competitive,” Hewitt said. “If the expected rate reductions come through over the next quarter, we could see a very different lending environment, supporting the recovery of property markets across Australia.”

Hewitt said while it is difficult to draw a trend from only December figures, there was ‘no question’ the market was increasingly competitive and non-majors did particularly well.

Data from the Australian Bureau of Statistics shows a 17% year-on-year rise in financing for the year to November 2011.

Loan Market said the company has itself experienced a 16% spike in refinancing enquiries over the past 12 months, and further rate cuts could continue to boost activity. “With expectations of more rate cuts by the RBA in the first half of 2012, we should see sustained growth in the refinance market, which – along with first homebuyers – will be the strongest sectors this year,” Loan Market COO Dean Rushton said.

AFG’s mortgage index showed borrowers continue to be attracted to fixed rate products with the proportion of fixed rate loans rising to 19.2% in December, up from 17.2% the month before. The proportion of

Mark Hewitt

borrowers locking in their rates peaked in October at 20.4%.

A traditionally slow month for mortgages, mortgage sales dropped off by 26% when compared with November, though this was 5.4% higher than last year.

Big boost for refinance in rate reductions Refinancing has received a major boost following successive RBA cash rate cuts.

Data from the Australian Bureau of Statistics shows a 17% year-on-year rise in financing for the year to November 2011, and Loan Market COO Dean Rushton has predicted the trend is set to continue. Rushton said the company has itself experienced a 16% spike in refinancing enquiries over the past 12 months, and further rate cuts could continue to boost activity.

“With expectations of more rate cuts by the RBA in the first half of 2012, we should see sustained

growth in the refinance market, which – along with first homebuyers – will be the strongest sectors this year,” Rushton said.

Rushton said consumers held the “overwhelming sentiment” that rates would continue to move downward throughout 2012, a sentiment which should drive refinancing throughout the year.

“The key point for the refinance market has always been rates,” he said.

A rise in refinancing may be indicative of a trend of homeowners choosing to stay put rather than upgrade. A recent RP Data report has suggested a massive increase

in the time homes are staying on market for many capital city council areas, and analyst Cameron Kusher said vendors now have to readjust expectations with an increase of unsold stock.

“We are now seeing an increase in the amount of stock available for sale where it has risen to record highs over the year. Vendor discounting levels have increased and the negotiation process has taken longer. The average time on market has risen,” Kusher said.

Mortgage Choice spokesperson Belinda Williamson said homeowners will have to weigh carefully whether upgrading is

feasible in a stagnant housing.

“Homeowners considering relocating also need to examine the costs associated with selling and buying, such as fees for real estate agents, advertising, legal advice, stamp duty, removalists, etc. Those with a loan may need to investigate if there are early repayment or discharge fees, if the loan can be transferred to the new property and if lenders’ mortgage insurance is payable on the new property,” she said.

“For some homeowners the funds needed to purchase and relocate could be better spent upgrading the existing property.”

www.brokernews.com.au

13

Aussies sunny about financial future Fears over the economy haven’t dampened Australians’ optimism towards their own finances.

Don Koch Three-quarters of Australian households have a positive outlook for their own financial future this year, according to ING Direct’s Financial Wellbeing Index.

Australians believe cautious spending and an increased saving rate will improve their finances over 2012, while only 22% expect to be worse off

financially by the end of the year.

The optimism is underpinned by the fact that in spite of a turbulent year for the economy, 65% of households either improved their financial situation in 2011 or were able to hold their finances steady.

Respondents tipped increased savings and reduced spending as key to shoring up their financial position last year, and showed a continued appetite towards deleveraging debt.

“Australians recognise that while they cannot control the direction of the economy they can take positive action to strengthen

Financial wellbeing by state NSW

Vic

Qld

SA

Proportion who say their 21% finances deteriorated in 2011

36%

39%

44%

35%

32%

Proportion who expect to be worse off in 2012

25%

22%

27%

21%

22%

18%

WA National

their own finances and that is exactly what many households did throughout 2011. By building a buffer of savings, focusing on essential purchases and tightening household budgets, many Australians have shored up their financial position. It’s not a case of bunkering down; it’s just sensible money management,” ING Direct CEO Don Koch said.

The news wasn’t good for all households, however. One in three households said their finances had taken a hit in 2011, and more than half of low income earners said their financial position deteriorated last year. South Australians fared particularly poorly, with 44% saying they were worse off after 2011. Thirty-five per cent of households also hold fears for the economy in 2012, saying they expect the Australian economy to decline.

Rising living expenses and fears over tax increases proved the most worrying for households. Thirty-

Key steps households took to maintain financial wellbeing in 2011 • 38% – Built a bigger pool of savings • 38% – Reduced spending on unnecessary purchases • 37% – Secured a better paying job • 36% – Improved household budgeting • 29% – Lowered home loan interest rates • 24% – Paid down most of credit card debt • 9% – Closed out their credit card altogether

one per cent tipped rising fixed costs and taxes as the strongest financial headwind they expect to face in 2012, while 17% said they were concerned about their job security.

New low–doc to allow more cash out Mortgage manager Better Mortgage Management has taken the wraps of a new low-doc product that it says will put an end to broker ‘frustration’ over selfemployed low-doc to low-doc refinances.

The new ‘Flexi Access’–branded loan will offer self-employed borrowers cash out up to 80% LVR, which can then be used for any worthwhile business purpose or the payout of ATO debt.

BMM’s managing director Murray Cowan told Australian

BrokerNews the launch came in response to mortgage broker frustration with major bank low-doc offerings.

“It’s been a difficult last 12 months for many small businesses and the last thing they need is to have difficulty refinancing their mortgage, but the reality is the major banks have moved away from this market, particularly at LVRs greater than 60%,” Cowan said.

Better Mortgage Management funds low-docs via lenders Adelaide Bank, Resimac,

Advantedge and Pepper. Cowan said the Flexi Access combines a mix of funding from these lenders, in order to package the most flexible cash out options of each funder and sell it to the broker market.

Cowan said the product is a new offering to the market, and not a resurrection of something available to brokers prior to the onset of the financial crisis. “Cash out on low-doc has always been available, but we are trying to offer it at higher LVRs at a better

rate and with more options in regards to what income verification the client supplies,” Cowan explained.

Despite ASIC being increasingly vigilant of low-doc brokers, Cowan said that he is not concerned about the risks of the products.

“Low docs are not risky under NCCP, provided brokers conduct a thorough assessment of the client’s needs and financial position, keep records and ask questions relating to any financial information provided by the client,” he said.

14 brokernews.com.au

News THE COALFACE Vivian Wang, V Money, Victoria

• Potential 30% year-onyear growth • Property marketing referrals pay off • Key referrer relationships prioritised

Vivian Wang

Key referral relationships are paying off in spades for Vmoney director Vivian Wang, as she eyes an unexpected growth in loan volumes of 30% this financial year.

Ranked 20 in MPA’s 2011 Top 100 list, Wang netted close to $67m worth of loans last financial year, and had set herself an early target of 20% growth year-on-year.

However, a strong relationship with a key referrer – a property marketing group – and the timely maturation of a number of off-the-plan projects have seen settlements spike.

“The previous year, we didn’t have a lot from them – we just tried very hard to get clients using our own resources,” Wang explains.

“But what happens with off-theplan is that settlements sometimes take between two and three years – some projects were delayed – so it’s all come through this financial year,” she said.

Wang said Vmoney had been focused on maintaining this strong key referral relationship.

“Over the past year, we’ve been trying to improve the relationship to try and find out what they need, help them through their sales, and also provide better customer service,” she said.

Wang said the business will continue to prioritise these referral relationships – including one with an accountancy firm that shares an office with Vmoney.

“I’m trying to spend as much time with referrers as possible – if you don’t see them very often they will forget you,” she said.

For example, Wang said she will further integrate her services with the property marketing referrer.

“I’m thinking of getting involved with their sales meetings, and trying to attend them as much as possible. We’ll also have a question session for their sales consultants, and give them updates on the lending industry. If they need me to see their clients, I’ll be there.”

Wang named customer service and time with referrers as key to her business in 2012.

“I spend most of my time seeing clients,” Wang said.

“A lot of brokers are trying to do everything themselves, but it’s very time consuming doing the paperwork. They don’t fully utilise their time. They need to start hiring staff to do the paperwork – that’s quite important if they want to grow their business,” she said.

David Thomas, Vision Finance, Canberra • 20% year-on-year growth target • Trainee to add broker to headcount • Investors primed as interest rate drops

ACT-based Trilogy Funding has not lost a staff member since 2008, and plans to continue its strategy of training brokers from the ground up to achieve 20% year-on-year growth.

Following the tenets of a five-year business plan, Trilogy Funding’s David Thomas said he will add one additional broker to its frontline broking staff this year, bringing its broker headcount to five.

The key to its strategy for growth over five years is “cultivating” new brokers in-house.

“What we do is bring in a trainee broker ever year – we train all our own brokers in-house,” Thomas said.

“We bring someone in and they start as an assistant, then go through to write their own loans.

As their confidence grows, we move them into becoming a broker,” he said.

Thomas said this is not a fast process; it can take 18 months to two years to bring a new broker through.

So what’s the key to a zero staff turnover rate? “You find the right person, train them up properly – you nurture and educate them, and create a good relationship with them.”

Thomas said the business looks for “intelligence over experience”, and the last two candidates were in their late 20s.

“They have purchased houses, understand finance, are a little bit worldly, but don’t have it all yet,” he said. “They tend to have been out in the real world, but are not set in their ways.”

Every year, Trilogy aims to start another fully trained broker, to assist the business in meeting 20% year-on-year volume growth, making the most of the new staff resources.

Trilogy Funding’s core market is property investors, and it generates most business via referral.

“About 60% of all business we write is repeat business or referred to us by existing clients. About 20% comes from industry referrals, while a further 20% is from outbound marketing.”

Thomas said Trilogy sticks close to its core clientele in property investment. “We market ourselves as independent experts in property investment,” he said.

And for Trilogy, the market looks good for this year.

“We are viewing it positively based on interest rates and rental returns. It’s the first time in a couple of years that cash flow neutral or positive properties are going to be readily available due to a decrease in interest rates – that’s always when investors return to the market.”

Emma Lockwood, Lockwood Finance, Elwood, Victoria Not a month seems to go by without an industry pundit telling mortgage brokers they have to utilise social media – but no one ever seems to explain how.

Emma Lockwood of Lockwood Finance has managed to harness Twitter and Facebook to fantastic results, and said getting started isn’t as difficult as brokers think.

Rather than using social media primarily as a client lead generation tool, Lockwood utilises it to build referral relationships. Lockwood said her CRM is adequate for generating leads and maintaining contact with existing clients, and while she does use Facebook to keep herself top of mind with friends and family members who may need finance in the future, she primarily uses Facebook to maintain her profile with established referral partners.

“My followers and fans on Facebook are mainly my referral

partners. It’s a good way to keep myself top of mind with them rather than harassing them for leads. They can see I’m in the office, they can see I’m ahead of changes in the industry,” she said.

Twitter, Lockwood said, is more focused on making new contacts and putting herself in front of businesses and individuals who could become future referrers.

“I try to get agents and buyers’ advisers who aren’t referral partners, and build a profile with • Systematic approach yields social media success • Facebook to network with established referral partners • Twitter to build new referral partnerships them and use that as a way to set up a meeting with them in the future to build a referral relationship. They’ve already seen my profile, they’ve already seen my personality. It’s building my profile within the industry,” Lockwood said.

Lockwood encouraged brokers moving into social media to have a strategy. Scattershot updates won’t gain traction, whereas disciplined posting can help develop a following.

“It needs to be systematically approached rather than ad hoc.

You need to say, ‘I’m going to tweet three times a week and retweet five times’. An ad hoc approach doesn’t work. When I start retweeting or having a conversation on Twitter, I find the amount of followers I have increases exponentially in that week,” Lockwood said.

A systematic approach will also guard against inundating followers with updates. Lockwood warned brokers to be wary of sending “useless” tweets or overwhelming followers with a barrage of updates. She advised brokers only to post updates on social media when there’s strong content to back them up; however, she said regular activity is a necessity.

The concept of social media as a networking tool may still seem foreign to many mortgage brokers, but Lockwood said there is no cause to be intimidated.

“I think people don’t understand how easy it is, and once you get started it’s super easy to maintain going forward.”

brokernews.com.au

15

Liberty claims network on goal Liberty Network Services has said it is on target in its recruitment of brokers, despite a challenging year in 2011.

The company recently announced it had teamed with Intellitrain to provide training to its advisers, and CEO Brendan O’Donnell has said the diversity of the business’ offering means its branded brokers will need a broad knowledge beyond mortgage products.

“It goes beyond mortgages, so from a training perspective we need broader training than in the general marketplace because our advisers will be offering not just one product, but a range of products. It’s about making sure that we meet the needs of the customer and provide them with appropriate advice,” he said.

O’Donnell has been a

firm advocate of branding in the industry, saying it provides scale and marketing power to brokers. Liberty Network Services had its soft launch late last year, and O’Donnell said the business is thus far meeting its recruitment goals.

“We’ve had some really good response from across the board, both established brokers and those new to the industry. We’re still working through all those and bringing advisers on board, but we remain on goal at this stage in terms of the targets we had set for ourselves,” O’Donnell said.

Positioning the business as a proposition to brokers looking to align with a brand will be only one of the challenges Liberty faces in 2012, O’Donnell said. Another challenge will be repositioning

Brendan O’Donnell

Liberty as a lender in the minds of brokers.

“Brokers have largely seen us as a lender of last resort, whereas we’re actually a lender of first resort. We’ve expanded our prime range, our commercial range and our motor range. We have a lot more on offer than we did a year ago,” he said.

O’Donnell conceded that 2012 was set to be a challenging year, but said he was “quietly optimistic” about the future for Liberty Network Services.

“Are we on track? Yes we are. Is it a difficult market?

Absolutely. But I think brokers are looking for distribution models that fit more with what they’re looking to do.”

Borrowers flock to fixed rate deals Despite back-to-back cuts by the Reserve Bank, borrowers are still keen on the security of a fixed rate mortgage, early 2012 mortgage data indicates.

Mortgage Choice said that 24% of mortgages written by the business in December were fixed – up from 21% in November. In volumes the business labelled ‘unrelenting’, the proportion of fixed rate loans sold through the listed broking group have increased for the past seven months in a row, pushing them up 13 percentage points since May. “Consecutive cash rate cuts in November and December 2011 have not swayed Australian borrowers’ desire for fixed rate loans,” a Mortgage Choice spokesperson said.

“It is possible borrowers’ need for certainty around their home

loan repayments, coupled with the affordability of fixed rate loans are the driving forces behind demand for this loan type.”

Mortgage Choice credited the increased uptake of fixed mortgages in December to the fact that these products still have attractive rates.

“During December fixed rates were significantly lower than variable rates, in some cases the difference was one percentage point or more,” the spokesperson said.

“Our loan data shows fixed rates are now more in demand than they have been in over three-and-ahalf years at the expense of variable rates, which have lost popularity among new borrowers.”

In tandem with the fixed rate uptick, demands for

other loan types saw a decrease.

“Customer demand for variable rate loans fell from 79% –76%, well down on the 12-month average of 85%,” the spokesperson said. “The most popular variable rate home loan with new borrowers, ongoing discount rate loans, slipped to 41% from 44%.”

Basic variable loan demand rose marginally to 15% of all approvals for Mortgage Choice in December – up from 14% in November – while standard variable loan demand fell slightly to 16% from 17%. Interest in line of credit loans dropped to 3% from 4% and the uptake of introductory rate loans was steady at 1% of all loans processed.

16 brokernews.com.au

News Housing still searching for its ‘mojo’ in 2012 The housing sector may take some time to “get its mojo back”, with 2012 likely to be another weak year.

That’s according to the latest Business Outlook report from Deloitte Access Economics. The company has forecast another difficult year for housing. While interest rate cuts and population growth could spur demand, Deloitte said recovery is some way off.

“The pace of housing construction is going nowhere in a hurry. Indeed, that trend has been evident in leading indicators such as approvals and loans for a while now,” the report said.

Deloitte pointed to lingering effects from 2010’s rate increases, along with fears of falling house prices and development roadblocks, saying activity in the housing market had been “sidelined” by the factors.

There is cause for optimism, however. The company said there had been recent stirrings in demand for housing credit, which had risen to a four-year

high. Successive Reserve Bank rate cuts would also renew appetite for housing, Deloitte predicted. Housing construction could also begin to reawaken in the months ahead.

“Although that gap between the demand for housing and its supply doesn’t imply a surge in construction tomorrow, it does add important upward pressure. So although the next few months will see construction remain under pressure, the long awaited upturn may finally become evident by late 2012,” the report said.

New entrants into the Australian mortgage market could also prove a boon to lenders, though major banks may face the year with “trepidation”, Deloitte said.

“It has finally sunk in that weak credit growth may be the ‘new normal’. With the Eurozone crisis also haunting the horizon and rumours of Japanese competition in mortgage markets, 2012 may be a tough year for the finance sector,” the report forecast.

House prices are also set to face added pressure in the year ahead.

Though median prices saw a modest lift at the end of 2011, Deloitte predicted prices will still see drops in 2012.

“Although we don’t see housing prices as a bubble, we did take a vow a couple of years ago to avoid saying that there was no problem with housing prices in this nation.

On the contrary, Australian housing prices are too high, and that’s part of the reason why they

are already falling,” Deloitte said.

And though consumer spending is set to remain subdued, Deloitte said RBA rate cuts could “loosen the noose of family finances”.

“Although employment and wage growth have slowed, both remain much healthier than their international equivalents. Besides, the Reserve Bank has cut interest rates and the big banks have followed suit,” the report said.

Forecast change in housing starts

10.90% 4.80% -5.90%

2.40% -5.20%

-12.10% 2010– 2011

2011– 2012

2012– 2013

Source: Deloitte Access Economics

2013– 2014

2014– 2015

2015– 2016

brokernews.com.au

17

Sydney dethroned as second costliest city Sydney has been unseated as the second costliest city in the world in a new survey of housing affordability.

The 2012 Demographia International Housing Affordability Survey has seen Sydney overtaken by Vancouver as the second least affordable housing market globally, with Hong Kong maintaining its top spot.

The survey ranks markets based upon the multiple of the median house price divided by gross annual median household income. Median house prices in Sydney are 9.2 times median household income, while prices in Vancouver are 10.6 times median income.

Hong Kong outpaced other world markets with median prices 12.6 times household income, the highest in the survey’s history.

Though Sydney no longer holds the second spot in the survey, the city is still termed “severely unaffordable” by Demographia’s measures. Australia also performed poorly nationwide, ranking as the second least affordable national housing

market. While Hong Kong outstripped Australia in terms of median house prices compared to household incomes, Demographia claimed Australia had the “most pervasive housing affordability problem” given its abundant land supply. There were no affordable markets throughout Australia in 2011, and Demographia termed the majority of markets severely unaffordable.

The report put much of

Australia’s affordability woes down to land usage regulations.

Demographia pointed out that Sydney, along with other capital cities in the “severely unaffordable” category, had “restrictive land use regulation” in place.

Ironically, the survey comes as new figures from the Real Estate Institute of Victoria show housing affordability in the state improved over the December quarter.

Median house prices remained

relatively stable for the quarter, and affordability received a boost from successive interest rate cuts.

“REIV data confirmed that, overall, the median house price has not changed over the last six months; the key factors driving the current market are a combination of lower consumer confidence, a slowing state economy and an increase in supply,” REIV chief executive Enzo Raimondo said.

Housing affordability by country Country

Affordable markets

Moderately Seriously unaffordable unaffordable

Severely House prices compared unaffordable to median income

Australia

0

0

7

25

5.6 times median income

Canada

9

19

1

6

3.5 times median income

China (Hong Kong)

0

0

0

1

12.6 times median income

Ireland

3

2

0

0

3.3 times median income

New Zealand

0

0

3

5

5.2 times median income

United Kingdom

0

1

12

20

5.1 times median income

117

64

16

14

3.0 times median income

United States Source: Demographia

18

brokernews.com.au

Analysis

Much ado about nothing The big banks have warned they may not pass on future Reserve Bank cuts, which draws into question the power the RBA wields, writes Adam Smith

T

he second Friday of January bore witness to a landmark moment in which nothing actually happened. On 16 January, ANZ announced to borrowers and media that it would not move its mortgage rates for the month.

The announcement would come as little surprise as there is no RBA Board meeting in January, and thus little impetus to move on rates. But the occasion was nonetheless noteworthy, marking the first time the bank made a rate announcement independent of the RBA, and setting a course for a future in which cash rate moves may mean very little in the real world.

Following the Reserve Bank’s December rate cut, the Big Four stubbornly sat on their hands for days, remaining tight-lipped amid a firestorm of borrower outrage and political grandstanding. The banks were urged, threatened and cajoled to pass on the full cut to borrowers, but maintained a resounding silence until ANZ led the way with a 25bps reduction.

Though the banks may have finally blinked, they did not retreat. Each rate cut announcement came with a caveat that borrowers may not be so lucky next time. ANZ Australia chief executive Philip Chronican called the bank’s decision to follow December’s RBA move “one of the most difficult we have made in recent times”, and argued that bank funding costs were becoming increasingly detached from the official cash rate. As such, Chronican said ANZ would now make rate announcements on the second Friday of each month, more than a week after the Reserve Bank announcement.

A toothless tiger

Though the other banks may not have set a specific time for their rate announcements, they did echo Chronican’s sentiments in arguing that the RBA’s moves had little to do with their cost of funding. This contention begs the question of whether the Reserve Bank’s interest rate trigger is still an effective tool for influencing the economy. If the major banks are steadfast in their decision to move independent of the RBA, having flagged as much in their December rate announcements, the central bank may have been rendered toothless in an environment where banks are more closely tied to what happens in Europe than what happens on Martin Place.

The banks, of course, point to higher costs and low

availability of wholesale offshore funding to justify their divorce from the Reserve. This hasn’t stopped them from steadily narrowing the gap between the official cash rate and bank deposit rates, but there’s little doubt that the worsening Eurozone crisis has had a material impact on both the cost and availability of offshore funding for the Big Four. Westpac CEO Gail Kelly last year warned that many funding markets used by Australian banks had “effectively closed”. Even when the markets reopen, Kelly predicted the cost of funding would be higher than at any time since the GFC. Out-of-cycle hikes certainly haven’t won the banks any popularity contests, and any future decision to stay put on rates following an RBA cut will almost certainly be met with a flood of criticism, but in their December rate announcements, the Big Four seemed to be preparing the public for a future in which they will turn a deaf ear to such outrage. They may also have been signalling to the RBA that it can no longer expect Australian financial institutions to fall into line when it asks them to.

Cuts may not mean much

Reserve Bank Governor Glenn Stevens tried to justify the disconnect between the cash rate and mortgage rates, saying that mortgage rates had historically not tracked the cash rate, and called the trend of banks moving in line with the RBA “an unusual period of history”. The question could be asked whether Stevens was trying to justify any future ineffectiveness of official monetary policy in influencing bank behaviour.

If future RBA cuts don’t budge the banks, it would be doubtful that they would do much for borrowers either.

Last year’s cuts don’t seem to have gained too much traction with consumers as it stands. The most recent Westpac-Melbourne Institute Index of Consumer Sentiment found that Australians were actually less confident in the economy than they were before the successive cash rate decreases in November and December. Westpac chief economist Bill Evans argued that the rate cuts may have staved off an even more significant decline in consumer sentiment, but that should be cold comfort to a Reserve Bank Board trying to kick-start the economy with its monetary decisions.

With Europe now seeming destined to head into serious recession and jobs growth stagnating here at home, analysts are tipping further rate cuts in the year ahead.

TD Securities has forecast the cash rate to sit at 3.5% by mid-year, while Westpac has forecast a more modest 50bps in cuts over the year. When the Reserve Bank meets again in February, they may well choose to take the knife to rates yet again. The question is, will anyone be listening?

RBA cuts not catching on with consumers The Westpac-Melbourne Institute Index of Consumer Sentiment increased by 2.4% in January, in what Westpac chief economist Bill Evans labelled “a disappointing result” following 50 basis points in cuts.

“The Index is still slightly below the level which it registered before the first rate cut. In effect, at this stage, the rate cuts have been unable to raise consumer confidence,” Evans said.

However, Evans said that this did not mean the cuts themselves had had no effect on consumers. “Given the ongoing financial turmoil in Europe, a flat housing market and further weakness in the labour market, sentiment is likely to have been lower without the rate cuts,” he said.

The results meant for the sixth time in the last seven months, pessimists outnumbered optimists.

Consumers were also revealed to be concerned about their own financial situation, with a 2.5% drop in the subindex on ‘family finances compared to a year ago’ and a small 0.7% gain in income expectations.

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VIEWPOINT

The online world is encroaching on the broking business – but will it lead to third party extinction? We asked our industry pundits what brokers should do to survive

Kim Cannon, FirstMac

Finding an online future “What’s the use of a broker?”

That’s the question being asked

by Kim Cannon of FirstMac – and that he says brokers should be asking of themselves – as the mortgage market increasingly shifts online.

Cannon said as consumers increasingly go online, the broking proposition is in danger.

“A lot of the aggregator groups are setting up white label programs at the moment. I believe these programs will become the online vehicles of those aggregator groups further down the track,” Cannon explains.

“Now you have to question if they are taking online leads and online applications via those vehicles, what’s the use of a broker? Do they [aggregators]

19

John Kolenda, 1300 Home Loan need a broker to sit down with a customer? Or can it be done with a much cheaper person?” he says.

According to Cannon, brokers need to wrap their heads around the online space. “Start learning the online business in a hurry.

Otherwise you won’t be there in the future.”

Not all in the industry are as convinced that brokers face imminent extinction. 1st Street Home Loans’ Mardee Thomas, for one, is convinced brokers will still be consulted – particularly when advice is needed on more complex lending. “White labelling has been around for quite some time – it is not a new sensation,” Thomas says.

“The younger generation are probably going to be the next ones to do a lot of their lending online, but again, it’s going to be very plain vanilla lending in these

scenarios. All the complex deals that need a bit more of a helping hand and assistance are not going to be done online,” she says.

1300 Home Loan’s John Kolenda is likewise an optimist.

“The cheapest rate online has been around for a long time. A number of banks, aggregators and brokers have been chasing that business for a little while, but it’s a small segment of the market, and it’s certainly not going to detract from the broader broker offering.”

Complexity will continue to drive consumers to brokers, Kolenda argues, though these brokers may struggle to carve out a presence for themselves in the virtual world.

“It’s one thing to have a website, but it’s another thing to drive traffic. So, that’s where it could be quite a large investment for a

Mardee Thomas, 1st Street Home Loans broker to get their page ranking to drive traffic,” he says. “You can do it by carving out a niche online, by dominating a word or search, where you actually get featured quite high. But with the amount of competition in that space, a lot of their biggest competitors actually take up a lot of the online investment and marketing.”

Brokers will need to put themselves in the shoes of their clients, Cannon argues.

“Just think of your own self – how much do you spend online shopping at the moment, and put the consumer in your place. That’s what they are doing at the moment they are online shopping.

As we found from our online business, first homebuyers want to talk to a broker and they want to get advice, but second and third homebuyers just want a loan and keep it simple.”

FORUM

‘Grow up’, brokers tell class action clients Brokers may now be subject to responsible lending obligations, but as the Australian BrokerNews forum makes clear, brokers think borrowers should be obliged to do a little more responsible borrowing of their own, and not blame everyone else.

Australian Broker reported that a class action was being mounted that would pit up to 300,000 struggling mortgage clients against the major banks who extended them credit. However, brokers have been incensed by the move – and have told these clients to ‘grow up’.

Jaime (16 Jan 2012 01:59 PM) ruthlessly denounced these borrowers. “When will borrowers accept responsibility for their own actions? They enter into a loan facility bright-eyed and bushy-tailed, full of enthusiasm to achieve the ‘Great Australian Dream’, often without having done any of the hard yards,” Jaime wrote.

“Wake up to yourself people; if you borrow money, the key word

is ‘borrow’ and you are required to pay it back under the terms and conditions that were documented before you signed up and took delivery of the dream.”

JohnnyWakko (17 Jan 2012 09:28 AM) thought this was a classic example of the Australian ‘Nanny State’ in action. “Always someone else to blame. 300,000 people need to grow up,” he said.

Meanwhile, online contributor Donut (17 Jan 2012 07:33 AM) brought the debate back to the liability of brokers. “How many of these so-called 300,000 borrowers had the loan organised by a broker?,” he said. “I can’t imagine, under NCCP, that there would be too many brokers that would allow first homebuyers to overcommit. I know I wouldn’t and I don’t know a broker that would.

MFAA CEO Phil Naylor was of the same opinion, with Australian Broker reporting his argument that the success of any class action was unlikely under responsible lending.

The predicted resurgence of commercial lending in 2012 was greeted by one of our regular readers with a welcome – though caution was urged.

Having been involved in commercial lending for over 30 years, this outlook is a little bit ambitious. Yes, I am seeing an increase in commercial applications, not just because of rates, but also because there is some return of confidence and growth in profits, and some increase in demand for rental properties. If you are going to go into commercial broking and do not have the qualifications, by all means get them, but also seek a mentor from within your aggregator. This type of lending can be complex, time consuming, and at times very rewarding and, unlike home loans, most deals take 2–3 months to settle. Have a go, but be aware of all the complexities and pitfalls.

Country Broker on 19 Jan 2012 01:33 PM

And here are some more reactions to the nascent borrower class action.

Applying for the loan indicates some form of agreement that you can afford the repayments. This won’t fly too well.

Brad Q on 16 Jan 2012 10:19 AM NCCP puts the onus on all other parties to make reasonable enquiries and disclosures. When does the borrower have to take responsibility to declare they have taken reasonable steps to understand their commitment? However, this also begs the question of the wider community education involved.

Without oversimplifying the root cause, I think there should be some significant changes in our secondary education system. To begin, a mandatory inclusion of financial principals of budgeting, borrowing and managing of financial affairs for every student, not just those taking economics. Just imagine a better, financially educated consumer making smarter, more balanced financial decisions.

Casey on 16 Jan 2012 04:52 PM  To vote in our latest online poll or get involved in our forum, visit our home page at brokernews.com.au

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Comment OPINION

Broking in a time of abundance Scarcity of credit gave birth to the broking industry, and a focus on scarcity can ensure its survival, writes Futurology’s Kym Dalton Abundance! What abundance?

Things are crook out there.

But wait.

Despite what you read about lenders’ issues with the availability and cost of funding, access to finance for consumers is abundant.

Creditworthy customers can access credit on reasonable terms and it looks like they’ll be able to for the foreseeable future.

Sure, FAM (Fog-A-Mirror) loans aren’t as abundant as they once were – but they weren’t responsible and should have been scarce anyhow.

I can remember times when access to credit wasn’t abundant; indeed, I can remember times when it was downright scarce.

For instance, take the time prior to the 1983 deregulation of banking and during that ‘had to have’ recession in 1990/91. Some household name lenders flew very close to the wind and some had to cease or ration lending, as funding and capital was very scarce.

Yet there was a vibrant and active broking community at this time, despite this scarcity – indeed one could say that these pioneer brokers owed their existence to scarcity.

In this narrower world pre the web, knowledge wasn’t abundant and brokers assisted with their knowledge of where to find appropriate funding.

There was an active ‘grey market’ of private lending and some financial institutions – particularly regional banks and the ‘NBFIs’ – lacked geographic dispersion. They

Kym Dalton

scarcely had customers outside their narrowly defined regions and brokers assisted these lenders to spread their footprint and to punch above their weight.

Rolling forwards into the mid1990s when brokers themselves moved into the mainstream, there were spurts of innovation, with new lenders, wide price differentials and new product features. In these heady times, awareness of the options available and where to find the ‘best’ deal was indeed scarce.

Since then there’s been massive convergence, from product features to interest rates – frankly, there’s not much new in the zoo in the mortgage area – when was the last ‘big’ product innovation?

(Note to lenders: if you’ve got the time and a massive R&D budget, call me; I’ve got a few ideas.)

So we’ve got homogeneity and an abundance of funds to lend. Not itself particularly good for brokers, I would venture.

The ‘dismal science’ of economics is concerned with the allocation of resources in the presence of scarcity.

In the absence of scarcity, ie, in a time of abundance, one finds potential resource misallocation and its handmaiden, reductions in price – which in the broker space could translate to reductions in commissions.

I believe that broking thrives on scarcity. The good news is that abundance often generates its own tracts of scarcity.

In the future, brokers need to align their business to focus on what’s scarce when homogenous products are abundant.

To truly thrive, brokers should possess something that others lack and customers want, rather than focusing on providing credit assistance to obtain ‘mere debt’.

Time, understanding, energy, cash flow planning, monitoring, control and discipline are all things that may be scarce in abundant times.

An old adage is that ‘the fate of the middleman is to be the agent of their own oblivion’. In the future, brokers can avoid such a fate and indeed thrive by focusing on what’s scarce.

Remember: The Future isn’t what it used to be.

Kym Dalton Kym.d@futurology.com.au

Commercial recovery underway, as demand dam breaks A ‘soft’ run for commercial finance in 2011 has created latent demand that will provide new impetus for the sector this year, writes Jonathan Street After an extremely busy runthrough to May 2011, commercial property lending volumes fell away through the middle of last year and remained suppressed, particularly as events in Europe began to destabilise global markets from early August onwards.

Similarly, mid-year deal quality also diminished. This was characterised by an influx of requests for finance from borrowers in stressed positions seeking to refinance an existing loan, either because their bank had asked them to move on or their lender had closed its doors.

The middle of 2011 also presented other challenges for the market in general. Continued pressure on commercial property valuations had been adding to the task of borrowers, and consequently many lending opportunities were failing to meet standard criteria.

Purchasers in the meantime were largely sitting on the sidelines, unwilling to commit to transactions amid concerns over rising interest rates in the first half, persisting soft conditions in the retail and services sectors and intensifying international volatility.

However, heading into 2012 the situation has been improving noticeably.

In the lead up to Christmas, Think Tank observed a significant increase in the number of finance applications for property purchases, suggesting SMEs started to gain confidence on the back of easier monetary policy and better-than expected employment, retail and consumer sentiment data.

We are inclined to think the RBA rate cuts in November and December will provide more impetus to this trend as the costs of borrowing reduce, thus improving net rates of return for commercial property investors, and reducing the cost of ownership for owneroccupiers providing for a more compelling option over renting.

With the outlook for monetary policy now very much on the neutral to easing side, conditions

Jonathan Street

Conditions are presenting more favourably for the broader economy and most specifically for commercial property are presenting more favourably for the broader economy and most specifically for commercial property.

We are expecting this positive commercial property trend to continue through 2012, with the quiet period of mid-year 2011 merely having generated latent demand that is beginning to translate into more property changing hands and increased demand for property finance.

This had been Think Tank’s experience through the GFC when a protracted period of suppressed activity sprang into life at a later date.

Whilst we remain concerned over the very real potential for systemic global market disruption to feed through from Europe this year, which would adversely impact the Australian economy bringing the current pick-up to a halt, we don’t believe such a tipping point will be reached. Our indicators presently point to a positive and potentially strong year ahead for the sector.

Jonathan Street is the executive director of commercial lender Think Tank Property Finance

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Review What a difference a year makes … or not. Australian Broker reflects on the punditry, breaking news and influential trends that made headlines in the magazine 12 months ago Australian Broker Issue 8.2

Headline: House prices frozen in 2011 (page 6) What we reported:

What’s happened since:

NAB’s Residential Property Index last year painted a pretty depressing picture for house prices. Expectations were for median prices to flatline throughout the year. As house price growth stalled out towards the end of 2010, analysts predicted 2011 would see sideways movement at best and modest declines at worst. NAB chief economist Alan Oster said the bank expected the market to remain “broadly flat”, but denied that Australia was on the verge of a housing bust. Oster did, however, forecast a further two RBA rate rises for the year.

“Frozen” was probably the fairest description for house prices in 2011, though many capital cities tracked downwards for the year.

The housing market did manage to end the year on a high note.

While Oster’s two predicted rate rises failed to come to fruition, two successive rate cuts gave a boost to housing at the end of 2011.

The RP Data–Rismark Home Value Index for November showed the first rise in capital city house prices for the entire year, fostering hope that Reserve Bank action may have given housing the shot in the arm it needed.

Headline: Embrace fee-for-service, industry urges (page 12) What we reported:

What’s happened since:

The fee-for-service debate reared its head again last year when Australian Finance Group claimed the model would prove ‘disastrous’ for the industry. Advantedge head Steve Weston came out in support of the model, saying that the industry would increasingly move towards charging a fee for advice. First, though, brokers would have to “really believe” they were providing value over and above that of lenders, Weston said. An Australian BrokerNews poll showed widespread broker support for the model, with 92% of respondents indicating they would transition to charging a fee.

The debate over fee-for-service seems unlikely to be quelled any time soon. A survey conducted last year by Mortgage Choice did serve to cast some light on consumer perceptions of the model. Previously an advocate of a ‘no-go’ fee, Mortgage Choice chief executive Michael Russell said the company would not be introducing such a fee following poll results which showed 61% of consumers would not be willing to pay any kind of fee to a broker. Russell contended, though, that resistance to fees would fade as consumers became better educated and mortgage broking became increasingly professional under the licensing regime.

Headline: ASIC pushes through last licences (page 19) What we reported:

What’s happened since:

Early last year, ASIC said it planned to finish processing all outstanding ACL applications by the end of March, well ahead of the 30 June deadline. Following the completion of licensing, the regulator would take up its role as cop on the beat for the credit industry. ASIC senior executive leader for real economy, Kathrine Morgan-Wicks, told Australian Broker at the time that surveillance activities would be ramped up to identify and halt unlicensed activity. Morgan-Wicks said ASIC had vowed to ensure everyone operating in the credit realm was “inside the tent”.

ASIC has definitely begun to ramp up its presence in the marketplace. Late last year the regulator released a report on low-doc lending, chastising some brokers for lax methods of income verification. ASIC vowed at the time that lenders would next be under scrutiny. The watchdog has also engaged in some public sabre rattling, banning a Melbourne broker for providing misleading statements on an ACL application and slapping Commonwealth Bank on the wrist for failing to include a $350 annual fee in advertising a comparison rate for one of its home loans.

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Insight

The 16 principles of influence 7. Justification: People buy with their hearts and justify with the heads. Even if you are able to capture the hearts of your buyers (through the emotional journey you take them on) if you can’t make the ROI case for working with you, you won’t make the sale.

8. Trust: The principle of trust works closely with the principle of belief. Belief is faith that something will work. Trust is faith in you. Trust is the foundation of the sale. No trust, no sale. (And, with trust, don’t just try to gain it. Deserve it.)

Sales is a process that can be learned – and it could be as easy as these 16 steps.

Peter Heinrich takes you through the sales journey to find out where you can improve

T

he best salespeople consistently employ 16 specific ‘principles of influence’. These are listed somewhat in the order that they flow in the sales process. I will seek to outline them for you here. Then you can ask yourself, “Do I need to be better in this principle?” and if so, you can go away and look into it more deeply.

1. Attention: Top sellers capture the attention of busy prospects. They are memorable in prospecting and in sales conversations. They break through the noise.

They highlight their differentiation. You can’t influence someone if they’re focused on something else. Use a good fact find!

2. Curiosity: Once you have someone’s attention, the easiest thing to do is lose it. Your goal is to pique and hold the prospect’s curiosity. Curiosity is a powerful concept. People know what they have, but they want to know what they are missing. Give them the sense they might be missing something and they’ll naturally want to know more.

3. Desire: Desire is the gap between where someone is and where he wants to be. The more you can stoke someone’s desire to change his reality, the more you’ll be able to influence him. When buyers start to see what’s in it for them, they start to become emotionally involved in wanting whatever it is.

4. Envy: Desire is powerful. Envy is desire with a turbo boost. If your prospect wants something they don’t have, their desires will drive them. If they want something that other people have, their unhappiness will eat away at them until they get it.

5. Emotional journey: People forget what you tell them, but they remember how they feel. Top salespeople, leaders and professionals take prospects on an emotional journey, often through stories that evoke emotional responses. This emotional journey helps prospects to feel the pain of where they are, and feel what the happiness and fulfilment will be like in their better future.

Peter Heinrich

6. Belief: You’ll have maximum ability to influence people when prospects believe that things could be better, should be better, and can actually get better if they buy from you. The more convinced they are that your solution will succeed, the more willing they will be to move forwards.

9. Stepping stones: People are driven to be consistent. So if you can get them to try or buy something from you once, even if it’s small, they’re much more likely to buy again. Break the information into small chunks and don’t rush them.

You can shorten the leap of faith with stepping stones, small bits of information and then ask them if they understand what you have said.

10. Ownership: Until an individual takes ownership over decision, actions and results, your ability to influence him is limited. Your job is to make it the buyer’s agenda to move forwards, not your own.

11. Involvement: When you have a hand in creating something, you’re more likely to be a passionate advocate for its success. Buying is the same thing.

Involve your buyer in the selling process, and they’ll be much more attached to seeing the solution come to life.

12. Desire for inclusion: People don’t want to be left out. They want to feel included. If the best companies are purchasing a certain technology, they want to be in on it. If a new management method is sweeping the nation, people don’t want to feel left out.

Mortgage clients are no different. The more you can help buyers feel included, the more they’ll want to move forwards.

13. Scarcity: People value rarity and don’t want to miss out on an opportunity. Good brokers highlight differentiation, and make sure that buyers know when they may miss out on an opportunity.

14. Likeability: People buy from people they like. They interact with people they like. Likeability creates and enhances opportunity for conversation at all stages.

And, as we know, conversations are at the heart of sales success.

15. Indifference: Indifference is emotional detachment to the outcome of making the sale. Indifference is often being understood in light of its opposite: neediness. The more you seem like you need the sale, the less likely a buyer will view you as a peer, and the more difficult it will be to sell.

16. Commitment: Good brokers are great at getting buyers to agree to next steps. Written and public commitments are stronger than verbal and private commitments. The best sellers ask for commitment at the right time, get signatures, and get buyers to communicate commitments publicly.

Peter Heinrich is the managing director of industry education provider National Finance Institute.

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Column

2012 and beyond – a list of lists What’s in store for the economy this year? AMP Capital’s Shane Oliver compares the opportunities and risks for investors amid European gloom

I

was determined that, after writing endlessly about Europe last year, my first note this year would not be on Europe. I thought it would be useful to provide a summary of key views on the global economy and investment outlook in simple point form, both from a 2012 and a mediumterm perspective. In other words, a list of lists. So here goes:

Shane Oliver

What are the key themes for 2012?

• Fiscal austerity and de-leveraging in Europe and the US • Monetary reflation with quantitative easing in Europe, the US, the UK and Japan, and rate cuts in the emerging world and Australia • The emerging world to again account for most global growth • Global growth of 3%; 1% in advanced countries, 5% in emerging countries and 3% growth in Australia • Falling inflation and price deflation in some areas thanks to plenty of spare capacity • A volatile first few months in markets on continuing European woes, but then improving market conditions and returns as markets start to anticipate the next economic upswing helped by attractive valuations and easy monetary conditions

Why a recession is unlikely in Australia?

• There’s a long way to go to zero for interest rates.

Roughly 85% of mortgages are variable rate and hence households get a huge boost to spending power as rates fall • Low public debt by global standards means scope for fiscal stimulus if necessary • The A$ will fall if need be, providing a buffer • Corporates have low gearing and are cashed up • Households have high savings rates which provide a buffer • The mining investment boom provides resilience • Our trading partners are in reasonable shape

Why will medium-term economic growth in advanced countries be constrained and volatile?

• Private sector de-leveraging in advanced countries has a way to go, which will be a headwind for growth • There are excessive public sector debt levels in Europe, the US and Japan and ongoing fiscal austerity • Extreme monetary policy settings, eg, zero interest rates and quantitative easing, can inspire extreme market volatility when changes occur • The gains from the 1980s and 1990s disinflation are over, and deflation (eg, Japan over the last 20 years) or rising inflation (Asia in the 1970s) would be bad for shares • Social unrest is on the rise and politics is becoming more polarised (eg, the Tea Party in the US and the ‘Occupy movement’) • The policy pendulum is swinging back to the left with less growth-friendly policies (tax the rich, re-regulate markets, trade barriers, etc) after the economic rationalism of Thatcher, Reagan and Hawke/Keating.

• Greater reliance for global growth on emerging countries which are usually more volatile

What should investors consider in the current environment?

• The cycle lives on – history tells us that times of gloom will eventually give way to boom and vice versa • The power of compound interest – regular investing of small amounts can compound to a big amount after 20 years plus • Buy low and sell high – starting point valuations matter, and the lower valuations thrown up by market weakness over recent years provide opportunities for far-sighted investors • Focus on investments providing decent and sustainable cash flows – dividends, distributions, rents – as they are a good guide to future returns, a good buffer in volatile times and provide good income • Invest for the long term but for those with a short-term horizon, such as those close to, or in, retirement, consider investment strategies targeting desired investment outcomes whether in the form of a targeted return or cash flow • Avoid the crowd – just as the crowd got it wrong piling into the ‘Japanese miracle’, the ‘Asian miracle’, the ‘tech boom’ and the credit and US housing booms of mid-last decade, it might also find that the dash for cash of the last few years will ultimately prove to be wrong over the next five years or so This article is an edited version of economist Shane Oliver’s ‘Oliver’s Insights’. Shane Oliver is chief economist and head of investment strategy at AMP Capital.

A focus on investments providing decent and sustainable cash flows – dividends, distributions, rents – are a good guide to future returns.

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Toolkit

Sale away Successfully exiting your business could be crucial to the enjoyment of your retirement from mortgage broking – so how can you maximise your sale?

P

icture this. A beach in the tropics. Cocktail in hand. No phone reception – and no client calls. Nothing to do but sit back in the sun, look forward to the massage you have booked later that afternoon, and think about all that money you’ve just been paid for your business.

Stop. That could be you post-mortgage broking – but only if you manage your exit well.

So how can you make a smooth transition into your next step in life? Two brokers who have recently sold their businesses – Mario Borg of Mortgage Achievers, and Scott Beattie of Cube Central and Cube Home Loans – answer your questions on maximising business sales.

Q: What should you prepare or beware of before selling?

Mario Borg: Start with the end in mind and the rest will fall in place. Regularly ask yourself this question: “Would I buy this business and what am I prepared to pay for it to achieve a satisfactory ROI?” You’ll very quickly ascertain what issues you need to work on.

Whether you are planning to sell your business or not, I would recommend thinking in this way to ensure your business is not just a trail book (as our industry tends to think), but a true business with the right fundamentals that delivers the right financial result for you.

Scott Beattie: Legal complications; privacy issues, ASIC issues and the like. Connective were helpful, but in some cases, their hands were tied (by legislation) in what they could and couldn’t do. I would suggest a minimum of three months for a transition to occur.

Q: How did you find the right buyer?

MB: I wasn’t looking for a buyer per se. It was through contacts I established within the industry and the right knock on the door came around. A key consideration for me was that the buyer (or buyers in my case) was the right fit for my clients, in relation to approach and culture. You only get one name in this industry, and I wanted to protect my reputation with all stakeholders.

SB: One of our contractors who managed Cube Plan & Protect was paying for me to go to a conference in Cairns – I suggested that he not do that as we would be out by the end of 2012 due to our sale. He asked what we were looking for, he said he was interested, and within two weeks, we agreed on the T&Cs and they are the new owners!

We are very positive and I am actively involved with the new owners in the transition. I think that we (as the previous owners), the staff, clients and business partners (ie, lenders, referrers, etc) have been very lucky that our team works well together and have been extremely supportive of the entire process the whole way through.

As we had started the brand from scratch, we were keen to sell to someone who was likely to keep the brand in place, which was a massive appeal when one of our team said they were interested in the purchase.

Q: What influenced the eventual purchase price?

MB: Key measures included the size of mortgage funds under advice (trail book), annual trail income, EBIT, consistency of growth (ie, settlement volumes, trail book, and profit), established systems and processes (including ongoing management of clients), the quality of CRM in relation to client details and accuracy thereof, as well as perceived trust in the brand.

Keeping a scorecard to monitor our progress was key, from an ongoing management perspective as well as providing any required information for the buyers. As they say, you can’t manage what you don’t know!

SB: What are you selling? A brand, a trail book or both?

Is it reliant on you or not? A ‘me’ business (in my opinion), will not attract the same price as a systemised business.

In the event of a sale, everything should be documented so that there is a procedure – legislation was helpful in reviewing and implementing these.

In our case, we agreed on a price that included an ongoing payment based on turnover. We feel that we had a well-established, multi-award winning brand with an active database that wasn’t solely reliant on mortgages.

For me a key consideration was that the buyer was the right fit for my clients…

I wanted to protect my reputation with all stakeholders

Q: Looking back, would you have handled anything differently?

MB: The sale went very smoothly so no real issues.

The main hold up at one stage was the bank (funder), as they took a very long time to cut through the red tape and approve the finance for the purchaser. Banks unfortunately tend to pigeon hole mortgage broking businesses based on industry averages, so if someone is paying a much higher multiple based on the purchase of a business and not just a trail book, the blinkers blur the bank’s decision on funding. In the end, the numbers told the real story!

SB: Although there was some ‘transitional’ pain (ie, Telstra!), we are extremely pleased and proud to have built a business and brand to a level that our buyers (Steve and Janet) can take to greater heights.

Where are they now?

Scott Beattie: For Scott and his wife Jo, the plan is all about spending more time with their kids over the next few years – time Scott did not have as a broker. “We have another project that we are working on where we show people how to turn their expenses into an asset, but that’s only around 20 hours per week (on a bad week!),” he said.

Mario Borg: After a trip to Hollywood following the business sale, Mario is now in the process of constructing a fourtownhouse development in Brunswick West, Melbourne, to add to his portfolio.

“This will be my first challenge since mortgage broking. I plan to continue to grow my wealth and financial security through residential property, and who knows perhaps I may even package my knowledge and experience up, and educate others about it,” he said.

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Market talk

Positive news for negative equity

H

The number of underwater mortgages is rising in Australia, but the news isn’t as bad as it seems

eadlines in late January trumpeted an alarming rise in negative equity across Australia.

The proportion of homeowners whose homes are now worth less than the purchase price jumped to 5% over the September quarter of 2011.

The RP Data National Equity Report showed negative equity beginning to creep up from its previous 3.7%. As capital city property values fell, more homeowners began to find themselves underwater. With median values tapering further in October, RP Data said it was likely the number of households in negative equity would continue to increase.

Lost amongst the headlines, however, was some considerably good news. By far the largest proportion of Australian homeowners – 42.9%, in fact – now own a home worth at least double what they paid for it. A further 13.7% have seen their home increase in value between 50–100%. While it may come as little consolation to those who find themselves in negative equity now, the vast majority of Australian homeowners have come out far ahead.

A surprisingly good result

Negative headlines and doomsday forecasts tend to receive the most press, and the media is rife with predictions that the Australian housing market is on a bubble and property prices are set to collapse by as much as 40%. Regardless of the veracity of these claims, the encouraging news is that should the worst case scenario come to fruition, most Australian homeowners will still have seen some capital gain.

Not surprisingly, capital city values have fared the best. Across capital cities, there is a lower proportion of negative equity and a higher proportion of homes worth more than double their original purchase price.

Melbourne buyers have seen the best results, with 53.4% more than doubling the value of their home. Also unsurprising was the result in regional Australia.

Resource-rich and agriculturally driven regions proved to have much more robust capital growth than other areas.

The surprising result came in the sheer number of homeowners who find themselves in a very positive position. Despite an uptick in negative equity, only 13% of households are either underwater or have less than 10% equity. By contrast, better than 56% of properties have grown more than 50% in value since their purchase.

Doing it tough

Of course, the news isn’t so cheery for homeowners in every market. Markets like Far North Queensland, the Gold and Sunshine Coasts and several areas throughout WA have been hit and hit hard.

“This is no real surprise considering both [Queensland and WA] have been particularly weak performers over recent times, most notably within coastal markets which had previously been supported by tourism and the ‘sea change’ phenomenon,” RP Data noted.

Surprise or not, a staggering one out of five Far North Queensland homes is now worth less than the purchase price. The Gold and Sunshine Coasts haven’t fared much better, at 14% and 13.5%, respectively. It seems the ‘sea change’ trend has well and truly come to an end, as seven out of the 10 regions with the highest proportion of negative equity are represented by coastal areas.

Recent purchasers may have also found themselves grasping the short end of the stick. Australian Property Monitors figures show median house prices saw a year-on-year drop of 3.5% in 2011, and with LVRs

creeping back up towards pre-GFC levels, homeowners who bought with a minimal deposit are likely to find themselves in negative equity. In such cases, timing, it seems, is everything.

“The findings ... point out the fact that the length of tenure has a large impact on equity accumulation. As would be expected, homes held for a longer timeframe have accumulated more equity than those held for a shorter period of time. Similarly, those homes purchased after 2007 have a higher propensity to show negative equity as many of these homes were purchased after the significant housing market gains recorded between 2000 and 2004 and during 2007,” RP Data said.

A comfortable position to weather the storm

All told, Australia finds itself in a more comfortable position than many doomsayers may have anticipated.

Negative equity is trending upward, but is incredibly removed from the likes of the 23.2% of homes underwater in the United States. There’s even some positive news for homeowners who find themselves in negative equity.

While house prices fell year-on-year, RP Data-Rismark figures showed median values recorded their first rise of the year in November 2011. December’s rate cut may also yield a bump for property values.

Should the bubble proponents be right, and should Australia experience a cataclysmic drop in house prices, there’s little doubt it will have a profound effect on the economy. No amount of equity can erase this worst case scenario. But perhaps the majority of homeowners can take some comfort in the knowledge that the worst case scenario won’t erase their equity.

The findings point out the fact that the length of tenure has a large impact on equity accumulation Greatest proportion of homes with negative equity Area Far North, Qld

Percentage of properties in negative equity 20.2%

Gold Coast, Qld

14.0%

Sunshine Coast, Qld

13.5%

Lower Great Southern, WA

12.3%

Far West NSW

11.8%

Lowest proportion of homes with negative equity Area

Percentage of properties in negative equity

Canberra, ACT

1.2%

Loddon, Vic

1.6%

Melbourne, Vic

1.9%

Barwon, Vic

2.4%

Central Highlands, Vic

2.6%

Source: RP Data

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27

NUMBER CRUNCHING Top five capital city housing market slowdowns Capital city housing markets that have seen the greatest 12-month increase in time to sell Houses 60

59%

50

49%

40

42%

40%

Cambridge, WA

Subiaco, WA

30

38%

20 10 0 Mosman Park, WA Units 80 70 60

Derwent Valley, Tas

74%

71%

Botany Bay, NSW

65%

50

55%

48%

40 30 20 10 0 Cottesloe, WA

Swan, WA

Fremantle, WA

Brighton, Tas

Melton, VIC

Source: RP Data

National equity position How much equity do Australians have in their homes?

4.9%

42.9%

8.2% 15.2% 15%

13.7%

Negative equity 0-10% 10-25% 25-50% 50-100% 100% plus Source: RP Data

House prices end year on a high The RBA’s decision to cut rates on Melbourne Cup day last year resulted in an immediate impact on house prices as capital cities recorded their first price rise of the year.

RP Data-Rismark’s Home Value Index for November showed a 0.1% seasonally adjusted increase in capital cities, the first rise since December 2010. Likewise, regional home values increased 0.3%, in their biggest increase since the same month in 2010.

Rismark director Christopher Joye said the figures augured well for housing activity during the first quarter of 2012, which he predicted would rebound strongly.

“The best proxy for housing demand – the number of new home loans approved for purchasing established properties – has risen robustly every month since its nadir in March.”

Joye added that the November result meant that the housing market had responded much quicker to the RBA’s cash rate cuts than many analysts had expected.

“Over 90% of all Australian home loans are fully variable, and lenders have passed on most of the 0.5 percentage points worth of RBA rate cuts during the final months of the year.”

As Australia’s most interest rate

At a glance…

sensitive sector, Joye said the housing market would be one of the biggest beneficiaries of the RBA’s ‘munificence’ and house prices would rise in 2012.

Yellow Brick Road's Mark Bouris said there is reason to be optimistic in the first few months of this year.

“The rise in Australian capital city house prices is proof that the RBA’s rate cuts have had a real impact on immediate market recovery,” he said. “We believe this is just the tip of the iceberg when it comes to positive house price movement heading into 2012 and it looks like for the first time in a long time, home owners are taking back the market.”

In the month of November, all of Sydney, Melbourne, Perth and Canberra produced flat to positive capital gains, while Adelaide, Brisbane and Darwin continued to soften.

Best performing capital cities Darwin and Canberra with values up 0.3% over the three months to November Weakest performing capital cities Melbourne and Brisbane, with values down 1.7% over three months to November

-3.18% * +3.55% *

*The change in Australian house prices last year Source: ABS

*The per annum growth predicted by Residex for the next five years Source: Residex

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brokernews.com.au

People

Over the break

It was a tough 2011 and a busy 2012 has begun – but what did brokers do in between? Australian Broker finds out if brokers do actually take holidays?

What was the highlight of your Christmas and New Year break?

Stephanie Cook, Mortgage Choice, Lane Cove Sydney

The most I’ve laughed for a long time was watching my husband cutting an enormous crayfish with a bush saw on Christmas morning! We had the traditional Christmas Day, but as most of our family lives around Melbourne (we’ve lived in Sydney for 20 years ) we all gathered at our holiday house at Aireys Inlet on the Great Ocean Road.

The highlight was New Year’s Eve, catching up with old friends for a huge seafood feast at their farm in the hills near Whittlesea where we were able to see the entire Melbourne fireworks reaching from Geelong to the Mornington Peninsula. Driving the 1000km back to Sydney on New Year’s Day in 40°C was certainly not the highlight.

Confession time – did you leave work entirely behind you on the holiday?

I definitely had a break from work. Not that it was necessarily planned that way, but the technology let me down and I could not get access to emails for almost a week (my staff tell me all was under control). Once I did manage to get access to emails it was almost Christmas Day and those next few days are always a very quiet time for my business.

It’s good to dream: Have you locked in your next holiday, and where will it be?

I find the best time to plan your next holiday is while you are already on holiday, so this year’s time off is pretty well organised. We’ll have quite a few weeks

David Friend, Tiffen & Co, Canberra

What was the highlight of your Christmas and New Year break?

Scott Porter, TEAL Financial Services, Pascoe Vale, Queensland

David Friend: Highlight was having the family (all 30 of them) for Christmas day and over that weekend. We had Christmas at home (including a Karaoke machine) followed by a few days lounging around before heading to the coast for New Years.

Scott Porter: I went to Fiji for 10 nights, so was great to relax as I haven’t had a relaxing holiday in a long time.

Kellie Lam: Christmas and New

Kellie Lam, Abacus Home Loans, Sydney

Years was spent with the family and watching the fantastic New Year fireworks.

Andrew Brumby: Christmas day is such a big thing in our house with a young family so it’s good after the actual day to try and slow things up. Our family headed bush for a few days and tried our best to chill out in 40 degree heat.

Serge Scekic: Finally I managed to spend some quality time with my family. We stayed home, did a few motorbike rides with the kids and dined out nearly every second night.

off, but will stick closer to home this year as we had a month overseas in 2011, which is something we tend only to do about every five years. I’m doing some office refurbishment at the end of January, so I’ll be taking advantage of that and will be spending a few days at the tennis in Melbourne and then catching up with friends on Sydney Harbour for Australia Day. There are a few Mortgage Choice franchisees celebrating 15 years in the business this year, so we’ve decided to extend this year’s conference in July at Hamilton Island. Then in September we’ll spend 10 days or so back on the Great Ocean Road – it tends to be lovely and cold down there at that time of year and the fireplace with a good book and some even better red wine suits me just fine. My husband also thinks the surf is better down there at that time of year.

The essential question: What’s your main New Year’s Resolution this year?

My New Year’s resolution unfortunately is one of those really boring traditional ones – get fit and lose a few kilos!

Finally, what’s the main goal you have for your business this year?

To get some stability back and simply build on what we already have. The last 12 months have been rather “all over the place”, as I’ve employed two new staff members, restructured the two franchise operations to run effectively as one, and had a month overseas. Even though it was a very good year in terms of settlement numbers I just felt it was all a bit “frantic”.

Andrew Brumby, Develop and Invest, Melbourne

Confession time – did you leave work entirely behind you on the holiday?

David Friend: I had a break. We have a van at Merry Beach where there is no phone coverage and we spent two weeks down there.

Perfect.

Scott Porter: I did work up until Christmas and between the break to New Years, but I had most files sorted so I could enjoy my holiday.

There were still a few things on my mind, though, I must admit.

But all worked out fine. I had access to my emails so I did check

Serge Scekic, Aussie, Dee Why, Sydney

them every couple of days to make sure.

Kellie Lam: Not really, I was in the office preparing for 2012 and joining 1300 Home Loan – a very exciting opportunity for Abacus Home Loans.

Andrew Brumby: Tried my best not to turn on the computer, but checked it once or twice. I can guarantee I did not do one loan interview between Christmas and New Year period.

Serge Scekic: I actually really managed to have a break this year!

>>

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>> It’s good to dream: Have

you locked in your next holiday, and where will it be?

David Friend: We’re planning a ski holiday in July to Queenstown, New Zealand, with our seven kids and two of their partners.

Scott Porter: I am hoping to have a few weeks break mid-year either to go to Europe or America so we will see how the next six months go.

Kellie Lam: I will be going to Hong Kong in February with my family for a short break.

Andrew Brumby: My family are Bali nuts so it’s over there for I think my 20th time. Always best mid-year when freezing in Melbourne. The family go for a month but unfortunately a bit hard for me to be away that long.

Serge Scekic: Probably in 2013; Rome for one week, one week to travel to Paris via Croatia, Hungary, Czech Republic and Austria and then a week in Paris on the end.

The essential question: What’s your main New Year’s Resolution this year?

David Friend: Become a better fisherman.

Scott Porter: Get fit!

Kellie Lam: As a workaholic, I would like to spend a bit more time with family and friends and join a Pilates class.

Andrew Brumby: Need to get the golf handicap down as it’s not moved much in the last year.

Serge Scekic: To get active, and to be honest it is happening! I have a personal training session twice per week and I managed to squeeze few walks down at the beach per week.

Finally, what’s the main goal you have for your business this year?

David Friend: Keep driving our sales team to outperform last year’s results. We achieved this last year through some internal changes and the results were positive across the whole team.

Scott Porter: To write more residential loans than last year and increase commercial loans by 30%.

Kellie Lam: To strengthen and streamline the operations of the business and expand it under the 1300 Home Loan umbrella.

Andrew Brumby: In one word, “streamline”. This covers compliance, ongoing customer touch after initial deal and day-to-day file management. I’ve just got to continue the process of making all of these an easier process.

Serge Scekic: Well, the main goal is to increase our loan book and to crack 120m in settlements on an office level.

29

MOVERS & SHAKERS ME Bank names head of broker

‘Challenger’ brand ME Bank has promoted an internal candidate to fill a new role as national manager of its broker operations.

Previously manager of funding and liquidity, Stewart Saunders will head up the bank’s broking distribution, where he will be expected to build relationships with brokers and aggregators.

The institution recently announced its intention to distribute through third party channels.

The bank has promised brokers transparent processes and support, as well as direct access to credit staff and business development managers.

In his role as manager of funding and liquidity, Saunders assisted with the execution of $12bn worth of residential mortgage securitisation transactions.

Saunders said he expects brokers will enhance ME Bank’s customer service and value proposition for consumers.

Pepper doubles up on BDMs Non-bank lender Pepper Home Loans has announced the recruitment of Patricia Salas as

a BDM in Queensland, doubling its sales contingent in that state.

Salas has spent 12 years in lending Patricia Salas operations, relationship management, sales and underwriting at institutions including St.George, RAMS, and Gateway Credit Union.

Salas will work alongside existing Pepper Queensland representative Neil Meurant, to boost the non-bank’s footprint in the Northeast of Australia.

Both BDMs will spend February plugging Pepper’s eVoucher deal, which expires on 29 February. The promotion offers brokers who settle a Pepper Self-Employed Advantage home loan a $500 eVoucher they can redeem on the establishment fee of their next Flexi Advantage or Self-Employed Advantage application.

Pepper said in an email to brokers the $500 saved for a client will make them advocates of their business, and add to increased word-of-mouth referrals.

Q&A Clair George recently left a stellar career at Aussie home for a life at independent brokerage 1st Street Home Loans. Australian Broker asked why she made the move How did you get into mortgage broking?

It was really by chance that I became a mortgage broker. I was offered an opportunity in 2003 by friends who had a Wizard Home Loans branch and I really enjoyed working with figures as well as the client interaction.

I worked with Wizard – who later became Aussie – for almost nine years.

We’ve heard you were one of Aussie’s strongest brokers?

I was awarded the ‘National Loan Writer of the Year 2011’, which was based on annual settlements.

What does your business look like at the moment?

My client base has changed significantly over the years. Initially I relied upon head office leads and branch leads and after a few years I started getting a lot more repeat business and referrals. Currently my annual loan volumes are approximately $40m.

When did you join 1st Street and why?

I joined 1st Street in January this year. Being a boutique brokerage, 1st Street enables me to offer a much more tailored and personalised client service. 1st Street director, Jeremy Fisher, has a very good reputation within the industry and he promotes a very open channel of communication within the business. At 1st Street I am able to own and build my loan book and I also have much more freedom and day-to-day flexibility.

Why did you feel Aussie was no longer for you at this stage of your career?

As one of the most prominent consumer home loan brands on the market, Aussie (and previously Wizard) offered me a great start in the industry with strong guidelines, plenty of lead generation and helpful support. After nine years in the industry I felt ready to take control of ‘my business’ and be in a position where I could make more decisions regarding how to manage clients and of course to be able to start building my own loan book.

Will you miss the backing of the big brand that Aussie provides?

When I first started working as a mortgage broker I had no prior experience in finance and knew little about the industry so I felt it was vital to have the backing of a powerful brand with rigid systems and well-documented

operating frameworks. The Aussie name opened many doors for me but I got to a stage where I was confident in my abilities, I had made a name for myself within the industry and I Clair George felt it was more important to take things into my own hands and effectively start my own business, which I am able to do with 1st Street.

What goals do you have in the mortgage broking industry in the future?

Now that I am with 1st Street I am looking forward to building my loan book and client base as an asset for the future. I am taking what I learnt from Wizard and Aussie and combining it with the systems in place at 1st Street to develop a style of operations that I feel will work best for my clients, 1st Street and for me as well. 1st Street currently is Australia’s number 1 individual broker so I am working hard to try to become the number 1 broker at 1st Street!

30

brokernews.com.au

Insider

Got any juicy gossip, or a funny story that you’d like to share with Insider?

Drop us a line at insider@ausbroker.com

banker, and then siphoned off his accounts to make the payments.

They reasoned that someone with so much money wouldn’t miss a “few thousand pounds” here and there. Turns out they were wrong, and are now facing jail terms. A little tip: He probably didn’t get to be a millionaire by failing to miss a few thousand pounds here and there. Insider’s favourite detail of this particular mortgage scam is that the ringleader, an unlicensed mortgage broker who’s evidently been operating for decades, also tried to pass himself off as a British Lord. One almost has to respect the audacity. It’s one thing to fraudulently pass yourself off as a licenced broker. It’s another to pass yourself off as a licenced broker and royalty all at the same time. Insider understands the faux-broker has been assigned two prison cells; one for him, and one for his massive set of solid-steel balls.

And now the bank bashing…

Counting down to calamity?

W

ell, the New Year has kicked off in grand fashion economically. The International Monetary Fund has now said it will need around an additional $500bn in funds to keep Europe from reverting to the Dark Ages and stop the global economy from plummeting like a fat guy in metal pants falling down a mine shaft with a magnetic floor.

The $500bn the IMF plans to raise includes $150bn already committed by European countries.

That’s great. It only leaves them short by $350bn. Chump change.

A quick trip to Cash Converters to pawn some electronics should take care of that. On an even sunnier note, the IMF has warned that a recession worse than the GFC is on the horizon, and Assistant Treasurer Bill Shorten has flagged job losses in Australia as we cop the effects of the Eurozone’s economic implosion. Happy New Year, everyone! Insider doesn’t

know about you, but his New Year’s resolution was to buy an abandoned missile silo and start hoarding petrol and ammunition.

Who needs broking?

I’ve got Chilli Jam

Brokers have been absolutely decimated in overseas markets by the financial crisis, which should remind Aussie professionals how lucky they can count themselves.

What amuses Insider about the situation however, is the diversity of paths ex-brokers take after coming on some hard luck. The latest is Simon Barrett from the UK’s Thixendale in Yorkshire, who after leaving the profession in 2008 as the financial crisis hit, took on a six-month contract at a gravy factory in Wetherby.

Exposed to the world of scale food production, Simon suddenly decided his future didn’t lie in mortgage broking – it was clear to him, the future was Chilli jam.

That’s right, Barrett – who goes by the self-styled title, “The Chilli Jam Man” – first came across the wonderful world of Chilli jam while he was down under between 1995 and 2000. “I lived in Oz for five years and when I came back I found there was a gap in my cupboard. I came across a lot of Southeast Asian and Thai-based flavours in Oz and I was really missing that flavour set,” Simon told the local press. “One of my mates said ‘have a go at chilli jam’, so I dug out some recipes on the internet, mixed and matched flavours and came up with the original.” The rest, of course, is history. The Chilli Jam Man is now a popular flavour in the UK, having landed a batch of awards after winning over tastebuds across the nation. He now produces between 2,500 and 3,000 jars a day. So, should GFC Mark II hit our shores, we can be assured of some ‘spicy’ post-broking stories to follow.

Fraud with panache

Insider recently came across a rather important lesson for any would-be mortgage fraudsters: Just because someone is a multimillionaire doesn’t mean they don’t pay attention to their bank balance. That was the tough lesson learned by a UK mortgage fraud racket when they stole the identity of a French banker. The gang secured a half-million pound mortgage in the name of said

No edition of Insider would be complete without a little bit of bank bashing, right? Well, lucky the banks always manage to provide a little ammunition so Insider can fill the column inches.

This time around, it’s Westpac, who the Finance Sector Union is decrying for sacking almost 200 of its workers in its tech division and back office. Well, banks fire employees all the time right?

That’s business. Sure, a little restructure here, a little offshoring there. That’s life in a globalised world, where Aussie workers are a tad pricey and it’s all about being competitive against the rest of the banks, who themselves are cutting, and so it goes on, around and around. So, what’s the Finance Sector Union on about? Well, it turns out, Westpac is not just firing their staff, but asking them to train their own Indian replacements. That’s right: India-sourced trainees on temporary visas have come to Australia so that these nowredundant workers can assist with a ‘knowledge transfer’ to their cheaper counterparts. The Sunday Telegraph quoted one employee as saying: “She has been shadowing me, sitting next to me and I have to teach her how to do my day-to-day job. Basically sitting next to me like a sponge, sucking in as much information as possible. It’s devastating. I feel insulted and very low.” Wow, that’s some thank you. Insider is only worried there’s a cheaper copy of himself somewhere else in the world – surely bank bashing is a commodity by now?

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Services

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AGGREGATOR/WHOLESALE BROKER Choice Aggregation Services 1300 135 389 www.choiceaggregationservices.com.au Page 11 PLAN Australia 1300 787 814 www.planaustralia.com.au Page 7

BANK Commonwealth Bank 13 20 15 www.commbank.com.au Page 32

FINANCE Rhino Money 1300 654 355 www.rhinomoney.com.au Page 4 Semper Capital Pty Ltd 1800 SEMPER (1800 736 737) enquiries@semper.com.au www.semper.com.au Page 21

31

LENDER

Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 12 & 13

AMP 1300 300 400 www.amp.com.au/distributor Page 9

Versara 1300 CAVEAT (1300 228 328) www.versara.com.au Page 16 & 17

ANZ 1800 812 785 www.anz-originator.com.au Page 5

SHORT TERM LENDER Homeloans Ltd 08 9261 7000 www.homeloans.com.au Page 15

Mango Media 02 9555 7073 www.mangomedia.com.au Page 1

Liberty Financial 13 23 88 www.liberty.com.au Pages 3 MKM Capital 1300 762 151 www.mkmcapital.com.au Page 2 NCF Financial Services Pty Ltd. 1300 550 707 www.ncf1.com.au Page 8

OTHER SERVICES

www.residex.com.au The House Price Information People

Residex 1300 139 775 www.residex.com.au Page 31 Trailerhomes 0417 392 132 Page 27

To advertise in Australian Broker call Simon Kerslake on +61 2 8437 4786