Australian Broker magazine Issue 9.09

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ISSUE 9.09 May 2012

New ‘unfair’ liability as NCCP enhanced

Jon Denovan

 Fringe lending

markets face fresh exodus as brokers shoulder full liability for conduct New slated amendments to NCCP legislation run the risk of putting brokers off non-conforming lending at a time when their attitude to the market was thawing.

The government released proposed amendments to the NCCP in April, including one that

would change the way courts address unfair or dishonest conduct by finance brokers.

Jon Denovan of Gadens Lawyers said that under previous legislation, courts could potentially make decisions impacting the terms of a lender’s loan contract.

However, under the proposed legislation financial redress for unfair behaviour is to fall upon brokers, said Denovan. While this may be good news for lenders, the move could put brokers in a difficult position particularly in the area of non-conforming borrowers.

Denovan claimed definition of ‘unfair or dishonest conduct’ could be too broad, putting brokers off what could be considered more risky lending in specialist areas.

“The difficulty is the uncertainty of it all,” he said.

“There’s already stories of brokers refusing to do anything other than prime lending because they’re afraid about the licensing impact.

You have people like Pepper and Resimac doing roadshows to say that’s the wrong interpretation of the law, and even the Assistant Treasurer has come out to say that it’s too rigid,” he said.

A relapse into broker reticence towards specialist lending may see many borrowers unnecessarily locked out of the market.

“This could be just another reason for brokers to find an excuse to refuse service to those who need it the most. They’re the ones who most need brokers.”

Denovan slammed the new amendments. “It’s what’s been expected to come along for some time, but that doesn’t mean it’s good. There should be no more regulation, because we’ve got to let the dust settle and let people understand where we’re up to,” he said. “It’s a very big piece of legislation, and lawyers are going to read it in different ways. Small businesses have no bloody chance of understanding it,” he added.

The Treasury released its proposed ‘NCCP Enhancements Bill’ in April and industry was invited to provide submissions before 7 May.

Commission vigil Close watch kept as FoFA broker threat looms Page 2

Whiter labels Advantedge tips product tweaks to support sales Page 6

Hard times WA broker laments state’s foreclosure spike Page 10

Inside this issue Forum 19 Brokers on commission bans Opinion 20 New times call for new words Feature 22 Business building via BNI Insight 24 The keys to cross-selling Market talk 26 The suburbs set to crash People 28 BDM icon leaves industry Caught on camera 29 Vow brokers converge in Sydney

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News MFAA closely watching commissions Commission bans for financial planners under the Future of Financial Advice (FoFA) reforms need to be closely watched in case any government tries ban broker commissions too, the MFAA has said.

MFAA CEO Phil Naylor recently told an assembly of Vow Financial brokers in Sydney that at present there is no indication that the Federal Government is intending to go down the path paved by FoFA, which will see commissions banned for planners in July this year.

However, he said it is the type of thing a future government might say would be a good thing to regulate for brokers as well, and for that reason had to be • FoFA commission bans could be applied to brokers • MFAA member numbers stable after NCCP fallout • New-to-market brokers need assistance to survive

monitored closely. Naylor said if commissions were banned in mortgage broking in a similar way to FoFA “that would be a huge issue for the mortgage broking sector as it is now”.

Speaking on other issues, Naylor claimed the association’s member numbers have now stablised, and that it is now focused on helping new entrants succeed.

Following a rapid drop-off from 13,800 before the global financial crisis and the subsequent introduction of new compliance obligations under NCCP, Naylor said membership numbers had remained close to 11,200 for the last six months.

He said this indicated that those brokers who still remained in the profession were more permanent players who were able to maintain viable operations into the future.

However, the MFAA has been concerned about an extremely harsh 65% drop-out rate of new entrants to the mortgage broking industry over the past five years.

COPY & FEATURES NEWS EDITOR Adam Smith PRODUCTION EDITORS Sushil Suresh, Moira Daniels ART & PRODUCTION DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan

Phil Naylor CORPORATE

Naylor said the near one-inthree survival rate had led the MFAA board to discuss its approach to the question of whether this was ‘nature’ at work – where only the ‘strong survive’ – or if it could do more to support these entrants.

“We had encouraged these new brokers to enter the industry, but we also felt we had the responsibility to help them survive,” he said.

Uneducated brokers not taken seriously A trainer has claimed brokers need to better educate themselves if they are to be taken seriously by their referral partners.

The MFAA has faced backlash over its requirement that brokers complete their Diploma, but AAMC general manager Jeff Mazzini has told Australian Broker that brokers will have to increase their educational standards if they are to build referral partnerships.

“I always say to brokers, ‘Who are your referral partners? Do you deal with real estate agents, with accountants or with financial planners? What’s their minimum level of education that they have to have to be qualified in their industry?’ It’s a Diploma. How come a broker can walk in with a

Cert IV and say they want their business?” he said.

Mazzini claimed that many accountants, financial planners and real estate agents do not take mortgage brokers seriously due to a lack of industry-wide education, and said many are reticent to refer clients to brokers.

“I go to PD days and meetings with them, and they all tell me the same thing: they will not get involved with brokers because of their skill level and education level,” he said.

While many brokers have railed against the industry’s increasing educational imposts, Mazzini claimed the standards would ultimately benefit brokers’ bottom lines.

“The whole thing they’re

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EDITOR Ben Abbott

forgetting is that upskilling and education will actually help them earn more income.

People have got the opportunity to Jeff Mazzini gain a minimum of 10% more than a person who’s not educated,” he said.

However, Mazzini said brokers were not alone in fighting against higher educational standards. He claimed this mindset was common across Australia.

“The problem with most industries across Australia is a lot of people have to be forced into study. I get frustrated because people don’t understand or appreciate the value of education,’” Mazzini said.

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Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

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Commercial lenders split on future demand Top commercial brokers are at odds over the availability of funding for commercial property deals.

MPA Top 10 Commercial Broker Ranjit Thambyrajah of Acuity Funding in Pennant Hills, NSW, said lenders are increasingly reticent to write commercial property deals.

“Banks in general are very picky

Ranjit Thambyrajah Acuity Funding

as to whom they take on, making it very difficult for large commercial clients to obtain funding,” Thambyrajah said.

Thambyrajah claimed that lenders were sparse in much of the commercial market, and that it was often difficult to find someone willing to fund deals.

“There are not enough lenders to satisfy the demand for the variety

Daniel Zadnik Hawthorn Finance

of funding that is required. To secure commercial funding in this market you need to have experience and skill,” he said.

But fellow MPA Top 10 Commercial Broker Daniel Zadnik of Hawthorn Finance in Victoria has claimed banks are willing as ever to fund commercial deals.

“I think the banks are all keen to fund good quality commercial projects. I think they have a good appetite at the moment,” he said.

“Having said that, they have a good appetite for good quality deals. If someone wants to do a commercial deal and it’s a little skinny, they’ll let that pass,” Zadnik added.

Regardless of the supply of funding, Thambyrajah said the demand for commercial property remained depressed.

“I have seen the commercial property market more than halve in value since the GFC. It is hard to determine when demand for commercial properties will start to improve as we are still experiencing record vacancies in

commercial properties,” he said.

But new demand could be driven by high retail rents, Zadnik said.

As leasing becomes more expensive, many business owners could be looking to buy.

“There are a few businesses that perhaps are renting commercial space, and with this market they’re taking the opportunity in a lower interest rate environment if they can get into a property for the equivalent of what they’re paying in rent,” Zadnik said.

The results of Veda Advantage’s Commercial Credit Demand Index for the first quarter of 2012 showed that while overall business credit inquiries increased in the first quarter of this year with 8.8% growth compared to the same period last year, most of this demand was driven by the mining states. Northern territory demand was up 18.6%, WA 11.6% and Queensland 10.2%. Veda Advantage said the commercial credit demand figures showed the two-speed economy is in ‘full swing’ in Australia.

Brokers warned to be wary of credit repair A credit repairer has cautioned brokers against using the service for their clients, saying they could find themselves violating NCCP rules.

Oasis Finance Solutions’ Graham Reibelt has warned that brokers who refer clients to credit repair companies could risk putting clients in unsuitable loans.

Reibelt said Oasis briefly offered to take referrals from brokers, but quickly withdrew the service upon receiving legal advice.

“To make a decision on one or a range of loan products, all known information about the client’s true position and needs must be clearly identified as part of the assessment process. If a broker

elects to arrange to have a client’s credit history repaired and then not disclose that past history, then a key element will be missing from the assessment process, so any loan selection decision will be tainted,” Reibelt said.

The essence of credit repair, Reibelt said, was to ensure clients became eligible for credit they would not otherwise have been able to secure. Because of this, he cautioned that brokers and lenders should be wary of repairing clients’ credit.

“If the selected loan product would not have been one the client would previously have qualified for, then the broker and/or the lender would have breached their

obligations under the NCCP to find a product that was not unsuitable,” Reibelt said.

Disclosing credit repair may not be enough either, he suggested.

While disclosure of the credit repair would be imperative, Reibelt said it would defeat the purpose.

“The very essence of the NCCP is disclosure both to the client and to the lender; therefore, to avoid these issues the broker must disclose known information about their client’s credit history to the lender. How else can the lender make an informed decision?

Clearly by disclosing their client’s adverse credit history it will negate any benefit the credit repair may have achieved,” he said.

Graham Reibelt

“Brokers should not be referring clients to credit repair companies, the risks facing them are too great,” Reibelt added.

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Smartline merger pays off for Mortgage Gallery brokers A Mortgage Gallery broker has said the company’s franchisees are already seeing benefits from a deal that saw a merger between the WA-based franchise and Smartline.

Smartline managing director Chris Acret announced the move late last year, and confirmed that the merger was complete as of 1 April.

Mortgage Gallery broker Justin Smith of Rockingham in WA has said the deal will bring a boost to the company’s franchisees. “[Smartline’s] back office systems are a lot better, and they’ve got more of an Australiawide perspective on things rather than just a state perspective,” Smith said.

Name recognition is an important factor in the deal, Smith said. While he said The Mortgage Gallery was a wellrecognised brand in WA, Smith commented that Smartline brought with it national name recognition.

“Financing a home is the biggest decision most people will ever

Chris Acret

make. With a good name and a big name, consumers are more confident, whereas if you’re just some kind of backyard job no one knows if they can believe you.

Size and reputation are everything,” he said.

Acret touted the merger as a good fit for both companies, pointing to what he said were shared values.

“The Mortgage Gallery is a great business. Both groups share similar values and have a similar culture – a culture of helping each other, professionalism and a real client focus.

“Both companies have a franchise model with a commitment to helping their franchise owners succeed and grow,” Acret said.

Smith agreed, and said the transition to Smartline had not been difficult, with The Mortgage Gallery maintaining its own branding, but adding a Smartline logo to its marketing materials.

“They’ve got a similar ethos to us, and they’re more of a family-oriented type business just like the Mortgage Gallery.

They’re certainly happy to listen to us and take feedback on where things can be improved,” Smith said.

A major change has been the switch to Smartline’s software platform. Smith said the move took getting used to, but was optimistic it would be a beneficial change.

“Like any amalgamation of software, there’s been a few hitches, but we’re working through it and I’m positive things will be all good in the future,” he said.

Advantedge tips white label improvements Advantedge has tipped service enhancements to its white label product suite, which it said will simplify the process for brokers.

Advantedge general manager of distribution Brett Halliwell said the funder would look to roll out product and service enhancements for its white label suite “over the coming months”.

“Brokers told us that they want simple, straightforward policy documentation and we’ve evolved our loan documents and processing to reflect that. By rethinking our documentation and processes, brokers can now expect a more functional, transparent and predictable loan assessment and approval process,” Halliwell said.

Halliwell said some of the improvements would focus on consumer messaging, and better positioning the company’s white label products to borrowers.

“At the consumer level, it’s marketing collateral where the consumer can understand what a home brand is, where it’s coming from and the benefits to them,” he said.

Halliwell said brokers could also expect to see a simplification of the legal documents required for the products.

“A big one is changing the legal documents, which will affect the application, the offer letter and the terms and conditions. I genuinely believe we will have one of the

The promised white label changes • Better loan documents and processing • Enhanced white label consumer branding • Revised loan legal documentation

Brett Halliwell

leading legal docs within the whole market,” he said.

The announcement comes as the company recently completed a nationwide road show of its home brand suite, which Halliwell claimed was accounting for an increasing share of broker volumes.

“This is a rapidly growing part of our business. As more and more brokers realise the benefits of offering their own white labelled product we’re seeing a marked volume increase,” he said.

Halliwell commented that Advantedge’s white label brands had seen steady growth since their launch two years ago. He said the products had proven popular with the company’s broker network.

“Regularly across the different brands of PLAN, Choice and FAST we’re rated either the number three, four or five lender on their panel,” Halliwell said.

Halliwell argued that the product suite’s appeal lay in its simplicity.

He said that the majority of brokers’ clients want a “straightforward” product.

“For the majority of customers – or certainly a large proportion – they’re looking for a home loan.

They’re not looking to change their banking arrangements, or their direct debits or credit cards,” he said.

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News Payday lenders unimpressed by Shorten overture Payday lenders say a proposed increase to a cap on interest rates will make little difference and have urged the government not to rush through mooted regulations of the oft-maligned industry.

Financial Services Minister Bill Shorten has released draft amendments to his Credit Enhancements Bill, lifting the interest rate cap on small amount credit contracts from 10% to 20% of the amount of credit advanced.

Shorten has also sought to change the previously proposed cap on monthly fees from 2% to 4%.

But National Financial Services Federation chief executive Phil Johns said the change will mean little to payday lenders.

“Doubling a fictitious, idealistic

number from one value to another without any research into its viability or sustainability means nothing,” Johns said.

Johns argued that the cap was due to misconceptions about the amount of interest charged by payday lenders.

“The whole problem with this capping issue is if I give you $100, and you turn around tomorrow and pay back $101, that’s 365% annualised interest. Annualising the fees on any loan that doesn’t run over a year doesn’t make any sense,” he said.

Johns expressed frustration at the industry consultation done in the wake of Shorten’s regulatory proposals, and said the extent of the amendments had yet to be

made clear by Treasury.

“We’ve been given two versions of the bill, and at the same time we’re being asked to make comment on the regulations when we don’t even know what’s in the regulations. It’s the regulations that will hang us every time,” he said.

But Shorten praised the legislation, saying it would safeguard consumers.

“Payday lending can be high risk for vulnerable or low-income consumers. People often borrow money from payday lenders in order to meet short-term commitments like rent and groceries. The interest charged on the loan is often so exorbitant it only worsens the financial position of the consumer

Bill Shorten

in the long term, who may need to take out further loans in order to pay off the original loan and the interest,” he said.

Genworth flood loss forces IPO stall

Ellie Comerford

Genworth has been forced to postpone a mooted initial public offering, after announcing a first quarter loss of US$21m on the back of more delinquencies heading to foreclosure.

Genworth’s American parent company last year announced it would offload a 40% stake in its Australian business to offset financial losses in its US division.

The IPO was slated for the second

quarter of 2012, but has now been rescheduled for early 2013.

“For the 2012 first quarter, the company expects to report elevated loss experience in Australia as lenders accelerated the processing of later-stage delinquencies from prior years through to foreclosure and claim at a higher rate and severity than expected, particularly in coastal areas of Queensland that experienced natural catastrophes and regional economic slowdowns and among certain groups of small business owners and self-employed borrowers,” Genworth said in a statement.

The company claimed that its liquidity and risk buffer plans were not dependent on the IPO, and that it held a sufficient amount of cash to delay the offering.

Genworth Financial later revealed to the market that the Australian business had reported an operating loss of $21m in the first quarter of 2012, which was down dramatically on the operating earnings of $52m that the

Australian business notched up during the same period in 2011.

At the same time, its US CEO Michael Fraizer stepped down, with the company announcing he would be replaced for an indeterminate period by chief financial officer Martin Klein. The business said in a statement that it was “very disappointed” with the Australian arm of its operations.

The profit news alarmed ratings agency Moody’s, which put the mortgage insurer on alert for a possible downgrade. Moody’s senior credit officer Ilya Serov said the first quarter loss showed Genworth’s vulnerability.

“The company’s performance during this period was adversely affected by developments in the coastal Queensland housing markets, underlining the vulnerabilities of its business model to a downturn in a regional area or in the broader Australian housing market,” he said.

Serov said the review would examine whether the postponement

of the company’s IPO would heighten its reliance on its US parent company. The review will also look at Genworth’s efforts to stem the losses caused by the rise in delinquencies and foreclosures.

Despite the pending review, Moody’s noted that Genworth had a conservative underwriting profile, no exposure to sub-prime loans and had undertaken efforts to improve the amount and quality of its available capital.

However, rival ratings agency Standard & Poor’s confirmed its rating of Genworth Financial following the profit announcement, saying that the troubles facing the Australian business would not affect the long-term outlook of the business. “The affirmation reflects our expectations that a recent reserve strengthening is an isolated event, and is not an indication of a structural deterioration in earnings, or threat to Genworth Australia’s very strong capitalisation,” said credit analyst Lucy Huynh.

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WA on track for record Macquarie launches SMSF loan foreclosures Western Australia may be set to see its highest number of housing repossessions on record; a development a WA broker has said comes as no surprise.

The Community Housing Coalition of WA has claimed the state is on track to see 1,533 repossession applications over the 2011/2012 year. The number exceeds the previous high of 1,342 during 2008 and 2009 at the height of the GFC. “What these figures demonstrate is that an increasing number of home owners are struggling to balance mortgage payments and other household expenses. They are extremely vulnerable to factors such as interest rate increases and hikes in the cost of petrol and household utilities,” Community Housing Coalition WA executive officer Barry Doyle said.

MPA Top 100 Broker Warren Dworcan agreed, and said the numbers were unsurprising given the recent weakness of the Perth market. Dworcan said the run-up in Perth property values prior to the GFC saw many investors and owner-occupiers in over their heads.

“I think that because we saw such extraordinary growth in Perth and throughout WA, we saw people putting themselves in the position where they were over-leveraging.

They saw everyone around them making money and wanted to get in on it, and it seemed like there was no downside,” Dworcan said.

Weak demand in the market means many are also unable to sell their property, he said.

Dworcan also noted that many property owners got into the market when higher LVRs were still available, and may now find themselves in negative equity.

Despite all this, Dworcan cautioned against reading too much into the figures. While the 2011/12 financial year was set to see a higher number of repossessions, he questioned whether this represented a higher proportion of homes heading into foreclosure.

“The number of repossessions has increased, but population growth has increased as well. With more people coming into the state and more people buying investment properties, as a percentage it may not be such a massive change from previous years,” he said.

Macquarie Bank has gotten in on the SMSF property push with a new loan for investors.

The bank has announced the addition of a self-managed super fund property loan, which head of mortgages product James Casey has said was in direct response to growing demand for property exposure in SMSFs. “One of the key reasons SMSFs are growing at such a rapid rate is that they offer the flexibility for people to choose where their money is invested. Currently 15% of the assets in SMSFs across Australia are allocated to real estate, and as the number of SMSFs grows, we also expect the focus on real estate as an SMSF investment to grow,” Casey said.

The product will be a limited recourse loan available to borrowers with an existing self-managed super fund or who are currently in the process of establishing an SMSF. The loan will also be available to refinance existing SMSF property loans from other lenders.

Casey said SMSFs now accounted for nearly one-third of the $1.2trn of superannuation assets in Australia, and were expected to reach approximately $1trn in funds by 2020. He said the bank had specialist experience in the SMSF market, and could help brokers new to the products.

“We understand the complexities involved with SMSFs and, in particular, with SMSF property lending, and provide intermediaries with direct access

James Casey

to our credit specialists to support them and their clients throughout the application process,” Casey said.

Macquarie said its SMSF Loan was the latest addition to a wider range of SMSF solutions. The bank said that more than one in four SMSFs in Australia use the Macquarie Cash Management Account as a cash hub, while the Macquarie Wrap platform is designed to streamline SMSF administration.

“Macquarie has more than 20 years’ experience with SMSFs, and the SMSF Property Loan enhances our broad range of SMSF services and solutions,” Casey said.

The SMSF release came at the same time as Macquarie Group announced a net profit after tax of $730m for the full year ended 31 March 2012, which was down 24% on the full-year ended 31 March 2011.

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News Mortgage demand stirs for first time since 2009 Mortgage demand has seen its first increase in eight quarters, leading an analyst to predict house price recovery is not far behind.

The Veda Quarterly Consumer Credit Demand Index has shown the first increase in mortgage enquiries since 2009. Enquiries rose 1.5% year-on-year, driven by strong increases in Queensland, NT and WA. Veda head of consumer risk, Angus Luffman, predicted that house prices could begin to see a recovery if mortgage demand was sustained.

“Turning points in mortgage enquiries usually occur one to three quarters ahead of turning points in house prices, an early warning sign which could indicate that after a continued decline, mortgage enquiries may have bottomed out,” Luffman said.

Luffman commented that mortgage activity showed a marked difference from state to state, performing strongly in resourcesrich states while lagging in other areas.

“In terms of state by state mortgage activity we are seeing

different trends play out with NSW mortgage enquiries being affected by the expiration of stamp duty and Queenslanders starting to bounce back after a challenging year,” he said.

Overall credit demand continued its decline, falling 4.8% year-onyear. Credit card applications were particularly weak, falling 8% year-on-year. Personal loan applications fell 1.4%, but saw an 8.3% increase in WA. Luffman again pointed to the state-to-state variation in credit demand, and said while households may be saving more on the whole, mining regions continue to show the greatest hunger for credit.

“While applications for credit cards and personal loans have both declined, the reduction in card applications is far greater, showing that they are increasingly falling out of favour with consumers as households continue to focus on saving. However, the results indicate that Australia’s two-speed economy is still in effect with consumer credit demand significantly stronger in the mining states,” he said.

While consumers remain wary of taking on more credit, business credit demand showed a strong result. The Veda Commercial Credit Demand Index has shown strong growth for business credit, with inquiries increasing 8.8% in the first quarter compared to the same period last year. Veda head of commercial risk Moses Samaha said the sector represented a growth opportunity for lenders.

Growth in business credit demand was largely driven by mining states, while states such as Victoria, South Australia and Tasmania lagged behind. Business loans and trade credit accounted for the largest rise in credit enquiries. Samaha said asset finance remained subdued.

While demand for asset finance rose in the Northern Territory, Queensland and WA, it fell in the non-mining states.

Home loan demand reawakening (%) 10.2

9.7

6.6 4.0 2.4

3.6

4.4 3.1

1.4

-0.7

2.3

-0.8

-2.0

-3.2 Year-on-year change Quarter-on-quarter change

-7.6 ACT

NSW

NT

QLD

SA

-8.7 TAS

VIC

WA

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Share volatility wooing Aussies spending up back property investors

Leslie Janusz Hooker

Property investors are showing new interest in the market with more than a quarter of homeowners looking to buy an investment property.

Research released by LJ Hooker has claimed 26% of current homeowners plan to buy either an investment property or holiday home. L. Janusz Hooker, deputy chairman of the real estate company, said the volatility of other asset classes has sent Australian investors back towards property.

“Uncertainty in the share market is drawing Australians back to traditional investment options to ensure long-term results,” Hooker said.

Chan & Naylor director Ken Raiss agreed, and said renewed activity from investors could signal an eventual upturn in the housing market.

“Anecdotally we are seeing more interest from property investors both new and old. Whilst this increase is modest, it indicates new confidence and the likelihood of a new property cycle,” Raiss said.

MPA Top 100 Broker Troy Cameron said he has seen this trend play out firsthand. While buyers had previously been wary, Cameron said investment activity was beginning to return.

“We have seen a trend of clients being quite conservative with their spending or investing over the past 18 months, but we are now experiencing a large volume of clients feeling the confidence to get back into the investment property market,” Cameron said.

Interest rates still rate highly with potential investors. The LJ Hooker research indicated that 42% of homeowners based their decision to choose a second mortgage on available interest rates. This being the case, Raiss predicted that banks would have to follow future RBA movements to re-instil confidence in investors.

“The banks reducing their own rates in line with the RBA will act as a confidence booster which in turn will increase expenditure on consumables and investment.

Ultimately the biggest stimulus for the economy is healthy competition between banks,” Raiss said.

Raiss encouraged any would-be investors to research thoroughly before entering the market. He called on investors to look on property as “an exercise in financial diligence rather than of the heart”. Hooker agreed, and said mortgage brokers could be key in advising first-time investors.

“Investors tend to get excited about the idea of capital gains but forget to factor in additional expenses, taxes and how they will manage an additional mortgage,” Hooker said.

Cost of living concerns may be getting Australians down, but a new study has found Aussie households have more discretionary income than in the past.

The latest AMP.NATSEM Income and Wealth Report has found that while the cost of living has increased, incomes have increased even more. The study indicated that household incomes increased 37% since 1984 for couples with children, 34% for single parent households and 22% for working families. Disposable income went up 20% in the same period.

AMP Financial Services managing director Craig Meller said households were spending more of their disposable income than in 1984, thus leading to a greater perception of cost of living pressures.

“Many Australians are leading busier lives and facing greater demands on their time which means we’re now paying for things we may not have previously, such as childcare, gardening and housekeeping. We’ve also seen a noticeable shift in spending habits with people spending more on education, holidays and eating out.

Essentially we seem to be leading bigger lifestyles, all of which can

add to perceived cost of living pressures,” Meller said.

The study did find, however, that some living costs have risen disproportionately since 1984.

Electricity increased 253% over the period, while rents grew 223%, mortgages grew by 256%, petrol increased 208% and public transport costs climbed 287%.

Medical, dental and insurance costs saw even more dramatic rises, climbing by 560%, 356% and 346% respectively.

Australia remains an expensive place to live by global standards.

Sydney and Melbourne rank at seven and eight respectively on the international cost of living index, and Sydney continues to be Australia’s most expensive capital city.

“Sydney is the most expensive capital city to live in, costing on average, $71,426 for a standard ‘Sydney’ basket of goods per year, or $1,374 a week. For that same basket of goods, Adelaide is the cheapest costing the average household $4,442 per year less than Sydney,” the report said.

Canberra was judged to have the highest standard of living when taking into account both average costs and income, followed by Perth and Darwin.

How are Australians spending?

Discretionary items

38.9%

39.6%

Relative necessity Necessity Source: APM.NATSEM

21.5%

Industry not satisfied with deep RBA cut The Reserve Bank has been called on to move on rates yet again to deliver stimulus to sagging consumer demand.

With the Reserve Bank shocking analysts in May by cutting 50bps from the official cash rate, the Bank said it wanted to see lower borrowing rates filter through the economy.

However, 1300 Home Loans founder John Kolenda has claimed the RBA will need to make yet another cut to jumpstart the economy.

“This is a good start but the RBA will likely need to cut rates

again by 25bps over the coming months to really deliver the economic shock treatment the economy has been crying out for,” Kolenda said.

The move came after the Reserve Bank chose to sit on its hand in its first three meetings of 2012. RBA Governor Glenn Stevens defended the Bank’s decision to stay put in the first quarter of the year.

“Since it last changed the cash rate in December, the Board has maintained the view that the setting of policy was appropriate for the time being, but that the

inflation outlook would provide scope for easier monetary policy, if needed, to support demand,” Stevens said.

But Firstfolio chief executive Mark Forsyth claimed the bank could have staved off the need for deeper cuts by taking action sooner.

“Our view is that a 25bp cut in February was appropriate, and may have forestalled the need for [a] deeper cut,” Forsyth said.

Nevertheless, Stevens said the bank made the more dramatic move to ensure lower mortgage

rates filtered through to borrowers.

“In considering the appropriate size of adjustment to the cash rate at John Kolenda [April’s] meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates,” Stevens said.

brokernews.com.au

13

ASIC chides Westpac for misleading customers …

Westpac has become the second bank to be pinged by ASIC for misleading consumers over credit limit increases.

Commonwealth Bank previously accepted an enforceable undertaking from the watchdog regarding misleading communications with consumers regarding limit increases. Now Westpac has also run afoul of the regulator.

NCCP regulations commencing 1 July restrict lenders from sending out unsolicited credit limit increase invitations, unless a customer has previously consented to the communications. ASIC said that between February and March of this year, Westpac sent messages to customers via email, credit card statements and through its website requesting they provide consent for the credit limit increase invitations, and falsely suggesting that customers needed to act urgently or miss out on accessing additional credit. As a result, around 3,700 customers provided consent.

“Under the changes to the law, customers can provide or withdraw their consent at any time. Further, regardless of whether they have consented to being sent credit limit increase invitations, customers can request a credit limit increase from their financial institution at any time. Nothing in the new legislation changes this,” ASIC said in a statement.

In spite of being chastised by the

regulator, ASIC commissioner Peter Kell praised Westpac for cooperating fully.

“Westpac has acknowledged ASIC’s concerns and has undertaken to not rely on the consents obtained from customers who may have been misled, and contact each customer who consented to correct any misleading impression,” Kell said.

Kell said Westpac had also obtained customer consent through methods the regulator had not deemed misleading, and that these consents would be unaffected.

Nevertheless, Kell vowed that the regulator would continue to keep a close eye on NCCP compliance throughout the industry.

Flashback: CBA’s credit limit bungle Earlier this year, CBA was the first bank to cop a slap on the wrist over its communication to customers regarding credit limit increases. CBA sent messages suggesting that if customers did not urgently consent to receiving credit limit increase offers, they could miss out on the chance to access extra funds and wouldn’t be able to receive credit limit increase offers in the future.

The bank immediately withdrew the messages and contacted affected customers once concerns were raised

by ASIC.

... and bites over HSBC advertising snafu HSBC has been taken to task by ASIC over an advertising campaign for home loan discounts that the regulator deemed misleading.

The bank ran ads promoting its “Let’s Bankercise” campaign, which ASIC said featured potentially misleading claims.

The ads featured the claim that borrowers could get up to 0.95% off the bank’s Home Smart Loan, and also touted a minimum loan amount of $250,000.

The watchdog took issue with the campaign’s fine print. While juxtaposing the 0.95% discount with the minimum loan amount, the ad’s fine print revealed that the full discount was only available to loans above $1.5m. Borrowers with loans starting from the $250,000 minimum amount were only eligible for smaller discounts.

“ASIC was concerned that as the loan amount that applied to the 0.95% discount was very large and was not prominently disclosed in the ad, consumers may be misled into believing they would receive a higher discount than what was actually available to them. HSBC has agreed to change the wording to more clearly

disclose the discounts on offer,” the regulator said.

ASIC commissioner Peter Kell took aim at bank advertising, and warned lenders to be clear in their disclosures.

Peter Kell “Advertisements should give balanced information to ensure the overall effect creates realistic expectations about a financial product or service. ASIC does not consider that a promoter can rely on statements such as ‘up to’ if, in fact, the offer being promoted is only available in limited circumstances and this is not prominently disclosed,” he said.

Kell vowed that the watchdog would conduct regular reviews of advertising following the release of its guide on standards for advertising financial services. He said ASIC would take swift action where it deemed ads misleading.

“ASIC’s guidance will help industry participants understand their obligations but we are also sending a message that we will take action in response to misleading ads for financial products and services,” Kell said.

14 brokernews.com.au

News

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

Houses overvalued, claim FHBs

Affordability elusive for low income earners

First homebuyers are proving sceptical of the price of Australian property, with the vast majority saying houses are overvalued.

The QBE LMI Barometer report has found that 83% of first time buyers believe property in Australia is overvalued. The result includes 50% who believe Australian houses are “significantly overvalued”, up 8% from the previous report in 2011.

“In contrast only 62% of respondents nationally think properties are overvalued, with 41% saying they are somewhat overvalued, and 20% perceiving them to be significantly overvalued,” QBE said.

Despite believing prices are inflated, first homebuyers remain bullish on the outlook for the market in the medium term, with 52% expecting property prices to increase strongly over the next three years. By contrast, only 42% of overall respondents believed home values would see a run-up.

Low income Australians are out of luck in capital city rental markets, with few affordable options available.

An Anglicare study has found rental affordability is elusive for Australians on low incomes. The agency’s Rental Affordability Snapshot has indicated that many capital cities have no private rentals within the reach for people on a single income, aged care pension or NewStart allowances.

“What the Snapshot shows is that people on the minimum wage need two incomes to rent a house.

In many places even that is not enough. And for those trapped on the NewStart, supporting parent or youth allowance there is absolutely nothing suitable available at all,” Anglicare executive director Kasy Chambers said.

Chambers said many capital cities provided few options for single income earners.

“In Perth, there is absolutely

First time buyers showed decreasing confidence in the housing market over the shortterm. Fifty-three per cent believe property prices will either rise or remain stable in 2012, as compared to 73% who expected this outcome in 2011.

Regardless of their skepticism surrounding the housing market, 44% of first homebuyers said they intended to purchase within the next 12 months. Of these, 16% said they would make their purchase in the next six months.

The result was down slightly from 2011, however, a result QBE put down to a late rush of purchases last year.

“The change could also be due to the change in stamp duty concessions in NSW, which has seen a reduction in intention among NSW/ACT respondents to enter the market,” the company said.

First time buyers also showed flexibility in the location of their purchase.

5% FHB property price expectations over 12 months 3%

How much housing is affordable?

18%

3%

Much lower

20%

6.5%

Stable

Source: QBE LMI (figures refer to expected prices in 12 months)

Tasmania

<1% Sydney

0.7% Perth

Don’t know

0% Melbourne

1% Adelaide

Much higher

2%

Darwin

30%

37%

Canberra

Somewhat higher

4%

Brisbane

Somewhat lower

nothing available for anyone on a single income, and these results are largely replicated across all our capital cities. In Sydney and Melbourne, with over 20,000 properties advertised between them less than 40 properties were suitable across all of the household types,” Chambers said.

Regional Australia did not fare much better in the survey.

Chambers pointed to some of the results, indicating only 2% of available properties in the NSW Southern Tablelands would be within the reach of a single parent on minimum wage, while only 6% of properties available in Gladstone would suit a family of four low income earners.

“Anglicare’s Snapshot gives an insight into the experience of housing stress, and makes it clear how distant secure housing is for hundreds of thousands, even millions, of Australians, and raises the question of why it isn’t a true national priority,” Chambers said.

Source: Anglicare (figures are for single people on minimum wages)

Aussie harvests data for real estate referrals Aussie Home Loans has announced the launch of a real estate referral program it has said will target high-performing agents.

The franchise brokerage said it will use a partnership with RP Data to identify top real estate agents in each local market nationally, and will refer qualified, pre-approved buyers to them. No personal details apart from the client’s property requirements will be shared with the agent without the client’s consent, the company said.

The referral program will identify clients who match the

skills of local agents. Aussie will then contact the clients, provide them with property reports and seek their consent to refer them to a local real estate agent.

“Our brokers are leading our clients, who now total more than 250,000, through the sometimes difficult process of accessing a great home loan and now we are extending this service to property search, in partnership with top quality agents,” Aussie executive chairman John Symond said.

Symond said the company was in the process of contacting high-performing real estate agents across the country to introduce the

referral program, and connect the agents with local franchisees. He claimed the program would provide a boost to both brokers and agents.

“Our program will provide a shot in the arm for real estate agencies and the residential property market, while providing our customers a full service value proposition when purchasing and financing their new home or investment property,” he said.

Symond claimed Aussie’s broker network was conducting close to 10,000 client appointments per month, suggesting that the

volume of clients brokers were seeing represented an opportunity for real estate agents.

“According to John Symond RP Data, there are more homes listed for sale in Australia than ever before in history. Our aim is to develop a database of qualified buyers who can be introduced to the right property via our local agent partner. The program is designed to provide high level service to both the property buyer and the agent,” he said.

brokernews.com.au

15

INDUSTRY NEWS IN BRIEF Westpac delivers rate relief Westpac made a pre-emptive move to woo borrowers in April, ahead of the RBA decision. The major bank lowered the minimum loan amount eligible for its 0.7% discount rates from $250,000 to $150,000 through the bank’s Premier Advantage Package. The bank previously offered a 0.4% discount for loans of $150,000.

The bank also made cuts to its one- and three-year fixed rates. Westpac dropped its one-year rate from 6.49% to 6.34%, or 6.14% with a 20bp discount available through the Premier Advantage Package.

The bank’s three-year rate has been cut from 6.53% to 6.39%, or 6.19% with the 20bp discount on offer.

Bernie Fraser questions RBA Former Reserve Bank governor Bernie Fraser weighed into the RBA debate in April, calling on the central bank to cut by 50 basis points. Fraser told the ABC’s 7:30 Report that everyone was expecting at least a quarter of a percentage point cut, so it loses its impact and effect on confidence. “You have to get ahead of the game occasionally to trump those expectations,” he said. He added that economic conditions were questionable.

“I think the economic circumstances, signs of weakness in large parts of the economy and going with that a lack of worry about the inflation problems, provide an opportunity to do that [cut rates],” he said.

Fixing still favoured Demand for fixed rate loans continued in May. Data from Loan Market showed a significant increase in demand for fixed rate loans over the month, with the company putting the rise down to banks’ decisions to move independently of the RBA. “We’ve seen demand for fixed rates increase by 15% in the past month in a clear sign consumers are mindful the banks may keep raising their variable rates irrespective of RBA rate decisions,” a spokesman said. “The spread between variable and fixed rates is getting wider and is as much as 70bps for your average three-year fixed rate mortgage,” he added, saying fixed rates remained attractive.

Broker jailed over Ponzi plot A WA broker has been jailed for running a Ponzi scheme which defrauded clients out of $1.2m. The ABC reported that Rockingham-based mortgage broker Mark Booty was found guilty of defrauding seven clients between August 2007 and March 2009. Prosecutors told a district court that Booty took money from clients promising to invest it in shares and property, but instead paid company debts and personal expenses. Initially promising investors monthly interest payments, Booty declared himself bankrupt. While Booty denied defrauding clients, he was found guilty of eight charges and will be sentenced in June.

Depositors reap mortgage pain gains Home loan customers may have been hammered by the banks, but term depositors are still reaping rewards.

Banks have defended out-of-cycle rate moves by pointing out benefits to depositors, and now comparison site RateCity has defended the claims. While at-call savings accounts have seen little benefit, term deposit rates have remained competitive, the company’s CEO Damian Smith claimed. “The major banks continue to look for term deposits as they try to shore up funding sources and attract a more cautious investor,” he said.

Smith said the major banks had passed on around 80% of the RBA’s cash rate cuts since November, while term deposits had only come down by 40% of the RBA reductions.

Vow rules out acquisition-led growth Vow Financial will pursue only organic growth for now, despite previously indicating it was on the hunt for merger and acquisition partners. Speaking to Vow Financial brokers in Sydney last month, CEO Tim Brown said that M&A with other groups was not a profitable strategy at this point, and the group had decided to grow organically. Brown encouraged brokers to refer their colleagues to the aggregator, which he said would support them with its consolidated aggregation model and BDM support. Brown flagged that Vow would, however, engage in more joint venture-style tie-ups.

Borrowers getting ‘crumbs’: Symond Aussie chairman John Symond lambasted the RBA in April, saying it would be “a farce” should consumers not see a 25bp reduction. Speaking to the Australian Financial Review prior to the RBA’s announcement in May, Symond said the Reserve would need to cut the cash rate by more than 25bps in order to ensure consumers saw a significant rate reduction.

“It would be shocking for the RBA to drop 25bps and for the punters to receive crumbs from that. It would be a farce, which is why I think the pressure is now on the RBA to significantly drop rates,” he said. Symond claimed that banks were honest in their assessment that funding costs had risen, meaning that the RBA would have to make more severe cuts.

Victoria cuts stamp duty The housing industry has welcomed Victoria’s funding for stamp duty cuts for first homebuyers. Despite a 1 May budget hit by large stamp duty income writedowns, the government promised $65m to fund an increase in stamp duty cuts from 20% to 30% from 1 January 2013. A first homebuyer bonus of $13,000 for newly constructed homes will expire in June, with the government saying all first time buyers spending less than $600,000 will benefit from the new policy. Victoria still offers a first home owner grant of $7,000 for homes under the value of $750,000.

16 brokernews.com.au

News Big Four lose more House prices show ground with customers signs of life The Big Four have lost more of the customer satisfaction improvement they gained last year.

Out-of-cycle moves by the major banks have continued to draw the ire of customers. Roy Morgan Research’s Banking Customer Satisfaction report has found that major banks declined again in March, following a drop in February. The decline in February was the first since March 2011.

Roy Morgan Research communications director Norman Morris said ANZ’s position as first mover in its out-of-cycle rate rises had seen the bank hammered by its home loan customers.

“Over this period the satisfaction among ANZ home loan customers declined by 3.4% points, Westpac home loan customer satisfaction went down by 1.9% points, NAB home loan customers fell 1.3% points and CBA down 0.8% points,” he said.

NAB continued to lead the pack in satisfaction numbers at 77.5%, but a 1.7% decline in March saw it just edge out ANZ at 77.4%.

Commonwealth Bank remained third at 77%, while Westpac stayed at the bottom of the pile on 75.5%.

The majors remained well behind smaller players, however.

Second tier ING Direct tallied 89.8% satisfaction, while Bendigo

Bank had an 89.4% rating and ME Bank saw 86.4% satisfaction.

Building societies and credit unions remained popular, with 91.1% and 88.7% satisfaction, respectively.

“It will be interesting to see if the superior performance by the smaller players can be translated into market share,” Morris said.

Some of the ire directed towards the majors may be due to their business banking performance, Morris said. While he called the banks’ performance with personal banking customers “lacklustre”, he said the majors’ personal customers were far more satisfied than business customers. Roy Morgan business banking figures show only 64.9% satisfaction with the majors among business customers, and Morris theorised that customer crossover could be dragging personal satisfaction levels down as well.

Feb 2012 – March 2012

March 2011 – March 2012

ANZ (77.4% satisfaction)



0.5%



3%

CBA (77% satisfaction)



0.3%



5.3%

NAB (77.5% satisfaction)



0.8%



5.8%

Westpac (75.5% satisfaction)



0.3%



1.7%

Median house prices have seen their first quarterly rise in 20 months, and the result has prompted analysts to theorise the market could be stabilising.

Australian Property Monitors data shows median values crept up 0.9% for houses and 0.1% for units, the first increase since June 2010.

Every capital city apart from Brisbane and Adelaide saw increases over the quarter, with Darwin recording 6% for the quarter. Melbourne and Sydney were the next-best performers, with prices rising 1.4% and 1.6%, respectively.

APM senior economist Andrew Wilson said the future for house price growth would hinge on the performance of national and local economies in the months to come.

Nevertheless, he was optimistic about the prospects for some capital city markets.

“The Perth, Brisbane and Sydney markets remain the best prospects for growth over 2012, and although the Melbourne market has been encouraging so

far this year, this may prove to be short-lived if the Victorian economic performance continues to deteriorate,” he said.

Wilson predicted that the market would continue to improve on the back of the quarterly rise, with buyers and vendors becoming less wary about the future of the economy.

“Early signs are positive for most Australian housing markets in 2012 with the likelihood that buyer and seller confidence will continue to rise in 2012 after a subdued 2011,” he said.

But despite the quarterly rally, the market remains down in most cities year-on-year. House prices fell in every capital city on an annualised basis. Brisbane has seen the most marked decline, falling 4.1%, while Adelaide followed with a 3.9% decline. Unit prices proved volatile as well, with only Sydney and Hobart escaping a year-on-year decline.

March quarter rise in house prices 0.1% 0.9% Units Houses

1% -0.1%

-5%

-0.3%

-5.4%

-0.3% -2.3%

National 3%

Darwin

6% 11.3%

Hobart Perth

0.1% 0.1% 0.9%

Canberra Adelaide Brisbane Melbourne

1.6% 2.5% 1.4%

Sydney

Source: APM

Source: Roy Morgan Research

Low home sales to be propped up by RBA cut The housing industry has pointed to decade-low home sales as reasoning for further moves by the Reserve Bank.

The HIA-JELD-WEN New Home Sales report has showed a decline of 9.4% for new home sales in March. HIA chief economist Harley Dale said the weak sales should jolt the RBA into making further cuts in the months ahead.

“The Bank needs to send a clear signal that it is back on the case of assisting an economy that is clearly weaker than it anticipated in 2012,” Dale said.

He called for a further cut by the

bank in June, and said the forecast for housing remained grim. Dale said further cuts could shore up a sector he claimed was heading in the wrong direction.

“Leading housing indicators such as new home sales are pointing to ongoing deterioration in already very weak new home building conditions. That situation is in turn having a major negative impact on manufacturing and services sectors,” Dale said.

But Raine & Horne chief executive Angus Raine has taken an optimistic view, saying the 50bp cut will revive the real estate

market. “The move by the RBA to cut rates is like a much needed defibrillator for Australian real estate, and it will have the pulse of the property market beating faster. This will prove a significant boost to entry level markets in our capital cities and regional towns, and will help to assist more first timers, carrying the weight of rising rents, into a family home,” Raine said.

“It’s also fair to expect lower interest rates will tip investors who have been sitting on the fence to take the plunge into a real estate asset,” Raine said.

The Real Estate Institute of Australia agreed, but President Pamela Bennett said recovery in the market was Angus Raine some way off.

“First homebuyers are starting to return to the property market but the level of activity is still only about half of what it was in 2009 and affordability has plateaued.

We desperately needed this cut and we’re pleased the RBA has finally decided to respond appropriately,” she said.

18 brokernews.com.au

News VIEWPOINT

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

Reverse mortgages should be the domain of altruists, not capitalists, while banks should revisit their clawback policies and make them fairer, brokers told Australian Broker TV

Customers close, commissions closer

Darren Moffat, Seniors First

Specialists, not capitalists required Haven’t heard much about reverse mortgages lately? Well, maybe not from lenders, but you may soon be hearing more about them from clients looking to access their equity.

Seniors First’s Darren Moffat says that reverse mortgages are growing to levels as high as those seen prior to the GFC, despite no advertising or marketing going on in the industry.

“This is telling us that the organic demand for the product is very strong,” he says.

SEQUAL’s Kevin Conlon said the future is sure for reverse mortgages, as seniors look to access the equity they have in their home – as long as the product supply is there.

“There is an inevitable growth in the equity release market,” he says.

“Just the number of senior Australians moving into retirement, the fact that their wealth is concentrated in the family home, and that longevity suggests that people are going to live longer than their other sources of income are going to support,” Conlon explained. “So the underlying trends are very strong towards growth in the equity release market.

However, those brokers who are not specialists in the area may not be well suited to picking up on the predicted wave of future reverse mortgage demand.

Moffat says it would be best for a broker to specialise in the area, rather than dive in in an attempt to add a new revenue stream for the business.

“I don’t think it’s possibly the best outcome for a broker from John Smith Home Loans to suddenly go into reverse

Kevin Conlon, SEQUAL

If you are looking for a quick turnover high volume business then equity release is not for you mortgages,” he says. “If you want to do it properly you should think about establishing your own reverse mortgage brand.”

Conlon agrees. “The key to this is that senior Australians need to make informed decisions, and that is a process that needs to be undertaken with great responsibility,” he says.

“If you are looking for a quick turnover high volume business then equity release is not for you. If you are looking to build engaging and meaningful relationships, not only with the customer but their children and other stakeholders, then these transactions may have some of those relationship benefits.”

And in the end, reverse mortgages may be a more altruistic pursuit than a revenue raiser.

“Ultimately, you have got to really enjoy helping people,” Moffat says. “You have got to be – hand on heart – very, very genuine in putting the interests of the consumer above your own interest. You have also got to be alert to other factors that you probably would not see at all in the forward mortgage or conventional mortgage market,” he said.

Do you think clawbacks are fair?

If not, you’re not the only one.

“Lenders have forgotten that we are their customers,” says Kiran Saldanha of The Finance Professionals. “In the service chain, they have forgotten where the broker fits in.”

Speaking with Australian Broker TV, Saldanha said that 2012 had shown that banks were starting to realise the importance of the broker’s role. “There is the distribution of the product, but more so the management of how that lender is perceived in the open market.” He said changes in policy by St.George and NAB’s retirement of segmentation were examples.

Indeed, clawbacks have begun to bite, and brokers are said to be “once bitten, twice shy”.

Saldanha says there are good reasons for this. “If someone had to sit down and look at what they had to do before their ASIC licence registration, one of the things was a risk assessment, and funny enough in this business the biggest risk is the way we earn our income,” he said.

Clair George of 1st Street Home Loans believes that the banks should look at their clawback criteria, and put more emphasis on the relationship with a broker, rather than just one deal. “It would be great for the banks to look at a policy where they think about a particular broker’s quality of loan book, and look at it on a bit of a case-by-case basis rather than an individual loan being refinanced or property being sold within the clawback period.”

But brokers are doing what they can to minimise the impact of clawbacks. For George, it is all about staying close to the

Kiran Saldanha, The Finance Professionals

customer – to ensure those commissions stay as well.

“First and foremost I spend a lot of time establishing my client’s goals and needs,” she said. “If we do that thoroughly and place them into the right loan, there shouldn’t be any need to refinance during the clawback period. Certainly, if the client is looking to sell in the short-term, we know about that and it should come as no surprise if we are clawed back.”

George said the business also contacts all clients postsettlement. “This is to make sure that the loan we have placed them in is working well for them and to get through any teething problems that they have there,” she explains.

Saldanha says brokers need to go beyond being a face of a bank if they are to stay close to their clients and avoid clawbacks.

“I have got relationships in property and direct relationships with lenders where we actually have the entire facility of products including a fee for service option, and so we are really providing that edge to our customers about where we fit into the discussion, rather than just being the face of a bank or any other service provider,” he said.

First I establish my client’s goals. If we place them in the right loan there shouldn’t be a need to refinance during the clawback period

Clair George, 1st Street Home Loans

brokernews.com.au

19

FORUM The MFAA vowed it will keep a ‘close watch’ on financial planning Future of Financial Advice reforms to ensure commission bans don’t hit the broker market.

Wow, stern stuff [from the MFAA], “a close watch” [on FoFa]! That’s like laying on the lounge cheering for your footy team – it won’t change the outcome. How about getting out in the middle and declaring that they vehemently oppose any move to fee-for-service? Or, are they waiting on instructions from the lenders? Brokers are watching closely.

Steve McClure on 26 Apr 2012 10:00 AM How do these people making the rules expect us to earn a living, and why do we allow people that do not actually work for a living as a mortgage broker and do not know what our clients are like or want, dictate how to run our industry? Do they really think that the everyday Mr & Mrs Smith will pay or can afford to pay brokers a fee!

Mark on 26 Apr 2012 10:20 AM I am certain that the banks will be loving this sort of speculation.

Wouldn’t they love not to have to pay us trail commission or any commission.

If the MFAA were truly representing the brokers and not the banks they would put the banks on notice that if this happened it would be at their peril. Also our aggregators should stop pushing this fee for service, as it will give the banks more ammunition to reduce our commissions.

John Whitten on 26 Apr 2012 10:36 AM I can’t see any lender or aggregator wanting to pay all loan writers a salary... That is just too funny. We are paid to get the job done, what could be fairer than commission?

Josh on 26 Apr 2012 12:28 PM Investment advisors control clients’ money and can make poor decisions when commissions influence their investment advice. The industry has form going back many years and the reason the regulators are making changes is because of a poor track record and well documented and publicised disastrous outcomes in recent times for consumers who have trusted them.

Mortgage brokers can also make poor decisions but we don’t control the client’s money and the difference in commissions available in our industry would not be significant enough to be the main cause of bad advice. Most of the ‘bad eggs’ in the mortgage broking industry are shonks passing through. There are also part-timers crossing into mortgage broking from other industries (real estate etc) who seem to be operating at the edges of respectability but the regulators should be able to identify them and remove them. The industry needs to increase its vigilance against the shonks rather than focusing on making the already good people even better.

Broker Tony on 26 Apr 2012 12:40 PM

Meanwhile, brokers were thrilled at second tier lender ING Direct’s commitment to service across-theboard to all brokers and customers, rather than implementing segmentation.

Well done ING in joining NAB with a strong stance against this – you guys both get that it needs to be all about the customer!

Customer service, remember that saying?

Every customer deserves the same respect and service delivery each and every time.

Well done ING & NAB and shame on the rest of your competitors for trying to justify segmentation as being good for their customers when it’s clear it’s all about raising volumes!

Fat Albert on 19 Apr 2012 10:04 AM Good on you ING, that’s the way it should be. If all banks followed this line of process there would be better competition and the bank ‘service’ levels would have to improve across the board.

ChrisC on 19 Apr 2012 10:54 AM It is pleasing to see another major lender re-enforcing the equal opportunity concept for all brokers and not just a select few who offer limited choice to borrowers. Well done ING. John Black on 19 Apr 2012 11:01 AM  To vote in our latest online poll or get involved in our forum, visit our home page at brokernews.com.au

Poll: Will commissions for brokers eventually be banned?

The MFAA has declared a close watch on financial planning FoFA reforms, amid fears commission bans might be extended to brokers. We asked brokers what they thought.

Yes

30% Source: Australian Broker Online

No

Perhaps partially

65%

5%

20

brokernews.com.au

Opinion MOHNACHEFF

It’s crazy to be a single basket case Putting all your eggs in one basket doesn’t work in life and it shouldn’t work in mortgage broking either, argues Liberty Financial’s John Mohnacheff Before we plunge into this debate, I think it is appropriate to apply a clear definition to what we’re actually discussing, so let’s begin with the most contentious word: diversification.

To me, the simplest definition is “Don’t put all your eggs in one basket”. Everyone has heard this expression; it applies to life in general and, in this post-GFC world, it certainly applies to the broking industry. And yet there are many brokers out there who still seem reluctant to apply this basic principle to their customers.

Everyone understands that the more products that a customer holds with one organisation, the less likely they are to move to another organisation. So, as a broker, isn’t it a good business principle to offer a variety of products and services to your customers?

Think about it. You give greater value to your customers as you become their trusted advisor for multiple products and services, therefore increasing your customer retention. Your business gains greater value because you earn multiple income streams per customer. Your business has greater appeal to existing and potential referral sources and your marketing capabilities increase.

Making customers sticky

Let’s take a moment to review the practical application of these points. Instead of developing a relationship (and I use this word loosely) with your customer purely to arrange their mortgage, imagine the impact that you’d have if you also offered to arrange their motor finance, their children’s motor finance, their business finance, their home and car insurance as well as their loan protection? These are necessary expenses for any family.

By offering these services, you have grown your per customer income from just one product

A New Word Order There are too many worn out words in the mortgage industry that deserve to be revised or reinvented. Commentator Kym Dalton has some suggestions for the scrap heap Words wear out. In a world of relentless change, words and phrases should have a spring clean to make sure they suit current circumstances.

Our industry is barely 20 years old.

In some ways it’s a mature industry and it could be reasonable to think that the components of our industry came about with great foresight, planning and intent. This is most definitely not how it was, however.

The first challenge to traditional branch-based retail banking was from the RMBS issuers using the securitisation process. This is the industry I was involved with and I can tell you the pace of change progressed at warp speed from 1989–1993. Things evolved so rapidly that many of us literally made it up as we went along.

Indeed, I’m going to stake a claim for “inventing” one of the terms

mentioned below. I can tell you on great authority that I made it up under pressure and it’s just stuck.

Mortgage broking in the form we know it today was very much a response by the banking sector to the price leading, category killer RMBS issuers. In adopting brokers and wholesale, the ADI sector (including Credit Unions and Building Societies) needed to rapidly create a terminology to describe fresh methods, features and ways of relating to the new channel of mortgage distribution represented by brokers.

Most would have heard of the term “paradigm shift”– indeed it’s become a bit of a buzz phrase that’s often used out of context.

A paradigm shift is actually when anomalies arise in a set of concepts, values or assumptions that cause a new set of concepts or

to potentially three or four. I understand that many brokers believe that there is not enough income to be earned from other products, or that they don’t have the time to attend to them, but the fact is that, collectively, your potential income stream is more than doubled. I say that you cannot afford to do without them.

Why? Because your customers will buy these products and services, and they’ll buy them from your competitors. The more products and services that you arrange for your customers, the less opportunity your competitors will have to market to them. Your customers will not need to seek alternate providers; they’ll revert to you for all their financial and domestic protection requirements.

Let’s not be under any misconception. There are more potential competitors coming into the residential mortgage space. And many of these new entrants have access to enormous databases.

With a diversified strategy you incorporate the “hamburger with the lot” approach. Instead of just offering to assist your referrers’ clients with a mortgage, you offer a wider proposition. This gives your referrer the surety of corralling their customer, narrowing the need

values to be more representative of an activity.

I’d venture that the paradigm of broker/wholesale of 20 years ago differs substantially from that of today but the lexicon of the industry hasn’t kept pace with the shift.

As an indication, here are just some of the terms that I think need some close examination and the application of some imagination.

Non-bank lender: What exactly is a non-bank lender? This tag is applied to mutuals, RMBS issuers and businesses funded by subsidiaries of banks. Time for a new term.

Second-tier lender: Second tier has connotations of “lesser” or inferior. I’m sure the Australian operations of global banks like Citibank, ING and HSBC don’t consider themselves inferior.

Something more appropriate needed.

Mortgage manager: There’s so much variation in the business models of businesses known as mortgage managers, the term isn’t descriptive of their activities and it’s also a term that would no longer resonate with consumers. It’s a bit naff. Time for a revamp.

Trails: Under FoFA, trailing commissions for planners are to

John Mohnacheff

for them to have multiple referral sources.

Busier but better

And here is the icing on the cake!

We’re all becoming busier. The majority of people admit that they are time poor. With this new business strategy in place, you can confidently go to the marketplace and promote yourself as the “one stop shop” – all your customers’ finance and protection requirements are met. Not only is this a strong consumer proposition, it also puts you in control of how you market yourself and your business. Be a broad-based solutions provider.

John Mohnacheff is national sales manager at Liberty Financial.

be banned within superannuation.

More generally, in regulatory circles, there’s recognition that revenue should be received as recompense for a genuine activity. Maintaining the term ‘trails’ is setting the industry up for a regulatory bullseye.

Aggregation/Aggregators: The IT industry, public utilities and news services all have aggregators. The activities they undertake are relatively simple and light years from what the highly sophisticated risk-taking businesses that Australian broking aggregators are. Aggregators are radically different businesses than they were 20 years ago and it could be time to spring clean the term to reflect their evolution.

In the future, I believe our industry could well do with a new word order that reflects the growth, reach and increasing sophistication of the broking activity.

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

Kym Dalton www.futurology.com.au Kym Dalton is a principal of SAKS Consulting and Futurology Pty Ltd – finance industry analysts, consultants and ‘true believers’

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 influential trends that made headlines in the magazine 12 months ago Australian Broker Issue 8.9

Headline: ‘Common sense’ pledged as clawbacks expand (Cover) What we reported:

As fears over clawbacks grew in the wake of last year’s ban on exit fees, lenders came forward to pledge “common sense” in meting out the policies. LJ Hooker’s Peter Bromley said the lender would not impose clawbacks where clients discharged loans for a legitimate reason such as redundancy, divorce or death, and Pepper’s Mario Rehayem said the company would continue to assess clawbacks on a case-by-case basis, granting reprieve to brokers who had a good history with the lender..

What’s happened since:

Clawbacks have again been in the spotlight this year with AFG releasing research indicating they had not hit brokers as hard as expected. Fears of borrowers chasing rates and hopping from loan to loan seem not to have eventuated. A recent Australian Broker poll found most brokers had not felt the sting of clawbacks. The poll found that 19% said they had not seen the effects at all, while 49% said the impact had been entirely manageable. Meanwhile, 32% said clawback policies had hit them where it hurt.

Headline: Non-banks not a last resort (page 4) What we reported:

What we reported: Research last year revealed that broker attitudes towards non-bank lenders were shifting. A poll conducted

by Homeloans found that only 13% of brokers thought that nonbanks were only suitable for borrowers with poor credit, down 7% on the previous year’s result. Nearly half of brokers said they wouldn’t have a problem recommending a lender clients weren’t familiar with, and 69% of first homebuyers said they would consider using a non-bank.

What’s happened since:

Non-banks are a bit more in vogue these days. Several aggregators have come forward in recent months to say that there has been a shift to the lenders, with brokers increasingly eschewing major banks. AFG figures indicate that 22.9% of first homebuyers chose a non-bank lender. Bad press around the majors likely has helped the drive for alternative lenders. The Big Four’s out-of-cycle hikes have seen their Roy Morgan satisfaction ranking take its first dive since March of 2011.

Headline: Push for scale driving consolidation wave (page 10) What we reported:

Figures released by the Market Intelligence Strategy Centre (MISC) last year claimed that the number of broker groups in its research pool, including aggregators, had fallen from 190 to 138 over 2011, a 27% decrease. The research company put the result down to consolidation throughout the industry. MISC said the six most important industry mergers in the previous year had involved more than $30bn in loans under management.

What’s happened since:

Consolidation seems set to continue. Aussie CEO John Symond earlier this year predicted that boutique broker groups were not long for this world. He made the claim after acquiring boutique aggregator National Mortgage Brokers. But the remaining boutiques have argued that they’re not going anywhere any time soon. KeyInvest’s John Trubicyn said the aggregator was not getting in on the consolidation wave, and still had a compelling proposition to offer to brokers.

Headline: Specialised lending becoming mainstream option (page 16) What we reported:

Pepper Home Loans last year claimed that specialised low-doc lending was set to become more of a mainstream option as banks clamped down on their lending criteria. Rehayem said the lender was looking to significantly ramp up volumes through brokers, and had brought on five new BDMs to handle the workload.

What’s happened since:

Pepper has continued its appeal to brokers with its “Give Pepper a Crack” campaign, a promotion vowing to beat competitor’s rates on deals given unconditional approval. Rehayem has urged brokers to shop deals from other specialist lenders to Pepper, and said the campaign has already unseated a number of its competitors’ top brokers.

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brokernews.com.au

Feature

Riding high with BNI All around Australia, brokers are using Business Networking International as a local tool to build word-of-mouth referral and recommendation.

Ben Abbott reports

W

hen first invited to a BNI meeting in Hobart three years ago, Gary Pitchford, a mortgage broker with Pace Financial Services, was unsure of what it would mean for him.

“I was invited along to a meeting, in the normal way that anyone usually gets involved in BNI,” Pitchford says.

“The contact was a client – a photographer – and I must admit at first I was a bit sceptical; I didn’t really know what I was getting myself in for,” he says.

However, Pitchford’s doubts evaporated quickly. Since then, he has attended weekly meetings with local BNI chapter ‘Royale’ every Thursday morning from 7:30a.m.

And despite the early hour, Pitchford said his involvement was immediately beneficial. “I walked away from the first meeting with two referrals, thinking ‘I need to be involved in this’. It certainly increased my exposure to other businesses in Hobart,” he says.

Breaking down BNI

Gary Pitchford

Business Networking International began in Southern California in 1985, when consulting company director Dr Ivan Misner was looking for new ways of generating business for his company. Misner decided to put together a network of local business professionals, who all came together with the goal of building their businesses via word-of-mouth marketing. Almost 30 years later, Business Networking International (or BNI) has over 6,200 active chapters globally, consisting of 14,000 members. In Australia alone, its chapter members generated over $A2000m of business referrals through their participation last year.

For many, the advantage of BNI is the consistent and structured networking environment, where professionals are able to join a locally sourced chapter or group of professionals, and be guaranteed they will be the only member of their profession in the room.

Mortgage brokers have been among its greatest advocates here in Australia. In fact, mortgage broker positions are often one of the first positions to be filled when any new chapter is launched – alongside their real estate agent referrers. At present, there are over 220 mortgage brokers listed on the BNI Australia website, from 57 regions across the country.

Fast facts: What you need to know • BNI’s Australia members reported to BNI that they generated over $A200m of business referrals through their participation last year.

• There are over 220 mortgage brokers using BNI across Australia in 57 regions across the country, with brokers often among the first in any new chapters.

• BNI is a business networking organisation with over 6,200 active chapters and 140,000 members in approximately 50 countries.

Jemmy Best

Source: BNI Australia

Joining for the best

Jemmy Best from Best Home Loans in Townsville originally heard about BNI when she was operating as a mortgage broker in Cairns – but found a hard time getting in.

“I heard about it before I moved to Townsville, mortgage brokers are always among the first spots to get taken, so I couldn’t get into a Cairns one.”

However, when she relocated to Townsville as she attempted to expand the business, Best said she decided to get involved. “There was 10 or 11 chapters here, and at one point representatives of Best Home Loans were in three different chapters.”

Four years later – although she is the only one remaining – she has not looked back.

“It has really worked for me. All our business comes from referrals and networking, and you only really need one deal to cover your membership,” she says. “You don’t get a referral every week, but it’s a great form of word-ofmouth marketing,” she says.

Pauline Sultana of Pride Mortgage Services in Penrith, Sydney, has risen to become president of her chapter, after attending meetings with her chapter for almost seven years.

“I’d never heard of it before, but a broker I’m close with in my local area said a place was opening up that she didn’t want – so I bit the bullet,” she said.

“I do see the value of it. You get the opportunity to build strong rapport with members who you meet every week and who feel more comfortable with you, and who are then more likely to use or recommend your services, I would say,” she said.

A structured opportunity

“I see BNI as just a regular part of my business week and my Thursday working day,” says Gary Pitchford of Pace Financial Services in Hobart. Likewise, other BNI brokers are happy to attend weekly meetings, despite the time commitment this entails, often before a regular work day begins. So why the enthusiasm? The answer is simple. Referrals.

During a BNI meeting, each participant is given the floor for 60 seconds, when they are able to talk about their business, and what they do. Each session, one member is given a longer slot of 10 minutes, when they are able to detail their services at length. This is followed by an exchange of referrals, where the aim is to give out at least two referrals every week.

“Being a member doesn’t give you the right to everybody’s business,” Pitchford says. “But the important thing is that if you use the system, it builds up people’s trust in you.”

Members are also encouraged to meet with another of their chapter on a one-on-one basis once a week. This ‘dance card’ opportunity, which both Pitchford and Best say they try to use religiously, gives brokers an in-depth chance to meet and align with other businesses.

brokernews.com.au

23

SKINNER BUILDS LOCAL BRAND VIA BNI It was only three months into his mortgage broking career – back in late 2007 – when Andrew Skinner first heard about Business Networking International – or BNI. “I got involved through a client,” he says. “The client had a relatively new business as well, and he started telling me about BNI and within three months a position had come up.”

A broker with Aussie Home Loans in Hampstead Gardens in Adelaide, Skinner says BNI meetings have become a regular part of his Friday morning routine ever since.

And the results are impressive. Though admittedly a large time commitment per week, Skinner says meetings yield quantifiable business – a reason he keeps coming back.

Andrew Skinner “It was hard to start with, but it has become part of my routine. I’d feel strange if I got up on a Friday morning now and didn’t go to a meeting. The leads have been something that have grown and grown.

On average I get a good half-a-dozen well-qualified leads on a monthly basis, and while dollar value is up and down, from that perspective it does cover the time.”

For Skinner, the formalised structure of the referral meetings – as well as everybody being in the room for the same business building purpose – was a good reason to join the group.

And he says it is a compliment to Aussie’s ‘big brand’ marketing. “Being with Aussie, whatever I may do is like a drop in the ocean, so I like to promote myself locally,” he explains. “When I got to BNI meetings, I talk more about my personal experiences and what I do as opposed to the brand I work with, as I don’t need to push that,” he said.

Skinner says he has managed to build solid referral relationships with a ‘core group’ of local BNI members, including an investment property dealer and IT professionals.

He recommends any broker not involved in a local BNI chapter should consider joining.

“The mortgage broking seat is one of the seats most quickly filled, so it may be a struggle to find a lot of chapters that don’t have one,” he said. “But I’d recommend checking it out to see what they think. I’m sure all brokers have been to a networking function, but the difference with BNI is the format, which is structured and professional,” he says.

Spreading the word, by mouth

Sultana says she has built a variety of relationships, and can attribute how much of her trail income comes as a result of referrals from some of the group’s members.

“For example, there is a family law lawyer who moved to a different chapter because she moved out of the area, and I still get referrals from her to this day. I also have a strong rapport with an accountant; we hold investment seminars together a couple of times a year.”

Sultana said that as a result of bourgeoning business relationships, she planned to soon expand these seminars to include the local solicitor, financial planner and buyer’s agent.

“Not only is it referrals, but with the financial planner and solicitor, for example, you are touching base with each others’ databases,” she says.

“Through a seminar I will be able to meet their clients and offer my services, so it’s my way of leveraging their database.”

It’s not only associated professions that mortgage brokers are benefitting from.

“It is diverse,” Pitchford says. “You do get a lot more leads from people like the accountant, but I’ve also done a lot of work with cleaning and gardening services.

They are going into their clients’ houses every day,” he said.

Sultana said people like tradespersons have proved strong lead generators, while for Best, show said she should get at least 30 referrals per year, it is her chapter’s

real estate agent that has proved the most lucrative referrer.

“I work closely with the Real Estate agent, who refers a lot of clients to me. You align with people who complement your business.”

In the end, it is about extending word-ofmouth marketing throughout the local community. “Being in business on my own, it is great to have people recommending you – whenever I get up in front of my group, I say ‘Good morning my marketing team’,” Sultana says.

“I class them as part of my team. They know my business and promote my business, and this doesn’t require me to advertise. It is a reiteration of the services you offer if someone in your BNI group says at the end of the meeting you gave them great service.”

Support in hard times

The Hobart market has been tough following the GFC, according to Pitchford.

“The market is fairly tough down here at the moment, things are ticking over, but we are not seeing the world set on fire,” he says.

Pitchford says Tasmania usually lags the mainland economically, and at the moment it was doing it tough in a similar way to what Victoria has previously gone through.

“We are flattening out, but hopefully are moving forwards,” he says.

However, Pitchford said there is one thing that won’t be stopping. “It’s even more reason you need to be involved in groups such as BNI and be networking.”

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brokernews.com.au

Insight

Three keys to crossselling your clients Brokers often fail at cross-selling their greatest asset – existing clients. James Veigli explains how brokers can make more from them, every single time

C

ross-selling is not a dirty word! In fact, it is your biggest opportunity to diversify your income, increase profit and bullet-proof your client base, by offering complementary products and services that will ultimately help your client in a more complete way.

Isn’t that why we are here, to help people?

There are two main reasons why you must master the art of cross-selling. First, there are only two ways you can grow your income. Either make more money per client, or find more clients. Now it’s a fact that the easiest person to sell to is an existing client, someone you have already invested your time and expertise in – so increasing your income per client is a far easier way to grow your income, compared with finding more clients more often.

The second reason is for client protection. The more products and services you help your clients with, the less risk you have of them leaving. You become their centre of influence for all things finance, and it becomes difficult for your client to stray when they are heavily invested in you and have all their finance needs in the one place.

Here are three steps to ensuring you cross-sell 100% of your clients:

1) Form your own inner-circle

The more products and services you help your clients with, the less risk you have of them leaving

James Veigli

Once you’ve identified which products and services you want to cross-sell, you’ll need to decide who will provide the services and how you will coordinate the process.

Do you have the skills and qualifications to provide the products and services yourself? will you hire a staff member or take on a partner who does? or will you find a professional (or business) who you trust to look after your clients? Each option has its pros and cons that you will need to consider before making a decision.

To coordinate the process of forming alliances with outside professionals, take charge and clearly document exactly how you want the referral process to flow, how you

Cross-sell, not upsell Brokers who attempt to offer consumers a larger amount of credit than they come asking for are being seen as operators exhibiting less quality than banks and credit unions.

The findings, released by Core Data, found mortgage brokers trounce banks and credit unions across most categories, except notably on a ‘quality’ measure.

Core Data head of mortgage research Andrew Inwood said there is a small number of businesses in the market who are prone to what a consumer may see as “overlending”, by offering them more credit than the consumer originally comes asking for.

“They may have come asking for $400K, and the broker has said, ‘Well, in your circumstances we can get you $650K’, and they are saying ‘No, I only want 400K’,” he said. “That’s now being seen as a destroyer of value. Risk aversion has taken over the market, and having access to more credit is not now as valuable a thing for consumers.”

Source: Australian Broker Online

want your clients treated, how you want to be remunerated, and how often you will communicate and update each other on the progress of any referrals.

The reality is that most professionals are uneducated about how to effectively cross-sell and refer clients, so often your biggest task is teaching your alliance partners how to play the game to get a winning result for both parties.

2) Use a bigger-picture approach with clients

There are two approaches you can take with your clients.

The first is the “product-based” approach – where you discuss borrowing capacity, lenders, rates, fees, and the process of buying a property. This is how the majority of brokers are taught to deal with clients – and it makes cross-selling an uphill battle.

The second and more effective way is the “solutionbased” approach – where you discuss big-picture wants and needs with your client, create a solution to help your clients achieve these wants and needs, then help them implement the solution. The reason this approach is so powerful is when you help your clients implement a big-picture solution, this will involve a wide range of products and services – which means the cross-sell and referral process is a natural part of helping the client achieve their goals.

3) Take charge!

If you want to integrate and maximise cross-sells in your business, diversify your income and protect your clients, and if you really want to help your clients achieve their financial goals – then you must take charge, control the conversation and become a solution-based broker.

Never wait for your client to ask. You are the professional. You are the expert. You know what’s best, so show your clients a big-picture solution, get their approval, and then tell them what they need to do.

If you do, you will close more deals, make more cross-sells, earn more money – and your clients will love you for it!

James Veigli is a business profits specialist and founder of the Broker Profits Vault Visit brokerprofitsvault.com.au

3 reasons why brokers fail at cross-selling • They don’t have professional alliance partners in place to refer to, or they don’t have effective processes in place to cross-sell internally.

• They wait for the client to ask, or they don’t know how and when to introduce other products and services.

Most clients will not ask because they either don’t know what to ask, or they don’t realise you offer additional products and services.

• They are often small-picture focused when dealing with clients. If you focus on the “small” things like loans, rates, fees and repayments, you’ll find it harder to crosssell your clients after helping them with their loans.

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brokernews.com.au

Market talk

Suburbs slipping towards disaster Whether or not there’s a housing bubble in Australia, some suburbs look set to crash, and crash hard writes Your Investment Property Magazine’s Aidan Devine

T

he idea of an Australian property crash is one that draws a lot of ire. Bank economists, real estate analysts and most brokers bristle at the idea of a housing bubble. But despite their protestations, there are select suburbs across the Lucky Country where a crash looks all but inevitable.

Many indicators show that select areas in Northern Queensland, rural Tasmania and the South Australia coast might see price crashes soon. They are joined by a host of other areas where price falls look set to continue.

Tourist trap

Tourism towns look most likely to take a hammering.

According to DSR score indicators, tourism-based economies in Queensland look set for further house price slides with current demand in these markets lacklustre at best.

Real Estate Institute of Queensland-Cairns chair Greg Clyde-Smith says that Queensland’s far north remains one of the softest markets in the country because of a range of factors.

“A decline in tourism was the start of an economic downturn as well, which has put us a little bit out of sync with the rest of the country,” he says.

Areas in Queensland that look especially unlikely to show capital growth for, arguably, some time to come include Magnetic Island, 8km offshore of Townsville, Daintree, and Mossman – both in the far north of the state.

RP Data figures show that Magnetic Island house prices sank 23% in the 12 months to January, while SQM Research figures indicate a vacancy rate hovering at around 6%. Another sign that demand may be poor in the months ahead is an auction clearance rate of only 11%,

suggesting that buyers may be a little reluctant to purchase property in the area.

Daintree and Mossman, on the other hand, have shown decent growth recently. RP Data indicates that both saw 14% price growth over the three months to January.

However, more recent indicators suggest that this may have been a seasonal spike, with vacancy rates especially high – 6.86% and 7% for Daintree and Mossman, respectively. A whopping 6% of all the properties within Mossman are also up for sale – a telling indication that supply may outstrip demand.

Sunshine state not alone

Queensland is not the only area where property prices look set to tank. Other regions across Australia hinting at future falls include Port Sorell, on Tasmania’s Bass Strait coast, and Port Augusta, 322km north of Adelaide.

Port Sorell prices fell 6% in the 12 months to January, according to RP Data, and a sign that this may continue is the fact that 8.36% of all properties within the area are up for sale. With the average property in the area already spending 213 days on the market before selling, the supply-demand situation looks stacked heavily in favour of negative growth.

John Price of Roberts Real Estate says that one reason for poor demand in this area of may be a lack of infrastructure.

He expects this may change within a year. “A primary school is currently being built [near Port Sorell], as well as a community centre and a shopping centre. This flat period for prices may continue for another nine months or so, but demand may pick up,” he says.

Port Augusta, SA, home to a population of about 13,000, may see price falls in the months ahead largely due to slow demand. DSR data shows that houses are currently sitting on the market for 296 days, on average.

Headed for a crash: a breakdown of the suburbs in decline MAGNETIC ISLAND, Qld, 4819 Typical value: Days on market: Auction clearance rate:

PORT SORELL, Tas, 7307 $315,000 173 11%

GLENGARRY, Tas 7275 Typical value Days on market Auction clearance rate Vacancy rate

We have been affected in this area by the downturn of tourism for quite some years

Data current at end of April 2012

$317,000 137 22% 7%

Typical value Days on market Auction clearance rate Vacancy rate

$315,000 193 25% 5.11%

MURRAY BRIDGE, SA, 5254 $252,500 294 6.62%

WONGA, Qld, 4873 Typical value Days on market Auction clearance rate Vacancy rate

Typical value Days on market Auction clearance rate Vacancy rate POMONA, Qld, 4568

$350,000 137 22% 6.86%

PORT AUGUSTA, SA, 5701 Typical value: Days on market: Vacancy rate

$308,000 213 4.93%

MOSSMAN, Qld, 4873 $372,500 221 25% 4.91%

DAINTREE, Qld, 4873 Typical value Days on market Auction clearance rate Vacancy rate

Typical value: Days on market: Vacancy rate

Typical value: Days on market: Vacancy rate

$272,500 265 26%

NEWELL, Qld, 4873 $350,000 137 12.5% 7%

Typical value Days on market Auction clearance rate Vacancy rate

$350,000 137 22% 6.91%

brokernews.com.au

Property professionals seeing confidence boost Confidence is returning among property professionals, who predict house prices to stabilise.

The Property Council of Australia-ANZ Property Industry Confidence Survey has found sentiment among property professionals rose for the quarter.

Property industry participants anticipate a stabilisation of prices, and an increase in their own forward work schedules.

“Respondents are feeling less buffeted than in previous quarters, where the storm in commodity prices, global economic insecurity and domestic political uncertainty contributed to negative sentiment,” Property Council chief executive Peter Verwer said.

Verwer said a renewed optimism towards the fate of the global economy had helped to quell uncertainty in the sector.

“It is clear that property leaders are less pessimistic about the global economy, which is translating into greater confidence in Australia’s economy, but they are still hesitant about hiring for growth,” he said.

Indeed, with the exception of Tasmania, respondents to the poll said they anticipated increases in their own level of work, but were less positive about their own hiring intentions in the future.

Verwer has pointed out regional disparities, as well. He said confidence in Victoria remained flat, while sentiment in Tasmania declined.

“More than half the quantifiable

lift in sentiment is attributed to three states – Western Australia, the Northern Territory and Queensland – despite the fact these states account for less than a third of the nation’s population,” Verwer said.

Verwer also commented that the property industry remains sceptical of government planning laws, and their potential impact on the housing market. Half of the survey’s respondents disagreed that their state or territory governments were doing a good job of planning and managing growth.

“Property professionals give their governments a ‘fail’ in planning and managing growth.

Top marks went to the WA Government, which has embarked on a broad planning reform program, clear planning strategies and new implementation vehicles to get things done. Other states should take note,” Verwer said.

Commercial property also saw a boost in confidence. ANZ chief economist Warren Hogan claimed the commercial market was at the early stages of a value up-turn.

“Limited new supply, solid demand and tight vacancy – combined with a rebound in economic growth – suggest significant upside to rents,” he said.

27

NUMBER CRUNCHING What’s holding back first homebuyers?

52%

13%

25%

Lack of savings

5% 5%

House prices Interest rates Job security Stamp duty Source: Loan Market

Vacancy rates low, but stable City

Vacancy rate March 2011

Vacancy rate Feb Vacancy rate March 2012 2012

Sydney

1.2%

1.5%

1.5%

Melbourne

2.5%

3.0%

2.9%

Brisbane

1.5%

1.6%

1.5%

Adelaide

1.1%

1.3%

1.4%

Perth

0.9%

0.6%

0.5%

Canberra

0.6%

0.7%

0.8%

Hobart

1.2%

2.3%

2.4%

Darwin

1.9%

0.7%

0.6%

National

1.5%

1.7%

1.7%

Source: SQM Research

At a glance…

$50.6bn* *The amount Australians owe in credit card debt Source: RBA

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brokernews.com.au

People BDM icon bids industry farewell

Firstmac footy deal

An AMA-winning BDM has announced her retirement from the industry after more than 40 years.

Westpac BDM Debbie Neale, a former BDM of the Year winner at the 2010 Australian Mortgage Awards, has said she will retire to pursue “other passions and interests”.

Westpac general manager of mortgage broker distribution Tony MacRae has praised Neale’s contribution to the mortgage broking industry during her career.

“We’re honoured and deeply privileged to know that Deb has been a part of the lives of many broker businesses,” MacRae said.

“She has made a difference to her brokers and seen many of them succeed and grow, which is why she has been passionate about brokers, customers, the mortgage industry and Westpac.”

Following the announcement, Neale reflected on her legacy,

Firstmac has inked a deal with the Brisbane Broncos that will see the lender take a prominent sleeve spot on the team’s jersey.

The company has entered into a three-year sponsorship with the team, and Firstmac managing director Kim Cannon said the deal would help present the lender directly to consumers.

“As the new force in financial services we wanted to partner with a team that could help us get cutthrough in a very crowded market dominated by the banks,” he said.

The company previously announced a Firstmac Broncos Home Loan to tie into its sponsorship of the leading Queensland-based team. The loan offers a 6.58% interest rate, and three years of family memberships to Broncos home games.

“It’s great value for fans and homeowners who want to do the switch, and get behind the Broncos to cheer them to a premiership victory,” Cannon said.

saying she had enjoyed serving as a “trusted advisor” to brokers. She offered parting advice to brokers to remain innovative.

“In a highly competitive and changing financial services environment, we must all be accountable for continuing to be innovative and highly capable to ensure the bar is being raised on the value being delivered to mortgage brokers and customers,” she said.

“I leave with the knowledge that our industry is in good hands, with great people driving this successful approach: continued strength, confidence, professionalism, passion and drive within the Australian mortgage industry I have come to love,” she said.

Debbie Neale

Westpac reshuffles as Karpathakis move on

St Kilda latest to feel brokers’ love

Westpac’s broker distribution team has a new national manager of strategic partnerships, after former NSW state manager Paul Bakker was boosted into the role in April.

Bakker replaces Michael Karpathakis, who has left Westpac’s mortgage broker distribution team for mortgage broking group Loan Market, where he will be NSW state manager.

Reshuffling its team, Westpac also announced that Frank Speranza would fill the vacancy

A leading brokerage has joined the mortgage industry’s rush to partner with leading football teams, having announced a partnership agreement with Victorian AFL team St Kilda.

Mortgage Choice will promote its online HelpMeChoose.com.au business via the arrangement, which will see the brand feature on St Kilda’s coaches’ box, match-up boards, media backdrops and website.

CEO of Mortgage Choice Michael Russell said the deal aims to drive national brand awareness and attract a stronger customer following in Victoria, for both Mortgage Choice and HelpMeChoose.com.au.

A two-year agreement, Mortgage Choice will also be entitled to leverage the club’s supporter database, which the brokerage said it will use to power national business opportunities.

“We were attracted to the fact that St Kilda has a huge supporter base and one of the most powerful business networks in the sporting industry,” Russell said.

In February when announcing its half-year results, Russell put an 8.5% decline in net profit after

Michael Karpathakis

left by Bakker as NSW state manager.

Commenting on Bakker's appointment, Westpac head of mortgage broker distribution Tony MacRae said he will be tasked with ensuring Westpac continues to gain traction with aggregators.

“As part of Westpac’s mortgage broker leadership team, he will work closely with aggregator partners nationally to manage and communicate key changes, in addition to updating them on market activities undertaken to strengthen Westpac’s broker market proposition,” MacRae said.

Frank Speranza previously acted in the NSW state manager position over the December and January Christmas period, but was more recently bank manager at national branch leader Burwood.

“During this time he has led the growth of Westpac’s local Burwood customer portfolio, achieved exceptional sales performance in difficult markets and delivered exceptional advocacy especially in our key affluent segment,” MacRae said.

tax for the Mortgage Choice business down to the performance of the comparison website.

“While HelpMeChoose.com.au did not perform to revenue expectations, and was the prime reason for lower than expected net earnings, we have implemented the necessary changes to remedy this result,” Russell said at the time.

“Adjustments include a complete management restructure.”

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Caught on camera Vow Financial tested a new concept in March with a mini-conference that brought brokers together with key executives and alliance partners. Brokers also heard from motivational speakers, the MFAA’s Phil Naylor and RP Data’s Tim Lawless.

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Mario Rehayem, Pepper Andrew Parry, Macquarie Bank Robert Ward, Equitimax director The Allianz stand (Vow insurance JV partner) Rowan Astill and Rosie Hunt (Vow Legal) Tim Lawless, RP Data Leighton King and Tim Brown (CEO, Vow Financial) announce the winner of a ticket to Vow’s 2012 National Conference, George Ignatiou from GI Financial Services Ross Carcozza (Citibank) Phil Naylor (CEO, MFAA) addresses delegates Vow welcomes brokers to Sydney’s ANZ Stadium Jack Czechowski (Vow Financial compliance manager) Nabbroker’s Stephen Kemp speaks with broker Govind Sami

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Insider

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Drop us a line at insider@ausbroker.com

Hip-py banking

You got that right, Mr President

“That White House refinance was some deal...”

I

t’s often hard to get referrals and endorsements of your business – after all, you’ve gotta service the hell out of those clients first. But it’s even harder, Insider thinks, if you’re a dodgy mortgage broker and you’re looking to get the public vote of confidence of the President of the United States – that’s right, the Commander-inChief – himself.

However, one such mortgage broker hasn’t had too much trouble at all. Hayden Barnard of Paramount Equity Mortgage in Seattle – who was pinged for $400,000 back in 2009 for false advertising – is now running an advertisement on radio stations in the West of the country that grabs a large sound bite out of an Obama speech. During the oratory, the President appears to extol the virtues of refinancing. Not only that, but Paramount has made it seem as if the President is actually talking specifically about the

business itself. Perhaps a step too far, Insider thinks.

As reported by Forbes, Paramount is not only burdened by a dodgy advertising history, but is being looked at closely by the media for Presidential – oops, predatory – lending. In fact, Insider thinks the President may not have been too happy to find out Paramount’s connection to one Robert Bales – the Army sergeant currently facing charges for murdering 17 civilians in Afghanistan. A report in a local Seattle newspaper claims Paramount put Bales into two loans that could be considered ‘subprime’, with high interest rates, prepayment penalties, and ‘balloon payments’. Didn’t anyone ever tell Paramount mortgage stress is a killer? Paramount has denied being predatory – but apparently is still happy to link itself with all things Presidential.

So far, the White House has kept silent – not for long?

Bankwest seems to be trying to snare some of Apple’s magic of late, opening a flagship store in Perth’s CBD that draws some heavy influences from the trendy tech giant. The store features free wi-fi, web browsing and coffee, and a courtyard that should serve as a perfect camping spot for Occupy protestors. The regional has touted the branch’s extra-long opening hours, multiple digital touchscreen installations and free finance seminars as big draws for customers used to the Steve Jobs retail experience. The branch even has an “Expert Bar”, mirroring Apple’s Genius Bar, albeit probably with more conservative haircuts and less smugness. It all sounds pretty lavish and forwardthinking, but Insider has noticed a few missteps in the plan. First, the store features a section which highlights the bank’s sponsorships of the West Coast Eagles and the Western Force. That’s all well and good, but Bankwest’s target audience with this branch – hipsters – don’t like sports. They should have hired a sad-eyed bearded guy to sit in the corner playing synth. Moreover, they may be striking out altogether trying to draw Gen Ys into a bank. Everyone knows hipsters’ financial planning consists of just borrowing money off Mum and

“I was into Bankwest before it was cool”

Dad. At any rate, Insider wishes Bankwest good luck with the swanky new store. Now he knows where to go when he needs to take out a loan to afford a new iPad

Can you feel the fraud tonight?

When Insider thinks of Kenya, he doesn’t automatically think mortgage fraud and deception. In fact, he is more likely to think of a pride of lions cavorting along singing Hakuna Matata. However, the circle of life is known to include the bad, as well as the good. And so it was in the UK, where Kenyan mortgage fraudster Patrick Kamande was recently sentenced to six years behind bars, along with his mortgage broker Tahir Malik, who pipped Kamande by receiving a greater sentence of six-and-a-half years.

Their crime? A complex series of mortgage frauds, where Kamande pursued the purchase of a number of properties under false names. Of course Malik, the complicit broker, helped Kamande by brokering the mortgage loans. Insider guesses he just couldn’t wait to be King.

However, he won’t be singing so loudly in prison. In fact, he’ll probably have to rewrite those lyrics from “Free to run around all day/Free to do it all my way” to something more appropriate to an imprisoned state.

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