Australian Broker 11.13

JULY 2014 ISSUE 11.13

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS FIGHTING FRAUD

How brokers can serve as the first line of defence P10

+ SPECIAL REPORT SPECIALIST LENDING

Dispelling nonconforming myths P12

+ MARKET TALK GEN Ys BAND TOGETHER

Young investors are pooling their resources P21

+ FORUM MENTORS AND MONEY

Are high mentoring fees keeping people out of the industry?

P27

Tim Brown: FUTURE-PROOFING YOUR BUSINESS The Vow CEO on his business’ growth and how they’re preparing for the future

V

ow Financial has seen some significant developments of late.

In May, it was announced the aggregator would be acquired by Yellow Brick Road, adding $18.5bn worth of mortgages and more than 700 brokers to YBR’s books. On top of this, the aggregator smashed its previous records with May settlements. But Vow CEO Tim Brown said the company is still keeping an eye on the future.

FULL STORY PAGE 18

+ PEOPLE SLEEPING ROUGH

A brokerage CEO takes on homelessness P28

+ CAUGHT ON CAMERA INDEPENDENT FINANCE BROKERS FORUM P29

NEWS 2

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NUMBER CRUNCHING

BIG FOUR SHARE OF WALLET

AUSTRALIAN SME CONFIDENCE

Share of major bank customers’ banking and finance products held at bank

DID YOU KNOW?

60%

ANZ – 29.9%

Online jobs ads are down 60% from their March 2008 peak

CBA – 37.5%

Extremely worried Fairly worried

Extremely confident

9%

9%

26%

Source: Department of Employment

38%

Westpac – 32.5%

FAST FACT

NAB – 32%

17%

$16.9bn Home lending finance for April Source: Roy Morgan

Neutral

Fairly confident Source: Sensis

Source: ABS

WHAT THEY SAID...

STEPHEN DINTE

PETER WHITE

“In recent times I am finding “We want to encourage new the worst culprits at producing industry participants, not dodgy identity documentation take advantage of them” P16 are the various government departments” P10

ANTHONY WALDRON

“We’re not just committed to the channel. It’s completely core to what we do as a bank” P26

SAM WHITE

“When you look at situations where things haven’t gone right for people, it emphasises the duty of care we have to help our customers” P28

NEWS 4

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MORTGAGE FRANCHISES LENT CREDIBILITY BY NEW REGISTRY

EDITOR Adam Smith PUBLISHER Simon Kerslake COPY & FEATURES

DID YOU KNOW?

19% Peter White

Low rates could come back to bite borrowers ■ The ECB recently took the drastic step

of dropping the deposit rate to -0.1%, which means banks will have to pay to deposit money with it.

The move is hoped to encourage banks to lend their money instead, ideally to businesses, to boost the economy in general.

Analysts say the move to introduce negative interest rates could drive more European bank investors towards bonds or mortgage-backed securities issued by Australian banks, pushing down the sector’s funding costs.

But FBAA chief executive Peter White said while all borrowers like cheaper rates, it will also encourage people to overcommit without taking future rate rises into consideration.

“Our response to these media reports is ‘caveat emptor’ – buyer beware – as rates that are too low can only go in one direction.”

Abnormally low rates may encourage more loans but, “the upwards correction could be quite large to compensate the extreme low”, White says.

“This will not only remove any advantage borrowers had but could have the reverse effect and result in people losing their homes due to a failure to meet increased payments.”

The FBAA advocates for banks to absorb increases to protect borrowers, and banks should equally absorb any unusually low cost of funds, White says.

“Borrowers thrive when interest rates are more constant. Any drop on the cost of funds simply won’t last. It can’t.”

The proportion of financial services businesses receiving orders via the internet was just 19% in 201213. This compares to an Australian average of 30% Source: ABS

■ Mortgage franchises will face

stronger scrutiny in future as Australia’s first franchise registry was launched to bridge a ‘credibility gap’.

The Franchise Registry was launched by Small Business Minister Bruce Billson at a franchise industry event in Melbourne in June.

Billson welcomed the registry’s purpose to enhance the credibility of Australian franchising, improve franchisor compliance and provide a sound resource for people looking to invest in a franchise.

“Federal government has long had an appetite for better indicators of stability in franchising and we welcome any initiative that can generate more meaningful data that we can use to enhance our support of the sector,” Billson said.

The registry’s website states it was set up to fill the “credibility gap” that currently exists in Australian franchising.

TIPS TO AVOID FALLING VICTIM TO FALSE BILLING Make sure the business you are dealing with is the real deal – if you receive a form or tax invoice out of the blue, verify who they are by contacting the company directly using contact details you sourced independently through a phone book or online search.

Make your business ‘fraud-free’ – effective management procedures can go a long way towards preventing scams. Have a clearly defined process for verifying and paying accounts and invoices, and try to avoid giving too many staff authorisation to make orders or pay invoices.

Don’t be intimidated – do not let anyone pressure you into making decisions involving payments or contracts. If you are unsure, always seek independent financial or legal advice.

Update your IT security software regularly and make sure you use and offer secure online payment methods.

JOURNALIST Calida Smylie 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 Maria Katsiotis 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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SMEs see generally rosy future

WORLD NEWS UNITED STATES OF AMERICA

■ The majority of small and medium enterprises

FAST FACT

AMERICAN BROKERS LOBBY FOR OVERTIME

Mortgage brokers in the United States may be able to claim overtime pay in future, should a lawsuit be successful.

The US Supreme Court has agreed to hear an appeal from former mortgage brokers for online mortgage giant Quicken Loans, who claim the lender owes them overtime pay for their work in the last decade.

The justices said last week they will review a lower court ruling in favour of Quicken. The case will be argued later this year, reported Associated Press.

At the heart of the brokers’ grievance are rules put in place by the US Department of Labor – which were changed twice in a four-year period that spanned the Bush and Obama administrations.

In 2006, the Department of Labor said the mortgage brokers were like executives and thus not covered by the overtime provision.

In 2010, the department reversed itself.

If the new case is successful, it would make the mortgage brokers eligible for overtime pay under federal labour law.

18% Proportion of Australians who spend more than they make Source: ING Direct

expect prospects for revenue growth to improve over the next year, although nearly three-quarters said economic conditions would impact business.

SME Association of Australia commissioned McNair Ingenuity Research and Stable Research to conduct a survey of the SME sector, which found although SMEs were generally upbeat about future prospects they were still concerned about economic and bureaucratic ‘anchors’ holding back the sector and economy.

More than a quarter of the respondents expected to employ more people in the coming 12 months, and only 12% said they would employ fewer people in the year ahead.

Chairman Craig West said an “interesting observation” was the majority of this employment growth will be from businesses that were established post-GFC, when global economic uncertainty prevailed.

ISSUES FACING SMEs Although optimistic about Australia’s economic outlook and prospects for employment growth, SMEs considered the main issues which make business difficult were general economic conditions (71%), compliance and bureaucratic issues (62%), and cash flow (53%).

General economic conditions

CANADA

71%

MORTGAGE DEBT SHRINKING

Mortgage debt growth is shrinking, according to Statistics Canada, signalling more prudent lending may be creating a healthier lending industry.

According to StatsCan, mortgage debt totalled $1.1trn at the end of the first quarter this year, up a mere 0.6% from the previous quarter and marking the slowest pace of growth in five years.

Meanwhile, consumer debt is actually on a downward trajectory, according to the government agency.

“Consumer credit debt edged down 0.3% from the fourth quarter to $507bn by quarter end,” according to Statistics Canada’s National Balance Sheet for the first quarter. “Consumer credit debt as a proportion of total outstanding household debt has generally been declining since the financial crisis.”

Compliance and bureaucratic issues

62% Cash flow

53% Source: SME Association of Australia

NEWS

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RBA TAKES AIM AT FOREIGN INVESTMENT FEARS ■ Reserve Bank of Australia research has debunked popular fears that

foreign investors are driving up prices and snatching homes from the hands of first home buyers.

RBA economists point out that Foreign Investment Review Board approvals to foreigners over the past decade have remained steady at around 5–10% of the value of homes bought and sold every year, with the number of transactions around half that level.

FIRB data indicates the value of approved foreign investment in residential property in Australia has increased, rising from around $6bn annually in the 1990s to more than $17bn in 2012-13 – driven mainly by approvals for new dwelling purchases and construction.

However, because national dwelling prices and turnover increased significantly over the past 20 years, the value of foreign residential approvals as a share of total dwelling turnover in Australia has not actually increased over time, the RBA said.

“Overall, the available data suggest that while foreign residential purchases change a bit from year to year, they have been relatively steady and fairly low as a share of turnover in the housing market in Australia and hence are unlikely to have been the main driving factor behind the recent increase in prices, notwithstanding the pick-up in approvals more recently,” the central bank economists said.

BROKERS REPLY Brokers on the Australian Broker Online forums weren’t convinced that foreign investment isn’t becoming an issue of concern in Australia

INCOGNITO “Debunked popular fears?

From the article: 1. Up to 10% of property by value being sold to foreign investors?!

2. More than $17bn of property in 2012-13?!!

3. Foreign investment ‘concentrated (four fifths) in new dwellings in NSW and Vic’ (where FHOG applies on new property only)!???

Fears not debunked, fears confirmed.”

WE ARE MUPPETS “When will the government finally start effective recording of property ownership and verifying the owners’ legitimacy as a matter of course?

That’s right – we are now into removing red tape. Even if the buyers wanted to do it all by the book, there are many loopholes to wiggle through. Just google FIRB limits. Structure accordingly with some eager local help, and go on a buying frenzy.”

DID YOU KNOW?

82% Australian banks recorded an 82% satisfaction rating Source: Roy Morgan

Tony Carn

E-supporting docs slated to be mandatory ■ An electronic supporting documents service

which cuts down formal approval time for loan applications has had promising uptake by brokers so far this year.

NextGen’s Supporting Document service was launched at the end of last year, with lenders St.George, Westpac, NAB and Macquarie currently offering it. Five other lenders will take it up over the next couple of months.

NextGen sales director Tony Carn told Australian Broker he is “really pleased” at the take-up rate so far, with 25% of supporting documents to applicable lenders now being lodged through the service.

To compare, when NextGen first launched electronic documents 10 years ago it took around three years to get up to a 30% usage rate, Carn said.

“We expect the usage rate to get even faster as brokers advocate the service,” he said.

WE EXPECT THE USAGE RATE TO GET EVEN FASTER AS BROKERS ADVOCATE THE SERVICE

ANALYSIS 10

Spotting DODGY DEALS Credit fraud is on the rise. How can you spot fraudulent borrowers before you get stung?

C

redit fraud can sometimes see brokers left holding the bag. When clients perpetrate fraud, brokers – rightly or wrongly – can end up being held responsible for failing to catch the misinformation they were given.

And with credit fraud on the rise, it’s more important than ever for brokers to protect themselves against clients who may be trying to take advantage of them.

Credit reporting company Veda says credit application fraud is at its highest level in five years. The company’s shared fraud database – which records confirmed fraud events across the country – has shown a 27% increase in total credit application fraud in the 12 months from 2012 to 2013. That fraud has taken place across all types of credit applications, including home loans, credit cards and motor vehicle finance.

Perhaps even more alarming, identity theft has grown the fastest of any category of credit fraud. Veda fraud and identity solutions general manager Imelda Newton says identity takeover grew a shocking 103% from 2012 to 2013.

“What’s of more concern for us is what we’ve seen in the increase in organised crime and the activity that’s behind that organised crime. Sadly, a lot of that activity is around the use of stolen identity and identity takeovers, and that has a far-reaching effect on the market, both on consumers and broker reputation and losses to the lenders,” she says.

In 2007, identity takeover represented just over a quarter of all identity fraud.

By last year, this figure had risen to 89%.

With identity takeover so prevalent, Newton says brokers can serve as an important line of defence.

“Whilst lenders should also do identification checks, brokers have the first contact. If they are performing identity checks at that point it is very helpful, as the earlier detection the better.”

Newton says fraudsters have adopted identity takeover as a technique, rather than creating fictitious identities, because improvements in identity checking practices and technology have made creating bogus identities far more difficult.

So what can brokers do to halt identity takeover in its tracks and spot unscrupulous clients? Newton says the first step a broker should take is through manual verification of identity documents like passports and drivers’ licences, being confident the applicant is the person pictured, checking with the issuing agency that the identification has not been stolen, and matching data between different identity forms.

Even better than this is electronic identification.

“It’s better because you’re applying consistent standards – not subjective, such as one person in the office thinking the person doesn’t look like the person in the ID photo and another person in the office does. It’s a much more stringent process,” Newton says.

Electronic identification checks the documents the broker has to hand with electronic records such as the electoral roll, Veda documents, and phone data.

The broker should also ask ‘out of wallet’ historical questions, such as what address did the applicant live at five years ago.

“It doesn’t mean the broker has to know this information – Veda can provide it for the purpose of identity checks,” says Newton.

And brokers should also be sure to

scrutinise borrowers themselves during client interviews. This doesn’t mean eyeing new clients with suspicion from the get-go.

Instead, Newton says brokers should look for some telltale signs.

“Firstly they should probably look for inconsistencies and unusual behaviour.

By inconsistencies I mean things that just don’t add up in an application,” she says.

Behaviourally, Newton says brokers should be suspicious of clients who seem hesitant to provide certain information, or make excuses and take an inordinate amount of time to provide common supporting documents.

Of course, brokers can find circumstances beyond their control working against them in the fight to spot fraud. Stephen Dinte of Australian Mortgage Planners says fighting fraud can be an uphill battle when even government departments issuing identity documents often get things wrong.

“In recent times I am finding the worst culprits at producing dodgy identity documentation are the various government departments,” he says. “I’ve been given driver licences with abbreviated names, ie Joe in lieu of Joseph; driver licences with additional letters added to names, ie Chantelle in place of Chantell; as well as Medicare cards with Christian names spelt incorrectly. It is a case of lazy public servants being inattentive at their jobs,” Dinte says.

Dinte says the cases in question were clients well known to him, rather than borrowers actively trying to perpetrate fraud.

But he says the situation highlighted the difficulties brokers could face in this area.

“What this does demonstrate is how simple it must be for the bad guys to commit identity theft or fraud,” he says.

SPECIAL REPORT 12

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AHEAD + ANALYSIS THE HIGH COST OF LEARNING

Is the cost of mentoring discouraging new talent from entering the industry?

P16

+ MARKET TALK HIGH PRICES STALLING GROWTH Affordability concerns could place a drag on property prices P20

+ BEST PRACTICE CLOCK WATCHING Tips to manage your time wisely P22

Non-conforming lending: A GROWING DEMAND Specialist lending has moved beyond past stereotypes, industry leaders say

+ FINANCIAL SERVICES

BASHFUL BROKERS Insurance brokers are embarrassed to admit their profession P24

+ SPOTLIGHT INVEST IN YOURSELF

ANZ’s Keiran Evans says brokers should invest in development P26

N

on-conforming. Low-doc.

Alt-doc. Sub-prime.

Near-prime. The nomenclature in specialist lending is as myriad as the products on offer, and can be a source of confusion and consternation for brokers.

Thanks to the bad old days of pre-GFC lending, specialist deals have often been tarred with the brush of risky lending that could incur the wrath of NCCP. But according to lenders in the space, many brokers have an inaccurate view of specialist lending.

They argue that the sector is providing solutions to a wide range of everyday clients, and that brokers are the perfect channel to help serve an ever-growing base of borrowers.

SOME COMMON MISCONCEPTIONS

The specialist lending sector is growing used to fending off misconceptions. One of the biggest, according to Homeloans general manager of sales Ray Hair, is the survival of the sector itself.

“The most common

misconception surrounding specialist lending is that NCCP and responsible lending heralded the end of specialist lending. This is not the case; yes brokers need to be prudent and they must know their customer, but it does not rule out meeting customer needs with alternative solutions,” Hair said.

Hair argued that specialist lending is alive and well, and serving a growing client base.

Resimac chief commercial officer Allan Savins agreed, and said the sector’s products cater to a wider range of clients than brokers may realise.

“The reality is specialist lending caters to a wide range of borrowers, from the company director who hasn’t prepared current financial statements and is needing to borrow at 85% LVR to the PAYG public servant who has just been through a messy divorce and as a consequence has a less than perfect repayment history,” Savins said.

But this isn’t to say all borrowers with less-than-perfect repayment history are specialist clients.

Australian First Mortgage

managing director David White said some may still fit within mainstream channels.

“The issues – like some defaults – that exist might not make it a specialist lend, and, with the right explanation, it might fit normal channels,” White said.

Conversely, not all specialist clients have impaired credit.

For instance, La Trobe head of credit product Cory Bannister said specialist products can help provide solutions to business owners. In doing so, they can also provide brokers with a diversification strategy.

“We have been educating brokers about how specialist lending is a core component of the Australian residential and commercial lending markets which has had an immediate positive impact on their business from existing relationships, and ultimately their bottom line. To us it’s part of the diversification strategy that is increasingly important for brokers who want to ensure a strong future,” Bannister said.

MKM Capital credit and

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13

THE REALITY IS SPECIALIST LENDING CATERS TO A WIDE RANGE OF BORROWERS - A LLAN SAVINS

compliance manager Mary McGowan said one misconception is that the higher price point of some specialist products is unwarranted. Instead, she said brokers should look at the products as bespoke solutions.

“Specialised loans tend to cost more as they are smaller volume, labourintensive and often higher risk. Think of it as the difference between buying a tailored suit and an off-the-rack suit. One is designed to fit your requirements, but costs more,” McGowan said.

And Allstate Home Loans general manager Tony Shield said many brokers put specialist loans in the “too-hard” basket. Shield said the deals were easier to get through than many brokers realised.

“Put together a good application, supply your supporting docs, know your client and you have as good a chance of success as you would with a prime loan application,” Shield said.

THE SIZE OF THE OPPORTUNITY

For Bannister, one of the biggest selling points of getting involved in specialist lending is the size of the market. Bannister said brokers should take note of the opportunity provided by demand for the products.

“The overall market size for residential mortgages in Australia is roughly $1.2trn with annual volume of circa $240bn, or approximately $20bn per month. Specialist lending would represent annual volume of around $1.5bn–2bn per year or $150m per month. Importantly it’s a niche that responds to supply – if there are clear, quality loan products available then

demand lifts with awareness: bringing it to brokers’ and borrowers’ awareness is self fulfilling. Demand is returning strongly after the pause associated with the GFC and 2010 regulation and this return is definitely now underwritten by a stronger, positive understanding of this product in the Australian context,” Bannister said.

Savins agreed, saying that the size of the client base is evident in the variety of borrowers the products appeal to.

“What’s a typical specialist lending client? They are doctors, dentists, sports stars, the self-employed, blue collar workers, public servants – anybody who needs a solution that cannot be provided by a mainstream lender. There is no demographic that a specialist lending client falls into. Put simply, they are either a borrower who has suffered a life event which has impacted on their credit history or a borrower who needs a lending solution that a mainstream lender does not cater to. In short, they are everyday people like you and me who are in a unique situation where they need our assistance,” Savings said.

And this is a client base that could be set to grow. Legislative changes mean that more borrowers may fit the specialist profile in the future, Shield said.

“The new positive credit reporting changes have not yet made their presence felt, but I believe in the future more clients may be affected by this and will result in an increase in demand for specialist lending,” Shield said.

WHAT YOU NEED TO KEEP IN MIND

“There are no special skills required to write a specialist loan,” Savins asserted.

SPECIAL REPORT 14

RAY HAIR

This should come as a comfort to brokers who are being told they need to upskill in order to take advantage of many of the diversification opportunities in the market. By contrast to SMSF, commercial or insurance products, specialist applications require nothing more than an attention to detail, Savins said.

“The key to any specialist application is keeping an open mind and asking the borrower as many questions as necessary to get an understanding of what their situation is and more importantly what their needs are. Brokers just need to be able to articulate that background story via their loan notes, and effectively place the loan assessor in front of the borrower as if they were taking the application themselves,” Savins said.

But this attention to detail is extremely important to keep in mind, White said. He said applications for specialist loans are likely to be scrutinised more thoroughly than mainstream deals.

“Specialist applications will be more deeply investigated, so brokers should be upfront from the beginning.

Where gaps are found under scrutiny the applications lose credibility,” White said.

Hair argued that the only thing brokers needed to offer specialist lending was the willingness to dig deeper to fulfil their clients’ needs.

“Brokers need a willingness to explore alternative lenders, products and solutions. Specialist lending is there to assist those customers who don’t fit the standard template.

Providing solutions to these customers is about being prepared to explore the alternatives; brokers can work with us to understand the customer’s position, mitigate risk through alternative verification where possible and provide a risk rated solution that reflects the customer’s position and

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ALLAN SAVINS

DAVID WHITE

CORY BANNISTER

meets their finance needs,” Hair said.

And while non-conforming deals require attention to small details, McGowan said brokers also had to keep a holistic view of their clients in mind.

“Non-conformers tend to look at the big picture rather than taking a tick box approach. So it’s important to ask the applicant big-picture questions like, ‘How did you get into this situation?’ or ‘What are you going to do with the money?’ ” McGowan said.

NON-CONFORMERS TEND TO LOOK AT THE BIG PICTURE RATHER THAN TAKING A TICK BOX APPROACH - M ARY MCGOWAN

FAST FACT

$150m per month Volume of specialist lending in Australia Source: La Trobe

Bannister offered brokers some dos and don’ts, saying that communicating openly and honestly with clients was the key to success in specialist lending.

“Do educate the borrower about their situation, and communicate realistic outcomes for them to consider. If it is unlikely they will get the lowest rate or cheapest fees, don’t promise it, and instead sell the solution. Don’t make quick judgements when dealing with specialist loan scenarios. Keep an open mind; look at the facts; listen to the borrower’s explanations; and then determine if it is reasonable to proceed,” Bannister said.

And Shield said brokers needed to keep in mind that specialist solutions were – by their nature – a temporary solution. He argued that this was actually another aspect of specialist lending brokers should find attractive, as the deals offer a logical touchpoint to build a long-term relationship with a client.

“Also remember that although a specialist loan may be written over a 30-year term, no one expects them to actually last more than a few years.

TONY SHIELD

Keep in contact with your client and once they have overcome the reason they needed a specialist loan and are back on track you will be in a great position to then refinance them into a prime loan. That is just good business sense,” Shield said.

WHAT’S ON OFFER

White said for brokers looking for specialist solutions, the choices were varied.

“There is a wide range of specialist products available. As long as a request makes sense we will most likely have a product to cater for the request. Typically though, the specialist product is short term in nature and will involve an exit strategy to return the borrower to a mainstream product,” White said.

Hair agreed, and said Homeloans had a variety of products to suit the needs of borrowers of many different profiles.

“Homeloans has a range of specialty products to cater for anyone from those with serious credit impairment to those who don’t have genuine savings or have reached their exposure with mortgage insurers,” Hair said.

But McGowan said brokers should keep in mind that specialist lending has changed post-GFC and with the advent of the NCCP. This means brokers shouldn’t look to the products expecting short cuts.

“No-doc loans have largely disappeared in the wake of the NCCP and even low-doc loans have developed a bad name as the term implied a short cut was being taken. We prefer the term flexi-doc as it depicts a flexible approach to income assessment, rather than none at all.

Another term commonly used is alt-doc designating an alternative, but not lesser, method of income assessment,” McGowan said.

ANALYSIS 16

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The high cost of learning Is the cost of mentoring discouraging new talent from entering the industry?

M

ortgage broking can be a difficult market to crack. New brokers have a variety of licensing and educational hurdles to clear, not to mention no guarantee of an income. For many talented young people looking for a career in finance, the idea of an industry with high barriers to entry and startup costs could be a tough sell. Add to that the cost of mentoring, and mortgage broking can be an expensive industry to get into.

The cost of mentoring is one hurdle FBAA president Peter White believes has become too high. White claims mentors are charging too much, and is worried the practice is hurting new entrants’ financial stability and view of the industry.

“Over a bit of time we have been collating evidence and supporting documentation to ensure this wasn’t a ‘one off’ from when first it came to our attention, and then it has grown – unfortunately – from there… the reports we have been hearing are so concerning we have an obligation to the industry to speak up,” he said.

The end result of high mentoring fees could be a lack of new entrants, White said.

“The practice is scandalous and will end up hurting the industry’s reputation and dissuade new brokers from entering the industry.”

Many organisations run courses for people wanting to learn how to mentor, from registered training organisations

to the Mortgage & Finance Association of Australia, although FBAA does not.

White stresses it is not the mentor course which is the problem, or the qualified mentors who are charging fair rates.

However, White said the FBAA has been told of mentees being charged up to $38,000 value to be mentored, with many mentors charging an initial large fee, plus a percentage of the mentee’s upfront and trail, and then a quarter of the trail for the life of a loan even after they stop mentoring, according to White.

This puts new brokers in a difficult position, White said.

“Some have borrowed from their parents to pay these high upfront costs, and they haven’t even started earning an income yet.

“We’re on the side of the industry and its future and we don’t want to see it trashed like this. Mentoring new brokers should not be seen as a cash grab for established brokers and industry associations, but as an opportunity to develop new brokers, promote professional conduct and practice and enhance the industry.”

White said the FBAA recommends new brokers go through RTOs – which can be accessed through HECS so there are no upfront fees – that offer long-term, appropriate mentoring by skilled brokers.

However, he emphasises the FBAA is not opposed to brokers charging for mentoring.

“Mentoring is an important part of the process for new

brokers and no one expects experienced brokers to do this for free. The issue here is new and often young brokers being duped into thinking they have no choice but to pay exorbitant prices because the mentor may have done a short course and uses the term ‘certified’,” White said.

“Certified,” he said, is not a legal or regulatory term, neither does it mean anything officially.

White argued that his association has worked to develop a genuine career path for the industry, which includes promotion of the sector among university students, free student membership and a pending apprenticeship scheme.

“We want to encourage new industry participants, not take advantage of them.”

TAKING ADVANTAGE OF FAIR PRICING?

But just how much is mentoring worth? Mentors understandably look to cover the cost of their training plus their time spent mentoring.

The MFAA course for would-be mentors costs $1,650 and covers the prospective mentor’s intensive three-day training program, teaching materials, a two-year mentor master-plan, and 24 fully-documented ‘how to’ lesson plans for each month of the two-year program.

Once a broker is an MFAA Certified Mentor he or she can access all existing intellectual property the association has on the topic, at a cost per mentee of $2,800.

MFAA CEO Phil Naylor said

THERESE O’NEILL’S TOP TIPS FOR A NEW BROKER LOOKING FOR A MENTOR Ask about payment structure and fit it in with your budget over the next two years Find a mentor who suits your personality.

“You’ve got to get on and like each other – it’s an intimate relationship” Ask how many mentees the broker has mentored before, and ask whether you can speak with them to get their experience Ask what plan or structure the mentor has for imparting knowledge over the next two years Ask yourself whether broking is really what you want to do, right now. “Sometimes the kindest thing you can say [to a new broker] is ‘stay in your job for two more years and then come back once you’ve got some savings’ ”

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MENTORING NEW BROKERS SHOULD NOT BE SEEN AS A CASH GRAB FOR ESTABLISHED BROKERS AND INDUSTRY ASSOCIATIONS - P ETER WHITE

the instruction and materials provided by MFAA to would-be mentors are high quality and the costs reflect that, but the association cannot influence what a mentor can charge a mentee.

“MFAA does not and cannot, at law, control what mentors charge mentees, but our view is the market will sort that out – we are gradually increasing the number of certified mentors and have encouraged a number of aggregator groups to have their mentor programs recognised by MFAA as certified.

“This means there is plenty of competition in the certified mentoring market so if there are any attempts to overcharge, competition will ensure there are other options for wouldbe mentees.”

Naylor said the MFAA has thus far seen no evidence that the mentoring costs have deterred new brokers from entering the market, as its membership is growing at the rate of over 100 new members each month, Naylor explained.

Over 70 MFAA members have completed the Certified Mentor training over the past five months.

One of the association’s Certified Mentors, Therese O’Neill, of Alpha Broker Mentoring, firmly believes new brokers get huge benefit from being mentored by qualified, experienced mentors.

O’Neill said she has never heard of new brokers being deliberately “ripped off” by mentors, but has heard of cases where the new broker thought they learnt nothing over 12 months of mentoring. This could be because

new mentors have taken on more than they can handle. O’Neill said while the mentor may have started out with “the very best of intentions”, some have not thought through what it really means to take on a less-experienced broker under their wing every day for two years.

“It’s a bit like getting a new puppy,” she explained. “At two weeks everybody loves the puppy, but six months down the track once it’s chewed up your shoes and nobody wants to walk it, it’s a different story.”

Even if a broker has done a mentoring course, it is up to the individual’s inclination and aptitude as to whether they will make a good teacher, and new brokers looking for a mentor should do their research, she says.

But O’Neill, who has run Alpha Broker for five years this month, is reluctant to say professional associations should be keeping a closer hold over who can be a mentor and what is charged.

“I don’t think [associations] should get involved in pricing. In our case, Alpha Broker doesn’t take a cut of trail, but that’s not to say that’s a bad model.

“If you’re being mentored and paying money but not seeing the value of it six months on, then you need to walk with your feet.”

O’Neill suggests having a contract which allows mentees to give a period of notice if the mentoring is not working out.

Alpha Broker charges a new broker up to $18,000 over two years for “intense” every day mentoring, and chooses its mentees wisely, she said.

NEWS 18

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E

Tim Brown: FUTURE-PROOFING YOUR BUSINESS The Vow CEO on his business’ growth and how they’re preparing for the future

ven in the wake of the YBR merger, Brown said the company was still looking to grow. He said Vow had continued to bring on new brokers.

“We’ve been recruiting pretty heavily for a long time now.

People like the Vow proposition, which is about choice in the sense of commission rate and diversification opportunities. We don’t push people into one commission structure. They can choose the one that suits their business at the time and move into another as the business gets bigger. That way they can stick with us as their business evolves and continues to grow,” he said.

The attractiveness of the proposition can be seen in the aggregator’s improved settlement numbers. Brown pointed to the company’s increased settlements, and said much of the improvement was due to new recruits.

“We’re up 42% on the same time last year. Now, 18–19% of that is the market, but the rest is new growth. When you can double the market, you’re travelling pretty well,” Brown said.

It’s not uncommon for aggregators to crow about new growth. What Brown said sets Vow apart is that the majority of this new growth is coming not from brokers shifting from one aggregator to another, but from brokers entirely new to the industry.

“Part of our recruitment strategy is to invest in training and development. Out of 15 to 16 people we’re recruiting every month, 10 of them are new to the industry and the remaining five or six are existing brokers coming across from another aggregator,” Brown said.

This is rare in an industry that has struggled to onboard new recruits. The relatively high barriers to entry for mortgage broking – combined with the lack of guaranteed income – can make it a tough sell for young talent seeking a career in financial services. But Brown said the company’s broker

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Career opportunity with one of Australia’s leading finance companies & mortgage originators network was well suited to foster new entrants to the industry.

“I think it’s having businesses that can provide for new recruits.

There are a number of large businesses existing within the Vow network that can bring on and provide for new brokers. Of those 10 new-to-industry brokers, eight of them probably go to existing businesses that are continuing to grow and prosper in this environment. Our big groups are getting bigger,” he said.

The growth the aggregator is seeing is not for lack of competition in the aggregation sector, Brown said. He argued that aggregators were still competing fiercely for brokers, and that brokers have become – if anything – even more discerning about who they choose to align themselves with.

BROKERS ARE BECOMING MORE DISCERNING, BECAUSE THEY’VE BEEN PROMISED THE WORLD IN THE PAST AND NOTHING HAS BEEN DELIVERED “Competition between aggregators is as intense as it’s ever been. Brokers are now seeing through some of the discount offers out there, and they want value for money,” he said.

Delivering value for money doesn’t necessarily mean cut-rate pricing, Brown said. It means offering services that add value to brokers’ businesses, and then delivering on those services.

“We’re not the cheapest, but we’re not the dearest either. We charge for services, and the services brokers choose to take on are up to the broker. That’s where brokers are becoming more discerning, because they’ve been promised the world in the past and nothing has been delivered.

You’ve got to have the ability to deliver on what you’re saying,

DID YOU KNOW?

44.1% On an annualised basis (2013 financial year vs 2014 financial year) Vow Financial has grown its monthly settlement volumes by 44.1%. During the same period, the total lending market grew 16.9% Source: Vow Financial

and be able to demonstrate that,” he said.

One of the services Brown said brokers find valuable is the company’s diversification offering.

“Our diversification model resonates with a lot of brokers.

They know they need to do it, and they appreciate having the options we do. They can do general insurance, commercial, property, financial planning; there are four or five they can pick and choose to diversify into,” he said.

Brown said the company would look to add to these services in the future. Looking at the coming six to 12 months, Brown said Vow had more initiatives in store.

“We’ve got a number of strategies we’ve got in place. No doubt, we will introduce a white label. I’ve held off on introducing a white label because all the white label products I’ve seen have looked like everyone else’s.

Now we feel we have a point of differentiation,” he said.

Brown said the aggregator would also expand its current insurance offering, and he said they would announce key appointments to ignite growth in other areas of the business.

“We’ve recruited someone to head up our wealth division, and he comes from a financial planning background. We’re also looking to bring someone on to run Vow Commercial, which will be a big investment because we see this as a major growth area for aggregators,” he said.

As the company looks to position itself for the future, Brown urged brokers to do the same. He argued that, while the Australian economy has been relatively buoyant, an eventual recession was “inevitable”. Keeping this in mind, he said brokers should look to insulate their businesses from such shocks.

“In any business, you’ve got to recession-proof yourself. There will be a time when business slows, and the best time to structure for that is in the good times. It’s no use doing it in the bad times because it’s too late.”

Queensland Mortgage Advisory Service is part of a group of companies that manages a client base of approximately $2 Billion throughout QLD, NSW and VIC. We have a proven track record in delivering high-quality services and products.

Queensland Mortgage Advisory Service is looking for energetic, enthusiastic persons who possess: • Diligence, a strong work ethic and a high degree of self-motivation • Exceptional customer liaison skills and effective communication • Strong organisational skills including time management • Have a burning desire to succeed within a rapidly growing company Successful applicants will have current industry accreditation including Cert IV and Diploma FMBM. You should be able to work autonomously as well as within a team environment, have good computer skills, be happy to work hard to achieve personal and business goals and be able to adapt to different situations.

The successful consultant does not need to organise appointments, all appointments are qualified and appointments are made and confirmed by our internal Client Account Managers.

This is an excellent opportunity to set up your long-term career supported by ongoing mentoring and assistance. OTE of minimum 100k+ including retainer and commissions.

Written expressions of interest including a detailed resume can be forwarded to b.cross@qmas.com.au

MARKET TALK

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20

A AFFORDABILITY i issues could see growth stall The property market has seen strong growth lately, but affordability concerns could bring it to a halt

P

roblems with affordability could be causing growth in the residential property market to stall.

According to new research by Onthehouse. com.au, residential capital growth rates for May were lower than expected, with numbers dropping in many capital cities.

Nationwide, house values grew by only 0.36%, while unit values dropped by 0.23%, in May. This compares to last quarter where house values grew by 1.71% and unit values grew by 1.17%.

Onthehouse.com.au consulting analyst John Edwards said the data clearly pointed to the difficult affordability conditions for the median family in most capital cities.

THIS AMOUNT IS CLEARLY INSUFFICIENT FOR COMFORTABLE LIVING - J OHN EDWARDS The number of people who could afford to buy and then repay a loan for a home was now limited, he said.

For example, when looking at the calculated figure the median Sydney family would have to spend after tax and meeting home loan repayments, it was too small to maintain a reasonable standard of living.

“The Sydney median family who buy the current median property valued at $823,500 with a 20% deposit only have around $821 per week to spend after making home loan repayments. This amount is clearly insufficient for comfortable living.”

In May, Sydney house growth stalled at just 0.24% – although it still recorded 17.42% growth over the last 12 months.

The data also indicated that the Sydney unit market had passed its peak, with growth of 2.81% for the quarter ending May. Edwards said it was not clear whether the house and land market had arrived at the same position – although auction clearance rates suggested the market was slowing.

Meanwhile, Melbourne house values fell by 0.03% in May, which meant they entered negative territory.

However, over the past 12 months, this market recorded 9.45% growth.

Slower growth rates would be beneficial for the economy, as they meant a property market “bubble” followed by a severe correction was likely to be avoided, Edwards said.

However, the Sydney market was still overvalued and too expensive, he added.

“The data from May is not sufficient on its own to confirm that this lower rate of growth is about to be a new feature, but my best guess is that this will be the case.”

HOUSES MEDIAN VALUE

GROWTH MAY 2013MAY 2014

LAST QUARTER

MAY 2014

ACT

$531,500

2.28%

0.07%

0.55%

Adelaide

$412,000

4.61%

1.55%

-0.15%

SA Country

$252,000

-0.37%

-2.85%

-0.29%

Brisbane

$467,000

7.52%

2.77%

0.41%

QLD Country

$379,000

2.76%

1.33%

-0.51%

Darwin

$575,500

1.30%

-1.22%

-0.53%

NT

$538,500

3.24%

1.92%

0.98%

Hobart

$361,000

0.41%

-1.18%

-0.82%

TAS Country

$266,500

-0.32%

2.18%

0.87%

Melbourne

$627,500

9.45%

1.77%

-0.03%

Vic Country

$337,500

3.52%

0.64%

0.28%

Perth

$526,500

4.19%

-2.24%

-1.90%

AREA

WA Country

$352,500

2.87%

5.01%

2.38%

Sydney

$823,500

17.42%

4.72%

0.24%

NSW Country

$375,500

7.15%

1.65%

0.34%

Australia

$464,500

5.76%

1.71%

0.36%

MEDIAN VALUE

GROWTH MAY 2013MAY 2014

LAST QUARTER

MAY 2014

ACT

$410,000

1.07%

-0.56%

-0.28%

Adelaide

$315,000

3.53%

2.54%

0.64%

SA Country

$239,000

13.73%

6.43%

-0.02%

Brisbane

$364,500

5.27%

1.59%

-0.22%

QLD Country

$314,500

4.93%

1.38%

0.62%

Darwin

$431,000

2.50%

0.43%

0.42%

NT

$416,000

4.26%

2.38%

1.53%

Hobart

$261,500

7.12%

2.31%

-2.38%

TAS Country

$189,500

-6.47%

-5.77%

-2.73%

Melbourne

$458,000

6.32%

1.58%

-0.07%

UNITS AREA

Vic Country

$257,000

1.21%

-0.39%

-0.20%

Perth

$459,000

1.84%

1.14%

-1.21%

WA Country

$322,500

6.54%

0.90%

-1.02%

Sydney

$562,000

13.59%

2.81%

0.27%

NSW Country

$315,000

6.86%

2.15%

-0.08%

Australia

$428,500

6.88%

1.17%

-0.23% Source: Onthehouse.com.au

MARKET TALK brokernews.com.au

21

Savvy Gen Ys BAND TOGETHER High prices may be stymying first homebuyers, but John Hilton reports some young investors are discovering there’s strength in numbers

F

irst homebuyers have had a tough time getting into the property market, as prices rise and it becomes more difficult to save a deposit.

The latest ABS figures put first homebuyer participation at 12.3%, equal to the lowest share on record.

The solution? Young people are considering splitting the bill (and the risk) by buying property with a friend, according to the latest independent research commissioned by Slater & Gordon Conveyancing Works.

The survey found more than one third of 18-24 year olds, and just under a quarter of 25-34 year olds, would consider buying a property with a friend.

In contrast, those aged 45 or over were much less likely to buy a property with a friend, but more likely to buy a property with a family member other than a spouse.

“That more of the baby boomers would consider buying with a family member probably reflects the fact an increasing number of parents recognise their children are fast being priced out of the market and are willing to help them out,” said Slater & Gordon Conveyancing Works solicitor Robert Kern.

“Capital city prices increased by

10.9% between March 2013 and March 2014 and recently the International Monetary Fund warned Australian homes were the third most expensive of 24 countries. So it’s no surprise young people are willing to consider buying a property with someone other than a partner to get their foot in the door,” he said.

Even though buying property with family members is becoming more common, investors should be cautious about the potential pitfalls, said Kern.

“Down the track it’s quite possible one of the owners will want to sell or can’t cover the mortgage, or even just want out of the contract.

“That’s why it’s important you consider all of the potential scenarios upfront and actually have mechanisms for one or both of the parties exiting the contract written into it.

“Without them, the worst case scenario is that the Supreme Court will step in and appoint an independent trustee.

“This can be a stressful, long and expensive process, so some people choose to include alternative dispute resolution avenues, such as mediation, in the contract as well.”

FINDINGS OF THE SURVEY

37.85% 23.65% 37.85% of 18-24 year olds and 23.65% of 25-34 year olds would consider buying a property with a friend

9.14% Only 9.14% aged 55+ would consider buying property with a friend

60.75% 60.75% of 18-24 year olds and 53% of 25-34 year olds would consider buying property with a family member other than a spouse

37.7% 37.% 37.7% of 45-55 year olds and 37% of Australians aged over 55 would consider buying a property with a family member other than a spouse

58% 48% 45.5% 58% of 18-34 year olds said they did not know the difference between joint tenants and tenants in common, compared with 48% in the 45-54 age bracket and 45.5% over 55

58% 58% of Australians said they would not feel confident working through the legal documents themselves when buying or selling

54% 54% of 18-24 year olds said they would not feel confident working through the legal documents themselves when buying or selling

64.5% 64.5% of Australians over the age of 55 said they would not feel confident working through the legal documents themselves when buying or selling

BEST PRACTICE 22

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Are you a TIME SAVER or TIME SPENDER? Corptraining managing director Nikki Heald offers ways to manage your time more effectively

D

o you ever wish you had more hours in the day? Do you find yourself stressed, anxious and a little overwhelmed when tasks are incomplete? Well, if you think it’s getting harder and harder to manage your time, you’re certainly not alone. More and more employees are complaining about the pressure on their time and how their workload appears to be increasing.

We each have 24 hours in our day, so why is it that some people breeze seamlessly through their tasks while others struggle with time?

Time management is really about managing yourself. Whilst we can’t control the number of hours in our day, we can control the way we work. Interestingly, your personal time management beliefs may well be contributing to your productivity downfall.

Are you convincing yourself that there is not enough time? Do you refrain from delegating because it’s easier to do it yourself? Are you in the habit of always saying yes to others?

Do you believe that multitasking makes you more efficient?

Firstly, in order to make positive time-management changes it’s important to develop the mindset that your time is valuable. In other words, recognise the importance of what you do and decide what deserves your energy. The essence of working effectively is, firstly, knowing what to do, and secondly, just doing it.

Now whilst these appear to be very simple steps at first glance, with so many distractions and interruptions in the workplace it’s easy to lose focus. Research has demonstrated that approximately 2.1 hours per day are wasted on trivial intrusions. These time wasters destroy any attempt at effective time management if they are not identified and eliminated.

Some interruptions, of course, are necessary and cannot be avoided, but many are just needless annoyances.

Think about your working day and consider all of the inconsequential disturbances that may occur. Some of the biggest time wasters include checking Facebook, texting, social chit-chat, smoking breaks, IT issues, humorous emails, feeling tired, personal phone calls, questions from colleagues, and notifications. It’s easy to see just how quickly 2.1 hours can accumulate.

Additionally, a lot of time may be spent on low pay-off activities, rather than high pay-off activities. Our high pay-off activities are those activities that bring us maximum return. Essentially, they are tasks or actions that are the most significant. High pay-offs are duties that are generally aligned with our KPIs, targets or form part of our job description.

Low pay-off activities are those activities which, in reality, don’t significantly impact on results or the bottom line. And yet it’s often these tasks that get the majority of our attention. Why? Well, firstly they often require minimal effort and can be done quickly. This provides us with instant gratification – we feel as though we’ve been

TOP TIPS Ensure you take regular breaks – allow yourself some rest time, which will improve your focus.

Clear your workspace. Working in a cluttered environment clutters the mind and unnecessary time is wasted having to find things.

Think about when you are at your most productive and then plan important tasks for this time.

WHILST WE CAN’T CONTROL THE NUMBER OF HOURS IN OUR DAY, WE CAN CONTROL THE WAY WE WORK ‘busy’. Additionally, because they are easier, they may be more pleasant and enjoyable to complete than high pay-off tasks.

High pay-off activities will vary from person to person, job to job. A low pay-off for one individual may well be a high pay-off for another. Either way, it’s vital you have a clear understanding of what your high pay-offs are.

That way, you can ensure that maximum time is devoted to these.

In theory and ideally, we should be aiming to work on high pay-offs for around 70–80% of our working week. Unfortunately, research has demonstrated that realistically only about 40% of our working week is actually spent on them.

The trick is to identify your low pay-offs and, once you’ve done so, consider ways to remove or eliminate them. Not everything has to be done by you! Create a list outlining low pay-off tasks in one column and high pay-offs in the other. Doing this will provide clarity about where the majority of your time is being depleted and allow you to recognise where your time should be invested.

Learning to manage your time wisely not only improves productivity but also has important health benefits. When we feel more in control of our workload it’s only natural we are likely to feel less stress. How many times have you taken work home or logged on remotely late at night? If you find yourself doing this consistently, it’s important to recognise the toll on your health, wellbeing and ability to relax.

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HERE ARE SOME TIPS THAT MAY ASSIST YOU TO INCREASE EFFICIENCY AND MANAGE YOUR DAY BETTER: 1. Take time to plan your day either first thing in the

morning or in the afternoon before you leave work. Create a to-do list or a system that you can refer to. Invest planning time to save working time.

2. Diarise and allocate specific times to attend to certain

tasks. Be sure to set time limits and stick to them. Utilise your most productive time.

3. Consider the four D’s of time management:

Do it – only if it takes less than two minutes to complete.

Delegate it – many low pay-off tasks can be delegated.

Ensure the person you delegate to has the required competency or skills.

Dump it – trivial or meaningless information/emails that are not required.

Diarise – non-urgent tasks can be diarised to do in the future.

4. Keep track of time spent on low pay-off and high

pay-off activities. Try to keep a schedule for a week.

5. Batch or ‘chunk’ similar work such as processing or filing. This ensures you are in the headspace of doing repetitive work, and promotes efficiency.

6. Avoid the urge to multitask. Research has

demonstrated that multitasking slows you down and increases the likelihood of error.

7. Allocate contingency or buffer time in between

tasks. This will allow for unexpected interruptions and distractions.

8. Plan for periods of relaxation and try not to be a

workaholic. Ensure you take your lunch break – resting improves focus and attention.

9. Don’t always be a ‘yes’ person. Saying yes to others will certainly increase your popularity; however, it will impact negatively on your personal productivity. Learn to say no nicely.

10. Finally, resist the urge to check your inbox constantly – some things can wait and don’t require your immediate attention.

Remember, good time management is about managing yourself.

We all have the same amount of time, but what we do with it and how we use it will determine whether or not we are successful.

Happy planning!

23

FINANCIAL SERVICES 24

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Insurance brokers don’t want to admit their profession

M

ortgage brokers often feel under-appreciated, but spare a thought for insurance brokers. Many don’t even want to publicly admit what they do. It started off as an innocent question on professional social networking site LinkedIn: Have you been mauled at a barbecue recently for telling someone you work in insurance?

But the question set off a torrent of responses ranging from lowly admin staff to executive management all eager to add their personal experiences, and reasons, for admitting or denying.

One worker, who fessed up about her profession to her tattooist while having ink done, feared his ranting would be left indelibly marked on her skin, so irate were his complaints about insurance companies.

ANZIIF digital communications manager, Edward Vukovic, who posed the question, said it was prompted after speaking to several people recently who admitted they fudged the truth at social gatherings when it came to where they worked to avoid being hassled.

“One even confessed to saying they worked in real estate!” he said, to demonstrate just how desperate people are to avoid saying they work in insurance.

David Koch, claims manager for KIB Insurance Brokers, said he felt like every day was like a mauling at a BBQ. “It is a seriously high stress job at times, and the abuse we cop is phenomenal. So I don’t bring up what I do at BBQs. I try to avoid the question.

“It doesn’t matter how good or experienced you are, at the small broking level you are constantly unappreciated.”

FLOOD PREP NEEDS RADICAL RETHINK

BY THE NUMBERS

40 cents For every US$100 spent on development aid, only 40 cents has been invested in defending that aid from the impact of disaster Source: Zurich

SHODDY AUDITS LED TO BANKSIA COLLAPSE An auditor at collapsed mortgage financing firm Banksia Financial Group has been banned from practising for five years.

Australian Securities & Investments Commission has accepted an enforceable undertaking from Warren John Sinnott of Kennington, Victoria, that he will not practise as a registered auditor until 11 June 2019, as part of an ongoing investigation into Banksia’s collapse.

Sinnott was the lead auditor responsible for the audits of companies in the Banksia group – which included Banksia Mortgages, debenture issuer Banksia Securities, Cherry Fund and BFG Management – for the financial years 2009 to 2012.

ASIC found Sinnott failed to carry out the proper duties of an auditor. In particular, ASIC discovered he did not conduct the audits in accordance with the Australian Auditing Standards, as required under the Corporations Act. After investigating each audit, ASIC formed the view that Sinnott failed to perform sufficient audits on loan receivables, and obtain sufficient audit evidence to reduce the risk of material misstatement of loan receivables to an acceptably low level.

He did not display an appropriate level of professional skepticism when auditing loans receivable, or remain alert through the audits that the risk of the potential impairment of loan receivables may cast doubt over Banksia Group’s ability to continue as a going concern, ASIC said.

Zurich Insurance Group has released two new research papers examining global flood resilience, which have led it to make calls for a renewed focus on prevention and mitigation.

Group general insurance CEO Mike Kerner said: “There is a need for a radical rethink on the approach to mitigating and preparing for floods.

We need to focus more on pre-event mitigation, as opposed to focusing almost solely on recovery.

Because we know that ‘after a flood’ is really just ‘before the next flood’.”

The Zurich Insurance Group’s two papers focus both on successful measures used recently, and the future impact severe flooding may have. One report, which was produced as part of a multiyear collaboration with the Institute for Applied Systems Analysis and the Wharton School at the University of Pennsylvania, focuses on how mass urbanisation and climate change may worsen the impact of floods.

Enhancing community flood resilience: a way forward, suggests that in the past two decades, nearly 87% of aid funding went toward emergency response, reconstruction and rehabilitation, and only 13% toward reducing and managing risks.

“The key to enhancing flood resilience,” Kerner said, “lies in increasing our understanding of the full breadth and scale of the risks and how to best protect against them.”

Zurich is testing a proposed framework to measure communities’ ability to withstand floods and improve resilience by collecting data in countries prone to flooding including Indonesia, Mexico, Nepal and Peru.

LOVE HURTS … YOUR WALLET New figures from the consumer watchdog show a 10% rise in reported scams last year, costing Australians around $89m. The Australian Competition & Consumer Commission’s report reveals that dating and romance was the biggest sector for scams in monetary terms, but a fairly small percentage in actual reports, so people seem prepared to take a bigger risk when it comes to finding love. Phishing and identity theft were among growth areas reported and while the number of over 65’s reporting scams doubled, the biggest age group filing reports were in the 45-54 demographic.

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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, July 2013

The return of Rudd: Will it make a difference for brokers?

Last year the political arena was shaken when the long-mooted showdown between former PM Kevin Rudd and then-PM Julia Gillard came to a head. Rudd took back the leadership reins of a government flagging in public support. At the time of the change, MFAA CEO Phil Naylor said it was unlikely to impact on the association’s lobbying efforts. “Ministers come and go, whether they’re the same party or different parties, and we always learn to deal with them,” Naylor remarked.

What’s happened since?

“Ministers come and go…” Truer words were never spoken. The return of Rudd was short-lived, with the Coalition sweeping into power at the Federal Election.

Now the new government finds itself on the nose with voters courtesy of an austere budget critics say disproportionately impacts on lower-income earners, and Labor and minor parties are sabre-rattling about a double dissolution. Once again, ministers come and go but brokers remain.

Specialist lender returns to Australian market

Bluestone last year entered into an agreement with AFG to provide specialist home loans to the aggregator’s broker network. The company said the partnership would provide Bluestone with access to 1,800 brokers in AFG’s network, and would enable brokers to offer a broader suite of home loan options. Bluestone exited the mortgage market during the GFC, transforming its business into portfolio and capital management.

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Brokers core to bank business

W

ith news that broker market share has finally cracked the 50% benchmark, many industry figures are predicting that broker share could go even higher.

It’s because of this shifting market power that NAB general manager of growth partnerships Anthony Waldron says banks are serious about their commitment to the third-party channel.

“From a NAB perspective, we see that being in the broker market is absolutely essential, because that’s what the customers are choosing. More and more customers are choosing to come to brokers. We’re seeing that on the residential side, where a little more than 50% of flows are coming from the broker channel, and commercial is growing quite substantially as well,” Waldron said.

Waldron pointed to the bank’s purchase of the former Challenger aggregation platforms. Five years later, the Advantedge group of PLAN, Choice and FAST have proven a lucrative investment for the bank, he said.

“It’s probably the best acquisition we’ve ever made,” Waldron said.

Waldron argued that such an investment showed the bank’s commitment to the channel. And he indicated that their commitment wasn’t merely token but formed a significant part of the bank’s strategy.

“People often ask banks if they are committed to this part of their business and to the channel. We’re not just committed to the channel. It’s completely core to what we do as a bank, and we see that it’s going to continue to grow. We have to play a part in that,” he said.

Playing a part in the channel’s growth means continuing to invest in the mortgage broking industry, Waldron said. He predicted that the market for brokers would continue to swell.

“We want to help the industry grow, and we want to continue to invest because more and more customers are going to choose to come to brokers,” he said.

What’s happened since?

The lender has spent the last year reasserting itself in the specialist lending sphere.

General manager Peter Wood said Bluestone’s return had been positively received by brokers. “Our plan is to release products and technology onto the market on a regular basis, and we’re working on some technology now … A key part of our business is to make sure we keep providing for the broker distributor network,” Wood said.

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

FORUM 27

brokernews.com.au

Mentors, money and the plight of new brokers Are mentors charging new industry entrants too much? Brokers are split

HIGH FEES COULD BE WARRANTED

FBAA president Peter White decried the fees charged by mortgage broking mentors. Sticky Tape was not so taken aback that some mentors were charging high fees.

“No surprises that some are charging those sort of fees. It is becoming the world as we know it.

I do NOT condone them, but on the other side there needs to be something fair and equable between mentor and mentee. Only those 2 parties can decide what is fair for each of them respectively.

“If a mentee finds it too much from the start, find another mentor (yes, it is harder in regional areas etc), but the decision still rests with each individual. They are supposed to be intelligent adults.

“Myself, I won’t be a mentor. Too much time, cost and effort for an unknown quantity, no matter how good a mentor you are.

“Kath’s example of someone being charged a $5,000 upfront fee and 50% commission and all trail, probably fair for the first 12 months, then charge 30% & 50% for next 12 months.

“The problem I see with it all is that after 2 years there is no guarantee the mentee will stay working for you, and that after all, that is potentially what you want by being a mentor.

“I would, obviously, after the 2 years offer normal splits and then after 5 years they get the initial $5,000 back.

“To me, they would be minimums if I was to do it. Some will find that fair, some will not. Again, it is an individual decision.

“The role of the MFAA and FBAA, to my mind, should be ensuring the mentees are happy with their arrangement with the mentor or helping them shop around for good mentors or giving guidelines on reasonable fees and allowing them to then make their own decision.”

Sticky Tape on 11/06/2014 at 10:11AM

B

rokers have been fiercely debating the role of industry mentors – more specifically, mentors charging ‘exorbitant amounts’ for their services to new brokers.

The discussion was started by FBAA’s Peter White, who told Australian Broker he was passionate about the issue as he did not want to see new brokers ripped off and the industry’s reputation tattered.

Reaction from those in the industry has been mixed.

Some attacked White personally for bringing the issue up – to be put in place by Stephen Dinte, who said: “One of the great aspects of our industry is the ability for all of us to have differing points of view on every subject, including this one regarding mentors and mentees.

What I do find sad however is the constant put downs in blogs like this one by brokers… It is the Peter Whites and Phil Naylors of this world who are the ones trying to improve our industry.

This does not mean that they are always correct, but at least they stand behind their beliefs and put themselves out there for one and all.”

BradQ advised new brokers to shop around before taking on a mentor. “… New brokers shouldn’t be pillaged of their income, just to start in the industry. It’s hard enough as it is, starting out with no income for 3, 6 or even 12 months ... If you are new to the industry, look for somewhere that you can be trained and mentored without having to pay such fees.

They are out there!”

Regional Broker suggested the MFAA should set up a fee structure for mentoring of new entrants that is fair and regulated, and Robert Knight said that while mentors were a good idea in principle, those who were simply ripping off new entrants were disgusting. “I would like to see these so called mentors named and shamed.”

Kath agreed she had heard of new brokers being ripped off.

“As a new broker, I have heard some horror stories from others that I did my Cert IV and Diploma with. Most aren’t even in the industry any more. They had to pay a $5000 up front fee, 50% of their commission and all their trail! Some brokers are mentors just to build up their trail books. It’s terrible and it’s no wonder that we have an older/ ageing industry – it is too hard to get started and succeed!”

GARTH, THAT WAS A HAIKU

BANK HOME LOAN ADS MISLEADING

The IMF has warned that Australia’s house prices are the second-highest in the world relative to incomes. One commenter was moved to poetry by the issues faced by Aussie buyers.

Incognito on 12/06/2014 at 10:55AM “Australia’s property market is ill.

Yet the racket continues.

Vested interests love it.

Young families are dying on the vine.”

What do you think?

Leave your comments at brokernews.com.au

A study commissioned by People’s Choice Credit Union found consumers were confused by bank home loan advertising.

Broker on 17/06/2014 at 11:36AM “Don’t tell ASIC, as they will find a way to blame brokers for that!”

Old Country Broker on 17/06/2014 at 9:20AM “Even more reason to use a broker.”

PEOPLE 28

brokernews.com.au

CEOs sleeping rough Loan Market CEO Sam White takes on homelessness

L

oan Market chairman Sam White slept under a makeshift cardboard shelter on the cold streets of Redfern.

The only difference between White and the more than 100,000 Australians who find themselves homeless each night of the year is that he will choose to go home to a warm bed in a comfortable house tonight.

White was one of the 1,041 chief executives across Australia who took part in the CEO Sleepout, raising $5.37m for the St Vincent de Paul Society. The top fundraisers, St.George’s George Frazis and Best & Less’s Holly Kramer, raised more than $210,000 each. White himself reached his target of $14,000.

White’s perception of homeless people has changed markedly over the three or four years he has been involved.

“I used to think if you were homeless you’d brought it upon yourself. I now know that there are many different factors that contribute to homelessness that are out of that person’s control – things like mental illness and domestic abuse.”

His main motivation for doing the sleep-out was to raise awareness around a major issue which is not improving.

Nearly 60% of people experiencing homelessness are under 35 years of age; 44% are women and 12% are under 12 years of age.

“The problem is actually getting worse, not better. Did you know there

are 28,000 kids under the age of 12 who are living on Australia’s streets?

That to me is shocking, and something we all need to do something about,” White says.

I USED TO THINK IF YOU WERE HOMELESS YOU’D BROUGHT IT UPON YOURSELF. I NOW KNOW THAT THERE ARE MANY DIFFERENT FACTORS THAT CONTRIBUTE TO HOMELESSNESS THAT ARE OUT OF THAT PERSON’S CONTROL In the lead-up to the sleep-out, White visited a hostel run by Vinnies and talked to case workers to understand the scale of homelessness, and what services the charity provides, such as mental health care, meals and vocational help.

Homelessness has a particular significance for White, as the CEO of a home loan company. He believes financial education, budgeting lessons, and rental arrears management are all areas in which Loan Market and the broader mortgage and property industries could help those who have fallen through the cracks.

Vinnies’ case workers stress that prevention is key to stopping more

DID YOU KNOW?

60% Nearly 60% of people experiencing homelessness are under 35 years of age Source: St Vincent de Paul Society

people from being forced to live on the streets.

“This is something mortgage brokers and our industry can get more involved in. Homelessness reminds us of the obligations we have to the community. When you look at situations where things haven’t gone right for people, it emphasises the duty of care we have to help our customers,” White says.

He suggests contacting the charity to offer volunteering time or money.

“It’s important to be involved in this cause – there are a lot of ways people can help Vinnies. Getting involved for me has been an eye-opener, and it’s humbling.”

Since the CEO Sleepout began in 2006, it has raised over $19m in important funds for Vinnies Homeless Services and nationally.

brokernews.com.au

CAUGHT ON CAMERA

IN FOCUS

T

he Independent Finance Brokers Forum recently held an industry discussion regarding a broker whose accreditation was unexpectedly cancelled by a major lender. Industry leaders and association heads sounded off on the issue.

29

INSIDER 30

brokernews.com.au

HIDDEN CASH FRENZY

sparked by anonymous rich guy An American real estate mogul is giving back in the strangest way possible

A

secretive millionaire, who uses the Twitter name @HiddenCash, has been leaving packets of cash around California, posting clues to the location of envelopes to his more than 450,000 followers on the social network.

The $100 bills or envelopes containing several $20 bills are amounting to $1,000-a-day philanthropy in what he terms on his Twitter account “an anonymous social experiment for good”.

The game started in San Francisco towards the end of May – with tweeted clues such as “A couple new drops in SF today.

Hint: Hope the sea lions don’t get it” – before expanding to Los Angeles.

In late May, the generous benefactor tweeted he had plumped 36 ‘Angry Bird’ toys full of money –some with up to $180 – and stashed them around Hermosa Beach, an oceanfront city just south of Los Angeles.

The resulting scenes were described as “pandemonium” by one Twitter user as scores of locals descended on the beach.

However, some have been sceptical about the man’s motives, questioning whether the

whole phenomenon may be a clever marketing ploy by a yet to be revealed company or advertising agency.

But “Mr HiddenCash” refuted that, and said he is just getting enjoyment out of creating the scavenger hunts and sharing his wealth around with people.

“Why is it so hard for some to believe that genuine acts of generosity are possible with no ulterior motive? Are we so jaded? Love,” he tweeted.

A self-described member of the “one per cent” of wealthiest Americans, the man encourages finders to share the money with those around them who need it.

The real-estate investor recently closed a deal with a six-figure profit, so decided to “give some of it back” through random acts of kindness, he told CNN in a telephone interview.

“This is not a set-up charity, but I wanted to do something fun and creative,” he said.

“We were thinking of something like the ‘Survivor’ TV show or something of that nature that was a scavenger hunt. They were basically too involved. So what we did was hide cash in different places. I thought

it would be fun but it’s also something simple to execute. All you’re doing is leaving money and putting clues on Twitter.”

The man said he’s between ages 35 and 45, but maintains anonymity because he wants the attention on his pay-it-forward activities, not himself.

Meanwhile, the phenomenon has gone viral, with worldwide followers joining his Twitter feed not only for the promise of finding hidden cash, but for uplifting quotes and seeing people commit random acts of kindness after being spurred on to ‘pay it forward’.

The anonymous millionaire tweeted: “Why do you think we have gone viral? The prospect of free cash or the mass scavenger hunt or something else?”

The question remains whether Mr HiddenCash will carry on once he is outed, as the world is not only curious for his cash but someone to pin the good deeds on.

Recently, he tweeted: “There are some false rumours about who Mr HiddenCash is, some naming our friends and others people we never heard of. Don’t believe it!”

DIRECTORY BANK

ANZ 13 13 14 www.anz.com.au Page 5 Commonwealth Bank 13 25 88 commbroker.com.au Page 15

FINANCE

Rhino Money www.rhinomoney.com.au 1300 654 355 Page 8 Semper Capital Pty Ltd 1 800 SEMPER (1 800 736737) www.semper.com.au enquiries@semper.com.au Page 21

LENDER

Allstate Home Loans 07 3211 3181 www.allstatehomeloans.com.au Page 13 La Trobe Financial Services 1800 707 707 latrobefinancial.com.au Page 9

Liberty Financial 13 11 33 www.liberty.com.au Page 3 Macquarie 13 62 27 macquarie.com.au/mortgages Page 32 MKM Capital 1300 762 151 www.mkmcapital.com.au Page 10 Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 11

NON BANK LENDER

Australian First Mortgage 02 9643 4300 www.australianfm.com.au Page 17

SHORT-TERM LENDER

Boleyn Capital 1300 765 534 www.boleyncapital.com.au Page 4

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

Interim Finance 1300 731 317 www.interimfinance.com.au Page 2

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

WHOLESALE

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

OTHER SERVICES

Queensland Mortgage Advisory Service 50 Water Street, Spring Hill Qld 4000 07 3105 9690 www.qmas.com.au info@qmas.com.au Page 19 RP Data 1300 734 318 Page 23 Trailerhomes 0417 392 132 Page 26

Friday 17th October 2014 Sydney Town Hall

Join your industry colleagues and see The Diamonds take to the stage for the 13th annual Austr alian Mortgage Awards

Book your table now!

event partner:

award sponsors:

www.austr alianmortgageawards.com.au