Australian Broker 11.14

JULY 2014 ISSUE 11.14

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS DOUR CONSUMERS When will sentiment pick up?

P10

+ SPECIAL REPORT SHORT-TERM LOANS

Getting your clients from Point A to Point B P12

+ MARKET TALK IS AUSSIE HOUSING OVERHEATED? Shane Oliver takes on the age-old question P20

+ FORUM SIFTING OUT SPRUIKERS

Brokers take aim at property pushers P27

+ PEOPLE SHAPING THE FUTURE

Mark Woolnough:

A finance vet starts a new career mentoring young talent P28

THE CUSTOMER OF THE FUTURE ING Direct’s head of third party distribution on the changing needs of customers, and how brokers must adapt

C

hange is a constant in any market, and the pace of change in the mortgage market is accelerating. What’s more, where change used to be driven by suppliers, it’s now largely driven by consumer demand. All of this can seem dizzying to brokers just trying to do business, but ING Direct’s Mark Woolnough says brokers must adapt to customer needs.

FULL STORY PAGE 18

+ CAUGHT ON CAMERA MPA’S AGGREGATOR ROUNDTABLE P29

NEWS 2

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NUMBER CRUNCHING

CREDIT DEMAND EASING

HOUSING ON THE MOVE

Veda consumer credit demand index by quarter

Annual change in capital city home values 12 months to June 2014

FAST FACT

8

$520

6.9

%

7

*Median weekly rent for Sydney houses

6 5 4

5.3

%

4.9%

3.1%

Source: RP Data

3

HOBART

2.5%

ADELAIDE

2.9%

CANBERRA

2.9%

PERTH

5.2%

DARWIN

2 1

5.7%

BRISBANE

FAST FACT

0

$36m

-0.2%

-1 -2

-3.0

%

-3 2013 Q.1

2013 Q.2

2013 Q.3

2013 Q.4

2014 Q.1

2014 Q.2 Source: Veda

*The price Yellow Brick Road paid for Resi Mortgage Corporation

7.0% 9.4%

MELBOURNE SYDNEY

15.4%

AUSTRALIAN CAPITALS

10.1% 5

Source: ASX

10

15

20 Source: RP Data

WHAT THEY SAID...

PHIL NAYLOR

“There is no evidence to support the assertion that third-party or broker loans are any riskier” P4

HARLEY DALE

“Inadequate land supply is one prominent example of supply side constraints preventing new home construction reaching its full potential” P8

ANDREW LITTLEFORD “Diversifying into the ascending market of short-term lending is as opportunistic as it is lucrative” P12

SHANE OLIVER

“Australians don’t seem to be using their houses as ATMs at present. Rather they still seem very focused on paying down debt” P21

NEWS 4

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Big Four best global banks in profitability DID YOU KNOW?

10.5%*

Phil Naylor

MFAA takes APRA to task on broker loans ■ The MFAA has dubbed an

APRA report misleading for asserting that broker-introduced loans are riskier than other channels.

The association has demanded the banking regulator correct its draft Prudential Guide on Mortgage Lending, saying the report contains misinformation and is misleading. MFAA CEO Phil Naylor rejected APRA’s claim that broker-introduced loans carried higher risk.

“There is no evidence to support the assertion that third-party or broker loans are any riskier than loans proprietary channel lending. We have strong evidence to back up our case,” he said.

Naylor said broker-introduced loans were of higher quality based on arrears, approvals and conversion rates.

He pointed to both the NCCP and the MFAA codes of practice, saying they held brokers to a high standard.

“These are stringent rules that come with heavy penalties if problems occur, providing strong protection to consumers at every step of the process. On this basis, it is ludicrous to single out broker loans for special attention in the draft guide,” he said.

*IBISWorld has forecast the superannuation sector to grow by 10.5% over the next 12 months.

Source: IBISWorld

■ Australia’s big four banks are the most

profitable in the world, a global study has claimed.

The Bank of International Settlements has said Australia’s major banks saw a higher rise in pre-tax earnings as a share of their total assets than banks in 10 other developed countries.

The result marks the fourth consecutive year Australian major banks have bested their international counterparts in terms of profitability. The report also revealed that the four Australian major banks enjoyed wider net interest margins and lower costs than the majority of overseas banks.

EDITOR Adam Smith PUBLISHER Simon Kerslake COPY & FEATURES JOURNALIST Calida Smylie PRODUCTION EDITORS Roslyn Meredith, Moira Daniels ART & PRODUCTION DESIGN MANAGER Daniel Williams DESIGNERS Kat Vargas, Kim Tomacruz SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING EXECUTIVE Alex Carr TRAFFIC MANAGER Maria Katsiotis CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley

Mortgage market set to soar ■ A new report from business information analyst IBISWorld

has identified the mortgage industry as one poised for strong growth in the year ahead. The company forecast 9.6% revenue growth for the industry in 2014–15, and said a number of factors were set to drive growth in the year ahead.

“Over the past five years, mortgage lenders have significantly increased their residential mortgage portfolios in line with growth in demand for dwellings around the nation, particularly in the capital cities. IBISWorld has identified this increase as being driven by favourable lending conditions, declining interest rates and a suite of government assistance packages designed to help boost demand for residential property,” the report said.

While demographic shifts in demand may be occurring, IBISWorld general manager Daniel Ruthven said demand for housing would remain strong in 2014–15.

JOB ADS BOUNCE BACK AFTER MAY SLUMP ■ The ANZ job advertisements series has shown

a recovery for job ads, following a 5.6% fall in May. Job ads rose 4.3% in June, driven by a 4.5% increase in online job listings.

ANZ senior economist Felicity Emmett said, while the bounce in ads suggested a confident outlook for the labour market, unemployment was likely to remain flat.

“We expect we’re going to see quite modest gains in employment going forward and while that should keep the unemployment rate from rising much further, it’s probably going to keep it at around the level it is now for some time. We don’t really expect to see any significant improvement in the unemployment rate until later next year,” Emmett said.

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

Pass rate cuts on to business: White

WORLD NEWS UNITED STATES OF AMERICA

■ A move by a non-major to trim its home

SIX NEW YORKERS HAVE BEEN CHARGED IN A MORTGAGE SCAM DESIGNED TO STEAL MILLIONS FROM LENDING INSTITUTIONS

Mortgage broker Alex Barrett, property managers Barthelemy Adjavehoude and Samuel Terrell Bell, title agent Michelle Baker and property managers James Bayfield and Dirk Hall were indicted in federal court for the scam, according to New York Newsday.

Prosecutors say the defendants submitted mortgage loan applications with false information to lending institutions. They also allegedly inflated purchase prices and appraisals for the properties and submitted fraudulent information about purchasers’ assets, Newsday reported.

The ring allegedly scammed US$5.5 million in loan proceeds from lenders.

CANADA CROWD-FUNDING TO BYPASS REAL ESTATE

Crowd-funding is helping all kinds of business and ideas to get off the ground, but some proposed changes to make these kind of investments easier, may exclude real estate deals.

The National Crowdfunding Association of Canada says that provincial securities commissions have concerns about abuse of the system if this finance model is used for home purchases, typically investors collectively buying rental properties. Those opposing the changes say real estate is a proven business model and a relatively safe investment, certainly compared with an unknown start-up company. In the US, real estate is one of the biggest sectors of crowdfunding, worth an estimated CAN$135 million.

FAST FACT

347,074* *The number of residential property listings in June

loan rates is welcome, the FBAA president Peter White has said, but businesses need a hand as well.

Suncorp recently announced discounts on its variable Back to Basics product and 3-year fixed product. The lender cut its Back to Basics product to 4.65% (5.21% comparison rate) and its 3-year fixed loan to 4.84% (5.67% comparison rate).

White welcomed the cuts, but has called on lenders to begin passing rate cuts on to small business, a move that would stimulate the wider economy.

Peter White “Given Suncorp is able to reduce its rates on residentially-secured properties, it would also be great to see the same benefit passed on to business borrowers who use their residential homes as security for their business debts,” White said.

And it does seem businesses could use the help. A Roy Morgan report shows business confidence is at its lowest level in two years.

White suggested a raft of rate cuts could help alleviate the problem, and have positive effects for the entire economy.

“This will enable small business owners to continue to trade profitably and to possibly expand their businesses and employ more people.”

Source: SQM Research

Arrears up as Aussies overspend at Christmas ■ Christmas overspending has driven an increase in home loan

delinquencies.

A new Fitch report shows arrears edged up slightly for March, rising to 1.35% from 1.24% at the end of September 2013. The ratings agency put the increase down to Christmas overspending, but said arrears were down 10bps on a year-on-year basis.

While Queensland was the worst performing state for arrears with a delinquency rate of 1.42%, Fitch said Victoria was the only state to see a year-on-year increase in delinquencies. Seven of the 20 worstperforming suburbs in Australia were in Victoria, while no region in the state was among the best performing.

NEWS

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8

New home sales see first fall of the year ■ The HIA’s New Home Sales Report recorded a 4.3% decline for

DID YOU KNOW?

20.7%* *Business confidence is now 20.7% below its peak in October 2013

May. The fall is the first in five months. But HIA chief economist Harley Dale said the overall figures were still encouraging.

“The overall profile for new home sales is a healthy one, given that May marks the first decline in new home sales this year.

Sales grew by 3.8% over the three months to May 2014 to be up by 21.0% compared to the same period in 2013,” Dale said.

While Dale said new home sales may have peaked, he forecast further growth for detached house building and elevated levels of multi-unit construction for 2014–15.

“Detached house construction has the potential to grow faster in 2014–15 than in 2013–14, but land supply constraints are again being exposed in this current upcycle, including a shortage of titled land in Sydney and Perth. Inadequate land supply is one prominent example of supply side constraints preventing new home construction reaching its full potential, highlighting the need for a focus on housing policy reform,” Dale said.

Peter Kell

ASIC takes payday lenders to task ■ ASIC has taken aim at two payday lenders,

alleging they have shirked responsible lending obligations.

The watchdog has begun civil proceedings in Federal Court against Gold Coast-based Teleloans Pty Ltd and Finance & Loans Direct Pty Ltd. ASIC said the companies have claimed they do not have to comply with certain NCCP consumer protection laws, because their loans are exempt under a short-term credit exemption. But the regulator has argued that the companies do not fall under the exemption, and must comply with all aspects of the NCCP including responsible lending obligations relating to payday loans and caps on fees and charges.

“These proceedings will ensure that payday lenders do not deliberately structure their businesses to circumvent laws that protect consumers. This is particularly important as the consumers who access these small amount loans can be financially vulnerable,” ASIC deputy chairman Peter Kell said.

Sulicich new CEO for MyState ■ MyState has announced the appointment of Melos

Sulicich as managing director and chief executive officer, effective 1 July. Sulicich previously headed RAMS, and was general manager of mortgage broker distribution with Westpac from 2008 to 2013. MyState chairman Miles Hampton said Sulicich’s previous experience in wealth management and broker distribution were significant selling points.

“Mr Sulicich has considerable experience in the financial services sector; in particular the wealth management and mortgage broker markets. This is of significance as we continue to grow a strong diversified financial services organisation. Importantly, the board values the wealth of knowledge Mr Sulicich brings from other business sectors which will enable us to capitalise on the nature and speed of change in the financial services industry,” he said.

Sulicich replaces former CEO John Gilbert, who retired in March.

ANALYSIS 10

Are we becoming a nation of pessimists?

Consumer sentiment remains stubbornly low.

When will Aussie buyers begin to cheer up?

A

ustralians are dour. Our outlook on the economy, on our personal finances and on the future of the nation is grim. So, when will we finally show some signs of optimism? Is there a light at the end of the tunnel for consumer sentiment? It appears so, but for now we remain a nation fixated on the negative.

The latest Westpac Melbourne Institute of Consumer Sentiment edged up slightly in July, climbing 1.9% from 93.2 in June to 94.9.

The result puts the index only 2% above its low in May, and 14% below its most recent high in November 2013. The index is now 10% below its 2013 average. A rise in sentiment might normally be seen as a positive, but the 1.9% rise was anaemic compared to economists’ expectations.

“This is another disappointing result for the Index. We had expected a stronger bounce back in the index following its 7% tumble in the aftermath of the Commonwealth Budget in May,” Westpac chief economist Bill Evans said.

Even two months after the Budget was revealed, it remains front of mind for the Australian consumer. And even with two months to sell the benefits of its austere money-saving measures, the government has failed to convince households that there’s

much to cheer in the Budget. Evans said the survey tracked “news recalled”, and found that the Budget was still the top issue consumers were thinking about.

“This part of the survey is only conducted quarterly. A record 74% recalled news on ‘Budget and taxation’, the highest ever recall rate for this issue, swamping other news items such as ‘economic conditions, ‘employment’, ‘interest rates’ and ‘international conditions’. The recollections last month were extremely unfavourable and are likely to have remained that way,” he said.

It’s not just the content of the Budget that’s rattling consumers, Evans suggested. It’s also the wait-and-see period Australians must suffer through before any certainty that the Budget’s measures will come to bear on their finances.

“A significant number of the unpopular savings measures in the Budget appear to be opposed by the Opposition and the minority parties in the Senate. It may be some time before households get some clarity around the final state of the Budget. We have seen a 0.5% contraction in retail sales in the March-May period and this uncertainty may be a key reason for that slowdown,” Evans said.

BUSINESSES BLEAK AS WELL

Businesses are also displaying a grim outlook.

Roy Morgan Research’s latest Business Confidence survey has revealed business confidence fell 5.4% from May to June, a decline the research firm said also reflected the continuing dampening effect of the Federal Budget.

Business confidence is now 20.7% below its peak in October 2013 following the Federal Election, and at its lowest level since June 2012.

The decline was driven by a dwindling proportion of businesses who said they believed economic conditions in Australia would improve over the next five years. This measure is now at its lowest level since August 2011.

LIGHT ON THE HORIZON

Pessimism has a way of breeding pessimism, but Evans said there is hope that consumer sentiment will turn around in the year ahead.

“Overall a solid recovery in confidence is still the most likely prospect over the course of 2014 as concerns over the Budget gradually fade,” Evans said.

And Australians are already becoming gradually more optimistic about their own financial position, Evans said.

OVERALL A SOLID RECOVERY IN CONFIDENCE IS STILL THE MOST LIKELY PROSPECT OVER THE COURSE OF 2014 – BILL EVANS “Views around family finances improved.

The sub-index tracking assessments of ‘family finances relative to a year ago’ improved by 1.9%. The sub-index on the ‘one year outlook for finances’ posted an even stronger 12.3% rise,” Evans said.

Unfortunately, this strong rise didn’t erase a precipitous 23% decline in the “one year outlook for finances” sub-index, Evans said. But he said economic fundamentals will eventually sway consumers toward a sunnier outlook.

“We expect that high savings rates, strengthening household balance sheets and a surge in residential building will all support a solid lift in spending as the recovery in consumer confidence comes through.”

SPECIAL REPORT 12

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STILL AHEAD + BEST PRACTICE MAKING MOVIES

10 things to avoid when making a video for your business P16

+ BEST PRACTICE CREATIVE REFERRALS

Tips to launch your own employee mortgage rewards program P22

+ FINANCIAL SERVICES

SMSF CREATES HAPPY CUSTOMERS Self-managed super is streets ahead in satisfaction P24

+ SPOTLIGHT VITAL FOR VITALITY

Mentoring is a necessity in an ageing industry P26

+ INSIDER PRAY FOR PAY

A company lands in trouble for forcing religion on its employees P30

Short-term lending: Building long-term relationships Short-term lending can lead to lifelong relationships with clients.

Two industry leaders share what you need to know about the sector

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A

s a category of specialist finance, short-term may be one of the more maligned and – perhaps – most misunderstood. But for the right clients, short-term finance can provide solutions to urgent needs.

Interim Finance director Andrew Littleford and Semper Capital director Andrew Way are two of the sector’s most high-profile leaders. They say brokers need to be discerning when venturing into short-term deals, but that the sector can also offer significant opportunities.

CLEARING THROUGH THE MISCONCEPTIONS

When it comes to misconceptions about the short-term market, Way is blunt in his assessment.

“I don’t think there are many misconceptions. If it is thought of as bandit-country with potential highwaymen lurking at every corner then that’s a fairly accurate description. Every market has its rogues, but the commercial short term space being largely unregulated is full of them. From those willing to charge large fees without any intention to lend to others whose rates and fees don’t accurately reflect risk but take advantage of a borrower’s vulnerability, and until there is some form of policing it will continue,” he said.

Way pointed out that the rogue operators in short-term lending tend to be “not lenders but brokers masquerading as lenders”.

Littleford agreed, but said research could help brokers avoid unscrupulous operators.

“There remain a few operators in this space whose business model and ethics could at best be described as questionable. With some research, brokers can be assured that loans written in the short-term sector will be compliant based on the established processes [and] regulations now applied as an industry standard,” Littleford said.

But in addition to this, Littleford said there were some misconceptions surrounding the industry. For one, he argued that the short-term industry is often painted as carrying excessive interest rates. Littleford said this was because home loan rates should not be used as a point of comparison, as the timeframes and risk profiles involved were completely different.

“There’s an increasing expectation that rates don’t exceed 1-2% per month in a typical short-term loan period of 1-6 months. Striking a balance between the risk and providing the best solution for a client’s need at a competitive rate is the correct approach,” he said.

Another common fallacy is that short-term deals are too difficult and labour intensive, Littleford suggested.

“Short-term lending creates an

13

alternative income stream that can be highly profitable. A short-term loan has a significant return on the time invested.

Transactions are generally dealt within 3-10 days, with the broker paid on the day of settlement. There are no clawbacks,” he said.

And while some expertise is required for any niche market, Littleford argued that Interim had hit upon a solution for brokers looking to get involved in short-term lending.

“Interim Finance has addressed this obstacle by offering a complete back-end support service, where brokers can elect to have the loan written and managed on their behalf at no cost. This has been popular for those who are time poor/ under-resourced, and seek the assurance that the loan is compliant. Commissions aren’t affected and the client relationship is maintained,” he said.

THE SIZE OF THE OPPORTUNITY

Littleford described short-term lending as a “rapidly expanding market” with an “ever-increasing client base”. This is due to the volume of clients being pushed from the prime to specialist space by tightening credit rules, he said.

“Post-GFC, banks have generally tightened their loan qualification criteria. This cautionary approach and general lending stringency has pushed the volume of traditional bank clients into the specialist sector. In particular, SMEs have been a core market which seeks short-term loans to quickly counter a lack of cash flow. This sector continues to evolve rapidly throughout Australia,” he said.

But Way said it’s difficult to measure the market’s temperature due to the lack of available statistics. Not to mention, he said, the fact that some operators jump into and out of the sector.

“I don’t know how this can be measured accurately because there’s no

WHO NEEDS SHORTTERM FINANCE? Andrew Littleford of Interim Finance says short-term products are generally geared to provide solutions for: • • • • • • • •

Working capital Bridging finance Business expenses Creditor payments ATO/BAS assistance Joint ventures Business investment and expansion Commercial and residential construction financing • Refinancing Source: Interim Finance

SPECIAL REPORT 14

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ANDREW LITTLEFORD

‘official market’ and no collection of statistics. But certainly there’s always new lenders hoping to make a quick buck and this might give the illusion of ‘growth’, but these tend to come and go, learning that the reliable sources of introduction know where to find a good lower-cost offer with which they can’t compete so they take risks they shouldn’t in return for high rates but lose their shirts,” he said.

Nevertheless, Way identified a variety of clients who would normally seek out short-term lending solutions.

“I suppose there are four types of client: firstly, those needing to bridge a buy and sale chain or pending sale of an asset; secondly, those that need funds the banks won’t or can’t give them for a period of time during which they prove their case or improve their financial strength to the bank; thirdly, those the banks want out and who need to deleverage before getting back to a bank; and finally, those that want to release equity for some purpose before they can refinance.

Applicants that are not suitable are those looking for a lender of last resort and with no options to exit,” he said.

Typically, Littleford said short-term products provided solutions for clients seeking working capital, bridging capital, looking to pay creditors or business expenses of those needing assistance with the ATO or BAS. Additionally, clients undertaking joint ventures, business investments or expansions or commercial or residential construction may be in need of short-term lending solutions.

“It’s also worth noting that at the end of the short-term loan period, refinancing is often required, providing ‘two bites of the cherry’.

In short, tapping into short-term lending enables a point of difference through a broadened solutions/service offering, which equates to a greater revenue stream,” he said.

THE MOST IMPORTANT SKILL IS IN KNOWING YOUR LENDER TO AVOID A BAD BORROWING EXPERIENCE - A NDREW WAY

“The primary market is SMEs who require an often crucial cash injection to enable businesses to expand and/or bypass cash flow issues, to include paying creditors, purchasing stock, paying the ATO and GST, providing working capital or bridging finance,” Littleford added.

WHAT’S ON OFFER

When it comes to the types of products available, short-term lending can sound confusing. But Way said the types of products break down into a few basic customer needs.

“I don’t know about others but we cater to the $1m to $10m space and our clients fit one of three general types: 1. Deleverage clients needing to sell assets to achieve bank serviceability – many are in the hands of external administrators and need us to take them out. 2. Developers looking to fund an option and start development while they achieve the pre-sales necessary to secure bank funding. 3. Companies in the process of refinance that need funds while they wait,” he said.

Likewise, Littleford identified a few customer needs his product line fulfils.

Caveat loans, he said, are available to clients who wish to retain their existing first mortgage but require a short-term line of funding beyond their current credit provider’s capacity.

Second mortgages are for clients who

ANDREW WAY

wish to retain their existing first mortgage but require a medium-term line of funding beyond their current credit provider’s capacity. First mortgages fulfil the needs of clients who offer unencumbered security and require a line of funding for the short to medium term.

TIPS FOR PUTTING TOGETHER A DEAL

Like any niche market, Littleford said brokers needed some understanding of the short-term market. But Littleford again pointed to Interim’s back-end support service for brokers who were time-poor.

Aside from this, he said there were a few things brokers needed to keep in mind.

“To ensure a smooth and streamlined process, we encourage brokers to do their due diligence and extract all relevant information about the deal as soon as possible. Furthermore, we urge brokers to make sure they’re getting the best-inmarket rate and offer optimal solutions that best address a client’s requirements.

Be sure to ask the hard questions upfront, choose a professional lender and be realistic. Be mindful of the commission expected. Large commissions seem attractive but are often met with resistance by the borrower and can result in a deal not proceeding,” he said.

Way offered three main tips for brokers looking at short-term deals.

“Only three things matter: a property valuation to determine LVR and available equity, proof of use of funds and benefit by borrowing, and a trustworthy and definable exit. Everything else is waffle,” he said.

Also, brokers need to understand the needs of their clients and be discerning in their choice of lender, he said.

“All they need to recognise is the need that fits the short-term product. The most important skill is in knowing your lender to avoid a bad borrowing experience. A broker only needs to know three short-term lenders to meet all their needs satisfactorily. They just need to identify who they are,” Way said.

THE COALFACE

15

Business soaring for home loan team leader Toni Lamb has trekked across the world to find her current role serving the travel industry

B

y her own admission, Toni Lamb came to the mortgage industry in Australia through a circuitous route. She started by launching a home loan business in Singapore.

“I had in my previous role in property been managing quite a few clients in the property management space. I decided to leave that role and go to Singapore. I noticed in a few trips over there that they were very much behind us in terms of financial products. For instance, they didn’t have line of credit products, which were very popular over here at the time. So, basically I went over there and started my own mortgage business,” she said.

Lamb explained that in Singapore, the banks serve as a second mortgagee to the government, which owns the actual mortgage. Compulsory super contributions in Singapore, she further explained, are up to around 22%, and Singaporeans can use this account to invest in shares or property.

“I showed them how to utilise an overdraft and how they could buy property utilising an overdraft. I did that for a couple of years and then took it one step further, and did a lot of work behind getting one particular bank on board to really get the market moving,” she said.

Upon returning to Australia, Lamb took up a role with Macquarie.

“It gave me the tools to understand brokers’ businesses and the positives and negatives of their businesses,” she said.

As she gained this understanding, she decided to move into a mortgage role.

“I worked for a smaller boutique and

TONI LAMB

WHEN YOU LOOK AT YOUR CURRENT CLIENT DATABASE YOU’VE GOT TO MAKE SURE YOU’VE GOT A GREAT RETENTION PROGRAM IN PLACE got my Cert IV and did my Diploma, and then I left there and set up my own broking business for 12 months and got some understanding. I found it difficult doing the marketing component,” she said.

It was then that Lamb came upon Moneywise Global Home Loans, a provider that serves the employees, family and friends of Flight Centre.

As Home Loans Team Leader for the company, she said the arrangement gave her a massive pool of potential customers.

“I don’t think anyone else out there is doing it. We have a financial planning business, tax business and mortgage business. Flight Centre has about 10,000 staff,” she said.

While her role has opened a new source of leads and referrals, she said it’s still important for brokers to make sure they look after their existing clients.

“I suppose it’s the old adage that when you look at your current client database you’ve got to make sure you’ve got a great retention program in place.

We all do hard work to get our clients, but then we can tend to forget about them,” she said.

BEST PRACTICE 16

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MAKING MOVIES: 10 things to avoid when making a video for your business Video can be a great way to engage with potential and current customers, and these days it costs very little. Video expert Geoff Anderson points out some common mistakes to avoid

V

ideo is one of the most powerful and accessible tools we have in business today. When it is done well, it builds community, creates rapport and enhances your brand.

However, when it is done poorly it can turn away our followers, customers and create brand damage.

By being clear on your audience, you can target your message in a way that truly resonates. If you struggle with your target audience, think about who you would like to be writing a loan for after seeing the video.

Here are my 10 mistakes to avoid when making videos for your business:

AN UNFOCUSED MESSAGE

NO CLEAR AUDIENCE

1

As with any marketing activity, it is critical to be clear on who your audience is.

Don’t try to be everything to all people. If you do this, your message will get lost and have little meaning.

If you have a niche for your mortgage business then be clear about it.

TOO MUCH INFORMATION

3

2

The days of indulging in 10 or 15 minutes of your audience’s time to watch your video have passed. The key now is to keep the content concise and valuable, which goes back to the purpose of your video.

The clearer you can be about why you are making the video, the easier it will be to focus your message. What is the action or message you want the viewer to take away after watching your video? Keep coming back to this as you draft your scripts and think – is this relevant or helpful for my intended audience?

For example, if the purpose is to encourage people to visit your booth at the next ExpoMart or call you to discuss their lending requirements, then find ways to get to that point quickly and clearly.

Sometimes too much information ends up turning people away, or worse – boring them.

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FACTS INSTEAD OF EMOTION

4 Ok, you may be offering the best lending rates or the lowest fees, but how can you make this information resonate with your audience? Does it mean they can have less stress on their repayments and be able to move into their new home knowing they can afford it? Focus on the emotional needs of your audience and how you can satisfy them.

you connect a suitable microphone to it.

Ideally you want to have a camera that allows you to monitor the sound as it is being recorded. That way you can check if there is any rubbing noises or buzzing that could be affecting the quality of the audio. If you can’t plug in headphones while you record then do a test recording first and listen back to check the quality.

Even if you are shooting on a smartphone, there are plenty of microphones you can get to ensure the audio sounds right. These include a shotgun microphone, a lapel microphone or a hand held.

TOO MUCH EMPHASIS ON YOU

5 Keep the focus of your video on the viewer and how your work can help them rather than focusing on yourself. If you find yourself talking about we and I, stop and think about how you can shift it to “how you will benefit from these rates”.

If you focus more on what’s important for your customer you are more likely to keep them engaged.

POOR AUDIO

6

WOBBLY CAM

9

BADLY FRAMED

7

Keep asking yourself – why does this feature matter to my customer? You can connect with people at an emotional level when you focus on how they will feel and benefit as a result of using your services.

Leave the weighty details on your website for those who really need to know.

against walls as it will create shadows and look uninteresting and flat. The more depth you can have in the picture the better, and a background provides an opportunity to show some additional information that can enhance the character of the presenter or the information you are sharing.

When filming people, make sure you put the top of the head at the top of the frame.

Many newbies look through the camera and put the face in the middle of the screen. This ends up with empty space above the head.

Learn to look through the viewfinder as if it is a framed picture on the wall. Generally if someone is talking directly to camera make sure they are centred in the frame. The only time you might play with this is if you want to use the space on the side to add extra information such as text points.

A tripod is a must for newbies to avoid shaking hands and wobbly video.

You can even get holders for mobile phones which will ensure your shot is steady.

Unexplained camera movement distracts the viewer and dilutes the impact of your message.

USING CHEAP TECHNOLOGY TO IMPRESS

10

If you are interviewing someone on camera, ensure you give a little space for “talking room”.

If you are using your smartphone for filming then please, please, please make sure you hold the camera in landscape mode. If you shoot in portrait aspect you will end up with a thin image with black bars on either side. Also avoid using the zoom; this will just reduce the quality of the recording – instead, stand closer to the device to fill the frame.

UNINTERESTING OR DISTRACTING BACKGROUND

8

Cheap and easily accessible devices such as mobile phones are a way to stay connected with your community.

However, I wouldn’t recommend trying anything too tricky or impressive using a phone camera – such as a promotional video or green screen effects. Better quality lenses, image sensors and audio will give you a better result for that sort of stuff. In which case talk to the professionals.

Keep the do-it-yourself content for maintaining rapport with existing customers. If you are looking to use video to attract new customers then spend the time and money to work with the professionals.

Viewers will put up with rough visuals but they won’t forgive poor sound. No matter what camera you are using, make sure

Be aware of what is in the background of the shot as this will form part of the story you are telling. Avoid filming people up

Geoff Anderson is a video producer and owner of Sonic Sight, a corporate video production company. He presents on using video in business and is the author of the Amazon Bestseller “Shoot Me Now – Making videos to boost business”.

Visit www.sonicsight.com.au

NEWS 18

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CONTINUED FROM PAGE 1

MY VIEW IS THAT THE CUSTOMER WILL BE GIVEN EVEN GREATER ACCESS TO MUCH MORE TECHNOLOGY TO PUT THEM IN MORE CONTROL

Mark Woolnough: W

THE CUSTOMER OF THE FUTURE ING Direct’s head of third party distribution on the changing needs of customers, and how brokers must adapt

oolnough, the bank’s head of third-party distribution, has pointed to rapidly-changing consumer trends. Technology is driving an evolution of consumer expectations, and brokers must evolve with this, he said.

“Customers now have access to more information, and they’re much more educated and accountable for the decisions they make. I think we’re seeing a change in paradigm in terms of the extent to which the customer is happy for the broker to make the decision for them rather than to validate the decision,” Woolnough said.

As home buyers increasingly become digital natives, the expectations they bring into the home loan process will change, Woolnough suggested.

And these changes are already occurring. There’s a trend, Woolnough said, toward customers taking greater control of the buying process. It’s a trend Woolnough believes will only become more dominant in the future.

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“My view is that the customer will be given even greater access to much more technology to put them in more control. They’ll have an abundant array of online utilities to self-equip and power their selection and decision making. Social media engagement will continue to climb as customers will be provided with ‘people like you’ comparisons.

Like for like people on the same journey or path that your customer is on.”

This means that the role brokers plan in the home loan transaction is evolving.

“The challenge for the third party is to become more of a financial coach or mentor for their customers, an endorser or a proof point for the borrower. The broker will never be redundant as long as the customer sees value in the service, but part of the traditional steps that brokers used to take with customers will become less important as technology allows customers to take those steps themselves,” Woolnough said.

COMPETING WITH DIRECT CHANNELS

As Woolnough said, brokers will remain relevant to consumers as long as they continue to see value in the service the channel provides. That value seems self-evident, with brokers providing an abundance of choice, a simplification of the home loan process and outsourcing the legwork of putting together the relevant documentation needed to secure a home loan. Woolnough argued, though, that brokers still must not discount the competition provided by direct channels, particularly as consumers show a desire to take greater control of the home loan process.

“Customers with more control will want greater reward for the steps they take to find solutions.

They’ll take ownership and accountability for their decisions and will want to educate themselves through online research, and take on board the opinions of friends. The third party is going to have to make sure their systems and processes are equal to or in advance of what the customer is able to achieve by going direct,” he said.

Traditionally, one of the only true drawcards available to direct channels was the perception of offering a cheaper deal. But Woolnough said this is no longer the case.

“Way too often the very thought or comment of customers choosing to go direct quickly leads to debate and conversation around a cheaper price, however this is certainly not what the research suggests. Whilst there has, and always been a segment that sought a more favourable price point by going direct the majority do so as they believe they will enjoy a better and quicker experience,” he said.

And online channels are becoming easier and easier for consumers to utilise as technology makes the process more streamlined.

“Right now the customer can go to any bank site, they can apply now and get an indication of approval or an estimate of borrowing capacity within two minutes. They can upload payslips and tax returns, and in time they’ll be able to provide consent where the bank can jump onto a government portal and get those tax returns. The valuations are ordered online. You’ve got solicitors working on B2C communications that they can press a button to send it to the customer. The customer sends it back and then you’ve got PEXA [Property Exchange Australia]. This isn’t in the future, this is now,” Woolnough said.

This means that brokers will have to look for ways to integrate technology into their business in order to provide a smooth, seamless and quick experience for customers who come to them armed

with more information and a greater sense of self-determination.

“The traditional broker role worked because you had complicated products. Couple this with the fact that mortgage transactions can be complex, and there were so many lenders customers didn’t have time to go to every branch manager to find out more about that particular offer. They outsourced that work to a professional and expert. But if the customer is able to get this information far more quickly and efficiently at a time that suits them with a device that suits them, the third party is going to have to find a way to integrate this into their business,” Woolnough said.

THE DECISION TO EVOLVE

For some brokers, integrating technology into their business to address these trends can seem overwhelming. But Woolnough has said brokers who don’t feel comfortable with keeping abreast of technological trends driven by consumer behaviour don’t have to throw in the towel. Instead, he said they can look to bring savvy young people into their business who bring with them the expertise to deal with a new type of borrower.

“Brokers have got some big decisions to make.

The broker of the future and the broker that looks at ensuring their business is set up for success needs a planning and recruitment strategy that recruits specialists in the areas their business needs to develop. They don’t just need to go and recruit four or five more loan writers. If you think you’re going to build your business by getting four more of you, you’re not going to build your business.

You almost need a reverse mentoring situation where you have a young, savvy digital native mentoring you on the evolving trends of dealing with customers. Knowing what is important to the younger and future generations and delivering will be critical to the sustainability of your business regardless of the industry,” Woolnough said.

This is all well and good for brokers who run a multi-staff business, but many brokers simply can’t afford to bring on board more employees for the express purpose of utilising new technology. For them, Woolnough said their aggregation group can provide this expertise.

“The sole operators have to surround themselves with strong and professional networks that can provide solutions around technology systems and help them understand the data at their disposal.”

This means that the onus is largely on aggregators to help brokers evolve along with a changing marketplace, Woolnough argued.

“An aggregator has no business without productive members. If their members aren’t as productive or are less relevant, what is the future of that aggregator? We have to make sure that professional development events and the education being offered communicates, develops and educates in these areas,” he said.

But Woolnough’s primary message to brokers isn’t to fear online competition. It’s to embrace the ways technology can improve the customer experience and make business more efficient for the broker. Any technology solutions should be driven to meet the needs of the end customer, Woolnough said. Consumers aren’t looking for an online mortgage, he said. They’re looking for a home. Moreover, they’re looking for an experience buying a home that fits their demands.

“Never be concerned about online mortgage solutions, because that’s not what the customer is looking for. They’re looking for a way to integrate technology into their property-buying experience.”

MARKET TALK

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IS THE AUSTRALIAN HOUSING MARKET TOO HOT? Has the growth in Australia’s property prices gone too far and are we finally reaching bubble territory? Shane Oliver of APM examines the facts

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wo years ago some (mainly foreign) commentators were convinced Australian housing was in a bubble that was in the process of collapsing as the Chinadriven mining boom faded. Instead, lower interest rates have led to the usual response of rising house prices and approvals for new homes. But has it gone too far, taking us into another bubble?

SHANE OLIVER

GREAT NEWS FOR THE ECONOMY

While it took a bit longer than usual, the housing sector has responded just as it should to lower rates: • lower interest rates led to improved housing affordability; • which has led to increased home buyer demand (housing finance is up 23% year on year and new home sales are up 40% from their September 2012 low); • which in turn has led to higher house prices; • which has signalled to home builders to build new homes – with building approvals now about as high as they ever get pointing to a construction boom on the way; and rising house prices, which boost wealth, and stronger housing construction, are positive for retail sales.

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BUILDING APPROVALS ARE ABOUT AS STRONG AS THEY EVER GET Dwelling approvals, monthly ‘000s

18 16 14 12 10

DID YOU KNOW?

10.6% Capital city house prices are up 10.6% over the year to March with Sydney home prices up 15.6%.

Source: RP Data

8

90

92

94

96

98

00

02

04

06

08 10 12 14 Source: Bloomberg, AMP Capital

This is all good news as a stronger housing sector is critical if the economy is to rebalance away from mining investment.

BUT IS IT TURNING INTO BUBBLE TROUBLE?

While a housing recovery is necessary to rebalance the economy, a concern is whether it’s becoming another bubble.

The home buyer market has started the year strongly with auction clearances high and house prices surging. According to RP Data, capital city house prices are up 10.6% over the year to March with Sydney home prices up 15.6%.

90

AUCTION CLEARANCES REMAIN STRONG PERCENT FIRST RATE CUT

80

MELBOURNE FIRST RATE CUT

70 60 SYDNEY

50 40 Jan 07

Jan 08

Jan 09

Jan 10

Jan 11 Jan 12 Jan 13 Jan 14 Source: Australian Property Monitors, AMP Capital

Property prices are on the rise again in other comparable countries, eg the US and UK. The trouble is that Australian house prices are turning up from a high level.

AUSTRALIAN HOUSE PRICES TURNED UP FROM A HIGH LEVEL 700

Australia

House prices indexed to March quarter 1987 = 100

600 500

UK

400 300

US

200 100 87

90

93

96

99 02 05 08 11 14 Source: Case-Shiller, Nationwide, ABS, AMP Capital

Asset price bubbles normally see overvaluation, excessive credit growth and self-perpetuating exuberance. On these fronts the current readings for housing are mixed.

AUSTRALIAN HOUSING IS OVERVALUED

While real house price weakness through 2010 to 2012 saw this diminish the problem has returned again with a vengeance: Real house prices are 13% above their long-term trend.

AUST HOUSE PRICES TURNING BACK UP ABOVE THEIR LONG TERM TREND BEAR

1600 REAL HOUSE PRICES INDEXED TO 1926=100

BULL

800

BEAR

BULL

400

13% ABOVE TREND

LONG TERM TREND

BEAR 200

REAL HOUSE PRICES 100 1926

1936

1946

1956

1966

1976

1986

1996

2006

2016

Source: ABS, AMP Capital

According to the 2014 Demographia Housing Affordability Survey the median multiple of house prices to household income in Australia is 5.5 times versus 3.4 in the US. The ratio of house prices to incomes in Australia is 21% above its long-term average, leaving it toward the higher end of OECD countries. This contrasts with the US. On the basis of the ratio of house prices to rents adjusted for inflation relative to its long-term average, Australian housing is 27% overvalued.

So Australian house prices meet the overvaluation criteria for a bubble. Other criteria are less clear though.

CREDIT GROWTH IS A LONG WAY FROM BUBBLE TERRITORY

Over the year to February housing related credit grew 5.8%. This is up from recent lows, with 7.6% growth in credit for investors leading the charge. But it is pretty tame compared to 2003-04 when housing related credit growth was running at 20%-plus and 30% for investors.

Related to this we have yet to see much deterioration in bank lending standards.

THE SELF-PERPETUATING EXUBERANCE THAT ACCOMPANIES BUBBLES SEEMS MOSTLY ABSENT AT PRESENT

House price strength is not broad based. Whereas prices in Sydney (+15.6% year on year) and Melbourne (+11.6% year on year) are very strong, in every other capital city they are up 5% or less.

Related to this there has been only one year of strong gains, whereas the surge into 2003 ran for seven years.

Australians don’t seem to be using their houses as ATMs at present (ie where mortgages are drawn down to fund consumer purchases and holidays). Rather, they still seem very focused on paying down debt.

We have yet to see property spruikers out in a big way.

There is little sign of buyers rushing in for fear of missing out.

MARKET TALK brokernews.com.au

The cooking shows are still out-rating the home related shows on TV! For these reasons I don’t think it’s a bubble yet. However, the acceleration in price gains means the risks are rising.

WHAT’S TO BLAME FOR HIGH HOUSE PRICES?

Whenever house prices take off and affordability deteriorates there is a tendency to look for scapegoats. A decade ago it was high immigration and negative gearing. Now it looks to be foreign buyers (from China), self-managed super funds and as always negative gearing. However, none explain the relative strength in Australian house prices.

Foreign and SMSF buying is no doubt playing a role in some areas but looks to be relatively small overall. Chinese interest in Sydney seems to be concentrated away from first home buyer suburbs.

Such simplistic explanations ignore the fact that when interest rates go down, Australians borrow to buy houses and prices go up. We don’t need to resort to foreigners to find a reason why house SHANE OLIVER prices have gone up!

Negative gearing has been around for a long time. It was removed in the 1980s but was reinstated as it was clear its removal worsened the supply of dwellings. Restricting it for property would also distort the investment market as it would still be available for other investments.

Rather, the fundamental problem is a lack of supply. Vacancy rates remain low and there has been a cumulative construction shortfall since 2001 of more than 200,000 dwellings. The reality is that until we make it easier for builders and developers to bring dwellings to market – and hopefully decentralise our population in the longer term – the issue of poor affordability will remain.

AUSTRALIAN HOUSE PRICES MEET THE OVERVALUATION CRITERIA FOR A BUBBLE. OTHER CRITERIA ARE LESS CLEAR THOUGH -

IMPLICATIONS FOR MONETARY POLICY

As things currently stand the risks to financial stability flowing from the surge in house prices are more than balanced by subtrend economic growth, falling mining investment and risks to Chinese economic growth. As such, it remains appropriate for the RBA to keep interest rates on hold at 2.5% for now. However, our expectation is that the RBA is likely to step up its jawboning of the home buyer market by warning buyers not to take on too much debt and not to expect ever-rising prices, ahead of a move to higher interest rates probably starting around September/ October once economic growth has started to pick up.

While talk of so-called macro prudential controls, such as limits on loan to valuation ratios for mortgages, may hot up, the RBA would probably prefer to avoid such retrograde approaches (they

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didn’t work in the days pre-deregulation) in favour of jawboning and an eventual rate hike.

Against this backdrop we expect further gains in house prices but at a slowing rate over the remainder of the year, particularly once interest rates start to rise again.

Longer term, the overvaluation of Australian housing will likely see real house prices stuck in a 10% range around the broadly flat trend that has been evident since 2010. This is consistent with the 10–20-year pattern of alternating long-term bull and bear phases seen in real Australian house prices since the 1920s. See the fourth chart.

HOUSING AS AN INVESTMENT

Over long periods of time, residential property adjusted for costs has provided a similar return for investors as Australian shares. Since the 1920s housing has returned 11.1% pa compared to 11.5% pa from shares. Both have been well above the returns from bonds and cash.

LONG TERM ASSET CLASS RETURNS $ 1 638 400 $ 409 600

AUST RESIDENTIAL PROPERTY (11.1% pa)

VALUE OF $100

$ 102 400 $ 25 600 $ 6 400

AUST BONDS (6.9% pa)

AUST SHARES (11.5% pa)

$ 1 600 AUST CASH (5.6% pa)

$ 400 $ 100 1926

1936

1946

1956

1966

1976

1986

1996

2006

2016

Source: ABS, REIA, Global Financial Data, AMP Capital Investors

They also offer complementary characteristics: shares are highly liquid and easy to diversify but more volatile whereas residential property is illiquid but less volatile, and shares and property tend to be lowly correlated to each other.

As a result of their similar returns and complementary characteristics there is a case for investors to have both in their portfolios over the long term.

CONCLUDING COMMENTS

The recovery in the housing sector is playing a key role in helping to rebalance the Australian economy. However, while the house price recovery does not appear to have entered bubble territory yet, the risks are rising. The RBA’s first line of attack is likely to be more intensive jawboning, warning home buyers not get too giddy in their house price expectations and not take on too much debt.

Later this year though this is likely to be followed up by a couple of interest rate hikes, all of which will likely see house price gains slow.

Shane Oliver is head of investment strategy and chief economist, AMP Capital

BEST PRACTICE 22

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7 STEPS FOR LAUNCHING YOUR OWN EMPLOYEE MORTGAGE BENEFITS PROGRAM Marketing coach Doren Aldana explains how you can gain a captive audience for referrals

W

hen it comes to generating mortgage leads, there are lots of ways to skin the cat. With that said, not all lead generation strategies are created equal. The real question you want to ask yourself is, “What’s the absolute best way to attract a steady stream of closed deals that requires the least amount of time, energy and money?” To answer this question, consider the following three factors:

1. THIRD-PARTY ENDORSEMENT: The degree to which you are being recommended or endorsed by a trusted “third party,” thereby giving you instant credibility and attracting hot, motivated prospects Who are pre-sold on working with you before they even meet you?

2. MARKETING REACH (CAPACITY): The number of ‘ideal clients’ you’re able to cultivate a relationship with, so when the time comes that they need a mortgage, you’re the first and only logical choice.

3. COST OF ACQUISITION: In other words, the average cost of acquisition per client.

The lower the cost, the higher your profit per deal.

So, with those three factors in mind, here’s one of the best ways to generate more business: Launch your own employee mortgage benefits program. This is where you offer companies the opportunity to help their employees save time, energy and money when buying, selling and refinancing. You supply all the employee communication materials, and your on-site education seminars bring their employees up to speed on the latest mortgage financing programs and products. It costs the company nothing to have you provide this voluntary benefit to their employees, and it gives you a steady stream of pre-sold mortgage prospects. What a great win-win!

Now, as cool as this strategy looks at first glance, the truth is, most mortgage pros get sweaty palms and high blood pressure when they realise they’re actually going to have to start calling on corporate executives to make this thing happen. The intimation factor is a major game-stopper. So why bother doing this in the first place? Good question.

Here are eight exciting advantages of corporate benefits marketing:

1. IT POSITIONS YOU AS A ‘WANTED GUEST’ INSTEAD OF AN ‘ANNOYING PEST’

Once a company approves your program, you’re no longer an outsider – you’re an insider. No more cold calling. From now on it’s only warm calling. After all, you’re the official, authorised and endorsed mortgage provider for the company.

You’re part of the family now.

2. IT GIVES YOU THE ‘OPRAH EFFECT’

If you’ve ever watched The Oprah Winfrey Show, chances are, you’ve seen her recommend her favourite books on Oprah’s Book Club. Well, knowing the powerful influence Oprah has over her enormous audience of 15 to 20 million viewers per day, I had a hunch this would be big for her featured authors, but I had no idea how big.

According to Richard Butler, professor of economics and lead author in a recent study conducted at Brigham Young University in the US, “Not only did her picks rocket from obscurity, in most cases, to the top of the best-seller lists, but our statistical tests proved they generally had longer staying power on the lists than other best-selling books.” This massive increase in book sales linked to Oprah’s endorsement has been coined the ‘Oprah Effect’.

According to publishing sales monitor bookscan, the average US book is now selling fewer than 250 copies per year and fewer than 3,000 copies over its lifetime. In contrast, Oprah’s recommended books consistently rise from the dark corners of obscurity to sell millions of copies overnight, thereby skyrocketing their titles to the top of the best-seller lists, and in most cases, staying at the top much longer than their non-endorsed counterparts.

So, what does Oprah’s Book Club have to do with your mortgage biz? Everything! You see, you don’t have to know Oprah in order to benefit from the ‘Oprah Effect’. All you have to do is find a person or organisation with a strong influence over a large group of your ideal clients and then get them to endorse you. That’s exactly what corporate benefits marketing allows you to do.

3. IT GIVES YOU A CAPTIVE AUDIENCE

Have you ever dined at a restaurant in an airport? If you

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have, chances are, it wasn’t exactly your idea of great value.

In my experience, the food is either nasty-as-nasty-gets, or the service sucks, or it costs a fortune – or all of these!

However, in spite of all those obvious shortcomings, most of these restaurants are still thriving while most of their competitors (outside the four walls of that controlled environment) are dropping like flies. In other words, they’re succeeding in spite of themselves. Why? Because they have a captive audience. They have a hungry crowd who can’t or won’t go anywhere else. Now, just imagine how much more successful they’d be if they actually delivered great value.

Not only will having a captive audience bring you more closed deals more often, it will also position you as the only logical choice in the minds of your prospects and clients. It’s like becoming a big fish in a small pond instead of just being a small fish in a big ocean.

4. IT ALLOWS YOU TO GAIN REFERRALS FROM THE EMPLOYEES

You see, the potential for business is not limited just to the employee population itself – the benefits offered can also extend to the employees’ friends and family. Furthermore, studies show that the average person knows at least 250 people. That means if your company has 100 employees, by making their friends and family eligible for the same benefits, your marketplace just expanded to 25,000 people!

5. COMPANIES PROMOTE YOU TO THEIR EMPLOYEES

Once your program is approved, you can leverage the ‘Oprah Effect’ gained from having the company endorse you (either implicitly or explicitly) to all their employees. This gives you instant credibility and the corollary is more qualified mortgage leads who are presold on working with you before they even meet you.

6. EMPLOYEES ARE INCLINED TO REDEEM BENEFITS THEY’RE ENTITLED TO

Think about it for a moment. Have you ever been entitled to a ‘group discount’ at a hotel and not taken advantage of it?

If you’re a cheapo like me, chances are the answer is no.

Why? Because we tend to redeem benefits we’re entitled to.

The more exclusive the benefit, the more we’re inclined to take advantage of it. This proven, psychological trigger acts like a slippery slope with no razor wire, causing the employees to gravitate towards you instead of your competitors.

7. IT’S VERY LOW COST TO IMPLEMENT AND MAINTAIN

Sure, an upfront investment will be required to develop your marketing collateral. However, once that’s in place, the ongoing maintenance cost is relatively low. In fact, aside from marketing to your own database of past clients, I can’t think of a higher-leverage, lower-cost marketing method than corporate benefits marketing.

8. IT PROVIDES A RELIABLE ALTERNATIVE TO REAL ESTATE REFERRALS

One of the principles I teach my clients is to build stability through diversification. As marketing guru Dan Kennedy says, “The worst number in business is one.” One income source, one referral source, one lead source puts your business is a precarious position. It’s like sitting on a one-legged stool – you’re setting yourself up for a fall! The more you diversify your lead sources, the less you rely on one source, the more stable, consistent and reliable your income will be.

So there you have it. I’ve just given you eight compelling reasons why it pays to launch your own employee mortgage benefits program. So, is it worthwhile? I would have to say emphatically, yes.

Doren Aldana

Doren Aldana is considered by many to be Canada’s leading mortgage marketing coach and has won the “Best Industry Service Provider” award three years in a row at the 2012, 2013 and 2014 Canadian Mortgage Awards. He has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free copy of Doren’s new CD titled, “21 Secrets of Superstar Mortgage Brokers,” visit: www.SuperstarMortgageBroker.com

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FINANCIAL SERVICES 24

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HOME BUILDING DRIVING CONSTRUCTION INTO GROWTH

Aussie companies underrate digital risk

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ustralian companies continue to underrate potentially serious and costly risks such as cyber breaches, according to Aon’s 12th annual Australasian Risk Survey.

Aon surveyed 380 businesses operating in 15 industry sectors and asked companies to rank their top key business risks.

Local economic conditions and regulatory change ranked in the top three for all companies, however Jason Disborough, managing director global for Aon Risk Solutions Australia, said it worried him that companies continued to rank the threat of cyber risk at number 15 or lower.

“It was really surprising to see that some of the risks we would consider to be quite serious rank so low,” Disborough said.

He suggested the low ranking of cyber breaches could indicate a lack of awareness of the potentially serious consequences.

Disborough said that the recent experience of Target in the United States served as a powerful example of what can happen when the risk of cyber breaches is not adequately mitigated. In that case, nearly 40 million customer records were stolen, including sensitive debit and credit card details.

“And this is despite the fact that privacy laws in the US are far more advanced than they are in Australia. Our privacy laws have recently been strengthened, and it’s clear that we are moving towards a US-based model, but cyber risk remains a real concern.

“What worries me is the possibility that some companies may not see the link between cyber risk and brand damage, given that brand and image has for the last 12 years been consistently ranked in the top-five risk concerns for Australasian organisations across all industries and sizes,” Disborough explained.

Improvements in home building have helped to drive the national construction sector into growth territory for the first time this year.

The Australian Industry Group Performance of Construction Index was up 5.1 points to 51.8 in June. Any reading above 50 indicates an expansion in activity.

Home building grew 2.2 points to 56.6, while engineering construction rose to positive territory, up 16.3 points to 51.1. HIA economist Diwa Hopkins said the rise in housing construction represented the 10th-straight month of growth for the sector.

The construction sector closed off the financial year on a positive note by lifting back into growth following five slow months.

The housing sub-sector went from strength to strength, marking a 10th-straight month of expansion with an accelerated pace of increase in June.

The stars aligned for engineering construction with an unexpected lift in activity on the back of local government and infrastructure projects.

However, new orders in the engineering construction sub-sector continued to fall and, with the mining construction boom winding down, the outlook for this sub-sector is for ongoing weakness.

In contrast, and suggesting further rebalancing within the construction sector, new orders grew at a faster pace for both housing and apartment building.

a

SMSF STREETS AHEAD IN SATISFACTION Self-managed super continues to far outstrip other classes over superannuation in terms of customer satisfaction.

A new report from Roy Morgan shows self-managed super funds (SMSF) clearly led industry and retail funds in customer satisfaction.

In May, SMSF saw a 75.6% consumer satisfaction rating. Industry and retail funds trailed significantly, at 55.8% and 53.7% satisfaction, respectively.

Roy Morgan industry communications director Norman Morris said the financial sector should take notice of the high levels of satisfaction with SMSF. “It is worth noting that even when the larger balances held in self-managed funds are allowed for, their satisfaction remains higher than other funds. The majority of selfmanaged funds have balances over $250,000 and when satisfaction is compared to industry and retail fund members with balances over this amount they are still well ahead,” he said.

THINKTANK TOUTS CMBS DEAL

DID YOU KNOW?

3.44% *In spite of pushing online platforms, the banking sector is expected to increase its investment in branches 3.44% between 2014 and 2018 Source: Ovum

Thinktank has closed a $113.6m commercial mortgage backed securities transaction, and CEO Jonathan Street said the issue is significant for the broader industry as well as his company.

“It is a significant transaction for our business as well as for asset-backed issuance in the local market and has been achieved through the combined efforts over an extended period of a number of parties,” Street said.

The transaction is the first pure smallticket CMBS transaction in Australia since 2007. Deutsche Bank acted as arranger, while Commonwealth Bank and Deutsche Bank were joint lead managers “This transaction demonstrates the strength of the current market and the growing interest in asset classes outside residential mortgages ... We look forward to working with Thinktank to broaden its investor base in the future,” CBA head of debt markets securitisation, Rob Verlander, said.

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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, August 2013

Big four most profitable banks in the world Last year, a study by the Bank for International Settlements (BIS) showed Australia’s big four banks ranked most profitable in the world for the third year running. The major lenders made better returns than banks in 10 other developed nations, including the US, Britain and Europe – and total profits in 2013 year were expected to exceed $26 billion. BIS said pre-tax profits for the majors were equal to 1.18% of their total assets, putting Australian banks ahead of other wealthy countries on the list.

What’s happened since?

Not much has changed. This year’s study saw Australia’s majors take the crown of most profitable in the developed world for the fourth year running. Australia’s major banks saw a higher rise in pre-tax earnings as a share of their total assets than banks in 10 other developed countries. The majors also enjoyed wider net interest margins and lower costs. The Australian Bankers Association, of course, rejected the idea that these profits were excessive, instead saying they were indicative of the overall health of the economy.

SMSFs top growth industry

IBISWorld last year revealed that superannuation was expected to be the top growth industry in Australia over the next 12 months. “Superannuation funds top the list of growth industries with an impressive 40.5% rise anticipated in 2013-14, followed by iron ore mining, wind and other electricity generation, online shopping and internet publishing and broadcasting,” the company said.

What’s happened since?

Superannuation is again tipped to skyrocket. IBISWorld has forecast 10.5% growth for the sector for the year ahead. The good news is the business analyst also forecast strong growth for the mortgage industry. IBISWorld said it expected revenue in the mortgage industry to grow by 9.6% for 2014-15 on the back of growing residential housing demand, favourable lending conditions and declining interest rates.

brokernews.com.au

Mentoring vital for an ageing industry

M

entoring is increasingly vital for an ageing industry. As seasoned brokers exit the industry, young blood is needed to keep the industry at the cutting edge.

But what makes for a good mentor? The MFAA’s head of professional standards, Rod Edge, has told Australian Broker TV it’s a combination of factors.

“Certainly experience. We’ve seen that you need to be an experienced broker to become a good or even great mentor. But it’s not just experience. You’ve got to have passion. You’ve got to have energy.

Commitment I think is something a great mentor needs to have,” Edge said.

Commitment may be one of the most important factors for success in mentoring, because mentoring, Edge said, takes time.

“Mentoring is certainly not a coffee conversation once a month with your new entrant. Mentoring requires you to allocate a huge amount of time and requires you to take on a great deal of responsibility, because you are providing that journey for a new entrant to our industry. You’re providing that twoyear journey, and that two-year journey is going to provide them with everything they need to succeed,” Edge said.

If the challenge for mentors is finding the time and passion to invest in new entrants, what is the challenge for those being mentored? Toby Giordano, of Australian Credit and Finance, recently finished the MFAA’s two-year program, and said the biggest challenge is the lack of income when new brokers first start out.

“Before you actually get paid, you’ve got to find the client, broker the deal and you might not get paid for three or four months. Surviving in that early period until money started coming in was a big challenge,” he said.

Putting together home loan deals was also challenging, Giordano said, but it’s here that a mentor proved invaluable.

Giordano praised “the benefit of having a mentor there by my side to walk me through the process, especially for the first five or 10 deals”.

But before entering into a mentoring relationship, Edge said it is vital that both participants understand what the relationship is intended to accomplish.

“With mentoring, I think it’s critical to ensure both mentor and mentee have very clear goals and objectives in terms of what they’re going to establish and support each other through,” Edge said.

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

FORUM 27

brokernews.com.au

Brokers can help drive out spruikers Brokers answered the call to help drive unscrupulous spruikers from the property advice market

MFAA TAKES APRA TO TASK

The MFAA has criticised an APRA report labelling broker loans riskier than other channels.

“There is no doubt that NCCP compliance has had to have had a forced improvement on loan quality from both a presentation & credit perspective. Put simply a ‘Credit Adviser’ really doesn’t want to have to rewrite a loan more than once to get it over the line. To do that they tarnish their image with their client and duplicate workload.

Therefore the front end ‘research’ would appear to be much more thorough than pre NCCP days. Credit Advisers have to get it right the first time. Why would this be different in either selling channel?

If anything ‘sales’ targets under the proprietary channel could undermine credit quality? Need to qualify and quantify the info sources for the APRA draft document?

Perhaps Phil could follow that up for us before he leaves?”

MCC on 27/06/2014 at 5:00PM

HOMESIDE SIDELINED

NAB recently announced it would do away with its Homeside branding.

What do you think?

Leave your comments at brokernews.com.au

D

omaCom head of sales and marketing Warren Gibson recently called on the financial services sector – including financial planners, accountants and mortgage brokers – to get behind efforts to regulate the property investment industry. He has urged brokers to join one of the sector’s industry associations, PIAA (Property Investment Association of Australia) or PIPA (Property Investment Professionals of Australia).

Gibson’s call seemed to resonate with commenters on the Australian Broker Online forums.

Regional Broker said Gibson raised an important point, but stopped short of vowing to join another industry association.

“Aggregators and Brokerage groups really need to look at their relationships in this area. Will not have anything to do with the ‘spruiker’ element , I will not accept a referral from them , for me it is just too risky , still write a fair share without them. As to joining another profession body - probably not.”

Papery pointed out that some property spruikers resided in the mortgage broking industry.

“Many Spruikers are either Brokers themselves or employ Brokers & are pretty slick with the sales pitch when they suck the consumer in...& Conflicts of Interest are never discussed. Not sure how you can drive any one

been screaming for for a long time. And it took an ex-aggregator head to get the job done. Well done, Steve. Hope you can lead NAB into the new broker paradigm!”

Regional Broker on 25/06/2014 at 1:05PM “Good move. Hard to explain to a borrower who Homeside was then have documents turn up with NAB on them. This just makes it simple, so long as they keep the product suite broker exclusive and focused.”

The Senate inquiry into ASIC’s performance raised the question of whether ASIC adequately took on big companies.

Finally on 25/06/2014 at 9:31AM “Well done NAB for doing what many have

Lance on 30/06/2014 at 5:55PM “Nobody regulates the big-enders. They

ASIC PICKING ON SMALL OPERATORS?

out of an industry when they haven’t technically done anything wrong.”

SteveL said brokers could help mitigate the influence of spruikers themselves.

“One way to take control.

Always MAKE the contract subject to val coming in. Don’t go unconditional unless this is met.

There are plenty of providers that will do this for you if you push them.”

And Andrew Edwards said clients can be confused by the entire property-buying process.

“I would be more than happy to steer my clients to a reputable source such as the PIAA so they can do their own research. There is just so much confusion out there and the feedback I get from my clients is they feel real estate agents will tell them anything (fact or fiction) to get them to buy the property they have listed. As a mortgage broker I have to be extremely careful recommending anyone or any business because if it all falls in a heap we are held accountable.”

set the regulations. If a small operator was charged with the financial planning fiasco that the CBA was he or she would be jailed, but, no, the CBA just shakes off the dirt and goes on. How about taking their licence?”

Garry on 30/06/2014 at 7:27PM “This is simply proof that ASIC don’t have the guts to take the banks on. They would rather attack brokers and then beat their chest so people think they are doing what they are paid to do.”

PEOPLE 28

brokernews.com.au

‘Career banker’ seeks new challenge in shaping young guns An industry veteran takes on a new role mentoring young talent

A

manager has been hired to mentor new brokers at the only MFAA-approved training academy in Australia.

Loan Market’s Queensland Broker Academy has appointed Karen Laursen, who has nearly three decades’ experience in the finance industry, as its academy manager.

Laursen has been a “career banker” with majors such as Westpac and NAB for the past two decades but wanted a change.

“I ultimately needed to challenge myself and wanted to find a great company to work for – there aren’t that many of them out there actually – and Loan Market kept popping up,” she said.

In looking for a new challenge, Laursen said the Loan Market academy seemed a perfect fit.

“The academy manager is a rare and wonderful position and exactly what I wanted to do – to coach, train and mentor young and not-so-young new brokers.”

The broker academy was started in 2011 and Queensland is the only state to have its own dedicated facility for the broker academy.

The academy involves a two-year mentoring program that encompasses MFAA and all relevant industry accreditation, on-the-job training and business coaching.

Currently the academy has 25 ‘cadets’ at various parts of the program.

“It’s a wonderful model which provides new-to-industry brokers with the self-help knowledge which will give them drive and direction for the future,” Laursen said.

She was looking forward to being a “dedicated mentor” without administrative distractions.

Brokers who already hold their Certificate IV qualification spend one

to two years studying at the academy, depending on their knowledge level, before becoming freshly-minted Loan Market brokers.

“I believe it’s a wonderful opportunity to be involved in shaping minds and building skills so new brokers are confident in going out and being successful in their new chosen career,” Laursen said.

“I feel very lucky to be in this position and feel I have a lot of responsibility.”

MFAA professional standards head Rod Edge said mentoring can not only help new entrants to the industry, but can also be a benefit to seasoned brokers looking to expand their business.

“A high percentage of our members are using mentoring to bring on other loan writers. One experienced broker wanted to build his business by bringing on new loan writers, but didn’t have the time to do so without following an already-developed program. He did the course and was given all the materials and program on paper which cut down on time and made it easier for him,” Edge said.

Edge pointed to the MFAA’s certified mentoring program as a good framework for bringing new talent into the industry.

“The program is good as it makes sure new entrants are set up from day one, and ensures we have minimum standards within our industry.”

Karen Laursen

MOVERS AND SHAKERS DEBTOR FINANCE COMPANY APPOINTS INDUSTRY VET Scottish Pacific has appointed Greg Charlwood to run its FactorONE division. The division delivers cash flow solutions for smaller businesses and SMEs. Charlwood previously served as CEO of three other Australian factoring businesses, Orix, Bibby and Pacific Working Capital Solutions. He has also twice served as chairman for the Institute for Factors and Discounters of Australia and New Zealand.

“Greg is well respected in debtor finance and his high-calibre skills will help drive the growth of FactorONE and also enhance Scottish Pacific’s national executive team,” Scottish Pacific CEO Peter Langham said.

NON-BANK TOUTS NEW HIRES AS PART OF EXPANSION PUSH Homeloans Ltd has appointed two new BDMs Natalie Sheehan in Victoria and Janelle Packman in Queensland. The lender said the appointments were in line with its push to grow new business.

“We’re intent on capitalising on the opportunities within the third party mortgage market – and providing strong support to our brokers is crucial to achieve this. We already have a strong, dynamic

BDM team and we continue to bolster our team to partner with brokers and help drive growth. We see that there’s more growth to come, so are further strengthening our support structure to leverage this,” Homeloans general manager of sales, Ray Hair, said.

Both new BDMs have extensive experience in the banking and finance industry, Homeloans said.

Sheehan has qualifications in accounting, banking and finance and law as well as practical experience in non-conforming, specialist and prime lending.

“I’m passionate about the mortgage broking industry and third party distribution and am looking forward to the opportunity of building strong, sustainable relationships with Homeloans’ business partners,” Sheehan said.

“I have been on both sides of the fence – both in credit and as a broker myself, so I have a good understanding of what is required from a BDM’s and broker’s perspective,” Packman said.

brokernews.com.au

IN FOCUS

A

ggregator heads recently gathered to take part in an MPA panel discussion about the state of the aggregation industry, what they’re doing for brokers and the changing demands of mortgage professionals. Keep an eye out for the video series coming from MPA.

CAUGHT ON CAMERA 29

INSIDER 30

brokernews.com.au

That’s me in the corner A US company is in hot water after allegedly forcing employees to join its religion

Y

ou might be grateful to have your job, indeed you might think yourself blessed and want to thank a heavenly being that you are gainfully employed.

But if you were forced to thank God for having a job in public in order to retain that job, you might not feel quite so happy about it.

This is one of the charges that three New York insurance company workers are bringing against their employer, United Health Programs of America, and its parent company, Cost Containment Group, according to Newsday.

The Long Island healthcare firm is under fire for allegedly forcing employees to join prayer circles, thank God for having jobs and say ‘I love you’ to co-workers and managers.

The US Equal Employment Opportunity Commission (EEOC) filed a discrimination lawsuit against the company, alleging it required employees to practise a belief system called ‘Harnessing Happiness’ or ‘Onionhead’. It includes praying, discussing personal matters with colleagues and reading spiritual texts.

The commission says employees of the Syosset-based firm who objected were disciplined or terminated.

Elizabeth Ontaneda, Francine Pennisi and Faith Pabon allegedly had been demoted and later let go for refusing to attend meetings to discuss divine paths and moral codes.

Staffers were also required to wear ‘Onionhead’ buttons to work, read spiritual texts, keep a dim lighting in the office and burn candles, the lawsuit claimed.

STAFFERS WERE ALSO REQUIRED TO WEAR ‘ONIONHEAD’ BUTTONS TO WORK, READ SPIRITUAL TEXTS, KEEP A DIM LIGHTING IN THE OFFICE AND BURN CANDLES ‘Onionhead’ was created by a relative of the company owners, according to court filings. The EEOC stated the New-Age religious practises have been in place since 2007.

“While religious or spiritual practices may indeed provide comfort and community

to many people, it is critical to be aware that federal law prohibits employers from coercing employees to take part in them,” Sunu Chandy, senior trial attorney for the EEOC, told Newsday.

The Harnessing Happiness Foundation describes ‘Onionhead’ as a belief system that was created two decades ago by a mother and daughter to guide people to more harmonious and successful lives.

The EEOC is asking a judge to stop the practises and ensure employees receive back pay and other compensation.

The United Health Programs of America has denied the allegations laid out in the federal lawsuit, deeming them without merit.

DIRECTORY BANK

ANZ 13 13 14 www.anz.com.au Page 5

FINANCE

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

LENDER

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 15 ING DIRECT 1300 656 226 introducer.ingdirect.com.au Page 7 La Trobe Financial Services 1800 707 707 latrobefinancial.com.au Page 11 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 8

SHORT-TERM LENDER

Boleyn Capital 1300 765 534 www.boleyncapital.com.au Page 4 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 9

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

OTHER SERVICES

Deposit Power 1800 678 979 www.depositpower.com.au Page 6 Moneywise Global 1300 360 517 enquiries@moneywiseglobal.com Page 10 Queensland Mortgage Advisory Service 50 Water Street, Spring Hill Qld 4000 07 3105 9690 www.qmas.com.au info@qmas.com.au Page 13 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!

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