Australian Broker magazine Issue 9.05

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ISSUE 9.05 March 2012

Practising certificate impost rejected

Michael Russell

 Calls for a broker

practising certificate are being rebuffed as overkill under NCCP A broker ‘Certified Practising Certificate’ mooted by the MFAA and the Commonwealth Bank’s Kathy Cummings is an unnecessary impost in the eyes of a major broking franchise.

The MFAA’s Phil Naylor has said

it is the association’s stated goal to introduce a practising certificate.

However, Mortgage Choice chief executive Michael Russell believes practical competencies should be policed by broker groups and lenders.

Russell said the NCCP environment removes the need to place an additional educational requirement on brokers. “The law clearly mandates that a mortgage broker’s ‘practising certificate’ is their Australian Credit Licence or

Credit Representative status, as issued by ASIC,” Russell said.

“While I remain highly supportive of the MFAA as an industry association, the MFAA, in stipulating a higher standard than that required by the law, can only prescribe this for its members, not the industry overall.”

As such, Russell indicated Mortgage Choice had no plans to adopt a practising certificate.

CBA’s executive general manager of third party Kathy Cummings has argued for the introduction of the certificate, saying it would improve conversion rates and create channel efficiencies. But Russell said the responsibility is shared between brokers and lenders.

“Application to settlement conversion is a priority for both brokers and lenders. It is a high priority for brokers in particular because successful conversion encourages improved productivity and customer satisfaction.

Similarly, it is important to lenders as it can greatly reduce origination costs.”

Cummings has previously tipped that if conversion rates fail to improve, commissions could be put under further pressure.

Russell indicated this would be a fair consequence, so long as lenders are pulling their weight.

“It is fair to say that if our conversion rate deteriorates through no fault of a lender’s processes, then so too will our commission,” he said.

Independence Day ASIC risks confusion by redefining outlawed term Page 2

Going ‘Platinum’ Westpac defines new seal of introducer excellence Page 4

Facts unfound Key facts sheet a mystery to borrowers and lenders Page 6

Inside this issue Coalface 16 Mining, charity benefits brokers Opinion 20 Redefining mortgage stress Viewpoint 22 Leveraging rates moves Market talk 26 When fear does you a favour Toolkit 28 The right time for an office People 29 Industry legend Bowell farewelled Insider 30 You caught me ’cause you could

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News ASIC risks confusion after terming brokers ‘independent’ ASIC is risking market confusion in its repeated use of the term ‘independent’ to describe brokers, despite this language being strictly prohibited in broker representations to clients.

ASIC has repeatedly warned brokers against using terms such as ‘independent’, ‘impartial’ or ‘unbiased’, which are outlawed due to the conflicts created by lender commission payments.

As recently as February, ASIC guidance on advertising said these terms were restricted if a provider receives a commission, volume bonus or other benefit that may influence advice.

However, despite the regulator’s enforcement of the restriction – including an enforceable undertaking for Mortgage Choice in 2004 – it has recently enshrined the term ‘independent’ in its documentation.

Australian Broker has uncovered an updated version of the credit regulator’s Australian Credit Licence application form ‘CL01’, where applicants are asked if they will provide ‘independent’ credit assistance. The ACL question, which defines independence as providing a choice of product from a number of different providers, even goes so far as to bold the word independent.

“Does the applicant intend to provide independent home loan credit assistance?” the form asks.

“Your business will be providing independent home loan credit assistance where the credit assistance relates to credit products offered by more than one credit provider independent of the licensee,” it says.

This definition of ‘independent’ credit assistance is also stipulated in newly-released Regulatory Guide 206, Credit Licensing: Competence and Training, which

outlines broker training standards.

“In our representative training requirements, we distinguish between (a) representatives who provide independent home loan credit assistance... and (b) other representatives who only provide home loan credit assistance in relation to credit products offered by their own credit licensee,” the guide says.

In the document, ASIC defines independent credit assistance as assistance related to credit secured by real property where neither the licensee nor its representatives will be the credit provider.

Last year, an amendment to the NCCP Act stipulated that a licensee must not use the words ‘independent’, ‘impartial’ or ‘unbiased’ to describe their services to consumers. In its guidance on advertising, ASIC said the use of these three terms is also restricted by the Corporations Act. ASIC explains its restriction by saying consumers may not understand their meaning.

“An advertisement should not claim that a financial advice service is an ‘independent service’, or describe an advice service or adviser in language that implies independence if this is not the case,” ASIC says. “For example, because all or part of the adviser’s remuneration is derived from the financial products they recommend, or because there is a relationship between the adviser and a particular product issuer.”

When approached by Australian Broker about the discrepancy in terminology, an ASIC spokesperson responded by saying the regulator may change the term if there is confusion.

“ASIC is comfortable with the use of the term but if there was evidence of real confusion ASIC

would consider providing further explanation in RG 206 or adopting another term.”

However, ASIC said it had seen no such confusion. “We have seen no evidence that brokers are confused by that use of the term in the context of RG 206.

ASIC said it had specifically defined the term ‘independent’ in RG 206 for this specific purpose.

“Independent credit assistance is defined in RG 206 for the purposes of RG 206 and in order to make a distinction with credit assistance provided by employees and representatives of lenders solely in relation to that lender’s own loans,” the ASIC spokesperson said. This was done after a public consultation process on training standards for such credit advisers.

ASIC said it was comfortable brokers understood the difference.

“We are also comfortable that brokers generally understand why there are restrictions on the use of the term independent in describing their services to potential customers because of the potential conflicts associated with commissions etc,” the spokesperson said.

Off limits… for brokers: “An advertisement should not claim that a financial advice service is an ‘independent service’, or describe an advice service or adviser in language that implies independence if this is not the case—for example, because all or part of the adviser’s remuneration is derived from the financial products they recommend, or because there is a relationship between the adviser and a particular product issuer.”

Source: ASIC Regulatory Guide 234

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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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Westpac outlines platinum ‘seal of excellence’ Westpac has outlined the details of its nascent top ‘Platinum Broker’ tier, which is now offering 100 of its best brokers preferential service and support at the bank.

Following its announcement that it would insert a new tier above its Advantage + offering, Westpac said it has inducted 100 brokers, a pool it promised to grow over time.

Platinum brokers will be offered a suite of service sweeteners,

including a dedicated team of credit managers, free upfront valuations or automated valuation model valuations, a two-hour response guarantee from broker support officers and 24-hour conditional approvals.

Platinum brokers will also receive discounts of between 30% and 50% off Davidson Institute courses for themselves and their staff, as well as 50% of Australian Property Monitors data subscriptions, 15% off advertising campaigns on Fairfax’s domain.com.au, and discounts on BRW and Smart Investor magazines.

However, Westpac head of mortgage distribution Tony MacRae said one of the key benefits of the invitationonly broker club was access to co-branding materials that would provide Westpac’s seal of endorsement, allowing brokers to leverage this status with clients.

As part of the top tier

offering, brokers will be entitled to use a ‘Platinum Broker’ endorsement logo or ‘seal’, will receive a Westpac ‘Platinum Broker’ certificate for display in an office, and will be included in some customer marketing campaigns.

To be considered for the top tier, Westpac has stipulated a minimum requirement of 15 applications per calendar quarter, a conversion rate of at least 70%, a low arrears book, a minimum settled book with the bank of $20m, and a minimum application quality of 65%.

MacRae said the new offering aimed to bring its key broker partners and Westpac’s local bankers closer together to build increasingly strong business relationships.

MacRae said this did not create an ‘agent’ arrangement, despite being comfortable with any one broker sending in the vicinity of 80% of business to the major bank.

As part of the offering, Westpac will also offer brokers

Tony MacRae

Platinum Hurdles • 15 applications per quarter • 70% conversion rate • Settled book of $20m plus • Application quality of 65% access to personalised banking services, via a premium financial services relationship management team.

The 100 Platinum brokers sit above an existing 400-strong contingent of A+ introducers.

Aussie, MFAA accused of Diploma ‘mockery’ Aussie has been accused of belittling industry experience with its new inductee Diploma program.

The national franchise recently announced plans to introduce a three-week induction program for new members, which would be externally accredited as a Diploma of Financial Services. Aussie said all new recruits would need to complete this “before they meet a customer”.

FBAA president Peter White said Aussie’s decision to hold brokers out as industry professionals after completing a three-week Diploma was a ‘disgraceful’ act that belittled industry professionalism.

“This has to be the biggest load of garbage I’ve seen in decades of being in this industry and it is a disgrace that this sort of thing should be allowed to be called higher educational standards,” White said.

“It flies in the face of all those true industry professionals, of whom some have done a Diploma if they saw fit, and took them months if not a year to do, even with many, many years of industry experience.”

As part of Aussie’s program, the franchise will also implement a structured six- to eight-week program to provide ongoing support through ‘intensive’ skill development and one-on-one

sales coaching. Aussie said its objective is to be “the most highly trained and professional large mortgage broker”.

“Aussie always aims to lead the industry and this is another example where we are ensuring customers are delivered the best and most professional broking service available,” executive director James Symond said.

White responded by saying new trainees should not be able to hold themselves out as professional after a three-week Diploma. White supports those who take a Diploma, but does not believe this should be enforced until ASIC makes it a minimum requirement.

“Let’s get back to the real world

people of proper training, proper education, and real long-term experience before anyone is called the “best and most James Symond professional” at what they do,” he said.

“If this is the level higher education has dropped to, then hey, I’m taking a 33-year career change and going to become a neurosurgeon next week,” he added.

Aussie’s announcement comes as the franchise targets growth in numbers “over the next few years”, up from its current 1000 headcount across its entire business.

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Refund administrator accused of ‘dragging heels’ on sale Refund franchisees have accused administrator SV Partners of “dragging their heels” on the mooted sale of the business.

SV Partners sent a letter to franchisees on 23 February saying final contract terms had been put in place for a sale of the business to State Home Loans. The administrator claimed a contract would be signed “in the next few days”. A Refund franchisee has now claimed that no contract has been sent to franchisees, and has accused SV Partners of delaying the process.

“We’ve been told that the buyer is jumping up and down wanting to make this happen. If the buyer really wants it, I don’t understand

what’s taking so long,” the franchisee said, speaking under the condition of anonymity.

Communication from SV Partners obtained exclusively by Australian Broker indicated that final touches were being put on the sale contract as of 28 February, with the administrator saying a contract could be signed within one to two days. The Refund franchisee said that weeks later, franchisees remain in limbo.

“The problem is the communication from the administrators has been an absolute joke. We’ve been treated like cattle when they don’t realise we’re the nuts and bolts of this business,” he said.

The franchisee said buyer State Home Loans wanted the company’s best brokers, but was in danger of these brokers exiting the business if the administrator did not “hurry up”.

“This thing could go into liquidation, and we as franchisees are trying to sort it out, but they won’t listen. They’ve made it very clear they’re in no rush. We’re the ones writing the business but they don’t even speak to us.”

SV Partners had previously told franchisees the sale required as many franchisees “as possible” to continue operating under the franchise. The deal would also see continuing franchisees paid all upfront and trail commissions

owing. Clients who are owed refunds on loans written by continuing franchisees would also be paid. The Wayne Ormond administrator also assured franchisees that Refund founder Wayne Ormond had no interest in the buyer’s company, and was in no way party to the offer.

The administrator previously told franchisees that following the sale, an outline would be provided which would describe the buyer’s intentions with the Refund name, any changes to the company’s business model, the nature of advertising and amount of advertising levies and other organisational moves. One change revealed by the administrator was the move from current aggregator Choice.

Borrowers, banks in the dark over key facts sheet Recent surveys indicate consumers and lenders are largely unaware of the government’s Home Loan Key Facts Sheet.

The poll by direct lender MyRate.com.au has found that 64% of consumers had never heard of the key fact sheet. Of those who were aware of the governmentmandated document, only 5% had heard about it through home lenders. By contrast, 18% came across the sheet online, 11% heard about it on television and 2% had come across its existence via magazine and newspaper articles.

The company has claimed a Treasury spokesman acknowledged that laws regarding the fact sheet were not working to their fullest extent.

“The government is considering expanding the range of circumstances in which lenders have to provide key fact sheets, even if consumers don’t request them,” the spokesman said.

The regulations surrounding the Key Facts Sheet dictate that it is not compulsory for lenders to provide the sheet unless specifically requested to by a consumer.

The poll comes just weeks after consumer group CHOICE conducted a shadow shop of 18 bank and credit union branches, claiming that staff “have little or no idea that the key facts sheets for home loans even exist”.

The group sent shadow shoppers posing as first homebuyers to Sydney bank branches. The shoppers asked to be provided with comparative fee and interest rate information without explicitly using the term “Key Facts Sheet”.

CHOICE claimed of the 18 branches visited, only an ANZ branch was able to provide the Home Loan Key Facts sheet, and this was only after being asked four times.

The group said a NAB branch representative provided a handwritten summary jotted down on Allianz stationery, while a Westpac branch worker wrote down details on one of the bank’s brochures and CBA staff provided a sheet comparing only the bank’s own products.

“It seems the last thing the big banks want to do is help consumers compare products. We don’t think consumers should have to come up with three magic words – key fact sheets – to get access to clear information to help them find the best mortgage What a NAB branch employee allegedly supplied offer,” CHOICE head of when asked for comparative fee and interest rate campaigns Matt Levey information said.

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News Broker practising certificate MFAA’s idea: Naylor MFAA chief executive Phil Naylor has said the idea of a certified practising certificate for brokers is not a new one, and that the MFAA have been working on the initiative for some time.

CBA executive general manager of third party and mobile banking Kathy Cummings has commented that brokers should have to earn a qualification proving practical acumen.

Naylor has now claimed this initiative has been spearheaded by the MFAA since 2009.

“At this time there is not a practical theories test, and that’s why we have stated as an official requirement that members have to do practical co-studies,” Naylor said.

“Part of the MFAA’s strategic objective as well as having education requirements is that members will be required to obtain a practice certificate. We are currently talking with lenders to ascertain the requirements. It’s not something new. It’s part of what we have wanted to achieve for a number of years.”

While Cummings supported the MFAA’s Diploma requirements, she questioned the value the qualification added to the industry.

Naylor has argued that the association’s Diploma requirement positions brokers as professionals, while a practical certification would ensure their competency.

“We’re building the broker to be seen by the regulators, by the public and by the media as a professional. They’re all building blocks of that, the educational standards and the practical standards,” he said.

Naylor would not be drawn on whether any practical certification would use lender conversion ratios as a benchmark, and instead claimed the MFAA was still gathering feedback from lenders to “ascertain what they think is appropriate”. He said he hoped the association could gather the necessary feedback from lenders soon, and assured brokers that their feedback would be sought on any potential certification requirements.

“The challenge really has been to be able to get lenders to understand and agree with the concept, and we’re working through that process now. We need engagement from lenders, and then we’ll seek feedback from our members, and feedback from the broking groups and aggregators,” Naylor said.

“It’s something that’s not going to be done from an ivory tower.

We’re going to be talking to a lot of people to make sure we get it right,” he added.

Phil Naylor

Flashback: CBA champions broker practising certificate The Commonwealth Bank called on the MFAA in February to introduce a new ‘Certified Practising Certificate’ across the broker market that would improve broker ability to submit quality applications. CBA executive general manager of third party Kathy Cummings said while the current MFAA requirement to raise the bar to a diploma qualification was a good move, she was unsure if this was adding any value to improving submission quality or conversion rates.

Instead, Cummings said a new more practical certification of ability was required, to ensure that the industry was ‘more sustainable’ in the long run through the creation of channel efficiencies.

CBA called on to stop blaming brokers The Commonwealth Bank has been criticised over claims brokers need to skill up to improve submission quality.

Commonwealth Bank executive general manager of third party and mobile banking Kathy Cummings has called for practical certifications to improve broker conversion rates. But FBAA president Peter White has argued that CBA must take responsibility for its own systems and training issues.

“It wasn’t that long ago that CBA were in the press stating their systems and training would basically take care of poor broker submissions. That must not have worked, so let’s get someone else to do it,” White said.

“Blaming the brokers is not the answer. Getting someone else to do your work is not the answer, especially when they don’t have the skillset to do it. Taking responsibility for your own issues and doing something about it yourself is,” he said.

White claimed that brokers were often asked to resubmit information that had already been supplied, and said this signified “incompetence somewhere”. He argued that while “slackness” in supplying documents was unacceptable on the part of the broker, varying banks systems and “degrees of bank staff competencies” made it difficult for brokers to correctly

submit information.

“One answer might be consistency between the banks and lenders: one common platform, one common application form, one common list of requirements, one common process,” he said.

White lashed out at large banks over claims of poor broker application quality, and said smaller lenders had bested the banks in providing brokers with necessary training.

“I don’t hear the non-bank sector screaming the same issues. Maybe their training and systems are far superior to the banks, so maybe the banks should take a leaf out of their books on this,” White said.

White also took aim at raising

educational requirements beyond those outlined by the NCCP. “Cert IV is recognised as a minimum educational requirement

by ASIC. The Diploma is only an option, not mandatory by law under the NCCP, and a Diploma will not fix poor applications being submitted. Greater experience and better, more focused training by those responsible to conduct it will,” he said.

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February spike cuts through ‘static’ for Heritage

CUA could expand lending beyond major franchises

Heritage Bank has claimed it has reaped the benefits of customer dissatisfaction following rate hikes in February.

The mutual bank has announced an 82% jump in home loan inquiries for February, which chief executive John Minz said came following a “relatively static” previous five months.

“A significant chunk of those people were customers from one of the big banks who have started to realise the benefits of switching over to Heritage,” Minz said.

This “significant chunk”, Minz said, has led to 30% of the bank’s business in February coming from customers refinancing loans from other institutions.

The spike also comes after Heritage recently expanded its broker distribution nationwide.

The mutual added to its East Coast network by announcing it would distribute through brokers in Tasmania, the Northern Territory and WA. General manager of retail services Paul Francis said the expansion into the states had been well-received.

“We launched in WA on the 31st of January with our new BDM, and we had about 150 mortgage brokers come along and hear about us, and it was very well received.

With the Northern Territory and Tasmania, we’ve got probably half a dozen loans through already, and business through NSW and Queensland and Victoria is increasingly strong in the last month in particular,” Francis said.

While Francis said he did not have firm numbers on volumes from brokers, he said he believed

CUA has re-embraced brokers after a post-GFC hiatus, and said it may consider expanding lending beyond its existing arrangements with Mortgage Choice and Smartline.

As previously reported by Australian Broker, CUA had been looking to return to broker distribution for some time, and was hampered by continued market volatility.

However, group general manager Darrin Northey said that the move was necessary for CUA as it seeks to grow, largely due to mortgage broker market power.

“Given around 40 per cent of homebuyers seek out a home loan via a broker, CUA’s re-entry means we will be expanding the reach of our products to a greater potential audience.”

Prior to the GFC, CUA distributed anywhere between 20–35% of its new home loans via brokers, depending on fluctuating volumes. As a result of the GFC, the mutual terminated new lending through the two franchises, but maintained service to existing customers.

Northey said the mutual had been looking at it for the last few months, and now was the time to “make things work commercially for all parties involved”.

“We’ve been on a growth strategy for a couple of years now, and we always maintain a keen

Paul Francis

there was a correlation between Heritage’s spike in inquiries and the expansion of broker distribution. Francis said the bank had already gotten “a number of loans” from brokers through to settlement since its 31 January launch in WA. “Applications and the volume of inquiries and lodgements are growing by the day,” he said.

Heritage has ramped up its broker distribution after pulling back from the channel during the GFC. Francis, however, contended that the mutual never pulled back from brokers with whom it had firm relationships.

“Throughout the GFC, we maintained a relationship with our broker partners, and as things have picked up we’re getting our share out as well,” Francis said.

He argued that the mutual had a compelling proposition for brokers, with attractive pricing on fixed and variable rates, and asserted Heritage’s commitment to the channel.

“The broker market has always been important for us, and at times we’re around a 50/50 split between our broker partners and our proprietary distribution,” he said.

Pre-GFC

Distributed between 20–35% of mortgages via franchise brokers Mortgage Choice and Smartline.

eye on how effective we can make the channel for us,” he said.

Northey said that strong franchise brokers fit the business best for the moment, but that it was open to other opportunities.

“We had a relationship [with Mortgage Choice and Smartline franchises] in the past and maintained that, and it is a lot easier to maintain service to brokers and customers when it is someone you are used to dealing with,” Northey said.

“We will continue to look at the different opportunities available.

We are keen to get this bedded down and provide the right service and look after those broker channels, and over time we will look at other opportunities to expand,” he said.

Northey said that mutuals were critical to competition in Australia. “There needs to be competition in the Australian market – the industry needs it and customers need it,” he said. “We are massive supporters of driving competition. The mutual sector and institutions like CUA have the opportunity to be that alternative.’

Northey said the problem was that the mutual sector was “misunderstood”, and that it was important that customers realised they were customer owned, were there for customer benefit, and provided the same products and services of any of the major banks.

March 2012

Re-launched distribution through Mortgage Choice and Smartline.

Could expand distribution in future.

March 2012

Re-launched distribution through Mortgage Choice and Smartline.

Could expand distribution in future.

Brokers berated for ‘unhealthy reliance’ on majors Adelaide Bank’s Damian Percy has argued that brokers still have an “unhealthy reliance” on major banks.

Percy, the bank’s general manager of third party lending, claimed that brokers are still largely sending deals through the majors to the neglect of smaller lenders.

“I think if you talk to most of the aggregators there’s been some movement at the periphery, and some movement between the majors, but the general thrust is that an unhealthy reliance on a

small group of funders is largely still the case,” he said.

Percy argued that brokers have a responsibility to provide clients with a range of offerings, rather than relying solely on major lenders.

“This is an industry built on diversity and choice, and it’s important that’s maintained,” he said.

Second tiers often have to appeal to brokers with special offers. Percy cited Adelaide Bank’s current nil application fee offer. The bank has waived the $795 application fee on

its suite of residential lending products, in the hope brokers will take notice of the bank.

“Everybody needs to recognise you can’t win long-term by jumping into the market with special deals, but if people haven’t used you in a while you need to give them a reason to use you,” Percy said.

The nil fee offer is available for applications submitted from 1 March onwards, and is for all new loans, including split loans, internal refinances and credit increases. The bank has also cut the application fee for its

GoBetween bridging loan product to $200.

Percy said there was no set time limit on the promotions.

Damian Percy “We’re putting it out there just to reflect the current state of the market and we’ll leave it out there until we feel it’s either done its job or it hasn’t,” he said.

“What we’re trying to do through the nil fee offer is add to the competitive pressure that alternative banks can provide,” Percy added.

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Positive credit to stop client ‘poor track record’ The incoming positive credit reporting regime has been touted as a solution to consumers’ “poor track record” of selfreporting.

Veda head of legal Olga Ganopolsky has defended the positive credit reporting regimen, saying it will be a “game changer” for both the regulatory environment and lenders’ risk assessment practices. Ganopolsky claimed consumers often inaccurately report their credit situation, and argued that the new regime would alleviate this.

“Rightly or wrongly, the research that’s been conducted shows that consumers have a very poor track record of selfreporting on one’s liabilities,” she said.

Ganopolsky pointed to research showing that consumers with poor and clean credit alike often misrepresent their credit history.

“When research is done on bankrupts, the astonishing results were that more than 95% of people in bankruptcy were applying for credit virtually on the eve of bankruptcy. A lot of even solid credit individuals don’t provide accurate credit information. Just under 20% of people don’t accurately report,” Ganopolsky said.

In contrast, Ganopolsky argued that the wider array of information available in the new reporting regime will enable lenders

to make more informed risk decisions. She claimed the regime carried a “strong link to responsible lending”.

Ganopolsky also hit back at claims that collecting more information about consumers could put their personal data at risk. She said credit reporting agencies were some of the most “heavily regulated” bodies in the world, and said there was a “strong acknowledgement” by reporting agencies of the sensitivity of consumer data, and the necessity to protect it.

Critics of the regime say it violates consumers’ privacy and places the burden of proof on consumers should lenders make a mistake. And though Ganopolsky claimed the regime would enable more responsible lending decisions, NSW Consumer Credit Legal Centre director Karen Cox has called the regime “only a tool”, and pointed out that a positive credit reporting regime existed in the United States during the subprime mortgage crisis, where she implied it did nothing to curtail irresponsible lending practices.

Construction finance at ‘110% capacity’ Loan Market has claimed rapid growth in its construction division, with plans to branch out into South Australia and Queensland.

The broker’s national director of sales, Mark De Martino, said construction team leader Steve Matsoukas would lead the drive into SA and Queensland following “remarkable growth” in the division.

“Loan Market Construction currently comprises 26 brokers in Victoria but they are running at 110% capacity with all hands on deck. They are doubling their business size every six months. The team attributes its strong success to both its strong referral source partners and its highly effective broker team,” De Martino said.

De Martino claimed the division was receiving just under 1,500 leads per month over the past year, and said it had received more than 500 leads in a single weekend.

“This type of lead generation is unheard of for a team of this size,” he said.

De Martino said Loan Market Construction, which deals primarily in financing land and construction deals but has the capacity to broker residential deals as well, will begin a “major recruitment campaign” in the states.

“We are targeting South Australia and Queensland as we see opportunities to grow the business in those states,” De Martino said.

Matsoukas trumpeted the division’s lead Mark De Martino generation capabilities.

While brokers on the popular Australian BrokerNews forums recently called into question the worth of franchise-sourced lead generation, Matsoukas claimed it was key to the division’s success.

“All of our brokers attribute their success to the lead generation achieved.

Having access to such a strong lead referral source has certainly made all the difference,” Matsoukas said.

Matsoukas claimed the division had attracted some of the company’s top performers, and had seen brokers produce high volumes in a short amount of time.

“Five of our brokers achieved CBA Diamond Status last year. One of our team members, Bravesh Shah, was also the Loan Market Rookie of the Year last year and settled over $36m in just his second full year in the mortgage industry,” he said.

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Big franchises defend ‘strong lead’ quality Franchise brokers have defended the quality of leads handed to franchisees, arguing franchisees have a “healthy balance” between self-generated and companygenerated leads.

Aussie Home Loans reported a 41% increase in leads in February, and general manager of marketing and product Stuart Tucker said the leads being handed to franchisees are high quality.

“I think we’re providing very strong leads, and we’ve seen our lead to conversion ratio increase over the last six months by 5%, which is significant,” Tucker said.

Commenters on the popular Australian BrokerNews forum questioned the quality of franchise-generated leads, and argued that brokers should generate their own leads through

referrals and client relationships.

Tucker declined to comment on the company’s specific conversion ratios. However, he contended that conversion ratios were high and that company-generated leads can prove a valuable supplement to brokers’ businesses.

“We find even some of our most experienced brokers participate in our model where they receive company sourced leads. They like the regular flow of customers, and they supplement that with their own activities,” he said.

Tucker said brokers must strike a “healthy balance” between company-generated and selfgenerated leads, and said Aussie conducted training on sourcing leads from the community. It was also one of the best months Aussie has seen “in years” for broker-

sourced lead generation, according to Tucker, who said brand recognition gave brokers a conversion edge.

“I think the Aussie brand is a door opener. If you’re calling from Aussie to your local network versus calling from Joe Blow mortgage broking, there’s no doubt in my mind that people will be more open to what you have to say.

I’ve seen independent market research indicating that Aussie is the number one most recognised brand in mortgage broking by a country mile,” he said.

Tucker claimed brokers often tip lead quality as an important factor in choosing broking groups or aggregators. “I know for a fact that one of the primary reasons brokers choose to join Aussie is the consistent quality and quantity of

the leads provided at a national level, particularly those who are new to the industry,” he said.

Oxygen Home Loans general Stuart Tucker manager James Green defended company-sourced leads. He said Oxygen provides leads for free, and claimed 39% of the leads converted to settlement.

“We do this because we want the best brokers looking after our very important McGrath Estate Agent customers. We are always looking for top talent to partner with. To us it makes perfect sense to have the best brokers helping to increase the affordability of customers buying property from McGrath and making the buying process easier,” he said.

‘Don’t be lax in rosy times,’ RBA warns The RBA has warned that banks must not become lax on lending standards in times when “everything seems rosy”.

RBA head of financial stability Luci Ellis has commented that the Australian market is well-placed to avoid the pitfalls of the US subprime crisis. Ellis said prudential standards are much higher in Australia, and commented that even lenders falling outside prudential regulation fell under the purview of ASIC. “Consumer protection standards for credit products have in recent years been broadened, and shifted to a national framework

administered by ASIC. But the earlier state-based system still had the three features most needed to avoid US-style problems: it was nationally consistent; it covered all consumer borrowers; and it covered all lenders consistently, regardless of whether they were prudentially supervised or not,” she said.

But Ellis warned against the temptation to ease lending standards in the face of slowing credit growth.

“It is always tempting to ease lending standards, and dress that up as responding to competition or giving the customer a better deal.

It must be hard to resist the

disappointed customers who just want to borrow that bit extra to purchase their dream home, especially when the loan officer is also trying to make budget on new loan approvals. But in the experience of the United States, we have seen what can happen when lenders yield to that temptation,” she said.

Ellis suggested that consumers would ultimately be disadvantaged by a relaxation of lending standards.

“If lenders were to ease lending standards beyond the point of prudence, they would not be doing anyone any favours. Their customers, the borrowers, would

be overburdened by their debts.

The firm themselves would face difficulties if loan defaults were to rise. And financial stability would be much harder to maintain,” Ellis said.

While Ellis argued she did not see signs of “widespread lax lending practices” in Australia, she warned that lenders in “rosy” times could find it difficult to “maintain the necessary prudence”.

“While the regulators can take actions and central bankers like me can warn of the risks, in the end we all have a stake in maintaining financial stability,” she said.

14 brokernews.com.au

News Cabinet reshuffle a boost to housing: HIA The housing industry has hailed Prime Minister Julia Gillard’s February cabinet reshuffle as a “unique opportunity” for housing.

The new-look Cabinet, announced in the wake of the high-profile leadership spill, sees the appointment of Brendan O’Connor as Minister for Housing and the Homeless as well as Minister for Small Business. He was previously Minister for Human Services and assisted with School Education.

O’Connor replaces sacked Kevin Rudd supporter Robert McClelland in the housing role, and takes over the small business portfolio from Senator Mark Arbib, who announced his surprise retirement from both the ministry and Parliament following the leadership spill. The move also sees the small business portfolio brought into cabinet for the first time.

In spite of the drama surrounding the roles, Housing Industry Association chief executive Graham Wolfe said the housing and small business portfolios are a natural fit.

“The Australian housing industry is made up of around 85% small business.

By combining these two portfolios, Mr. O’Connor has the unique opportunity to promote much needed policy initiatives and programs across small business and

residential building,” Wolfe said.

Wolfe praised Gillard’s move to keep the housing portfolio in cabinet, and the decision to elevate the small business portfolio to cabinet.

“The housing industry puts around 400,000 Australians into new homes every year and creates thousands of new jobs.

Housing is a staple of life that drives both economic and social outcomes. Yet Australia is facing both a housing shortage and affordability challenge, which needs urgent attention. We look forward to meeting with Mr O’Connor to discuss the many pressing policy areas that need to be addressed to revitalise the residential housing industry,” Wolfe said.

Residential Development Council executive director Caryn Kakas said O’Connor’s appointment was an acknowledgement that housing played a “centerpiece” for Australians’ wellbeing and stability.

“As member for Gordon in Melbourne’s rapidly growing outer west, Mr O’Connor will be able to bring first-hand experience of the importance of delivering both housing and infrastructure to new communities,” Kakas said.

“Housing should be the focal point for a system that clearly aligns long-term planning, infrastructure and the provision of both homes and jobs,” she added.

Brendan O’Connor reaps rewards of Rudd’s defeat In: Brendan O’Connor appointed as Minister for Housing and the Homeless, as well as Minister for Small Business.

Out: Rudd supporter Robert McClelland was sacked from his role as Minister for Housing and the Homeless and sent to the backbench.

Out: Senator Mark Arbib tendered his resignation from both the Small Business portfolio and Parliament, saying he wanted to spend more time with his family.

Nova Home Loans out, as licence cancelled Sydney-based finance broking firm Nova Home Loans has had its credit licence cancelled by ASIC after a period of not being a dispute resolution scheme member.

Nova, which was expelled from membership of the Financial Ombudsman Service in June 2011, then failed to obtain membership from the Credit Ombudsman Service. When ASIC became aware of this, the regulator said it took steps to cancel Nova’s credit licence.

“Membership of an EDR scheme is an important requirement for Australian credit licensees, and as the consumer credit regulator ASIC will not hesitate to act against those who fail to comply with their responsibilities’, ASIC commissioner Peter Kell said.

Nova Home Loans is a Sydney-based finance brokerage that purports to service

clients throughout Australia via a network of “qualified and trained home loan agents”.

However, following the ASIC announcement the business’ website has been inaccessible to the public. The business could not be contacted for comment.

ASIC said that in December 2010, Nova was granted a licence to engage in credit activities relating to credit contracts, consumer leases, related mortgages and guarantees, and credit services.

However, its period without an EDR scheme membership entitled ASIC to cancel its licence under the NCCP regime, which requires all credit licensees to be EDR scheme members. ASIC took eight months to eject Nova Home Loans.

Nova has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

www.brokernews.com.au

15

Bouris claims celebrity yields leads YBR chairman Mark Bouris has claimed his hosting duties on The Celebrity Apprentice have generated leads for the company’s brokers, despite contributing to a cash loss for the company.

The company’s half-yearly results, released yesterday, show that it paid out $2.6m for Bouris to lock in his spot as host, but Bouris has told shareholders the deal has yielded good results for the company.

“It created the platform to launch the Yellow Brick Road brand nationally with television viewing audiences of over one million on average per episode,” Bouris said.

Bouris said market research following the show indicated it had increased consumer awareness of the brand from 7.7% to 27%, and had generated in excess of 4,500 leads and enquiries for the company’s representatives. He claimed the move had increased productivity across the company’s branch network, and predicted this would lead to revenue benefits in the second half of the 2012 financial year.

Bouris also claimed operating at a loss will lay a “strong foundation” for aggressive growth. The company reported an operating loss of more than $3.4m for the half year to 31 December. Bouris told shareholders the loss was due to “an aggressive period of investment” which he said would provide a foundation for future growth.

“We are a growing business, building momentum and off-balance sheet assets to deliver annuity-type revenues into the future and so we have been actively investing in the key elements of our stated strategy to create the solid foundations required for our planned growth,” Bouris said.

The company saw its expenses nearly

double over the half, from $5.67m in the first half of 2011 to $10.139m in the second half. Total revenue, however, was up 30% to $6.7m.

The company also said Mark Bouris its mortgage and finance revenue rose 86%, reflecting the growth of its branch network and “increased productivity from established branches”.

Yellow Brick Road announced in January of this year that it had signed its 100th franchise agreement, and Bouris said branch productivity was improving “as they mature”.

Flashback: YBR branches hit century mark In January, YBR announced it had signed its 100th franchise agreement.

The company said it added 50 branches to its network in 2011, and would aim to add another 25 by the end of the financial year. YBR chairman Mark Bouris drew a contrast between the company’s rapid expansion and 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.

Consumers lament lack of bank competition Nearly two-thirds of Australians believe there isn’t enough competition in banking, and say they would consider looking outside the majors for a mortgage.

A new survey from Citibank has found 65% of respondents believe the banking sector suffers from a lack of competition.

The Citi-Fin Q survey also found Australians gloomy on property prospects, with 63% saying home ownership will be outside the grasp of the next generation.

Citibank director of mortgages Vibha Coburn chose to find positives in the results, saying they pointed to a trend of Australians taking a more studied approach to property and housing finance.

“Despite the doom and gloom from our survey respondents, I believe the fact that Australians will look at mortgage

providers outside the big four when choosing their home loan is a positive sign,” she said.

The survey also found consumer attitudes towards home ownership are changing. Eleven per cent of respondents said they had moved or downsized in the previous 12 months to lower their expenses, and 62% said that they have adjusted their expectations regarding their “dream home” due to the high cost of housing.

“We’re seeing a trend where customers might sacrifice the size of a property to live in a particular location or vice versa.

This could mark a return bygone to eras when first homebuyers bought an entrylevel property with the aim of upgrading to another, larger property or a property in another area,” Coburn said.

16 brokernews.com.au

News

For all the latest mortgage industry news, visit brokernews.com.au

THE COALFACE Mining boom drives Backhouse wealth, today Osborne Park-based finance broker Ray Backhouse is riding growth in financial planning and the Pilbara mining boom to expand his increasingly diversified financial services business.

Backhouse, who featured in MPA’s Top 100 Brokers listing in 2011, commenced as a Wealth Today franchisee 12 months ago as he sought to expand his business beyond pure finance.

Having completed a Diploma of Financial Planning in 2006, Backhouse said poor experiences with client handover and conversions under MLC/Garvan Financial Planning led him to Wealth Today.

The results have come quickly.

While mortgages still act as the primary lead generator, over 35% of his revenue now comes from advice such as debt counselling, risk products and investments.

This growth at a time of challenge is due to the mining boom.

“We have quite a lot of investment clients, and quite a good deal of them are in the Northwest, in the Pilbara,” Backhouse explained.

Backhouse was able to create a niche within the mining

Giving back and receiving in return When Amber Linzer of Mortgage Fair in Elsternwick in Victoria became an ambassador for nonprofit 10thousandgirl, reaping business benefits from her involvement was not her goal.

But Linzer has said giving back to the community can bring some tangible rewards.

10thousandgirl is focused on creating financial literacy among women, providing everything from personal finance lessons for Australian women to microfinance loans to women in developing nations. Linzer said her involvement initially grew out of her passion to see women become financially savvy.

• Supporting financial literacy yields referrals • Community engagement enhances community standing • Trusted organisation leads to trust in broker

sector by getting involved with housing development marketing companies, for whom he originally did commercial lending.

“The business evolved from that – I went on to look after the clients they were selling to – mainly house and land packages – and it has just evolved from there,” he said.

Backhouse now has six financial advisers based in his Wealth Today office, with clients offered additional services outside of finance and mortgages – often for a fee.

“While the mortgage business drives the planning side we are starting to get straight referrals for the full package,” he said.

And if all goes according to plan, Backhouse will drive even more revenue for advice this year.

“I’m basically targeting a situation where the financial planning revenue will come closer to the 50% mark, but it’s hard to know at this stage. The industry is changing very rapidly,” he said.

• Pilbara boom drives finance volumes • Financial planning now 35% of revenue • Wealth Today chosen after MLC/Garvan

“I got involved about a yearand-a-half ago by becoming a business sponsor. They have a life planning workshop which leads into a personal finance program.

Women aged between 18 and 60 came in for the day, and a facilitator takes them through setting goals, building a budget, figuring out where their money is going and what they want to do with it,” she said.

“We have gotten loan appointments out of it from people seeing what they can borrow after doing the class.

We’ve become that source of information where people go to for financial knowledge,” she said.

Linzer urged brokers to consider involving themselves in a charitable activity close to their hearts, indicating it was good business as well as good civic citizenship.

“It creates opportunities, and it helps you even on the social media side. A lot of companies, once you’re aligned with them, are happy to promote you through their social media networks. People do contact you through that, especially if you’re aligned with a trusted organisation,” she said.

AFM promises smoother SMSFs with new deal

Australian First Mortgage has signed a deal with SMSF solutions provider SuperShift Australia in an effort to streamline the SMSF lending process for mortgage brokers.

SuperShift, a division of 2020 Group, markets a ‘turn-key’ advice offering helping borrowers to ‘shift’ their superannuation into direct property assets.

AFM’s new deal will allow brokers to refer their SMSF clients to SuperShift completely, to handle the entire SMSF transaction, or assist them via SuperShift’s wholesale model, which promises to set up all SMSF structures in 15 minutes via a no-advice model.

The SuperShift service will be available to brokers in tandem with AFM’s newly minted Platinum Option SMSF, which was launched late last year.

AFM’s David White said the alliance could see it pick up true market share in competition with SMSF heavyweights St.George and NAB, who are dominating the sector.

“We are now educating our broker affiliates that they can make a strategic imprint within their client base, the general community, their business centres around and achieve professional cut through by understanding the opportunity and following a simple process.”

White said the ease of referral for SuperShift is “one of the very best” he had ever seen.

“Part of the problem with brokers getting into this space is the need to refer clients back to

their accountant, advisor or solicitor to set up the structures, and then weeks or even months later David White get them back in for a loan – it’s a long time to wait and patience naturally can grow thin,” he explained.

“With SuperShift, the whole process can be done with a client in the broker’s office – fully setting up all structures in approximately 15 minutes with a no advice model.”

If help is needed, SuperShift is offering AFM a virtual office and an on-the ground BDM team to provide support.

SuperShift is headed by adviser Nic Ellis, who said AFM offered an excellent SMSF product.

“The AFM broker network enables us to distribute our SuperShift product through their distribution channel and then partner the serious broker who wants to develop their business model and profit in this tremendous new growing area,” Ellis said.

“It also allows other brokers to set up a more casual referral model and build passive income streams from being provided with a safe home from opportunities that may arise.”

SuperShift’s services to SMSF borrowers • Investigates the appropriateness of the strategy • Calculates maximum purchase price of property • Sets up all tax, legal and lending structures • Organises rollovers from existing super funds • Offers buyers’ agent services to find property • Facilitiates conveyancing of the property • Property manages the SMSF-owned property • Manages the SMSF on an ongoing basis • Provides tax depreciation reports

18 brokernews.com.au

News Aggregator boasts February sales triumph AFG has announced its highest February sales in the history of its mortgage sales index in a month when borrowers flocked back to fixed rates.

The broker has announced sales of $2.8bn for the month, trumping 2011’s result of $2bn and 2010’s sales of $2.2bn. AFG also stated that record numbers of borrowers were gravitating towards fixed rates in the wake of banks decoupling from the cash rate.

AFG general manager of sales and operations, Mark Hewitt, said the data indicated the dynamics of the mortgage market were shifting.

“The very good news is that the past six months has seen a steady stream of first homebuyers return, which is vital to the future of property markets. As well as this, increasing competition among

major and non-major lenders, and the decoupling of lender rate announcements from the RBA is making the mortgage market a more complex place,” Hewitt said.

This “steady stream” of first homebuyers accounted for 14.9% of AFG’s loans in February. The result was down slightly from 15.8% in January, but first homebuyer participation has remained largely consistent for the

aggregator, holding around the 15–16% range since August 2011.

As new homebuyers enter the market, Hewitt said brokers are well placed to take advantage of an increasingly confusing and complex lending environment.

“This is an environment in which brokers thrive, because borrowers know they really need to shop around for the best deal, and increasingly rely on us to do so,” he said.

The proportion of fixed rate loans rose to its highest at 23.2%, while average loan size cracked the $400,000 mark.

There was good news for smaller

lenders as well. Major banks lost some of their market power, with their share of home loans dropping from Mark Hewitt 79% in January to 76.1% in February.

AFG said the change was due to an increasing trend among first homebuyers to seek out non-major lenders. More than 29% of first homebuyers chose to go with a non-major lender in February, up from 27.4% in January.

AFG Mortgage sales: Last four months TOTAL Majors

REFINANCERS

Non-majors

Majors

FHBs

Non-majors

Majors

INVESTORS

Non-majors

Majors

Non-majors

Nov-11

80.40%

19.60%

78.90%

21%

71.30%

28.70%

82.60%

17.40%

Dec-11

75.70%

24.30%

71.20%

28.80%

71.70%

28.30%

78.00%

21.90%

Jan-12

79.00%

21.00%

78.90%

21.10%

72.60%

27.40%

83.10%

16.90%

Feb-12

76.10%

23.90%

78.70%

21.30%

70.90%

29.10%

82.90%

17.70%

Source:AFG

Shaky housing finding its footing

SMEs pressing on, despite finance difficulties

Housing declines in January have been offset by a solid February, but the result has left the market flat.

The inaugural RP Data – Rismark Hedonic Daily Home Value Index has indicated a slight rise for the market for February, reversing declines at the start of the year. Capital city values notched up a 0.8% rise for the month, all but erasing the 1% decline they saw in January. RP Data research director Tim Lawless said Reserve Bank cuts have helped to stabilise – not to supercharge – housing values.

“While the rate of decline in Australian home values has eased in 2012, conditions remain soft across most capital cities. The November and December RBA

SME confidence has taken a dive as businesses have difficulty securing finance, but few are considering closing up shop.

The Sensis Business Index has found confidence among small and medium businesses has taken a hit. The index found 30% of businesses are worried about the year ahead, including 10% who said they were extremely worried.

“While we are not seeing anything like the low levels of six months ago, business confidence is considerably down on this time last year,” report author Christena Singh said.

Singh said small businesses felt it was difficult to access the finance necessary for business

Key indicators of confidence for March 2012 Indicator

Mar-12

Business confidence

­ 27%

Sales

¯ 4%

Employment

¯ 4%

Wages and salaries

­5%

Prices

­ 8%

Profitability

¯ 11%

Capital expenditure

¯ 16%

Source: Sensis

cash rate cuts have improved affordability but have not yet fed into higher home values, which is no surprise,” he said.

Rismark’s Ben Skillbeck agreed, and said the market was showing signs of life even before the Reserve Bank moved on rates.

“The strong February results, accented by capital gains in Melbourne and Sydney of 1.8% and 0.8%, respectively, likely reflect the impact of the November and December rate cuts. Even before the RBA reduced rates, housing finance flows were staging a rebound with the ABS reported seasonally-adjusted number of new home loans approved for people buying established dwellings rising for nine consecutive months,” he said.

Capital city values have still seen a 4.4% year-on-year decline, with markets ranging from 0.4% increase in Canberra to a whopping 8.3% decline in Hobart. But Lawless said higher rental yields have helped to offset capital losses, and pointed to signs that shakiness in the housing market may be lessening.

“Auction clearance rates aren’t moving any lower. In fact, last week’s clearance rate was above 50% for the first time since July last year.

investment, and that this sentiment had led to weak capital expenditure trends. She said businesses are also expecting weak trading conditions for the next quarter and the year ahead.

SMEs also took aim at the Federal Government’s policies relating to business. While support for government policy improved “marginally” during the quarter, Singh indicated it was “significantly weaker” than a year ago. The main reasons SMEs gave for their displeasure were a lack of incentives, too much bureaucracy, the introduction of new taxes and the perception that the Federal Government only concerned itself with “big business”.

February sees housing bounce back Monthly change in value

Quarterly change in value

Sydney

0.80%

-0.50%

-2.70%

Melbourne

1.80%

0.30%

-5.40%

Brisbane

-0.10%

-0.30%

-7.60%

Adelaide

1.00%

-2.70%

-3.70%

Perth

-1.80%

0.80%

-4.60%

Hobart

2.20%

-0.90%

-8.30%

Darwin

5.00%

4.10%

-5.10%

Canberra

1.90%

-0.30%

0.40%

Capitals

0.80%

-0.20%

-4.40%

Source: RP Data

Yearly change in value

20

brokernews.com.au

Comment OPINION

What do we want mortgage stress to be?

There is a crucial difference between a ‘household’ and a ‘family’, and as ARAP’s Greg Campbell explains, society needs to choose how we define mortgage stress Mortgage stress is typically defined as a situation where a household is paying above 30% of its income on mortgage repayments. Whilst I agree with the 30% hurdle in this definition, what’s missing is an understanding of what a household really is and what makes up the income upon which that 30% assessment is based. This is where real mortgage stress resides.

In attempting to quantify mortgage stress we indiscriminately talk in economic units such as household income and house prices. However, to really understand mortgage stress we need to consider a home instead of a house and a family instead of a household.

To me a house is an asset on a balance sheet and a household represents the occupants in a form of accommodation regardless of whether they are a family unit or flat mates. A home on the other hand is where families live and households are made up of families comprising Greg Campbell

various combinations of provider, nurturer and dependants, all performing important societal roles beyond just providing household income and being consumers.

Only by relating to the real life circumstances of a family in their home can we properly understand mortgage stress and determine sustainable solutions.

A shifting economy

Over the last 30 years there has been a fundamental shift in the pricing of the family home. Whereas the price of the family home used to be based on one income, in the last three decades it has changed to being based on two. Putting this in social terms, whereas the price of the family home used to be based on the income of the family’s provider/protector it now also requires an income from the family’s nurturer.

When I started in real estate I was encouraged to save a 30% deposit for my first home. I didn’t achieve that, but I did save 20%, meaning I borrowed from the bank on an 80% LVR. An LVR we now hear a lot of property and finance industry participants complaining about as being too low. As importantly, if not more, the interest cover on my first

mortgage was based on my income only; it did not include my wife’s, and in our mortgage application we had to allow for a couple of percentage points increase in the interest rate.

In 1992 the property developer I was working for went bust and I was out of work for six months.

Fortunately we were able to rely on my wife’s income plus our savings so we never missed a mortgage payment. Had our mortgage been originally based on both our incomes we would have been in serious trouble. And even though we were able to make our repayments, I can assure you we

To really understand mortgage stress we need to consider a home instead of a house, and a family instead of a household lived with mortgage stress for those six months with every dollar being accounted for.

For many Australian families this is how they live every day.

The provider/protector as well as the nurturer both need to work in order to meet the family mortgage repayments, and they still account for every dollar. Mum doesn’t work because she wants to; she works because she has to.

If Mum is working because she has to instead of wanting to (note the difference – I have nothing against working Mums, as long as it’s their choice) then how does she find the emotional strength, let alone time, to nurture the family?

By my way of thinking mortgage stress can exist even when mortgage payments are less than 30% of a household’s income.

Stimulus and stress

So how did home pricing evolve from being based on one income to two? In short – easy credit and government handouts.

Without any question, the First

Home Owners Grant increased prices. That’s why many refer to it as the home vendors grant.

Instead of home prices naturally coming back to what families could afford, governments on both sides artificially increased affordability to maintain prices (simple supply– demand economics). The trouble with this social policy is that when you turn off the bonus you instantly reduce affordability. Sales drop and industry calls for the re-introduction of government assistance. Our societal choice is to indefinitely maintain such schemes or take our medicine and stay off these artificial benefits that are ultimately not beneficial (think Greece).

Six years ago I could have bought property with almost no deposit.

Heck, they’d even lend me the deposit. Banks were throwing credit at us; remember “Equity Mate”? Not only did lending institutions lower borrower criterion but also by including the partner’s income we could afford an even more expensive property. Easy credit is another form of artificially increasing affordability to improve price growth – but at what cost?

Easy credit and government handouts were the major contributors to the median house price approximately doubling in most capital cities in the first decade of this century.

Do government incentives and lower lending criterion relieve mortgage stress or ultimately just make it worse?

The right measure

The property market will come back into equilibrium; it’s nature’s way and it is inevitable. It’s only a question of how long this will take but the more we interfere in this re-balancing the longer it will take. For various reasons America let its real estate market drop whereas in Australia our banks have endeavoured to protect their balance sheets by softening the landing, thereby prolonging the time it will take for the market to realise a new equilibrium. It is a question of affordability (supply and demand); if prices don’t come back then we have to wait until demand catches up through affordability i.e. wages growth.

The question we have to ask ourselves as a society is how we want to measure affordability; as a household or a family?

Greg Campbell is the director of ARAP, which assists clients facing mortgage default overcome their difficulties through an ‘Agreed Risk Adjusted Purchase’.

brokernews.com.au

21

Review

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What a difference a year makes … or not. Australian Broker reflects on the punditry, breaking news and trends that made headlines in the magazine 12 months ago Australian Broker Issue 8.5

Headline: Non-banks are back, while LVRs shrink (page 2) What we reported: Last February saw non-bank market share

rise to levels not seen since prior to the GFC. AFG reported that non-bank lenders snared 21% of the mortgage market, up from a 15.4% market share in the December 2010 quarter. The aggregator also pointed to a more conservative approach among borrowers. The average LVR declined to 53.2%, the most conservative result in six years. The decline in LVRs came in spite of more lenders easing policies towards deposits, and LVRs on offer creeping up towards pre-GFC levels. The company also reported overall mortgage sales of $2bn, down from the $2.2bn it recorded the previous February.

What’s happened since:

Non-banks saw a particularly good February this year, with nonmajors claiming 23.9% of the market. Borrowers also began to jump on higher LVRs. The average loan to value ratio in February was 67.7%, while January saw average LVRs at 68.9%. Banks continued to move LVRs north of 90% throughout 2011 and the beginning of 2012. Recent RateCity research showed 70% of lenders in Australia offered LVRs of 95% and above. This compares with only 50% two years ago. As for AFG’s sales, the company saw a banner February, recording 2.8bn in home loan sales.

Headline: NAB acts to improve broker service (page 8) What we reported:

NAB Broker general manager of distribution John Flavell last year vowed that the bank was improving its service to brokers through a simplification of its mortgage documents and an increase in its outbound calling. He said the bank would look to provide its loan offer document and mortgage document as part of one pack, rather than the previous two he said had caused difficulty for brokers and borrowers. Flavell also promised “more rigour” around calling brokers direct rather than relying on emails or SMS messaging.

What’s happened since:

NAB Broker caused some surprise – and won praise – when it scrapped its star rating system last year. The bank opened perks previously reserved for its top tier across its broker network. Flavell announced that all the company’s accredited brokers would be able to order online valuations, and that all brokers would now receive 65bps in upfront commission. Flavell also touted the bank’s service improvements, and said its satisfaction rating from brokers had reached an all-time high.

Headline: Bankwest sweetens broker deal (page 8) What we reported: Bankwest last year sought to woo brokers

with a 10bp sweetener to upfront commissions on loans with LVRs of 75% or less. The promotion followed a 10bp conversion initiative run by the bank in 2010 to reward loan quality and conversion ratios.

The bank also waived application fees on its products. Bankwest head of specialist banking Ian Rakhit said the initiatives were a “direct response” to moves by other banks to ramp up competition.

What’s happened since:Bankwest this year tipped further

process improvements it said would make it easier for brokers to lodge deals with the bank. Rakhit said Bankwest would aim to cut its approval time from eight days to four days by adding a dedicated underwriting authority and allowing supporting documents to be emailed into a file rather than faxed. He said the bank was working on a platform for electronically sent contracts, and deal-specific document checklists. Rakhit urged brokers to “come to the party”.

Headline: Consumer group pushes for exit fee ban (page 12) What we reported: As the industry braced itself last year for the government’s mooted exit fee ban, consumer group CHOICE praised the ban and claimed that it would not hurt smaller lenders. While a variety of small lenders stated that the ban would severely impact margins and lead to a less competitive landscape, CHOICE Better Banking campaign director Richard Lloyd claimed the consumer watchdog had conducted dialogue with small lenders, and stated that exit fees were not “as significant to them as they are to the big banks”.

What’s happened since: It was fairly difficult to find any small

lenders who echoed Lloyd’s remarks, but the DEF ban has come into place without apocalyptic results. CHOICE, meanwhile, has managed to draw the ire of the industry several times over the last year. The group participated in the controversial Big Bank Switch program, which saw it receive referral fees for directing clients to lenders (after having criticised broker commissions). The group also stirred controversy by calling the quality of financial advice available in Australia “crap”.

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brokernews.com.au

Comment VIEWPOINT

Tony Bice, Finance Made Easy

The banks aren’t making rates easily predictable for borrowers – a situation good for brokers, as is a rebound in commercial fortunes, say our industry insiders

Ken Sayer, Mortgage House

Rates uncertain? Get closer to clients Ring five clients a day. That’s the message from Finance Made Easy’s Tony Bice, who argues bank rate moves above and beyond the RBA is creating opportunities for brokers to connect with clients.

“If you ring five clients a day and just say hello, and bring up in your conversation what’s happened and the confusion around it, I think most of those clients would be attracted to listening to an alternative,” Bice told Australian BrokerNews TV. Brokers should be taking every opportunity to talk to their clients about the changes, which could include sending out a “short sharp newsletter” detailing the moves.

“The media that we have seen in the weeks following the changes has created an opportunity, and if a broker leverages that and provides key advice they could do very well out of it.”

Likewise, Mortgage House’s Ken Sayer. “Brokers that are very close to their clients and stay in touch on regular basis will see the

Sarah Wells, redconcierge

fruit and realise the upside very quickly,” he said.

But what to tell clients? That’s the tough question, says redconcierge’s Sarah Wells.

“Most of my clients are asking at the moment do I have a crystal ball on what is going to happen.

Unfortunately I don’t.”

Sayer is less circumspect. “I think the official cash rates will continue to drop over the short foreseeable future. However, bank margins have to increase,” Sayer said. “So my advice to clients right now is to negotiate a fixed rate loan for at least one to two years, and keep a portion of that variable.

What we used to do many years ago is suggest a 50/50 split; my mind is a very sharp one- to two-year fixed rate for 75%, and keep 25% variable.

Wells said she is seeing a swing away from the big four. “There was a move towards the big four banks during the GFC when people where confused and concerned about the imminent issues in the banking system. There does seem to be a trend towards people looking more towards the second tier and smaller institutions,” she said.

Iain Forbes, Australian First Mortgage

Ranjit Thambyrajah, Acuity Funding

Don’t just think commercial “My advice to all brokers is to think commercial.”

Sounds counterintuitive? Sure, the commercial market has been under pressure post-GFC, but Iain Forbes of Australian First Mortgage and other brokers and lenders involved say the market is bouncing back – and resi brokers are set to miss out on the new boom.

According to Acuity Funding’s Ranjit Thambyrajah – MPA’s Top Commercial Broker for 2011 – the commercial arena should not be shunned or ignored by residential brokers.

“I think we are in good times for commercial from a broker’s point of view. If you have a client, well clients aren’t sourcing finance that easy – so that’s a good thing for a broker. And the clients are keen to get specialist knowledge,” Thambyrajah explains.

“Especially with residential broking being a bit oversupplied at this time, and banks not rewarding brokers as they once did – you just can’t ignore it. So, for a broker it is

Cathy Dimarchos, Sintex Consolidated

really important to partner with an expert in the field.”

“There seems to be a nice vibe actually being generated in the marketplace, particularly in the non-bank sector,” Sintex Conslidated’s Cathy Dimarchos says.

“A lot of brokers are approaching Sintex to become accredited, and that is a new space for us. What has also been really interesting is seeing that rejuvenation of business coming from our mortgage managers. There has been a bit of a lull in the commercial space for them but we are seeing them, I guess, being approached for commercial business as opposed to going back to the banks,” Dimarchos said.

Iain Forbes said it is all about diversification. “Make your business a one-stop-shop,” he says.

“It is a matter of diversification – and at the end of the day it is extra income. Commercial is not difficult, particularly when you have a lender at the other end of the phone. If need be we will will come out and meet your client, and structure that deal.”

FORUM When ASIC redefined the term ‘independence’, the reaction from brokers – who are unable to use the term in front of customers – was predictable (ASIC muddies waters by dubbing brokers independent, 5/03/2012) I have been in business as an SME for 35 of my 54 years and have always known the stranglehold the ‘pillars’ have on our economy. Consequently, since I began broking in 1999 I have proudly worn my ‘independence’ on my sleeve. This revelation of the lumbering, blundering policeman stepping on its own toes should be no surprise to all of us who

Brokers were again unimpressed by the lack of awareness around the recently introduced Key Facts Sheet (Consumers, banks in the dark on key facts sheet, 01/03/2012) The Key Facts Sheet is only required when the consumer asks for it.

There’s absolutely no awareness in the public of its existence. What did the Treasury expect?

PeterT on 01 Mar 2012 12:00 PM Given the info that has to be included in a broker’s finance contract, there is not even a need for these fact sheets. Any broker worth his salt has access to software to determine product competitiveness etc; why anyone these days walks into a bank looking for a loan is anyone’s guess.

Damien on 01 Mar 2012 05:37 PM

Prime Minister Julia Gillard and challenger Kevin Rudd dominated headlines in late February, and brokers were left disappointed by the outcome My preference is JOE HOCKEY iMac on 24 Feb 2012 09:55 AM Out of those two I’d take Rudd.

But both have proved incompetent during their reigns. Libs please.

Trent on 24 Feb 2012 12:11 PM

have watched the system forever cater to the big end of town. Let us rejoice in our independence, and may ASIC never again tell us such an important word and concept is off-limits.

Independently yours, Michael Bates Crown Capital MichaelBates on 05 Mar 2012 11:40 AM As clear as mud! ozboy on 05 Mar 2012 10:43 AM Does the left hand know what the right hand is doing. Absolutely not! sidbroker on 05 Mar 2012 10:18 AM

Given a choice I wouldn’t choose either, but I’d take Gillard over Rudd any day. Rudd couldn’t get anything done with a majority government. What was done was badly thought out and badly implemented. Gillard has had a difficult minority government being attacked on all sides. I don’t like many of the things she’s done, but she has gotten things done. That deserves some credit. Rudd led by opinion poll, what’s popular. Gillard tries to do what she thinks is best for the country.

PeterT on 28 Feb 2012 11:48 AM

Meanwhile, Michael Maher had his say on the incoming positive credit reporting regime.

Our business, Fair Go Finance, provides personal loans to credit impaired clients, often needing instant access to cash. We rely on the current “negative” reporting system through Veda Advantage to assess the client’s application. The comment that “consumers often misrepresent their credit history” is confirmed daily in our business. Consumers do not like to remember nor admit to financial blemishes, human nature is often to only remember the good. That said, I therefore fully support the incoming positive credit reporting system as I believe it will better reflect a client’s credit worthiness.

Michael Maher – Fair Go Finance on 29 Feb 2012 11:26 PM  To vote in our latest online poll or get involved in our forum, visit our home page at brokernews.com.au

Poll: Where is most of your new business coming from in the current market?

Mortgage market dynamics are constantly shifting. We asked brokers what sector of the market they expected their business to come from in March.

Investors 21% Source: Australian BrokerNews

First homebuyers 14%

Refinancing 65%

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brokernews.com.au

Insight

Refining your pitch

products is written for your buyers, not you, and that it explains how you will help them. Most ‘brochures’ are still written for the company, not the customer. It glorifies the company and its products and its founders or CEOs rather than speaking directly to the customer about their issues, concerns or aspirations. What’s crucial and missing is the explanation about how the company is best suited to help the customer solve their problems, generate new ideas, realise their goals and achieve results.

Rule number 2: What’s your statement?

Never answer the buyer’s question “so what do you do?” by handing out your company or product brochure.

Instead make sure that you have a one to two sentence statement that quickly and succinctly explains WHY & WHAT: what you stand for and what you do.

Rule number 3: The ‘common problems we solve’ hand-out

Boring a client with selfindulgent monologues is a trap that experienced brokers avoid – so how can you articulate your value succinctly?

Sue Barrett discusses the essentials.

E

ver been asked at the very beginning of a prospective client meeting exactly what you do despite your sincere intention to ask questions of the buyer – not talk about yourself?

I bet you have and I bet you found yourself on more than one occasion feeling somewhat uncomfortable because: a) You didn’t know what to say quickly and succinctly, thus making yourself feel and look a bit silly; or b) You ended up talking about your business, your products and yourself ad nauseam while watching your client or buyer’s eyes glaze over.

Hmm, awkward. Why do most of us find this awkward?

Because we have been asked to validate ourselves; establish our credentials; prove our worth to the buyer – quickly.

If we’re not prepared we can often find ourselves floundering and we don’t want to find ourselves stuck in a 15–20 minute monologue talking about ourselves and our company. However, we still need to answer the question “what do you do?” in a manner that has our buyer feeling at ease with our answer and wanting to continue the conversation.

Avoiding these awkward situations is simple if we are prepared to look at ourselves through our buyers and clients’ eyes. Here are some simple rules we can follow to help us positively validate ourselves and position us positively in the minds and hearts of our clients.

Rule number 1: What does your marketing material say to your customer?

Make sure marketing literature about your company and

After opening with your statement of ‘why & what’, immediately show your client your ‘common problems we solve’ document. As mentioned, never start showing your prospective buyer the company or product brochure that makes no sense to them because it is not contextually anchored. Instead create a ‘common problems we solve’ document/page. Products and services sell because they solve problems for our customers and help them achieve results. A ‘problem’ can be interpreted as an issue, opportunity or priority a client wants to address.

By understanding this, you can deliver value to your customer rather than just selling to them based on price and product. To ensure that you do not miss valuable business opportunities, always think about your business in terms of problems you solve. After they have finished reading this list of common problems, ask them: ‘Is there anything on the list that is relevant to you now?’ The answer is invariably ‘yes’.

Rule number 4: How do we do it?

Whether or not the buyer indicates their issues are represented on your list, you now have an opportunity to explain to them how you go about helping people (at a high level – no details or specifics yet).

You can combine rules two and four in one statement, followed by Rule three if that seems to flow more easily.

And it is important that you use your own words. These statements also help you out when you meet people in all sorts of other situations. For example, they can be used as your “elevator” pitch or your “BBQ” speech, though they may need some refinement depending on the level of your audience.

So, to recap, instead of drawing yourself into a 15–20 minute monologue or being caught like a rabbit in the head lights, now you can quickly and succinctly validate yourself and position yourself to begin to ask questions and listen to their real priorities. Once you’ve established their priorities you can talk specifics about how you can help them, but not before.

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brokernews.com.au

Market talk A healthy dose of fear Consumer wariness and pessimism may have had a positive side effect: Australians are in a surprisingly good financial position

T

he predominant story of the past 12 months or so has been one of economic uncertainty, and consumers have shown a bent towards pessimism when it comes to Australia’s financial future. But this dour outlook may have had an unintended – and positive – consequence.

New research shows that Aussies are tracking remarkably well with their finances.

The Bankwest Financial Fitness Index has found Australians are handling their personal finances better than in the past. The 2011 index indicated that the number of Australians classed as “financially unfit” has fallen from 31% in 2010 to 24% in 2011. In contrast, 25% were considered financially fit, up from only 17% last year. Meanwhile, 51% fell in the middle ground of “borderline financial fitness”.

It may seem a shallow victory that financially fit Australians are roughly equal in number to those financially unfit, but there are encouraging signs personal finances are improving. Forty-six per cent of Australians have become more conservative in their spending patterns. In addition, 79% of Australians said they are not paying any more to service debt this year than they did last year.

While this improving financial position may belie the trend towards consumer caution, Bankwest retail chief executive Vittoria Shortt suggested that it is just this caution that has put Australians in a better financial position.

“Consumers are responding to the economic uncertainty by being more careful with their finances, such as using cash or debit cards to make purchases rather than credit. This follows on from last year when consumers were making a conscious effort to reduce their debt levels and curb their spending,” Shortt said.

Young, afraid and fit

The trend has particularly caught on among younger Australians. Gen Y were the most likely to say they had cut their spending over the past year, with 51% saying they had become more conservative. While only 12% were categorised as financially fit, this was a 6% increase on the year before – the largest of any generation.

“Generation Y is the least burdened with long-term debt, such as a mortgage, so they have the most leg room to change their immediate habits. Their fear of rising unemployment is driving their conservative spending behaviour, including reduced dependence on credit cards,” Shortt said.

Rising costs are also leading to a more measured approach towards spending. The majority of the index’s respondents said they had seen food, energy and transport costs rise over the past year, and 41% said housing costs were up as well. While no one wants to do it tough, it appears the growing cost of living is actually putting many people in a more responsible financial position.

Wealth Today managing director Tony Pennells said he has seen firsthand the effects of consumer caution and

Health check: How financially fit are Australians? $

Most financially fit state

→

Victoria (28% financially fit)

$

Most financially unfit state

→

Queensland (31% financially unfit)

$

Generation in the worst financial shape

→

Gen X (38% financially unfit)

$

Generation in the best financial shape

→

Retirees (39% financially fit)

$

Proportion of financially unfit males

→

21%

$

Proportion of financially unfit females

→

34%

fear following the GFC, and that it has actually helped to reverse bad financial habits.

“I would 100% agree if it continues long-term. One of the things we’ve seen is that with a couple of decades of growth, almost anything consumers tried to invest in or touch went up in value. They very much started using their homes as their own personal credit card. What’s happened since the GFC is the realisation that you can’t assume every asset is always going to go up in value and you have to pay that debt back, and I think that’s a good thing,” he said.

Fear may be spurring Australians towards a better financial future, but Shortt has argued there is still some way to go. While economic uncertainty has led to an increase in our financial fitness, Shortt argued too many Australians continue to throw caution to the wind.

“Although we are developing positive habits, a quarter of Australians are still over-reliant on debt, have less savings and insurance, and are struggling with relatively higher housing costs,” Shortt said.

But a little bit of fear is nothing to be afraid of, Pennells said. As more consumers learn the difficult lessons of the GFC, fewer rush into sinking themselves in debt. “If people now are seeing that they need to put their surplus money into clearing debt, [fear] definitely has a benefit,” he said.

Have Australians become more or less conservative in their spending?

8%

44%

48% More Less No change

Australia’s overall financial fitness

51%

25%

24%

Financially fit Borderline fitness Financially unfit Source: Bankwest Financial Fitness Index

brokernews.com.au

27

Pent-up demand to release this year: BIS Pent-up investment demand is set to kick into gear from late this year, provided consumer and business confidence isn’t delivered another shock.

BIS Shrapnel has delivered an update to its long-term forecast for the Australian economy, and has predicted that credit hunger could reawaken in 2012. The forecaster conceded that the demand to take on more debt has been extremely weak over the past year.

“Households have been trying to deleverage since the onset of the Global Financial Crisis.

As a result, the household saving rate has increased to its highest level since the 1980s, housing credit growth has fallen to its lowest

annual rate on record, and the level of business credit remains nearly 10% below its late 2008 peak,” BIS said.

BIS commented that credit providers had also taken a hit from weak demand. This weak demand, BIS said, had flowed through consumer credit as well as business credit, with resources-reliant industries remaining the only driver of investment activity.

“Business investment outside the mining industry has been weak as a result of businesses deleveraging and maintaining a cost-containment and cash-preservation focus since the Global Financial Crisis. This weak investment has had a flow-on impact on those

‘Mixed fortunes’ ahead The forecaster pointed out the good and bad leading indicators for the economy’s future.

• Household spending is once again growing in line with incomes, but a lot of the increased spending is happening overseas, and is therefore by-passing local retailers.

• Firms exposed to the minerals boom are making large profits and increasing employment.

• Many other trade-exposed firms are downsizing or closing completely given the prospect of an extended period of the Australian dollar being around or above parity against the US dollar.

• Other firms are trying to decipher whether the current weak demand they are experiencing is because the benefits of the economic upswing are just around the corner or is it because demand for the goods and services they provide are now structurally lower.

• Many industries, sheltered from the high Australian dollar but still affected by the weakness of investment are struggling, with their activity and profits remaining weak.

industries servicing that investment,” the forecaster said.

But the trend is not set to last, BIS predicted.

The company said pent-up demand was due to release late in 2012, but offered the caveat that another shock to confidence or a trend of credit rationing could scuttle any recovery.

“The negative news coming out of Europe and the United States has weighed heavily on consumer and business confidence. It has also encouraged creditors to tighten lending standards. Hence, private dwelling and non-dwelling building activity has been very low for some time. This under-investment has created pent-up investment demand, which will drive activity from late this year provided the required funding is available and consumer and business confidence does not take another hit,” BIS said.

The news from Europe and the US has dampened business confidence

Source: BIS Shrapnel

NUMBER CRUNCHING Average loan-to-value ratios across the country

What market segment do brokers say they see the most business from?

Refinancers

20%

Property investors Self-employed borrowers First homebuyers

36%

3%

67.7%

66.7%

70.2%

68%

66.4%

68.1%

66.7%

Source: Loan Market

February 2012 NSW Source: AFG

QLD

SA

VIC

WA

NT

Australia

41% At a glance…

69%

*

*The proportion of home loan products offering LVRs of 95% or above

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brokernews.com.au

Toolkit

Finding an office Getting a permanent office address marks a coming of age for many broking businesses. Here’s how Brisbane’s Get Real Finance made their journey from home to office.

W

hen Kelly Cameron-Tull and her husband Brett launched brokerage Get Real Finance, it was in downstairs level of their two-storey home in Windsor in Brisbane’s north. However, living upstairs and working downstairs wasn’t going to work for them forever.

“We wanted to separate our office from our home,” Brett Tull explains. “At the time, Kelly had had a baby, so it was really important for us to have those two things apart.”

Their only choice was to find a new office – either leased, or purchased – to enable them to grow both business and their family independently of each other.

But what should a broker look for in a new office premises – or is it still even better to be mobile?

Finding an office

We wanted to separate our office from our home

Kelly Cameron-Tull

Poll Are brokers with their own licences seen by clients as more ‘professional’ than mobile brokers?

Yes 61% No 26% Depends on the broker 13% Source: Australian BrokerNews online poll

For the Tulls, leasing was initially the preferred option.

But finding the right new home for Get Real Finance was difficult. “You always have requirements such as size, facilities and aesthetics you need to consider. We were looking for something around 100 square metres, and we saw a lot in that range, but there was always a box or two they didn’t tick.”

The result? Purchasing turned out to be the best choice.

“As I was searching I started looking at the “For Sale” page, and one of the first ones we saw we ended up buying,” he said.

The Tulls saw advantages in being able to treat their new office – a two-storey house in Brisbane’s innersuburb of Fortitude Valley – as an investment property.

They created a stream of revenue by leasing out the top floor and basing their business downstairs.

Tull said while considering leasing, he also discovered more how much control experienced landlords have, and that being their own landlord gave them flexibility “down the track”.

“When you sign a lease for three plus three [years], you have to be confident you are going to be fine there for three years no matter what happens to the business. If you zone in on a particular size, you’ve got to consider your growth. For example: what if we want to grow to four brokers if our business grows? We’d have to send them out on the road to hot desk.”

Tull said buying their business premises meant the business could choose to move if necessary. After all, they could always lease out the downstairs space for income.

Deal makers and breakers

Mortgage brokers are in the business of providing access to home finance. So what better place for a business to be based than a comfortable two-storey home?

“It was important for us to have a professional looking office, but we didn’t need the retail, high street exposure – so we tended to look at the back streets,” Tull said.

“As we are as much in property as we are in finance – and we have a lot of mums and dads in the house – we liked the idea of being in a commercial property that was a house. It had to have a warm, welcoming feeling, to make clients feel at home,” he said.

But that wasn’t the only thing to consider. For one, there was street parking (“We didn’t want them putting money in a meter”) and the visibility of signage (“We had to consider how customers could see it from both directions, particularly at night”). Tull said not being

located on a main street, the current location meant there was always good street parking where customers could find at least one parking spot, though they are also considering putting in a second driveway to expand the options available to clients. For signage, the Tulls installed signs that picked up headlights, and put two that could be seen in both directions.

When is an office right?

For a traditionally mobile profession, it is often difficult for brokers to know when – and if – moving into an office is the right decision to make for their business growth.

Brett Tull said that a business needs to be “reasonably mature” in its process and offering to make an office work. “Most people lease for at least two years, so if you are not set up in what you are offering to clients and you don’t know how you are going to get them, then tens of thousands on rent is a lot of money to kick in with business not coming through the door.”

Brokers also need to be confident in getting their clients to come to them. “Two or three years ago Kelly used to go out to 90% of meetings. It was a big call to change this, but we talked about how to do it, and we have had very little opposition from clients if any,” he said.

“Being a broker is not about having an office really. But once you build referrals and your client base, you’ll know when the time is right,” Tull said.

Brokers on offices and professionalism Having an office is certainly the preferred option, but justifying the expense is questionable.

Factor in rent, power, travelling costs, phone and internet, etc and I’m paying about $2,800 a month. With predominantly repeat and referred business, I find it hard to justify and will be setting up a home office in the near future. It really depends on your business model.

Colin Kelly on 10 Feb 2012 11:19 AM Yes, I believe that a professional commercial office adds significantly to the professional image/perception of a broker in the clients and referrers eyes. However, there are many professional brokers that do not operate from commercial premises as well. We work closely with many accountants and they are far more comfortable in referring their clients to us because we operate from professional premises.

While it is a big expense, it does generate significant business as well, so like Glenn says, it is a marketing strategy as well.

Jon Colley – Loan Wize on 10 Feb 2012 11:50 AM As I have always said, if you are professional in yourself that is the main requirement. As most potential clients like to be seen in the comfort of their home, why have a commercial office if you can set up a separate office in your home? It is not as if the potential client will be coming out of their home at night to meet you at a commercial office. I have been in the finance industry for over 30 years. You would have to write a lot of business just to cover the costs associated with having commercial office space.

Coast Broker on 14 Feb 2012 09:41 AM

brokernews.com.au

29

People Industry legend Bowell farewelled

Eric Bowell

Industry stalwart and former QBE LMI senior manager Eric Bowell was farewelled at his funeral in

February. Bowell passed away in Sydney following a battle with cancer. His funeral was held at Northridge Vineyard Christian Fellowship in Thornleigh.

Bowell, an Associate MFAA member, is survived by his wife Katy and four children Gareth, Rhys, Jeremy and Gabrielle.

Oxygen Home Loans general manager James Green remembered Bowell as “an industry legend” and credited him with helping to drive non-bank competition throughout the 1990s, as well as helping to guide the transition of PMI to QBE LMI. “Heaps of people will be saddened by this,” Green said.

Vale Eric Bowell, a true gentleman and stalwart of the mortgage industry.

Justin Delanty on 23 Feb 2012 10:31 AM Eric was a true gentleman and a great guy. I was sorry to read this sad news. Farewell Eric.

Judy Micallef on 23 Feb 2012 11:06 AM A true gentleman. Few and far between in our industry. Vale Eric. Will

miss your wisdom.

Craig N on 23 Feb 2012 07:40 PM I first met Eric when I was GM of AMIC and he was with Allied Mortgage and Investment in NZ. I recruited Eric as manager of AMIC NZ and after I retired from CUAMIC Richard Nott brought Eric to Australia. Eric was a very fine man and a pleasure to work with. A very sad loss.

Alan Skidmore on 27 Feb 2012 03:25 PM

MFAA chief executive Phil Naylor also hailed Bowell’s legacy, saying the association was deeply saddened by his passing.

“He was a very supportive and active player within the mortgage industry as a whole and the MFAA. He had been on the

MFAA NSW and ACT council for a number of years, and he was one of those people I would describe as a quiet achiever. He didn’t make a lot of noise, but he made a lot of sense, and that’s the kind of person who’s a valuable asset to any organisation,” Naylor said.

Wisbey shifts to aid Ballast expansion

LoanKit to recruit ‘best in the west’

Mortgage Ezy head of sales and marketing Chris Wisbey has been snatched up by boutique aggregator Ballast.

Wisbey, appointed to his Mortgage Ezy role in 2009, will take on a new sales position with Ballast. Mortgage Ezy said the company had a “longstanding, excellent working relationship” with Ballast, and claimed Wisbey’s appointment to the aggregator will “further strengthen these ties”.

Mortgage Ezy chief executive Garry Driscoll praised Wisbey’s contribution to the company, but vowed that Wisbey’s departure would not negatively impact brokers. “He will be missed; however, we have built our business so that our brokers have multiple contacts within the company so that at any time

LoanKit is seeking to boost WA recruitment via the appointment of new state manager Barry Harrison.

The aggregator, which saw 20% national growth in broker numbers in the six months to December 2011, said it had added former PLAN state manager Barry Harrison to recruit the ‘best in the west’.

A former broker with experience in institutional sales and management roles, Harrison has been charged with leveraging “robust industry contacts” and providing a permanent WA recruitment presence.

LoanKit CEO Simon Dehne said brokers would benefit from Harrison’s ‘wealth of knowledge’ and would propel growth in the state. “Barry has the industry

experienced account managers are always available as well as executives from myself down who are always available to assist and get involved.”

Driscoll indicated that Wisbey’s replacement will be announced soon. Meanwhile, Ballast general manager Frank Paratore said Wisbey would help the boutique aggregator expand its presence on the East Coast.

“I’ve known Chris personally and professionally for some time and he is someone that has built an excellent reputation in the industry.

He has a track record and commitment to the broker community that we believe will bring to reality our vision of real collaborative commerce; something that ultimately we both very much see eye to eye on,” he said.

experience and contacts that will prove lucrative to our expansion plans in Western Australia.”

Harrison’s role Barry Harrison will include assisting the existing WA broker network with industry knowledge, resources and coaching that will help them drive business growth.

Harrison said he will relish the new position, and would strive to help LoanKit become a “major player”.

“I strongly believe in the proposition of this business – providing tailored solutions to established broker groups who are not satisfied by a one-sizefits-all philosophy,” he said.

Bibby launches in Western Sydney Bibby Financial Services has appointed Richard Markowski as a regional sales manager to support increasing demand for debtor finance from businesses in the Greater Western Sydney region. Markowski is based in Parramatta.

Managing Director Greg Charlwood said the appointment was an important step in the company’s growth strategy and would enable it to better service local businesses.

“Greater Western Sydney is a

very important Australian industrial region and we see excellent potential for us to support these businesses, particularly manufacturers, importer/wholesalers and business service providers,” Charlwood said.

“Richard is a qualified debtor finance professional who brings with him over 25 years of experience in the debtor finance industry. With a focus on cash flow and capital raising solutions, he will be a tremendous addition to

the Bibby team.”

Markowski said SMEs are often not well serviced by the banks, who tend to focus their efforts on the corporate sector. “This often leaves SMEs with limited professional service or advice.

SMEs cannot grow without strong cash flow and capital,” he said.

Markowski added banks may be set to further cut their lending to SMEs. “Following the recent spate of announcements regarding mass retrenchments of banking staff, it is my belief the banks will further

Greg Charlwood

reduce their lending to the SME market in the coming years.”

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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

Catch me if you…

Oh, you can?

I

nsider is a great fan of the extravagant lifestyles fraudulent mortgage brokers treat themselves to. Not ones to put their fraudulently obtained pennies away for a rainy day (like an escape to South America when their game is up), it seems brokers just love to live it up, with no thought of what the consequences might be tomorrow. And so it went for Olakunle Okubote of London in the UK, who was recently sentenced to two-anda-half years in jail. Okubote, who enjoyed a lavish lifestyle in a million pound property in the borough of Finchley, was engaged in a series of frauds, where he obtained discounts on properties that lenders and borrowers knew nothing about. Hence, these poor borrowers were in fact mortgaged for more than the value of their

property – gives negative equity a new name. He also brokered loans for criminals with false documents, one of which (Kola Ajibade, who had been imprisoned for 18 years in America for drug trafficking) eventually led to his scam coming unstuck. Okubote took his ill-won gains (which he hid via a series of bank accounts in false names) and invested not only in prime residential property, but a self-esteem boosting Bentley and a Land Rover – perhaps to aid his escape? However, he was too late for that. And now he won’t be getting behind any wheel for some time.

Round and round we go And they’re off! The RBA is first out of the gates, which will come as a surprise to some, considering the fans have been at each other’s

throats over whether the horse would go forward, back to the stalls, or just stay stubbornly put on the line. And who’s just behind? Well, it looks like ANZ, who is odds-on favourite to follow the RBA by exactly two lengths to the finish line. Then there’s that slightly tubby stayer, the Commonwealth Bank, which is behind by a length, Westpac is running high on the outside, and there’s NAB sneaking by the rest on the inside rail – but this could just be a cheap trick. Have you got your bets on? Well, if you haven’t, you’re mad, because this is the race everyone is watching, and everyone wants to be a part of – the monthly “Rate Rumble Cup”. We’ve got the politicians in the stand (Look, there’s Wayne Swan, bleating at the top of his lungs that they are all going the wrong way – doesn’t look like they’re listening) and there’s the pack of journalists (who seem to be moving about just like a flock of geese, trailing the bank pack in a predictable formation), and there’s the accompanying chorus of the housing industry choir (in tune as usual, singing to be heard over the ruckus, but drowned out as usual). And there, spectating in the stands, we have those poor, powerless masses of mortgagors, leveraged to the hilt and on the edge of their sweaty seats as they await the outcome– the biggest punters of all. Put your bets on!

Put your bets on! The stakes have never been higher – and that’s just how we like to gamble.

as too extravagant. The Spanishbased bank has sent new forms out to brokers asking borrowers to provide information not only on regular expenditures like bills and credit card payments, but irregular expenditures like subscriptions, holidays, miscellaneous goods and services, religious festivals and birthdays.

Santander has been lashed by consumer groups and brokers over the move, who have pointed out that people tend to cut down on extravagant purchases when they have a mortgage to pay. The bank claimed it had been checking one-off spends like this for years, but industry analysts argued that the more onerous restrictions on things like gift-buying and overseas travel were entirely new policies for the lender. Oh, and borrowers aren’t allowed to enter a zero for irregular expenditures, lest they want their application rejected offhand. Santander defended the move, saying it would allow them to form a more accurate view of borrowers’ expenditure. Regardless, Insider would put money that whoever came up with this policy will be visited by three ghosts on Christmas Eve.

The Santander who stole Christmas

Families looking to take out a mortgage in the U.K. better forget lavish holidays, big Christmas spends or splashing out for the occasional flatscreen TV or new iPad. The nation’s second-largest mortgage lender, Santander, has just put in place new lending criteria that would see borrowers turned down for a mortgage if the bank deemed their one-off spends

What’s this? Two dollars for coal to heat your dismal little cell? Rejected!

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