Australian Broker 11.02

$4.95 POST APPROVED PP255003/06906

FEBRUARY 2014 ISSUE 11.02

+INSIDE + NEWS A look at what’s been making headlines P4

Sam Boer:

FORGING AHEAD FOR 2014

Commonwealth Bank’s general manager of broker sales says the bank remains committed to helping brokers gain efficiency

T

he past few months have seen some big changes at Commonwealth Bank. Sam Boer, general manager of broker sales, service, cross sell and business productivity improvement, has said the year ahead may see the bank staying the course in its strategy, but that doesn’t mean CBA will be standing still.

FULL STORY PAGE 18

+ ANALYSIS SYMPATHY FOR THE WATCHDOG?

ASIC has been taking fire from all sides P10

+ ANALYSIS THE AGE ISSUE

Brokers worry older borrowers are being locked out P14

+ MARKET TALK NEW HOPE FOR THE NEW YEAR

A comprehensive look at what 2014 has in store P20

+ BEST PRACTICE CROSSING CULTURAL BOUNDARIES

How to communicate with overseas investors P22

+ CAUGHT ON CAMERA FBAA’S NATIONAL CONFERENCE P29

NEWS 2

brokernews.com.au

WHAT THEY SAID...

NUMBER CRUNCHING

SATISFIED CUSTOMERS?

MARK HEWITT

How the majors rate for mortgage and term deposit customer satisfaction

“The non-majors have been agile and focused on service delivery, targeting specific borrowers and using very attractive fixed-rate deals to great effect” P4

ANZ 79.4%

FAST FACT

77.4%

0.9%

CBA 78.3%

The rise in underlying inflation for the December 2013 quarter.

The HIA claims this indicates interest rates will remain steady

86.2% NAB 78.2% 85.7%

Source: ABS

Westpac 79.5%

PAUL ELDRIDGE

“The industry needs to be better at … promoting the fact that it exists and that it is a career opportunity” P6

81.2% Mortgage satisfaction Term deposit satisfaction

GREG MEDCRAFT

Source: Roy Morgan

“Recent media reports have tried to cast doubt on ASIC’s good work and smear our staff and culture” P12

MORTGAGE ENQUIRIES ON THE RISE

% YEAR-ON-YEAR (Q4 2013 VS Q4 2012)

% QUARTER-ON-QUARTER (Q4 2013 VS Q3 2013)

Overall credit demand

0.4%

6.3%

Credit card enquiries

2.4%

4.1%

Personal loan enquiries

-1.4%

8.3%

Mortgage enquiries

15.3%

9.3%

SUBURB

MARIO REHAYEM

“It is an ageing industry, and what we’re having is the industry stalwarts slowly but surely exiting the industry, and if we’re not careful we’re not going to be able to harness that experience” P26 Source: VEDA

NEWS 4

brokernews.com.au brokernews.com.au

Mortgage brokers in hot demand

EDITOR Adam Smith PUBLISHER Simon Kerslake COPY & FEATURES JOURNALIST Amy Rosenfeld

■ There seems to be an underlying sentiment in

mortgage broking that the job market is pretty bleak for new entrants, considering rising barriers to entry and the difficulty of building up trail income. But a recruiting agency has touted the field as a hot job market for 2014.

Hays Quarterly Hotspots revealed a list of skills in demand for the first quarter of 2014, identifying mortgage broking as one of the areas with strong job opportunities.

“Mortgage Brokers continue to be sought after due to demand from investors and first home buyers,” said the report.

It also noted that with changing demographics in the Australian property market, and increasing interest from Asian investors, bilingual brokers are in hot demand.

“Increased sentiment in commercial property in the vital Sydney & Melbourne CBD markets will counteract tougher conditions in those affected by the resource led economies,” the report said.

An increase in mortgage demand is also driving a need for more credit assessors and mortgage admin staff. “There has been an increase in demand for the preparation of mortgage documents due to the competitive interest rates in the market, banks competing for business and the new legislation around VEDA – where banks will be able to request information on behalf of the customer regarding failed credit checks.”

Lenders are seeking to poach top-performing mortgage administrators from rival banks to grow their market share, according to the report.

DID YOU KNOW? Of the 410 submissions received in the ASIC inquiry, 70 were confidential, 10 were received from academics and academic institutions, and 45 from industry bodies, associations and consumer groups

Low-docs in the spotlight ■

The final submissions to the Senate committee’s review on ASIC’s performance are in, and low-doc and no-doc loans are a hot topic.

At last count, more than a third of the 400-plus submissions received were related to low-doc and no-doc loans.

The latest submission, by Rocco Cassaniti, hit out at ASIC for failing to act after he alleged that incomes were “grossly inflated” in borrowers’ low-doc loan applications in order to secure funding.

“Simply these matters are shrouded in legal protection for banks, hurting the livelihood of the unsuspecting citizen in the process,” wrote Cassaniti.

“With so much evidence against bank inappropriateness, why do we have an organisation who does not protect the consumer?”

PRODUCTION EDITOR Roslyn Meredith ART & PRODUCTION DESIGN MANAGER Daniel Williams DESIGNER Loiza Caguiat SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Anna Farah

Mark Hewitt

Non-majors gobbling up fixed-rate market share

TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Adam Smith tel: +61 2 8437 4792 adam.smith@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au

■ Non-major lenders tripled their market share of

new fixed-rate loans in the final quarter of 2013, the latest statistics show.

AFG’s latest Competition Index shows that between February and November 2013 non-major lenders’ share of the fixed-rate market soared from 13.6% to 42.3%. This share fell back slightly in December to 38.2%.

Non-major lenders making significant inroads into the fixed-rate market included ME Bank, which peaked at 13.8%, ING on 7.4% and Suncorp on 6% of all new fixed-rate loans (November figures).

Non-major lenders’ overall share of all new home loans peaked at 27.7% in November 2013, the highest figure AFG has recorded in the three years since it has been monitoring competition. This figure compares to an overall share of 21.7% in November 2012 and 18.5% in November 2011.

Mark Hewitt, AFG general manager of sales and operations, says 2013 saw competition heating up between lenders in a way not seen since before the GFC. “The non-majors have been agile and focused on service delivery, targeting specific borrowers and using very attractive fixed-rate deals to great effect,” said Hewitt.

“While the loan books of major lenders ensure their continued dominance, it is great news for borrowers that they now have much wider choice.”

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, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Auckland, Toronto, Denver, Manila, Singapore 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 Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008.

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

MARKET SHARE BATTLE: MAJORS VS NON-MAJORS SHARE OF FIXED-RATE LOANS

81.1% 61.8% 18.9% JAN 2013

38.2% % 0.63

Majors

Non-majors

DEC 2013 Source: AFG

NEWS

brokernews.com.au

6

Training program looks to battle youth gap

WORLD NEWS UNITED STATES OF AMERICA

■ Training provider Intellitrain recently rebranded itself as Australis

MAJOR BANK TO SLASH 950 JOBS Citigroup in the US will cut about 950 mortgage jobs in 2014, according to the Charlotte Observer. The cuts come in the wake of the bank’s sale of the servicing rights for about 64,000 Fannie Mae residential loans.

Almost 20% of total mortgages serviced by Citigroup were included in the sale, which saw Citi offload the majority of its delinquent-loan services.

The loans had an outstanding principal balance of about US$10.3bn, according to the Observer.

The cuts also come in the wake of disappointing fourth-quarter earnings for the lender. Although Citigroup posted a Q4 net income of US$2.7bn, its per-share earnings were 9 cents lower than projected, the Observer reported. The bank attributed the disappointing earnings in part to last year’s precipitous drop in refinance activity.

Workers affected by the layoffs can apply for other job openings at Citigroup, a company spokesman said.

Those who do leave are eligible for 60 days of pay and a severance package based on their years with the company. The lender also plans to offer job placement support to affected employees.

FAST FACT

2.6% The nationwide vacancy rate for December, a 0.4% increase month-on-month and a 0.3% increase year-on-year Source: SQM Research

College, and with the rebrand has launched a pilot program that aims to attract new brokers to the ageing profession.

Australis CEO Paul Eldridge said the college had actively been out in Australian communities, running career nights and information booths in local shopping centres to promote broking as a career path.

“That’s something the industry needs to be better at doing, promoting the fact that it exists and that it is a career opportunity.”

The MFAA has previously warned of a “youth shortage” in the broker profession, with figures showing membership under the age of 30 is down to just 6%.

Australis College’s new-entrant program is designed to give new brokers their Cert IV qualifications and then place them in work experience with partner organisations, including RAMS, Choice and Loan Market.

For the next two years the brokers will then receive mentoring, CPD training and eventually their Diploma in Finance and Mortgage Broking Management.

An issue that has often deterred new entrants to the industry, Eldridge said, is the requirement to fund your own costs for an initial period of six months to one year while receiving little or no income.

Being an approved VET FEE-HELP program means Australis’s program can help mitigate these costs.

“It means they have no education expenses for the first two years; it’s all absorbed by VET FEE-HELP. So it’s been a bit of a game changer and has meant we can actually give people some real quality training in their first two years and people can defer the payment to pay back through their taxes.”

Paul Eldridge

CANADA ASSOCIATION VETERAN STEPS DOWN

A Canadian mortgage industry stalwart has stepped down from his position as the vice president of the Canadian Association of Accredited Mortgage Professionals (CAAMP), the country’s peak body for the mortgage industry.

“It is with personal regret, but best wishes, that I announce the retirement of CAAMP’s VP of member services and former executive director of CIMBL [Canadian Institute of Mortgage Brokers and Lenders], Michael Ellenzweig, from full-time employment this June,” CAAMP’s chair, Paul Kozan, said. “Michael’s departure signifies the end of an era for the Canadian mortgage industry.”

Ellenzweig is a past CAAMP Mortgage Hall of Fame inductee and has held the position of VP, member services, for over 15 years. He has also had a CAAMP award – the CAAMP Michael Ellenzweig Outstanding Service Award – named in his honour.

“A mentor, a colleague, a leader and a friend, Michael has touched many people throughout his career,” Kozan said.

Bank profits subdued in 2014 ■ The Big Four are constantly the target of complaints over massive

profitability, but that may be set to change. Profit growth is likely to be “modest at best”, according to ratings agency Fitch in its 2014 Outlook: Australian Banks report.

Strong loan competition is set to put pressure on bank margins, along with high impairment charges resulting from asset-quality deterioration. However, this is likely to be offset, at least in part, by high credit growth and reduced funding costs in 2014.

“Australian bank profitability is likely to remain solid through 2014, providing a buffer to absorb Fitch’s expected asset-quality deterioration,” wrote analysts Tim Roche and Andrea Jaehne.

“The banks generally have substantial buffers in addition to profit – provisions and capital – to absorb losses in the unlikely scenario that they exceed pre-provision operating profit,” said the report.

While household leverage remains high, it is “modestly” declining, which could put banks in a vulnerable position should unemployment levels or interest rates rise significantly.

“Cost management should remain a key focus for the Australian banks. Wealth management and measured expansion into Asia provides earnings diversification for the larger banks.”

NEWS

brokernews.com.au

8

Smart thinking can shore up your trail book – Davis

Central banks to blame for bubble talk, claims economist

■ Many brokers struggle to grow their trail book once it reaches a

■ CBA’s chief economist, Michael Blythe, has

placed the blame for the current housing market squarely on the shoulders of the central banks.

Record low interest rates determined by central bank policies are making loans more affordable but fuelling higher house prices, Blythe told the AFR. “Concerns about a housing ‘bubble’ have lifted in tandem with dwelling prices,” said Blythe.

“The risk of a speculative price overlay highlights the concerns about rising investor interest in the housing market. But investor interest is a rational response to the environment created by central banks.

“Their actions have encouraged a search for yield, lifted risk appetite and created an environment where asset prices rise,” he said.

Figures show the dollar value of home loans rose 1.7% in the month of November, 26% higher than the same period in the previous year and the fastest growth in the past four years.

In order for the housing market to form a true bubble, however, Blythe says “rising prices need to be backed up by an acceleration in housing credit growth over a relatively short period; an easing in lending standards; and an expectation that prices keep rising”.

Latest figures show dwelling prices up 11.8% from mid-2012 and 3.5% above their previous peak in 2010.

FAST FACT

$17.7bn The amount of unrecovered tax debt in 2012/13, more than 60% of which is owed by small businesses

certain point, says one top broker, but with a little smart thinking brokers can reduce their run-off and increase their profits.

Mark Davis, principal of the Australian Lending & Investment Centre (ALIC), says that due to the business model, the run-off from his trail book is significantly lower than many other brokers’.

“When your book grows to a certain point, the amount of work that you’ve got to do just to maintain those customers is why you find a lot of books don’t grow much… They’re really only reaching a break-even point year-on-year with minimal movement.”

Davis estimates his run-off to be about 2% on over $600m of funds under management that he individually holds, whereas he says most brokers and banks have a rate of around 15–18% annually.

This is partly due to the fact that ALIC is a relatively new business, says Davis, having been in operation for just over four years, but it is also due to the type of clients his business has and the way it deals with them.

“At ALIC we work specifically with clients that want to invest and create wealth and use their money with purpose. We’re in a situation whereby those clients are always going to be wanting to do something – whether it’s buying, selling or gearing, they’ve got an active investor mindset.”

Davis also keeps in regular contact with his client base, including face-to-face meetings two to three times per year.

Source: ATO

BANK BUSHFIRE EFFORTS LAUDED ■

The ABA has welcomed the relief offered by banks in the wake of bushfires that have devastated the Perth Hills area.

ABA chief executive Steven Munchenberg praised individual banks for offering emergency relief packages to assist those affected by the bushfires.

“Banks understand this is a difficult and stressful time for people whose homes and livelihoods have been destroyed, damaged or affected by the fires. It’s not a time when people want to be worrying about their finances,” he said.

All four major banks have announced disaster relief packages that include options such as: • deferring home loan repayments • restructuring business loans without incurring fees • giving credit card holders an emergency credit limit increase • providing payment holidays on credit cards • financing personal loans at a discounted fixed rate • waiving interest rate penalties if term deposits are drawn early • deferring repayments on equipment finance facilities

Get your customers moving

To find out how to get your customers moving into their next property, call us one 1800 678979 or visit depostipower.com.au.

Deposit Power - Australia’s leading provider of deposit guarantees

depositpower.com.au Deposit Power Guarantee is issued by CBL Insurance Ltd. Deposit Power PTY Ltd ABN 49 160 226 442 as Authorised Manager for CBL Insurance Ltd. Deposit PowerÂŽ is a registered Trademark of CBL Insurance Ltd.

ANALYSIS 10

brokernews.com.au brokernews.com.au

WATCHDOG under the spotlight Australia’s financial services regulator has found itself taking fire from all sides

11

brokernews.com.au

I

t’s been a rough few months for ASIC. The finance industry watchdog, used to being the one doling out the punishment, is seemingly copping a caning from all sides. A Senate inquiry into ASIC’s performance has raised some uncomfortable questions, and has put the regulator on the defensive. It’s been accused of waste, ineffectiveness and – perhaps most seriously – of employing bullying tactics, all allegations ASIC has vehemently denied. So who’s been piling it on ASIC, and what have they been saying?

DID YOU KNOW? In the past three years, ASIC has been responsible for:

4,000

=100

INSTITUTIONAL SURVEILLANCES

AFTER SCALPS

The Senate inquiry received 410 submissions on ASIC’s performance, and many of them were less than flattering. A common theme among submissions was the collapse of Trio/Astarra, which was mentioned in 20 submissions. The failure of Storm Financial received 11 submissions, and negligent advice relating to Commonwealth Financial Planning resulted in five. One of the more damning accused ASIC of being a bully “after scalps”.

A former financial planner and CEO of Professional Investment Services, Robbie Bennett, slammed ASIC for “an unwillingness to communicate and a desire to bully”.

Bennett’s submission claimed the regulator was “not willing to participate in discussion and resolution – rather they are after ‘scalps’ and the perception of being an active enforcer (after the fact and to the wrong parties)”.

Bennett claimed extensive industry experience beginning in 1986, outlining a number of encounters with ASIC in which he claimed the regulator showed a lack of understanding and an unwillingness to listen.

The former CEO alleged he had raised issues regarding failed financial companies Storm Financial and Westpoint on various occasions with ASIC representatives, but that the regulator had failed to act.

THEY ARE AFTER ‘SCALPS’ AND THE PERCEPTION OF BEING AN ACTIVE ENFORCER – R OBBIE BENNETT

554

=10

INVESTIGATIONS

168

BANNED PEOPLE

=2

Bennett claimed inconsistency in the way the regulator prosecuted offenders, alleging that ASIC merely looked to prove a point.

“Advisers and AFSL holders are seen as easy scapegoats and quick fixes – whilst the fundamentals remain unaddressed and flawed.

Surely liability for failed products lies with the product manager who has the control, responsibility and ultimate benefit – not the intermediary,” he wrote.

“Product providers are not held accountable for their actions. If the product providers were held accountable for the information in their documents and what they do with the clients’ money most issues could be avoided. Remembering, remove product failure and you remove 98% of bad advice.

Failing to ‘dot an i’ or ‘cross a t’ is not what causes financial losses.

ANALYSIS 12

brokernews.com.au

RECENT MEDIA REPORTS HAVE TRIED TO CAST DOUBT ON ASIC’S GOOD WORK AND SMEAR OUR STAFF AND CULTURE – G REG MEDCRAFT

“More regulation and red tape is seen as the only solution – on the basis that the end consumer is the ‘beneficiary’ of this increased regulation. Increased regulation that leads to consumers being provided with over 100 pages of advice is not in the best interests of consumers,” said Bennett.

INACTION ACCUSATION

And perhaps even more disturbing, an anonymous whistle-blower claimed that the regulator had ignored warnings of wrongdoing by huge financial institutions.

A former ASIC and J.P. Morgan employee said he had tried to discuss alleged dodgy dealings at J.P. Morgan, but that ASIC had ignored him.

The dealings included misleading reports being provided to head office, and trades not booked into systems and only being tracked by paper-based legal agreements – which would be torn up if required, therefore leaving no trace, said the man, who worked within the team that regulated Australia’s stock exchange.

The subsequent submissions from the whistle-blower explained how ASIC internal documents had confirmed the matter was within its jurisdiction and of high regulatory impact, but he concluded that “since it wasn’t ASIC itself which had made the discovery nothing would be done”.

He said: “ASIC even finalised the complaint one month before I even met ASIC staff to discuss the matter and provide information.”

To back up his claims, the man provided to the Senate copies of ASIC’s final assessment and online complaint form regarding his whistle-blowing report.

According to the copied documents, ASIC confirmed the allegations against J.P. Morgan were within its jurisdiction as they involved “fraud, dishonesty or gross negligence” and more than 25 people were likely to be affected. It also found that if J.P. Morgan’s alleged misconduct was proven, it would attract a substantial penalty.

However, ASIC concluded there was insufficient evidence to investigate.

In his second submission, the man also said that while he was an ASIC employee between 2010 and

2013 he had prepared documents for ministers, the Senate and Parliament on instruction from the corporate watchdog to avoid or remove content that could lead to difficult questions.

“The Senate should be aware that there is a culture within the agency that seeks to maintain appearances, shift blame, is uncooperative, and obscures issues.”

The man said that on one occasion ASIC did not investigate a company that had failed to repay investors, despite the man raising areas of concern to an ASIC senior manager. The reason ASIC did not investigate was that “no investor had complained to ASIC”, he said.

On other occasions he alleges he was berated by a senior manager for discussing ASIC’s poor assessment standards, and who reportedly said “ASIC didn’t care about such matters and that another regulator could bother about them”.

Another hot topic in the ASIC-bashing submissions was the regulator’s treatment of low-doc loans. At last count, more than a third of the 400-plus submissions received related to low-doc and no-doc loans, and some accused ASIC of failing to take adequate action to stop bad lending practices.

The latest submission, by Rocco Cassaniti, hits out at ASIC for failing to act after he alleged that incomes were “grossly inflated” in borrowers’ low-doc loan applications in order to secure funding.

“Simply these matters are shrouded in legal protection for banks, hurting the livelihood of the unsuspecting citizen in the process,” wrote Cassaniti.

“With so much evidence against bank inappropriateness, why do we have an organisation who does not protect the consumer?”

BEING CHAIRMAN OF IOSCO DOES MEAN I HAVE TO TRAVEL FROM TIME TO TIME, BUT I THINK IT IS IMPORTANT AND BENEFITS AUSTRALIA – G REG MEDCRAFT A BRIDGE TOO FAR?

ASIC has also been taken to task over chairman Greg Medcraft’s travel expenses. Facing the ire and scrutiny of politicians and media, the regulator released Medcraft’s travel expenses for 2013, and it did little to quell populist uproar. The total travel costs for Medcraft and his staff between January and November last year amounted to $246,490.99.

The total costs for Medcraft’s business-class flights, rail passes and transfers came to

ANALYSIS brokernews.com.au

$98,465.19. His hotel stays came to $19,101.16 and other travel costs to $10,474.39.

Staff travelling with him – also in business class – made up the remainder of the amount, with $91,363.53 worth of air and rail travel, including transfers. They spent $17,000.57 on hotel stays and $10,086.15 on other travel expenses.

Last year, Medcraft spent at least 74 days – around a fifth of the year – travelling overseas for conferences and meetings, with the majority of the places visited in his capacity as chairman of the International Organisation of Securities Commissions (IOSCO).

Medcraft has been criticised for accepting the role as head of IOSCO, which he was elected to early last year – in particular his taxpayer-funded business-class travel.

His chairmanship of IOSCO has riled politicians and regulators, who say he should spend less time jetting off overseas and concentrate on Australia’s problems, in particular those facing ASIC. In releasing the figures, ASIC said it had a number of criteria when assessing whether proposed travel was necessary. These included the available budget, direct relevance to a demonstrated domestic priority, and the meeting agenda. Medcraft also defended his chairmanship of IOSCO, saying it benefited Australia.

“IOSCO is a body that represents over 120 jurisdictions around the world, 95% of the globe’s capital markets, and is the key reference group for the G20 leaders and other policy-makers,” said Medcraft.

“Being chairman of IOSCO does mean I have to travel from time to time, but I think it is important and benefits Australia.

“So many of the issues facing Australia are global issues and need a global approach. Also, we want to make the global initiatives work for Australia, rather than against us.”

Medcraft also took to YouTube to defend ASIC’s culture, labelling media treatment of the regulator a “smear”: “Recent media reports have tried to cast doubt on ASIC’s good work and smear our staff and culture,” he said. “These reports coincide with the Senate inquiry into our performance.”

He gave a list of key accomplishments by ASIC in the past three years, including 4,000 institutional surveillances, 554 investigations and banning 168 people.

“And, most critically and crucially,” emphasised Medcraft, ASIC “obtained over $349m in compensation for consumers.”

It’s unclear how ASIC’s report card will read when all is said and done. But, in the meantime, the watchdog finds itself in the unfamiliar – and no doubt uncomfortable – position of starting 2014 by playing defence.

349M

13

ANALYSIS 14

brokernews.com.au

Too old to borrow?

Pundits warned that the NCCP could inadvertently lock out older borrowers.

Has this already come to pass?

W

THE GREYING OF AUSTRALIA According to the Australian Bureau of Statistics (ABS), 14% of Australians are 65 or older, and this is expected to reach 23% by 2056. This will see an increase in the percentage of adults (currently 4.6%) caring for their own parents or other family members outside of spouses or children.

25 20 PERCENT

hen the NCCP came into play, many mortgage industry stakeholders warned that a potential side effect of the legislation could be locking older borrowers out of credit. Now, brokers have claimed this unintended consequence has come to fruition, and are calling on lenders to ditch the hard and fast rules on lending to older borrowers, saying it amounts to age discrimination.

Rael Bricker, managing director of House + Home Loans, says he can understand the banks are trying to protect themselves, but feels some ‘age policies’ have taken the matter too far.

“I think it should be viewed much more on a case by case basis, whereas I think lending managers are all so nervous about being on Channel 7 chucking someone out of their house when they’re 65 that they’re being more cautious than they need to be,” says Bricker.

Allan Faint, director of Home Finance Centres of Australia, says since the introduction of NCCP and the end of the GFC, lenders refuse to make exceptions for financially sound older borrowers.

“It’s not right that somebody in their 50s can’t get a loan. The only thing that’s changed is the terminology. There’s nothing specific in the legislation that says somebody in their 50s can’t get one but the terminology has changed so that it can be twisted that way… And I’m sure it’s got nothing to do with fact that 10-years’ worth of loan repayments isn’t really a great profit margin to a lender when you can get a much greater profit from somebody else.”

Bricker, however, argues that the average loan only lasts six years before it is refinanced, and therefore doubts the policies come down to the banks’ bottom lines.

“But from a bank perspective and what they view as responsible lending, they’ve got to say ‘What is the person’s exit strategy?’ If they don’t have enough super to cover their mortgage then they’re saying that selling the house in 10 years’ time is not a valid exit strategy,” says Bricker.

Faint is currently in his 50s, and says he is concerned lenders would be reluctant to let him refinance his loan because of his lack of super, despite being a long way off retirement.

“A lot of small business owners and self-employed people don’t have super, but those people in particular are being told they can’t get home loans because they’re in their 50s. It used to be considered normal and practical that once you got up to a certain age and got up to retirement and

15 10 5 0

2014

2056

15

brokernews.com.au

I THINK LENDING MANAGERS ARE ALL SO NERVOUS ABOUT BEING ON CHANNEL 7 CHUCKING SOMEONE OUT OF THEIR HOUSE WHEN THEY’RE 65 THAT THEY’RE BEING MORE CAUTIOUS THAN THEY NEED TO BE - R AEL BRICKER your house was too big or you weren’t going to be able to afford it then you downsize to something smaller.”

Bricker agrees, adding that upgrading your property at 55 in a high growth area with a look to downgrading again in 10 years’ time should be considered a valid strategy if that person has a history of buying and upgrading property.

“If they’ve doubled the value of their equity over that 10 year period it’s actually not a bad strategy.

Do I think they need to be more lenient? No, but I think they should look at a person’s history. If it’s their first home they’ve ever bought… well, why?

But if they’ve upgraded their home every three or five years then they’ve got a history of doing that and there’s nothing wrong with that they understand what they’re doing.”

Lenders seem to be happy to fund borrowers aged 50+ in buying investment properties, says Bricker, but he recounts one story of a woman in her 60’s simply wanting to switch from a low-doc to full-doc loan.

“Not increase her debt, just refinance. It was the same lender, full-doc and they said ‘Oh because you’re in this age group and you’ve got no super we can’t do it’. So they actually left her on a higher interest rate even though they couldn’t justify going to a lower interest rate. Their policy says she’s 62 and they’ve got to work it out over 20 years and she doesn’t service.”

Faint has similar stories of borrowers stuck in financial limbo due to NCCP changes, and says it’s time lenders addressed the discrimination.

“Something needs to be done about it. Nobody is willing to say it’s because of age discrimination and it drives me nuts.”

AGEING, BUT NOT OUT One of the key arguments in lending to older Australians is income, but as generational trends change, people are staying in the workforce longer.

A recent found a remarkable 10% of Baby Boomer workers intend to continue working right up until death.

The COTA SA study also found some 20% expect to work at the least until the age of 71, while 8% of South Australians born between 1945 and 1964 would like to stay on part time or casually. Less than half, (40%) said they would like to retire between the typical retirement age bracket of 61 to 65.

Financial necessity may be the chief motivator for a small sector of the boomers, but for the majority of respondents work was an enjoyable experience made better by health and flexible hours.

Notable findings included: • Approximately 40% of workers said they would prefer a phased withdrawal from the workforce • 20% wanted a clear-cut end to their working life • Almost half of workers were not confident about their financial stability in retirement – up to 44% expected they would need an age pension

OLDER AUSTRALIANS FACING UPHILL BATTLE Home lending is not the only area where older Australians can face discrimination. One in ten Australian businesses have an age above which they will not recruit, according the Australian Human Rights Commission – and that age is 50.

A study conducted last year by the Australian Human Rights Commission found businesses were reticent to hire older workers.

A third of the business leaders surveyed said older workers ‘did not like being told what to do’ by someone younger, and were more forgetful, while a fifth said older workers preferred not to use technology, had difficulty learning new things and did not want to work long hours.

Fifteen per cent said older workers ‘complain a lot’, and 11% felt older workers were ‘grumpy or short-tempered’.

The survey also found that one in five bosses would not encourage job applications from older workers and that older women felt more discriminated against than older men.

OPINION 16

brokernews.com.au

Inquiry a chance to be BOLD WealthMaker’s Michael McAlary provides a snapshot of big-picture issues for the financial services inquiry of all products, including deposit, investment and lending products, to consumers and businesses would be done through independent third parties.

Limiting ADIs to manufacturing product would go a long way towards addressing the moral hazard issue as no institution should be too big to fail. It might lead to a more level playing field among ADIs in terms of access to retail and wholesale funding, while increasing competition and product innovation.

Importantly, consumers would get independent home loan and investment advice, which isn’t possible under today’s conflicted situation in which ADIs own differently branded mortgage brokers, aggregators or dealer groups. It could also help foster development of the corporate bond market as the banks would be keen to develop new product manufacturing income streams.

The current diversified businesses are complex and therefore inherently risky. A simpler business model would enable bank management, boards, investors and regulators to better understand the risks.

A

robust financial services system that everyone has confidence in is an important pillar of a democracy.

The federal government’s support of the banking system during the GFC was necessary, as the counterfactual of financial system failure would have been far worse, as Iceland can attest.

THE WORLD IS A VERY DIFFERENT PLACE FROM WHEN THE PREVIOUS FINANCIAL SERVICES INDUSTRY INQUIRIES WERE HELD INVESTOR BEHAVIOUR

Currently, institutional and retail investors buy bank shares with their ears pinned back because their investment and returns are in effect guaranteed.

Longer term, the banks would be treated as an asset class like infrastructure. Retail and institutional investors, either directly or through S&P/ASX 200 Index-based investing, would seek out other asset classes because the banks would comprise less of the benchmark index. There would be less institutional investor demand for bank shares, helping Australia to address its capital shortage to fund major infrastructure projects and reducing reliance on foreign investors that comes at a premium.

MORAL HAZARD

The moral hazard debate has been liberated by the federal government’s move from the implicit to explicit guarantee of retail deposits and whole funding lines even though the banks paid for these guarantees. It had been the elephant in the room for many years, but now the Financial Services Industry Inquiry (FSII) has the opportunity to address the legacy issues that are continuing to impact on consumers, taxpayers, investors and businesses today. Some of the flow-on implications include a change in investor behaviour and a misperception that the financial services sector can be a major driver of economic growth. It is also a reason, along with quantitative easing, for the misallocation of the capital flows.

This moral hazard debate goes to heart of the role of an ADI. They are mobilisers of capital, and their return on equity should track credit growth, reflect changes in their capital base, productivity improvements and considered credit risk taking.

NEW WORLD

SEPARATE PRODUCT MANUFACTURING FROM DISTRIBUTION

Given their perceived status as ‘too big to fail’, there has been media commentary that the major banks should be broken up.

The real question, however, is whether an ADI’s role should be limited to product manufacture. If their mandate was limited to mobilising deposits and providing lending products, then distribution

Michael McAlary, CEO WealthMaker Financial Services (www.wmfs.com.au)

The world is a very different place from when the previous financial services industry inquiries were held. These inquiries resulted in the deregulation of the financial services industry, and the changes went hand in hand with other macro and micro economic reforms. We have now lived with a deregulated environment for 30 years and it has generally served us well, but today the challenges are different. Australia is now part of a global economy; there is an ageing population, a drive for productivity improvements through offshoring and outsourcing, and the internet is delivering new and exciting opportunities. The FSII can go for incremental changes that may only serve the current players, or it can be bold and determine a framework that supports Australia’s future economic growth.

NEWS 18

brokernews.com.au

CONTINUED FROM PAGE 1

WHENEVER YOU START TALKING ABOUT PROCESS EFFICIENCY, BANKS ARE QUICK TO POINT THE FINGER AT BROKERS AND VICE VERSA. I’M NOT INTERESTED IN THAT

Sam Boer:

FORGING AHEAD FOR 2014 Commonwealth Bank’s general manager of broker sales says the bank remains committed to helping brokers gain efficiency

O

ne can hardly discuss Commonwealth Bank’s relationship with the mortgage broking channel without discussing Kathy Cummings. Cummings announced in November that she would move on from her role as executive general manager of third party and mobile banking at CBA. Few could dispute Cummings’ influence in the channel, and her decision to move on amounts to the departure of one of the industry’s most high-profile personalities.

But Boer said the leadership transition had been a smooth one, largely due to the quality of the team Cummings had in place.

“Kathy’s been in the industry so long, and it’s tremendous the business she’s built and the relationships she’s had in the industry, and the impact both internal and external. So the transition, whilst it was a bit of a change, she’s

SAM BOER

trained us up well. When I look at the broader team, at the amount of knowledge and industry experience that sits in the third party team at CBA, I believe it’s second to none. So it’s been a pretty seamless transition.”

While Cummings may have moved on, her strategies remain vital to the bank’s goals in 2014, Boer said. Rather than a wholesale rework of strategy, Boer said 2014 would see CBA reviewing and tweaking the way it goes about implementing its strategy.

“We set our strategy a year ago, and strategy doesn’t change just because of a change of leadership. But there are a few tactical changes we can do, and we already have a number of those things in the pipeline.”

And this doesn’t mean the bank will remain stagnant, Boer said. He mooted a number of initiatives CBA planned to launch in the year ahead that he said would deliver benefits to the broker channel.

“We have a number of initiatives in 2014 that – when they come online – I think the broker market will see as a refreshing change. I don’t want to give away all our trade secrets, but we have a few game changers as well, which I think will take our broker partnership model to another level,” Boer said.

“We’re really excited about the opportunities in front of us, and showing both the bank and the market that we have a lot more to offer the industry.”

THE DRIVE FOR EFFICIENCY

One of the key strategies that will remain in place, Boer said, is the drive towards greater productivity in the channel. Boer said productivity remained an

NEWS 19

brokernews.com.au

important goal for the bank, though he conceded it could be a contentious subject.

“I’ve been talking to brokers for some time now about the productivity challenge, and I still believe that’s the biggest challenge facing the industry,” Boer said. “Now, some people when they hear that will probably say, ‘Here we go again’. But what we’ve seen – and we’ve learned a lot from our industry workshops with our broker partners – is that there’s clearly an underinvestment in process excellence. There’s still a lot of waste in the system.”

WE HAVE A FEW GAME CHANGERS … WHICH I THINK WILL TAKE OUR BROKER PARTNERSHIP MODEL TO ANOTHER LEVEL Boer said he realised many brokers chafed at the idea of being told they weren’t working as efficiently as they could be. But for Boer the productivity challenge is not about finger-pointing.

“I think it’s been a bit of a blame thing.

Whenever you start talking about process efficiency, banks are quick to point the finger at brokers and vice versa. I’m not interested in that.

Instead, let’s all get on the same page as to where the opportunities are, because I believe if we can improve it helps brokers improve.”

While processing efficiency may be a sore spot for the channel, Boer argued that the statistics bore out the need for improvement.

“The facts are that as a channel we still have the lowest straight-through processing rate. That’s a fact, and we have the data to prove that. We really need to close that gap, and I think there are things that we can do, and we will do them and we are absolutely committed to that,” he said.

And banks are by no means immune to productivity challenges of their own, Boer said.

He argued that CBA had its own shortfalls, and was working to do its part in the drive for greater efficiency.

“We’re investing heavily in our own business improvement projects, so we know where we’re deficient in our operations and where things fall over, and we’re also committed to getting that fixed. That in turn flows down the line to brokers,” he said.

The productivity challenge, then, applies to both banks and brokers, Boer said. Furthermore, solving the challenge is in the best interests of both parties. “Brokers want to be out seeing more clients. I don’t want them spending their day on the phone to us chasing up files.”

Boer said brokers of all sizes and business types could benefit from process efficiency.

“I realise that every broker’s business is different. We have some operators who are very diversified, and then we have some more monoline guys who are going very gung-ho and writing as many home loans as they can, and then we have some on the retirement end of things who are probably managing their existing customer base, writing loans here and there but don’t want to set the world on fire. I still believe that for each and

every one of those different types of operations, efficiency is the key. We all want to make more money. A lot of time we see people spending time on low value-add activities when they could be out seeing more customers,” he said.

DOING THEIR PART

FAST FACT Kathy Cummings, who departed her role as head of third party with CBA at the start of the year, had also served on the MFAA Board from 2002 to 2009

For its part, Boer said Commonwealth Bank was working to identify logical areas where it could help brokers spend less time on paperwork and more time seeing clients.

“Some of it is simple things, like the printing of documents in the broker’s office. Anything we can do to reduce the amount of time that documents are out to the customer is going to be a win-win for everyone. And we are expanding our print-doc capabilities. That’s a major initiative we’ll be rolling out.”

Boer also said the bank listened to feedback from its third party partners, and looked to take action accordingly.

“It’s about sitting down with our business partners, finding out what their concerns are and then implementing changes.”

And Boer said the bank remained committed to helping brokers grow their businesses in the year ahead.

“We are committed to making sure that we are still investing in our learning systems, training, PD days and the like to give brokers as much information as possible from the experts around the business so they are fully equipped to have the best conversations they can with their customers and set themselves apart from their competitors.”

MARKET TALK

brokernews.com.au

20

New hope for a new year “The combination of moderate long term growth and the RBA cutting the policy rate over the past 24 months has eased pressure on affordability levels. Fitch expects overall affordability metrics to remain stable in 2014 due to the continued low interest rate environment, although cities with strong house price growth in the past 12–18 months may start to experience some affordability pressure.”

FAST FACT Fitch’s overall market outlook for Australia is “positive to neutral”

Fitch has released its forecast for 2014, and it’s mostly good news for Australia

F

One slightly concerning factor in Fitch’s forecast is its expectation for mortgage arrears.

“Recent quarterly data from the Fitch Dinkum Prime Index have shown gradual improvement in 30+ days delinquencies of 1.54% in 2Q12 to 1.19% in 3Q13,” Fitch said.

But this gradual improvement could suffer a setback in 2014 as economic conditions tighten.

“Fitch expects arrears rates to deteriorate slightly through 2014, in line with projections of slower economic growth and higher unemployment.”

Fitch forecast a rise in unemployment over the year, from 5.7% to 6.2%.

HOUSE PRICES: CONTINUED HOUSE PRICE GROWTH

AFFORDABILITY: SHORT-TERM OUTLOOK RELATIVELY STRONG AND STABLE Fitch pointed to a steady rise in debt-to-income ratios in Australia, but even though housing appears expensive relative to other countries, it said affordability pressures had eased.

The RBA has won a lot of supporters in the mortgage and housing industry with its latest easing cycle, which has seen the cash rate fall from 4.75% at the top of the cycle to 2.5%. But the rate-cutting party may have come to an end, Fitch said.

“Fitch expects current mortgage rates and the RBA policy rate to be broadly maintained in 2014, as The RBA guards the economy against the reduction in resource investment and focuses on stimulating the non-mining sectors of the economy.”

The agency also pointed to lenders’ failure to pass on full rate cuts to borrowers, but said that standard variable rates were still considerably lower than at the top of the cycle.

“The majority of borrowers have benefited from a discount to the SVR. The average discounted SVR now stands at 5.1% vs. 6.8% 24 months ago.”

MORTGAGE PERFORMANCE: LIKELY TO SLIGHTLY DETERIORATE

itch’s Global Housing and Mortgage Outlook has forecast the state of the mortgage and housing industry across the world in 2014.

The news for Australia is mostly positive, with a sprinkling of headwinds.

According to Fitch, house prices across Australian capital cities saw 11.8% growth in the 19 months to December 2013. It put the growth down to the Reserve Bank’s rather aggressive easing policy, which led to 225bps of interest rate cuts between October 2011 and August 2013.

Fundamentally, the ratings agency claimed house prices would be supported by an undersupply of stock.

“Data from the Australian Bureau of Statistics (ABS) show that in recent years, the supply of new residential properties is running at below long-term averages. At the same time, population growth has been above long-term averages, through both natural growth and increased immigration. There is speculation about undersupply to support prices, although this might not be true for all regions.”

Fitch forecasts house price growth of 4% across Australia, though it said growth in Sydney, Melbourne and Perth was likely to slow.

MORTGAGE RATES: LITTLE CHANGE EXPECTED IN 2014

MORTGAGE LENDING: STEADILY GROWING

Fitch said mortgage lending had seen a slight increase over the past year, with net mortgage lending averaging 5% in the 12 months to October 2013 compared to 4.7% the previous October. The increase, it said, followed a pick-up in housing activity in the second half of the year in response to low interest rates.

OUTLOOK ON THE ECONOMY What Fitch forecasts for 2014–15

6.1% 2.8% 2.5% UNEMPLOYMENT

GDP GROWTH

INFLATION

MARKET TALK brokernews.com.au

21

“Fitch expects lending net volumes to continue to grow steadily due to increasing levels of activity in the housing market. Borrowers are expected to continue to be cautious with higher than average household savings being maintained.”

Fitch also pointed out that mortgage lending growth had been driven by investors and existing owner-occupiers, with first home buyer activity falling to historical lows.

“First home buyers in the Australian residential housing fell to a low of 12.5% share of all owner occupied properties purchased in September 2013.

Increasing property prices and the reduction of first home buyer grants (in the form of stamp duty concession and cash incentives) have led to lower affordability measures for first time buyers. Finance commitments to investors purchasing residential property have increased by 22% in the 12 months to September 2013. Investors represent 37.3% of total monthly residential finance commitments; this rate has gradually been increasing over the past two years. The low interest rate environment and preferential tax treatment of investment properties have encouraged more investment activity.”

Fitch said first home buyer participation was likely to remain in the doldrums for 2014, especially with incentives having been wound back.

“The first home owners grant in South Australia expired in December 2013 and in the absence for further assistance the first time buyer activity across Australia is expected to remain subdued.”

PREPAYMENTS: FORECAST TO INCREASE SLIGHTLY

FAST FACT

4%

Fitch forecasts a 4% rise in Australian house prices in 2014

HOW WE MEASURE UP US

CANADA

UK

AUSTRALIA

RMBS 3-month-plus arrears

9.2%

0.3%

2%

0.6%

Current mortgage rates

4.4%

5.1%

4.3%

6.0%

New mortgage lending year-on-year

17%

Flat

13%

3%

House price growth year-on-year

10%

3%

7%

4%

Fitch said mortgage prepayments had tapered off over the last two or three years, falling to 20–25% from 25–30%. But the trend could reverse in the year ahead.

“Given the slight increase in transactional activity in the Australian housing market, slightly higher levels of prepayment of existing mortgages are expected in 2014.”

MORTGAGE AFFORDABILITY

Affordability is often a sore subject in the Australian housing industry, but Fitch said concerns had eased, at least for existing homeowners.

“Although Australian house prices nationally appear expensive with a house price in gross income ratio of 8.3 times, affordability has improved substantially with existing borrowers seeing mortgage rates fall to an average of 5.1% from the high of 8.95% in August 2008.”

But new borrowers aren’t likely to see huge gains in affordability in the year ahead.

“Fitch expects housing loan rates to remain around current levels in 2014 before rising.

Australian lenders underwrite new mortgages using an interest rate buffer of 1.5% or higher than the current applicable rate when assessing a borrower’s ability to repay the loan.

“With house prices expected to continue to increase in 2014, and interest rates to remain unchanged, affordability pressure will continue to be experienced by new borrowers in Sydney and Melbourne.”

BEST PRACTICE 22

brokernews.com.au

Connecting ACROSS CULTURES With foreign investment in Australia growing, smart brokers are looking for ways to capture overseas clients

W

ith overseas investors on the rise and growing immigrant communities in many parts of the country, it’s smart business for brokers to look at ways to connect with clients from other cultures.

According to the latest statistics from Colliers International, Chinese commercial property investments in Australia grew from just $17m in 2007 to over $870m last year, an increase of more than 5000%.

And this figure is expected to grow in the next decade, says Colliers national director of research Nerida Conisbee.

“Changes to regulations surrounding investment into property by Chinese investors is expected to lead to significant amounts of capital entering Australia.”

Substantial investment in Australian property is also coming from South Korea as this nation’s large pension system looks to actively invest in property worldwide.

“It is likely that pension funds will continue to increase their investment in Australian property, both local superannuation funds and offshore groups. Malaysian investors are also expected to become more active, particularly from the huge amounts of personal wealth in that country,” says Conisbee.

Nicole Cannon, director of Pink Finance, says changes in the demographic landscape of Sydney, and Australia as a whole, formed a large part of her decision to hire new-to-industry broker Elaine (Ying) Lam. “If you want to keep up with the times and the trends of the demographics, then you have to adapt. The statistics are clear that 30% of all migrants now to Sydney are Chinese. That in itself made me realise that what I’m doing is the right thing to do,” says Cannon.

Although Lam has only been a broker for around six months, she says she already has a strong client base, many of whom are from overseas and have English as a second language.

Lam, who speaks both Cantonese and Mandarin, says one of the keys to understanding Chinese clients is respecting that trust is a very important aspect of the culture.

The majority of Lam’s international clients were referred to her through friends and acquaintances, she says, and brokers who do not yet have these connections would do well to make themselves visible in the local area.

“Stay in touch in your community – it’s so important. For me, I studied English here so I keep in touch with all of the people I studied with from

time to time, even just through email or Facebook.

Keep in touch in the community and let people know what you’re doing and they will ask your advice.”

Often these kinds of connections are part of a longer-term strategy, says Lam. “Often customers don’t feel ready to buy just now but they’ll start to feel comfortable with me talking about plans. Then we can start to work on things like savings and working towards goals until they feel comfortable with you and they’re ready.”

A large part of putting clients at ease is showing strong product knowledge. While this is a must for any broker-client relationship, Lam says international clients put added emphasis on a broker’s ability to research and clearly explain products, deals and strategies.

“When people move to Australia in the beginning it is all very new. They’ve often done a lot of research, but if you can show them something they haven’t found, they appreciate strong research skills.

“There are a lot of products that are available to immigrants, but it’s just that people don’t know about them. I want to build the bridge between my product knowledge and those international customers – that is my niche market.”

The fact that she can communicate to Mandarin and Cantonese speakers in their native language also offers a great advantage, says Lam. While learning another language or employing multilingual brokers is not essential for attracting clients whose first language is not English, studies show it can give brokers a great advantage.

A study by industry research firm Common Sense Advisory has found that 72.4% of consumers are more likely to buy a product if provided with information in their native language, and more than half rate the ability to obtain information in their native tongue more important than price.

Demand for bilingual or multilingual brokers is growing across Australia, according to the latest research by Hays, with Chinese-speaking brokers in particular demand in Melbourne.

Nick Murphy, regional director of Hays, says a number of banks and mortgage companies are currently looking to recruit bilingual brokers.

“It’s going to be an ongoing demand in Melbourne. I don’t think you’re going to be able to fill the jobs that are out there and then it will stop; it’s something that will continue,” says Murphy.

In the long term this demand may also spread to other parts of Australia, he believes.

“Over time, although not in the short term, there will be absolutely a need for employees who speak another language, especially Chinese, because I

brokernews.com.au

SIGNIFICANT PURCHASES BY CHINESE INVESTORS IN 2013 •

•

Centennial Plaza (260, 280 and 300 Elizabeth Street, Sydney): Sold on behalf of Investa Property Group to Invesco (on behalf of Chinese Investment Corporation), for $305m – the largest direct property transaction in the Sydney CBD last year 229–234 Franklin Street, Melbourne: Sold for $17m to a private Chinese investor

think the level of English spoken in China compared to some of the other Asian countries is much less, and I think firms that are tapping into it will absolutely reap the rewards.”

While speaking another language is not essential, taking the time to understand cultural differences and preferences will aid any broker in their work as Australia continues to grow more diverse over time, says Murphy.

TOP 10 TIPS FOR CROSS-CULTURAL COMMUNICATION SLOW DOWN Even when English is the common language in a cross-cultural situation, this does not mean you should speak at normal speed. Slow down, speak clearly and ensure your pronunciation is intelligible.

SEPARATE QUESTIONS Try not to ask double questions such as “Do you want to carry on or shall we stop here?” In a crosscultural situation only the first or second question may have been comprehended. Let your listener answer one question at a time.

AVOID NEGATIVE QUESTIONS Many cross-cultural communication misunderstandings have been caused by the use of negative questions and answers. In English we answer ‘yes’ if the answer is affirmative and ‘no’ if it is negative.

In other cultures a ‘yes’ or a ‘no’ may only be indicating whether the questioner is right or wrong.

For example, the response to “Are you not coming?” may be “Yes”, meaning “Yes, I am not coming”.

TAKE TURNS Cross-cultural communication is enhanced by taking turns to talk, making a point and then listening to the response.

WRITE IT DOWN If you are unsure whether something has been understood, write it down and check. This can be useful when using large figures.

For example, a billion in the US is 1,000,000,000, while in the UK it is 1,000,000,000,000.

BE SUPPORTIVE Effective cross-cultural communication is in essence about being comfortable. Offering encouragement to those with weak English gives them confidence, support and trust in you.

CHECK MEANINGS When communicating across cultures, never assume the other party has understood. Be an active listener. Summarise what has been said in order to verify it. This is a very effective way of ensuring accurate cross-cultural communication has taken place.

AVOID SLANG Even the most well-educated foreigner will not have a complete knowledge of slang, idioms and sayings. The danger is that the words will be understood but the meaning missed.

WATCH THE HUMOUR In many cultures business is taken very seriously. Professionalism and protocol are constantly observed.

Many cultures will not appreciate the use of humour and jokes in the business context. When using humour, think whether it will be understood in the other culture. For example, British sarcasm usually has a negative effect abroad.

Maintain etiquette.

Source: Neil Payne: ‘Top Ten Tips for Cross-Cultural Communication’. www.kwintessential.co

FINANCIAL SERVICES 24

brokernews.com.au

The most and least stressful financial services jobs

J

ob search website eFinancialCareers surveyed those who work in the financial services industry to see which jobs are the most and least stressful.

1. INVESTMENT BANKER: The runaway choice for the most stressful job on Wall Street and in all of the financial services, finishing in the top three of every ballot. The main reason is that investment bankers are confronted by the two main triggers for career stress: the difficulty of the work, coupled with the sheer amount of it, particularly for associates and analysts.

2. TRADER: Most traders don’t work the hours of investment bankers, but they may have a sharper, more acute level of stress.

“Trader stress is in real time and can happen instantaneously,” said Sal Khan, managing director at Dynamics Associates.

3. RISK MANAGEMENT AND COMPLIANCE: Likely positions that wouldn’t finish this high years ago, risk and compliance personnel don’t get paid as highly as traders and investment bankers but they’re in a pressure cooker just the same. One reason risk and compliance didn’t finish higher is the dearth of qualified professionals able to fill all the openings (ie job security).

“New regulatory requirements are constantly rolling in and regulators and those on the business side are always on you, breathing down your neck,” said Lisa Mogilner, executive recruiter at Dynamics Associates.

FAST FACT

$246,409.99 The amount spent by ASIC chairman Greg Medcraft on international travel in 2013 Source: ASIC

4. WEALTH MANAGER/FINANCIAL ADVISER: Finishing near the top in some surveys and further down in others, wealth managers and financial advisers deal with one particular vehicle for stress: they eat only what they kill. Wealth managers get fired nearly as often as they get hired. One wealth manager who started five years ago said he was the only remaining member of his 30-person recruiting class still in the business.

5. INSTITUTIONAL SALES: Any role that focuses on sales causes stress. Couple this with the fact that job security and the ceiling on salary aren’t

what they used to be, and institutional sales can be a grind.

“As technology automates much of the function, there is simply no need for a human interface,” said Cohen.

6. MANAGEMENT CONSULTING: It’s all about hours, engagement and travel. Simply put, consultants always have to be ‘on’. And in between they are at airports and juggling complex business problems.

7. PRIVATE EQUITY: You must be smart, hard-working and well rounded, but the lifestyle doesn’t compare to that of investment bankers and the pay is often much better, particularly at the senior level.

8. INDUSTRIAL COVERAGE/RESEARCH ANALYST: Very rich, very passionate and very explosive fund managers and traders rely on research analysts, who will often get more blame than praise, particularly on the buy side.

“You agonise over every decision, then you agonise once the decision is made,” Lipstein said.

9. FUND MANAGER: Finishing just behind research analysts, fund managers push the final button – a highly stressful role – but they have seniority, don’t have to do as much grunt work, and likely have the bank account to relax, just a bit.

10. TECHNOLOGY: Like risk and compliance, tech pros get yelled at – a lot.

“They take plenty of blame, even when things are out of their hands, and they constantly have to re-educate themselves and take courses,” said Mogilner.

And, with operational budget constraints, there is a “continuing pressure to do more with less”, said Crowley.

11. ACCOUNTING: Finishing last on every ballot, accounting is “virtually stress-free as long as you like routine and are willing to work long hours on a seasonal basis,” said Cohen. There’s also minimal client-facing and you’re never on an island. “There is always someone in the assembly line with you,” according to Mogilner. Not much else to say.

BUMPER YEAR FOR SUPER The interim results of the Morningstar Australian Superannuation Survey have been published, finding Australian superannuation funds had a bumper year in 2013.

The median growth fund surveyed returned 18% over the calendar year, the highest since 1993.

The year started strongly, with the first quarter producing a solid 4.7%. The highest quarterly return was recorded in September, at 5.1%, and June held the lowest quarterly result, at 2.3%.

Only two negative medians were recorded in 2013: March (-0.3%) and June (-0.8%). The year finished with the December median of 1.3%, and results ranged from a high of 1.8% to a low of 1%.

Longer-term annualised returns were 9.2% (over three years), 9.6% (over five years), and 7% (10 years to 31 December 2013).

THE YEAR’S BEST-PERFORMING GROWTH SUPERFUNDS WERE: Legg Mason Growth (26.9%) Legg Mason Balanced (23.3%) Invesco Diversified Growth (22%) THE BEST-PERFORMING GROWTH SUPERFUNDS OVER FIVE YEARS WERE: Legg Mason Growth (12.4%) Legg Mason Balanced (12.1%) Schroders (11.5%)

AMONG BALANCED OPTIONS (40–60% GROWTH ASSETS), THE BEST PERFORMERS OF THE YEAR WERE: BT Balanced (15.2%) State Super Balanced (14.6%) REST Super Balanced (14.4%) Australian commercial for-profit and industry superannuation options were surveyed.

Read Australian Broker anywhere, anytime

for your iPad®

www.kaishinlab.com www.k

lab.com

aishinla

aishin www.k

b.com

DOWNLOAD YOUR FREE APP FROM THE iTUNES STORE TODAY w

ww.kais b.com and finance industry hinlab.c The preferred source of news for the mortgage is available aishinla om for www.k ® download on your iPad .

www.kaishinlab.com

The iPad® edition of Australian Broker features the latest breaking news as it happens, video and audio investigations and commentary, colourful photo slideshows, property market updates, business and marketing support, technical know-how – and even a word from ‘Insider’.

For all the latest news and industry developments - download your free Australian Broker iPad® app today!

COMMITTED TO INDUSTRY NEWS, OPINION AND ANALYSIS.

www.australianbrokeronline.com.au

ONE YEAR ON 26

ONE YEAR ON What a difference a year makes … or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago Australian Broker Online, Feb 2013

Consumer sentiment disappointing

At the start of last year, consumers showed a bit more confidence in the economy, but one major bank economist still labelled consumer sentiment “disappointing”.

The Westpac Melbourne Institute Index of Consumer Sentiment rose by 0.6% to 100.6 in January 2013, up from 100.0 in December 2012. But Westpac chief economist Bill Evans said it was a letdown that 175bps of rate cuts by the RBA had triggered such a miniscule rise.

What’s happened since?

The new year has begun well, with the Roy Morgan Consumer Confidence survey marking two consecutive weeks of rises. Of course, Roy Morgan executive chairman Gary Morgan pointed out that confidence is traditionally at its highest in January, so where 2014 takes us remains to be seen.

NMB hasn’t ‘painted the orange purple’ after Aussie buy

Following the purchase of National Mortgage Brokers by Aussie Home Loans, NMB managing director Gerald Foley assured brokers the aggregator had maintained its identity. With Commonwealth Bank in turn upping its stake in Aussie, Foley vowed the CBA takeover would have little direct impact on NMB.

What’s happened since?

True to Foley’s word, NMB has continued with its own branding, value proposition and personality. Co-founder and general manager of sales Sal Cinque announced last March that he would leave after 12 years with the company, but the aggregator’s leadership team and business model otherwise appear unaffected by the Aussie buy. NMB did manage to contribute to Aussie cracking $2bn in home loans lodged during October last year.

brokernews.com.au

Education an evolving challenge – Rehayem

C

ontinuing education in the broking industry is a constantly evolving challenge, and can often face resistance, according to Pepper’s Mario Rehayem.

Part of the reason is that it can prove costly, without providing a way to easily measure its impact.

“We all know that education is a very expensive route to go down,” Rehayem says. “It’s probably one of the only areas brokers can spend a lot of money on without a lot of tangible ways to measure return on investment.”

But education will be vital as the industry continues to age.

“It is an ageing industry, and what we’re having is the industry stalwarts slowly but surely exiting the industry, and if we’re not careful we’re not going to be able to harness that experience and that skill set that we’ve all embraced over the last 10 or 15 years in the industry, so we need to be mindful of that,” Rehayem says.

“In my view, it’s important that we start collating that skill set and begin building training materials around that.”

To that end, Pepper has introduced an e-learning portal to allow brokers to continue their education in a flexible way, Rehayem says.

“We all know that brokers are time poor. By having an e-learning portal you can use that when it suits you, not when it suits the facilitator.”

And Rehayem says anyone who benefits from the industry – be they brokers, aggregators or lenders – has a responsibility to feed back into the industry to add value.

“What we’ve done is not anything to do with Pepper’s business; it’s what suits a broker’s business.

We’re not out there pushing our products.”

WHAT WE’RE HAVING IS THE INDUSTRY STALWARTS SLOWLY BUT SURELY EXITING THE INDUSTRY, AND IF WE’RE NOT CAREFUL WE’RE NOT GOING TO BE ABLE TO HARNESS THAT EXPERIENCE

FORUM 27

brokernews.com.au

Are lenders guilty of age discrimination?

Brokers have called on lenders to ditch hard-and-fast rules on borrower age ,

Segmentation not a measure of success

The Big Four’s segmentation of brokers based on volume is no secret in the industry, but it is an issue that many brokers feel strongly about, as was revealed when the topic was raised by 1st Street’s Jeremy Fisher and PFS Financial Services’ Daniel O’Brien on Australian Broker Online. Brad Quilty, director of AMA Best New Brokerage 2013 Tungsten Home Loans, weighed in on the debate with a thoughtful response based on his own experience.

What do you think?

Leave your comments at brokernews. com.au

“I don’t overly agree with that.

Good service doesn’t mean same day approvals, it means getting the right loan for the client first time. So being a diamond/flame/preferred broker doesn’t make you a good broker.

It’s about looking after the client.

As far as new entrants into the industry then it doesn’t matter if they get an approval in 1 or 7 days as they can still make their mark by their reputation, which always takes time. I’m relatively new to the industry, with no banking experience, and I think it is a positive that I had to prove myself over time. It meant that I had learned my craft rather than just submitting loans for fast approvals to my favourite lender.

I don’t think segmentation by the lenders effects a good broker getting the right deal done and isn’t a hindrance to building a strong referral based business.”

Brad Quilty on 8/01/2014 9:25AM

B

rokers have taken lenders to task for being too inflexible on lending to older borrowers, saying it amounts to age discrimination.

Steve claimed banks often find ways around labelling a borrower too old, while still denying them credit.

“The banks will simply adjust their systems so they don’t discriminate on age but the client fails on ‘credit score’.

Nobody can challenge then because credit score is great and powerful.”

Old Joe called on industry associations to take up the issue.

“This is the elephant in the room. This has to be addressed.

I would like the MFAA to address this issue and release a discussion paper on it so we mortgage brokers have some reference material to work with.”

The Observer said the issue was complex, and that age was a fundamental factor that should be taken into account.

“Fundamentally, if you have an owner occupied home that you cannot pay for after your retire, then you have a real issue to address. I am self-employed and I will work as long as I can but some PAYG clients may at a certain age be asked to retire. Each client will have their own circumstances that we need, as brokers, to become familiar with and document. If a client wishes to downsize then this strategy is OK and ASIC even covers this

as an example. It is a case of asking the right questions and documenting the answers that should have always be the case pre and post NCCP. Once you are satisfied that the loan is not unsuitable for the client, then simply find the appropriate lender for the client.”

Papery said some fault lies with brokers, who often turn away older borrowers out of hand.

“I think there are still a few lazy or even less skilled brokers out there who as soon as they hear the age, straightaway tell the client they are too old and don’t even bother with accepting the client because of the additional effort required to get the deal done. Most of the time, providing you understand the lender’s policies and credit standards, it comes down to the broker’s skill in just being able to write the deal up and present it succinctly to the right lender.”

THIS IS THE ELEPHANT IN THE ROOM. THIS HAS TO BE ADDRESSED

LOW-DOCS IN THE SPOTLIGHT

Low-doc loans were the focus of a third of the submissions to the Senate inquiry into ASIC’s performance. One broker pointed out that borrowers need to shoulder some responsibility.

Dodgy Customers on 20/01/2014 6:08PM “I had a customer drag me and the lender through a two-and-a-half year matter in the Supreme Court. When it came to the trial the customer stood on the stand and admitted to the judge that he had got someone to work out what he would have to declare to get a loan and then put it on the application I gave him. But we overlook the conduct of customers giving false statements, as it is always the broker or the bank.”

PEOPLE 28

brokernews.com.au

A lesson from Iron Mike A speech by Mike Tyson inspired 1st Street’s Jeremy Fisher to bring sport to disadvantaged kids

T

he founder and director of 1st Street Home Loans, Jeremy Fisher, once represented Australia as a junior tennis player. Now, he and his Sydney-based team are playing an integral part in getting tennis coaching into local public schools as part of sport and PE curriculums.

Together with Tennis NSW, the brokerage provides schools with the Tennis Hot Shots programs, including coaches and equipment such as nets, racquets and balls. Fisher says the brokerage has had a long association with tennis sponsorships over the years.

“We have enabled many kids to be coached in tennis who couldn’t otherwise afford lessons.

The majority of 1st Street’s annual contributions go towards assisting youth sports and education, so this cause aligned well with our charity program.”

The program specifically benefits six- to 12-year-old public school students, many of whom Fisher says couldn’t otherwise afford tennis lessons. Many of the students involved come from low socio-economic backgrounds, and Fisher says that, aside from keeping young people active, the sport helps provide a “distraction” for troubled youth.

Earlier this year, Fisher met retired boxing legend Mike Tyson at an event aimed at getting disadvantaged young people into sport – something he described as a “standout experience”. Tyson gave a speech at the event, describing how sport had given him an outlet and an escape from the difficult

environment he grew up in, and Fisher says the event made a major impact on the students in the audience – many of whom had been pulled out of juvenile correction centres for the day in order to hear Tyson speak.

Fisher met Tyson after the talk and says the above photo was taken in a kitchen that provides food for disadvantaged youth.

“He was doing a tour [of Australia] and was invited to speak to the kids, many who are in and out of homes, juvenile detention, etc. We met him afterwards and he thought the program was great.

He had a much bigger story to tell, but I guess what he was trying to say was to find something you like, whether it’s boxing or whatever, and use that as a distraction.”

The entire 1st Street team is now involved in the program and 10% of the office’s total income is contributed to charity each year.

“We started the program last year and the numbers of schools we sponsor is growing, with seven schools currently receiving regular tennis coaching programs. It is an ongoing program with ongoing contributions. The kids are always happy and excited when they are taking part in the tennis lessons, and it is rewarding to know that we are encouraging healthy lifestyles. This program is inclusive, so that all children who would like to take part can take part, without paying fees.”

The only regret Fisher has is that he can’t get out of the office to play against the students as often as he would like. However, he’s hoping that will change and says several of the schools have reported that some serious talent is emerging from the program.

“The kids at the schools thoroughly enjoy their tennis coaching and we have heard that there are a few young players with a potentially strong future in tennis at some of the schools.”

CAUGHT ON CAMERA 29

brokernews.com.au

IN FOCUS

T

he FBAA recently held its second Annual National Industry Conference. The conference took place in the Paradise Room at Sea World and the Gala Dinner was held at Warner Brothers Movie World on the Gold Coast.

INSIDER 30

brokernews.com.au

DIRECTORY AGGREGATOR / WHOLESALE BROKER Choice Home Loans 1 800 SEMPER (1 800 736737) www.choicehomeloans.com.au Page 17 FAST 02 9233 8222 www.fastgroup.com.au Page 7

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

LENDER

That’d be one mother of a paper jam

B

rokers may soon be arranging mortgages for cement houses made entirely by 3D printing, according to one academic.

“In manufacturing, there is a process called CAD/CAM (computer-aided design, computer-aided manufacturing),” says Behrokh Khoshnevis, a professor of industrial and systems engineering at the University of Southern California.

“A lot of things that you see are designed on computers and without any human interference are sent to the production machinery that automatically makes those products that you use.

“So we want to scale up those processes and bring them to the realm of construction.”

Khoshnevis is also the creator of Contour Crafting, a 3D printing process that can automate the construction process for housing and other large projects. He hopes to use the technology to generate entire neighbourhoods at a fraction of the cost of conventional building.

“The architectural design is basically sent to the machine directly; the material, which is cementitious – initially concrete – is deposited through a nozzle and the building is built layer by layer,” Khoshnevis explains.

“In the process, a lot of things can be done, including automatic reinforcement, automatic plumbing, automatic electrical network installation, and once the basic structure is done there could be other automated processes that could do auxiliary operations such as finish work, BEHROKH KHOSHNEVIS tiling and even painting.

“In the end the whole building can be ready in an unprecedented time; we anticipate that an average house … can be built in about 20 hours, custom designed.”

The effect these homes would have on builders is obvious. But for brokers – whose job it is to find funding for homebuyers – these 3D-modelled homes could be built in lower-income areas and thus open the market up to an entirely new demographic. And, of course, they would provide a new pool of potential homebuyers who require a mortgage. We just have to hope that these new homebuyers wouldn’t be left swearing as their 3D printers cryptically flash “PC Load Letter”.

IN THE END THE WHOLE BUILDING CAN BE READY IN AN UNPRECEDENTED TIME; WE ANTICIPATE THAT AN AVERAGE HOUSE … CAN BE BUILT IN ABOUT 20 HOURS –

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 13 Liberty Financial 13 11 33 www.liberty.com.au Page 3

National Australia Bank www.nabbroker.com.au Page 5

SHORT TERM LENDER

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

Mango Credit 02 9555 7073 www.mangocredit.com.au Page 1

Quantum Credit 1300 135 212 www.quantumcredit.com.au Page 8

WHOLESALE

Resimac 1300 764 447 www.resimac.com.au Page 32

OTHER SERVICES

Deposit Power 1800 678 979 www.depositpower.com.au Page 9 RP Data 1300 734 318 Page 23 Trailerhomes 0417 392 132 Page 26

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

THE CHOICE IS YOURS WITH

iPHONE Latest industry news with built-in mortgage calculator

www.kaishinlab.com

iPAD Access to all Australian Broker issues via your iPad www.kaishinlab.com

MAGAZINE The only independent magazine dedicated to mortgage industry news, opinion and analysis

WEBSITE ENEWSLETTER

Breaking news, in-depth profiles, features, online forum and Australian Broker TV

Daily news service delivered straight to your inbox every morning

FOR MORE INFORMATION, PLEASE EMAIL EDITOR@BROKERNEWS.COM.AU