Australian Broker 11.06

APRIL 2014 ISSUE 11.06

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS TAKING A LESSON FROM CANADA

Could Canada’s banking system work here?

P10

+ SPECIAL REPORT SELF-MANAGED SUPER FUNDS

Industry experts help you tap into this growing sector P20

+ SPOTLIGHT TAPPING AN UNTAPPED MARKET

Phil Quin-Conroy:

A STRATEGY FOR THE FUTURE PLAN Australia’s CEO on the importance of being deliberate about engaging with technology

P

LAN Australia CEO Phil Quin-Conroy would be well acquainted with the company’s technology platforms.

Before taking over as chief executive at the aggregator he was head of broker services for Advantedge, and oversaw the back-office support for PLAN, Choice and FAST. But Quin-Conroy says technology is moving out of the back office and in front of the consumer.

FULL STORY PAGE 18

Self-employed borrowers need brokers’ help P26

+ MARKET TALK FOREIGN FURORE

An inquiry is examining foreign property investment P28

NEWS 2

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NUMBER CRUNCHING

TIGHT MARKET

MOVING PROPERTY

A look at nationwide rental vacancy rates

Average time on market for capital city houses and units

VACANCY RATE (Dec quarter 2013)

ANNUAL CHANGE

Sydney

1.8%

-0.1%

Melbourne

2.9%

-0.5%

Brisbane

3.2%

1.2%

Adelaide

3.1%

0.0%

Perth

3.3%

1.4%

Hobart

3.8%

-0.7%

Darwin

3.5%

0.4%

Canberra

5.2%

n.a.

Darwin 81 days 109 days Brisbane 72 days 76 days

FAST FACT

$800m

Perth 69 days 69 days

The amount MasterCard claims Australian consumers paid in 2013 for excessive credit card surcharges Source: MasterCard

Sydney 27 days 23 days

Adelaide 65 days 59 days

Houses Units

Source: REIA/Bendigo

Melbourne 42 days 58 days

Canberra 35 days 47 days Hobart 84 days 72 days Source: RP Data

WHAT THEY SAID...

JON DENOVAN

“Positive credit reporting will take a while to have any impact as lenders decide whether to contribute data” P8

SURESH PILLAI

GREG MITCHELL

ALLAN SAVINS

“SMSF lending presents “[SMSF lending is] a great niche “As we’ve seen credit policies brokers with an opportunity sector and, for brokers with strong tighten, the appetite to to do more for their existing affiliations with financial planners, service self-employed client base while acquiring accountants or lawyers, it’s a healthy borrowers has really addition to their business, but new customers” P20 dissipated over time” P26 obviously it has to be done properly” P21

NEWS 4

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Comparison sites no substitute for a broker ■ ASIC has been fairly aggressive in its punitive

actions of late, and the regulator has now called for even harsher penalties in the financial services sector to help remove ‘‘bad apples” from the industry.

The MFAA has praised a proposed ACCC crackdown on comparison sites.

Competition and Consumer Commission chairman Rod Sims said last week that the competition watchdog would crack down on misleading comparison sites for services such as loans, credit cards, insurance, flights and utilities.

Sims called the sites “an important marketing tool for business” but claimed they could sometimes “mislead consumers in significant ways”.

MFAA CEO Phil Naylor has welcomed the move, saying comparison sites are not a substitute for brokers. He claimed that a mere comparison of interest rates was inadequate to address borrowers’ needs.

“There is far more required in analysing what is the most appropriate home loan and other credit product for a borrower than merely comparing interest rates on a comparison website,” Naylor said.

EDITOR Adam Smith

ASIC DEALS BANKER BAN ■ Brokers have heard from ASIC a lot over the past six

months as bad apples are weeded out of the industry, but the watchdog has finally turned its eye to bankers. ASIC has permanently banned a former Westpac Bank home finance manager from engaging in credit activities and providing financial services.

David St Pierre, of Mt Nathan, Queensland, was a home finance manager for the bank between September 2000 and April 2011.

An ASIC investigation found that between July 2008 and June 2010, St Pierre submitted loan applications to Westpac for approval when he knew they contained false information and were supported by false documents.

He also failed to prepare an authority that accurately identified the payee of a cheque. This meant a customer cheque for $215,000 was paid into the personal trading account of a non-office holder of Capital Growth International Club.

St Pierre enabled and encouraged customers to borrow funds from Westpac and earned cash bonuses on the loans, in addition to his base salary, despite knowing that they were elderly, a pensioner, a carer or suffering from a disability, and would not be able to repay the loan if the scheme failed, ASIC said.

FOS accused of dragging its feet ■ An independent review of the

RATE CUTS AMOUNTING TO LITTLE ■ A flurry of interest rate cuts from lenders in the

absence of action by the RBA makes for a good headline but may have added up to little more than noise.

Comparison website InfoChoice shows that since the start of the year 26 lenders have changed their three-year fixed home loan rates, with the average change being a reduction of just two basis points. Of the 26 lenders, 11 actually put rates up.

Twenty lenders changed their five-year fixed rates over the same period, with the average change being a reduction of two basis points. And 15 lenders changed their one-year rates, with the average change being a reduction of one basis point.

The lenders who have made a large change are HSBC, which cut its three-year rate by 30 basis points, Teachers Mutual Bank, which cuts its three-year rate by 39 basis points, and Citibank, which cut its three-year rate by 19 basis points.

FAST FACT

$1.27tr The size of the global property investment market in 2013 Source: Cushman & Wakefield

Financial Ombudsman Service (FOS) has found that the external dispute regulator’s organisational model is inefficient and needs a makeover.

The reviewer, consultant Cameronralph Navigator, assessed FOS against ASIC’s benchmarks for external dispute resolution (EDR) schemes – accessibility, independence, fairness, accountability, efficiency and effectiveness.

It found that FOS, an ASICapproved EDR scheme, did not meet its benchmark for efficiency and caused undue delays when dealing with disputes.

Cameronralph Navigator said FOS needed to take immediate steps to clear its backlog and refresh its organisational approach.

PUBLISHER Simon Kerslake COPY & FEATURES JOURNALIST Calida Smylie CONTRIBUTORS Nikki Taylor, Miriam Bell PRODUCTION EDITORS Roslyn Meredith, Moira Daniels ART & PRODUCTION DESIGN MANAGER Daniel Williams DESIGNER Loiza Caguiat SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Alex Carr 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 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 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.

NEWS

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6

Number of Aussies facing credit ‘blacklist’ could skyrocket

WORLD NEWS UNITED STATES OF AMERICA

■ The number of Aussies blacklisted by credit reporting bodies will

MORTGAGE WHISTLE-BLOWER HEADED FOR HUGE PAYDAY

The whistle-blower who brought JPMorgan Chase to its knees for defrauding the US government on mortgage insurance is getting a US$63.9m payout.

Former JPMorgan assistant vice president Keith Edwards sued the bank in 2013 under the False Claims Act, which allows individuals to sue businesses for defrauding taxpayers. The Justice Department later joined the suit as a plaintiff.

JPMorgan admitted that for more than a decade it had submitted thousands of mortgages for insurance by the Federal Housing Administration (FHA) or the Department of Veterans Affairs that did not qualify for government guarantees.

JPMorgan also admitted that it had failed to tell the agencies that its own internal reviews had turned up problems.

The FHA and the Veterans Administration had to cover millions of dollars in losses after the loans went bad, Reuters reported. JPMorgan ultimately agreed to pay US$614m to resolve the claims.

CANADA REAL ESTATE LAG COULD HAND BROKERS UPHILL BATTLE

The Canadian Real Esate Assocation (CREA) has updated its forecast for home sales in Canada and the new data points to a very modest sales increase for 2014 and 2015, indicating that brokers may have a tougher time funding deals in the next 24 months.

“Sales are forecast to reach 463,700 units in 2014, representing an increase of 1.3% from 2013,” an official statement from CREA said. “This would place sales in line with their 10-year average, and hold national activity to within fairly short reach of the 450,000 mark for the seventh straight year.”

CREA also extended the outlook to 2015, which is expected to see an even more modest increase than 2014 year-over-year.

DID YOU KNOW?

53.4% A survey has found 53.4% of Australians are either “very worried” or “concerned” about their financial situation Source: Mortgage Choice

increase following changes to the Privacy Act allowing credit bodies to share data on borrowers among themselves, according to a national finance company.

Under the Privacy Amendment Act 2012 (Part IIIA), credit reporting bodies can disclose a borrower’s repayment history information (RHI), along with other credit-related personal information, to licensed credit providers.

Since December 2012 everyone’s RHI has been recorded in full. Safe Financial managing director Rafer Hart said this means that anyone who has failed to make a payment on time since December 2012 could be blacklisted.

“Repayment history information shows your repayment behaviour, including late repayments or missed payments,” he said.

“Something as little as one late repayment could now have far worse consequences for Australians, who may face being blacklisted.

“This alarming new amendment is going to hit Aussies hardest when they’re ready to apply for a car or home loan and learn that they’ve got defaults against their name.”

Having your credit file blacklisted because of one simple error can place a borrower’s life and financial position in limbo, Hart said.

“From 14 March [2014], there will be far more people seeking out alternatives to credit cards and bank loans and looking for more compassionate financing options.”

Non-bank touts commission options ■ A non-bank lender is saying brokers can ‘have their cake and eat it

too’ by choosing the income option that suits them best.

Australian First Mortgage managing director David White told Australian Broker they had made the decision around a month ago to offer a couple of income choices, after listening to broker feedback.

“A lot of brokers were saying to us, ‘I’ve been a broker for 30 years – I don’t need a higher upfront but I need a bigger trail in my loan portfolio’. Others were saying, ‘I’ve just started out and I’ve got a lot of costs; I need a higher upfront’,” White said.

Brokers can now choose whether a trail of up to 0.25% and upfront at 0.50% suits them best, or the option of upfront at 0.70% and trail of 0.15%. These options are available on loans of up to 80% LVR with interest rates starting from 4.85%.

“It gives brokers options to look at for income for their businesses to choose from based on where their business is at, and also makes sure the customers are getting low rates without any conflicts of Peter Wood interest,” White said.

NEWS

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8

Avoid positive credit ‘trap’ – Denovan

Reverse mortgage market picking up

■ While brokers may not immediately notice the difference brought

■ The move by two major funders to offer reverse mortgages again is

about by positive credit reporting, there is one ‘‘trap” to be wary of, says a senior lawyer.

“Positive credit reporting will take a while to have any impact as lenders decide whether to contribute data,” Gadens Lawyers partner Jon Denovan said.

“Once they decide to contribute data, lenders need to work out how to transfer that data to CRBs – credit reporting bodies – the new name for credit reporting agencies.”

Just as in the old regime, brokers cannot get credit reports as brokers, said Denovan.

“However, brokers used to be able to get credit reports as ‘agents’ for borrowers. Some like to get credit reports so that they don’t lodge deals which are knocked back for poor credit. Under the new regime, brokers can get credit reports as ‘access seekers’ – it’s really just a change in name, and to be an access seeker they must be appointed by the borrower.”

It all seems fairly straightforward – however, there is one trap. If brokers outsource any of their operations offshore or to other businesses, appropriate consent is important to avoid breaching the act, Denovan said.

Jon Denovan

BY THE NUMBERS 15 12 9

12.3% 13.2%

6 3 0

The proportion of first home buyers in the number of owneroccupied housing finance commitments rose from its historically lowest point of 12.3% in November to 13.2% in January. Despite the increase, the proportion is far lower than the long-run average proportion of 19.9%, even with eight interest rate cuts since November 2011

NOVEMBER FIRST HOME BUYERS

JANUARY

an indicator that the market is picking up since the GFC, the general manager of a mortgage servicing company said.

Macquarie Bank recently announced it is targeting retirees again by releasing a reverse mortgage loan and an accommodation bond loan. Both products have a maximum LVR of 45% and are available to customers over 70 years old.

And New Zealand lender Heartland Bank announced a deal last month to buy the Australian Seniors Finance business and Sentinel in New Zealand for NZ$87m from the Quadrant Private Equity-controlled Seniors Money International. The bank said its decision to invest in the reverse mortgage business is consistent with its strategy of pursuing niche lending opportunities.

Chris Evans, business development and relationships general manager at First Mortgage Services, said having new players in the market is a good sign.

“You know funders are okay with the market when they start funding reverse mortgages again.”

Judge upholds bank’s right to repossess house ■ A judge in Sydney has upheld a bank’s

right to repossess a multimillion-dollar north Sydney home despite the borrower claiming that no personal benefit had come out of the $3.6m loan, and lawyers say this reinforces how difficult it is for borrowers to say they have not obtained any loan benefit when corporate entities have been involved.

The Supreme Court of NSW rejected a claim by borrower Vicki Londish after she argued that she had received no benefit from a loan advance in 2009 of $3.6m from ANZ Bank, secured by a mortgage over her family home at Warrawee, Sydney.

Londish argued that funds advanced under the loan agreement were not advanced directly to her but rather to the benefit of corporate entities associated with her and her husband.

Justice Adamson found ANZ’s loan transaction was not unjust, because even though the ‘benefit’ of the loan went to corporate entities, the borrower’s family income came substantially from rental returns from properties owned by the family group of companies.

Therefore Londish had derived a real benefit from the loan, he said.

Justice Adamson said the borrower understood the nature of a loan and mortgage and that the bank had a right to take possession of the security property in the case of a mortgage repayment default.

ANALYSIS 10

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O, Canada?

Should Australia be looking to Canada to help promote lending competition?

C

anada and Australia have much in common.

The two countries have a similar population, similarly robust – and expensive – housing markets, and well-established mortgage broking sectors. One glaring difference has seen the Canadian mortgage market outdo Australia in terms of lender competition, and that is the country’s approach to securitisation.

MFAA chief executive Phil Naylor has long been a champion of the Canadian securitisation model, having lobbied the government for years to take a page from the Canadian playbook.

“It’s been demonstrated in the past – pre-GFC – that when Australia had a strong securitisation market we also had strong competition in the lending markets, and the non-bank lenders were very strong,” he told Australian Broker.

“The non-bank lenders were providing price competition on interest rates but also providing innovative products which were beneficial to consumers. Now, because they’ve effectively been squeezed out of the market, that pressure’s not there anymore.”

From 2002 to 2006, the big four had 58% of market share, non-bank lenders had 27–33% and securities had more than 20%, Naylor said.

But from 2009 to 2014, the big four had 80% of market share; non-bank lenders had 1–2% and securities had less than 5%.

In Canada, there is a strong securitisation market and a strong non-bank lender market, and consumers are benefiting from the better competition, Naylor said. Canada has 28.3% of its funding profile in securitisation, while Australia has 5%.

So what can be done to increase competition in Australia?

“You can do what the Canadians do, and that is their government guarantees the markets, and therefore it’s a strong market,” he said.

DON’T GO THERE

But FBAA president Peter White vehemently disagrees with

implementing a Canadian securitisation guarantee, and argues that the government should stay away from backing the mortgage market. In fact, White argued that a move to government-backed securitisation was “somewhere we should never ever go”.

“I have been a very outspoken opponent to this model for years as it simply doesn’t work and hasn’t anywhere in the world where governments get involved in mortgage lending – see USA Fannie Mae and Fannie Mac, for example.

“Even the government formally reviewed this extensively and agreed with me and kicked it out as an option.”

White disagrees that there is not enough competition in Australia, saying there is no lack of funds for mortgage loans.

“What people mean by ‘more competition’ is ‘cheaper’ and a return to the good old days of the mid-nineties when mortgage managers were kings.

“Back in the good old days banks and other deposit-taking institutions had cost-to-income ratios of that in the seventies and eighties. Now they’re all sub-50% and many way lower.

“So it’s not about competition and cheap government-backed money – it’s about efficiencies in production and distribution.”

USA NOT ABANDONING MORTGAGE MARKET

White’s example of Fannie Mae and Freddie Mac would seem apt, given that the taxpayerbacked American mortgage giants played a huge role in the onset of the GFC. And it is true that Congress is now making bipartisan moves to wind down the government-sponsored enterprises. But this doesn’t mean the US government is shying away from involvement in mortgage lending. While Fannie Mae and Freddie Mac may be headed for extinction, there’s general consensus in the country that the government must continue to back home lending in order to ensure liquidity and credit access.

Politicians on both sides of the American political spectrum

I HAVE BEEN A VERY OUTSPOKEN OPPONENT TO THIS MODEL FOR YEARS AS IT SIMPLY DOESN’T WORK – P ETER WHITE have called for a continued government guarantee of the mortgage market, and the industry appears to agree with them. Mortgage Bankers Association chairman EJ Burke recently said the group would support moves to reform the mortgage market, but only if the death of Fannie and Freddie saw a new system of government guarantees in their place.

“Specifically included in this new system must be an explicit government guarantee for mortgage securities,” Burke said.

CANADA RETREATING?

Supporting White, though, is the fact that Canada itself is beginning to shy away from its securitisation system. In a recent budget announcement, the Canadian government revealed reductions to the amount of new guarantees the Canadian Mortgage and Housing Corporation (CMHC) will provide.

“The Government continues to adjust the housing finance framework to restrain the growth of taxpayer-backed mortgage insurance and securitization,” the budget report states. “These measures will support the stability of the housing sector and the financial system by increasing market

discipline in mortgage lending.

“They will also reduce taxpayer exposure to the housing sector without compromising the availability of reasonably priced mortgages.”

This should come as no surprise to a number of brokers, with Finance Minister Flaherty recently stating that CMHC has evolved past its initial intention.

“Regrettably, CMHC became something rather more grand, I think, than it was intended to be,” Flaherty told reporters in December. “We’ll see over time what that role should be.”

Naylor admits that a full Canadian securitisation model may not be on the cards for Australia. This doesn’t mean, however, that securitisation is a moot issue, he said. While the model may never mirror that of Canada, Naylor says, it is vital to make sure the securitisation market works toward fostering competition.

“I think there’s a reluctance in Australia by the government, especially the current government, to guarantee anything in the private sector. So we just have to make sure that whatever regulations relate to securitisation – and there are several – help the development of the market rather than hinder it.”

BUSINESS INTELLIGENCE 12

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How to avoid business burnout Corporate speaker Phil Schibeci shares the secrets to maintaining your professional passion

M

ost people start a business or career with great enthusiasm and excitement. They are full of the possibility and expectation of what they can achieve. Unfortunately this initial euphoria can become a daily grind as they slowly slip into a rut and eventually feel burnt out. So is it possible to maintain the vision and passion that was there at the beginning?

I think it is – as long as we have a structure to follow.

I’ve been a speaker and workshop facilitator for over 21 years and I’ve managed to maintain a consistent level of enthusiasm for this demanding work by using the following simple steps.

1

STEP 1: WHAT DON’T YOU WANT?

Most people are clear at the start about what they want to achieve in their career or business. What they are not usually clear about is what they don’t want. As a result they start doing lots of things they dislike but feel compelled to do to achieve success. Eventually they forget what it was that excited them about their work in the first place.

If this happens to you and you want to get back on track, your first task is to recapture your passion. If you have forgotten or lost touch with what you want to achieve, the best way to rediscover it is to be clear about what you don’t want to achieve.

I’ve found the following technique to be the simplest and easiest way to do this.

Get a clean piece of paper and draw a line down the middle. In the right column make a list of all the things you dislike about your work or business. This is your opportunity to drag out all those annoying things that you feel you have to do but if given a choice would rather not do them.

Then next to each item on your list write the polar opposite.

Once you have done this you will

now have a list of things you want to do and you will also have a list of things you don’t want to do. Next, number the things you want to do in order of which is the most important to you. With the list you don’t like, look at each item and decide if you are either willing to stop doing it altogether or to delegate it to someone else. This process will help you focus on your strengths and start you thinking about how you can manage your weaknesses.

To run a profitable business or have a successful career we all have to perform tasks we don’t like doing. But when we are doing more things we don’t enjoy compared to the number of things we do enjoy we can quickly get into a rut because we are not having much fun and are not feeling fulfilled. Without a sense of accomplishment in our work we can experience a lack of motivation and feel tired and burnt out. The first step to getting back on track is to change the balance of enjoyable tasks in your favour.

WITHOUT A SENSE OF ACCOMPLISHMENT IN OUR WORK WE CAN EXPERIENCE A LACK OF MOTIVATION AND FEEL TIRED AND BURNT OUT have written on your list and then make it more real by writing next to it when you will do it and how this will make you feel. Now set some short-, medium- and long-term goals around that particular task.

Then create a simple plan of how you are going to get into action to achieve these goals.

Write down and be crystal clear about the very first step you need to take.

2

4

3

5

STEP 2: WHAT’S YOUR WHY?

Now that you are back in touch with what you want to achieve from your work and what you enjoy about it, you need to get in touch with your why. Why are you doing what you do? This is a very powerful question to ask yourself because your why is bigger than you. When you are focused on why you are doing something you are growth orientated instead of just goal orientated. Being growth orientated keeps your focus on the big picture. This in turn will prevent you from getting in a rut and feeling burnt out.

STEP 3: SET SOME GOALS AND CREATE A PLAN

As mentioned earlier, the quickest way to start feeling good about work again is to focus on what you enjoy the most. So, go back to your list and pick the most enjoyable task that you

STEP 4: TAKE ACTION

Most people don’t achieve their goals quite simply because they don’t take action. Procrastination can be a killer, so the time to start is right now. At this point you need to think less and act more. Don’t second-guess yourself; just jump in and do something to get the ball rolling again. The first step is often the hardest because there’s no momentum. By taking immediate action you start to build momentum, which makes taking more action easier.

STEP 5: CELEBRATE YOUR WINS

When you finally achieve your goal and get what you want, make sure to celebrate and then reward yourself in some way for a job well done before moving on to the next task or goal. This is really important and is something that is often overlooked because people

don’t realise how important it is.

If we don’t celebrate and reward ourselves for our hard work, our subconscious mind (which is where our motivation comes from) will have no reason to do it again: “What’s the point of doing all of this if there’s nothing in it for me?” By celebrating and rewarding yourself in the smallest way, your subconscious mind will feel nurtured, you will start to feel positive and motivated, and your productivity will increase greatly. This will in turn encourage you to do it all again with the next goal on your list.

One of the reasons people burn out is that they don’t have a structure in place to prevent it happening. With these five simple steps you now have a structure to help keep you on track with your business and career. It’s important to make this structure a routine so that you stick to it, especially when things don’t go the way you want. Even after building momentum, at some point you are going to hit a hurdle. This is when it will look like you are not going to get what you want.

What you need to do when this happens is stick to your five-step structure; keep doing what you know works and what’s got you this far. If you just keep going whether you feel like it or not, at some point circumstances will turn in your favour. Persisting this way will prevent you from slipping into a rut and experiencing the business burnout.

Phil Schibeci is a renowned corporate speaker and workshop facilitator. He teaches businesses and organisations the skills to create positive and productive workplaces. In his book, How to Get Out of The RUT Race, Phil has put together a practical guide that provides readers with the tools to get out of a rut and achieve major life goals. For more information, visit www. philschibeci.com or contact phil@therutrace.com.

THE COALFACE brokernews.com.au

13

Empty nest doesn’t mean idle hands While her business may be running smoothly and her kids have left home, veteran broker Peita Davies isn’t slowing down

W

hat do you do when your successful broking business is running smoothly and your kids have all flown the nest?

Most people would pick up a hobby, but not Peita Davies, owner of decadeold Choice Home Loans in the Blue Mountains.

Davies seems slightly bemused when asked what she likes to do in her spare time.

“I’m kind of just finding my feet with that at the moment. The business has taken up so much of my life over the past few years that I haven’t had time for hobbies.

“I used to have to wear my mother hat and my business hat, and now with no kids at home there’s actually space to add another hat – although I’m not sure what that is right now.”

Davies concludes she would rather take on some more work by expanding her business.

Davies has built up her successful local business by following advice she received early in her 14-year broking career – which is to not worry about what everyone else is doing, but rather focus on goals and the client and the rest will fall into place.

As a self-described “dinosaur” in the broking world, Davies still has the passion needed to give expert advice.

“When brokers say that what we do is ‘making the dream come true’, well, that’s true. I do love helping people; I think the advice we give is quite powerful, although I think we’re underrated,” she says.

But she does have one bugbear: the lack of positive stories in the media about brokers means that many people get a twisted view of how honest their mortgage broker is.

“I’d like to see more respect from the consumer with regard to the advice we provide them. There are still clients that just don’t get the value of the broker, and it doesn’t help that the media portray us in the light that we are all about setting a deal based on commission,” she says.

“Clients should do their research on a broker, make sure they are experienced and reputable and then let them do what they are good at – providing credit advice. Consumers need to understand it is not all about rate all of the time and there are many reasons why a broker makes a recommendation.”

However, Davies believes that, with recent regulations and licensing tightening up standards, the industry is “on the right road” to professionalism and a cleaner image.

TECHONOLOGY UPDATE

ApplyOnline Supporting Docs exceeds expectations St.George Bank reports that the ApplyOnline Supporting Documents service is slashing turnaround times by 30 per cent.

That’s just the beginning, maintains NextGen.Net Sales Director, Tony Carn.

Carn suggests that the ability to further slash turnaround times is inevitable as brokers discover the power of uploading their supporting documents online.

“In recent weeks, I’ve spoken with a lot of brokers at workshops and training sessions with lenders offering the Supporting Documents service.

The feedback from brokers has been overwhelmingly positive. Faster turnaround times have been a consistent message, as well as the confidence that brokers and their customers can enjoy by way of more predictable outcomes regarding approval time and avoiding requests for more information,” he says.

“Brokers will find that investing time upfront familiarising themselves with the Supporting Documents service will bring about vastly improved turnarounds and drive down reworks in even their second and third experience and improvements will continue from there on.”

“Based on the responses from brokers in recent weeks, it has been a credit to those lenders who have led the industry in offering the supporting docs functionality. A common question has been, when will other lenders be offering the functionality to them, and it is great to share that key lenders including Homeside, Citibank and Pepper, will also be offering Supporting Documents service in the coming months.

MoneyQuest Home Loans South Australia-based broker, Damian Harrison was so impressed with his experience with the ApplyOnline Supporting Documents service he contacted St George Bank (BankSA) and offered a testimonial.

“Since I have been using supporting docs I’ve been achieving much faster turnaround times,” he said. “The last deal was lodged and assessed in two hours. Approval took 24 hours because I’d requested an exception to policy.

The deal prior to that was approved in principle in two hours.”

Harrison estimates that pre the Supporting Documents service these transactions would have taken 48 and 24 hours respectively.

TONY CARN

DAMIAN HARRISON

“My customers think I’m terrific because I can get a loan approved on the same day,” he chuckles.

Reworks have rarely been an issue for Harrison because, as he says, he is fastidious about application lodgements and aims for them all to be “one-touch approvals”.

“Having said that, there was one instance recently where I was asked for more information. I submitted it through Supporting Documents service and it was picked up very quickly,” he says.

Harrison says the contribution that the Supporting Documents service has made to his efficiency and standing with borrowers has been immeasurable.

“It has sped up the application process dramatically,” he says.

“Waiting for approval is a stressful time for clients and the longer it takes the more nervous they get. So to have an answer the same day is fantastic.

“I was thrilled when it first happened,” he says. “I recognised the voice of the lady from BankSA and assumed it was about a different deal.

When she said she was calling about the deal I’d only just lodged that day I was blown away.”

The ApplyOnline Supporting Documents service has been declared a “game-changer” because it provides a collaborative tool through which brokers can work with lenders to get supporting document requirements right first go,” says Carn.

“Significantly, it manages the quality of the supporting documents at the point of submission rather than retrospectively after a loan application has been lodged.”

The now widely heralded service provides clarity of lender policy requirements at point of sale and ensures transmission of documents (that is no size limitations or dropping out of transmission).

“The reduction in turnarounds is exactly what we expected,” says Carn.

OPINION 14

brokernews.com.au

Help educate your clients on credit reporting changes Andy Sheehan, managing director of Experian Credit Services, says consumers need help understanding the new comprehensive credit reporting system

O

n 12 March, long awaited changes to the Privacy Act came into effect, and took Australia into a comprehensive credit reporting environment. Credit providers are now able to access five additional data elements to inform their credit granting decisions. These reforms are the most significant changes the industry has seen in 20 years and will positively affect both lenders and consumers.

What we’re hearing from the market is that credit providers are at varying levels of preparedness for the shift to comprehensive data and our global experience highlights this transition is not simple. It takes time but the benefits for those who get it right are significant.

Experian has worked in numerous countries around the world and can offer relevant advice to Australian lenders who are making the transition, regardless of their stage of readiness. While lenders have been focused on Day 1 compliance to date, the real opportunity lies in finding the business benefits of

comprehensive data in the long term. In the newly changed environment, we believe there are opportunities for lenders to enhance their lender-customer relationship and improve customer loyalty.

Experian undertook research to assess how prepared consumers are for the new legislation and it showed that there are business benefits for adopting an educative and informative role for their consumers. 30% of respondents said if their credit provider did a great job of educating them on their credit profiles, it would increase their loyalty.

Conversely, 35% of consumers said it would negatively impact their customer loyalty if their credit provider did a poor job.

The research paints a fairly stark picture about what consumers understand of the new legislation and makes clear the opportunity for lenders in an environment where there is consumer demand for information.

While we can see that many credit providers have been actively communicating with their customers, the research

shows that education takes time and the message is not yet getting through. It shows that more than 61% of consumers don’t remember hearing from their credit provider about comprehensive credit reporting.

The research highlights that credit providers who are able to effectively support their customers through the transition will be rewarded. However, the challenge is for the whole industry to work together and play a more active role to empower consumers to effectively

understand and manage their credit profile and to help identify and manage fraud.

However, to be able to help educate consumers, credit providers must be technically ready and prepared for the change to comprehensive reporting. We know lenders are at varying stages of preparedness. Experian continues to work with the industry to share global experience, and support lenders through the journey to reap the benefits of comprehensive data.

CREDIT EDUCATION DISPARITY

FAST FACT

85%

Proportion of Australians who have never accessed their credit file

84% of men say they understand what a credit report is, versus 76% of women Source: Experian

Source: Experian

A LACK OF GUIDANCE

Of the consumers who have accessed their credit report in the last two years, only 37% were given any guidance on how to read it Source: Experian

CONSUMERS IN THE DARK ON CREDIT CHANGES Experian research has indicated that consumers are largely unaware of changes to the Privacy Act

74%

61%

35%

consumers are not aware of changes to the Privacy Amendment Act

consumers don’t remember hearing from their credit provider about comprehensive credit reporting.

consumers said it would negatively impact their customer loyalty if their credit provider did a poor job on educating them about their credit report

30%

62%

said if they did a great job Australians are concerned educating them, it would about the long term impact of increase their customer loyalty not paying their bills on time.

Source: Experian

NEWS 18

brokernews.com.au

CONTINUED FROM PAGE 1

Phil Quin-Conroy: A STRATEGY FOR THE FUTURE PLAN Australia’s CEO on the importance of being deliberate about engaging with technology

Q

uin-Conroy said technological offerings in the broking industry will increasingly become less focused on the back office and more focused on providing brokers with tools to engage with their clients.

“The impact of technology is evolving, and the focus of technology is changing as well.

A classic example of this is some research Gartner released recently about chief marketing officers spending more money on technology than chief information officers. We’re seeing a real shift in the focus of technology from back office efficiency to the customer,” he said.

Technology has long been a cornerstone of PLAN’s offering to its brokers. The company has invested heavily in its CRM, and Quin-Conroy said a recent brand refresh highlights the aggregator’s commitment to providing its brokers with business building tools.

“We believe technology is vitally important. We’ve invested heavily in Podium 2.0, and that is really an end-to-end client business management tool for brokers to run their whole business.

Technology can be a game changer,” Quin-Conroy said.

PLAN’s investment in Podium 2.0 has been well documented.

Last year, the aggregator released major enhancements to the platform in response to broker feedback. And QuinConroy has said the CRM would continue to evolve to suit the needs of brokers. Part of this evolution, he said, will be delivering tools that not only drive process efficiency, but help brokers better engage their customers.

“We’re spending a lot of time thinking about how we can provide technology solutions to brokers that not only improve their back office efficiency, but help them be more effective in front of the customer to deliver a better customer experience as well.”

Quin-Conroy explained that PLAN’s technology offering delivered integration between devices via cloud computing.

“We’ve really embraced cloud technology and the benefits that can bring to the table. Brokers can get a lead via their smartphone with information to connect with the customer straightaway. They can sit down with the customer, log into Podium with the iPad app on their tablet and do some quick

modelling with that customer demonstrating the benefits they’re going to bring. That data that’s going to be sitting in the tablet for them to commence that modelling exercise won’t need to be re-keyed. It’s already there based on the lead that’s been entered in,” he said.

And once the data is entered in, Quin-Conroy said brokers could continue the loan process without even returning to the office.

“They’re able to get on the phone to their administrator to say that the appointment is completed, they’ve got the paperwork and have them commence taking this application through to approval via the desktop.”

Ultimately, Quin-Conroy said he believes this will deliver a better client experience, and therefore yield benefits for brokers.

“At the end of the appointment, we believe they’ll have a higher conversion rate because the broker is using really engaging tools to assist the customer in understanding what the broker can bring to the table,” he said.

STRATEGISE FOR TOMORROW

While Quin-Conroy said PLAN

was committed to delivering its brokers tools to enhance their business proposition, he urged all brokers to think proactively about how they engage with technology.

“I think customer expectations are changing in relation to technology. My advice to brokers is to have a technology strategy, and to observe what is happening in regard to the main technology trends,” he said.

In particular, Quin-Conroy advised brokers to pay attention to three major technological trends: cloud, social and mobile.

Cloud technology enables data to be shared across multiple devices, which Quin-Conroy suggested would drive efficiency.

Social media would also continue to grow in importance, he said.

While some in the industry have written off social media as a sales or marketing tool, QuinConroy said evidence shows its growing importance.

“Social is increasing in importance. Around 20% of users of social media are using it for product and service research. If you’re ignoring what’s happening in the social space, you’re going to potentially be blindsided by a major trend that’s occurring,” he said.

brokernews.com.au

MY ADVICE TO BROKERS IS TO HAVE A TECHNOLOGY STRATEGY, AND TO OBSERVE WHAT IS HAPPENING IN REGARD TO THE MAIN TECHNOLOGY TRENDS

Social media also plays a role in consumers finding brokers in the first place, he argued.

“Google have actually changed their algorithm recently, which means that social media has greater importance in regards to search engine optimisation. Lots of brokers are focused on ensuring their website appears well in searches, but if there’s no activity in the social media space they could be missing a trend.”

With the ubiquity of smartphones in Australia, Quin-Conroy said brokers also needed to be deliberate about their mobile strategy.

“Everybody’s using mobile.

Most brokers have websites, and they’re good websites. But research out of the States suggest that nine out of 10 websites aren’t mobile

compatible. They haven’t been developed using modern responsive design.”

For consumers, this means some brokers could be ruled out.

“A broker might have a fantastic website. The typical prospective customer will be searching for information on that broker on their smartphone, and the website typically won’t be compatible,” he said.

However they choose to address the challenges of a changing consumer landscape, Quin-Conroy urged brokers to put thought into the strategy they employ.

“There’s an opportunity to have a deliberate technology strategy, and to address some of the trends that are happening around cloud, around social and around mobile.”

SPECIAL REPORT 20

brokernews.com.au

AHEAD + FINANCIAL SERVICES FOFA KERFUFFLE What will Sinodinos’ resignation mean for FoFA? P24

+ SPOTLIGHT TAPPING AN UNTAPPED MARKET

Self-employed borrowers need brokers’ help P26

+ FORUM BANKS DON’T GET IT

A lender roundtable has raised broker ire P27

+ MARKET TALK PROPERTY BILLIONAIRES

A look at tycoons who made their fortune in real estate P29

+ INSIDER INTERVIEW MISHAPS

Job interviews that took a turn for the weird P30

SMSFs: How to crack the market There’s no shortage of talk about SMSFs, but how can brokers tap into the market?

SPECIAL REPORT 21

brokernews.com.au

L

enders and aggregators have been talking up SMSFs for some time now. The selfmanaged super fund industry is touted as the next big opportunity for mortgage brokers. But lending through self-managed super can seem a complicated and labyrinthine process. Is it really worth brokers’ time and energy, and what is the reward?

TAKING THE MARKET’S TEMPERATURE

In short, the SMSF sector does appear to be one brokers should take another look at. It’s a rapidly growing sector, and that growth isn’t expected to slow any time soon. Self-managed super funds are a rapidly growing segment of the superannuation market. As of June 2012, the sector accounted for around $434bn in total assets. By 2033, that number is expected to swell to $2.23trn.

Liberty general manager of commercial finance Suresh Pillai said the SMSF sector should remain hot for the near future.

“Strong growth for SMSF loans should continue in the short to medium term, with good future potential for acceleration. This is driven by the growth of specialists, for whom SMSF loans have become an emerging source of new business,” he said.

And of particular interest to brokers, the amount of SMSF assets in residential property has seen strong growth as well. Resimac chief commercial officer Allan Savins pointed to figures from the ATO as proof that SMSF lending is a sector to watch.

DID YOU KNOW?

$2.23tr The SMSF market is predicted to grow to $2.23trn by 2033 Source: La Trobe

“There is no doubt the SMSF lending market is growing rapidly.

According to the ATO, as of June 2013, $17.5bn of residential property was held by self-managed super funds in Australia, up from $13.8bn in March 2011. That’s a growth rate of 27% in just over two years. Given this segment is still relatively new, we expect SMSF lending to continue to be one of the fastest growing segments of the market for some years to come,” Savins said.

AMP Bank head of sales and marketing Glenn Gibson said that this snapshot may not even do justice to the current market.

“Since then, 35,000 new SMSFs have been established. We’re still seeing significant growth in new self-managed super funds and people wanting to invest in property.”

Property investment has been a strong driver of housing market resurgence in Australia over the last year, and Homeloans general manager of sales Greg Mitchell said SMSF has played a role.

“Certain housing markets around Australia are performing very strongly, with property investors a key driver. And a significant percentage of these investors are purchasing via their SMSF, so it stands to reason there’s a good pool of borrowers,” he said.

La Trobe head of credit and product Cory Bannister said self-managed super funds were “clearly but slowly” increasing the amount of capital devoted to property, and that SMSF borrowers were likely to continue to grow their share of the commercial and residential market into the future.

“SMSFs could, therefore, possibly reshape the housing market in both positive and negative ways. Some surveys suggest SMSFs want to commit 30% of their savings to housing, which implies $152bn for investment. The key question is whether SMSFs use their cash as deposits for leveraged housing investments or invest in other assets.”

Jonathan Street said the limited recourse borrowing arrangements [LRBAs] set up through SMSFs also had potential to benefit business owners.

“We believe that small and medium size businesses have excellent potential to use SMSF LRBAs to acquire their business premises as a great investment as part of their retirement wealth management strategy and that is where the most natural and significant growth will continue to be while the taxation advantages remain as attractive as they are,” he said.

WHY BROKERS SHOULD CARE

So it seems clear that borrowing for residential or commercial property through self-managed super funds is a growing trend. This being said, why should brokers focusing on residential loans take notice?

Mitchell said the sector provides brokers with a way to further diversify their revenue stream.

“SMSF lending provides an opportunity for brokers to diversify their businesses and enhance their revenue stream. It’s a great niche sector and for brokers with strong affiliations with financial planners, accountants or lawyers, it’s a healthy

SPECIAL REPORT 22

brokernews.com.au

SURESH PILLAI

GREG MITCHELL

retirements that they can see on the horizon,” Bannister said.

WHAT YOU NEED TO KNOW

If brokers are looking to get involved with SMSF, some special skills and knowledge may be required. But Pillai said many of the skills involved in an SMSF deal are tools brokers already have.

“The expertise required of an SMSF loan is similar to that already used by brokers in their daily business. With some additional information regarding SMSF borrowing structures and associated documentation, brokers can provide even greater value added services and advice to their clients. This additional

FAST FACT

913,500 The approximate number of SMSF members Source: Cushman & Wakefield

knowledge can be quickly obtained by working with lenders such as Liberty who will help you with the process,” he said.

Mitchell said it was also important that brokers ensure they have the right referral relationships in place.

“In the first instance, it’s important for brokers to have an affiliation with financial planners, accountants or lawyers, and for brokers to be able to tap into their existing client base to identify those who have self-managed super funds and are interested in investing directly in residential property,” Mitchell said.

Gibson said brokers could also upskill via training courses offered by lenders.

WHERE DOES THE MONEY GO? How SMSFs are allocated Listed shares

Unlisted shares Residential real properties

Listed trusts Other managed investments

Cash and term deposits

32.0%

1.1% 3.5% 4.2% 4.7%

5.6 %

addition to their business, but obviously it has to be done properly,” he said.

For Gibson, it’s a matter of helping to build strong referral relationships, which ultimately feed back into a broker’s main business proposition.

“It opens doors in regards to new customers, but it also opens doors in regards to referral clients. If they have a relationship with an accountant or financial planner, if they’ve got a broker who they know has a bit of experience in that space it opens up business opportunities in terms of referrals from that [accountant or financial planner]. Then it turns not only into just self-managed super funds, but standard residential deals as well,” he said.

Savins said offering self-managed super fund expertise also set brokers apart from their competitors.

“The feedback we have received is that brokers like communicating to their clients the fact that if the loan falls into difficulties, the remainder of their superannuation assets are protected and cannot be accessed by the lender,” he said. “SMSF lending is a great opportunity for brokers to offer a niche solution to their clients that other brokers may not be able to offer.”

Bannister said brokers would need to keep up with their clients’ needs.

He pointed to research suggesting that nearly 30% of families see housing as the wisest investment class, and suggested brokers may find themselves facing more SMSF demand in the future.

“It is possible that a significant portion of brokers’ current deal flow may be replaced by SMSF structures over time, particularly in both the commercial space, and as SMEs look to acquire property for their businesses in SMSFs, taking advantage of tax benefits, and also in the residential investment property market, as Australia’s ageing population gears up for their pending

ALLAN SAVINS

28.7%

8.8%

11.4%

All other assets Non-residential property Unlisted trusts

Source: La Trobe

SPECIAL REPORT 23

brokernews.com.au

CORY BANNISTER

“We spend a lot of time and effort in regards to educating brokers. We have everything from a two-hour accreditation session to boot camps we run around the country.”

But he warned that brokers who want to be involved must also be committed.

“It’s no good just dabbling in the sector. They need to put in the effort.

They really need to go work with an accountant or financial planner or specialist who can set it up for them,” Gibson said.

In spite of the extra effort required, Street said SMSF lending did not have to be the sole domain of specialists.

“I think it would be right to say that any experienced broker can learn to operate very effectively in SMSF lending but for someone without training in the area, whether it be practical or formal, it would be very hard to do a good job for your client in a field of lending with which you aren’t familiar. As mentioned previously, some lenders will also require separate accreditation for SMSF lending so unless you have the training to qualify for that you may be limited in terms of the lenders you could approach. You don’t, however, have to be a specialist who does nothing but LRBAs and as with everything there is always your first deal and everyone has to start somewhere.”

HOW TO GET INVOLVED

Street said the process begins with financial planners or accountants, before moving on to brokers.

“It is most likely that the prospective borrower will first discuss the idea with their accountant when they are completing their financial statements and/or tax returns. That or perhaps a financial planning session with a financial adviser. They quite often will already have an SMSF,” he said.

“Once this client decides they want

GLENN GIBSON

BY THE NUMBERS

JONATHAN STREET

THE GENDER SPLIT OF SMSF MEMBERS

AS OF JUNE 2011:

$506,000 THE AVERAGE SMSF BALANCE

$302,000

52.6% - Male 47.4% - Female

THE MEDIAN BALANCE Source: La Trobe

to borrow through their SMSF, brokers come into play.

It is at that point, and hopefully early in the process, that they will get in touch with their broker,” Street said.

Street added that it is important that brokers maintain contact with accountants or financial planners throughout the loan process.

And in this process, Pillai said brokers will play their usual role of educating borrowers on credit options.

“I think one of the principal roles for brokers is credit education – making people aware of SMSF loans and how they can be used to acquire property. Once a customer has advice and has expressed an interest in setting up an SMSF loan, the broker plays an essential role in obtaining the funds to implement the investment strategy. Brokers should just be mindful to avoid providing financial advice unless appropriately qualified,” Pillai said.

In spite of all this, Savins said the process of writing an SMSF loan is straightforward.

“Once the appropriate structures are in place, the matter of setting up an SMSF loan is relatively straightforward. Access can be

FAST FACT

84% Proportion of SMSF members aged 45 years or older Source: La Trobe

provided to the lender’s panel lawyers. They are the ones who prepare the documentation and set up the appropriate trust deeds if they are not set up,” Savins said.

But Gibson warned brokers to expect slightly longer timeframes.

“It may be a three month transaction, whereas residential is a five week transaction. The transaction time is not necessarily the broker’s part of the transaction.

The turnaround times for an application on an SMSF loan versus residential are the same. It’s just the establishment of the SMSF itself,” he said.

And Bannister said brokers will need to supply some additional information.

“La Trobe Financial’s application form and documentation requirements for an SMSF loan are the same as our regular loan products. However, for SMSF loans we require details of the superannuation fund, such as size and regular contributions, and copies of the trust deeds for both the Bare Trust and the SMSF Trust, so brokers familiar with our products will notice little difference in the process,” he said.

FINANCIAL SERVICES 24

brokernews.com.au

What will the Sinodinos case mean for FOFA?

W

e’ve just been through months of submissions, in-fighting, and reviews, but now, just as the FOFA amendments are beginning to roll out, the head of it all has been drawn into a major corruption case.

The assistant treasurer, Senator Arthur Sinodinos, stood down in March after a media furore about his role in the case that has seen Australian Water Holdings in front of the NSW Independent Commission Against Corruption due to its links with crooked former powerbroker Eddie Obeid. Prime Minister Tony Abbott has announced that while Sinodinos is stood down his ministerial duties will be undertaken by the minister for finance, Mathias Cormann.

Max Franchitto, a business analyst who gives best-practice advice to planners, expected there to be more delays with the FOFA amendments due to the upheaval.

“For me it’s another reason for everything to be delayed. There will be more consultation with individuals, and people will see this as an opportunity to try and convince the new minister to do differently,” he said. “[Cormann] might see things slightly differently, but we’re not going to change from apples to oranges. It’s just going to put another stretch on the timeline and there will be more debates and lobbying. In my humble opinion of 32 years in financial services, the industry needs to get on with it and advisers need to get on with what they do best.”

Brad Fox, CEO of the Association of Financial Advisers, indicated that he was not concerned, and was yet to receive any communications from worried advisers.

“I think this rises above an individual minister. I think [the FOFA amendments] are clearly the Coalition stance of what is good for the future of financial advice in Australia,” he said.

FOFA CHANGES COULD OPEN ADVISERS TO LITIGATION Advisers could face more cases of litigation if a proposal to amend FOFA’s best interests duty is passed into legislation, a superannuation organisation says.

Industry Super Australia obtained legal advice from firm Arnold Bloch Leibler which indicates that amending the best interests duty as proposed could have negative consequences for both advisers and their clients.

The firm advised that the amendments are inconsistent with the nature of best interests and add to legal uncertainty associated with financial advisers attempting to reduce the scope of duty by agreement with their clients.

The proposal for advisers and clients to agree to determine the scope of best interests is “inherently problematic” due to a disparity in the level of knowledge or understanding of what they are agreeing to and its consequences, Arnold Bloch Leibler stated.

Legal action could potentially be an issue if there are disputes about what the client understood and agreed to due to this different level of understanding.

The firm found that the removal of the “catch-all” provision, which is the seventh step in a process that advisers must take to prove they have discharged their duty to their client, will allow advisers to act without having to exercise judgment.

“This would likely reduce the overall quality of financial advice given in Australia,” it said, “with advisers focused on carrying out the remaining steps in the safe harbour as efficiently as possible – in other words, going through the motions and reducing the best interests duty to a mechanical checklist.”

DID YOU KNOW?

40% Women are retiring with 40% less in superannuation than men Source: MLC

ASIC SLAMS SYDNEY ADVISORY The AFS licence of AIE Fiduciary Services has just been cancelled

by ASIC following major concerns about how the company was run.

The cancellation comes in response to an application made

by AIE that aimed to respond to ASIC’s concerns about the management of the company and its compliance with the AFS licence obligations, in particular, the monitoring and supervision of certain authorised representatives.

In late February ASIC accepted an enforceable undertaking from AIE former director Manish Babulal Jani of Ryde, NSW, which prevented him from managing a corporation for five years.

ASIC’s investigation found that between 18 April and 8 November 2013, Jani failed to uphold a number of general obligations expected of him as the director of an AFS licensee, such as maintaining proper books of account and adequately supervising authorised representatives.

The EU also prevented Jani from having any involvement in financial services for two years.

At the time, ASIC deputy chairman Peter Kell said, “Directors hold a position of trust in any organisation and they must adhere to their obligations. If they do not, ASIC will act to ensure they are removed from the industry.”

BY THE NUMBERS 15

13.4% 12

9

6

10 YEARS TO 28 FEB 2014

5 YEARS

3 YEARS

1 YEAR

Growth super funds regained lost ground in February, with longer-term median annualised returns of 13.4% (one year), 8.8% (three years), 11.7% (five years), and 6.9% (10 years to 28 February 2014) Source: Morningstar

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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, April 2013

Macquarie making inroads with brokers

Following its re-entry to the mortgage broking market, Macquarie division director James Casey said the lender knew it could face scepticism. But last year, Macquarie launched a TV ad campaign aimed at directing consumers to brokers.

“When we knew we wanted to run with a TV program, it was second nature for us to make sure that the call to action was to ring our financial intermediaries,” he said.

Casey said the lender would continue to listen to and act on broker feedback.

What’s happened since?

Macquarie’s strategy seems to have paid off, with the lender easily topping Australian Broker’s inaugural Brokers on Non-majors survey. Macquarie won seven of the eight categories surveyed, and ranked number one overall. In November, CEO Nicholas Moore said the bank would look to double its mortgage market share.

Pepper’s $250m Citibank deal

brokernews.com.au

Self-employed borrowers an untapped opportunity

A

llan Savins, chief commercial officer of Resimac, has urged brokers to tap into the market for self-employed borrowers, saying they present a tremendous opportunity.

“The self-employed sector is grossly under-serviced,” he told Australian Broker TV. “As we’ve seen credit policies tighten, the appetite to service self-employed borrowers has really dissipated over time.”

Savins said the opportunity may be bigger than many brokers realise.

“In Australia there are over two million selfemployed people operating, and to me that represents a large and significant opportunity for mortgage brokers.”

Many of these self-employed borrowers are in particular need of the expertise offered by brokers, Savins said.

“I think the small business sector really seeks out mortgage brokers, looking for expertise in their field to provide them with a particular solution.”

Savins said specialist lenders could help brokers find solutions to fit self-employed borrowers.

“Sometimes mainstream lending solutions don’t fit those criteria either, so it’s good to have that knowledge base. That’s why I think brokers are so important,” he said.

With this in mind, brokers who can provide such solutions will be well-placed to capitalise on the opportunity presented by self-employed clients, Savins suggested.

“As lenders continue to tighten credit policies – as do the mortgage insurers as well – those same self-employed clients are looking again towards the broker community to try to service them with particular solutions for their finance needs.”

Pepper last year announced the acquisition of a $250m small balance commercial mortgage portfolio from Citibank, which the non-bank lender says is part of its strategic growth plans to extend its specialised lending services beyond residential home loan products. The deal represented Pepper’s first domestic acquisition of 2013, but came on the back of an 18-month period of various acquisitions.

What’s happened since?

Following a couple of years of expanding its servicing and funding capabilities, Pepper early this year announced the launch of its first prime mortgage product.

Pepper said it would remain focused on specialist lending as its core business, but that its prime lending launch came in response to broker feedback.

ALLAN SAVINS

For the full interview, head to www.brokernews.com.au/tv

FORUM 27

brokernews.com.au

Banks don’t get big issues: Brokers A recent roundtable of industry leaders addressed challenges facing the mortgage industry, but brokers say lenders are blind to the real issues

BANKS PUSHING THEIR OWN BARROW? A panel of lenders and aggregators at a Deloitte roundtable discussion drew the ire of brokers when they predicted fee-for-service could be a development in the future of the mortgage broking industry.

“Once the major bank that owns my aggregator starts dictating to me that I have to start charging fee for service they will lose me.

Not happening yet but these lender and aggregator heads are talking about it in this forum, so you can bet it is on their agenda somewhere.

Although if we as brokers are told to start charging fee for service and lenders consequently drop commissions the aggregators miss out unless volume bonuses then become the norm. Result being the bank-owned aggregator starts to push brokers to the lender that pays the biggest bonus.

Is this the future of broking? I, for one, hope not.”

Tim H on 12/03/2014 10:20AM

L

enders met to discuss the biggest challenge facing the mortgage industry right now – but brokers don’t believe they really have the grips of what the industry faces.

A recent roundtable of lenders discussed what they felt were some of the big issues facing the mortgage industry. Brokers were sceptical.

Brian Broker thinks the banks don’t “get it” and called for comments from FBAA and MFAA. “Brokers cost them nothing except commission which is paid a long time after the deal is done.

The winners will be the banks who reduce these overheads and pay the brokers better commissions – bring it on!”

QAL lamented: “The banks continually cry ‘we absorb the costs’. Hello? And what do you

FOS LACKS TIMELINESS

ASIC welcomed a new report that found FOS was falling down in the time it took to resolve complaints.

Tony on 13/03/2014 10:04AM “At last someone has exposed this highly inefficient organisation. Just a shame they have cost consumers and lenders significant amounts in terms of delay and equity loss. The area they do need a shake-

ASIC BANS FORMER BANKER

ASIC recently dealt a permanent ban to a former Westpac home finance manager.

John L on 12/03/2014 12:09PM “It appears he got off lightly thanks to working in a bank. Had he been a broker he’d no doubt be facing jail time.”

What do you think?

Leave your comments at brokernews. com.au

REVERSE MORTGAGES MAKING A COMEBACK

The move by two major funders to offer reverse mortgages again could be an indicator the market is picking up after the global financial crisis.

Mick on 14/03/2014 10:04AM “The elderly should enjoy the benefits of seniors’ equity release and ignore the selfish children who are greedy

think the brokers do? We absorb many costs as well. Commissions have been cut, compliance costs are up and clawbacks (due to lost business which is not our fault) on work already done.”

Steve L thought the only way to get a good overview of how the industry is going is to survey brokers.

“Why would you ask the lenders this question? Or aggregators for this matter? Survey the brokers and get the real results.”

Barney said lenders looking to address challenges could look at one particular quick fix “Blah blah blah. Give us our 0.25% trail back. That will fix an awful lot. More income enables brokers to reinvest back into their business to grow volumes and support in all areas – including compliance. The argument that the banks can’t afford it is getting a little stale.”

up in is their non-commercial approach.

They could learn from COSL who are a far more proactive organisation.”

Laurie Best on 13/03/2014 10:02AM “The reaction from ASIC is nothing other than “business as normal”, no admission the system they set up is fatally flawed. In many cases FOS taking too long makes the borrower/complainants’ position measurably worse.”

Gary S on 12/03/2014 11:30AM “As a former banker and mortgage broker for the last 20 years, I am disgusted to read these types of frauds. Once upon a time, bankers were respected within the community for their honesty and integrity.

It is mongrels like this that can destroy the integrity and sincerity of all the good bankers in the industry.”

enough to put their own self-interests before their parents who spent hundreds of thousands of dollars on their privileged upbringing.”

Papery on 17/03/2014 10:04AM “Agree. It’s when the greedy kids find out about the reverse mortgage that their perfectly capable parents put in place and start worrying about their inheritance that the misinformation comes out.”

MARKET TALK

brokernews.com.au

28

Overseas investment: A legitimate issue or a convenient scapegoat?

The noise over foreign investment in Aussie real estate has reached a fever pitch, resulting in a government inquiry. But is it just hot air?

Nikki Taylor and Miriam Bell investigate A generation of Australians are being priced out of the property market. Many face a lifetime of renting.’’

These were the words, spoken

by Credit Suisse analysts Hasan Tevfik and Damien Boey, that contributed to calls for a review of foreign investment protocol.

The comment was part of a Credit Suisse report that estimated 18% of new homes in Sydney and 14% in Melbourne are being purchased by Chinese buyers.

The report showed that in the past seven years, Chinese buyers have invested $24bn into the Australian property market, with $5.6bn spent in NSW alone in 2013.

Credit Suisse also reported Chinese buyers were investing $5.4bn per year in Australian real estate – buyers included investors, developers and temporary residents.

The recent report, which used data from the Australian Bureau of Statistics and the Foreign Investment Review Board, also predicted the Chinese could buy up to $44bn worth of Australian real estate by 2020.

The report sparked calls for an inquiry into Australia’s current foreign investment framework to examine whether the objective of the policy – to create housing – was being met, or if an influx of Chinese and other foreign investors were squeezing local buyers out of the market.

On 19 March, the House Economics Committee announced the terms of reference for an inquiry into foreign residential property investment and the policy governing it.

Committee chair, Liberal MP Kelly O’Dwyer, said that the existing policy was intended to channel foreign investment to boost the supply of new housing stock. This, in turn, was meant to create both economic and social benefits.

Foreign investors are limited to buying off-the-plan or newly built properties and can’t generally buy established properties for investment purposes.

However, O’Dwyer said the wider community has raised concerns that foreign investment is causing a distortion in the market and making housing less accessible and affordable.

Much of the speculation has been trained on Chinese investors, but O’Dwyer said the inquiry would not focus on investors from any particular country.

“The committee will take a very broad and holistic approach to examining whether the current policy settings are delivering the best possible outcomes for Australia.”

FAST FACT

$51.9bn Total proposed overseas development in real estate, 2012-13 Source: Foreign Investment Review Board

THE COMMITTEE HAS BEEN CHARGED WITH INVESTIGATING: the economic benefits of foreign investment in residential property whether foreign investment is increasing the supply of new housing and benefitting the local building industry and its suppliers how Australia’s foreign investment framework compares internationally whether there is scope to improve the administration of foreign investment policy in relation to residential property Submissions to the inquiry are due by 9 May 2014, and the Committee has to produce its report by 10 October 2014.

O’Dwyer told media the original mandate for foreign investment in residential real estate was to increase dwelling stocks and add jobs in the Australian construction industry and the

DID YOU KNOW?

18%

Despite the clamour over foreign investment in Australian real estate, there has actually been a drop of 18% in overall foreign investment in the Australian property market in the past two years Source: Foreign Investment Review Board

inquiry will determine whether those aims are still being achieved.

“The Reserve Bank Governor made some comments in the recent parliamentary oversight hearing of the Economics Committee, where he said all foreign investment does have an effect on prices,” she said.

“We want to know though whether or not the current laws and the current framework are being properly adhered to and whether it is a truly distorting impact.”

Meanwhile, dissenting opinions have been voiced in response to the inquiry announcement.

Dr Stephen Kirchner, from the Centre for Independent Studies, said that it is shoddy tax laws, not foreign investors, which are driving up the prices of new dwellings.

Meanwhile Australia China Business Council president Duncan Calder said the impact of Chinese property buyers has been overstated and that there are significant benefits from their investment.

This argument is supported by a newly released Colliers International research paper.

It concluded that Asian investment in Australian property has been a key factor in the improvement of the domestic retail sector.

Calder shunned concern, saying Chinese investors have not squeezed out local buyers, but helped boost the Australian housing market – a sentiment backed by the Foreign Investment Review Board.

Recent Foreign Investment Review Board statistics show a drop of 18% in overall foreign investment in the Australian property market in the past two years.

MARKET TALK brokernews.com.au

29

THE WORLD’S TOP 5 PROPERTY INVESTORS #1 LEE SHAU KEE

FORBES BILLIONAIRE RANK: 35 NET WORTH: $19.6BN CITIZENSHIP: HONG KONG AGE: 86 Founder and majority owner of Henderson Land Development, a property conglomerate with an interest in hotels, restaurants and internet services, Dr Kee has been listed as the 35th richest man in the world. It is understood Dr Kee focused on middle-class properties as he built his empire and later accumulated enough shares to enable Henderson to take control of Hong Kong Ferries and Towngas, which supplies 85% of Hong Kong homes.

#2 CHENG YU-TUNG

A look at property’s

BILLIONAIRES The Forbes Billionaires list includes tycoons who made their fortunes in property

I

f you still need proof that property investment can make you rich, take a look at the latest line-up on Forbes Billionaires List.

A total of 135 property tycoons now make up the world’s wealthiest list with 14 property billionaires joining the ranks this year alone, boosted by surging

property values around the world.

Chinese businessman Lee Shau Kee topped the list of the world’s richest property tycoons with an estimated net worth of $19.6bn, but Australia wasn’t forgotten with our own Harry Triguboff, aka “High-Rise Harry”, also named among the richest property investors.

FORBES BILLIONAIRE RANKING: 54 NET WORTH: $16.2BN CITIZENSHIP: HONG KONG AGE: 88 Cheng Yu-tung has long been one of Hong Kong’s richest men.

Yu-tung owns Chow Tai Fook Enterprises which operates the Sheraton Marina and publicly listed New World Group, among others. He found initial success in jewellery and later moved to property.

#3 WANG JIANLIN

FORBES BILLIONAIRE RANK: 64 NET WORTH: $15.1BN CITIZENSHIP: CHINA AGE: 59 The richest man in China, Jianlin is chairman of one of the country’s largest real estate development companies, the Dalian Wanda Group, and after purchasing AMC Entertainment Holdings for US$2.6m – is the world’s leading operator of movie theatres.

He also owns 75 department stores, 85 shopping plazas and 51 five-star hotels.

#4 DONALD BREN

FORBES BILLIONAIRE RANK: 69 NET WORTH: $14.4BN CITIZENSHIP: US AGE: 81 Bren has been named the richest property developer in the United States. After earning a degree in business administration and economics from the University of Washington, Bren served three years as an officer in the US Marine Corps before forming his own company in 1963 – Mission Viejo Company.

In 1977 Bren joined a group of investors to purchase the Irvine Company which has a portfolio exceeding 100 million square feet, including 480 office buildings, 41 retail centres, 125 apartment communities, three hotels, marinas, and golf clubs, primarily in Orange County, California and additional investment properties expanding into Los Angeles, San Diego and Silicon Valley.

#5 GERALD CAVENDISH GROSVENOR

FORBES BILLIONAIRE RANK: 81 NET WORTH: $13BN CITIZENSHIP: UK AGE: 62 Grosvenor has a couple of other interests aside from property, namely being the 6th Duke of Westminster. He is also a MajorGeneral in the British Army and the Chancellor of the University of Chester. He is also the richest person in Britain, outranking the Queen, thanks to a family trust that dates back to the 17th Century. The trust owns estates in Lancashire, Cheshire and Scotland as well as properties in London, Spain and Canada. His company Grosvenor Group has property interests all over the world.

TRIGUBOFF’S STATS

MAKING UP THE TOP 10 FOUNDER AND MANAGING DIRECTOR OF MERITON APARTMENTS PTY LTD FORBES BILLIONAIRE RANK: 281 NET WORTH: $5BN AGE: 81

#6 THOMAS AND RAYMOND KWOK

#9 JOSEPH LAU

This property heavyweight immigrated to Australia as a teenager in 1948 and built his first block of apartments in the Sydney suburb of Gladesville in the early 1960s. He began developing in Sydney’s Inner West area and his third project, a block of 18 units in Meriton Street Gladesville, would eventually change his life.

After completing the development, the name Meriton stuck and in 1963 Triguboff founded the company that would make him Australia’s 6th richest man – Meriton Apartments Pty Ltd.

#7 DAVID AND SIMON REUBEN Forbes Billionaire Rank: 95 Net worth: $11.5bn Citizenship: UK

#10 PETER WOO

Forbes Billionaire Rank: 86 Net worth: $12.6bn Citizenship: Hong Kong

#8 ROBERT AND PHILLIP NG Forbes Billionaire Rank: 106 Net worth: $11bn Citizenship: Singapore

Forbes Billionaire Rank: 158 Net worth: $8.4bn Citizenship: Hong Kong Forbes Billionaire Rank: 186 Net worth: $7.2bn Citizenship: Hong Kong

INSIDER 30

brokernews.com.au

Truly odd interviews Job interviews are always nerve-wracking, but here are some that took a turn for the weird

I

nterviews normally follow a standard procedure with the odd twist and turn thrown in; however, for some candidates the twists can drive the process into bizarre territory.

Users of question and answer website Quora.com recently shared their most bizarre interview experiences, and Australian Broker has selected some of the more unusual ones – from dog crashing to romance offers.

DOG CRASHER

Things got a bit hairy for Murli Ravi’s friend who was attempting to fill a mid-level management position at his firm. Following a series of interviews, Ravi’s friend, a CEO and founder of the company, was ushering in his next interviewee and “a golden retriever (dog) that had a collar but no leash walked in alongside the candidate”, he wrote.

Ravi continued: “He was naturally quite bemused but rolled with the punches.

Interview begins, dog saunters around, doesn’t really bother anyone, lies down under the table for a bit and then leaves the room out the same door it entered.”

The interview continued and Ravi said his friend liked the candidate and the interview was otherwise normal, so his friend asked: “Why did you think it was normal to bring your dog to an interview?”

“The candidate’s reply was, ‘My dog? I thought it was your dog! I wanted to ask you the same question!’” It turned out the dog had just been out for a walk and decided “on a whim to traipse into an open door”.

ENVIRONMENT VS LAW

While studying as an undergraduate in environmental science, Sam Huleatt considered a career in

law. He secured an interview at a prestigious law firm but the interview put him off.

He wrote: “During the interview the woman I was meeting with glanced up from reviewing my resume and then began ripping it into pieces asking, ‘As someone who clearly cares about the environment, does this bother you? We waste a lot of paper here and don’t really care’.”

A TOUCH OF ROMANCE

Leitha Matz’s interview turned out to be for something more than just a job. The proofreader was tipped that a businessman was looking for a copywriter and, on following up, the man invited her to his home office.

She wrote that he ignored her résumé and copy samples, asked a few basic questions, then launched into a spiel about his business and life story. As the hours ticked by he then invited her out to dinner to continue the conversation, which she accepted.

He told her how perfect she would be for the job over dinner, then afterwards promised to pick her up the next day to show her the site of her future office.

“He showed up (on time) in the expensive silver sports car with a cooler of beers. He took me across the state line (into Wisconsin) to

a location in the middle of the woods,” she wrote.

“At some point, he parked the car in a field, and we got out and hiked up a hill. He showed me the river valley below, picked up a stone shaped like a heart and told me it was a sign. He told me all this could and should all be mine. Here was my office. There was his. We’d do this together.

He wanted to get married, after a reasonable dating period, of course. He wanted to hire me.

I was terrified. I took his heartshaped rock. I drank a beer. He kissed me to seal the deal. I told him I needed to sleep on a life change as big as that.”

He called the next day and she politely informed him that the opportunity wasn’t for her, to which he asked: “For what, the job or the relationship?” Her response was “both”.

DIRECTORY AGGREGATOR / WHOLESALE BROKER

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