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KATHY CUMMINGS Productivity for prosperity Market forces are demanding brokers focus harder on business and loan processing efficiencies
hen the Commonwealth Bank first started measuring loan submission quality, the bank set itself a target of scoring 90% across its top five submission errors that required rework. With that target now achieved, the bank has moved its benchmark to what executive general manager of third party banking Kathy Cummings calls the new ‘holy grail’: straight-through processing. In what may seem a daunting vision for brokers engaged in the day-to-day challenges of progressing clients from application to settlement, CBA believes straight-through processing – and increased productivity – to be a goal worth fighting for. FULL STORY PAGE 12
NOVEMBER 2012 ISSUE 9.22
+INSIDE + NEWS WHITE LABEL SHOWDOWN
Aggregators dispute home brand product sales P4
ING GETS DIRECT
New model to combine broker and planner BDMs P6
+ OPINION Time to place a bet on increased competition P14
Why boutique aggregators think you should switch P22
+ CAUGHT ON CAMERA Vow Financial talks success in Phuket P29
+ PEOPLE Memories of a broker childhood singing sensation P28
WHAT THEY SAID...
“My view is that we are offering simple products that meet consumer needs, and brokers are choosing them” P4
34% The drop in financial services jobs in Australia between Q3 2011 and Q3 2012
DID YOU KNOW?
27% The amount major banks allegedly ‘short-changed’ variable rate customers over five years by not passing on rate cuts
7% $18 bn
The rise in personal loan applications FY 2011/12
The average wage of a BDM
Victoria accounts for a third of all new properties built in the last five years
“I believe that the National Broadband Network could well be that game changer in terms of how brokers and their customers interact” P15
The percentage a broker can allegedly increase yearly income by diversifying
“Clearly some brokers are disenchanted with their aggregator” P23
“Having a life outside work is a must to keep sane in just about any profession these days”
First test for white labels is client interest ■ National Mortgage Brokers’
Gerald Foley has joined the chorus of aggregator heads warning against brokers selling white labels based purely on special inducements on offer from aggregators. Foley said aggregators should not offer any special benefits or inducements to their brokers to give white labels preferential treatment over other lenders. Such inducements could include preferential processing, remuneration levels or credit decisions. Other aggregators including Mortgage Choice and Connective, which have their own branded product lines distributed through their broking networks, have also been vocal in encouraging their competitors to protect the industry from aggressive white label sales tactics. Both suggested a failure to do so could encourage intervention from ASIC in the future.
Foley said that if an aggregator provides a white label option and a broker properly sells that product where it fits a client’s needs, then there should be no problem with that. However, he said that in nMB’s experience, brokers had been split on the ethics of selling these to clients. “Many brokers were quick to consider and then add the nMB Direct products to their ‘own’ panel, and there were others who felt selling their aggregator’s product could somehow be a conflict,” he said. Foley said he did not believe a white label product produced inherent conflict, with inducements aside. Advantedge general manager of distribution Brett Halliwell defended the group’s aggressive white label strategy, arguing that in providing its suite of product to FAST, PLAN and Choice brokers, it was providing much-needed competition. He cited an enhanced service proposition for brokers and customers, as well as simplified product and documentation. Since the launch of the Advantedge white label range at the beginning of last year, each product has risen to become among the top four lenders on each of these aggregator panels. Foley questioned whether such products did add competition if an aggregator is owned by a bank. “We all know that all roads lead to Rome when it comes to the source of the funds for these loans,” Foley said.
CONFLICT GUIDANCE TO ADDRESS WHITE LABEL BOOM
Predictions that broker white label recommendations may face future ASIC scrutiny are being met by moves from the MFAA and its lawyers to update conflict guidance for brokers. With predictions from some aggregators that ASIC may soon look more closely at incentives to sell white label products, Gadens Lawyers senior partner Jon Denovan says the MFAA will soon release an updated ‘Conflict Module’ to keep broker groups on the right side of the law. “The MFAA has been able to lead industry and ASIC opinion by developing strong workable policies that balance consumer interests and business interests appropriately. I’m hopeful that will be the case here,” Denovan told Australian Broker Online. Denovan said white label incentives are a complex topic with “many traps and duties that need to be considered”, and the new conflict module will assist the industry to adopt best practice. Denovan said most questions would arise for regulators if a broker decides to ‘change hats’. “If the broker is clearly acting as a product distributor, then ‘buyer beware’ applies - just like a bank can set its own interest rate,” he said. However, Denovan said customers should be in no doubt which ‘hat’ a broker is wearing. White labels could still be threatened by regulation if questionable practices do arise, he said. “There is no doubt that sooner or later some fringe operator will make a mess of things and ASIC will review practices in this sector.” Denovan said it was important to balance consumer protection and to facilitate business.
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Shockwaves over Banksia fallout ■ Leading mortgage aggregators
who maintained Banksia Financial Group on their approved panel of lenders are in the midst of dealing with the group’s shock insolvency. Banksia Securities was put under the receivership of McGrathNicol last month, after secured creditor The Trust Company acted on fears over the group’s solvency. Australian Finance Group, which maintained Banksia Financial on its panel of lenders, indicated it was directing immediate attention to mortgage broker-sourced applications that have been approved and not settled or are currently being assessed or awaiting assessment. Director of sales and operations Mark Hewitt told Australian Broker a number of non-bank panel lenders had stepped into the breach, with offers to assist in relation to these files in progress. He revealed there were less than five such applications. Hewitt would not comment on the likely outcome for broker commissions on existing loans,
■ BDMs at ING Direct previously dedicated to the ASIC ACTS ON LENDER COLLAPSES ASIC is set to undertake a wholesale review of the way it regulates the debenture industry following the collapse of Banksia Financial Group and Provident Capital. The AFR reported that ASIC will examine requirements of debenture issuers to disclose whether or not they meet a set of suggested capital ratios, with no penalty if they are indeed undercapitalised. The debenture market is worth $4.5bn, and eight of the 15 largest debenture issuers identified as the riskiest by ASIC in 2007 have since collapsed. with administrators only appointed to Banksia Financial last week. “It is too early to speculate but we are committed to keeping our members informed as the situation becomes clearer,” Hewitt said. Banksia formerly encouraged commercial, industrial and rural property loan submissions from brokers up to $10m, funding its lending portfolio through a mortgage fund for investors. The administrators said $660m in funds are owed to investors.
Brokers act on CBA low-doc rate hike ■ The Commonwealth Bank
informed its broker network last month to contact their low-doc customers ahead of a 0.25% increase in the bank’s interest rate for some low-doc loans. The bank said that it would be writing to all its existing low-doc home, investment and line of credit customers after 26 October with loans funded before 1 April this year to inform them of a 0.25% increase in their rate. The bank suggested brokers contact customers that might be affected, in case they have the necessary documentation to convert to a full-doc loan, with additional features and benefits.
ING Direct defends BDM restructure
A respondent on the Australian Broker Online forum, Rach (30 October 2012) immediately contacted her database to look at refinance opportunities. “I don’t have all that many [clients] directly affected, but you never know. It’s a good opportunity to review and look at refinance options where customers can now go full-doc.” The Commonwealth Bank added that there would be no change to existing low-doc fixed rate loans during their fixed rate period, but that they would roll to the new reference rate on maturity, including the new 0.25% premium.
DID YOU KNOW? The financial services sector boasts some of the best HR teams and individuals, with Heritage Bank, Credit Union Australia and Citibank all featuring as winners at Key Media’s recent HR Awards.
broking channel will now be charged with servicing financial planners as well, after a service restructure at the second tier bank. ING Direct has made a further decision to combine its distribution teams for the broking and financial planning channels. Former head of broker distribution, Mark Woolnough, has been promoted to head up ING Direct’s entire third party distribution operations. Combined third party distribution teams across Australia, including BDMs and relationship managers, will be trained up in both wealth and mortgage products to provide sales and support for these products to third party businesses. Already piloted among brokers in WA and South Australia, the model is to be rolled out nationally. Executive director of distribution Lisa Claes reassured brokers that the change was not a de facto reduction in overall resources that are dedicated to them. “The integration and alignment actually delivers additional resources which will be allocated across brokers and advisors,” she told Australian Broker Online. “The service proposition currently enjoyed by each channel will not be impacted. In fact, one of the rationale driving the integration is to enhance our service proposition to our third party channels.” Claes said the bank would remain focused on all of its third party distribution partners, including those brokers who continued to just offer mortgage services. However, she said it may help brokers who are looking to add additional services to their business, and would likewise facilitate advisors interested in loan writing.
ANALYST SLAMS NEW BDM MODEL The move from ING Direct was slammed by industry analyst Max Franchitto from MGF Consulting, who said a move away from specialisation in these channels is unlikely to work. “Financial planning is a specialist field. BDMs have enough on their plates keeping up with what FoFA means to the planner and how they can add value to the relationship.” Franchitto said the required product and legislative knowledge alone would mean that the combined BDM would have to spend “more time reading that actually seeing advisors”. He said planning BDMs are supposed to offer business development support, not just push product features and benefits which he said was a “hallmark” of a mortgage broking BDM.
Case for housing bubble deemed ‘misguided’
THE STRANGER SIDE OF NEWS
■ A leading economist has told
SNOOZE AT YOUR PERIL
■ According to US researchers, hitting snooze
on your alarm each morning can reduce productivity later on in the office. The findings stem from a recent study into how early risers are more productive at work. One of the key traits of a good performer was an ability to leap straight out of bed. Researchers say the snooze button is a “slippery slope”.
■ Conflict-avoiders beware: computers of the
WHEN SHOULD BROKERS LOOK AT CROSSSALES? 1. Current clients who have been offered insurance but not taken it up
near-future will be able to read your emotional state, whether you like it or not. It’s called ‘affective computing’ and engineers across the globe are already programming computers to recognise despair, happiness, anger, boredom or frustration, among others, on the face of the user. ‘’Our digital world is for the most part devoid of rich ways of expressing our emotions,’’ says Rosalind Picard, the director of the computing research group at the Massachusetts Institute of Technology media lab. The solution? Computers, of course.
2. Current clients who have taken insurance but need a comparison
HAPPY AS PIGS IN…
■ …manure, or so the sanitised version
goes. A pig farm in south-eastern NSW has become the first to create a financial windfall from reducing carbon emissions. Farmers capture methane from the pigs’ manure, turn it into energy and give it back to the grid, which reduces their bills. The government then awards ‘carbon credits’. “The whole purpose for us was to eliminate our electricity bill,” farm owner Edwina Beveridge told the SMH.
UNEMPLOYED, OR CRIMINAL?
■ A new US survey has revealed recruiters
find it easier to place an ex-con in a job, than someone who has been unemployed for two years. ‘Hopping jobs’ or long periods of unemployment were viewed negatively by employers, while an ex-con with a two-year absence spent in prison was more favourable. It seems being unloved in the workforce is a far greater crime these days.
3. Clients making mortgage applications, though they often prefer applications to be approved first
one broker group that those who posit the existence of a housing bubble in Australia are ‘misguided’. Vow Financial brokers have been told by BT chief economist Chris Caton that the market cannot be compared simplistically with the US market, despite housing here being more expensive compared with disposable income. “When other countries are thrown into the mix, the argument that we have a housing price bubble in Australia is much harder to sustain,” Caton said. “The fact is our housing prices are in broad alignment with many similar economies, so it’s my belief talk of a housing bubble is misplaced.” Caton added that mortgage brokers were likely to see lower rates and higher housing prices over the next 12 months. “Although I’m not as bullish as some other economists on lower interest rates, I still expect at least one cut in the cash rate and possibly two as the Reserve Bank prepares for
a downturn in mining,” he said. Caton noted there remained major economic problems globally, but that he was optimistic about their impact in Australia. “The Euro-zone remains an issue, but it’s more about contagion across Europe than a Greece in isolation,” he said. “It’s Italy and Spain we have to worry about. That said, the trend in the long-term bond rates in those two countries in the past three months gives ground for some confidence.”
Brokers miss sales to a third of clients ■ Up to a third of all clients
would take up insurance if it was offered by their mortgage broker, though almost half of all customers are not being offered the products. The latest Commonwealth Bank/MFAA Home Finance Index found only 52.8% of Australian customers are being cross-sold home loan protection insurance by brokers. Meanwhile, only 48.2% of customers were offered home contents and building insurance by brokers, and an even smaller 31.2% slice of the market was offered life insurance. The findings come in contrast to the sales potential of the products, with the survey of 1,423 people finding that 34.1% of customers take home loan protection insurance if offered. “A growing percentage of borrowers are willing to have brokers offer them insurance products,” CEO Phil Naylor told Australian Broker. “That gives brokers the opportunity to enhance their revenue and profitability and be
52.8% OF AUSTRALIAN CUSTOMERS ARE BEING CROSS-SOLD HOME LOAN PROTECTION INSURANCE
OF CUSTOMERS WOULD TAKE HOME LOAN PROTECTION INSURANCE IF IT WAS OFFERED
seen by consumers as a source of other products and advice.” Naylor said in general, brokers are trusted by borrowers to offer them insurance products, but would need an AFS licence if they were to consider selling insurance themselves. Being a referrer is something brokers can do easily without an AFS, he added. “There is scope for all those options and it’s really up to individual brokers to decide on the depth of their participation.”
Parent equity loans put credit ratings at risk ■ A credit rating repairer has predicted an
imminent escalation in the number of well-meaning parents of first homebuyers with worse credit ratings as they approach pre-retirement. With first homebuyers’ grants in some states having been pulled back, MyCRA Credit Repairs CEO Graham Doessel says a possible rise in parent equity loans is a ‘dangerous trend’ that could see parents’ credit ratings impacted. Doessel says if the loans fall into arrears, parents would be liable, forcing them to work much longer than anticipated to pay off the debts. “Many people go guarantor for their children without assessing the risks to their own finances. If the child falls into arrears with payments, the parent is liable for any debt, and they are also blacklisted from credit accordingly,” Doessel said. Doessel said if the child fails to make repayments, the parents are liable for this debt, and if this extends past 60 days, the creditor can place a default on both credit files. “In some cases, parents are not aware repayments have stopped, and it’s not until they attempt to take out credit themselves and are refused that they realise there is a problem,” Doessel said. A default on someone’s credit file can severely hinder chances of obtaining credit, and remain on file for five years. “Worst case scenario is the bank begins to use the property the guarantor put forward as collateral to recover lost debts,” Doessel said. “There is a danger the guarantor can lose their home. Those people who were so close to financial freedom are now facing debt, and a shaky retirement.”
Broker low-doc fears unwarranted ■ Confusion and misconceptions over low-doc loans have led brokers to become unnecessarily cautious, according to non-bank lender Resimac. Chief operating officer Allan Savins said brokers were initially scared off low-doc lending due to having limited knowledge and confidence around NCCP when it was first introduced. He said that with the continued and rapid rate of legislative change in the industry, it is difficult for some brokers to know where they stand with low-doc lending. “NCCP wasn’t created to provide a prejudicial or narrow based solution for all borrowers, it is fundamentally there to promote responsible lending,” Savins ALLAN SAVINS said.
Resimac believes it is having a detrimental effect on brokers’ ability to write more business. “Many brokers believe NCCP has made servicing low-doc borrowers impossible,” Savins said. “Nowhere does the NCCP state that a specific interest rate makes a loan ‘unsuitable’ and this overall misconception has caused some brokers to needlessly stay away from servicing a legitimate segment of the market.” Savins said brokers need only make reasonable enquiries as to the borrowers’ needs and financial position, as well as acting with honesty and integrity. “It’s about making reasonable enquiries around a borrower’s circumstances and declared income levels and keeping a record of that,” Savins said.
Brokers lacking service to get ‘trampled’ ■ A leading mortgage broker
has claimed those brokers who do not capitalise on their core customer service proposition are likely to get “trampled” by bigger players. Ian Jordan of The Selector Group has said brokers need to ensure they go beyond technical ability such as structuring a deal and focus more on their customer service process. “I think that is where brokers might be missing a little bit, and this is their competitive advantage against the really big boys in town – their one-on-one ability to provide phenomenal service. “That is really their unique proposition and if they are not
doing that then they really are competing with the big boys and I think they are going to get trampled,” Jordan said. This goes beyond service such as asking a client “how are you feeling, and what are we going to do that is specifically different for you?” according to Jordan. Instead, Jordan said top brokers aim to make sure the customer has a great experience all the way through. Jordan added that this includes post-settlement service, not just during the loan application and approval process. Commenting on the current market, Jordan said despite improved sentiment figures he “didn’t realise the GFC was over”.
CONTINUED FROM PAGE 1
traight-through processing is when the file goes through and is not reworked,” Cummings explained. “The idea is that you have all the information in there [the application], it is correctly interpreted [by the bank] and the file just sails straight through.” Sound like mortgage broking fantasy? Well according to CBA, far from it. Thirty-five per cent of broker channel applications already achieve this benchmark, while 75–80% of the bank’s own proprietary channels manage the feat. And it is in that gap that there is an opportunity for brokers to further exceed their clients’ expectations. “Obviously it [straight-through processing] is very productive for the broker and the bank, and it means a sensational customer experience,” Cummings said. “It is very much about keeping the customer in the centre of the discussion, because when it is all said and done, that is what it’s about. Happy customers, happy referrers, and a happy broker.”
A PRODUCTIVITY ULTIMATUM
Straight-through processing is only one element in a much larger challenge facing not just CBA, but the Australian economy as a whole and even the world – productivity. “Productivity is a global issue,” Cummings explained. “It is critical for everyone to get it through their heads that if you don’t want to end up like Italy, Greece, Spain or Portugal, you need to get in and fix your productivity.” So why do banks and brokers need to worry about productivity? Because, according to Cummings, it is about sustainability of the mortgage broking industry. And, it may just pay off in business. “Brokers getting the basics right will spend more time looking after the customer and the next sale rather than spending that time in rework.”
Australian Lending and Investment Centre’s Mark Davis, recently named Australian Mortgage Broker of the Year for the second year running at the Australian Mortgage Awards, is one broker benefitting from an investment in productivity. Engaging CBA’s ‘Kaizen’ service in pursuit of process excellence, ALIC was able to integrate improvements that decreased the overall time taken to submit loan applications. “It was a really big success story,” Cummings said. “They were able to change the process around their customer letter – just getting their customer
A QUESTION OF QUALIFICATIONS A new broker ‘Certified Practicing Certificate’ has been mooted by the Commonwealth Bank’s Kathy Cummings as a way to improve the industry’s straight-through processing record. “It is the thing that would make a difference from a lender’s point of view,” she said. Agreed in theory by the MFAA though rejected by the likes of Mortgage Choice, it would seek to certify a broker’s practical loan submission competency. This would include a minimum loan submission standard, as well as ensuring an understanding of lender product and credit policy. Cummings said it would be far superior to the MFAA minimum requirement for a Diploma. “It’s all very well to say you have to have a Diploma, but what does it mean if you still can’t actually work through the structures and get an application through to the bank in a format so that it goes through?” In fact, Cummings even labels the current Diploma qualification championed by the industry “a joke”. “If you want to do another type of Diploma, it usually takes two years and covers 4–8 subjects. But sending someone to a three-day course?”
expectations right has changed the timeframe from initial contact to approval.” In fact, getting all of the customer’s details upfront and inserting them into the initial application is one area Cummings says many brokers can improve upon. Though not always the fault of the broker – for example, valuation shortfalls – brokers often cause rework. “One of the things we find is they will put in for an account number ‘5678’ – that is a rework item straight away,” she said. The resultant backwards and forwards is what CBA terms ‘waste’. “It’s waste because we are ringing the broker to get the correct information and thus distracting them from what they are doing; getting it right first time is the way to lift your productivity.” Cummings said improving processes can significantly improve business outcomes. “Brokers just can’t believe the difference in their business: they get the right documentation, they submit the application correctly and the thing goes through.”
JOINING THE JOURNEY
The Commonwealth Bank is itself on a journey towards increased productivity. “I have recently been through a two-day program on productivity myself and my team will go through that as well,” Cummings said. “We are on a journey of continued process improvement.” And CBA doesn’t always get it right. “I accept that the bank doesn’t get it right every time. But we have spent $100m on loan processing improvement. My commitment to the broking industry is that we are doing as much as we can to get it right on our side,” Cummings said. Cummings argued that productivity is a journey for the market, and brokers would be wise to join the bank on that journey. “Then it is going to be much better for your business and the customer experience. It’s a ‘little pain’s a lot of gain’.”
“Brokers just can’t believe the difference in their business: they get the right documentation, they submit the application correctly and the thing goes through”
Punting on a stronger field It would be better if both bookies and brokers realised lending is not a four-horse race, writes Lisa Claes
orget the Melbourne Cup. It speaks volumes that today’s online punters can place a bet on which of the big four banks will be first to respond to Reserve Bank rate cuts – too bad if you’d like to put your money on a lender outside the big four. The bookies don’t make provisions for this. It’s no secret that the big four have long dominated Australia’s $1.3 trillion home loan market, but there was a time prior to the GFC when more competition was beginning to emerge. In early 2007, the four majors accounted for 53% of the market. Other banks held a 17% stake, and non-bank lenders held an unprecedented 30% market share. Fast forward to 2012, and it’s a case of ‘back to the future’. The big four once again dominate, controlling 75% of the market. Other banks have 12%, and the non-banks’ share has more than halved to 13% (including building societies and credit unions).
BIG FOUR “UNLIKELY TO BE THREATENED”
Lisa Claes is head of delivery at ING Direct
Economists may describe the dominance of the big four as an oligopoly, but consumers know it as lack of choice. I think it’s simply not healthy for households or the industry, and it certainly won’t favour brokers in the long term. In June 2012 the broker channel accounted for 39% of the market, down from 45% in 2007. There are predictions of further concentration within the industry. The International Monetary Fund has found that the big four has grown market share of Australian assets by 10% since 2008. In its 2011 Mortgage Market report, IBISWorld forecasts “the level of concentration of the four largest players will remain at close to 90% of the banking
market over the coming five years, unlikely to be threatened by the smaller banks and non-bank mortgage lenders.”
In the past, a number of segments of Canada’s home loan market had been under-serviced. Today, niche players including the smaller lenders are specifically targeting these customers.
LOOKING BEYOND THE SQUARE
Concentration may be a feature of a number of mortgage markets globally. But it doesn’t have to be. In Canada for instance, where the economy and levels of home ownership are similar to Australia, five major banks dominate the financial scene. However, these five account for only 65% of the total market (versus 75% in Australia) and non-bank lenders have a 25% stake. And more importantly, smaller banks in Canada are growing, whereas in Australia the reverse is true. However, it’s the post-GFC rise in market share of banks outside the big five that is noteworthy. Despite challenging trading conditions, Canada’s smaller banks have grown market share from 8% in 2007 to 10% today. Yes, there has been government support in terms of access to funding, but that alone doesn’t build market share. Their growth was achieved by viewing the market for what it is – a composite of different segments requiring quite diverse approaches, rather than one catering to a single, homogenous mass market.
UNIQUE VALUE PROPOSITIONS
These strategies involve developing value propositions targeted to the respective market segment. And it’s paying off. Growth in market share is being achieved – forcing Canada’s big five banks to take notice. More importantly, it means underserviced consumers are receiving the attention they deserve, and by keeping competition alive, the entire market benefits.
WHERE TO... “Too bad if you’d like to put money on a lender outside the big four”
As Australia’s fifth-largest home lender, ING Direct has injected competition into the industry, and as a direct bank, the broker channel remains a core part of our business. But it’s hard to argue against the view that the current level of concentration is not good for customers or brokers. Twelve months ago I suggested that the dominance of the big four did not augur well for the longterm health of the broker industry. My view hasn’t changed. Inevitably, banks with extensive branch distribution will strategically prioritise channels over the longer term.
Mortgage broking, but not as you know it The ‘plausible’ future may look quite different, writes LoanKit CEO Simon Dehne, and brokers should to embrace technological change
he future is not predetermined, nor is it predictable. If it were, there would be no point in taking any action today, because actions taken today would have no effect on events in the future. Given that we can’t predict the future, should we really spend any time thinking about it? I would say ‘yes’, definitely, because while all the things we know to be true happened in the past, it is also true that the decisions we make now will come to fruition in the future. It is a complex world that we live in today; the opportunity for all of us is to find ways of making sense of it and attempting to predict how emerging trends will influence our business models and society in the future. No one can predict the future with 100% accuracy, yet many successful entrepreneurs do have a unique ability to see the trends that others miss and to maximise these emerging opportunities as they start to gain mainstream acceptance. This was certainly the case with mortgage broking in the early 1990s. Mortgage broking hasn’t really changed all that much in the
past 20 years. Our essential business model of providing great customer service, helping clients assess the myriad product choices on the market and simplifying the loan process, still stands strong and continues to be successful. We have all seen technology move ahead in leaps and bounds in recent years, yet the underlying proposition that a mortgage broker offers their customer has not really changed.
THE NATIONAL BROADBAND NETWORK COULD WELL BE THAT GAME CHANGER IN TERMS OF HOW BROKERS AND THEIR CUSTOMERS INTERACT I believe that the National Broadband Network could well be that game changer in terms of how people, in particular brokers and their customers, interact. Picture a typical family, a husband and wife with two children, for example. Instead of
having a bank manager or mortgage broker visit them in person, they visit the mortgage broker’s website, click the button to speak to a broker and then conduct the conversation via video link in their living room. They receive personalised support and guidance from a real person in the comfort of their own home. Of course, mortgage broking would not be the first to use this technology. The medical profession already uses video conferencing for routine consultations, but imagine what the productivity gains could be as the use of video meetings becomes more and more widespread. The need for both service providers and their customers to travel will decrease, and service providers will be able to focus on larger groups of potential customers, unrestrained by geographical location. Broking groups could conduct multiple loan interviews using video meetings from anywhere in Australia or even the world. For mortgage brokers, imagine helping customers who have already gone to your website, completed a loan application and used your tools to identify the
type of loan that they need. Your role now becomes one of advisor, providing support and guidance. And customers can conduct their business at a time that suits them, be it 11pm or 6am. While we still have some issues to work through in terms of security and identification of customers, these matters are surely not insurmountable, given that one online bank is already allowing customers to settle loans without any face-to-face meetings. There is no doubt that the paradigm we have become so familiar with in the mortgage broking business has served us well, but it is definitely due for an overhaul. Simon Dehne is the CEO of LoanKit
BEST OF THE REST NAB MOST POPULAR BANK IN HISTORY Roy Morgan’s customer banking satisfaction report has seen NAB score the highest of any major bank since the research began in NAB has been 1996. declared the most At 80.3% for the month of September, popular bank as rated NAB gained 3.8% over 12 months to become by customers “the clear market leader”, according to Roy Morgan, with much of its gain put down to rising satisfaction among its non-home loan customers. In poorer news for brokers recommending loans to the bank, Roy Morgan’s report shows that home loan customer satisfaction at NAB has actually decreased 1.4% over 12 months. However, NAB suffered a setback in October, when it reported a 22% plunge in group net The bank’s group net profit to $4.1bn on the back of the continued profit has plunged problems with its UK business. 22% year-on-year
OCTOBER PLUNGE FOR CAPITAL CITIES
RP Data has released figures that show the first month-on-month fall in capital city dwelling values since May. The research house found that during October, the market had a 1% fall in capital city values,
reversing a 3.1% gain recorded between June and September. RP Data said Adelaide and Melbourne showed the largest month-on-month falls across the major capitals during that month, with values down 2.1% and 1.6% respectively. The figures indicated the market is still
‘delicately balanced’, according to RP Data, which called on the Reserve Bank to keep this in mind when considering rate cuts.
AFM ALLIES WITH FORESTER COHEN
AFM has signed a deal with property investment firm Forrester Cohen, which it says will enhance the broker proposition and create additional income streams. Under the new partnership, brokers can refer clients who are looking to invest in property to Forrester Cohen’s network of advisors and properties. National head of sales Clint Hawthorne said the partnership could be lucrative for brokers, while being underpinned by a strong “compliance framework.” “This will safeguard brokers from any conflict of interest and potential liability issues for referrers. Forrester Cohen bases its offerings around the provision of sound investment advice, whilst giving brokers the ability to generate additional income.”
RATE CUT GAP WORTH $18BN
The majors have ‘charged’ their borrowers an extra $18bn by not
$18bn THE AMOUNT BANKS HAVE NOT PASSED ON IN RBA CUTS
passing on the RBA’s rate cuts to standard variables over the past five years. Comparison site RateCity.com. au claims the gap between the cash rate and the benchmark standard variable rate – the average between the four majors – had doubled since 2007. The benchmark standard variable rate was 182 basis points above the cash rate in October 2007, and has increased to a current level of 337 basis points, a difference of 155 basis points. The result means that on a typical $300,000 mortgage, borrowers have paid an extra $11,687 over the past five years. However, a RateCity spokesperson acknowledged higher funding costs and the pressure to maintain profits was at the heart of the majors’ decisions not to pass on full cuts.
WAYS to ensure your website connects with clients
What online financial services customers expect from websites is changing. Expert Claudio Pannunzio explains what it is that could set your website apart
One of the most important things is to make sure that you have the technology behind the website that allows it to load up very fast. This is something that is very important where people have a very short attention span. More than four or five seconds and people just drop it because it takes too long to load up. There are some studies that show a one-second delay equals over 10% less staying on the page.
Another very important factor is the ability to also be viewed on a smartphone. This is because a lot of people look at the information on the go. There are some studies which show that website visitors are 51% more likely to do business with an entity that has a mobile site that they can view on the go.
to be very brief and to the point. And have a page where you have your strategies and your product.
DON’T CREATE A PILE UP
Many advisers also have additional pages which are a disaster. It’s what I call a HOMEPAGE pile-up on Highway 05, where you have a The rules of the game have changed. The calculator, access to the Wall St Journal, homepage as we know it is what I call a access to publications. Most of the time glorified tombstone. these days where you have such a People don’t have time to read. They granular access to the internet we don’t don’t want advisors to talk at the visitor, need someone to give us access through but to talk to them. So, the homepage has links. So it has to be five or six pages at to exactly pinpoint what are generally the most, using very straight to the point speaking the key problems or issues that sound bites and a video with crisp, clear your average visitor has and underscore language. immediately what are the solutions that a financial advisor can bring. KNOW YOUR AUDIENCE Advisors also often don’t know their VIDEO audience. They don’t do their preparation. On the homepage I also highly I developed a product for my agency that recommend putting a 60- to 90-second I call the ‘message map’. In a nutshell, it’s video. The video really enables advisors an exercise where I go and sit down with to connect with their clients, for the the stakeholders from the firm and probe simple reason that you can have beautiful them for six hours until we create an prose, but human beings think in images. unquestionable positioning for the firm. So a video is much more powerful than words. Especially when you do a welcome, IMAGES when you underscore in three or four You must have good images. If you are bullets what you can do for them, and say a financial advisor who specialises in proceed to the next page or two and you college plans or you specialise in will find the information. concentrated stock options for your clients, don’t do what many advisors do. CREATE TRUST They pick these beautiful pictures of This is all about the homepage, which senior citizens who are riding the should have a brief bio with a clear infamous Italian scooter – the Vespa – on picture of the advisor. The picture a coastline in California, with their legs connects with the audience. The bio has and arms up in the air.
The bottom line
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
“There seems to be an attitude promoted by lenders that credit is a given right, and now the public, especially the more youthful, expect credit and almost live on it. The monster has been created over the last three decades. Until the government applies restrictions to borrowings, eg, 10% deposit, no retail sales with 48 months interest-free credit and restrictions on credit card debt, the monster will grow. The level of personal debt in Australia is massive. When the next major hiccup in the world financial markets happens, the truth of the evil banks trying to increase profits at any cost will be seen. How many brokers have clients that they couldn’t set with a particular lender only to have the client go direct to a branch and have the loan approved by the same lender?” Gary Perth, October 24
LONG AND SHORT OF IT
CBA’s announcement of a 0.25% rate hike for some low-doc customers drew a comical mix of short, supportive and derisive responses from readers. Brisbane Broker on 30 Oct What? Cost of funding? Rach on 30 Oct Contacted my entire database yesterday via email – don’t have all that many directly affected, but you never know who know who... Good opportunity to review and look at refinance options where customers can now go full doc! Coast Broker on 30 Oct Typical arrogance of CBA. Should be some actual media coverage on this. Luckily only have four clients affected by this. I will make sure that I will refinance
these clients away from CBA if I can. Why leave them there converting them to full-doc when a new application has to be completed with new application fees?
CARROTS AND STICKS
When industry figures warned of an ASIC crackdown on white label ‘incentives’ from aggregators to prevent an unfair bias from brokers, some readers defended the ‘carrot and stick’ approach. Martin on 22 Oct As long as the product is not unsuitable to the clients’ need, I can’t see an issue. Surely incentivising people is just a part of most sales and professional environments. Boned on 22 Oct I receive far more white label promotion emails from my aggregator than any other
It’s a topic bound to incite comment: a broker’s bottom line. JP Morgan recently brought it into question with a report that found broker profits were taking a hit, despite a bigger market share. “Brokers are still doing reasonably well, but it’s on a much lower volume. Therefore, the commission pools are much smaller,” said Fujitsu analyst Martin North. “A proportion of those we surveyed indicated they didn’t have a very profitable business,” he said. Australian Broker readers responded with both incredulity and resignation, depending on their own experiences. “In 10 years I don’t recall being busier than at present. Brokers should think long and hard about their business structure to minimise their overheads. That way they will remain profitable in quieter and busier times,” advised Paul Goldring. Dave directed his ire at analyst Martin North. “Imagine that, Mr North, after all your talk of brokers earning too much a few years ago and banks should cut commission... now you say we’re all doing well but at the same time everyone in the industry isn’t as profitable? “You must have been a rocket scientist in a past career. How about you stop bagging our industry and comment elsewhere!” Australian Broker’s favourite commentator, sidbroker, however
type of email. Actually, come to think of it, can’t recall the last time I received an email from my BDM that wasn’t white label related! Martin on 22 Oct The carrot and stick approach has been around for decades. We are moving into a new era of integrity which I think is great, I just believe we as individuals need to be the solution of taking care of customers’ needs and the industry will eventually follow. Terry on 22 Oct Let’s just go Communist and do what we have to for the good of the state: the same home loan at the same rate, all wear the same clothes, drive the same cars, eat the same food and we all get paid the same income each week regardless of occupation. That would be ‘best’ for us all and ‘not unsuitable’ at that. Problem solved.
shifted blame onto the NCCP. “The NCCP is the big problem as it has stopped a large percentage of our people from being able to borrow. This has impacted dramatically on our housing industry right across the board,” sidbroker said. Peter T cast doubt on claims commissions had suffered over the year. “Fewer brokers and increased market share has led to higher volumes for us. We’re consistently writing more business. The challenges of the last few years
BROKERS ARE STILL DOING REASONABLY WELL, BUT IT’S ON A MUCH LOWER VOLUME. THE COMMISSION POOLS ARE MUCH SMALLER
have led to greater efficiencies in the office, and whilst NCCP compliance hasn’t helped, it’s not the hindrance the so-called experts have made it out to be. “These days, volumes are up 25% over last year and the only thing that’s added to our cost base is about 2% due to NCCP compliance,” he said.
THE DEATH KNELL
The news that lender Banskia Securities Limited had gone into administration sent shockwaves through the finance world, dividing brokers. SDS on 26 Oct I just hope that fear does not now provoke the public to cause a run on LaTrobe and other mortgage trust operators. Some of those are only now returning capital after shutting down during the GFC. Pfft on 27 Oct These guys wrote too many dodgy low-doc loans. Their loan book is over 10% 90days plus in arrears. You only get a book like that when you prey on borrowers that cannot afford their loans. Good bye. What do you think? Leave your comments at brokernews.com.au
ONE YEAR ON brokernews.com.au
ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the news that made headlines 12 months ago Australian Broker Issue 8.22
Be professional, but stay ‘rebels’: MFAA Brokers were urged to balance increased professionalism with remaining market disrupters and ‘rebels’. The MFAA’s Phil Naylor said brokers needed to maintain their position in the consumer mind as industry iconoclasts. “They’ve come in as rebels and created a service… do they continue with that sharpness and entrepreneurialism, or do they consolidate into some sort of institution?”
What’s happened since? Market forces are conspiring against brokers being able to remain competitive while taking a ‘rebel’ role. Instead, brokers are closely partnering with larger institutions, which although often providing better service, pricing and security to their customers, is consolidating their former proposition of choice.
One Big Switch refutes failure claims One of the mortgage broking industry’s favourite targets was forced to defend claims of failure, after press reports that only 1,000 of 40,000 borrowers had seen any results from their involvement in its campaign. The group’s co-founder glibly said not to believe anything you read in the financial press, claiming double that amount – or 2,000 – were in hope of an outcome.
What’s happened since? One Big Switch continues to feel the heat, with 1300HomeLoans’ managing director John Kolenda recently launching a scathing attack on the group’s ‘Truth in Banking’ campaign, which Kolenda labelled “futile and misleading”, saying it took spin to a whole new level when not taking into account increased funding costs.
Broker productivity a concern: Aussie The mortgage broking industry was warned that brokers would need to become more productive if they were to see sustainable returns. Aussie’s chief financial officer John McDonald said that brokers in the Aussie group had increased their quality of application, but that he was worried about not seeing enough productivity gain to offset reductions in commissions.
What’s happened since? One only need glance at the cover of this issue to see that productivity remains a concern. As identified by CBA’s Kathy Cummings, brokers are often their own worst enemies by creating successive instances of rework that could be avoided by getting their customer expectations and loan submission processes finetuned.
3 GAME-CHANGING IDEAS Some brokers struggle for that game-changing idea that transforms their business, but BrokerProfitsVault’s James Veigli has three big ones
ame-changers for you are different to the broker next door, or the one across the other side of the country. They could be game-changing new ideas, new strategies or examples to learn from, gamemotivation and inspiration, and let’s not forget marketing to send a flood of customers your way. Let’s take a brief look at a few game-changing thoughts – and it’s your task to identify the BIG ones for you, and act upon them.
PRINT OVER SOCIAL MEDIA
Forget social media… at least in the short term, and consider this instead. Who has all the money at the moment? Basic short answer: Baby-Boomers. Now it makes sense to attract customers who have money, compared with customers who have lots of Facebook friends or Twitter followers! Wouldn’t you agree? And where do Baby Boomers (those with money) hang out? What do they read? It’s true that many are tech-savvy and carry smartphones and tablets around, but this demographic, the demographic with money, are still reading books, newspapers, magazines and attending live seminars. Most importantly, they still value face-to-face and professional help (and they are happy to pay for it, too). So if you want to ‘go where the money is’, you should strongly consider good old (proven) print advertising, flyers, letters, seminars and other live face-toface interactions. Because cold hard cash in the bank surely beats a bunch of online ‘friends’. (Note: I’m for social media, it does have its place and will continue to become more important, but don’t let it blind you from other opportunities).
There are two main ways I look at communicating (emails, print, marketing, speaking, etc): the
first is how we learn from the education system (school, university, etc), the second is the ‘Dumbo’ way. In terms of effective (engaging, entertaining, profitable) communication with your audience as a business owner, what you have learnt in school, university or business school is wrong – and in fact will actually hinder your progress. The problem is we are all taught to communicate in a report-writing, essay-writing, proper corporate, professional style. This may be fine for old-school English teachers, novelists and fuzzyhaired academics… but it’s got no place in small business. Why? Because nobody these days speaks like that and they don’t relate or engage with this style of communication. It’s boring. The ‘Dumbo’ communication method is simple, will help you build instant rapport with your audience and although you might initially think it’s unprofessional, it will make your customers love you and you’ll make more money. So how can you learn to use this method effectively? Practise. The concept behind this is to simply communicate like you are speaking with your best friend. If you use common language, slang, and “write like you talk” prose,
“It makes sense to attract customers who have money, compared with customers who have lots of Facebook friends or Twitter followers.” - James Veigli
your audience will feel more connected and comfortable with you, as if you are their best friend – and NOT a faceless corporate institution. Would you rather sit down and read a normal, corporate-style letter from your phone company or bank – or a letter from your best friend? There is an art to writing-likeyou-speak, so if you struggle in the beginning, here’s a tip: if you have a letter or email to write, first record yourself saying what you want to say in the letter or email – again like it was to be sent to your best friend. Then simply play back the recording and transcribe your words. You’ll need to edit slightly, but the result will be a more friendly, fun and relaxed communication that will more effectively engage with your customer or audience as a whole.
GAME-CHANGER 3: BUYING CUSTOMERS
Here’s a question: If I told you that for every $100 you gave me, I would return you a client that would (on average) be worth $1,000 to you… how many clients (leads) would you buy from me? Silly question right? You’d buy all of them all-day, every day. That’s a 10-fold return on your investment! Funny thing is most brokers forget about the concept of buying customers. Sure, referrals from professionals and clients are great (and usually free), but it’s not the only way to acquire customers. So how can you buy customers? You can buy trail books, businesses, databases of potential customers. You can use loss-leading strategies to buy customers now that will turn you a profit over the life of that customer. Buying customers can be a smart and fast way to build your business – but you do need the right tools to make it work successfully, so unless you know what you’re doing (or have my help), proceed with caution.
HINTS AND TIPS Social media is all well and good, but you’d be best to market in a form that reaches those clients who are most important to your business: those with money Communicating with clients as if they were a friend is the most engaging for them, so don’t turn them off by ‘professionalising’ your communication too much Access to customers could be a fantastic investment over the life of the client, so consider buying them in addition to referrals if you are serious about more business
James Veigli is the founder of BrokerProfitsVault. com.au; dedicated to helping brokers make more money with less effort
Happiness can unlock your potential Successful mortgage broker Stuart Wemyss from ProSolution Private Clients tells brokers how to get happy fast and improve their loan volumes at the same time
few weeks ago I had the pleasure of listening to Shawn Achor speak at a conference in Istanbul, Turkey. Shawn is a Harvard-trained researcher and an expert in happiness and human potential. Let me share with you some of my notes from Shawn’s presentation: • Most people are not average – average is just a statistical measure – it’s not relevant. If you study the average you miss out on learning. Best to study the above average. • It’s not reality that changes us, it’s the lens that we view the world through that changes us. What you focus on is your reality. Learn how to control your mind and focus, then you can only focus on the positive. • School grades do not predict success. In fact, studies suggest that a roll of dice is 2% more likely to predict success. • If we know a child’s IQ we can only predict one-third of success – so intelligence has little to do with it. • There are three things that determine success/happiness:
4. Meditation: Start with one minute of meditation and do more gradually. 5. Conscious act of kindness: Do something nice for someone such as sending someone an email of appreciation (because it creates social connection). Do one of these for three minutes a day for 21 days: that is required to rewire your brain.
1) Optimism – belief that behaviour matters and you can alter the outcome; 2) Strong social connection; 3) View stress as a good challenge – not a negative thing. • Be careful because negative patterns train your brain. Eg, if you always look for mistakes at work you’ll look for mistakes in personal life. • Happiness is a choice. What you attend to first is your reality. • Happiness spreads. The best way to change someone is to change yourself. • Happiness is a work ethic – it takes effort.
MAKING YOURSELF HAPPY
Shawn offered a few exercises that you can do daily – start by doing one of them only: 1. Three gratitudes: Each morning write down and say out loud three things you are grateful for. 2. The doubler: Think about one meaningful experience and write it down and think about it and visualise it. 3. The fun fifteen: Fifteen minutes of exercise.
A HAPPY BRAIN IS 37% BETTER AT SALES THAN A NATURAL OR NEGATIVE ONE
The problem is we think we might be happy when we achieve a certain volume in our businesses – $3m, $5m, $10m… whatever. So you work harder and harder to get to that volume so that you’ll be happy. Once you are there, you’ll move the happiness goal post up. Problem is – it doesn’t work. So you’re never really happy. Get happy first and that is what’s likely to get you more volume. A happy brain is 37% better at sales than a natural or negative one. Get happy first and success will follow. Stuart Wemyss owns finance business ProSolution Private Clients. He recently called for brokers to unite in taking more market share from the banks; visit brokerrevolution.com
A boutique battleground Brokers who are unhappy with their current aggregator should be looking at their options, and bigger isn’t always better. Australian Broker speaks to three boutiques to find out if they believe they can survive the competition and also what sets them apart
WE ARE ALL ABOUT SHOWING BROKERS HOW TO INTEGRATE NEW REVENUE STREAMS INTO THEIR BUSINESS
THE NBN IS A BIT LIKE WHEN ELECTRICITY WAS FIRST ROLLED OUT IN THE WAY IT WILL CHANGE THE WAY WE DO BUSINESS SIMON DEHNE CEO, LOANKIT
FRANK PARATORE CEO, BALLAST
Heading up an aggregator born out of providing brokers with uncomplicated software, it is not surprising that LoanKit CEO Simon Dehne feels the future lies in new technology. “We are all about trying to find ways the broker can be more efficient and productive using our software,” Dehne tells Australian Broker. How? Dehne says the aggregator is implementing improvements that allow customers to complete more information upfront, cutting down on the legwork required of a broker. “For example, brokers can now send a link to customers enquiring about a loan, and get them to fill out an application form online that is populated into their software automatically.” But this is not the only change. The group’s cloud-based system now allows brokers to do Skype calls and record them directly into LoanKit software. In addition, LoanKit has seen a sharp rise in the popularity of a secure online forum that allows brokers to connect with each other and lenders to solve scenario queries. In essence, Dehne says the aggregator aims to improve productivity and efficiency by
Talk to Frank Paratore of Ballast, and he will convince you in no time at all that the future of mortgage broking lies in diversification – a path his aggregator has firmly embraced. However, it is not just the provision of extra financial services that Ballast is aiming for, it is the integration of these services among members to assist their business growth. “People have heard the buzzword ‘diversification’, but are asking how do we integrate that into our business, how do we work with our partners and integrate new services?” Paratore says the days of an aggregator as a commission processing centre are over. “We are more about working with members to create structures that support growth, and working with them to integrate them into their businesses.” Ballast has signed a number of deals that have expanded its services over the past year. Paratore says the group will soon add to this, with plans to cement a legal arm in 2013, and the launch of a fully-fledged mortgage management proposition by year end. “From a growth perspective it’s been a massive year for us,
development of its aggregation software – though the best is yet to come. The team at LoanKit are currently busily positioning it for the advent of the National Broadband Network, which will provide nationwide access to broadband within 10 years. “The NBN is a bit like when electricity was first rolled out in the way it will change the way we do business,” Dehne says. He imagines a day when brokers will routinely supplement face-to-face client visits with video conferencing to reduce the amount of time taken to turnaround applications. The NBN could even spawn a business model that will see brokers housed in one location, with video conferencing facilities that allow them to do loans all over Australia. LoanKit has been perennially popular because of the simplicity of its software. In fact, although the group now has 275 active brokers, a further 80 just use its software platform. In doing so, they are able to expand their panels to include lenders such as Credit Union Australia and Newcastle Permanent. “Next up will be revamping the look and feel of LoanKit and streamlining even more,” he says.
but they are all services related to what our members want.” Paratore argues that some of the industry’s larger aggregators have been slow on the uptake when it comes to diversification, often because their size makes it such a difficult undertaking. Ballast has its own proprietary leads management software for its strategic alliance business, allowing it to track and manage lead conversions across its different businesses. It also continues to engage the services of an independent commission payments system, a decision it took when members originally requested it not house any of their databases. Paratore expects that the aggregator will be doing more to help its brokers with social media, as well as assisting with a fee-for-service transition if required. “We are all about showing brokers how to integrate new revenue streams into their business, rather than simply discounting a fee. We don’t want to enter a price war. “We value our service to members, and are happy for the competition; we will continue to stand on what we deliver to members that positions them for future growth,” Paratore says.
CLEARLY SOME BROKERS ARE DISENCHANTED WITH THEIR AGGREGATOR JOHN KOLENDA MANAGING DIRECTOR, FINSURE It may be tough to start an aggregator in the current consolidated mortgage broking market, but that hasn’t stopped Finsure’s John Kolenda from trying – and succeeding. With almost 129 brokers having come onboard in less than a year and with just under 20 staff within the business, Finsure is making a strong play for broker business. Kolenda’s initial pitch to brokers was a model that allowed a flexible fee model depending on where they were in the lifecycle of their business. It also backed this up with a high level of in-house support to assist new brokers. “Clearly, some brokers are disenchanted with their aggregator, and are motivated to make a move to someone they can move forwards with,” Kolenda says. Boutique aggregators are not finished, according to Kolenda, despite shrinking margins. “There is a lot being said about that by the bigger boys because of self-interest, but clearly there are a number of boutiques that have carved out opportunities for themselves. Some brokers are actually quite satisfied with what they are delivering,” he says. Kolenda has prioritised generating leads for brokers with
his new 1300HomeLoan business, as well as positioning for future online growth. In fact, he has spent “millions” on cornering some key domain names which he believes will ensure Finsure’s dominance of online leads. Along these lines, Kolenda has built significant in-house capabilities that help its brokers with building websites, and ensuring they are optimised to generate traffic and source leads. The next step – and one not too far away – will be a large diversification push, he says. “At a strategic level, we will move into a much bigger, broader offering. Setting aside, we will be a big player in the broking space, and we are also looking to the financial planning space.” Kolenda says this will require the group to provide a compelling proposition for both channels, to give them a reason to partner via Finsure rather than their own relationships. “Fundamentally, the broking landscape is now maturing to a level where brokers are running very, very good businesses,” he says. “It is an aggregator’s responsibility to understand where they are in that lifecycle, and then broaden the offering to those brokers,” he says.
TOP 10 REASONS TO SWITCH AGGREGATORS 1 2 3 4 5 6 7 8 9 10
Accuracy of commission payments Transparency of commission payments Speed of commission payments IT and broker systems Quality of lending panel Licensing support Quality of BDMs Back-office support Training and education Marketing support
TOP 5 BARRIERS TO SWITCHING 1 2 3 4 5
Data migration / IT issues Clawback / trail issues Licensing issues Upfront commission issues Contractual obligations
Source: MPA Broker on Aggregators Survey
BROKERAGE OVERHAULS WAGE STRUCTURE
From financial guru to fraudster
his investment guru aimed to offer financial liberation and security to the masses, but has now been convicted on 75 fraud charges. Jacqueline Bradley, the New Zealander who penned investment book The Winning Women, has been found guilty of defrauding NZ$15.5m (AU$12.28m) from 28 financial advice clients. According to a report in the New Zealand Herald, Bradley – along with her late husband and business partner Michael – told clients of her now collapsed B’On Financial Services Ltd business that their money was being safely invested in funds with dependable institutions including Macquarie Bank. However, neither Bradley nor her husband, who died of a heart attack last year, were registered financial advisors – and the prosecution case claimed that a large portion of client money ended up going towards the Bradleys’ own lavish expenses. The Bradleys also used client money to pay off earlier investors claimed the prosecution, leading Judge Christopher Field to state that “you and your late husband were running a Ponzi scheme over a period of about seven years.” One client lost as much as $3.3m, it was claimed. Another, who died before the trial but was able to give evidence in advance via video, claimed to have handed over a $150,000 life insurance payment to the Bradleys. Bradley was sentenced by Judge Field to seven years and five months in jail.
ONLINE ADVICE A THREAT TO BROKERS? In a further blow to the traditional broker model, an online insurance comparison site is now offering what it terms as “free professional advice” from “highly qualified advisers.” Cover Australia’s free professional advice comes with a Platinum Partner Program geared towards “making it easier for individuals to assess different types of insurance policies.” “We have highly qualified advisers and our principals are
two of the most experienced and highly regarded advisers in Australia,” said a Cover Australia spokesperson. “The amount and type of cover should not be selected at random. This is a very important decision and we strongly suggest that you talk to one of our advisers. There is no charge for this service.” Cover Australia claims it differentiates itself by “offering real time advice by actual professionals and not merely software.”
One of Australia’s biggest insurance brokerages has launched a broker incentive program to reward and retain high performers and attract new staff – something mortgage brokerages could take onboard. OAMPS Insurance Brokers has launched its MyBook program which the firm claims is designed around the simple proposition that allows OAMPS brokers who consistently grow their portfolio to share in its success. Brokers can earn up to 10% of the value of their book over any five-year period in addition to their usual salary and bonuses, simply by growing their book by 10% each year and meeting a small number of additional criteria. OAMPS wants to have all of its brokers participate in MyBook over time and a support program is being rolled out consisting of new tools, improved information at a portfolio level and targeted coaching support to help brokers achieve and then maintain MyBook eligibility. “At Wesfarmers Insurance, we are passionate about building a high performance team that delivers outstanding client experiences,” said Rob Scott, managing director of Wesfarmers Insurance, which owns OAMPS. “Therefore, rewarding our best performers is key to achieving this.”
Enjoyable, but not well-paid, say finance workers There are major downsides to the regular salary model, which is something commission-based brokers avoid. More than two-thirds of employees in the banking and finance industry believe they deserve a pay rise, although a staggering 90% enjoy the job nonetheless. These are the findings of the Upskilled Employment Report 2012, which also found 34% of Aussies in banking and finance followed their dreams and went into the role they had wanted since childhood. The ultimate career goal of 37% of people in the industry is to be happy in their jobs, followed by earning enough money to stop working (27%). Forty-eight per cent of workers in the banking and finance industry have undertaken training and have reaped the rewards from doing so. When all industry respondents were taken into account, only 30% believed they deserved a pay rise, but just 11% felt that they were paid appropriately for the work that they did.
NCCP changes divide brokers Are small businesses missing out on vital protection from the NCCP? Two leading figures argue for and against proposed changes to rectify this gap
he mortgage broking community is divided over calls for the expansion of the National Credit Code to protect small business. Ken Sayer of Mortgage House told Australian Broker TV the NCCP should be extended as mum and dad businesses are being increasingly caught out by bank-led property re-evaluations. “Even if their business is going to plan, they can’t find $500,000 or $1m with little notice, so what I’m trying to say is they should be made aware. And if they are not, they should be allowed some flexibility given that set of circumstances,” he says. “We would hope that properties appreciate in value. What most people don’t bank on is a depreciating value, and the consequences thereof.” However, Ranjit Thambyrajah of Acuity Funding says the proposed regulatory changes would hinder business, and create more red tape for brokers. “The NCCP is good for what it’s there for, which is to look after consumers, to look after people who aren’t fully aware of lending and lending policies and what that could mean for them and their future borrowings,” he says. “Small businesses, or small to medium-sized businesses are very different. They’re more sophisticated, they know what they’re doing. In fact, quite often they actually don’t want any intervention by government, they want to be allowed to make their own minds up and do what they want, and are prepared to wear the risks of that. “It’s a risk on return relationship, and they do not want to be hampered.” Thambyrajah argues banks are already contacting their business-owner clients ahead of any problems. “In every instance, it’s not the first phone call from the bank manager that clients are complaining about. “The banks have been very good with their client base, they’ve given them plenty of notice, usually they have a
KEN SAYER, MORTGAGE HOUSE
RANJIT THAMBYRAJAH, ACUITY FUNDING
relationship with the client, and they’ve actually explained why the problem is there. They’ve given them plenty of time to fix it up,” he says. Sayer, however, remains adamant the potentially devastating nature of a reevaluation is what’s at stake. “These guys are losing half their working life in a single blow, so I have a problem with that, and we should work much closer to small and medium-sized businesses,” he argues. “It’s the same as every enhancement: we all resist upfront, but it actually turns out better for the industry in the long run.” But what about the cost to brokers, in terms of extra training and awareness of new NCCP policies? Thambyrajah is sceptical. “For a broker to be properly equipped to work in an environment where NCCP covers some commercial-type transactions, it will take a lot more training, and a lot more experience, so that will make it very difficult,” he warns.
MARKET TALK 26
Mind the gap There are contradictory messages about the property market’s future, but one thing is becoming increasingly clear: the gap between confidence and actual sales is widening
omething strange is developing in the Australian property market: there’s an increasingly large gap between confidence levels and demand for mortgages. Last month, mortgage insurer Genworth said confidence levels had reached a “post-GFC high.” “[Our Index] is showing that homebuyers are far more positive than much of the current public debate centred on the economy,” said CEO Ellie Comerford. In fact, Genworth found nearly half of those surveyed believed now is a good time to buy a property.
A REALITY CHECK
News earlier this month from analyst Veda Advantage put a dampener on things. “We have now seen three quarters of relatively flat mortgage enquiries after two years of decline,” said Angus Luffman, Veda Advantage general manager of consumer risk. “The latest data suggests that lower interest rates are not having an effect on demand for consumer credit. In the current environment, the short-term outlook for consumer spending and credit growth is modest. “As households face increased expenditure, and uncertainty around wage growth and levels of unemployment, they will continue to be cautious, save and
THE RATE CUT FACTOR
LOWER INTEREST RATES ARE NOT HAVING AN EFFECT ON DEMAND FOR CONSUMER CREDIT -ANGUS LUFFMAN
pay down debt. This trend is likely to continue given the federal government’s pull-back on welfare benefits such as the baby bonus and health insurance rebates,” he said.
ALL TALK, NO WALK
What both Genworth and Veda are highlighting is that would-be property owners just aren’t walking the walk. It’s something the mortgage broking world is seeing more and more of. “People are not confident about the state of the local economy, their personal situation or their job security, so they will be unlikely to acquire or upgrade their property and take on the associated financial obligations,” says RP Data’s head of corporate affairs, Craig Mackenzie. “First homebuyers are a critical part of the confidence equation – if people feel confident to enter the market for the first time, this will have a flow-on effect in terms of existing property buyers’ upgrading.”
CHANGES IN MORTGAGE DEMAND STATE
2011 vs 2012
Source: Veda Advantage
Sam White, CEO of Loan Market is firmly in the optimistic camp, claiming the brokerage is seeing more positivity from clients. “Recently with interest rate reductions we have seen consumer confidence improve. This is backed by previous trends that have seen price increases following interest rate reductions,” he says. However, broker Justin Doobov sees the current rate cut war as having a detrimental effect on clients – namely, confusing them. “Interest rates have been moving a lot more regularly than previously, so it is now harder for consumers to do their own research as the data is normally out of date the following week, as each lender tweaks their offering,” he says.
Regardless, everyone agrees confidence levels play a critical role in getting these buyers over the line, and the trick may lie in appealing to lifestyle. “This decision is sometimes driven by lifestyle factors, such as the home being too small or too big for a family,” says White. “But in most cases, it is driven by the homeowner’s belief that the family will be better off in a new property – that the new property will appreciate faster and provide a better lifestyle.”
Q WHY DO CONFIDENCE LEVELS HAVE SUCH AN INFLUENCE ON THE PROPERTY MARKET?
PHIL NAYLOR MFAA
“Confidence plays out in a number of ways: the economy (will I have a job?); the market (what will prices do?); the government (will there be certainty?); interest rates (rise, fall or be stable?).”
MARK WOOLNOUGH ING DIRECT
“When people feel secure in their employment, feel confident interest rates will remain steady and expect property prices to rise, they feel it’s the right time to spend money on property.”
CRAIG MACKENZIE RP DATA
“First homebuyers are critical to the confidence equation – if people feel confident to enter the market for the first time, this will have a flow-on effect on existing property buyers upgrading.”
SAM WHITE LOAN MARKET
“Consumer confidence is a critical factor when individuals are considering trading properties. Recently with interest rate reductions, we have seen consumer confidence improve.”
MARKET TALK 27
ways to find your clients secret sales
Buyer’s agent Chris Gray reveals his tried and tested insider secrets to finding and securing a property for your clients before it goes to market
y property investing strategy has been to target median priced properties in very high capital growth suburbs, which are often found 5–15km from major cities. The downside is there are very few on the market and because there is such a great demand for them, they often don’t go cheap. For this reason, I spend most of my property-investing time trying to find ‘silent sales’: unlisted properties or property transactions that the general public don’t get to see. Here’s how you can get clever and access these secret property sales.
1) BECOME BETTER FRIENDS WITH YOUR LOCAL REAL ESTATE AGENT The key contact between sellers and buyers, agents are the first to know when a property is for sale, yet so many people are shy about handing over their mobile number at inspections. How are you ever going to know about deals or changes in a vendor’s expectations unless you make contact with the agent? Make sure they know you are pre-approved for finance, are serious about buying and can make a quick decision followed by a signed, unconditional contract.
2) LETTERBOX DROPS
Do what the agents do and letterbox drop in the areas you want to buy. If you are a serious buyer, the vendor can save time and money by going directly to
WHY ARE THERE SILENT SALES? • Some vendors do not like agents and think they are overpaid for doing very little. Why pay someone else when they could do it themselves? • Some vendors do not want to spend any money on marketing and sprucing up the property, so agents often say to them they can ‘test market’ it first • Some vendors need to sell quickly and have not got time for a full four- to six-week selling campaign. They ask their agent to find them a quick buyer. • Some vendors do not like the thought of an auction and the pressure that comes along with it. What if no one turns up or bids? What will they do then?
you. It takes more personal effort and will cost you some money, but spending a few hundred or thousands could get a great property at a great price.
3) GET ORGANISED
Make sure you are ready when the right deal comes along. Get pre-approved for finance and have your valuer, building inspector and strata inspector all in place so they can check you are buying the right property at the right price. As a professional investor and buyer’s agent, the number of people I see that have deals staring at them in the face but cannot recognise them is unbelievable. The more organised
you are, the more likely that the decision will become easier.
4) TELL FRIENDS, FAMILY AND COLLEAGUES YOU WANT TO BUY
Often, those close to you will know of someone else looking to sell, so spread the word. People love talking about property, so if you mention you are looking every time you talk to someone, it won’t be long before you make the right connection.
5) PAY A PROFESSIONAL
If you buy property once every few years and a buyer’s agent does it every day and has all the industry contacts, who will buy better? Sometimes you’ve got to spend a dollar to make two.
SYDNEY, PERTH TO LEAD 2013 PROPERTY GROWTH PRDnationwide has predicted a number of property markets will see growth through the year 2013. In its latest quarterly economic update, the real estate agency said it expected Sydney’s market to lead the pack. “We expect the tight market in Sydney to continue its upswing through 2013,” the update said. “It is reasonable to expect Sydney to experience steady, but modest growth of around 5%.” Meanwhile, Perth is also expected to perform stronger in 2013 on the back of continued mining investment. “A combination of mining investment and low interest rates will help shift this market off the bottom of its property cycle,” the report said. “A conservative estimate of price growth during 2013 would see Perth increase in value by 2%, but such is the swing with this resource affected region that greater market sentiment could give rise to 6% growth.” Meanwhile, Brisbane is expected to be “temporarily suppressed” by rising unemployment, and Melbourne will remain in a “period of consolidation”. PRDnationwide expects that Adelaide will remain fairly consistent with only marginal increases in 2013.
Q&A: The show goes on Broker Kiran Saldanha’s journey from a prizewinning child singer in India to setting up BPAY and migrating to Australia in 2003 is an inspiring story. He tells Australian Broker how those early years on stage helped him in building his business
HOW DID YOU BECOME A CHILDHOOD STAR?
In 1995–96, with the boom of cable TV in India, a new TV channel BiTV ran a contest called Shooting Stars along the lines of X Factor and Australia’s Got Talent. It was 32 rounds of serious competition. There were many talented Indian vocalists. It was a great experience and I was amazed when I won the contest and loads of prizes. It was not the first time I had competed on stage, but the first time it was on TV.
WERE THERE DOWNSIDES TO THE SUDDEN FAME?
I had to compete against my younger sister in the semi-finals and sang her song in the final.
WHAT DID YOUR PARENTS THINK?
From a young age, dad and mum showed us how to share the talents we had and enjoy ourselves without the need to drink, smoke etc.
WHY TRADE IT ALL IN AND MOVE TO AUSTRALIA?
Family and better prospects were the two most important reasons for migrating to Australia [in June 2003]. I applied for migration following a three-year contract as Senior Trade Promotion Adviser with the British High Commission. In
the few years they took to process my migration, I set up and launched BPAY in India as part of a team with India’s largest financial institution.
HOW HAS YOUR SINGING PAST SHAPED YOU AS A BROKER?
Being a broker in today’s environment is very challenging, on top of that with being an Indian and having migrated to this country in 2003. I owe my resilience and confidence to those early years on stage. As a financial strategist to my clients, I love the ability to help ordinary people realise their goals and plans. This would not have been possible without firstly being a mortgage broker and then understanding the opportunities and matching the benefits to the needs of my clients and their families.
DOES SINGING HELP YOU BE A BETTER BROKER?
As a choir member of Celebrate II, I constantly have to learn new songs, work with other voices and practise while being aware that I am only helping others to pray. It is so similar to being a broker – I help my clients by constantly updating my knowledge, working with lenders and including new products in order to help them realise their goals and dreams.
KIRAN SALDANHA, THE FINANCE PROFESSIONALS
SHOULD OTHER BROKERS FOLLOW SUIT?
Having a life outside work is a must to keep sane in just about any profession these days. Unlike most other jobs or professions, a mortgage broker is like being a doctor – you never close shop and are on 24/7.
My extra-curricular activities allow me to interact with many people on different levels. Some people know me as the guy who sings and reads at church, others as the MC at their wedding, while others know me as the soccer coach or the guy working in the school canteen. It is who we are that matters and it means a lot to clients who have been through three home finance managers for a single loan transaction.
AFG promotes management talent A major aggregator has reshuffled its NSW/ACT management and appointed a new head of national distribution within its lending business. Australian Finance Group has announced that former NSW/ ACT state manager, Chris Slater, has been promoted to a head of distribution role within its AFG Home Loans business. Replacing him in the NSW/ ACT state management role is
Stephen Doyle, who joined AFG from rival FAST in November 2010 and has since worked as a BDM in AFG’s Sydney office. Slater, who starts in the new distribution role in February next year reporting to general manager Paul O’Donnell, said the role has only recently been created. “Paul and his team have grown the business extremely strongly since the GFC and the role has
been created to capitalise on that growth and expand the offering across our network,” he said. Slater added that Doyle’s appointment was “pleasing” and a great reward for him. “Steve has proven to be a great asset to AFG in the last two years. He worked for AFG in NSW and I know he will work closely with our brokers to strengthen the business in NSW,” Slater said.
CAUGHT ON CAMERA 29
ow Financial selected Thai resort capital Phuket as the destination for its national conference this year, and brokers did not regret the decision. With lantern ceremonies and elephant rides slotting in around informative conference sessions and networking events, Vow’s brokers were once again motivated to reach for the broking ‘pinnacle’.
1. 2. 3.
5. 6. 1 2
Mike Nicholson, Jack Czechowski, Greg Cave, Jeff Wong, Hector Garcia
Mario Rehayem (Pepper), Scott Smith (Resimac), Jason Mikhail, Vase Marcevska (Pepper), Daniel Said, Stuart Bell
Hector Garcia, David Hodgkinson, Gary Fowler, John Buchelin (Allianz)
Jack Tarchichi, Daniel Said, Sirivat the ‘Sandwich Guy’, Jason Mikhail, Rodny Ghalie
5 6 7 8
Sirivat the ‘Sandwich Guy’, Vow’s conference presenter Vow Financial in conference Vow Financial’s welcome reception
Aaron Milburn (Citibank), Hayley Grant, Mick O’Shea (Bankwest), Sarah Wells
Peter Bryant (Vow) and Caro McAllister Macquarie Bank’s Andrew Parry, Dino Pesce, Alex Di Toro
View more photos from this event at brokernews.com.au/industry-events
Broking Hot: The winner!
nsider is pleased to announce that Queensland broker Rebekah Gould is the winner of Australian Broker’s Broking Hot competition. It was fierce: brokers certainly know how to dedicate themselves equally to both mortgages and weights. Gould’s fabulous abs, sculpted arms and refreshingly honest attitude to keeping fit won us over. Not to mention her love of a good steak. “I’m a meat-atarian,” she tells Australian Broker. “I don’t want to set up an illusion that I’m the perfect nutritionist. I’m definitely not perfect at it; I don’t weigh things out, count calories or anything like that. “I love a good red, good food, good company and the cosy feeling they all create and I don’t want to ever give that up, so balance is the secret I guess,” she says. A gym with a good, relaxed vibe is crucial for Gould – you won’t find her pumping iron at a trendy inner-city joint. “I chose a gym that has
friendly, fun people and that plays good music and is close to my home. “I crawled the Gold Coast for a Zumba class that had a dance instructor choreograph the routines and used modern, high energy music. You know you’ve done things right when you finish your training session and feel high – must be the endorphins. And having a training buddy definitely helps,” she says. Keeping fit boosts her productivity in the office, she says. “It not only keeps my mind focused but it helps me think positively, and I have lots of energy, enthusiasm and a general feeling of happiness.” In between the occasional piece of chocolate, red wine and kangaroo steak – a “favourite” – this gym bunny has a modest goal: to keep loving it. “Everything is all about how people and things make me feel,” she says.
It’s not you… Desk-bound brokers looking for a work/life balance, is this the worst letter you could receive from your boss after being sacked? Howard A Tullman, president and CEO of Tribeca Flashpoint Media Arts Academy in the US, revealed in a recent article for Inc magazine how sane, rational and level-headed people were a hindrance to his business and should be fired. He confessed to writing this letter to a sacked employee as a means of offering comfort. Insider’s not so sure…
[on] a very fast “Our company is nch of workaholic track, run by a bue all believe perfectionists. W it takes to win that that’s what erce odds. And against pretty fi t the right place this is simply no pecially people for ever yone – es a family, outside who want to have rmal life. I think interests and a no you’re simply it’s very likely thatwell-adjusted to too nice and too ies around here work with the craz e on us – not you. am sh ’s at th d an ings are. We But it’s the way thst.” wish you all the be
POOR FORM You couldn’t make this up: Rich Dad Poor Dad author and financial self-help guru, Robert Kiyosaki, has filed for bankruptcy after failing to pay the very company that propped him up. According to The New York Post, Kiyosaki owed The Learning Annex a substantial sum after it hosted and promoted his speaking engagements. He was taken to court where a jury forced him to hand over US$24m to Learning Annex’s chairman Bill Zanker. “I took Kiyosaki’s brand and made it bigger... We put his ‘Rich Dad’ brand on a stage. We truly prepared him for great fame and riches. But when it was time for him to pay up, he said ‘no’,” Zanker told The New York Post. “I won even more money than I asked for from the jury, then he declared corporate bankruptcy. Oprah believed in him, and Will Smith believed in him, but he didn’t keep his promise to us.” Turns out having celebrity fans won’t pay the bills after all.
BEWARE, TIMEWASTERS! Next time you find yourself losing focus at work because you’re fitting in a sneaky Facebook update on your smartphone, think seriously about the implications on your productivity. Management guru Cyril Peupion of Primary Asset Consulting Education believes “serial worktexters” waste two hours a day finding out who shagged who on the weekend. “People who think they can effectively multi-task by writing a report whilst also responding to emails and chatting on Facebook are fooling themselves. Interruptions and distractions pull us from a state of high productivity, and greatly reduce our performance,” says Peupion. He helpfully offers some words of wisdom to quell distracted behaviour. “There are times when you should simply not allow any interruptions unless the building is on fire,” he says.
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AGGREGATOR / WHOLESALE BROKER Ballast Finance 1300 270 942 www.ballast.com.au Page: 7
Choice Aggregation Services 1300 135 389 www.choiceaggregationservices. com.au Pages 5 & 23 LoanKit 1800 466 085 www.loankit.com.au Page 19
Liberty Financial 13 23 88 www.liberty.com.au Page 3 ME Bank 03 9708 3994 www.mebank.com.au Page 11 MKM Capital 1300 762 151 www.mkmcapital.com.au Page 10 NCF Financial Services Pty Ltd. 1300 550 707 www.ncf1.com.au Page 6
Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) email@example.com www.semper.com.au Page 21
Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4
ANZ 1800 812 785 www.anz-originator.com.au Page 32 Homeloans Ltd 08 9261 7000 www.homeloans.com.au Page 17
Rent4Keeps 1300 76 30 20 www.rent4keeps.com.au Page 15
Look Property Group - Residential Project Sales & Marketing 03 9827 8288 www.lookpropertygroup.com.au Page 16
Interim Finance 02 9982 2222 www.interimfinance.com.auÂ Page 2 Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1 Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 9
Resimac 1300 764 447 www.resimac.com.au Page 25
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