Australian Broker magazine Issue 9.16

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Cross-sell craze our big blunder Brokers have been warned they are headed in the wrong direction if a focus on basic product cross-selling is maintained

F

or many brokers, setting a business goal of writing $1bn in loans during a 12-month period while not focusing on the next revenue source or commission might seem counter-intuitive.

But for Mark Davis, a director of The Australian Lending & Investment Centre in Melbourne, there is no conflict. “If we do the right thing, we get paid. It’s as simple as that.”

FULL STORY PAGE 12

AUGUST 2012 ISSUE 9.16

+ INSIDE THE REVOLUTION

Mortgage broker calls for industry to unite P14

+ NEWS ‘AGGREGATOR, YOU’RE OUT’

ASIC casts broker group from industry P4

BANK DOMINANCE ATTACKED Full-scale overhaul needed to repair competition P6

+ THE WORKSHOP Don’t pursue these ‘insane strategies’ P20

+ INVESTIGATION How online leads will change your business P22

+ INTERVIEW Meeting the president P24

NEWS

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NUMBER CRUNCHING

WHAT THEY SAID...

DID YOU KNOW?

$7m

The price an investor sold Kalgoorlie’s famous Exchange Hotel for – a favourite with mining folk – in 2008. It’s now selling for roughly $3.5m.

58%

2056

The year Perth and Brisbane will enjoy the highest populations in Australia. Perth is forecast to grow by 116%, and Brisbane 114%, between now and then. *Source: Australian Bureau of Statistics

The average house price in Hobart, Australia’s weakest-performing city

2012:

$300,000

vs

1972:

$12,000

*Source: RP Data-Rismark and Productivity Commission

57yrs

vs

16yrs

The oldest and youngest members of the current Australian Olympic team *Source: News Ltd

Percentage of brokers who believe new clients will be harder to find in 2012/13

DOUG MATHLIN XXXXXXXXXXXX Quote here “People whoPxxwant a fee-for-service and are not willing to change their value proposition are destined for failure.” P11 LEAH BUSBY XXXXXXXXXX Quoteearly here Pxx “We decided on that we didn’t want to make decisions based on money, so we don’t pay for referrals.” P19

*Source: Macquarie Group Limited

40 The number of engineers signed on to mine asteroids in the future, under the Google-backed mining venture Planetary Resources.

James Cameron is an advisor. *Source: Bloomberg

VOULA KOTSIRAS NAME Quote hereprovide Pxx “If we can both online and traditional referrals, members can have the best of both options.” P22 MARTIN LEEDHAM NAME Quote here Pxx “We have fought hard to maintain the bankbased commission model, and we should do all we can to preserve that model.” P24

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NEWS 3

NEWS

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ASIC shock as first aggregator shown the door ■ ASIC has demonstrated its

willingness to crack down on aggregators who fail to comply with NCCP legislation, with a decision to cast one aggregator from the industry completely.

ASIC has cancelled the credit licence of Pump Financial, a Queensland aggregator and mortgage broker based in Brisbane, after it failed to obtain an EDR membership.

The watchdog said Pump Financial’s EDR membership was cancelled by the Credit Ombudsman Service in January 2012 and never renewed. Pump Financial also never obtained EDR membership with the Financial Ombudsman Service.

It’s the second time in a month ASIC has cancelled a credit licence due to a failure by a licensee to maintain an EDR

THE OFFENCE Brisbane-based Pump Financial failed to maintain an EDR membership membership, a key NCCP requirement. Sydney brokerage Dean Mooney Pty Ltd was banned from engaging in credit activities after failing to renew its EDR licence last month.

Phil Naylor, CEO of the MFAA, told Australian Broker he was “amazed there are still some brokers who are not abiding by the now NCCP requirement.”

“There are no excuses for fraud or not being an EDR member. I would have thought brokers who are operating professionally should have no concerns from ASIC,” he said.

Failure to hold membership to one of the two EDR schemes approved by ASIC is a serious offence. “ASIC has no hesitation in cancelling the credit licence of those who do not hold membership in either of the schemes,” said ASIC commissioner Greg Tanzer.

representative is claiming ‘sticky’ loans due to rate for risk pricing are better for everyone by increasing broker trail commissions, fostering client loyalty and keeping lenders happy.

Kon Avramidis, general manager of operations at National Mortgage brokers has told Australian Broker that there aren’t enough rewards for loyal, low-risk borrowers.

“Pricing on risk is a win/win

RATE FOR RISK KEEPS EVERYONE HAPPY ■ ■ ■

Client pays less for lower LVR Regulators happy with lender Brokers boost trail commission

for both client and lender. The client is rewarded for their prudent approach to borrowing, while the improved quality of the lender’s mortgage book can mean more favourable investment terms and will keep the regulators at bay,” he said.

While he admitted “banks

COPY & FEATURES NEWS EDITOR Caroline Dann PRODUCTION EDITOR Carolin Wun ART & PRODUCTION SENIOR DESIGNER Rebecca Downing DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Ben Abbott tel: +61 2 8437 4716 ben.abbott@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au

PHIL NAYLOR

Loyalty set to bring bumper trails ■ A leading aggregator

EDITOR Ben Abbott

don’t like it when people pay off loans early,” there were hidden benefits in encouraging timely payments and discouraging lender switching.

“If you miss a repayment, there’s a process that’s triggered, involving reminder notices, phone calls, paperwork – it’s very time-consuming for the banks.”

As for brokers, he believes trail commission will benefit greatly from borrower loyalty. “It can only be a good thing,” he said.

Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8437 4731 fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Toronto, New Zealand brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss.

Australian Broker is the most-often read industry publication, according to independent research carried out by the EhrenbergBass 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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NEWS 5

NEWS

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Brokers: Negativity is undeserved

Big banks see market dominance under fire

■ Talk of doom-and-gloom is unwarranted and

■ A leading professional services

threatening growth, say an increasing number of brokers.

The comments come after the Property Council of Australia’s June quarterly figures showed a marked drop in confidence levels nationally.

Key findings included poor confidence in the mining states – despite loan enquiries rising – and fears that financing wouldn’t be approved.

Peter Verwer, the Property Council of Australia’s CEO, said it was an unprecedented decline.

“It is the first time in the series that sentiment has turned downwards. The property industry’s expectations for the national economy have also worsened. Although there was a brief lift in sentiment in the June quarter, the turn-around has been swift and hard,” he said.

However, leading brokers have COLIN SHEPPARD expressed frustration at what they perceive as a damaging disconnect.

Many see negative sentiment as creating a risk-averse culture, which could, in theory, halt progress.

“From our research and from the ongoing discussions with leading economists, Australia is one of the healthiest economies in the world.

Borrowers’ lack of confidence in the property market is due to the overwhelming negative influence of the media,” said Loan Studio’s director, Colin Sheppard.

He added that continual investment by overseas property developers showed genuine confidence in the market.

Broker Justin Doobov also told Australian Broker there has never been a better time to invest – so long as people were willing to work hard and negotiate.

“While there is doom and gloom on the streets, now is a great time to buy, so long as you buy at the right price,” he said.

firm has called for a full-scale review to make competition fairer for mutual banks.

Deloitte Access Economics’ Competition in Banking report claims government initiatives are still ineffective and that mutuals cannot properly compete with the big four.

It prepared the report for Australia’s mutual bank association, Abacus, this month.

“While the government is attempting to restore competition in Australia’s banking and financial system, questions remain about how to achieve this,” it said.

Deloitte said recommendations made by the Treasury in 2010 to review the financial sector’s regulatory framework have not been taken up.

“For mutuals to provide effective competition, they need to be able to increase their market share.”

DELOITTE’S KEY ARGUMENTS Bigger banks are “too big to fail” and enjoy implicit government support to prevent failure Australian consumers benefit from increased competition, not market dominance Regulatory frameworks burden smaller lenders, putting them on the back foot

HERITAGE LAUDS BROKERS FOR HELP WITH RETURN ■ Heritage Bank has paid tribute to its broker channel, claiming it was vital in securing the bank’s 13th consecutive year of profits.

Earlier this month, Heritage announced a pre-tax profit of $44.36m for 2011/12.

CEO John Minz told Australian Broker he attributes part of the success to its growing broker channel. “It now accounts for around 50% of the mortgage loans that we approve, so is vitally important to us,” he said.

“We believe the future of lending through the broker network is extremely bright for Heritage.”

Last year, Heritage expanded its broker network to include WA, Tasmania and the NT. Minz says the performance of these states “exceeded expectations in the first six months, especially in WA.” “We are now a truly national player... [however] it’s not PROPORTION OF just expanding MORTGAGE LOANS HERITAGE our network that has made SOURCES a difference.

THROUGH We have had BROKERS to back that up with excellent products, competitive pricing and great service to brokers and to their customers.

“One of the big advantages that Heritage offers is our personalised service to brokers, which enables us to tailor individual solutions to suit the different circumstances their clients might have.”

50%

WANT MORE?

Want more tips from Moreloans’ Stuart Wemyss? See Insight on page 22

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NEWS 7

NEWS

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LL

ODDBA

Don’t bet on bubble popping, says RBA

THE STRANGER SIDE OF NEWS

■ RBA governor Glenn Steven’s

WHAT IS LOVE?

■ The age-old question was the most popular

search term for Google last financial year. Here at Australian Broker, we suspect it came from machines. ‘What is planking?’ rated third, along with ‘what is electricity?’

FACEBOOK LOSES A FRIEND

■ In the most catastrophic example of clicking

‘buy now’ too many times, UBS accidently bought $340.8m of shares in Facebook after it assumed its modest buys to Nasdaq weren’t getting through. UBS is now suing the US stock exchange for the bungle which put the investment bank into the red.

WORKING OUT IS TOO TAXING

■ A Melbourne gym is the first to be

caught by ASIC lying about the impact of the carbon tax. Genesis Fitness Club told members that -fees would increase as a result of the tax – but couldn’t explain why when probed.

A BBQ TOO FAR

■ An ACT woman has been awarded

$110,000 damages after a BBQ accident, in which a gas cylinder exploded at a friend’s picnic left her “traumatised.” The ACT Supreme Court claimed she “would never get over her nervousness around barbecues after the frightening events.” It’s every Australians’ worst nightmare.

DID YOU KNOW? In NSW, apartments have overtaken houses in the popularity stakes. Developer Urban Taskforce is hoping it leads to more lucrative apartment complex construction.

speech at a charity luncheon last month was characteristically cautious, neither confirming nor denying the possibility of a housing market crash.

He said the housing bubble “had yet to pop.”

“We should never say a crash couldn’t happen here, and the Reserve Bank continues to monitor property markets and the performance of mortgages quite closely.

“But the housing market bubble, if that’s what it is, seems to be taking quite a long time to pop – if that’s what it is going to do. The ingredients we would look for as signalling an imminent crash seem, if anything, less in evidence now than five years ago,” he said.

For brokers, his vision of a steady future housing market, underpinned by low prices, low interest rates and good income growth, should be welcome news.

He did, however, focus on a pattern seen internationally, of

GLENN STEVENS

increased dwelling prices preceding a severe crash.

“Australia saw a large run up in dwelling prices and household borrowing until a few years ago.

Some other countries that saw this suffered painful corrections and deep recessions,” he said.

A weak construction market and pressure on the balance sheets of lenders were the two main consequences of a potential crash, he said. However, it was an unlikely outcome for Australia.

Australia fine to ‘absorb global shocks’ ■ Low inflation and signs of

GDP growth are creating an “economic sweet spot” for the economy, with Australia now able to withstand “global shocks.”

TD Securities’ head of AsiaPacific research Annette Beacher made the assertions based on the results from the company’s Monthly Inflation Gauge in August.

In the 12 months to July, the trimmed mean rose by 1.4%, the lowest annual movement since the Gauge began.

“The June quarter GDP is shaping up to be a blockbuster due to strong private consumption and a significant rebound in the trade sector.

“This is an economic sweet spot and certainly backs up RBA

Governor Stevens’ glass-half-full chirpy theme of late. Australia is well-placed to absorb global shocks.

“Given the favourable inflation outlook, the RBA is in the enviable position to have the tools to ease if required, although by how much and when depends on what lies ahead for the troubled European Union,” she said.

Meanwhile, the carbon tax significantly increased household utility bills, adding extra strain to Australian households.

While the increases were expected in the Treasury’s predictions, it’s on the higher end of the scale, with a 14.9% rise in the cost of electricity, alongside a 10.3% increase in gas and other household fuels.

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NEWS 9

COMMENT

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M FORU

T S E B ENT COMNM NE O LI

Each issue, Australian Broker will publish the best online comment from the previous fortnight – along with your other feedback. So get online, and get participating!

BROKERNEWS. COM.AU

I agree that paper qualifications mean little when you come out of training. Having gotten into the industry through the Aussie Academy, I was overwhelmed at the different number of situations customers were in. Jack & Jill with $100,000 savings and jobs wanting to borrow $200,000 were not to be seen! But EVERYONE has to start somewhere.

What needs to be looked at is the support postinduction to ensure new brokers continue to learn and survive the first 12–18 months. Whilst the support and training we received was invaluable and our skills and confidence increased, seven out of a class of 11 left within nine months solely due to financial pressure. Three years down the track I am still learning every week and value having colleagues to bounce things off …

Andy on 31 Jul 2012 01:45 PM

OF TALL POPPIES, AND JAMAICAN BOB SLEDS There’s nothing that gets this industry going more than the debate over education.

When John Symond recently claimed Aussie is the industry’s most qualified large, branded brokerage, there was no shortage of supporters – and detractors.

There were vitriolic comments against both Aussie and John Symond, most from brokers with decades of experience in the industry who saw no point in gaining the Diploma.

Tony O’Halloran (30 Jul 2012 10:19 AM ) was one of them.

“After 35 years in the industry, I cannot see how a bit of paper will make a difference,” he said. Ian Jervis (30 Jul 2012 10:17 AM ) called Aussie the “Jamaican bob sled team of broking”.

However, the vitriol was matched by support. Jason (30

Jul 2012 11:53 AM) saw the point of continued up-skilling. “Aussie J is on the money! In any professional industry you need BOTH experience and ongoing education.” As did an anonymous client – the people brokers serve.

“Good to see some brokers will be qualified. As a first homebuyer, I looked for some kind of qualification or association membership from my broker.”

Some thought it was oldfashioned ‘tall poppy’ syndrome.

“Tall poppies. Justifying why you don’t have a Diploma, and why you don’t need one. Really? ” said Anon (30 Jul 2012 12:00 PM).

FORUM DON’T ‘CUT YOUR THROAT’ WITH A FEE When Smartline revealed it had put fee-for-service on the backburner (Cold water on fee-for-service debate 30/07/2012), brokers thought the issue best kept from the limelight iMac on 30 Jul 2012 01:16 PM Brokers, if you want to cut your own throat then keep talking about fee-for-service.

Banks would LOVE to do away with commissions.

Country Broker on 30 Jul 2012 11:10 AM Can all the so-called commentators and press just leave this issue on the table – that means stop talking about it. ASIC right now has other issues with other professional groups. DO NOT MAKE THIS ONE OF THEM. 10 year Broker on 30 Jul 2012 11:41 AM This fee-for-service argument is just a smoke screen for banks to force as many brokers out of the industry as

quickly as possible. Do lenders expect that we will refer them business for fun?

MOTIVATIONAL SPEAKERS CAN BURN YOU Brokers were also thinking twice about attending the next Tony Robbins seminar, when the San Jose Mercury reported its last fire walkers were burned.

Storm on 27 Jul 2012 10:20 AM

Also happened at a Tony Robbins seminar about six years ago when a group of Hungry Jacks employees were admitted to hospital with burns... talk about flame-grilled.

Caroline on 27 Jul 2012 11:24 AM

Thousands of people have done that fire walk with no burns at all – including myself who has done it twice – not even a hot spot on the feet either time!

What do you think? Leave your comments at brokernews.com.au

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SPOTLIGHT

Fees without value ‘destined for failure’ ‘Destined for failure’ are three words that no one likes to hear in reference to their business.

However, FrontRunner Consulting’s Doug Mathlin told Australian Broker TV that brokers need to be extremely careful if they are to make fee-for-service a success.

“People who want to go into fee-forservice who are not willing to change their value proposition, I think, are destined for failure,” he says.

Why? Belief. “I think the biggest problem is that internally they won’t believe their service is worth the extra fee they are trying to charge the client.”

More of an optimist on implementing a fee, James Veigli from The Broker Profits Vault says it is only fear holding brokers back from realising their full value.

“I think most brokers are just scared of changing the perception,” he says. “The perception out there is that brokers are free and although that is why the industry has become so successful, I think that is why a lot of brokers are missing out on a lot of potential. They should take a step back and position themselves as experts and position their businesses as something that is of a lot higher value than what consumers can get from a regular broker or bank.”

I THINK THAT MOST BROKERS ARE JUST SCARED

DOUG MATHLIN, FRONTRUNNER CONSULTING

JAMES VEIGLI, THE BROKER PROFITS VAULT

Mathlin says a way to raise value – and justify a fee – is if you can teach clients something.

“If you can teach them about how to structure their finances in a better way to save them money – and that might mean working in with their accountant or their financial planner, or maybe you are their financial planner – that’s where the fee-for-service comes into it.”

Veigli agrees, saying it is about ‘big picture solutions’ in line with client goals and dreams.

The new agents: Worth their salt?

Mortgage brokers and buyer’s agents could just be a match made in heaven.

“What we offer to mortgage brokers is that they refer their clients to us, they do the loans, but it gives them another stream of income so they are not solely reliant on upfront and trail commissions.

They can also get an upfront commission from a buyer’s agent company,” says Paul Giezekamp from Property Secrets in Sydney. “If you are a mortgage broker that doesn’t have that income, they would actually marry quite well,” he says.

Rich Harvey from Property Buyers says a key advantage of a buyer’s agent is their ability to speed up the process.

“They can speed up the time it takes, identify what to buy and make sure the client pays the right price,” he says.

“A broker will also often get preapproval and it will sit in the drawer for three months and then it will probably expire,” he says.

Giezekamp says brokers should know the buyer’s agent is on the side of the client. “A lot of investors speak to real estate agents but the agent’s job by law is to look after the seller, not the purchaser.”

PAUL GIEZEKAMP, PROPERTY SECRETS

RICH HARVEY, PROPERTY BUYERS For multimedia on these and other issues, visit brokernews.com.au/tv/

11

NEWS

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CONTINUED FROM PAGE 1

CLIENTS OVER CROSS-SELL: Mark Davis

D

avis, last year’s winner of the coveted Australian Broker of the Year Award at the Australian Mortgage Awards, said the broking industry has so far failed to adopt a client-centric attitude wholeheartedly, in favour of a bank-driven model prioritising cross-sell.

In fact, Davis said the mortgage industry is ‘stuck’ within this cross-selling paradigm, which tries to sell more products to clients, rather than providing for their wealth creation lending needs.

“I think the industry is stuck on cross-selling, but I don’t think it is the direction to go,” he said.

“It will probably be five years before the banks and brokers alike realise the direction they need to take.”

From bank to business

Davis and his fellow ALIC director Kevin Agent has witnessed the increased crosssell push. Only three years ago they worked at ANZ, where Davis played a key role in setting up and running the bank’s own investment lending centre.

However, the GFC changed all that. With funds drying up and banks putting a halt on lending, ANZ, along with other banks, began to offload their in-house lending teams. With first-hand knowledge of ANZ’s division, Davis and Agent decided to exit and start their own brokerage.

“If the banks weren’t going to utilise such a division, then it

“It will probably be five years before the banks and brokers alike realise the direction they need to take”

was a no-brainer. The decision was really made for us,” Davis said. “Because we believed in the concept, it was just the next progression to move and set it up for ourselves.”

ALIC aims to look after investment clients and offer lending strategies the banks “struggle to match”. It also has a pure mortgage writing arm, which is growing at a fast rate.

The business wrote $220m in its first full financial year, increasing to $332m during 2011/2012, while growing its number of loan writers from two to five. With more writers on board, the business is on track to hit $500m this financial year, and has an ambitious target of $1bn in the next 3–5 years.

A new path

“If you are good at what you do and you are writing enough

volume simply because you are good, then you don’t need to be cross-selling basic products,” Davis said.

This is a philosophy that other brokers should follow, in a market where Davis said the channel is erring by pursuing revenue growth through cross-selling.

“Banks are certainly pushing for that internally, and they also have targets that they expect the broker channel to meet,” he said.

“But I believe in doing what you are great at, not being 50% good at lots of things. It’s about being really focused and specialised.”

Davis’ vision for the channel is a move towards being a ‘personal investment banker’, that provides holistic services across investment lending which works around tax, property and building client wealth without crossing the line on advice. “You are their holistic banker – not in

PROFESSIONAL MORTGAGE MANAGERS

Specialises in assisting clients with their wealth creation journey through lending structures and strategies

A separate brand that focuses on home and investment lending

For Davis and ALIC, the future looks bright, especially if the attitude of the directors remains unchanged. “I just come to work every day and try to improve on yesterday,” he said.

Davis said the key to success is, in the end, a focus on the client. “Don’t be a standard broker where you are there to get the loan; you are here to structure and set up lending strategies and do the right thing by the client every time.”

$1bn

and

THE AUSTRALIAN LENDING & INVESTMENT CENTRE

Better and better

Vision

Ethical Lending Concepts Pty Ltd Trading as

the form of cross-selling, but in the form of talking, discussing and understanding needs, and progressing those for the client.

“And if you do the right thing every time, if you don’t put the client into anything you wouldn’t get into, you create an enormous reputation. Clients will always follow you.”

2011/12

2012/13

$200m

$332m

$500m (targeted)

2 writers

5 writers

9 writers

2010/11

in loans per annum within 3–5 years

$4bn

in funds under management

Top 20

All writers within top 20 in Australia

$80m

Investment lending managers write $80m per year by second year

$45m

Mortgage managers write $45m per year by second year

OPINION

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The mortgage broker REVOLUTION There is a revolution underway that will see mortgage brokers become the ‘trusted advisers’ of choice. Top broker Stuart Wemyss outlines the revolution’s manifesto

I

believe that we will enjoy a tremendous amount of economic growth in Australia over the next three to five decades. In addition, I believe Australians lack direction and trusted advisors because the financial service industry is broken.

The combination of these two things means mortgage brokers have a once-in-a-lifetime opportunity to transform the financial services industry.

THE FINANCIAL SERVICES INDUSTRY STRUCTURE IS BROKEN!

Research shows that between 60 and 80% of people believe the best source of financial advice comes from seeing a financial planner. However, the proportion of Australians that have an ongoing relationship with a financial planner appears to be in the range of 10–20%, based on various studies. Why are people so reluctant to engage with a financial advisor? I believe financial advisors have generally lost the trust of the public, because of their reliance on

commissions from only one investment asset class (managed share investment products) and reluctance to consider property investing in their advice. The important point is that most people don’t believe they can get independent and reliable advice from financial planners.

Accountants are the second most popular source of financial advice (behind family and friends!) according to ASIC’s research. However, in the main, they tend to stick to what they know: preparing tax returns and providing tax advice.

The third most popular source of financial advice is bank staff (and perhaps we can assume this also includes mortgage brokers).

My belief is that the financial services industry is broken because Australians don’t have a trusted source to help them make financial decisions.

A MASSIVE OPPORTUNITY TO CHANGE PEOPLE’S LIVES

I am very proud that mortgage brokers, on the whole, seem to have captured Australians’ trust and respect, with our market

3 STEPS TO REVOLUTION 1. Adopt The Mortgage Broker Revolution manifesto, in part or in whole 2. Sign on as an Ambassador on the Broker Revolution website (brokerrevolution. com.au), and commit to doing whatever you can to lead the industry in the direction of this vision 3. Pass on the manifesto and encourage key industry players such as lenders, aggregators and suppliers to support the ultimate vision

STUART WEMYSS

share hovering between 40 and 45%. I believe that the combination of structural changes in the world economy (with wealth flooding into our region) and the absence of a category of financial services professionals putting their hand up and working hard to earn Australians’ trust, means we have an enormous opportunity to help Australians make this country the richest in the world.

I believe that mortgage brokers are well positioned to rise to the challenge because: 1. Most people who earn any

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Why the revolution must succeed The economic landscape

At least 80% of humanity lives on $10 or less per day. The richest 20% of the world’s population accounts for three-quarters of its income. This means most Australians are among the richest people in the world and this is set to increase.

Will Australians make the most of these opportunities? My concern is that we won’t, simply because we don’t know how to manage money.

No one teaches you

Rarely are we given formal education about how to make the most of our financial situation and the dangers of financial mismanagement.

Arguably, financial education at school is probably 10 years too early. It’s when you finish formal education and get your first job where financial habits are formed.

If you have good money management skills from day one, it’s likely you’ll lay the foundations for a successful future.

material income will eventually buy a property; 2. Astute liability (loan/ mortgage) management interlinks with many other wealth management areas; 3. We don’t charge a fee, so there are few barriers; 4. We already have 40–45% market share so we enjoy strong awareness

AN ENVISIONED FUTURE

I dream of a future where contact with mortgage brokers is seen as an essential relationship by every Australian. Mortgage brokers possess the same trust and respect as the old bank manager relationship did over 40–50 years ago. People contact their mortgage broker as the first port of call to solve their financial problems or get questions answered. The term ‘mortgage broker’ doesn’t encompass the help offered, so perhaps ‘financial broker’ is a more accurate description.

A financial broker’s relationship with their clients is based on mutual respect, honesty, trust and advice – quite distinct from a simple product sales relationship of the past.

STEPS FORWARD

It’s a great vision, but what does it mean in a practical sense? Well that’s for us to work through as an industry, but to help us get started I think it means: • Disregarding the product and focus on ‘helping’ and ‘advice’

Money management is fundamental

The ability to earn a huge income isn’t a magic bullet to achieving financial security. There are plenty of people on ‘average’ incomes that have accumulated a strong and stable asset base, whereas there are plenty of high income earners who have no material assets to their names. Without a doubt, the most critical element is the ability to manage cash flow.

Two reasons why Australians fail

According to a report prepared by ASIC in 2011, Australians fail to make the most of their financial opportunities because they either: 1) make poor financial decisions; or 2) they disengage and fail to make any financial decisions (procrastination). Access to information to aid in decision making is no longer a hurdle. The missing piece of the puzzle is a ‘trusted advisor’.

• Looking beyond the mortgage and helping the client map their financial future • Help clients understand the importance of cash flow management (perhaps using tools and training) • Referring clients to other trusted advisors that put the client’s interest first • Giving the client the confidence to make timely financial decisions • Asking questions and listening • Give value first In essence, we simply need to help clients avoid making poor financial decisions and avoid procrastination. In simple terms the approach I’m suggesting is ‘thinking beyond the mortgage’.

HOW WILL WE KNOW?

How will we know if the movement has gained momentum? Perhaps the simplest measure is market share. For many years, the mortgage broking industry’s market share has hovered around 40 to 45%.

Inspiring great brokers with a big and bold vision will hopefully allow our industry to increase our penetration and break through the 50% barrier.

This is my ultimate goal – improvement in market share – and if we do it we’ll create history, so that’s my challenge to you… get out there and support the movement.

Stuart Wemyss, stuart@ brokerrevolution. com.au ProSolution Private Clients’ Stuart Wemyss is a top mortgage broking business owner settling over $100m per annum, who currently employs 11 people providing a full suite of financial services. His full manifesto is available at brokerrevolution. com.au

PEOPLE

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16

Robert Trewin, his wife Kylie with their deceased son Cooper

Broker turns tragic loss into fundraising triumph Veteran broker Robert Trewin, principal of Robert Trewin Mortgage Broking, has raised close to $210,000 in support of SUDC research with the help of the mortgage industry

R

For more information or to make a donation go to sudc.com.au

obert Trewin and his wife Kylie woke up two-and-half years ago to every parent’s worst nightmare.

Their cherished, happy and healthy 16-month-old son Cooper had died in his sleep.

The coroner’s report stated that the cause of death was unascertainable.

“When we were told by the coroner on the phone that it looked like it was SUDC, we were like, ‘what’s that?’ I can almost guarantee you’ve never heard of it. Most people haven’t,” says Robert.

SUDC, or Sudden and Unexplained Death in Childhood, occurs in children over the age of 12 months. Similar to Sudden Infant Death Syndrome (which occurs in children under 12 months), SUDC is a diagnosis of exclusion – when all known and possible causes of death have been ruled out. The incidence is approximately 1.2 deaths per 100,000 children, compared to SIDS, which is 45 times more common.

While they had heard of SIDS, the idea that they could

suddenly and mysteriously lose their healthy little boy to SUDC took Robert and Kylie completely by surprise.

“You think you’re out of the woods at 12 months,” Robert says. “We’d done everything right, we don’t smoke, there was nothing in the cot, he always slept on his back until he got big enough to turn himself over.”

Their tragic loss spurred Robert and Kylie to look for answers, but at the time they found there was absolutely no SUDC research being conducted in Australia. Since then they’ve dedicated their time and energy to raising money for research.

To date they’ve raised close to $210,000. “A big part of that has to do with the mortgage industry which has been very supportive,” Robert says.

In the last two years, Robert has told his story at the National Mortgage Brokers conferences in Melbourne and Hamilton Island. As a result, brokers generously donated about $15,000 in about 10 minutes on both nights.

Another successful fundraising initiative is the

COOPER TREWIN GOLF CLASSIC Date: Thursday, 18 October, 10 am registration, 11am tee-off Where: Sandhurst Club, 75 Sandhurst Blvd, Sandhurst, Vic (sandhurst. com) Event: 4-person Jensen’s Stableford Cost per group: $1,000 including BBQ lunch on course and golf carts finishing at approx. 3pm for drinks, presentations, raffle and short auction To register: contact • Gerald Foley (03) 9670 7640 or gf@ nmb.com.au • Robert Trewin 0400 873 946 or Robert@trewin. com.au

Cooper Trewin Golf Classic.

Last year’s inaugural event was sponsored by CBA, Westpac and NAB Broker and was supported by several major aggregators and mortgage brokers who participated in the tournament.

The success of the competition has encouraged Robert to make it an annual event, with this year promising to be even bigger and better.

“NMB has given us amazing support, and the support we’ve received from the industry from the golf day and with raising a huge amount of money in such a short amount of time at the conferences has been second to none. We had one broker donate $10,000. What an amazing act of generosity, especially given I had never met him before.”

The fund set up in Cooper’s honour is supporting an international research partnership into SUDC, with researchers from Boston Children’s Hospital in the US and Melbourne’s Florey Neuroscience Institutes collaborating on the project.

Despite their fundraising success, Robert says dealing with the tragic loss of their son is still a struggle.

“But we got stuck in to trying to raise this money and trying to keep busy because you can either curl up into a ball and hide from the world, or you can try and make him proud of you in an attempt to save another family from this tragedy and find a reason for it.”

Robert and Kylie were blessed with another baby in January 2011. “We had Chelsea and that brought a little bit of joy back in our lives,” Robert says.

CAUGHT ON CAMERA

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17

IN FOCUS

L

oan Market took a step in the direction of bringing ‘new blood’ into the mortgage industry last month, with the launch of its Broker Academy in Brisbane.

Attended by brokers fresh out of its initial Broker Academy training program, as well as CEO Sam White and Queensland state manager Andrew White, the group said it hopes the initiative will attract people from ‘all walks of life’ and turn them into stellar mortgage brokers.

Australian Broker wants to feature your industry event photos. Contact the editor: ben.abbott@keymedia.com.au

1.

7.

2.

3.

8.

1

4.

Lindy Spillman, Trevor Warburton, Catherine Crisp, Kim Stuart, Valentina Parra, Joanne Macbeth and Andrew White

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Loan Market Broker Academy graduate Dalton Kelly with Academy director Lindy Spillman, and Percy Smith and Michelle Murphy from Loan Market

3

Ed Thian (Loan Market general manager marketing) with Australian Broker news editor Caroline Dann

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Loan Market CEO Sam White with Queensland state manager Andrew White

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David Harvey, Leo Bozzi and Matthew Dique from Loan Market, with Steve Cook from Signs Australia

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Sam White addresses Loan Market’s new recruits and staff

Loan Market’s ‘Broker Academy’

Valentina Parra, Lindy Spillman, Catherine Crisp and Samantha Callaghan from Loan Market

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View more photos from this event at BROKERNEWS.COM.AU/INDUSTRY-EVENTS

PEOPLE

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18

Q&A

Dragon boat championships next for Aussie exec

SCHOOL’S OUT

IT’S A HOTLY-DEBATED QUESTION: IS THERE A ROSY FUTURE FOR MORTGAGE BROKERS JUST STARTING OUT? THESE TWO AMBITIOUS ACADEMY STUDENTS BELIEVE SO.

■ Aussie

risk management officer William Fitzgerald took up dragon boating in early 2010 in Canberra, after a 10-year senior rugby union career in Sydney and Canberra’s premier division. In 2011, back living in Sydney, Will was selected from his Sydney-based dragon boat club (Sloths) to represent NSW. In 2012, Will trialled for the Australian crew and was selected to represent Australia at the Asian Championships in Busan, South Korea on 4–9 September 2012.

This will be his first international level competition.

NAME: MELISSA CHANCELLOR COURSE: LOAN MARKET’S BROKER ACADEMY Why undertake studies?

Broking allows you to be your own boss and, with a team like Loan Market, it also provides you with great support if needed.

Why take this course?

Loan Market had a really good information session and I always felt that I was going to be well looked after.

Best piece of advice you received?

Don’t focus on closing the sale, focus on opening a relationship.

What would you say to brokers sceptical of formal qualifications?

I try to see it from the customer’s point of view. Although you can’t beat experience, I think customers feel more confident knowing that their broker has formal qualifications as well.

If you weren’t a broker, you’d be...

Unchallenged and unmotivated.

NAME: MICHELLE MURPHY COURSE: LOAN MARKET’S BROKER ACADEMY Why undertake studies?

I wanted to ensure I was fully compliant and up-to-date with all the changes in the industry on my return to being a broker after a seven-year break.

Why take this course?

It goes into great depth about the structure, terminology, scripting for interviewing clients and many other areas I needed a refresher in. Also, having access to their software, being able to talk to different departments in the company, and the commission structure are a few key reasons.

Best piece of advice you received?

Considering every appointment as an opportunity to grow my business.

What would you say to brokers sceptical of formal qualifications?

It’s about showing our clients we care about our industry, and we have the qualifications to prove we care.

If you weren’t a broker, you’d be...

A funeral photographer and videographer. Being with families who have lost a loved one, and capturing the memories for the day where everyone comes together to say their final goodbyes, would be amazing.

Broker nets $125,000 for Ronald McDonald House “We were blown away,” says Mortgage Choice’s CEO Michael Russell, speaking about the generosity of its “communityminded” franchisees, staff and business partners.

At the group’s national conference held in July, the group conducted a last-minute financial year fundraiser for Ronald McDonald House Charities, having already raised $65,000 via a series of fundraising initiatives including salary sacrificing and donations per loan settled.

The result? After franchisees, representatives from Ronald McDonald House Charities, and families who have experienced first hand the support of the charity asked attendees to dig deep, an extra $62,368 was added to its tally – bringing the total to over $125,000.

“We far surpassed our expectations at our National Conference charity night and silent auction – receiving ■

Mortgage Choice’s

de 2012 conference

legates

contributions that were 50% over our target,” Russell says.

“Kicking off the fundraising event, we heard the heartfelt story of one of our own franchisees who relied on Ronald McDonald House for support during a tough time. It was this experience that led her down the path of purchasing her Mortgage Choice franchise, so she could enjoy flexible working hours and spend time with her family.”

“This experience cemented in the minds of many in our business that now is the time to act.”

The group’s $125,000 donation equates to nearly 1,400 nights of accommodation at a Ronald McDonald House for Australian families with a seriously ill child undergoing treatment at a nearby hospital.

AUSTRALIAN BROKER WANTS YOUR STORIES! The world of mortgage broking is a lot more than just business – it’s a fun, people industry. Have you got a great photo, interesting story, or a passion you want to talk about? If so, we’d love to hear from you. Email ben.abbott@ keymedia.com.au

THE COALFACE brokernews.com.au

19

Blackfish Finance finds blue oceans in customer service KEY POINTS Housewarming blackfish for clients ■

No referral commission-split model ■

Strong brand uniformity in the market ■

LEAH BUSBY, BLACKFISH FINANCE

W

MOVERS & SHAKERS

hen in Adelaide, one shouldn’t be too surprised to find quite a few new homeowners in the market with a blackfish named ‘Leah’ as their first pet.

That would be, of course, because they are one of Leah Busby of Blackfish Finance’s clients, who have received a blackfish as a housewarming present from the business.

“It’s something very unique, and people really love it,” Busby told Australian Broker.

Though blackfish may now abound in Adelaide, it was only three years ago that Busby made the ‘big decision’ to walk away from an existing book and start her own business.

Having chosen AFG as her aggregator, Busby was named AFG Home Loans writer of the year in her first full year with the aggregator, and became an AMA’s Young Gun of the Year finalist last year. She is also BankSA’s second biggest broker by volume.

So how has she achieved such growth? Busby says it’s been a laser focus on the customer.

“We decided early on that we didn’t want to make decisions based on money, so we don’t pay for referrals,” Busby says. “The reaction to this is often surprise. When we talk to BDMs about our business model, some people don’t believe it,” she says.

Busby says she made a decision that the business should be recommended for its high levels of customer service, rather than any agreed kickback arrangements.

“I would rather write less volume than have to do twice as much volume because we have to pay that 30% commission split or the equivalent,” Busby says.

“It’s all about good old-fashioned customer service. We care about our customers, we like to keep banks accountable, and we make sure we get the service for our clients.”

Busby says the business is always on the phone to clients, and communicating regularly.

“Every client of ours has 17 touch points per year. We are hot on staying in touch.”

As might be expected, Busby is also an avid proponent of social media. “Facebook is really good for us, we get really interactive with our clients and we get good business from it.”

The result is a business based on satisfied customer referrals.

However, the brand has also been critical to Busby’s success – at least in her own ‘Blackfish world’.

“In my little blackfish world, so far, it certainly is. People do remember it,” she says.

WE DECIDED EARLY ON THAT WE DIDN’T WANT TO MAKE DECISIONS BASED ON MONEY, SO WE DON’T PAY FOR REFERRALS

THE WORKSHOP

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20

Stop those ‘insane strategies’ and get earning

THE GURU

Brokers could benefit from figuring out what is not earning them money, as well as what is

S

ometimes, making your business a more profitable enterprise is not about doing more of the ‘right’ things. It’s about stopping the things that just aren’t working for you.

Computer games for example.

Sound crazy? Well, for some mortgage brokers it’s a reality.

“There is a broker I know who is reasonably successful, who writes $20m a year, who I asked what was one of his biggest time wasters?” says FrontRunner Consulting’s Doug Mathlin.

“The answer? Distractions.

Internet, social media, games.

And this is a 60-year-old broker who has been in the gig for about 20 years,” he explains.

LET’S STOP TALKING ABOUT THE 10, AND LET’S START TALKING ABOUT THE TWO - DOUG MATHLIN While computer games might be an extreme example of an ‘insane strategy’ that results in less profitability, Mathlin can name any number of activities that are not profitable for a mortgage broking business, and that could be cut in favour of time better spent on other duties.

Wasting time on unproductive

referral sources, for example.

“People might say to me that they have 10 referring partners.

Well, I might be getting cynical in my old age, but if I was to ask them how much business came from each of them you’ll probably discover eight haven’t given you anything, and two of them are pretty good.”

Mathlin says brokers should focus their time on their top referrers.

“Let’s stop talking about the 10, and let’s start talking about the two. We aren’t cutting the eight that are not productive, but let’s start spending time with the people that are giving you the money, or giving you the leads.

Let’s catch up with two per month, instead of 10.”

Mathlin says the reality in smaller broking businesses is that brokers will often take anything that doesn’t go to tax and pay themselves with it – making the broker the biggest cost. For larger businesses, the broker’s time will still be one of the most significant assets.

“There is stuff that we always do out of habit because we have always done it and I reckon a lot of that stuff would be dead time,” he says.

“By saving that time, you could buy yourself two hours or even one hour a day, and that is significant. Then you could talk to three or four clients or you could book another appointment with a prospective referrer.”

BURNING QUESTION: IN-HOUSE PA, OR OUTSOURCED LOAN PROCESSOR?

■ Are you tossing up between hiring and training an in-house loan processor, and

outsourcing it to someone who can do it for you? Want to know what the experts think?

Well, according to Doug Mathlin of FrontRunner Consulting, brokers are often better off outsourcing these tasks as a first option, just because of the time and money that goes into hiring, training – and potentially losing – loan processors, which could impact profitability.

Indeed, finding that ‘dream’ stay-at-home-mum ex-banky may be harder than you think.

But if you do outsource, don’t expect miracles. Mathlin says it will take time for someone to get to know how you run your business, for example, if they should call the client in a particular scenario. But they are able to cover you on holidays – and hey, we all need more of those.

JOHN SYMOND

YOU ARE GOING INSANE IF: ■ You are still advertising in the Yellow Pages, with no basis in leads generated ■ You are playing Minesweeper, when you could be calling your clients ■ You are investing too much time and effort on unproductive referrers

Q: Transactions, or relationships?

A: I am here for the long haul. Our business

partners have been with us for as long as 20 years – like Macquarie Bank and others – and I am a real believer in the fact that you can shear a sheep for life, but you can only skin it once. And I am in the shearing business. I’m a long-term relationship builder rather than churning and burning and letting tomorrow worry about itself. No, I worry about tomorrow today, and I worry about next month today and I worry about next year today, and I say let’s build for the long term.

Q: Focused, or diversified?

A: I’m a very focused person. I’m very committed

and I don’t allow myself to be distracted. I have no other business interests – I have never played the stock market. That is, since my university days, when I lost $2,000 and it took me five years to pay it off. But this makes sure that I can’t be distracted and this enables me to concentrate on the business, and so I have my 1,000-odd team know that I am here every day and I’m concentrating on the business, what is best for the customer and what is best for the team.

Q: Change, or stay the same?

A: The market is changing faster than ever before

– in all industries – and you have got a very simple choice with change. You either embrace it and profit from it – and if you can take a leadership position that’s even better – or you become a victim of it and play catch-up for the rest of your life and have a whinge and throw stones and provide little value to the community.

ONE YEAR ON

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21

ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and influential trends that made headlines 12 months ago Australian Broker Issue 8.16

AFG to lift clawback veil

Broker outrage at Firstfolio fee

The future is saying ‘uni degree’

AFG’s Mark Hewitt announced the group would go head-to-head with an ‘evil’ of the industry, with a plan to call 1,000 of its mortgage brokers’ customers to find out why they had refinanced, resulting in a commission clawback. Hewitt said the group wanted to get a better understanding of why they occurred so it could have a ‘considered approach’, rather than brokers adopting defensive measures such as clawback clauses in their finance contracts.

Brokers joined in a chorus of outrage at a move last year by Firstfolio to impose a $150 per month fee on originators who didn’t hit volume targets with the lender. With one broker labelling the fee ‘harsh and unjust’ and another calling the move ‘aggressive’, Firstfolio was forced to explain that the move was simply enforcing an existing agreement with its brokers. One aggregator was nonplussed, labelling the move a ‘revenue grab’.

Liberty Financial’s John Mohnacheff launched a passionate defence of an MFAA vision that would see the mortgage industry eventually adopt a minimum university degree level of education, calling on brokers to ‘listen to what the future is saying’.

Mohnacheff said degrees would open the eyes of future brokers to greater opportunity, and consumers would be less likely to shun paying a fee if their broker had a higher level of education.

What’s happened since?

What’s happened since?

What’s happened since?

AFG’s research showed banks were generally ‘doing the right think’ on clawbacks. Hewitt said the big take away from the research was that brokers who did stay in touch with their clients post-settlement were far more likely to retain them and be front of mind for that client. A simple thing like getting a customer’s email address meant a broker was much more likely to retain the business.

Brokers may have experienced a touch of schadenfreude when the Firstfolio group ousted its former CEO Mark Forsythe, saying that he was no longer the man for the job.

With the group having appointed a new CEO and finished its management reshufflings, it has promised that it is on track to consolidate its diversified holdings.

The industry has struggled to make it even as far as a Diploma, with the MFAA’s membership failing to reach the mandatory deadline of July this year. With the MFAA postponing its deadline until the beginning of next year, the visionary university degree push has lost some of its wind.

INVESTIGATION

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22

Digital lead generation:

FRIEND OR FOE?

There’s no denying that the online sphere has shaken up traditional lead sourcing, but to what extent? Australian Broker investigates

T

✔ Mortgage

rust Aussie’s John Symond to deftly sum up a topical issue.

“If somebody said to me that within three to four years, 80% of all new customer leads will come through digital [means], I would have thought they must be smoking something.”

Symond, like many in the mortgage broking industry, is both incredulous at the pace in which online media has evolved, and excited at the business opportunities they bring.

“We are a big embracer of the digital revolution. We now get 80% of our new business from digital lead generation,” he says.

The term ‘digital lead generation’ refers, quite simply, to business leads that are generated through digital means.

Depending on how brokers have embraced technology, this may evoke fear, confusion or excitement.

Will websites – seen by tech enthusiasts as a digital broker – render the human broker obsolete? Or will they simply need to adapt and embrace technology as a business partner?

Either way, getting to grips with digital lead generation – the facts, not the hyperbolic ‘death of brokers’ argument – is the first step to embracing a potentially lucrative avenue.

✔ Loan

DIGITAL ISN’T THE ONLY KING

SEO terms every mortgage website should contain (and yes, the simplest are the best)

✔ Best ✔ Advice ✔ Save ✔ Switch ✔ Fees ✔ Leader ✔ Compare/ comparison ✔ Refinance ✔ Calculator *Source: Google

Any business will benefit from having a beautifully thought-out web presence.

In the broking world, it’s a combination of websites, ‘analogue’ marketing – newspapers, television – and old-fashioned referrals that count, say experts.

“Many of the leads we generate on our website come via consumers either seeing our television commercials or reading our commentary in the press and then finding us online,” says Mark De Martino,

TOTAL VISITS PER MONTH: TOP BRANDED BROKERAGES

AUSSIE 200,977 LOAN MARKET 90,404 MORTGAGE CHOICE 49,435 SMARTLINE 28,787

0

50,000 100,000 150,000 200,000 250,000 VISITS

national director of sales at Loan Market.

“In comparison to self-sourced leads and Ray White referrals, Loan Market online leads are roughly 33% of our business.”

Unique it may be, but online sourcing is growing. De Martino admits this requires more online engagement, done more effectively. “We absolutely do see an increase in not just website leads but demand for quality content and tools to help in searching for home loans.

“Consumer behaviour has long shifted to finding answers online, and those demands are continually evolving. We must ensure our website offers those looking for home loan help a better alternative than anyone else out there.”

Boutique aggregator Port Group, considered one of the fastest growing in Australia, claims it’s yet to see significant results from digital leads.

“We have aligned ourselves with traditional referrers such as developers, accountants, financial planners, real estate agents and lawyers in order to provide leads to our business,” says Port Group’s founder, Voula Kotsiras.

However, online is not entirely off the cards.

“We just want to ensure when we go down the track of online leads that we try and mitigate holes in the application process and therefore conversions to our

*Source: Experian Hitwise

brokers would be greater.

“I believe if we can provide both online and traditional referrals that we can have the best of both referral options for our members,” she says.

COMMITMENT ISSUES

THE ONLINE SOURCING OF PRODUCTS IS VERY MUCH WHERE THE INDUSTRY IS GOING. - VOULA KOTSIRAS

Another issue with digital leads is the nature of the enquiries: many believe online is a passive medium, and commitment levels are low.

“We have previously conducted research and trials with various online referrers, without great results. The leads on the surface looked promising, however, the conversion from lead to application remains very low and time consuming,” says Kotsiras.

She says leads from traditional face-to-face sourcing “are converting almost 95% of the time.” Again, it comes down to using digital leads as a partner, not a replacement, she says.

“Long term, I believe with the right online referral partnership, and systems/processes to better filter the leads, it could provide some diversity to our traditional methods. However, it would be in addition rather than to replace.”

BEWARE PRICE COMPARISON SITES

No discussion of digital leads should ignore its impact on the human broker.

While it would be lazy to assume digital leads render the

brokernews.com.au

V

Where does Aussie now source its leads?

80 %

DIGITAL

95%

TRADITIONAL

20 %

TRADITIONAL

s

30 %

DIGITAL

What are the conversion rates of different types of leads?

Lenders visited after comparison site Mozo.com.au, by clicks in July 2012

*Source: Port Group

Lenders visited after comparison site RateCity, by clicks in July 2012

Bankwest

4.73%

RAMS Home Loans

3.61%

UBank

3.46%

UBank

3.43%

ANZ

2.08%

Bankwest

3.15%

Suncorp

1.10%

ANZ

3.05%

InfoChoice

1.02%

RaboDirect

2.87%

1.00%

Suncorp

2.19%

Bankmecu

2.10%

ING Direct

*Source: Experian Hitwise

broker obsolete, the rise in price comparison sites poses a very real, and underestimated, threat.

“I think brokers are worried it will take away some of their business, and with good cause,” says Michelle Hutchison, PR manager for loan comparison website RateCity.

“Online is an attractive tool for consumers; it’s empowering, and the information is readily available and accessible.”

The portal has reported enormous growth in the past year alone.

“In the past three years, loan applications through our online portal have increased four times over. In the past 12 months alone, there’s been a 35% growth,” Hutchison says.

RateCity, like rivals Mozo.com. au, earns money through ‘selling’ digital leads to lenders.

Users compare the loans on offer, choose the one they like best, and hit ‘apply’. It’s this action that generates the breadand-butter for comparison sites.

“We are paid different amounts, whether that is when a home loan is approved, or simply every time someone clicks ‘apply’,” she says.

Interestingly, Hutchison refers to RateCity as a virtual broker, however “it’s cheaper than a broker’s fees, so I can see how it is a more attractive proposition for lenders.

“Also, by hitting apply it’s assumed the person is a done deal and is committed to the loan,” she says.

The current popularity in refinancing adds another dimension to the online debate.

“People can much more easily log on and see how their current loan measures up,” she says.

Hutchison believes Australia is currently three years behind the UK, where price comparison sites dominate the market.

“Most people [in the UK] wouldn’t dream of applying for a loan or credit card without visiting one.”

“We believe Australia will catch up quickly,” she says.

As for Loan Market, De Martino is confident digital leads will accelerate business growth very quickly.

“These sites give brokers the ability to action enquiries immediately, update content (such as adding testimonials) and upload live photos. We think it is incredibly important to offer a tool like this for our brokers so that they can focus on what they do best – writing home loans.”

Proving digital leads are becoming increasingly hot properties, he won’t reveal future plans when probed.

“We want to ensure we are first out of the gate with these technologies so we can’t go into any more detail.”

IN THE FRAME

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24

Meet the president

ideas from brokers who are new to the industry.

“Newer people in the sub-40 age group are bringing in great new ideas,” Leedham explains.

“They often come from varied backgrounds, are creative and well qualified, and they easily adopt things like software for cross-selling, marketing and social media.”

Leedham says this new generation of brokers will demand change as well as new systems and technology, and consumers will be the beneficiaries of this metamorphosis.

Martin Leedham is now representing the MFAA – and mortgage brokers – as national president.

Ben Abbott asks him what he sees as the industry’s future

F

or the MFAA’s new national president Martin Leedham, the goal for the mortgage broking industry into the future is simple.

“I want to see every borrower seek the services of a professional Credit Adviser,” he says.

This would see the broking industry come full circle for the Adelaide-based, 37-year industry veteran, who headed up BankSA’s broking unit when the channel was just getting started.

But for that vision to come true, it will need all industry players to get together.

“How do we get there? We’ve got to do it together. I want to see every [MFAA] member adhere to the highest standards and qualifications. Borrowers should be accepting nothing else.”

VETERAN, CHAMPION

Leedham is currently South Australian state sales and operations manager for AFG, where he has worked for the last 10 years.

Leedham has also held a position on the MFAA board since 2008, and has assisted the association in coming to grips with some of the defining issues of this industry era.

“There’s no doubt a big part of that has been the NCCP,” he says.

THE BIG ISSUES

MARTIN LEEDHAM

“The MFAA as a whole – and particularly Phil Naylor – has played a massive part in making sure the NCCP was as painless as possible.

“A lot of people don’t realise that, without the MFAA’s input, the regulations would have turned out to be something far worse than what we have today.”

Leedham was also involved in the MFAA’s strategic plan in 2009, which defined a direction for the association post-NCCP and saw new professional designations such as the Certified Credit Adviser born.

A NEW BROKER

The tasks of the MFAA are many, and Leedham says member engagement is top of the list. “We have to remember that this is a big organisation – we have 11,000 members – so we need to communicate with our members, and get them understanding what we do and why we do it. Effective communication is always on the agenda for us,” he says.

With the MFAA in the midst of a large education push, Leedham says it is essential that it continues to meet these needs.

But for Leedham, a personal ambition – and a key task for the MFAA – remains capturing a new generation of creativity and

VISION ■ For all

borrowers to seek the services of a Certified Credit Adviser

MISSION ■ Increased

member engagement ■ Continued

development of education pathways and formats ■ Embrace

and provide resources for the ‘new generation’ of brokers

Compliance has been the burning issue behind the other ‘noise’ in the industry, Leedham says, following the introduction of NCCP responsibilities.

However, compliance with the new legislation could soon just be the norm.

“We are getting to the stage where brokers are accepting it, they know what has to be done and are getting on with it, so as an industry we are starting to push that aside.”

Likewise, social media is creating a buzz that Leedham says is changing the way that brokers think about business.

“People are hearing about it, and want to get involved but often don’t know how to, and are confused by it.” The MFAA can play a leading role in helping brokers adapt, he says.

On other issues, Leedham says the MFAA continues to take an agnostic approach to the charging of fees, but emphasised brokers needed to be clear on the value they provide. “If they are charging a fee, they need to be absolutely clear with the client why they are charging that fee, and what additional services they can expect for that money.

And brokers need to make sure they deliver, or we’ll see those clients leave the channel.”

In fact, Leedham has warned an industry move to a fee model may be premature.

“Over many years we have fought hard to maintain the bank-based commission model, and we should do all we can to preserve that model,” he says.

The market will determine if the fee model can be borne by consumers, but there may be a tipping point where consumers do their own research and walk into bank branches.

“The danger there, of course, is for consumers, as they might not avail themselves of a wider choice of product.”

MARKET TALK

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26

Life after mining Will a predicted ‘mining boom fizzle’ impact Australia’s property market? Experts say yes, and the solution lies in government incentives

F

orget the Mayan 2012 apocalypse. 2014 is the year Australia’s economic growth will grind to a spectacular halt, with a fall-out even the best-laid plans may not be able to stop.

Of course, it’s all speculative and largely rests on the predicted ‘mining boom fizzle’ in two years’ time.

In August, analysts Deloitte and BIS Shrapnel offered a grim forecast for the Australian economy, claiming the mining boom – which the government relies heavily upon for economic stability – will inevitably dissolve. Deloitte’s Access Economics Report said falling prices in coal and iron worldwide, as well as decreased demand from China, would contribute to a sharp decline after 2014.

PROPERTY BEARS THE BRUNT

So how does this affect property?

The answer lies in how mining has propped up the economy.

“The strong bit of Australia’s economy is [now] starting to be called into question,” says Deloitte’s director Chris Richardson.

The result, he says, is that non-mining investment, including property, must be bolstered to keep the foundations from crumbling.

However, BIS Shrapnel’s researcher Tim Hampton is concerned it simply won’t hold.

“Both residential and nonmining business investments have continued to decline.

[However] it is these two components that will drive the next stage of economic growth.”

Compounding this is the government’s blinkered approach to investment, say critics.

“The government has built a budget that is wholly captive to the mining boom and the taxes to be collected from mining. Now it’s apparent the budget is unravelling because it was built on smoke and mirrors,” says shadow treasurer Joe Hockey.

Economists say lower interest rates and further government incentives could help.

THE DREADED CONFIDENCE DIP

For consumers, mining was hyped as the economic saviour.

A collapse may frighten consumers into ‘freezing’ investment activity.

“We needed to be seeing a strong recovery in new home lending coming through in the first half of 2012 to signal a significant turnaround in residential construction, from what will historically be a very low trough,” says the Housing Industry of Australia’s senior economist Harley Dale.

THE EUROPEAN EFFECT The percentage of Australian companies planning to invest in major capital expenditure projects:

25% This year...

Last year...

52%

The percentage of mining leaders who are optimistic:

20% This year...

Last year...

57%

Let’s not forget the Northern Hemisphere. A sudden absence of the mining buffer will leave Australia wide open to outside influences, including Europe.

“We expect the European situation will get worse before it gets better,” says Hampton.

“Irrespective of how their significant issues are resolved (Euro break-up, further debt write-offs), the main channels of influence for Australia will be through reduced consumer and business confidence, lower commodity prices, and tighter funding conditions.

“This would likely further delay the recovery in dwelling and non-mining business investment,” he says.

THE OUTCOME

With all this in mind, any ill-effects of the mining fizzle can be reduced to three key components: a fall in construction; a lack of consumer investment; and prohibitive market conditions due to poor commodity prices.

It’s not all bad news, says Hampton. Interest rate cuts may save us yet. “Residential investment, triggered by recent interest rate falls, should start growing from late this year, driven by the dwellings shortage that has developed,” he says.

TALKING HEADS

Q HOW HAS THE MINING BOOM AFFECTED AUSTRALIA’S PROPERTY MARKET SO FAR?

MARK HEWITT AFG

MARK WOOLNOUGH ING DIRECT

“It has driven up the cost of living, including rents in WA. This has created affordability issues for the vast majority of people who are involved in the mining industry.”

“The main impact has been in the resources states and [adjacent] capital cities and regional centres… underlying demand supported by immigration will underpin prices.”

MICHAEL RUSSELL MORTGAGE CHOICE “[It’s] certainly impacted residential property prices in all WA mining towns, where modest homes are currently renting for over $2,000/week as demand continues to squeeze supply.”

VOULA KOTSIRAS PORT GROUP “[It’s] created pressure on housing in locations directly affected. Investors are talking of achieving returns at unprecedented levels, which harms the affordability for locals.”

MARKET TALK

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27

10 tips for investing in mining towns Do you know the factors that will ensure your clients succeed even in a harder mining market? Seasoned investor Patrick Cornwell reveals his 10 secrets

1

TIMING

Boom and bust affects mining areas too, and depends on external factors.

These could include demand for resources, commodity prices, and expansion and extraction. Enter the market between regular property price growth ‘spurts’.

2

PHASE OF DEVELOPMENT

Bringing a mine online usually causes a large surge in employment at different stages, though more people are usually required to develop a mine than to maintain an operational one.

3

TYPE OF MINING INVOLVED

The demand and forecast future demand of the mineral or gas being mined effects the future of the local economy and property market.

4

NUMBER OF MINES IN A TOWN

development. A diversity of industry is also desirable. This ensures long-term sustainability.

6

INFLUENCE OF FIFO

Fly-in, fly-out workers are not a recipe for investment success, so mining towns that are smaller with FIFO workers will likely prevent a community from developing.

7

LIFESPAN OF MINES AND OUTLOOK FOR THE SECTOR

Mine lifespan depends on the size and quality of the resource deposits as well as long-term demand and profitability of the resource.

8

WHAT TYPE OF TENANT WILL YOU GET?

Like most properties, something renovated and nicely presented is likely to attract a better quality of tenant.

9

CORPORATE LEASE

The impact of a mine closure or workforce reduction in a ‘one-mine town’ can be devastating, so the number of mines is critical in building momentum and long-term tenure.

A good corporate tenant will need a high standard property and may pay a ‘lofty’ rental. However, high turnover may cause wear and tear.

5

10

INFRASTRUCTURE SPENDING

The best long-term investments will have significant infrastructure spending such as port, rail, roads, hospitals, schools, local shire development and property

RENTAL RETURN

Cornwell looks for a 10% return at purchase on a mining town property with ‘room on the upside’. Watch for quick fluctuations downwards due to a mine closure or staff cutbacks.

Positive property results deliver a boost PROPERTY PERFORMANCE IN BRIEF

■ BEST performing capital city: Darwin +3.2% ■ WEAKEST performing capital city: Adelaide, -2.3% ■ Most EXPENSIVE city: Sydney with a median dwelling price of $535,000 ■ Most AFFORDABLE city: Hobart with a median dwelling price of $300,000

RP Data’s Home Value Index for July showed both a rise in capital city values and a surge in auction clearance rates.

This made it a second consecutive month of growth, with an overall 0.6% rise. It’s modest, but a positive sign of improvement, according to RP Data’s research director Tim Lawless.

“The July result, when viewed together with the positive June result, suggests housing markets may be starting to respond to lower mortgage rates, which, according to the RBA’s latest Board meeting minutes, are around 50 basis points below their 15-year average,” he said.

Lawless added that auction clearance rates were above-average at 56.6%, the highest since February 2011.

Earlier this month, Sydney recorded a two-year high for clearance rates in one weekend alone.

Meanwhile, Darwin has shown unexpected growth for July, rising 3.2%. Adelaide fell by 2.3%, making it Australia’s weakest-performing capital city.

Sydney remains the country’s most expensive city in which to buy a property, while Hobart is the cheapest.

FEATURE

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28

A house price prediction House price vulnerability is rising, so don't expect a new boom any time soon, writes Shane Oliver

A

fter the surge in Australian house prices from the mid1990s into the last decade, my view was that while the risks of a sharp fall back in house prices were high, the most likely scenario was an extended period of range bound house prices in real terms.

However, the risks are rising again. Prices have slid 6% since their 2010 high and worries that the GFC is about to finally catch up with Australian housing are on the rise again.

OVERVALUED BUT NOT BY MUCH The bad news is Australian housing is still way overvalued.

The good news is it is less so, with real house prices going nowhere for the last four years:

Shane Oliver is head of investment strategy and chief economist at AMP Capital Investors

• According to the OECD, the ratio of house prices to incomes in Australia is 28% above its long-term average, putting it at the top end of OECD countries, although several other countries are more extreme.

• According to the 2012 Demographia International Housing Affordability Survey, Australian housing trades on a median multiple of house prices to annual household income which is double that of the US. In Sydney, median house prices are $637,600 compared to $324,800 in Los Angeles, for example.

• However, it is apparent that while real house prices are still above their long-term trend, the divergence has narrowed to

13% from a peak of 33%. Real house prices have now fallen back to 2008 levels.

• Another way of looking at property valuations is to look at the ratio of price to rents and adjust for inflation. On this basis Australian housing is still overvalued relative to its long-term average by 10%, but at least this is down from a peak overvaluation of 38% in 2003.

The bottom line is while it may not be as stretched as was the case a few years ago, Australian housing is still overvalued. This, combined with still high household debt to income ratios, leaves Australia vulnerable.

STILL UNDERSUPPLIED, BUT MAYBE NOT AS MUCH

One of the big supports for the Australian housing market is thought to be a shortage of housing with the National Housing Supply Council estimating a cumulative shortfall of more than 200,000 dwellings.

However, the just released 2011 ABS census wiped almost 300,000 off previous population estimates, suggesting that the undersupply may not be as chronic as thought, and along with slowing population growth, has potentially reduced a support for house prices. Low vacancy rates still attest to some undersupply.

WHERE TO FROM HERE?

Since the GFC, Australians have become fearful of taking on more debt and the once strongly held

THE MOST LIKELY SCENARIO IS MANY YEARS OF RANGE BOUND HOUSE PRICES AROUND A FLAT TREND IN REAL TERMS belief that house prices can only go up has long been ditched.

However, while fears are growing of a deep house price slump ahead, the most likely scenario remains a lengthy period of range bound house prices around a flat trend in real terms. Just as we have seen nationally over the last few years and in Sydney since 2003.

Essentially, poor affordability, overvaluation and high household debt levels have put a cap on house prices whereas undersupply should limit their downside, within which, prices will cycle up and down in lagged response to falls and rises in mortgage rates.

brokernews.com.au

Q&A

29

ANNE QUICK

Lynch Financial Group, Mount Gambier, South Australia

If I didn’t live in Australia I would live in:

I haven’t travelled all that much but Canada appeals to me with all its beautiful scenery.

What do you like about being a mortgage broker?

I really enjoy talking to people and seeing the wonderful smiles once their home loans are approved. It gives me such a reward for all the efforts. A recent customer of mine has promised me some crayfish, so I’m really looking forward to that!

The job is also a great challenge at times especially in today’s market and the lenders definitely keep us on our toes during these tough times. The flexibility with this type of work is good, too.

My biggest inspiration is:

My two girls are definitely an inspiration to me because of all they have achieved so far in their lives and the determination they both have.

My all-time favourite food is:

I just love Thai food and Vietnamese food. A good green chicken curry really hits the spot, especially in this cold weather.

May I also say crayfish is another favourite and I am very lucky living where I do with

the Southern Rock lobster fleet located only 20 minutes away!

The last book I read was:

Best of Friends by Cathy Kelly (a bit girly, I know).

Lately I’ve been listening to a lot of:

Well, I do have two girls, so lots of Tayla Swift and One Direction, of course played at full volume as often as they can!!! I must say though, I don’t mind a bit of the ol’ Jimmy Barnes.

My favourite saying is:

Don’t have one really, but I do call most people “Darl”.

My ideal Sunday involves:

Start the day with a sleep-in (of course!) then followed by a big brunch and nicely brewed coffee.

Since we have over an acre of garden, I enjoy precious gardening time, followed by a long hot shower and some R&R with a nice glass of wine watching the rest of the AFL.

The most extravagant gift I have bought myself was: My Pandora bracelet.

If I could have dinner with anyone I would choose:

I would say my husband first of all but second to that…maybe Ben Affleck.

I REALLY ENJOY TALKING TO PEOPLE AND SEEING THE WONDERFUL SMILES ONCE THEIR HOME LOANS ARE APPROVED

Three things I would love to do in my lifetime are:

1. Travel Europe for at least three months with my family and have coffee at all those out of the way cafés 2. See my girls get married and start their own families 3. Start a gourmet Farmers Market on our block next door

What motivated you to join nMB?

I am employed by Lynch Financial Group which is a financial planning & mortgage broking business. We originally signed with a franchise system when I started as a mortgage broker in July 2000. We later found the franchise model did not work well for us in Mount Gambier so we decided to look elsewhere. The opportunity of joining nMB was attractive, as their model offers a similar program to a franchise system with the added benefit of trading under our own brand and ownership rights of the loan book. nMB are very flexible to work with, especially as we produce local TV advertising and are a great, fun team.

INSIDER

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30

Offspring true to their name

One weekend can change everything…

s brokers, you would no doubt hear a lot about financial literacy. And sure, it can be annoying when those eager first homebuyers can’t tell their LMIs from their LVRs – even after the fourth explanation.

Don’t schools teach anything these days?

But it may be time to stop pointing the finger at them. If they – or your own kids – are financial failures and illiterates, you’d best point the finger where it belongs. At yourself.

That’s right, Canstar has said it is generally accepted that kids are an increasing ‘debt burden’ on parents. But if those parents are looking to blame someone for that, they should probably look at their own money management pedigree before labelling their kids financial failures.

“What sort of behaviour is inadvertently being picked up by the offspring?” Canstar asks.

“Bad behaviour is copied just as much as good behaviour and this also applies to money management. As parents, you need to stop and think about your own attitude to money. For instance, are you always in debt, unable to budget, or have an out-of-control shopping habit?” head of research Steve Mickenbecker from Canstar asks.

But hey, if they do turn out financial failures and aren’t able to scrape together more than 5%, there’s always high-LVR and LMI to fall back on. Or how about that parental pledge?

..or so claims the website of renowned motivational speaker and life coach, Tony Robbins.

Of course, brokers are more than acquainted with the motivational speaking circuit.

After all, at industry conferences it seems brokers barely have time for a quick sip of coffee between one speaker being shown the door, and the next energetically mounting the stage.

But at your next conference, be careful – even the best in the business can leave you burnt.

According to the San Jose Mercury, 21 people were recently treated for second- and third-degree burns after walking across hot coals at Robbins’ ‘Unleash the Power Within’ seminar. For the ‘Firewalk Experience’, 12 lanes of hot coals were laid out on the grass at a nearby park. The San Jose Mercury reported that witnesses heard “screams of agony”.

While the veracity of the reports were hotly disputed by both Robbins and his many ‘motivated’ supporters, Insider can only suggest brokers take care if attending. After all, one weekend (and some hot coals) could indeed change everything.

A

Under 12s

Brokers can benefit from giving their under-12s some solid grounding in saving money. This means one scoop not two scoops, and ‘no’ to some of those impulse-buy toys.

12–17-year-olds

Here’s where kids start using their petty cash more freely, so get them trained up in transacting practices.

No, that doesn’t mean a credit card just yet.

18+

As long as they have a solid PAYG job and a few payslips behind them, your kids could just be your next clients.

Here’s where they learn what LVR and LMI means.

This bank ad’s a bomb, says public If you often find yourself thinking the big four lenders are prone to perpetual public blunders, the latest advertising mishap from the Commonwealth Bank won’t help.

The bank was recently forced to remove an Olympic ‘bomb hoax’ ad during the games, released on its popular YouTube channel, after a public outcry over its content.

The video depicted three ‘CAN’ mascots attempting to enter the women’s volleyball tournament in London. They tell the security guard the nearby ‘T’ mascot is “sweating profusely and carrying a backpack, which is making ticking noises.” The security guard then tackles the ‘T’ to the ground.

Commonwealth Bank removed the video, before releasing an official apology.

It said, “the Commonwealth Bank apologises for the online video released to its YouTube Channel. We acknowledged some concerns were raised and the material was withdrawn this morning.” While it’s not unusual for companies to release provocative viral campaigns, the timing of this gem could have been better.

You see, London was on high terror alert at the time.

COMPETITION! Australian Broker is still waiting for contact from any brokers who think they may be more ripped than this insurance broker (see below). We offered to publish the photographic proof right here on this page, but so far, no brokers have stepped up to the challenge. A bottle of wine and industry infamy are on offer for the broker who can match this body!

SERVICES

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AGGREGATOR/WHOLESALEBROKER Choice Aggregation Services http://www. choiceaggregationservices.com.au 1300 135 389 Page 11

COMMERCIAL

Think Tank Property Finance 1300 781 043 www.thinktank.net.au deal@thinktank.net.au Page 7

FINANCE

Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) enquiries@semper.com.au www.semper.com.au Page 13 & 21

LEGALSERVICES

Bransgroves Lawyers (02) 9221 9522 info@bransgroves.com.au www.bransgroves.com.au Page 6

LENDER

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

31

Homeloans Ltd (08) 9261 7000 www.homeloans.com.au Page 15

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

Liberty Financial 13 23 88 www.liberty.com.au Page 3

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 9

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 14

Rapid Capital 07 5562 2485 www.rapidcapital.com.au Page 8

National Australia Bank www.nabbroker.com.au Page 32

WHOLESALE

NCF Financial Services Pty Ltd. 1300 550 707 www.ncf1.com.au Page 10 Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4

Resimac 1300 764 447 www.resimac.com.au Page 19

OTHER SERVICES Trailerhomes 0417 392 132 Page 27

SHORT TERM LENDER

Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2

To advertise in Australian Broker call Simon Kerslake on

+61 2 8437 4786