Australian Broker magazine Issue 9.24

DECEMBER 2012 ISSUE 9.24

$4.95 POST APPROVED PP255003/06906

+INSIDE + NEWS OPTIMISM MEETS PESSIMISM Brokers upbeat, while lenders show fear P4

COMMISSIONS STILL IN CRISIS

Brokers still going out of business P6

+ OPINION

STEPHEN Servicing MOORE sustainability Aggregators are being called on to ensure their member brokers are better supported through lean times

The guillotine might be kinder than EDRs P16

2013: THE OUTLOOK What other brokers and data is telling you about next year P18

+ CAUGHT ON CAMERA FULL STORY PAGE 12

Connective declares Mission: possible P29

NEWS

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WHAT THEY SAID...

NUMBER CRUNCHING

$33,000+

KYM DALTON

“The ‘right’ to complain to an EDR seems firmly embedded in consumers’ collective consciousness as a ‘first response’ ”

The amount Aussie’s 44-member ‘Movember’ team raised for the cancer cause

P16

DID YOU KNOW?

33

%

The percentage of lenders who believe 2013 will mean reductions in credit growth

The percentage of brokers who believe 2013 will mean reductions in credit growth

1 in 2

JAMES HICKEY

“Lenders understand and are supportive of the broker channel because of the proportion of consumers that choose them”

The proportion that credit-related disputes account for of a total 25,298 FOS cases during 2011-2012

86%

P20

HANY PHAM

“Being able to lodge an application instantly and error-free will make clients’ experience much better” P24

$300bn

The amount the Canadian government has invested in mortgage bonds over 5 years

40%

The proportion of Queenslanders ‘very stressed’ about personal debt

CLIFTON WARREN

“Poor prospecting skills is the single biggest cause of failure in this industry” P26

NEWS

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Brokers optimistic, but lenders not so sure ■ A recent Genworth report

shows brokers remain optimistic about the coming year.

The study, Home Grown: Mortgage Industry Perspectives, found two-thirds of those surveyed believe credit growth will pick up in 2013, compared with 12 out of 14 lenders who believe it will contract.

However, brokers were also quick to point out the need for competition between lenders to expand in order to grow their businesses in a low credit growth environment.

They also highlighted the need for lenders to focus on the loan approval process in order to improve loan volumes.

Ellie Comerford, CEO of Genworth, says that while a majority of lenders are experiencing “sluggish” growth, this is likely to lead to new lending techniques and that if expectations that consumers will continue deleveraging in 2013 prove accurate, then the urgency of implementing such techniques and channels can’t be underestimated. “The survey

12 out of 14* The number of lenders in Genworth’s report that believe credit growth will contract

warning to mortgage brokers, aggregators and lenders, outlining exactly what it will be watching during 2013.

ASIC told Australian Broker that the emphasis will be placed on reviewing issues like low-doc lending and credit market advertising. ASIC spokesman Daniel Wright says the industry watchdog plans to: • Review how aggregators and others with large numbers of representatives are monitoring

COPY & FEATURES JOURNALIST Mackenzie McCarty PRODUCTION EDITORS Carolin Wun, Moira Daniels ART & PRODUCTION SENIOR DESIGNER Rebecca Downing DESIGNER Ginni Leonard SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley

ELLIE COMERFORD

highlighted the need for lenders and brokers to use more similar criteria and methods during the credit sign-off process and to work more collaboratively to improve efficiencies, especially around the credit scoring policies.

Doing so could result in quicker and more efficient borrowing processes, ultimately driving credit demand.”

Brokers top ASIC’s 2013 hit list ■ ASIC has given a blow-by-blow

EDITOR Ben Abbott

and supervising the conduct of their authorised representatives, particularly in relation to responsible lending • Review how lenders are managing responsible lending in home lending, again particularly where loans are marketed as low-doc • Review of how industry is complying with national credit code requirements in relation to hardship variations • Monitor advertising across the credit market • Review individual complaints and issues arising in EDR and responding as appropriate

MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Ben Abbott tel: +61 2 8437 4716 ben.abbott@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8437 4731 fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Toronto, New Zealand brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss.

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

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

NEWS

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Discrimination law could increase claims ■ Employment lawyers have warned that drastic

legislative changes to the country’s discrimination laws will have a major impact on brokers and other small business owners.

Joydeep Hor, managing principal at People & Culture Strategies employment law firm, says employers can expect to see a rise in discrimination claims as the new legislation comes into effect.

“I would expect that there will be a significant increase in the number of discrimination, harassment and bullying claims that will be brought, particularly having regard to the shifting burden of proof and also the impact on the recoverability of costs in litigation.”

The new legislation effectively shifts the burden of proof to the employer, which Hor says will add to what he describes as a claims and litigation “minefield.”

“So long as an employee can prove that there was some level of consequence for them and that they fall within one of the grounds protected by discrimination legislation, the onus will be very much on the employer to disprove that any inappropriate conduct was occurring because of the attribute that that person had.”

Hor says that if an employee can prove that they were pregnant, for example, and can also point to the fact that their employment was terminated, the employer will have to prove that the reason for termination was something other than the pregnancy.

“This is a significant change from the current legislation, where the employee would have to actively prove that there was a connection between the attribute and the unlawful conduct.”

The turnaround in this area of the law means it will be harder for employers to justify potentially discriminatory actions. Hor says that while employers will still be required to deal with claims they feel are unjustified by working with the Australian Human Rights Commission, the best way to ensure your business integrity – and avoid paying expensive legal fees – is through prevention.

“The message in this for employers is the need for them to ramp-up their compliance mechanisms.”

EXPECTED OUTCOMES • Increase in number of discrimination, harassment and bullying claims • Onus on employer to disprove, not employee to prove claims

Brokers still strapped after commission hikes ■ An industry consultant

has said that recent upward commission adjustments from some non-banks will not be enough to keep some brokers being pushed to the wall by low volumes.

Several non-bank lenders have raised their broker commission rates in the past month, in the hopes of persuading brokers away from the major banks.

However, Sak’s Consulting principal Steve Paterson said many brokers are struggling in the current low volume market and that it will take an increase in loan applications, not just a hike in their commissions, to keep them in business.

“My understanding is that it’s difficult for brokers to run successful businesses at the current level [of lending volume].

If the current level continues, more brokers will leave the

CLINT HAWTHORNE

industry – it’s just not as simple as upping commission rates.”

AFM’s national head of sales Clint Hawthorne agreed, but said the major banks need to step up and do their part.

“It would be great to see brokers getting more reward for the amount of effort they’re putting in.”

Big banks creating ‘false perception of competition’ ■ Bankmecu’s managing

director, Damien Walsh, is calling on the Australian government to require banks to prominently disclose ownership in all advertising of wholly-owned subsidiary sub-brands.

Walsh said, for instance, customers taking up Bank of Melbourne’s new rates should be made aware that they’re actually banking with Westpac.

A Westpac spokeswoman, however, said such a legislative change is unnecessary. “Bank of Melbourne has brought real competition. In our advertising we clearly state that we are a division of Westpac,” she said.

But Walsh said this isn’t always the case.

“Multi-brand strategies being executed by the major banks are creating a false perception that there is competition because there is no transparency in the marketing of the sub-brands.”

He said the government has already set a precedent for helping consumers make informed decisions, after bringing in legislation requiring financial institutions to publish a comparison rate alongside the offered rate.

In a survey of more than 1,000 Australians conducted by Bankmecu earlier this year, 74% said they would support requiring banks wholly-owned by other banks to disclose their ownership in their advertising.

NEWS

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New ‘refund’ broker learns from Ormond’s mistakes

THE STRANGER SIDE OF NEWS

■ A recently launched ‘refund’

AN UNLIKELY GRINCH

■ The Catholic church has been forced

to clarify statements made by Pope Benedict in a new book, after headlines flashed around the world claiming the Pope had ‘cancelled Christmas’. In the ‘Infancy Narratives – Jesus of Nazareth’, the Pope claimed that there was no evidence of animals being in the stable where Jesus was born and that it could have been a cave, causing the ire of the many who treasure nativity scenes featuring the “ox and ass”.

BROTHELS FACE FISCAL CLIFF

■ Even the world’s oldest profession isn’t safe

from harsh economic times. According to the owner of Nevada’s legendary brothel the ‘Mustang Ranch’, the recession in the US has hit brothel business hard, with many low-end hotel workers in the region having lost their jobs now unable to afford a night’s fun. Even high rollers have less discretionary income, and Mustang Ranch’s new worry is the impending ‘fiscal cliff’.

MOVEMBER FOR GIRLS

■ If you thought that Movember was the

exclusive domain of the male half of the population, well think again. One UK housewife from Staffordshire joined thousands of her countrymen in sprouting facial hair in November. The 36-year-old Siobhain Fletcher reportedly put an excess facial hair problem she has had since being a teenager to use, stopping her usual daily shaving routine alongside her husband to raise awareness for cancer.

50%

The maximum amount of commission Arctic Home Loans will return to customers

model mortgage broker says it offers a similar service, but won’t make the same mistakes as defunct business Refund Home Loans.

Arctic Home Loans is offering to return up to 50% of mortgage brokers’ upfront commissions to home owners to help reduce their financial burden.

Arctic chief executive EuGene Yeap, who aggregates through PLAN Australia, says commissions are usually around 0.5% to 0.7% of the loan amount.

“For many people, getting an injection of funds at this time will provide some welcome relief,” he said.

Yeap says he realises mortgage broking franchise business Refund Home Loans grew quickly under a similar strategy, but had failed because of its funding model. He says Arctic won’t be dealing with the same fate, because the online model will lower costs.

“We know our model works because we have been using it with another one of our businesses, ESN Financial Planning,” he said.

“We have been offering upfront commissions back to consumers in regards to superannuation and insurance for some time. We are not a franchise model and have built Arctic on very sound financial principles.”

Home loan disputes contribute to FOS complaints surge ■ The financial ombudsman

service (FOS) has released its 2011/12 annual review of the disputes lodged against finance professionals, including mortgage brokers and loan providers.

The report shows that, in total, FOS accepted 25,298 disputes, up 24% on last year. Credit issues proved to be by far the most common dispute area with exactly half of all complaints (50%) concerning credit. Of these, 92% related to consumer credit, including home loans.

FOS says it believes the primary driver of this upsurge in credit disputes is a steep rise in the number of complaints lodged by people and small

businesses in financial difficulty, which accounted for 54% of all credit disputes.

“We received 8,659 financial difficulty disputes in 2011/12, up 42% on 2010/11… The continued rise in disputes about financial difficulty suggests a growing number of Australians are struggling financially.”

They also say that there appears to be an increasing awareness of FOS amongst the general public, which may also help to explain the rise.

Most of the financial difficulty disputes, says FOS, related to consumer credit products – particularly home loans, credit cards and personal loans.

Banks were involved in 73% of consumer credit disputes, followed by credit providers (17%) debt collectors (6%) and credit unions and credit reporting agencies (1% each).

NEWS

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ST.GEORGE IN PRE-CHRISTMAS VOLUME PLAY St.George Bank has promised to beat any advertised home loan interest rate offered by the four major bank brands, including its ultimate owner, Westpac.

The offer is available until December 21, with a $1,000 rebate also available for new customers.

In order to take advantage of the offer, which includes rates advertised in print, radio or online, customers must provide a copy of the relevant bank’s advertisement showing the interest rate being offered.

“I encourage people to look around, find the cheapest rate advertised by one of the four major banks then contact us, so we can offer them an even better rate.”

This offer is only available to new customers, or those who have a current Approval in Principal and supply St.George with a Contract of Sale during the campaign period.

SUNCORP LAUNCHES NEW LENDING PACKAGE

Suncorp’s general manager intermediaries Steven Heavey says a new ‘Home Package Plus’ product range will allow customers to combine their home loan with other banking products, like their everyday bank account.

“The new Home Package Plus is a terrific option for customers who

are seeking to bundle their banking in the one simple and convenient location.

“Customers will benefit from interest rate discounts and fee waivers on a variety of banking products, including savings accounts, credit cards and home and contents insurance, all by combining them in one simple package with their home loan.”

Heavey says Home Package Plus covers a diverse range of products, and that it provided greater savings as the number of lending facilities increased.

ASIC NEEDS MORE MONEY: IMF

ASIC needs more funding to ensure that its regulatory efforts are not hampered, according to the International Monetary Fund.

In a review of the Australian financial system which praised the regulator, the IMF said ensuring sufficiency and stability of ASIC core funding should be a high priority. “A significant amount of ASIC’s funding is non-core, earmarked for specific projects and the share of non-core funding has been increased in the last few years… To supervise a large number of licensees, ASIC uses desk-top, rather than on-site, reviews for initial risk-based assessments, reflecting … its resource constraints.”

Because of this, the IMF says it’s “important” that the government give ASIC more money and flexibility over its operational budget.

The government responded by saying the assessment is “fair”,

but hasn’t said whether there are plans to increase ASIC’s budget.

BABY BROKER BOOM

Lenders are starting to focus on the long-term performance potential of newbie brokers.

In their quest for volumes, lenders are increasingly engaging with brokers new to the home finance industry, according to Loan Market’s Queensland state manager Andrew White.

White says the brokerage has seen an increase in lenders engaging with recruits coming through its Queensland Broker Academy. “We have noticed some lender BDMs are bending over backwards to train and coach our academy cadets,” White said.

“With most lender BDMs targeting those that are already stars, some lenders are starting to realise that the stars of tomorrow are worth the investment today.”

White says it’s encouraging to see some lenders looking to the future, and that it’s a boost to the cadets’ confidence.

Andrew White

NEWS 10

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Brokers fight back against bad press ■ The broking industry has

returned fire after journalist Jessica Irvine compared brokers to washing-machine salespeople in the Sunday Telegraph.

Darren Moffatt, owner and director of Seniors First, describes himself as a “big fan” of Irvine’s columns, but says she missed the boat completely in her article ‘Borrowers beware, you must shop around for the best value home loan,’ published in November.

“Her attack on brokers might make for a nice headline,” Moffatt said, “but it’s riddled with factual inaccuracies and omissions. It’s not even a real story – everyone knows brokers are paid commissions and that is how it’s

WHAT YOU SAID

FAST FACT Jessica Irvine recommended borrowers use sites like iSelect and Rate City, so they could source a mortgage from the “comfort of their own home”

Greg Reid on 28 Nov 2012 09:43 AM “You would have to be an ostrich if you thought some brokers did not recommend certain lenders above others based on personal benefits, whether they be commissions, meeting volume targets or even ease of processing, it happens.

However under NCCP rules commissions should be disclosed. What I do not like is that we no longer disclose all lender commissions as I did under the older finance broker agreement.

The aggregator CRM spits out a client disclosure proposal for commissions to be paid but only for that lender.”

DARREN MOFFAT

PHIL NAYLOR

“Brokers are not just commissionearning machines”

“Transparency is a key aspect of how mortgage brokers operate”

(mostly) kept as a free service.”

In the News Ltd article, Irvine warned borrowers to treat brokers like appliance salespeople, saying that the fact brokers are paid commissions makes them an unreliable source of information.

“Mortgage brokers are paid entirely on commission, they don’t get paid unless they sign you up for a loan and those upfront commissions can vary from $2,000 to $4,000 depending on the lender.

We’d like to believe most are honest brokers, but when a broker can double their money by putting you on one loan over another, that creates a conflict of interest.”

Irvine goes on to claim that many brokers are failing to adequately disclose commissions they receive – something which, Moffatt says, is both illegal and unlikely. He says it’s impossible for any authorised credit representative not to disclose exactly how much they’re getting paid, unless they’re deliberately trying to break the law.

The MFAA CEO Phil Naylor reacted by saying the assertion

that brokers don’t act in the best interest of borrowers lacks foundation. “Transparency is a key aspect of how brokers operate and it is unfair to assert that brokers are not providing unbiased and comprehensive information, when it is published material for the borrower in the loan documents they review and sign.”

In her article, Irvine goes on to recommend the usage of sites like iSelect and Rate City to borrowers.

“From the comfort of your own home, you can check out the best deal and then approach a shortlist of lenders to apply for a loan. I know that’s what I’ll do when the time comes.”

But Moffatt says it’s not that simple – these sites also receive income from banks and lenders for introductions to potential borrowers.

“Brokers are not just commission-earning machines,” says Moffatt, who calls Irvine’s washing machine analogy “insulting”.

Hewitt gets direct with complaint to News Ltd ■ AFG’s GM, sales and

operations, Mark Hewitt, issued a formal complaint to News Limited editors, calling articles which questioned the integrity of the mortgage broking industry and published in November an “extreme disappointment”.

Hewitt told News Ltd that he speaks on behalf of “our 1,800 mortgage brokers and the 6,000-plus homebuyers they assist each month,” in expressing what many in the industry perceive to be, at best, an inaccurate depiction of a mortgage broker’s role.

“Your papers gave little credence to the points we raised with the writer when interviewed for the story, or any credit whatsoever for the benefits brokers provide to

consumers,” he wrote.

Hewitt outlines the fact that brokers are overseen by ASIC and that legislation is in place to ensure they provide loans to borrowers that are not unsuitable to the borrowers’ needs. “You didn’t conduct any analysis on the commissions paid by different lenders and the volume of loans they write to prove your assertion that commissions influence where brokers recommend customers place their loan.”

He says AFG suggested that Irvine review their competition index report prior to writing her article, but says it appears she “totally ignored” this suggestion.

Hewitt told News Ltd that brokers play a major role in promoting competition in a country where the banking system

MARK HEWITT

is a “virtual oligopoly.”

“Brokers play a very important role in helping the non-major brands and lenders without large branch networks compete and provide competitive options to the big four.”

He finished by reiterating that 50% of Australian home loans are transacted by brokers. “The one-sided nature of your story paints a grossly inaccurate picture of a service that is highly valued by the public.”

YOUR PAPERS GAVE LITTLE CREDENCE TO THE POINTS WE RAISED WITH THE WRITER WHEN INTERVIEWED FOR THE STORY

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CONTINUED FROM PAGE 1

STEPHEN MOORE

Servicing sustainability

C

hoice’s recent online re-launch has been geared towards meeting head-on the rapid change remaking the broking industry, to ensure it remains competitive into the future.

It is telling then, that as a result of deep engagement with member brokers over an eightmonth period, what emerged was a cry for help with sustainable business growth.

“This is important for many broker businesses, not just in Choice, but right around the country,” Moore says. “Being a sustainable business is about having all of the business fundamentals in place. But it’s not just about being loan writers – it’s about running a business as a business, being efficient, effective, productive and profitable.”

For brokers at Choice, this now means having access to practical business wisdom and support that will help them grow – things such as business planning support and coaching on profitability. Choice has also rolled out a new online marketing portal giving access to a range of marketing resources, and will help brokers further with local marketing initiatives.

“We are also packaging up the best practices – all the great things that brokers do across the

country – and documenting them and helping members realise current best practice.”

Moore says the aim is to shorten the ‘lifelong quest’ for best practice mortgage broking.

PROVIDING CHOICE ONLINE

Turning on its head the business model that once saw smaller brokers thrive as “anti-size” competitors to larger lenders, Moore says brokers now recognise the importance of brand.

“It’s now about having the strength of a brand behind you that can break through the confusion, noise and clutter of information in the marketplace,” he says.

As a result, Choice has sought to reinvent itself in the online arena via its re-launch.

“We believe there is real magic if we can combine consumer interaction online and the efficiencies that come with the online channel with the high quality advice of brokers.”

The group’s new website has been designed to raise the profile of its brokers in search engines such as Google to drive leads to broker CRMs, and is also mobile and tabletfriendly.

Moore says brand recognition will become an increasingly important asset for all brokers.

FUTURE FOCUS: WHAT’S IMPORTANT FOR AGGREGATORS? 1. THE POWER OF ADVICE “First and foremost, we think the future of broking is around the quality of advice. Product is secondary, and needs to be appropriate to the needs of the client.”

2. TECHNOLOGY “The future is about moving beyond a demarcated view of how customers interact, the idea that they only interact online or only face-to face: it’s about combining that together.”

3. RETAIL BRAND “There is so much information out there, but consumers just don’t know where to go, who to trust, and where they can find the right advice. The power of brand comes in when consumers search for a broker online, and are able to find a good quality brand and experience.”

BEING A SUSTAINABLE BUSINESS IS ABOUT HAVING ALL THE BUSINESS FUNDAMENTALS IN PLACE. IT’S ABOUT RUNNING A BUSINESS AS A BUSINESS

STEPHEN MOORE

“Our goal is to be a recognisable, trusted partner for brokers with our brand representing a mark of reliability and quality for their customers,” Moore said.

“A trusted and reliable brand is particularly important in maintaining customer loyalty as consumers move online and become increasingly social and mobile.”

The group hopes the combination of business system support and online brand reinvigoration will assist in attracting new quality brokers to the business.

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ONE YEAR ON 13

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 8.24

Home lenders next; brokers wanting Mortgage lenders were identified as ASIC’s next target for review, after a report on broker behaviour in the low-doc sector revealed much room for improvement.

ASIC’s Greg Kirk said the regulator had identified a more ‘acute’ case of broker responsible lending transgressions in the low-doc sector, and that lenders would soon be in the spotlight

What’s happened since?

ASIC has remained relatively quiet in the mortgage sector when compared with the activity being seen in other areas, including the financial advice sector. Though there have been sanctions of brokers, many of these were follow-ups to previous actions conducted by the MFAA. The only evidence of ASIC’s renewed focus on lenders has been in the advertising sphere, where a number have been rebuked.

NAB scores with ‘disparity’ removal Aggregators welcomed moves by NAB Broker late last year to scrap its ‘star’ broker segmentation strategy. NMB’s Gerald Foley said the expansion of 95% LVRs to include brokers outside its previous ‘4-star’ system was a welcome move, while Connective’s Mark Haron said that it was a sign that NAB intended to develop more broker business.

What’s happened since?

Segmentation strategies dominated headlines after NAB’s decision to scrap its model, with Westpac launching its own ‘Platinum’ broker segment and others such as CBA defending their segmentation models. Other second tiers branched out, with ING Direct developing a ‘Broker Partner Program’. NAB’s move has been welcomed by brokers, with the bank’s ranking improving in MPA’s broker surveys.

Zeroing in on mandatory MFAA membership The ACCC caused a furor when it announced that it was seeking consultation on mandatory requirements from lenders and brokers that brokers be members of the MFAA. The ACCC said it would review the arrangements of Aussie Home Loans, Virgin Money, ING Bank and Mortgage Choice which required MFAA membership, and warned it may revoke these arrangements.

What’s happened since?

The MFAA was relieved when the ACCC gave its vote of approval to the mandatory arrangements, as was the likes of Mortgage Choice which still stands behind its requirement to enforce MFAA membership. Some broker members of the MFAA were not as fond of the decision, which they said amounted to an anti-competitive decision. However, like most issues, this one may have been a storm in a teacup.

OPINION 14

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WHO COULD BE IN YOUR SERVICE CLUSTER? A real estate firm A financial planning firm An accountancy firm A legal firm A mortgage broking firm A general insurance firm

SUPERCHARGING YOUR SPECIALTY Diversification is an oft-used broking industry buzzword, but your business success is more likely to come from supercharging your specialty, writes John Black

T John Black is currently a relationship manager at Nexus Partners, and has worked as a mortgage broker and financial services professional for over a decade

he catch cry ‘diversify or die’ has been a common song of the financial services industry, with aggregators, financial planning groups, lending institutions and accounting and legal associations singing it for several years. It’s been ongoing in the broker space since the start of the GFC and the unilateral decision of lenders to reduce commissions. This has caused a phenomenon of people seeking dual or more qualifications, with financial planners becoming mortgage brokers and vice versa, and accountants and solicitors entering the fray as well.

SHOULD YOU DIVERSIFY?

It does not matter to what industry you belong, the same

basic rules of decision making apply when deciding to specialise or diversify. There are two key operations you need to work through to decide what the best path is for you. These are: Objectively analyse all aspects of your current position, both from internal and external perspectives. Know where you are and what you want out of your business.

Once you are clear on your current situation and where you want to be in the future, you need to decide the strategy you will use to get to your desired destination.

Everyone’s path will vary and ultimately only you can decide the one that best suits you. My personal view of diversification

A share broking firm A building firm A surveying firm A valuation firm A lending firm

for mortgage brokers and others, after having been in the financial services industry for 20 years in several different roles, is that the role of mortgage broker is already ‘cluttered’ with roles within the role. These different roles require ranges of diverse skills and it is difficult for a single operator to perform all that is required to a high level let alone complete them at all. Investigation usually shows only partial completion of essential tasks for ongoing success and or compliance with legislation. To ask brokers to further dissipate their core activities is a huge ask.

TEAMS WITHIN TEAMS

If I was sitting in the ‘aggregator chair’ I would be looking at encouraging my broker members to further ‘specialise’ by identifying their own key broking activity, the one they are most competent and comfortable in performing and helping them to partner with other brokers whose competencies complement their own. Some aggregators have partially but not fully ‘hit the nail on the head’ when they say they ‘believe we will see two or three brokers joining together and sharing administration’, simply because of the cost of compliance. This sharing of administration costs relating to compliance is only a very small part of the solution and a fairly weak reason to join forces. The strong argument will be the ability of the ‘consolidated broker firm’ to allow brokers choice of the broker role that their specialisation skills best suit in order to create a true ‘competitive advantage’.

Successful brokers perform three distinct over-riding roles: They acquire clients They recommend and match clients with suppliers and their products They maintain a posttransaction completion relationship with the client These separate activities are the ‘core’ drivers of the need to specialise. Selling more products probably helps the aggregator more than the broker given that more work is required by the broker.

CREATING A CLUSTER

A far more sensible solution to assist in increasing profitability

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IT’S AS IMPOSSIBLE FOR ONE PERSON TO PRODUCE THE SOUND OF A BAND OR AN ORCHESTRA AS IT IS FOR ONE PERSON TO DUPLICATE THE COMBINED SERVICE OFFERING OF MANY PLAYING THE SAME TUNE WITH DIFFERENT INSTRUMENTS

and also your client base is to identify other firms that offer complementary products to those you offer and establish relationships with them in order to share clients. I see enormous potential for complementary businesses to form semi-exclusive ‘clusters’ or ‘service hubs’.

Value flows can be bidirectional, tangible (where the earnings are shared according to pre-determined agreements) and intangible (where no money changes hands, with the value being in acquiring a client and in exchange of information), thus ensuring that all value resulting from a client transaction stays within the group. These groups can provide powerful competitive advantage to their members and enhance the client experience.

To be successful, the group members need to be: • targeting ‘like’ clients and be located within the same geographic operating area

15

• the groups must be built on strong foundations of trust, so choose your potential partners carefully and use the ‘honeymoon’ period to assess suitability and permanency • ensure processes, service levels and communication standards are explicit and agreed upon Most importantly, groups allow you to concentrate on your focus and specialise on what you do best and still share in the benefits that result from a diversified offering. Compare a single musician trying to be expert at playing multiple instruments and producing a sound similar to one created by many players; it’s just too hard and that’s why we have bands and orchestras. It’s as impossible for one person to produce the sound of a band or an orchestra as it is for one person to duplicate the combined service offering of many playing the same tune with different instruments.

CHANGE AND SUCCESS

Ultimately your success is directly driven by the ‘client experience’, and the more professional and enjoyable the experience your client has the more success you will enjoy.

It is almost impossible for one person to wear enough different hats to ensure a fulfilling client experience for an ongoing period of time. Focusing on your core specialty and enlisting the help of others will go a long way in achieving enduring success for all stakeholders.

There needs to be fundamental changes in the way brokers operate but I see these changes being in the form of greater specialisation as opposed to greater diversification. Industry models formed prior to the GFC will continue to struggle and ultimately die unless commission levels increase. They no longer offer a ‘fair share’ to all parties with too many ‘fingers in a smaller pie’.

CHOOSING WHO YOU DEAL WITH Some aggregator groups are pushing vertical and or horizontal integration models and attempting to contain complementary service offerings in-house with flow-on benefits for their members. In doing so they ‘clip the ticket’.

However, I am yet to be convinced the potential benefits of these models are greater than those you can enjoy from establishing your own strong relationships with ‘cluster’ firms you choose.

A number of the larger brokers have embarked on their own strategies of integrated service and product offerings using specialist personnel and this is another alternative path one could tread.

There are powerful advantages in establishing your own circle of providers such as sharing your client databases, co-hosting events and combining marketing activities.

Dealing with smaller groups also allows you to maintain a level of independence and flexibility in choosing who you deal with and not being locked in to certain service providers.

OPINION brokernews.com.au

16

A quick chop needed for EDRs Our EDR error doesn’t need to become our mistake, writes CreditED’s Kym Dalton, and a ‘quick chop’ to the system now might save us from more pain later

N

ot many would know that when Joseph Guillotine invented his beheading machine he was motivated by humanitarian concerns. A quick chop was thought to be a far better way of being despatched than being drawn and quartered, burnt at the stake, broken on the wheel or garrotted.

Most would associate the guillotine with ‘The Terror’ of the French Revolution, dictatorship and half of Europe being laid waste under Napoleon.

So many things start with the best of intentions, but intentions often go sadly awry and the actions arising from good intentions turn into errors.

EDRS AND GOOD INTENTIONS

Kym Dalton is the chairman of a new consumer comprehension program called CreditED

External Dispute Resolution schemes (EDRs) are a good intention. They are intentioned to be a free service to the consumer to provide a less costly and more efficient way to right wrongs than litigation and formal court proceedings.

Human beings being what they are, however – give them an avenue for complaint and they’ll turn it into a six-lane highway. I think therefore I complain (apologies to Descartes).

There’s been a considerable amount of review and enquiry into the operation of the EDR schemes. For those interested in the subject, I’d encourage you to search the ASIC website and read ASIC’s report 308, consultation paper 172 and many of the excellent submissions made in response to this consultation paper.

This correspondent, however, spends much of his time with his ear to the ground on the mean mortgage streets and I’ve got some further observations on how the EDRs are evolving beyond their original intent.

The original intent of the EDR schemes was surely to allow those of less limited means a practical form of redress where there had been a wrong committed by a credit professional. A laudable aim indeed.

In speaking with credit professionals and people in the

legal community, it’s being reported that the complaint mechanisms are being used to advantage by ‘professional borrowers’ with the means and the knowledge of how to game the system. Some of the loans in dispute are in excess of $1m. This just doesn’t seem right and it consumes valuable resources at the EDR that are needed to deal with ‘genuine’ complaints.

In engaging with the ‘payday lender’ community, they report that often the initial fee charged by an EDR scheme to deal with a complaint is frequently larger than their loan advance itself!

This doesn’t seem right and is an anomaly looking for correction.

I’ve spoken with many in the collections areas of ADIs – not just in mortgages but across the spectrum of consumer loans, including credit cards. They report that in many, if not most, cases where they’re seeking to collect overdue amounts, a reflexive response from the debtor is that ‘we’ll complain to an EDR’. The ‘right’ to complain to an EDR seems firmly embedded in consumers’ collective consciousness as a ‘first response’. This is clearly not the intent of the EDR regime.

Critically, the collectors to whom I’ve spoken report that this reflexive complaint response is almost wholly to do with consumers failing to understand their basic responsibilities under their loan contract. The complaints aren’t about righting wrongs; they’re borne of a lack of comprehension. If these debtors actually proceed with a complaint, yet again those in genuine need will be competing for resources at the EDR.

A RISING RISK

Most legislation and regulation brings with it unintended consequences. With unintended consequences, frequently, Murphy was an optimist.

The capital markets, domestically and globally are in a fragile state. Banking and the bond markets thrive on confidence and certainty.

Where’s there’s uncertainty, there’s risk and risk demands a premium.

KYM DALTON

I OWE YOU

FAST FACT Some of the loans in dispute are in excess of $1m, indicating professional borrowers are gaming the system

I’m concerned that domestic and particularly foreign investors may look at the operations of the EDRs and their ability to impede or influence lenders’ contractual and property rights in mortgage enforcement and factor this uncertainty into the interest rate at which they are prepared to lend to Australian banks and/or to invest in mortgage-backed securities.

If this was the case, mortgage lenders would need to factor a risk premium into their mortgage rates – leading to the unintended consequence of a good intention actually serving to either drive up the cost of credit or limit its availability.

One last concern. If the EDRs are experiencing physical resource issues due to the sheer volume of complaints being received, as the ‘right to complain’ is entrenched in consumers’ minds, they will need to address this by obtaining more resources. To obtain more resources they’ll need more revenue which means they’ll need to deal with more complaints (or the cost to the member will need to increase).

There’s the chance of a nonvirtuous circle developing here.

A QUICK CHOP?

What’s needed are filtering mechanisms to enable the EDRs to return to first principles and to enable them to act on their good intentions of assisting those in need. Enhanced financial literacy and greater comprehension of basic rights and responsibilities would greatly assist these filtering mechanisms.

To close with a lesser known quote from JFK: “An error doesn’t have to become a mistake unless you fail to correct it”. I believe some of the current practices of our EDRs are in error – let’s work together to correct them before they turn firmly into mistakes.

brokernews.com.au

Rather than going on the defensive over attacks on our industry, we should attempt to engage and educate. But it appears, we the industry, continue to move to the fall back position of “the home loan process is complicated”, “a broker needs to be paid for his expertise” and “with the myriad of home loans out there, you need a broker”. How can we criticise when we contribute to the debate with a less than well thought out argument?

We should educate so people understand what we do and quantify the value we add.

BJ on 27 Nov 2012 10:32 AM

COMMENT 17

WE ARE NOT ‘HAVING A LEND’

When journalist Jessica Irvine levelled a public attack on the mortgage broking industry, the industry responded with an attack of their own to defend their reputation (‘Brokers are not commission earning machines’ 27/11/2012).

Disappointingly, the media in Australia is following the worldwide trend of sensationalism.

Gary Perth on 27 Nov 2012 10:46 AM Lack of research, truth and real effort

by Ms. has put journalism one step closer to the coffin.

Paul Raad on 27 Nov 2012 10:12 AM This was something that Choice agreed with, reminding readers in Irvine’s column that mortgage brokers are salespeople who shouldn’t be relied upon to offer unbiased or comprehensive financial advice.

Hard to take anything reporters say seriously when they don’t even research the people they get quotes from let alone the information they give.

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

Cold reception for Arctic ‘refund’ model

A 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

fter the debacle in which Refund Home Loans found itself, the industry can perhaps be forgiven for being suspicious of any new refund models.

And so it was when the founders of Arctic Home Loans, which aggregates with PLAN Australia, came out in defence of their own onlinebased refund model.

Offering to return up to 50% of broker commissions to the customer, chief executive Eu-Gene Yeap said he had learned from the mistakes of Refund boss Wayne Ormond.

However, brokers on our online forum were less than accommodating.

“You pay peanuts, you get what you pay for,” Kevymac (23 Nov 2012 09:24 AM) said. “My clients have no issues with us receiving comms and many pay service

fees for work.”

Fellow PLAN member Coast Broker (23 Nov 2012 10:02 AM) said Arctic would not survive long on its refund basis. “As a PLAN Member myself I am sure that this business model cannot be sustained,” he said. “PLAN is an advocate of fee-for-service, however … they cannot say to a member they cannot have this business model.”

However, Scott (23 Nov 2012 10:20 AM) said brokers should look again at the model. “He is giving away 50% of his upfront, nothing is mentioned of his trails. I guess he will be keeping 100% of those. If so, and his loans run 5-6 years, he has only given away about 25%.”

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2013: Survival mode The International Monetary Fund is urging the world’s economies to get their survival strategy in place as “Recession 2013” is on its way. Andrea Cornish asks brokers how they plan to ride out the next 12 months

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artygoers on New Year’s Eve 2013 won’t be the only ones facing a hangover come 1 January. Economists, both home and abroad, are predicting low economic growth across the globe, as US and European policymakers grapple with high unemployment and huge amounts of debt.

While Australia’s outlook is slightly better than other advanced economies, domestic growth will be constrained by slowing expansion in China.

Given the dismal reports, some brokers are choosing to stay the course, rather than risk expansion in 2013.

John Minihan is taking a ‘steady as she goes’ approach to 2013. The Port Macquarie Professional Finance mortgage

broker predicts the next year will be a period to consolidate and maintain present business levels.

“It would be nice to see it grow, but I think with the state of the economy it’s just a matter of trying to keep things on an even keel and keep everyone happy.”

The brokerage already has a strong network of formal referral arrangements with accountancy firms and solicitors, which keeps business constant. However, Minihan is hoping to develop closer relationships with a few real estate agencies in 2013.

“That’s a little slow at this stage, but there’s potential for it to grow a little bit,” he says.

While some brokers are considering expanding their services to boost income levels in 2013, Minihan says the brokerage already has a strong

CHRISTIAN PATERSON, BRISBANE A lack of consumer confidence due to the uncertainty in the economy will be one of the biggest stumbling blocks to achieving growth, according to Loan Market’s Christian Paterson.

But Paterson isn’t content to let factors beyond his control determine the success of his brokerage. The Brisbane broker is looking to expand business opportunities over the next 12 months by growing his referral base. He plans on cementing referral partnerships by sharing an office space with an accounting and financial planning team.

Paterson is also looking to

[SOCIAL MEDIA] IS INCREASINGLY PROMINENT

improve his marketing to his existing customers, using social media as one of the tools in his overall strategic plan.

“I definitely see this as an increasingly prominent marketing avenue which we have not yet fully harnessed.”

diversification strategy in place.

“We diversified into home insurance, loan protection insurance, leasing, and commercial probably seven years ago. That’s part of our book and is naturally part of what we do.”

The business also does commercial of which Minihan says there has been a noticeable uplift in the last nine months and could continue to play a larger role going forward.

While external economic conditions will potentially constrict growth, Minihan predicts the greatest challenge facing brokers in the coming months will be efficiency.

“With the way the banks are in regard to their processing requirements, it’s just not as easy to process and manage as many loans in the same timeframe.”

KATRINA PARRINGTON, ALICE SPRINGS The last 12 months have shaped how Alice Springs Elders Home Loans broker Katrina Parrington plans to grapple with 2013.

“2012 was a challenging year. I think that eventually Alice Springs caught the economic cold that the rest of Australia was suffering.”

According to Parrington, a downturn in investment and tourism in Alice Springs, coupled with the federal government’s decision to withdraw programs which were attracting contractors and workers, has impacted housing demand in the area.

As a result of the challenges Parrington faced in maintaining business targets in 2012, she has implemented a diversification strategy to help boost business in the coming months. Parrington is launching a professional property investment arm – NPA Alice Springs – which will provide current and potential clients with a professional, ethical property investment service. According to Parrington, diversification will be key to broker survival in

KATRINA PARRINGTON

future. “Brokers who do not embrace diversification and provide a comprehensive financial service for clients may struggle in 2013 and following years,” she says.

While Parrington is confident going forward, she is hoping her consumers share her positive outlook. “I believe interest rates will continue to trend down and there is a lot of activity in our local market from first homebuyers, investors and refinancers. I’m just hoping the current confidence continues and is not adversely affected by global economic issues.”

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SANDRA MALLIA, MELBOURNE

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SARAH EIFERMANN, MELBOURNE In the coming months, Sarah Eifermann predicts client communication will be even more important, given the constant industry changes.

“Clients’ expectations about what they should and shouldn’t be paying for seem to be the biggest sticking points.

Application fees, monthly account fees, settlement fees – clients want all these for free, as well as the cheapest rate out there. Brokers are going to have a hard time setting the expectations for what is and what is not available for clients.

This is made harder when bank

Business in 2013 will be a family affair for Sandra Mallia, who has grown her team with the addition of her son. According to Mallia, he should be writing business by the early part of 2013. She also plans on hiring another assistant by the end of year if all goes to plan.

In addition to bringing on new staff and training, Mallia will concentrate her efforts on diversification.

branches have specials that brokers simply can’t match... and then there is the topic of fee for advice!”

Despite the challenges ahead, the owner of SFE Loans in Melbourne is looking to write 40% more business in 2013 by growing stronger relationships with existing and new referrers. She plans on building better relationships with referrers by offering a range of mortgage seminars that will open the door to cross-marketing opportunities.

She also plans to add to her already strong online presence.

I AM PLACING A FOCUS ON BEING AN EXPERT IN CAR FINANCE BUSINESS “I am placing a focus on being an expert in car finance business, and my personal assistant is making it her goal to excel in this area. For my business, this is an untapped opportunity,” she says. “I would also like to improve on my conversion of other products such as mortgage protection and insurance, and will find a way to further implement this in my processes.”

According to Mallia, the biggest hurdle brokers will face in 2013 is valuations.

“In particular, to assist clients wishing to use their perceived equity to either repurchase to upgrade, or to further their investment portfolios. They are still quite unpredictable.”

DAMIEN MILLS, PERTH The battle for business will be fought online, according to Damien Mills. The Loan Market broker predicts that the internet will be one of the biggest challenges facing brokers in 2013.

“Clients have more and more information at their fingertips and brokers need to … win business on knowledge and customer service, not just interest rate.” As for his own business growth strategy, Mills plans to focus on social marketing in 2013.

“I have arranged to write regular newsworthy content to be published on my webpage and social media sites to increase my profile in my local area. I also have a client contact plan which involves ringing my whole database every quarter, to check on their existing loans and ask for more referrals.”

While his business goal is to settle $30m in finance, Mills also plans on stepping up his diversification strategy.

“I want 75% of my new clients to take out personal protection insurance, as many Australians are underinsured in this area,” he says.

I WILL WRITE NEWSWORTHY CONTENT TO BE PUBLISHED ON MY WEBPAGE AND SOCIAL MEDIA SITES

DANIEL PYM, SYDNEY Having completed his Advanced Diploma of Financial Services in Financial Planning in 2010, Loan Market broker Daniel Pym is hoping to grow his business in 2013 by converting more of his mortgage clients into financial planning clients.

Keeping up with two sets of CPD points is tough, but Pym argues it’s just one of many challenges he’ll face in the coming months.

“Trying to stay focused on sales instead of administration work is difficult. There are a lot of competing interests, with brokers having to balance seeing new clients, to ongoing CPD points and NCCP requirements, lender follow up, to ensuring that loans settle on time with no mistakes.”

His goal is to settle a minimum of $36m this year, and to help him get there he’s hiring a full-time PA. He’s also engaged a social media company to help him optimise his website, produce informative online articles, and manage his LinkedIn profile.

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Commission levels safe despite margin squeeze A confluence of factors will make it all the more difficult for banks to make a profit from new business in 2013, but broker commission levels appear rock solid

C

ommissions paid to brokers are extremely unlikely to suffer further cuts in 2013, despite the challenges banks face in making acceptable profits as their margins get thinner.

Accounting firm Deloitte’s Australian Mortgage Report 2013 set the scene for an intensely competitive environment next year among major banks, as a range of factors combine to force banks to take less margin on new mortgage business.

Deloitte partner James Hickey told Australian Broker that continued intense funding pressure and competition for deposit funding, as well as mortgage discounting, was turning a focus to costs.

However, Hickey has assured the broking market that, at least at present, there is no appetite from lenders to decrease their broker

commission payments further.

“In any assessment of the end-to-end earnings and value chain of a mortgage, the cost of paying to third parties does come into that equation so I have confidence that it is certainly being looked at,” Hickey says.

But the consensus of 10 senior mortgage industry executives at a Deloitte mortgage lending round table, on which much of the Australian Mortgage Report is based, was that commissions would not be targeted as a potential cost-cutting measure.

“The view of the group was that in 2013 we won’t be seeing commission reductions of a material scale happen,” Hickey explained. “Lenders understand and are supportive of the broker channel because of the proportion of consumers that choose them; it is an important one in terms of meeting those consumer needs and therefore

THE FUNDING CHALLENGE: MAJOR BANKS VS NON-BANKS MAJOR BANK Back book

Discount 60 bps

NON-BANK New business

New business

Discount 80 bps

Discount 80 bps

Profit before tax 20 bps

Profit before tax and capital 125 bps NIM 240 bps

NIM 195 bps Broker 15 bps Credit 5 bps

Profit before tax and capital 95 bps Broker 15 bps Credit 5 bps Cost to income ratio 40% 80 bps

Cost to income ratio 40% 95 bps

Weighted average funding cost 60 bps over cash rate

Weighted average funding cost 35 bps over cash rate Cash rate

NIM 80 bps

Broker 30 bps Credit 5 bps Servicing/trustee fees 25 bps

Subordination 20 bps

AAA cost of wholesale funds 135 bps

Basis risk 20 bps Cash rate

Major banks are making a lot less on new lending than on their back book of mortgages, with cost of funding and heavy discounting giving them over 45 basis points lower margin than an average back book loan. This will create a focus on prolonging customer relationships. Source: Deloitte

lenders understand that brokers need to earn a living, to actually keep being successful.”

THE COMPETITIVE CHALLENGE

1.65% The increase in major bank wholesale funding costs from June 2007 to June 2012

1.86% The increase in deposit funding costs since June 2007 and June 2012

With borrowers expected to continue to seek the lowest price and settlement growth expected to reach 5% at most, representatives from Australia’s residential lending sector who spoke to Deloitte said they were gearing up to meet the increasingly competitive environment in 2013.

“To this end we consider that lenders in 2013 will focus on leveraging the opportunities in existing portfolios or back books,” Hickey said.

“This involves retaining customers by ensuring a better customer experience at the front end. It also means using data better to identify and leverage customer cross sell and upgrade opportunities, as well as protecting interest margins on existing portfolios.

“Leveraging existing portfolios – the back book – is the least expensive and most successful approach to maintaining residential mortgage market share and earnings. More so than competing aggressively for new customers,” Hickey explained.

LEVERAGING MORTGAGE BROKERS Though banks expect that online mortgage channels will begin to play an increasingly significant role in a few years, for 2013, the focus is still very much on mortgage brokers.

And the prognosis is bright.

Market share of the broker channel is expected by most to increase over the coming year, as the broker service and choice proposition win out.

However, 2013 is not expected to be without its challenges for brokers, and will be felt by smaller groups more than their larger counterparts, according to Deloitte. The firm’s analysis shows that the top 10 broker groups control more than 80% of the $400bn broker channel,

2013

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revealing the industry is “increasingly a scale game”.

“Deloitte believes broker groups with less than $10bn in outstanding loans will be under considerable competitive disadvantage and will struggle to survive,” the report states.

Though Deloitte said most industry executives believe that diversification and cross-sell will be one of the key drivers for success of individual brokers in the next few years, the accounting firm’s own analysis was less than sure – mainly because of broker reticence. “In Deloitte’s experience diversification for brokers is still unproven. Certainly having the products to offer and the training support is a must. But engaging the hearts and minds of brokers to offer diversified services is the challenge,” the report said.

Brokers may also face increased threats from professionals in some of the areas they are being urged to diversify into. Deloitte said that ‘scaled advice’ is likely to have an impact. “Australia’s burgeoning industry super funds are rapidly entering into scaled, low-end basic advice. Although not offering mortgage products as a manufacturer, they are moving to include debt advice as part of low-end scaled advice.”

LENDERS UNDERSTAND AND ARE SUPPORTIVE OF THE BROKER CHANNEL BECAUSE OF THE PROPORTION OF CONSUMERS THAT CHOOSE THEM

- JAMES HICKEY, DELOITTE

Non-banks back in the black Non-banks are receiving a welcome boost to their profitability, for which they should be thanking the major banks

T

he refusal of major bank lenders to pass on the full extent of Reserve Bank cash rate cuts has actually given non-banks the room to compete and make a profit, according to Deloitte.

Financial services partner Graham Mott said that due to funding costs, non-banks were actually in the red two years ago and had reduced ‘origination to a trickle’.

However, the clawing back of margin by the major banks and the recent movement in wholesale funding spreads for RMBS deals means the potential net interest margin that is now available to non-banks is approaching pre-GFC levels, giving them room to compete.

“But the situation is volatile,” Mott said. “They have a 20 basis point profit, but that can disappear very quickly. The non-banks are now viable, but they will continue to be very cautious with their origination activity,” he explained. Non-banks are unlikely to originate volumes “anywhere near” pre-GFC levels in the foreseeable future.

They are also facing a difficult battle for new customers. The result of this will mean non-banks

will want to move along the credit curve to more fertile ground – the prime lending space – where there is still funding appetite available via RMBS deals.

“We anticipate non-banks will increasingly return in 2013 along with investigating different asset classes such as commercial loans, leases and auto loans, as well as growth through acquisition,” Mott said.

There is high demand among these non-banks for government support to assist competition, particularly by providing RMBS guarantees. However, Deloitte’s report claims that while these guarantees are being sought, they are unlikely to occur.

Pepper Home Loans’ Todd Lawler believes the government needs to be careful with any new initiatives designed to support non-banks. “In our industry governments tend to be very reactive and try to fix perceived problems without seeing the whole picture – a perfect example was when they banned deferred establishment fees without understanding how they worked in the competitive environment.

“All these issues are interrelated and trying to fix any one with regulation may have unintended consequences,” he said.

21

2013

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2013: The data W

hat is the outlook for property prices in 2013? What will make brokers successful over the short term and the long term? And why is the year of the sheep a threat to your business?

Deloitte recently conducted a roundtable involving 10 mortgage industry

Q THE STATS What most executives feel is a reasonable return on equity for AA rated banks in 2013

professionals, primarily from lenders, who were asked to commit themselves to predicting the answers to these questions and others, at a time when unpredictability is a feature of the mortgage landscape itself.

Here is what they said and voted in September this year – will 2013 prove them right?

Q WHAT WILL HAPPEN TO BROKER GROUPS IN 2013?

Note: Roundtable participants were asked to give two responses

Grow market share of new lending

1620%

The average property price growth rate most industry executives are predicting

>5%

2015

The year of the sheep is more likely (than 2013) to see the genuine success of the online mortgage channel

Further consolidation of small groups

Commission reductions from lenders

$1.3 trillion

More institutional ownership by banks or others

MORTGAGE CHOICE HAS CERTAINLY INCREASED MARKET SHARE OVER THE LAST 12 MONTHS AND SO HAS AUSSIE. IT COULD BE THAT THE LARGER BRANDED BROKERS WILL LEVERAGE THEIR SCALE TO TAKE SHARE FROM SMALLER BROKER GROUPS AND/OR THE BROKER INDUSTRY WILL GARNER AN INCREASED SHARE FROM THE BANKS

The value of the Australian mortgage market, predicted to remain key to lender earnings performance

- M ICHAEL RUSSELL, MORTGAGE CHOICE WHAT THE INDUSTRY HAS TO SAY...

ON GOVERNMENT POLICY TODD LAWLER, PEPPER HOME LOANS

ON MAJOR BANK RETURNS CLIVE VAN HOREN, CBA

ON THE CHANGING CUSTOMER NICK BATEUP, WESTPAC

ON THE BROKER PROPOSITION PAUL CAPUTO, GENWORTH

“In our industry governments tend to be very reactive and try to fix perceived problems without seeing the whole picture – a perfect example was when they banned deferred establishment fees without understanding how they worked in the competitive environment.”

“It’s a difficult question – what’s a reasonable return? Between 16% and 20% is in line with global standards.

Simplistically, competition in the public’s eye is a function of how many participants are in the market. The question should be: ‘Are customers paying less and having more choice?’ ”

“Customers are more aware that they can negotiate. They don’t just accept the published rates any more.

They want to see if they can get a better deal. The reality is that most products have all the key features.

It’s not easy to differentiate on product.”

“There is a growing disconnect between the branch manager and customers. And there is more and more aptitude to use brokers. In the old days there was relationship. ‘I want to go to Westpac and will talk to Phil’.

Now it’s ‘I want Westpac, but I’ll go through a broker to get to Westpac’.”

2013

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Q WHAT WILL SUCCESSFUL BROKERS HAVE DONE DIFFERENTLY IN THREE YEARS?

Incorporated fee for advice into their business

Improved cross-sell of other customer needs

Expanded their business to be more than just sole operators

Leveraged their back book for retention of the customer

I THINK IT WILL BE ABOUT CROSS-SELL OF OTHER CUSTOMER NEEDS. AT AMP WE HAVE BUILT A VERY SUCCESSFUL BUSINESS DEALING THROUGH INTERMEDIARIES, INCLUDING A FINANCIAL PLANNING NETWORK WHICH IS CENTRED ON MEETING A RANGE OF CUSTOMER NEEDS, INCLUDING ADVICE AND PRODUCT SOLUTIONS

- R OB SLOCOMBE, AMP

Q

AT WHAT RATE WILL SETTLEMENT VOLUMES GROW IN 2013 vs 2012 LEVELS?

Investors

Young borrowers

WHO ARE ONLINE MORTGAGES MOST LIKELY TO APPEAL TO? First homebuyers

Refinancers

Q

0 5 4 1 0 >10%

6-10%

1-5%

Flat

Fall

Q ASSUMING NO FURTHER RATE CHANGES, WHAT ARE MAJOR BANK MARGINS LIKELY TO DO OVER 2013?

+10 basis points

- 10 basis points

Reduce by more than 10 basis points

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From broker to developer Do you ever wish there was software to solve a problem, or make your business more efficient? Well, Central Choice’s Hany Pham did, and decided to build it himself

F

ounder and managing director of broker Central Choice, Hany Pham, has been tech-savvy since he was a boy. “I’ve always been into it. I used to sit around building websites as a kid.”

Though becoming an accomplished property investor and mortgage broker as well as being successful in other businesses, Pham has always maintained this interest.

However, it wasn’t until he started using a ‘pretty cool’ iPhone app that his latest software development venture that could revolutionise document processing got started.

“The genesis for the idea was the iPhone app ‘Shazam’. You can be sitting in your car listening to a song, open up Shazam and it can identify the song playing on the radio,” Pham explains. “I thought, if only I could do that with all my mortgage and customer documents – the software would process it.”

DEFINING ONETOUCH

And so, Pham’s new patentpending automated document processing tool was born. Coined ‘OneTouch’, it is in the process of being integrated into aggregator Connective’s IT platform Mercury.

Combining optical character recognition technology with algorithms that read scanned images, extract data and remove unwanted data from supporting documents, the software is able to handle time-consuming essentials such as blanking out tax file numbers in mortgage documentation. It will also soon identify, split and rename stacks of documents into individual files after they are uploaded, as well OneTouch was inspired by the iPhone app ‘Shazam’, which captures music audio through a phone microphone and identifies the song for you instantly

as extract data into CRM systems and forms.

BUILDING THE FUTURE

Partnering with experienced development specialist John Schagen, Pham mapped out the entire mortgage process, and asked what they could do to automate it.

“We worked out there were about 100 individual steps from application to settlement, and with Schagen’s background in software, we came up with an idea for a prototype.”

However, the idea came with a catch. The types of scanned documentation used for a mortgage are many and varied, and often verging on illegible.

Could a piece of software recognise, clean up and capture such disparate data elements?

The answer was yes – with the right team. “We built a very strong IT team, because the algorithm to crack is very difficult, pretty high-tech.”

Pham recruited top IT development talent and promised them a reality which is now coming true: becoming true industry ‘disrupters’.

“They were captivated by the vision. Everyone in IT is looking for that hot idea, that chance to disrupt an entire industry; that’s how I got the buy-in of the team.”

What followed was what Pham says was “many, many months” of trying to crack the algorithm, after which he began to talk to players such as Connective.

AN EFFICIENT NECESSITY

With Connective having enthusiastically adopted OneTouch, Pham is in the process of assisting with the

WHAT ONETOUCH CAN DO FIRST RELEASE

 Automatically censor sensitive information such as a tax file number from group certificates, tax returns and ATO notices of assessment

SECOND RELEASE

 Automatically identify, split and rename a stack of documents into individual files

WORKFLOW COMPARISON

 Extract data to self-populate CRM systems and fact finders

Repeat until all documents are received from client

NORMAL PROCESS

ONETOUCH PROCESS

Interview client

Interview client

Provide loan options to client

Provide loan options to client

Collect supporting documents Verify information Follow up missing documents

OneTouch

Enter data into database Prepare application for submission Submit application to bank

Submit application to bank

BEING ABLE TO EFFICIENTLY LODGE A CLIENT APPLICATION INSTANTANEOUSLY, ACCURATELY AND ERROR-FREE, WILL MAKE THE CUSTOMER EXPERIENCE SO MUCH BETTER roll-out of successive releases of the new software.

And the timing couldn’t be better. With an industry push on for increased productivity, Pham says the adoption of such software may become critical for both aggregators and brokers. He cites fresh bank-led campaigns to improve productivity, that may see broker commissions penalised if they do not meet straightthrough-processing benchmarks.

However, it will also improve the customer experience.

“Being able to efficiently lodge a client application instantaneously, accurately and error-free, will make the customer experience so much better,” he says.

SPOTLIGHT

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Funding, fifth pillars and the future YBR’s funding deal with Macquarie might not be the ‘game-changer’ both organisations want it to be, say our Australian Broker TV pundits

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ellow Brick Road and Macquarie. Yes, you’ve all heard about the recent funding deal, which the media jumped on claiming it could represent a fabled ‘fifth pillar’.

But will it follow through on its lofty promise of genuine competition?

First of all, our Australian Broker TV commentators say that brokers should be clear about what the deal actually is – another white label product.

“The strategy is really one of white labelling,” says Choice Aggregation Services CEO Stephen Moore. “So while it is certainly not a new or groundbreaking strategy, it certainly is a proven one.” Indeed, Choice – and fellow Advantedge broker groups FAST and PLAN – are leading the vanguard of the current white label surge, as Moore attests.

“Our experience with white labelling has been fantastic, there is very strong broker and consumer demand in the market for alternate brands,” he says.

So can one new white label make such a big difference?

“A lot of headlines are around an upfront interest rate 1.15% below the banks, but it’ll come down to how many borrowers actually qualify for the product, its flexibility and the product features,” Pepper Home Loans Patrick Tuttle says.

“Does it really attack the banks’ heartland? Is it a gamechanger? It’s probably too early to say. But certainly we welcome more growth of the non-bank sector,” he says.

Tuttle says competition still remains a tough battle for institutions outside the major banks, largely because of the difficult funding environment.

“I think it is very difficult for the regionals and mutuals to compete against the majors… because the banks’ cost of funding is so much cheaper,” Tuttle says.

“When you take in deposit funding, their mix of covered bond funding, how efficiently they can securitise relative to

non-banks, that remains the issue. For genuine competition in the prime market, I think we are a long way from moving the dial away from the four majors’ market share,” he says.

Regardless, Moore says that the confusion caused by any launch such as YBR’s will actually play right into the hands of mortgage brokers, who are there to assist their clients.

“There is a fair bit of confusion in the eyes of consumers. Special deals, offers, new products. In the eyes of consumers it is confusing to know not only the right product, but who is the right lender for them,” Moore explains.

“The trusted advice that brokers can provide is now more than ever important going forward for consumers.”

DOES IT REALLY ATTACK THE BANKS’ HEARTLAND? IS IT A GAME-CHANGER? IT’S PROBABLY TOO EARLY TO SAY

STEPHEN MOORE

PATRICK TUTTLE

THE WORKSHOP 26

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Prospecting within your comfort zone

THE GURU

Your easiest prospects may just be the closest to home, writes Clifton Warren

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he third biggest prospecting mistake that financial professionals make is not clearly defining their markets.

To build a thriving client base, you have to ensure that you’re seeing an adequate number of people. You must identify the right markets that fit your style and interests, and will allow you to work from your comfort zone.

Select 3-5 markets that interest you. It is much easier to position yourself and build your credibility when you are seen as an expert.

Possible options include: • • • • • • • • • • •

Investors First homebuyers Refinance Self-employed Non-conforming Debt consolidation Divorced Renovation Purchasing a second home Saving for children’s education Self-managed super funds

Next, craft a value proposition for each of your markets. For example, “I assist with unlocking the value of their real estate.”

PINPOINT YOUR SOURCES FOR INTRODUCTIONS

Once you have chosen your market, you need to identify people who can introduce you to prospects in your target markets – and your best sources are the people you already know. How many of your family and friends really understand what you do and the value that you provide to the community?

Start with a list of everyone you know in the following categories. You want to contact each one and share your value proposition to determine whom they might know and can introduce to you.

• Local providers: dry cleaners, grocers, repairers, delis and shops • Professionals: Doctors, dentists, pharmacists, teachers, day care centres, and lawyers

• Clubs and associations: Rotary clubs, churches, sporting clubs and parents’ associations • Previous jobs before you entered the industry • Your relatives and relatives of spouse • Spouse’s acquaintances • Hobbies: Golf, tennis, fishing (you probably have met a number of people through this source) • Schools: List where you went to primary, middle, high school and university

KATHY CUMMINGS Q: Is technology important to productivity?

A: Australia as a country has been reticent around

OBTAIN INTRODUCTIONS

Poor prospecting skills are the single biggest cause of failure in this industry. There are two ways to prospect and build a business: the hard way, and the easy way.

Obtaining introductions by sharing your value with people who already know you is the easy way, one that will allow you to work from your comfort zone.

Approach everyone you know to share your value proposition and simply obtain an introduction to one of his or her friends. This is a first-class method of building a business from within your comfort zone.

DO THE MATHS

Let’s assume that you start with 100 names of people, of whom you obtain 20 introductions per month. You obtain appointments with 50% of those, and you’re successful with 50%.

That’s five new clients per month, or 60 per year. In 12 months, your contact base would grow to 160 contacts – 100 names plus 60 new clients – and within three years, your contact base will have grown to over 400 names.

Clifton Warren, CMC, principal of Corporate Eye Consulting, is a marketing and sales strategist, coach and speaker who works with banking, insurance and financial services professionals.

Contact him on (03) 9808 1136 or Clifton@ corporateeye.com.au

productivity and now we have to focus on it. And it is very relevant for the financial services industry. But if you think about where the next leaps are going to come from it is not necessarily going to come from technology. Technology is becoming something we are integrating into the way we do things, but it’s how you integrate it so your life becomes more effective and you do more with it. For example, if you just use all things social media, all of a sudden you have Facebook, Twitter, LinkedIn and now we’ve got Chatter. But it’s not productive to be replicating all of that. However, if there is something that makes your span of influence broader and you can attract more customers to buy something from you then that is more productive.

Q: How do brokers benefit from increased productivity?

A: They are being able to reinvest what they are

harvesting. We’ve had brokers using our Kaizen events who have been able to let resources go, so they’ve been able to let a couple of people go out of their offices or not replace them which goes straight to their bottom line.

Or they have been able to reinvest them into other activities such as customer relations or data mining etc, so they are able to better use those resources.

Q: What are some common broker improvements?

A: Too often brokers think, ‘I’ll get that later’, and they

submit a half-prepared application. The work we are doing is helping brokers understand how to get it right the first time, how to get their customer expectations right about what they need to bring with them to the interview, which is really helping overcome that problem. We have had numerous examples now where brokers just can’t believe the difference in their business because they have the right customer expectations, they get the right documentation, they submit the application correctly and the thing goes through. There are some very good examples of brokers that do it, but every customer situation is different.

FINANCIAL SERVICES 27

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ASSOCIATION GUTS FEE TAKE IN INDEPENDENT STAND

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n a move members of the MFAA would no doubt envy, one association of financial planners has slashed its membership fees by as much as 71% in an effort it says is aimed at tackling institution and industry fund domination of the industry.

According to the Association of Independently Owned Financial Professionals, the price cut recognises tough economic times and an aggressive push to grow membership numbers.

“We have decided to lower our membership fees to both assist current members and encourage new members to join,” the AIOFP’s Peter Johnston said, adding that cohesion and forgiveness should be on every independent planner’s New Year’s resolution wish list.

“After four disastrous years of market volatility and political victimisation by the Federal Government, all independents should realise that we are a vulnerable minority faction and

our future success depends on our ability to act as one commercial and political force,” he said.

“For too long we have been fractured by political infighting and manipulated by third-party influences where a divide and rule strategy suits their agenda.”

Johnston said the AIOFP is the only organisation that has the scale and business model to tackle the domination by the institutions and industry funds going forward.

Johnston stated that the minimum entry-level fee has been reduced from $900 to $325 for a one-adviser practice, and the maximum fee reduced from $7,000 to $2,000 for the larger groups.

ADVISERS FLOCK TO RISK WRITING

Australia’s financial planners are becoming increasingly reliant on risk advice to drive business income.

These are the findings of CoreData’s Annual Risk Report, which found that, on average, the proportion of business income derived from insurance advice has increased to 52.8% in 2012, up from 47.1% in 2011 and 40.4% in 2010.

This reflects a shift in focus in the advice industry from investment growth to asset protection, said CoreData.

“Advisers are looking for utility in the life company’s offer, as seen in the focus on competitiveness of pricing options and cover definitions across income protection, term life, trauma and TPD,” said CoreData head of advice, wealth and super Kristen Turnbull.

DID YOU KNOW? The Anglican Church claimed a royal commission into child sex abuse should focus on the actions of insurers, which it claimed were inhibiting the Church from “acting as it would wish” in settling cases with financial compensation instead of going to court.

THE PROOF: Brokers better than going direct The Financial Ombudsman Service has reported that of the 25,000-plus disputes it handles annually, insurance brokers are responsible for a tiny fraction compared with general insurers and other advice professionals.

The Financial Ombudsman Service’s 2011-2012 annual review revealed it has accepted 25,298 disputes into its formal dispute resolution process, where a customer had not been able to resolve a dispute directly with their financial services provider. This was up 24% on the previous year.

When broken into sectors, general insurers were responsible for 7,591 complaints, second only to banks who accounted for 12,210. Life insurers also had 851 complaints.

General insurance brokers were responsible for a paltry 123 complaints and life insurance brokers mustered only 13. This means that general and life broker combined accounted for just 0.5% of all complaints received by the Financial Ombudsman in the last 12 months, while general insurers were responsible for 30%.

Insurance brokers outstripped other finance professionals, including financial advisors/planners which had 949 complaints, managed investments scheme (MIS)/fund manager (375), non-cash payment system providers (433) and debt collector or buyer (794).

The results, which have been reflected in previous years’ Financial Ombudsman Service annual reviews, validate the claim clients are in better hands when using an insurance broker.

PEOPLE

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KERR TO DRIVE INNOVATION AT AMB Previous franchise and lender experience will be front of mind as AMB’s new CEO aims for innovation

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he previous head of the Commonwealth Bank’s mortgage innovation department, Nathan Kerr, has joined Australian Mortgage Brokers as its new chief executive officer.

Following the departure of founding CEO Paul Gollan earlier this year, AMB’s search ended with Kerr, who started with the group in early November.

Kerr told Australian Broker that he hopes to grow the brand’s franchise model over the next few years, which currently aggregates with Astute Financial.

“Within the Commonwealth Bank it was a franchise-type model,” Kerr said. “It’s the same principles that work for both models and I think also that having experience with a lender is good to bring to this model as well.”

Starting his finance career in 1999 with RAMS Home Loans, Kerr spent seven years gaining experience in national operations and distribution roles. In 2007, whilst employed with St.George, he was approached by CBA to head their mortgage innovation department.

AMB expects to leverage Kerr’s experience in franchise systems in order to gain a fresh perspective as their business model continues to evolve.

“I think it’s really about growing your contact with your existing customers, helping them with all facets. It’s about gaining customers for life,” Kerr said.

Former SEQUAL CEO lands new role He said he’d be back in the equity release market in some form, and he wasn’t joking.

Kevin Conlon, the former CEO of SEQUAL, has taken on a role as the general manager of business and professional development at Domacom, a new equity release product provider.

Conlon was previously let go

by SEQUAL, after the association decided it no longer needed a CEO due to the vast reduction in the

KEVIN CONLON

market following the financial crisis.

Referring to Domacom’s products as “second generation” equity release products following the previous round of bank products, Conlon said the need for the market to extend its reach beyond traditional bankfunded and debt-based products was overdue.

“The number of reverse mortgage providers has fallen dramatically since the global financial crisis at the same time as demand from senior Australians continues to grow and a better solution had to be found,” Conlon said in a statement accompanying his appointment.

Domacom is a provider that enables owners of property to unlock equity in their homes by giving external investors the opportunity to purchase a partial interest in these properties.

Investors are offered as much equity as a borrower would like to release, and can take as little as 1% of a property’s ownership and spread their investment across multiple properties.

I THINK THAT HAVING EXPERIENCE WITH A LENDER IS GOOD TO BRING TO THIS [FRANCHISE] MODEL

Hardiman swaps Advantedge for Homeloans

JAMES HARDIMAN

LES MCDONALD

To oversee Homeloans’ credit underwriting function, utilising previous experience as head of credit at Advantedge

Retiring after eight years with Homeloans, and credited with introducing a broker-friendly ‘intelligent credit’ system

Homeloans achieved a coup in November when it lured Advantedge’s head of credit across to take up a new role as general manager of underwriting.

Formerly responsible for the credit function across PLAN, Choice and FAST’s new white label lending products, Hardiman is to replace the retiring Les McDonald. Hardiman will utilise his underwriting and management experience to oversee Homeloans’ ‘decentralised’ credit function.

McDonald leaves the company after eight years at the end of December, with chairman Tim Holmes saying he had been instrumental in changing the group’s approach to credit assessment and the way the group interacted with its clients and customers.

McDonald was responsible for introducing a national ‘broker-friendly’ credit model and a concept which he called ‘intelligent credit’ at Homeloans.

CAUGHT ON CAMERA 29

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IN FOCUS

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onnective brokers recently gathered on the Gold Coast for the aggregator’s ‘Mission: Possible’ conference. With keynote speakers including Mao’s Last Dancer author Li Cunxin, future tech guru Rachel Botsman, and speaker and entertainer Anh Do, brokers were left inspired to achieve their business building ‘mission’ through an expected tough 2013.

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Fiona Brown and Mark Haron

Justin Kinsey (Commonwealth Bank) and Kevin Agent (The Australian Lending & Investment Centre)

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SA Group (left to right): Les Harris, Michael Ferrier, David Kennewell, Paul Eadon, Richard Flint, Matt Parsons, Justine Hockley, Domenic Schiafone, Ray O’Hara and Steve Jacquier

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Andrew Mirams (Intuitive Finance), Marcell Midolo (Connective) and Ray O’Hara (OwnHome)

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Vase Marcevska (Pepper) and Jonathan Chen (REACH Mortgages)

Ric and Clint from Australian First Mortgage with Connective Director Murray Lees

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Simon Sutterby and the team at Geelong Financial Group with Leigh Scukovic from ANZ

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Domenic Schiafone and wife (ORA Lending Solutions) James Markwisk (Lifebroker) and Glenn Lees (Connective) Rob Horner and Allan Rowsell (Jack Horner Financial Solutions) Mark Seymour plays to the large crowd at the gala dinner Chris and Aaron from Citibank chat with Connective director Glenn Lees Murray Lees and inspirational presenter Li Cunxin

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View more photos from this event at brokernews.com.au/industry-events

INSIDER

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T

Once bitten, but still not shy

hought you’d heard the last of Wayne Ormond?

Well, not so fast.

Business Review Weekly recently published a contribution from former Refund Home Loans boss Wayne Ormond, outlining his advice to businesses dealing with bank lenders.

Ormond, who was at the helm of Refund when it was put into voluntary administration leaving its brokers hanging (and keeping the Australian Broker news pages filled), wrote in BRW that dealing with the banks was like “swimming with sharks”.

“I recently swam with sharks at a water park on the Gold Coast,” Ormond wrote. “Why am I talking about swimming with sharks? Well it’s the closest analogy I have to my experience in dealing with Australian banks in the business sector.”

Ormond partially blamed Refund’s “restrictive banking facility” and a “poor relationship” with his bank for the company’s downfall, and gives tips so others can avoid his fate.

Refund Home Loans was eventually sold to Homeloans, which picked up only 54 brokers

EVERYTHING COMES TO AN END, SOMETIMES FOR THE BETTER, SOMETIMES FOR THE WORSE after sending out 170 contracts, as well as a loan book worth more than $1.9bn.

Ormond warns business borrowers to do adequate preparation, and does say that if he had his time over again, he would engage an experienced commercial loan broker.

“I hate to say it but, everything comes to an end, sometimes for the better, sometimes for the worse. When it comes to the banks, make sure you’re prepared for both,” Ormond wrote.

Good advice. After all, Insider was perhaps naively prepared never to see Ormond’s face again, but now realises he should have been prepared for this other, more likely outcome.

YOU’D BETTER BELIEVE IT...

Insider had to have a chuckle while recently listening to Westpac chief economist Bill Evans outline his opinion on why there is unlikely to be a house price crash in Australia.

Evans – and many other high level executives – regularly have to defend their position and the Aussie housing market at gatherings of international bankers and economists overseas.

After all, on paper, Australian housing looks overvalued, and such international pundits may feel they’ve gained some wisdom having missed their own housing crash the first time.

But Evans – who is in the business of scrutinising the fundamentals of the housing market on a daily basis – can rattle off an impressive blow-by-blow defence of housing values.

And so he did. The usual points came up – population growth, demand vs supply – and Insider, along with the Australian industry audience, were a friendly audience.

However, Evans has the sense of humour to drop a final joke at his own expense. He noted that he was lucky to actually believe in the case for Australian housing’s resilience – after all, he admitted that should he think otherwise while working at a bank with much of its assets tied up in the housing market, it may be quite a career-limiting move.

Insider hopes for his sake that Evans continues to find a rosy picture for Australian housing.

BANKS, BAILIFFS AND OPTING OUT Insider thinks that although Aussie borrowers like to whinge, they should be thankful we aren’t in the dire straits faced by some European countries at present.

A woman in Spain recently jumped to her death from her fourth-floor apartment as bailiffs approached to evict her after she failed to pay her mortgage.

The 53-year-old – who was reported to have worked at a local bus depot, was married to a town councillor and had a 21-year-old daughter – chose suicide rather than accept eviction from her home.

Spain’s mortgage rules allow for repossessions and evictions

in such cases, while these mortgage borrowers are still liable to pay the outstanding value of the loan.

More than 350,000 people have been caught in this trap since the 2008 property crash, with about 500 evictions being carried out a day, according to local reports.

Recent legal opinions have argued for Spain’s laws to be brought into line with the rest of Europe, where banks are unable to be as punitive in their contracts.

An Aussie-style EDR regime would have no doubt delayed matters, Insider thinks.

DIRECTORY brokernews.com.au

AGGREGATOR / WHOLESALE BROKER

Choice Home Loans 1800 188 288 www.choicehomeloans.com.au Page 5

FINANCE

Semper Capital Pty Ltd 1800 SEMPER (1800 736 737) www.semper.com.au enquiries@semper.com.au Page 21

LENDER

ANZ 1800 812 785 www.anz-originator.com.au Page 32 Homeloans Ltd 08 9261 7000 www.homeloans.com.au Page 13 Liberty Financial 131 133 www.liberty.com.au Page 3 & 23 National Australia Bank www.nabbroker.com.au Page 11

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NCF Financial Services Pty Ltd. 1300 550 707 www.ncf1.com.au Page 6

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

Versara 1300 CAVEAT (228 328) www.versara.com.au Page 4

TECHNOLOGY PROVIDER

NON BANK LENDER

Rent4Keeps 1300 763 020 www.rent4keeps.com.au Page 15

REAL ESTATE

Look Property Group Residential Project Sales & Marketing 03 9827 8288 www.lookpropertygroup.com.au Page 31

SHORT TERM LENDER

Stargate Group 1300 723 613 www.stargategroup.com.au Page 25

WHOLESALE

Resimac 1300 764 447 www.resimac.com.au Page 7 & 17

OTHER SERVICES

McCombe Finance 0409 566 822 Page 8 Trailerhomes 0417 392 132 Page 27

Interim Finance 02 9982 2222 www.interimfinance.com.au Page 2 Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

To advertise in Australian Broker call Simon Kerslake on 02 8437 4786