Australian Broker 11.20

OCTOBER 2014 ISSUE 11.20

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS DOES VERTICAL INTEGRATION MATTER?

Banks want a hand in the broker space.

Is competition under threat?

P10

+ ANALYSIS COOLING A HOT MARKET

The RBA is hinting that it could take bold steps to cool the housing market P12

+ BEST PRACTICE ATTRACTING CLIENTS WITH LESS EFFORT

How to maximise your marketing P14

Glenn Gibson:

A FOOT IN THE DOOR

AMP Bank’s head of sales and marketing says finding a niche is important, but isn’t enough for non-majors

N

on-major banks have made their fair share of noise in the market over the last year, but the market is tough for lenders when the four majors consistently own 75% of the home loan flows. No one knows this better than AMP Bank’s Glenn Gibson. Gibson, the bank’s head of sales and marketing, says non-majors have to be competitive across the board in order to stand toe to toe with the majors.

FULL STORY PAGE 18

+ OPINION HELP FOR LONG-TERM HARDSHIP

John Dickinson on a long-term view towards helping clients P16

+ MARKET TALK SMSF BEST PRACTICE

Valuing property held in SMSFs P21

NEWS 2

brokernews.com.au

NUMBER CRUNCHING

HOUSE PRICES LEVEL OFF

CUSTOMERS BANKING ON NEW TECH Bank customers intending to purchase an iPhone within the next 12 months

DARWIN

COMBINED CAPITALS

-1.0% / 7.1%

BRISBANE

0.1% / 9.3%

0.7% / 6.4%

FAST FACT 0.8% / 14.3%

8.3%

CANBERRA

ADELAIDE

-0.5% / 1.7%

0.9% / 5.8%

Source: NAB

BENDIGO BANK

9.8%

ANZ

9.7%

PERTH

-0.4% / 3.2%

HOBART

MELBOURNE -0.8% / 8.1%

NAB

8.1%

CBA

7.9%

20%

7.1%

BANKWEST

One in five Australians say they don’t have any financial goals and find it hard to get by day by day

5.4%

BOQ ST.GEORGE

YEARLY CHANGE

8.8%

WESTPAC

-0.3% / 4.6%

MONTHLY CHANGE (SEPTEMBER)

DID YOU KNOW?

9.1%

SUNCORP

SYDNEY

Year-on-year growth for online retail sales in August

14.1%

ING DIRECT

5.2%

AUSTRALIAN AVERAGE

8.0%

Source: RP Data

Source: Roy Morgan Research

Source: Veda

WHAT THEY SAID...

JUSTIN DOOBOV

“You will often find that what the client initially wanted is not the type of product that their broker would end up getting them, because it isn’t the right product for them in the long term” P8

MICHAEL RUSSELL

“The perception that bank ownership distorts a broker’s recommendations often arises when the bank on the register of the head group elects to pay a higher level of commission, or lowers their aggregation fees, as an inducement for business” P10

JOHN SYMOND

MICHAEL YARDNEY

“I’m concerned that what the “There are still opportunities Reserve Bank is suggesting in the Melbourne market. is fraught with danger, and It has a few more years it may well have unintended to run yet” P20 consequences that will hurt first home buyers and other sectors playing the housing market” P12

NEWS 4

brokernews.com.au brokernews.com.au

CBA says commission shake-up rewards loyalty ■ Commonwealth Bank recently announced it would

Glenn Mitchell

VOW TAPS EX-PLAN STALWART

implement a new commission structure from 1 January 2015 that would see it pay 15bps year-one trail for all new settlements. The bank said it was also in discussion with broker head groups on a ramped trail structure, and full details would be announced once an agreement had been reached.

The bank’s executive general manager of retail products and third party banking, Lyn Cobley, said the commission changes rewarded brokers loyal to the bank.

“We are very excited to reward brokers for their efforts and loyalty to the Commonwealth Bank,” she said.

Before the first-year trail changes come into effect, the bank will begin paying an extra 10bps of upfront commission for loans settled from 1 October to 31 December 2014.

Cobley said the bank recognised the third party as a vital channel for distribution. “We recognise mortgage brokers are an important part of the bank’s home loan distribution strategy, and they assist in meeting our customers’ financial needs. We are pleased to support this channel so we can continue to help more Australians buy their own home than any other bank,” she said.

Banks have been jockeying for position in the broker market of late, with several others announcing commission changes.

NAB reintroduced year-one trail earlier this year, while Westpac, Bankwest, AMP and ME Bank have all announced commission incentives as well.

ASIC takes majors to task on advertising

■ Vow Financial has snapped up

an ex-PLAN Australia manager to fill the newly created position of head of commercial and leasing.

The aggregator hired Glenn Mitchell, an associate of the MFAA who has been involved in the mortgage and finance industry for over 30 years.

Mitchell served on the MFAA council for over 12 years, and in his previous role at PLAN Australia he set up its commercial operations.

Mitchell said the commercial space was his passion and that he saw plenty of potential in the Vow brokers.

“Being part of a dynamic, fast-growing organisation like Vow Financial allows me to facilitate my passion by helping brokers set up commercial lending into their practice. Vow has a fantastic service proposition and I’m excited by the opportunity before me and believe there is plenty of potential within the Vow broker group,” he said.

■ ASIC has slapped two major banks on

DID YOU KNOW?

98.1 The Genworth Homebuyer Confidence Index rose to 98.1 in September, up 7.3 from 90.8 in March Source: Genworth

the wrist over misleading advertising.

The regulator has announced that both NAB and Westpac have paid infringement notices for potentially misleading statements in their advertising. ASIC alleged that NAB had made misleading representations in a home loan campaign for its UBank arm.

The UBank home loan ads appeared in newspapers, on the radio and online, as well as on digital screens on escalators.

ASIC expressed concern that certain details were not disclosed in a “clear and prominent manner”.

Meanwhile, ASIC took Westpac to task over product disclosure statements for its Westpac Annuity Deposit product. ASIC said the statements represented the interest rate for the product as being calculated on the principal amount invested, when in reality the rate only applied to the balance of the principal.

EDITOR Adam Smith PUBLISHER Simon Kerslake COPY & FEATURES JOURNALIST Julia Corderoy PRODUCTION EDITORS Roslyn Meredith, Moira Daniels ART & PRODUCTION DESIGN MANAGER Daniel Williams DESIGNER 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 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 8011 4992 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

brokernews.com.au

6

Mortgage House touts new broker portal ■ Mortgage House has announced a new upgrade that it says will make the loan

WORLD NEWS UNITED STATES OF AMERICA

AMERICAN BROKER HEAD VOWS ACTION The incoming president of the United States’ national broker association has pledged to do more to further the cause of the industry and help brokers’ livelihood.

John Councilman was sworn in as president of the American National Association of Mortgage Professionals (NAMB) at the association’s National Conference at the Luxor Hotel in Las Vegas last month.

Councilman said he would work to lobby on behalf of mortgage professionals to ensure they were secure from further regulatory imposts.

“There’s nothing wrong with making a living right now. The problem is, am I going to be hit with a buyback? Do I have compliance that I can’t possibly comply with? What is my future? We’re going to be working to make sure that your future is secure,” he said.

While Councilman said he would work to advance the cause of the industry, he called on mortgage professionals to do their part as well.

“We need to grow membership. You really need to be a member and be counted. And go out and do one other thing, and that is to tell somebody else they really need to be a member of NAMB. That is going to help us accomplish what I’ve set out here,” he said.

process easier for brokers.

Mortgage House CEO Ken Sayer said their mortgage software had been upgraded to allow a broker to access everything instantly and ‘on the go’ from any smartphone or tablet device.

“For example, if a broker is negotiating with the bank and they want to look up a document, they can go into the document portal and look at the group certificate and payslips on the go.

What is even better than that is if a customer has sent something indirect, they can also view that online instantly on their phone or tablet. It is the entire loan origination platform in the palm of their hands,” Sayer said.

Sayer said the upgrades were driven by the lender’s commitment to investing in innovative technology for its brokers.

“We love technology at Mortgage House. This is going to enable brokers to get real-time updates on their loans, and manage their clients on the go.

Everything will be at their Ken Sayer fingertips,” he said.

SMEs need brokers ■ A specialist non-bank lender says brokers are a crucial platform FAST FACT

4.6% September’s decline in consumer confidence Source: Westpac/ Melbourne Institute

for their business, but that since new research has revealed that a majority of Aussie SMEs are saying the availability and conditions of credit are hindering their growth potential, the broker platform has become even more crucial.

The Scottish Pacific SME Growth Index revealed that 62.6% of Aussie SMEs said they were expecting an increase in revenue over the next six months. But at the same time 61.2% said they found credit conditions a barrier to growth, while 51% said credit availability was a hindrance.

Peter Langham, chief executive at Scottish Pacific, said the index emphasised the uphill battle many SMEs faced in executing their growth plans.

“The research clearly shows that a majority of SMEs are in growth mode, and have plans to introduce new products and services. But many SMEs seem unaware of the funding options – such as asset-based lending, including debtor finance and trade finance – that are available beyond the traditional secured overdraft.”

Langham is now urging brokers to educate small business owners on their other options.

NEWS

brokernews.com.au

8

First home buyers saving longer ■ Rising property prices mean that first

Justin Doobov

BIDDING SITE NOT WINNING BROKER FANS

home buyers are having to scrimp and save for longer; however, they have also made them savvier when they finally do buy.

According to Mortgage Choice’s latest First Homeowner survey, one in four first home buyers said they had to save for “more than five years” before buying their first property. By comparison, research conducted by Mortgage Choice in 2011 found that first home buyers “saved for less than two years” before entering the property market.

Mortgage Choice spokesperson Jessica Darnbrough said surging house prices had also affected where they were buying their first homes.

“The First Homeowner survey found almost 40% of first-time buyers couldn’t purchase exactly where they wanted to. Of those buyers, 88.2% said it was the rising property prices that had stopped them from purchasing in their ideal area,” she said.

■ A new mortgage website launched this week – which

sees banks and brokers ‘bid’ against each other to win mortgage business straight from the consumer – isn’t gaining support from the broker community.

The site, flongle, boasts that it can offer a consumer a larger range and fairer deal than going to a broker or going direct to a bank, because it is not affiliated with any lender or mortgage broker and it doesn’t work on commission.

Justin Doobov, managing director of Intelligent Finance, said the site might be relying too much on consumers knowing what they want or need in a loan, which often isn’t the case.

“The majority of clients who walk through the door might want certain features and functionality or the cheapest rate, but by the time you sit down and nut out what their situation and goals are now and how their situation and goals may change in the future, then everything changes.

You will often find that what the client initially wanted is not the type of product that their broker would end up getting them, because it isn’t the right product for them in the long term.”

Doobov is also concerned about the quality of the ‘bidders’ on the site, who can compete for loans for free.

“I think that it is going to attract brokers that are more inexperienced, can’t generate leads or haven’t built relationships, which can potentially give the consumer a bad experience with brokers and damage the reputation of the industry.”

Low-doc lenders tightening criteria ■ An ASIC review of low-doc home loans has found that

BY THE NUMBERS

< 25% 36.9% of firsttime buyers said their mortgage repayments accounted for less than 25% of their after tax income Source: Mortgage Choice

lenders have tightened their lending practices following the introduction of responsible lending laws.

ASIC deputy chairman Peter Kell said, “ASIC, along with other regulators, has a strong interest in home lending practices. Our review shows lenders have lifted their game since the introduction of responsible lending laws.”

ASIC said its review of 12 lenders saw that they had taken steps to reel in their low-doc practices. The watchdog found that lenders were providing ‘low doc’ loans to a narrower range of borrowers; obtaining additional information to verify income; and had additional processes in place to confirm the reliability of information provided by mortgage brokers.

Kell said that, despite the strength and competition in the market, lenders should not slip back into old habits.

“Compliance with responsible lending laws is a key focus for ASIC, and we will take appropriate enforcement action where conduct falls short.”

ANALYSIS

brokernews.com.au

10

Who cares about vertical integration?

As banks increasingly try to own distribution channels, the market is taking notice of lenders’ growing stake in broker networks

B

DID YOU KNOW?

40% Banks have doubled their ownership of mortgage brokers to about 40% in the past two years Source: Fairfax

rokers have long raised the alarm over bank ownership of broker networks. While many brokers seem to feel the ownership structure of their aggregator or franchise group has little sway over the day-to-day operations of their business, the fact remains that the mortgage broking industry is one founded on the philosophy of fierce independence.

As banks snap up aggregators and franchise networks, some brokers have decried the erosion of this independent spirit. But brokers have tended to be the lone voices on the issue until recently.

A recent Fairfax report claimed that banks have doubled their stake in broker networks over the past two years. The statistic was cause for alarm for Mark Degotardi, chief executive of Customer Owned Banking Association. Degotardi told Fairfax the increasing lender encroachment into the third party space had troubling implications for brokers.

“There is already too much vertical integration in wealth management and in mortgage broking. If the biggest lenders own broking firms that employ nearly half the brokers in the market, we have a problem. There is an obvious conflict of interest,” he told Fairfax.

NOTHING TO WORRY ABOUT?

Not everyone agrees with the assessment, though. Mortgage Choice chief executive Michael Russell recently hosed down concerns that bank ownership of aggregators or

franchises distorts mortgage brokers’ lender recommendations, claiming there is “far too much misreporting on this issue”.

“While it is true that a number of bank and non-bank lenders do have a stake in several aggregators and franchisors, in most cases they do not own the individual broker businesses that operate under these head groups.

These individual broker businesses take great pride in always acting in the best interests of their clients, irrespective of who owns their aggregator or franchisor,” he said.

Russell maintains that the reason this issue keeps rearing its head has nothing to do with any alleged cases of broker bias anyway, only a ‘perception’ of bias.

“The perception that bank ownership distorts a broker’s recommendations often arises when the bank on the register of the head group elects to pay a higher level of commission, or lowers their aggregation fees, as an inducement for business. While this practice does not guarantee brokers will send more business to that particular bank, especially given the value brokers place on their professional advice, it does place them in a perceived conflict.”

Although, Russell says Mortgage Choice, which is partly owned by the Commonwealth Bank, has taken deliberate steps to ensure that they don’t come in the firing line.

“While the Commonwealth Bank of Australia has a 17% stake in Mortgage

Choice, we believe the only choice that matters is the one that is right for the customer and that is why our brokers are paid the same rate of commission no matter which home loan the customer chooses, as long as it is a residential home loan with one of the 28 lenders on our panel,” he said.

Homeloans Ltd national sales manager Ray Hair also claimed there is little cause for alarm.

“Lender ownership of aggregators provides the opportunity for improved relationships, service efficiencies and some influence, but it does not guarantee broker support. Mortgage brokers consider product, price and service when providing credit advice to customers. Relationships and commission are obviously important, but they are secondary to the provision of good advice and service.”

THE EROSION OF INDEPENDENCE?

Sally Hillman, business development manager at St.George Bank said bank ownership of aggregators is now more transparent than in the past.

“I have found that everything is more out in the open now in regards to who has a share in who or who owns who, so I don’t think it poses any major implications for the industry as people can make informed decisions.”

But this doesn’t mean brokers are entirely comfortable with the structure either, Hillman suggested.

“However, I still think the overarching ownership question can still play on a broker’s mind. I have often had brokers ask me about aggregators because they know that we don’t have a share in any aggregator. I have also had brokers who have been hesitant about some aggregators because they know that they are partially or fully owned by one of the big banks.”

Tanya Sale, CEO of Outsource Financial, is very clear about her opinion of bank ownership. Sale is a fierce supporter of keeping aggregators independent. In fact, she has stated that bank ownership of aggregators is one of the biggest issues in the industry.

“Broking evolved for a reason. It evolved to give the consumer a level playing field in relation to providing them a choice – and not just with the main four [banks],” she said.

While most brokers would argue that aggregator ownership does not impinge upon their individual business model, Sale said it often comes down to perception. And as banks increase their share in the third party, the perception could be that independence has become a thing of the past.

“Over 50% of mortgages in Australia are done through a mortgage broker and this [vertical integration] muddies the waters in relation to independence, choice and competition.”

ANALYSIS

brokernews.com.au

12

The RBA’s blunt instruments Overseas pundits have urged the Reserve Bank to use macroprudential tools to cool the housing market. Domestic commentators say it would be disastrous

W

hile consumer sentiment has remained fairly weak and dour economic news seems to abound, it appears no one has told homebuyers. The housing market has been seriously hot of late, and in spite of flattening out in September home values in Sydney and Melbourne in particular have seen meteoric rises. All this has led overseas commentators to warn that Australian housing is getting out of control.

The International Monetary Fund recently urged the Reserve Bank to think about applying LVR speed limits to cool the housing market and ease affordability pressures.

“We believe that the central banks have now the macroprudential tools to deal with such developments, and some of them are using them, some of them are increasing or varying the loan-to-income or loan-to-value ratios, for instance, in the housing market, which is one where we have seen clear volatility lately,” IMF director Christine Lagarde told the ABC. Lagarde isn’t alone in her assessment of housing volatility. The Swiss-based Bank for International Settlements recently rated Australia’s housing market as the second most expensive market in the world in terms of price to income ratio, which it said could lead to a price correction in the future. Closer to home, former Treasurer Peter Costello warned that eventual global interest rate rises could see Australian homeowners thrust into hardship.

“It could still be a good time for property if things revert to normal. But there could be a fair bit of hardship before we get there,” said Costello.

RBA LOOKING NERVOUS

The Reserve Bank is not deaf to these concerns. The Bank also seems nervous about the growth of the Australian housing market.

The RBA recently expressed concern over the composition of the mortgage market – with demand being much higher in Sydney and Melbourne than other capital cities, and demand for investor lending outpacing owner-occupiers.

“Lending growth is varied across geographical markets and individual lenders, which may suggest a build-up in loan concentrations and therefore correlated risks within the banking industry. The Reserve Bank’s assessment is that the risk from the current strength in housing markets is more likely to be to future household spending than to lenders’ balance sheets.”

The Reserve Bank has claimed the Australian housing and mortgage market is becoming “unbalanced” due to investor demand being out of proportion to rental demand.

In its latest half-yearly Financial Stability Review, the Central Bank says the low

interest rate environment coupled with strong house price growth – particularly in Sydney and Melbourne – is the reason behind the surging popularity in property investment.

But with investor lending growing noticeably more so than lending for owneroccupiers or businesses, the Bank is concerned about the risks this “unbalance” may have on the economy – as they worry investors may be buying up property in the hope of capital gains over rental income.

The Bank also raised concern over the risks to financial institutions if the high rates of lending growth persist, highlighting the argument for reviewing – and possibly raising – the current lending standards.

“In this environment, recent measures announced by the Australian Prudential Regulation Authority (APRA) should promote stronger risk management practices by lenders. The Bank is discussing with APRA, and other members of the Council of Financial Regulators, additional steps that might be taken to reinforce sound lending practices, particularly for lending to investors,” the RBA said.

BEATING EXPECTATIONS 32.8% of houses and 37.2% of units selling for more than their listed price

HOUSE

32.8%

UNIT

37.2% Source: RP Data

LENDING CAPS ‘RIDICULOUS’

But not everyone is convinced the danger is real, nor that it warrants drastic action.

Aussie Home Loans chief John Symond has told the ABC that enforcing tougher lending criteria is “ridiculous”.

“I’m concerned that what the Reserve Bank is suggesting is fraught with danger and it may well have unintended consequences that will hurt first home buyers and other sectors playing the housing market,” he told the ABC. Moreover, property lobbies have claimed that LVR speed limits could lead to “perverse” outcomes for the housing market.

“Arbitrarily increasing lending measures runs the risk of shutting more first home owners out of the property market. Macroprudential controls should only be introduced where there is systemic risk. The RBA needs to be careful if changing borrowing practices applied to fix presumed problems in pricing in some localised mainland centres which may have an adverse impact on cities such as Hobart, Adelaide, Canberra and regional Australia,” executive director of the Residential Development Council Nick Proud said.

Proud said that housing lending in Australia is already managed prudently by the banking sector, and that public concern about rising house prices is at odds with the facts.

“With the public debate around housing price increases being somewhat disjointed from the facts as presented by the RBA, there is an emerging need for better national metrics about housing activity which is one of the nation’s most critical industries. There is a need for a repository of national residential development metrics data to be at hand to benefit long-term national fiscal and monetary policy decisions that relate to all housing users including renters, first home owners, owner occupiers, seniors, and investors both domestic and foreign,” he said.

BEST PRACTICE 14

brokernews.com.au

Five steps to attract more and better clients with less effort Marketing expert Clifton Warren on how you can focus your marketing activities

H

ave your previous marketing efforts been filled with good intentions but delivered little tangible results? I know from speaking to other professionals that finding, attracting and acquiring new business is still one of the toughest challenges.

Even experienced professionals who’ve grown their businesses organically (via referrals, word of mouth and personal contacts) are finding new business development difficult in today’s competitive market. Buyers are better informed and have a variety of channels and ways to purchase the products and services you offer. However, doing nothing is no longer an option.

I’d like to show you a simple five-step process that anyone can follow to attract more and better clients with less effort.

It comprises the following steps: • • • • •

Focus on a niche market Create a target list Create a buzz piece Employ high-impact prospecting Automate your follow-up process

If you work on only one step a week, in just a few weeks you’ll have a marketing system in place to help you attract more clients with less effort. Let’s explore each step of the process in more detail.

STEP 1: FOCUS ON A NICHE MARKET

Focusing on a market niche is one of the most important strategic decisions you can make for the growth of your business.

Research done by successful top producers shows that focusing offers several advantages: specialty/niche business is more profitable, easier to retain and obtain leads for, and provides a stream of new business through referrals.

The first step to finding an ideal market is to become very clear about the type of client (or clients) that are best suited to your business. Once you know what you are looking for, everything else will fall into place.

There is no magic formula for finding your ideal markets, so begin with the markets that you’re currently serving, and ask yourself these questions: • What are the markets of your best clients?

• Is this a good fit for you and your business?

• Is this of interest to you and your staff?

• Do you have strong non-client referral sources?

STEP 2: CREATE A TARGET LIST

Create a target list of prospects that fit your ideal client profile.

When building your list, quality always trumps quantity.

You are much better off with 50 good names that you’ve sourced than randomly compiling a list of 10,000 names.

Three ways to create a target list: • Your existing network • Previous employers • LinkedIn

STEP 3: CREATE A BUZZ PIECE THAT FOCUSES ON YOUR PROSPECTS’ PROBLEMS AND CHALLENGES

A buzz piece is an effective tool that can act as a magnet to draw high prospective clients to your business. It’s also referred to as a guide or special report but can be created in a variety of formats, including: • Checklist • How-to guides • List of tips

A good buzz piece is typically published in an electronic or print format. It can make every aspect of the marketing and promotion of your services easier by wetting your prospects’ appetite for the kinds of services you provide. They will want to learn more about who you are and what you do. Visit www.corporateeye.com.au/subscribe/ to see an example of a buzz piece.

STEP 4: EMPLOY HIGH-IMPACT PROSPECTING TACTICS

You can’t acquire a client until you have a lead. Prospecting is not just about generating the most leads possible; it’s also about quality.

There is no single method or combination of prospecting tactics that is ideal for all professionals; many top professionals employ one or more of the following tactics: • Tapping your personal network Let family, friends and acquaintances know about what you do and the types of value that you provide for your clients – and ask for referrals and introductions.

• Warm email prospecting Send personalised emails with a customised message, using your bait piece to draw prospects to you.

• Networking Join organisations of your target niche markets, and offer to send prospective clients your free special report.

• Website Create a website that can be used to get prospects to request your free special report and to opt into your mailing list so you can continue to build a relationship with them.

STEP 5: AUTOMATE YOUR FOLLOW-UP PROCESS

It can take some time before a prospect is converted to a client.

You need to stay on their radar and remind them of your value, using a variety of methods.

It’s easy to get busy servicing existing clients and forget to follow up prospective clients who’ve shown an interest in your services but are not yet ready to do business with you.

You can automate your follow-up process to allow you to send additional communications such as newsletters and follow-up email messages in a timely manner.

SUMMARY

It may appear that building a marketing system is complex, but it really isn’t. In fact, if you work to implement one of these steps each week, in as little as three to four weeks you can have a marketing system in place that’s probably doing a lot more for you than what you have currently. The marketing process I’ve outlined works very well for many top professionals, and I truly think it will work well for you too.

A successful sales professional in the financial services arena, Clifton is the principal of Corporate Eye Consulting. He helps professionals target and attract more and better clients with less effort. Clifton be contacted at +613 9833 3411 or clifton@corporateeye.com.au.

OPINION 16

brokernews.com.au

Credit providers need to help with long-term financial hardship John Dickinson of Just Budget argues that credit providers need a policy in place to help clients in the long run

L

et’s face it, no credit provider wants to learn that their client is struggling and is unable to pay back a loan at the required level.

Creditors are faced with this situation every day and we find that while some approach these matters commercially and with the borrower’s interests in mind, many are still taking a hard line, often to their own detriment.

There is legislation related to financial hardship that creditors must comply with, and among the most relevant is the National Consumer Credit Protection (NCCP) Act. This legislation states that a debtor who is unable to meet their obligations under a contract due to illness, unemployment or other reasonable cause may apply for a change to the terms of the contract.

An application by a debtor must seek to change the terms of the contract in one of the following ways: (a) Extending the period of the contract and reducing the amount of each payment due under the contract accordingly (without a change being made to the annual percentage rate or rates); (b) Postponing during a specified period the dates on which payments are due under the contract (without a change being made to the annual percentage rate or rates); (c) Extending the period of the contract and postponing during a specified period the dates on which payments are due under the contract (without a change being made to the annual percentage rate or rates).

The NCCP does not state that relief in cases of financial hardship can only to be provided over a limited period. This is interesting as many credit providers still hold this view.

Another relevant code that covers financial hardship is the Banking Code of Practice. This is a voluntary scheme; however, once a credit provider has subscribed to it, they are under an obligation to comply with its principles. Most major lenders subscribe to this code, which states: With your agreement and co-operation, we will try to help you overcome your financial difficulties with any credit facility you have with us. We could, for example, work with you to develop a repayment plan.

The Banking Code of Practice does not limit the time in which financial assistance

is to be offered. It is clear that the intention of this code is for a credit provider to offer assistance that is consistent with a borrower’s financial situation, and not just to apply a blanket short-term solution that in many cases does not take the borrower’s financial circumstances into account.

UNFORTUNATELY, MANY CREDITORS HAVE NO CLEAR INTERNAL POLICIES FOR DEALING WITH CASES OF LONG-TERM FINANCIAL HARDSHIP The Credit and Financial Ombudsman Services also have strong views on hardship, as do ASIC and the ACCC. However, much of the information published by these bodies is more of an expectation or guideline than actual policy and is therefore subject to interpretation. As a result, there can be confusion and misunderstanding by some creditors in regard to what their obligations actually are with respect to offering financial hardship assistance.

The period of time in which assistance is offered can also be a problem for borrowers.

Generally speaking, credit providers look at offering assistance over a relatively short period of time, typically 90 days. While such

a solution can help people who are experiencing a temporary restriction of cash flow, this doesn’t help those who need financial assistance over a longer period.

Unfortunately, many creditors have no clear internal polices for dealing with cases of long-term financial hardship. It’s common for a creditor to offer a borrower a short-term solution to what is a long-term problem and then pass the debt on to their collections area or even a mercantile agent when the borrower is unable to continue with regular payments. These situations have the potential to push borrowers into exploring insolvency options such as a ‘Part IX’.

While insolvency may be appropriate for some, there is no doubt that many people are forced into this option unnecessarily.

The good news is that some credit providers are becoming aware of this and have formed new divisions to handle cases of longer-term financial hardship. These credit providers understand that if they work with their clients in a positive and productive way they are far more likely to not only effectively help their clients but also recover what they are owed.

We find that most people who are suffering long-term financial hardship want to pay what they owe; they just need a little help and understanding to do so.

Credit providers who take a more flexible approach to financial hardship and offer longer-term solutions are leading the way to positive change within the industry, which ultimately will help them as well as their clients.

NEWS 18

brokernews.com.au

CONTINUED FROM PAGE 1

Glenn Gibson:

A FOOT IN THE DOOR AMP Bank’s head of sales and marketing says finding a niche is important, but isn’t enough for non-majors

A

MP Bank has carved itself out a variety of niches in the market, Gibson says.

He says the lender’s roots as a financial planning institution give it a natural space in which to reside.

“As AMP is the largest administrator of self-managed super funds, we bring a lot of knowledge not just on the lending side but on the administration side as well. Broker education is something we’re very keen on in the self-managed super fund space. That’s probably our leading niche,” Gibson says.

In addition to self-managed super, Gibson says investors and investment loans form a niche for AMP Bank. And SMSF and investment neatly come together to form what he sees as the bank’s third natural area of expertise.

“Where that all dovetails together very nicely is in self-employed and complex deals. While it’s challenging to process complex deals very quickly, because we started as a bank for financial planners you can imagine the level of complex deals submitted through them. Our credit team have to be highly skilled and be able to understand those complex deals. We have the skill sets in our team that are very focused on complex deals,” Gibson says. “When you put that all together, it’s a nice little niche. It is a difficult one, though, because from a lender’s perspective it’s a costly niche to have in regard to processing costs, but that fits with our brand.”

But just settling into a niche market isn’t enough for non-majors, Gibson says. The difficult position non-majors find themselves in, he argues, is having to carve out a niche market while also competing across a more general range of products and services.

“You need to have a niche, and you need to be able to compete. You use that niche to get your foot in the door, but that foot in the door is for a small percentage of your business. Then you need to be able to go toe to toe [with the majors], whether it be on product, on pricing or on service. We’re looking forward to 2015, because some of the enhancements we’ve done this year to be able to compete will fall into place,” he says.

NEWS brokernews.com.au

RAISING THE PROFILE

Gibson says the bank is working hard to raise its profile as more than a superannuation administrator. While brand awareness is strong, he says consumers often don’t equate the brand with retail banking.

“We’ve been spending probably the last four years trying to establish what we are and who we are. Everyone knows AMP, but not everyone knows that AMP has a bank. There’s been a lot of foot-soldiering from our BDM team in particular. We’ve done well raising our profile in the broker and planner space. The larger challenge is the consumer perception. Consumers know AMP for superannuation and for SMSF, but they don’t know us for banking,” Gibson says.

To this end, Gibson says the bank has invested in educating consumers on its proposition.

“You may have seen this year that AMP was a sponsor for The Block. That was to highlight that AMP knows property, and that certainly fits in with the bank.”

And the investment the bank is making isn’t just in its appeal to consumers. Gibson says AMP is also working towards raising its profile among brokers.

“We actually had more funds spent this year on AMP Bank than we have in the last several number of years combined. I’m out a lot talking to brokers, finding out what they like and what they don’t like. As a result, we have the Visa Debit that we brought to the market, we have the mobile app that includes banking and superannuation, and we had the pay tags, which are the stickers you use like Pay Wave. Probably the biggest initiative is that we released the first stage of our new mortgage origination platform,” he says.

THE PROBLEM OF POPULARITY

One of the issues that can come from raising brand awareness and profile is a problematic influx of business. Many non-majors in the past have suffered reputational damage from touting their proposition to consumers and brokers and then being unable to deal with the increase in volume that comes as a result of such efforts. Gibson says AMP Bank has worked hard to make sure this issue is addressed.

“Once we become popular, we get rushed. A while back, like three or four years ago, we didn’t handle it that well.

We’ve certainly handled it better the last two years, but we want to continue to increase our capacity to serve brokers the way they want to be served. The number one thing on brokers’ wish lists is consistency and

19

turnaround times. We’ve struggled to deliver that in past years, but we’re really excited to deliver on that in the next year,” he said.

While Gibson says the bank has always enjoyed a good reputation with brokers, he says it is important to fill any service gaps in its push towards a higher volume of broker business.

“We’ve always been fairly well liked.

We haven’t really annoyed anybody.

We’ve always had good rates, good products, good service and good BDMs, but there have been a couple of gaps.

It’s really nice to have things aligned at the end of this year to fill those gaps and be able to heavily focus on the broker market next year,” Gibson says.

WE’VE DONE WELL RAISING OUR PROFILE IN THE BROKER AND PLANNER SPACE. THE LARGER CHALLENGE IS THE CONSUMER PERCEPTION It’s an exciting time to focus on the broker market, he says. With lenders competing more and more fiercely, the market is becoming increasingly complex. Therefore the broker proposition is becoming more and more attractive.

“I think the market that brokers are currently in is exciting and difficult at the same time. It’s certainly exciting because from different lenders there’s a lot of activity going on, and a lot of change in costs, pricing, features and benefits. But it’s difficult for brokers to keep across all that. The general customer just doesn’t know what’s going on at the moment. The average mum and dad wouldn’t have a clue. That’s a big opportunity for brokers,” he says.

And while a niche may be a comfortable spot for lenders to reside in, Gibson says those that prosper will be those willing to re-evaluate their business on a regular basis.

“We have to be across what the competition are doing and where we need to find these little niches. The challenge is being flexible enough to change on almost a monthly or fortnightly basis,” he says.

He offers the same advice to brokers looking to navigate a competitive landscape.

“If you don’t change your business, the market may move around you, and then you’re out of date.”

MARKET TALK

brokernews.com.au

20

This will undermine capital gains and rental growth.

• There is also an oversupply of newly built house and land packages in Melbourne’s outer northern and western suburbs.

• Yet there is a shortage of well-located established homes and apartments in Melbourne’s middle-ring suburbs. In these areas, demand is outpacing supply and keeping prices strong.

Mixed signals divide the Melbourne market Melbourne’s property market presents conflicting and confusing signals that often leave investors wondering whether to flee or dive in

I

t’s a time of good results at a time of oversupply. It’s a period of growth and a time of contraction. It is indeed a tale of two markets in Melbourne.

According to the latest APM Quarterly Housing Report, Melbourne’s median house price increased by 1.7%, while its median unit price went up by 0.7%, over the June quarter.

This was a slightly stronger result than that seen over the March quarter.

However, APM senior economist Andrew Wilson did note that the annual outcome for the city was likely to be around half of the exceptional 2013 results.

This belief was supported by Residex founder John Edwards in his July property market update. In his view, the data indicates that the rate of growth in Australia’s recent market leaders – of which Melbourne is one – is cooling and moderating.

So while Melbourne’s market continues to post attractive results, the golden hour looks to be coming to an end.

MIXED-MARKET TALES

Metropole Property Strategist’s Michael Yardney says Melbourne has seen about 9.5% capital growth this year, which indicates the market is performing well. In fact, he finds the overall strength of the market quite surprising.

“It’s a mixed market,” Yardney says.

“Some markets are experiencing significant oversupply while, at the same time, there is a shortage of stock in others.” This means that: • There continues to be notable oversupply in the inner-city and CBD apartment markets. Further, a high number of new apartments are still coming on stream.

Victoria price performance Area

Type

Median value

Growth over 12 months

Growth over Gross three months rental yield

Rent amount

Melbourne

H

$565,000

9.7%

8.5%

3.5%

$380

Vic country

H

$295,000

3.4%

-1.3%

4.9%

$280

Melbourne

U

$455,000

5.6%

3.2%

4.1%

$360

Vic country

U

$242,000

2.1%

-1.8%

5.2%

$240

Source: RP Data, August 2014

The contradictory situation is underpinned by immigration-fuelled population growth, which at 1.9% per annum is high. People moving to Melbourne want to be close to the jobs, while younger people want to be close to a range of lifestyle options, hence the popularity of the middle-ring suburbs that provide easy access to everything.

However, it is in the inner city that properties are being developed, Yardney explains. “And we have a planning minister who wants to ‘Manhattanise’ the CBD of Melbourne in readiness for its projected population growth, which presents both challenges and opportunities.”

The problem is that, of late, there have been some scathing reports on the state of Melbourne CBD apartments, he says. Issues to do with density and overdevelopment, as well as the size and quality of apartments, have been identified.

Further, a host of new planning regulations – which will limit development in established suburbs – are likely to add to the difficulties in catering to the city’s growing population.

While this situation could push prices up, Yardney believes there won’t be as much capital growth in the next few years as there was in the last couple. That level of capital growth was unsustainable, so it is good for the market to slow down to avoid a crash, he says.

“There are still opportunities in the Melbourne market. It has a few more years to run yet. The cycle will come to an end when interest rate rises kick in, probably circa 2016–17.”

VICTORIA’S ECONOMIC SCORECARD

Meanwhile, the latest Deloitte Access Economics Business Outlook states that the high Australian dollar has hurt Victoria’s manufacturing and international education sectors. In turn, this has kept the state’s unemployment rate higher than the national average and hurt job growth generally.

On a more positive note, the report says Victoria’s strong population growth has helped maintain and lift the housing construction sector. This means that the “recent downturn in Victorian growth” is unlikely to accelerate.

In fact, the report states that good news on interest rates and exchange rates, along with rising wealth and strong population gains, should keep growth in Victoria “solid enough”.

The latest CommSec State of the States report lends further weight to this assessment of Victoria. It, too, notes the state’s strong population growth is sustaining home purchase and construction, despite comparatively weak commercial and engineering activity and relatively high unemployment.

MARKET TALK brokernews.com.au

21

SMSFs. RP Data’s HUB integrates with these platforms, allowing their end users to order valuations seamlessly.

At a recent conference held by one of these providers I had the opportunity to engage with numerous accountants, financial planners and fund managers. What became clear is that confusion still reigns with respect to the valuation requirements of real property assets held in SMSFs. Despite the ATO issuing guidelines in March 2013 to clarify matters, we still heard many conflicting theories:

Clarifying the valuation of real estate held in an SMSF RP Data’s Chris Spanos on best practice for SMSF property vals

Y

ou have no doubt repeatedly heard the impressive numbers describing the fantastic growth of SMSFs in recent years, with an increasing number of funds holding considerable real property assets. By now most industry participants know that in order to ensure compliance with annual audit and legal requirements it is important for SMSFs to understand when and how they should conduct a valuation of their real property.

RP Data has had the privilege of working with some of Australia’s leading providers of software and platforms to help manage

• I think I need a valuation of real property every three years.

• I thought we needed annual valuations of real property.

• Using a valuer is expensive, so I just get my local real estate agent to provide me with valuations.

Rather than specifying how often a valuation should be conducted and by whom, the ATO took a less prescriptive approach.

A valuation is not needed every year, or even every three years. Rather, a valuation should be conducted when an event trigger occurs, such as: • preparing the financial accounts and statements of the fund; • acquiring assets between SMSFs and related parties; • investments made and maintained on an arm’s-length basis;

• determining the market value of an SMSF’s in-house assets (including inter-SMSF loans and lease arrangements) as a percentage of all assets in the fund; and • determining the value of assets that support a member’s super pension.

When a trigger occurs an external valuation is not always required. Indeed, the ATO will generally accept a determination of an asset’s value if this value was used for any corresponding CGT event and it was based on objective and supportable data.

More specifically, while the ATO does not specify what ‘type’ of external valuation is required across the various event triggers, it does suggest the use of a qualified valuer where: • the value of the asset represents a significant proportion of the SMSF fund’s value; or • the nature of the asset indicates that the valuation is likely to be complex or difficult.

RP Data recommends following best practice (see table below) to ensure you act within the spirit of the ATO guidelines and provide your clients with industry-leading service. If in doubt, contacting a local qualified valuer will help you determine what your options are given your specific circumstances.

Best practice for residential properties <$1.5m

>$1.5m

Initial valuation

Year 1 anniversary

Year 2 anniversary

Year 3 and beyond

• Short form

• AVM with FSD +/-10% • If FSD >10% then EVR/desktop • *~

• AVM with FSD

• Short form • *~

• EVR/desktop • *~

• EVR/desktop • *~

• Long form

* Also upon material change in the market value of a property in an area or region, or ~ For audit purposes for superfunds, at the fund’s reporting date

+/-10% • *~

• Long form • *~ Source: RP Data

BEST PRACTICE 22

brokernews.com.au

Five mistakes to avoid when starting a new business Small business accountant John Corias shares tips to make sure your new business venture starts out on the right track

means. It is important to manage cash flow, and the best way to handle this is to make sure you have a financial plan, a business plan, and that you are prepared.”

3

Some small businesses jump into the sector without giving it a second thought.

With the entrepreneurial boom there are plenty of people coming up with ‘new business ideas’. However, many of them do not have a legitimate plan in place to secure the future of the business.

“Most businesses are making mistakes because they are not thinking things through. There is a lack of research, which includes questions such as ‘How much rent am I paying?’, ‘Am I getting ripped off?’, ‘Can I get a better deal?’ I cannot stress how important it is to have a strong foundation and plan before you even think of starting a business. You need to plan for the financing, the structure, and have a contingency plan for the unexpected hiccups.”

4

O

ver half a million Australians are involved in the early stages of setting up a start-up business, and it is a well-known fact that most small businesses fail within the first few years. The question remains, what are they doing wrong? With more than 25 years’ experience in small business accounting, John Corias, senior partner of MAS Accountants, knows the mistakes to avoid when starting a new business.

“We have a lot of businesses come to us in the early stages, and we are able to spot the red flags. Our company was the original accounting office specialising in small businesses in Australia, so we know what to look for and the most common problems small businesses face,” Corias said.

He said the following were ‘mistakes to avoid’ when starting a new business:

1

LEAVE EMOTION AND EGOS BEHIND

Most small businesses are built from the ground up, so of course it is natural to grow emotionally attached.

However, this is where so many people go wrong.

“Being emotionally invested only sets you up for failure. It clouds your judgment and stops you from seeing clearly. These emotional investments may include the ego factor. Egos are bad for business. Usually, when high stakes are at play the egos come

out. This happens more often than not in business. However, the ego can shroud judgment and can cause even the most sensible people to make stupid business decisions. When clients come in with a business or business idea that they are too personally attached to and are set in their ways, we have to give them the ‘tough love’ speech. Take a step back, assess it as business, and find the best ways to move forward.”

MOST BUSINESSES ARE MAKING MISTAKES BECAUSE THEY ARE NOT THINKING THINGS THROUGH

2

UNDERCAPITALISATION

When creating a business, funding is the key. Having the right amount of capital can turn the business from non-existent to booming; however, lack of capital is a common mistake most start-ups make.

“Either the business was not able to get the bank loan approved, or they financed the business with short-term capital rather than permanent capital, or simply made business purchases that exceeded their

UNDERPREPARED / DIDN’T DO HOMEWORK

SEEKING INVESTORS TO FAST-TRACK GROWTH

Most start-ups want to grow quickly and seek investors to solve this problem.

However this doesn’t always work in the business’s favour.

“Finding an investor for rapid business growth is not ideal, and it is much better to grow the business organically. Growing it naturally is more sustainable as you have invested the time to create the right foundations and systems to ensure long-term sustainability. When mismanaged, fast growth can cause the company to crash.

Also, investors won’t be satisfied until they earn their cash back. This means they may push for rapid growth, which won’t always match up with your business plan.”

5

JUMPING INTO PARTNERSHIPS WITH FRIENDS

Partnerships with friends can seem like a fantastic idea when sharing a drink on a Friday night. However, reality tends to be less than amicable.

“Partnerships are tricky, especially those with friends, because it not only involves an extra element to the business but an emotional element as well. Before delving into a partnership, it is best to evaluate whether the other party has a different approach to the growth of the business, a different vision or different values.

Partnerships work when all parties complement each others’ strengths.

Remember that most business partnerships do not survive, so make sure to think it through before going ahead.”

MAS, which began in 1961, is the first accounting office in Australia to cater specifically for small businesses, and has been running for over 50 years. Brothers John and Peter Corias have been involved in the business since 1981. Their clients range from doctors to dentists, construction companies to restaurants, interior designers to solicitors.

THE COALFACE 23

brokernews.com.au

A mortgage broker with an edge Katherine Stewart had a successful career as a real estate agent before becoming a mortgage broker

K

atherine Stewart, mortgage and finance broker at Five Star Mortgage Solutions, spent almost 15 years working as a real estate agent before making the move into mortgage broking and setting up her own business.

Stewart knew very early on that she had a passion for the property market.

She got into real estate when she was still in high school, working part-time in her school holidays. After she graduated, she completed her real estate licence and worked as a realtor until 2012.

“What I loved about real estate was being able to talk to people and build relationships with people. I also love seeing people get into their new homes.

It was a very fast-faced and thrilling career. I found it really rewarding to see a campaign through right from the start to the finish, and to be able to see the results of your work.

“I’m more of a practical and logical person rather than an emotional person, so I was good at working with contracts and signing contracts with people. That can be one of the more stressful parts of the job, but I was able to keep everyone calm and get the job done in a way to ensure everyone was happy.”

Stewart made the move into mortgage broking after the decision to have children. While she was on maternity leave, she completed her Certificate IV in Finance and Mortgage Broking and her Diploma in Finance and Mortgage Broking.

“As thrilling as real estate was, it was also very demanding and very stressful.

We were selling 27 or 28 auctions a night. But I have three young boys now and I wanted a job that was more flexible and enabled me to have more control over when and where I worked.

“As a real estate agent, you work a lot of nights and weekends, and your phone does not stop ringing. When someone sees a ‘For Sale’ sign, they won’t take the number down and ring you on Monday, they will ring you at 9pm on a Sunday; they will ring you whenever it suits them. So when I had my third son, trying to manage children and work was difficult.”

Stewart says her background in real estate has given her an edge as a mortgage broker.

“Real estate and mortgage broking are a very connected industry, so my background has definitely helped me as a mortgage broker.

“I am able to give my clients insight

I AM ABLE TO GIVE MY CLIENTS INSIGHT INTO THE BUYING AND SELLING PROCESS into the buying and selling process.

I often give my clients some tips and tricks for buying real estate, for example, if they are trying to buy a property before auction and they aren’t really getting any guidance from the real estate agent, who is working for the vendor. I have also been able to give them advice on contracts.”

Stewart also says her background has helped with building relationships with real estate agents as a referral and lead source.

FINANCIAL SERVICES 24

brokernews.com.au

ASIC BANS INSURANCE BROKER

FAST FACT

Smaller banks still big on satisfaction

S

maller banks continue to lead the majors in customer satisfaction as bank satisfaction has hit an 18-year high.

The latest Roy Morgan Research consumer banking satisfaction survey has found that the satisfaction level of personal banking customers rose to 82.3% in August, up slightly from 82.1% in July. The result represents an 18-year high for personal banking satisfaction.

Commonwealth Bank maintained its lead but now holds on to only a 0.3% edge over Westpac among total customers.

Among main financial institution customers, however, Westpac has gained the lead over the other majors for the first time since 2003.

Westpac has shown the largest improvement in satisfaction among the majors over the last four months, up 2.1% to 80.7%.

ANZ saw its ranking improve 1.5% to 79.7%, while both CBA and NAB lost ground. NAB saw its score fall 0.5% to 80.7%, while CBA fell 1.6% to 81%.

In spite of moves by Westpac, smaller banks still far outstrip the majors in terms of satisfaction. Teachers Mutual Bank leads the satisfaction rankings at 89.9%, followed by ING Direct at 89.7% and ME Bank at 88.9%.

RISE IN REGULATORY RISK Financial services think tank JWG has published its analysis of 131 regulatory bodies in the G20 nations, and a total of 50,000 documents that they have produced in the last five years. The report shows that the “volume, pace and complexity of deciding how to comply with a continually evolving regulatory agenda is staggering”.

The analysis reveals that by 2020 the page count of regulations for the financial industry will be “three Eiffel Towers high” and that 54% of the major legislation this year was on topics unforeseen five years ago. Fines have topped $260bn it says. Rather than survive on management by regulatory deadline, audit points and lots of human intervention, JWG found leading firms to be moving towards a comprehensive approach to regulatory risk management that allows them to use the regulatory changes for competitive advantage.

41% Proportion of Australians who believe now is a good time to buy a home. The result is down slightly from 42% in March Source: Genworth

ASIC has permanently banned former insurance broker Leslie Allan Gentle from providing financial services after an investigation found that he had deposited client cheques for his own use in his personal bank account without their permission.

Gentle, from Coffs Harbour, NSW, was an authorised representative of Westlawn Insurance Brokers.

ASIC’s investigation found that between March 2013 and 31 October 2013 Gentle had deposited client cheques in his personal bank account without permission on multiple occasions, including insurance claim payments for his clients, who he then deceived by failing to advise them of the payments, as well as insurance premium payments received from clients that he then used for his own purposes.

“It is essential for those in the financial services industry to act with honesty and integrity at all times.

Individuals who do not act in this way will be removed from the industry,” ASIC deputy chairman Peter Kell said.

Westlawn has stressed that Gentle’s affected clients were not disadvantaged in any way.

Gentle has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

Peter Kell

a

SCRAP NEGATIVE GEARING, SEE NEGATIVE OUTCOMES New research has claimed that restricting access to negative gearing for residential property would reduce investment in housing, hinder housing affordability and increase the cost of renting.

In a research paper titled ‘Economic Impacts of Negative Gearing of Residential Property’, commissioned by the Housing Industry Association (HIA), it is argued that discounting residential negative gearing is a backwards step for tax reform.

“New housing is one of the most highly taxed sectors in the economy, and the removal of negative gearing would only make that situation worse and discourage investment. This would in turn reduce housing supply and increase the cost of renting,” HIA managing

director Shane Goodwin said.

“Negative gearing promotes private investment in the rental market, thus stimulating economic activity and taking the pressure off social housing and the public purse.”

Goodwin said stimulating investment in housing was important for future planning.

“With an ageing workforce and future pressure on services, policy settings such as negative gearing that promote wealth creation and self-sufficiency in retirement should be promoted.”

The research paper argued that abolishing stamp duty on conveyances should be the top priority for housing tax reform, making housing more affordable for both renters and owner-occupiers.

Read Australian Broker anywhere, anytime

for your iPad®

DOWNLOAD YOUR FREE APP FROM THE iTUNES STORE TODAY w

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

www.kaishinlab.com

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

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

COMMITTED TO INDUSTRY NEWS, OPINION AND ANALYSIS.

www.australianbrokeronline.com.au

ONE YEAR ON 26

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

APRA uncomfortable with housing ‘exuberance’ A surging housing market last year caused APRA some discomfort. In its Insight release, the banking regulator warned that low interest rate environments could lead to rising household leverage. In spite of this, APRA said credit growth remained sluggish, and warned banks not to relax their standards to spur demand.

With lenders ramping up competition for home loans and the housing market beginning to heat up, APRA looked set to keep a tight rein on lending standards.

What’s happened since?

If APRA was uncomfortable with last year’s exuberance, they must be positively pulling their hair out. The RBA has commented recently on the surging housing market, saying it could use macroprudential tools to cool demand. The IMF and the Bank for International Settlements have both warned that Australian housing is getting overheated. But the latest RP Data results would suggest the market may finally be reverting to a normal growth level.

Odds in favour of Melbourne Cup Day cut

A survey of economists last year found that many expected the Reserve Bank to make its final cash rate cut on Melbourne Cup Day. The RBA had already trimmed the cash rate to a record low 2.5%, and economists believed another cut was in store before the end of the year.

brokernews.com.au

Brokers embrace video marketing

T

he fight for business in an increasingly tech-savvy marketplace can be a real challenge for brokers. Brokerage Smartmove is taking a leap in embracing video marketing in its appeal to potential clients. Smartmove general manager Darren Little explained to Australian Broker TV how the brokerage views its marketing efforts.

“For us at Smartmove marketing is a really critical part of our business. We use marketing more as a connection with our customer base. We rely on our customers very heavily for repeat and referral business. When we talk about marketing, we talk more about interacting with those existing customers at different touchpoints. That’s our focus,” he said.

Smartmove managing director David Brell outlined some of the company’s marketing programs.

“Another initiative we’re undertaking is filing a video profile of every single staff member. I think it’s critical to business. It’s probably the one way you can connect face-to-face without being face-to-face,” Brell said.

As customers become more connected and informed, video marketing enables the company to have a more personal connection, Little said.

“With LinkedIn and the likes, we see already a lot of our customers before they see us are actually looking at our profile to see who we are, looking at things like the awards we’ve won and that type of thing. By taking it to the video we feel that’s the next step of really personalising those relationships,” Little said.

And Brell encouraged other brokers to think about making video an integral part of their marketing strategy.

“I think it’s an important mechanism for any broker to undertake, and I’d highly recommend it,” Brell said.

What’s happened since?

Hopefully those economists were better at picking horses than they were at picking rate cuts, otherwise it was a very long Melbourne Cup Day for them. The RBA has stayed on the sidelines since August of last year, and most pundits believe rates will remain on hold until at least next year. The general consensus is that the RBA’s next move will be up.

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

FORUM 27

brokernews.com.au

Tougher lending rules would be ‘ridiculous’ A crackdown on lending criteria could hurt the market, according to Aussie chairman John Symond

INTEREST-ONLY CAN WORK FOR THE RIGHT CLIENT Some brokers and lenders have expressed concern over the rise in popularity of interest-only loans. One broker pointed out that they can be a viable solution for the right clients.

“I have had a scenario where the client was advised by a broker to pay as much off her first home as quickly as possible to give her the ability to buy a better home later. The unfortunate things was the broker didn’t ask or didn’t listen to the clients plans down the road.

The client’s sole desire was to use the first unit as a stepping stone to a bigger property at Leichhardt in Sydney, and keep the unit as an investment. When I met her she had paid down the loan on the unit to $90,000. She was ready to buy a property for $750,000.

The problem was that she had all her cash in what was to become an investment property. So if we had have moved forward, the client would have borrowed $78,000 for purchase and costs of the new owner occupied property, and pay interest on the whole amount with no tax deductions. Kept a $90,000 loan on an investment property earning $450 per week in rent, whilst paying tax on the profit of the rental.

“The client asked was there a way she could have done it better. The answer was to have an interest-only loan on the (at the time) owner occupied property, save her extra repayments in an offset account, so when it comes time to buy the new property, the Investment Loan can be at its maximum, the owner occupied loan can be at its minimum and all is good.

“What did the client do, well, after speaking to her accountant, she sold the unit, used the cash for the owner occupied property the purchased another investment property. To sell the unit and buy the new investment property, it cost her about $30,000 which was going to be less than what the other structure would have cost over three years.

“That was eight years ago and we are now just financing her fourth property because she received good advice.

“This sort of structure is not for everyone. A good broker should be able to tell from the A & L position, the savings and debt history of the client whether it is a good way to go. For the right borrower, this is a sound practice and should stay as a facility that can be used.”

Tony on 26/09/2014 at 11:05AM

I

n its latest half-yearly Financial Stability Review, the Central Bank claimed the Australian housing and mortgage market was becoming “unbalanced” due to surging investor demand. But Aussie Home Loans chair John Symond told the ABC that enforcing tougher lending criteria was “ridiculous”.

Maria Rigoni questioned whether the RBA was talking up concern over the investor market to pave the way for more expensive loans.

“Are we sure this is not just a way to allow the banks to increase interest rates for investment properties? Make it more expensive to hinder demand? I remember the old days around 1991 when investment loan rates were a good deal higher than owner occupied loan rates.”

Bottom Line argued that the real problem was cash buyers.

“There’s a problem in one or cities, so the RBA try one sweeping rule which has the potential to cripple many of the other cities and states. Sounds like the ‘Modern Government’ way of cracking walnuts with sledgehammers.

Here’s one from left field: try banning the overseas buyers that are paying cash for Australian properties, thereby pushing the market up. Not sure how changing the lending rules is going to combat the cash buyers.”

Broker Chris argued that changing LVR rules would do very little to stem the tide of investment.

“Our business operates prominently in the investor market. It is very rare that we see an investor gearing greater than 80%. The higher LVR lending remains with the first home buyer. These are the borrowers at risk of negative equity. This should be the area of focus that limits the risk to the banks.”

Finally, Hey Mr. RBA Governor argued that first home buyers were still facing an uphill battle in the market.

“You want to bring balance back to the market? Make the playing field more level. It’s time to loosen up genuine savings and equity rules for FHBs. While we are at it let’s stop penalising them with the double whammy of excessive LMI premiums and a loaded interest rate.”

NAB’S COMMISSION CHANGES COME INTO PLAY

NAB’s mooted year-one trail recently came into effect.

Incognito on 2/10/2014 at 10:09AM “NAB got the commission model right in 2007. John Flavell was a visionary.

Other banks are just catching up but NAB deserves the credit, and the loyalty.”

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

PEOPLE 28

brokernews.com.au

The Toughest Footrace on Earth Starting his own broking business was easy for Jason Arnold, after conquering the ultimate ultra-marathon across the Sahara Desert

J

ason Arnold, managing director of JAK Property Finance, is one of the adventure and fitness junkies who has battled 50 degree heat and rough terrain to run 230km over six days – conquering the ultimate ultra-marathon that is known as “the toughest footrace on earth”.

The Marathon des Sables is a gruelling multi-stage marathon through one of harshest climates in the world – the Sahara Desert. In 2013, Arnold and two of his friends put their bodies on the line to compete in the toughest footrace on earth – all in the name of a “friendly challenge” between mates.

“I started competing in marathons and triathlons as a bit of fun with some mates,” he explains. “We are all in the finance industry so it is fun to have that competition between each other. We started off doing the BRW corporate triathlon, and then jumped up to do the Noosa triathlon. After doing the Noosa triathlon year after year, we decided to step it up and do something a little bit more challenging – so we began competing in Iron Man events.

“When I went to enter the Melbourne Iron Man competition in 2013, it sold out within four or five minutes, so I missed out. After I missed out, I was having a coffee with my mate who had done the Marathon de Sables before and he challenged me to enter. Without looking into the finer details, because I always love a challenge, I committed to it.”

The actual routes and format of the Marathon de Sables changes every year, with the official route held secret until the day before the event starts. However, participants should expect to run a marathon a day for five days (about 30-40km per day), while one day is a double marathon (about 70-80km). In 2013 when Arnold competed, the fourth day was the double marathon, at a distance of 78km.

“Out of the 78km on that massive fourth day, I would say there was about 65km of running through sand. Not just running through sand, but running through sand in 54 degree heat while you’re carrying a backpack that is about 12-15kg. I went into the event weighing 66kg and seven days later I was 60kg. That was one of the hardest things when I got back – every time I ate I got stomach cramps because my stomach was readjusting.”

Although, surprisingly, Day Four wasn’t the hardest for Arnold.

“Day One was the toughest because you can’t simulate the temperature and the surroundings. When I was training, I tried to run at the peak of heat during the day to get used to running in hot conditions. But the

maximum of 35 degrees I was training in during Melbourne summer was nothing near the 54 degrees I was competing in. Day One is all about adjustment. I felt like my head was in an oven and all my sore spots came out. Day One was about 30km and it took me about five hard hours.”

The Marathon de Sables is not for the faint-hearted. After running a marathon each day, don’t expect a bed to sleep in, or even a luxury tent for that matter. Each night, contestants camp in sideless bivouac tents, and if you don’t make it to the campsite on time, you are disqualified.

“We had very disturbed sleeps because temperatures get down to below zero at night and you are sleeping on rock most of the time.

When I would lie on one side, I would wake up a few hours later with a dead arm and have to roll over. Meanwhile, my muscles were constantly twitching from all the running.”

But giving up was never an option for Arnold, not even after he sustained an injury.

“I had a rock fall on my toes on Day Two, so every night after I finished running I would have to go to the medical tent and get my toenails drilled – they had to drill a hole through my toenail to release the blood and release the pressure. It was extremely painful to start running again each morning, but after a while I found my feet would just numb out so it was bearable. But because a lot of the terrain was rocky, if I accidently kicked up a rock, I would be in excruciating pain until it numbed out again. I’m very competitive though. So for me, there was never a choice of quitting. It came down to a matter of composing myself.”

There were almost 1,100 competitors in the Marathon de Sables 2013, and Arnold crossed the finish line in 200th position. When he first returned home, he swore he would never compete again. But now a year on, he says he would love to compete again to crack the top 100.

“It taught me to believe that anyone can do anything as long as they commit themselves and work hard,” he said.

“Competing in the Marathon de Sables and the Iron Man events have been a great life lesson for me. I find you can apply them to work, family and any other life event or obstacle you face.”

Arnold owns and operates a commercial, residential and construction finance brokerage, JAK Property Finance. JAK has a particular speciality in commercial lending, and has a strong partnership with its preferred commercial lender, Thinktank.

PEOPLE 29

brokernews.com.au

A helping hand for homeless youth

MOVERS AND SHAKERS HOMELOANS BOLSTERS BDM TEAM

An insurance group is helping to combat youth homelessness, and wants brokers to be involved

Non-bank lender Homeloans has announced that a new BDM will be joining their ranks in Melbourne, in a commitment to their rebuild and growth strategy.

The new BDM, Sophie Kyris, has more than 20 years’ experience in the banking and finance industry.

She has previously held BDM positions in a number of groups, including Victorian Mortgage Group, AON Warranty Services and Homeloan Services.

Ray Hair, general manager national sales at Homeloans, says this brings the national team to 13 strong, but the lender has plans to grow the team further in the near future.

“Homeloans is at an exciting stage in its rebuild and growth strategy, and it’s crucial to have a solid, experienced team of BDMs to work closely with those brokers looking to develop relationship-based solutions,” he said.

ALI Group CEO Huy Truong and Kids Under Cover CEO Jo Swift

A

loan protection insurance specialist has announced a new partnership that sees it taking on youth homelessness.

ALI Group has partnered with not-for-profit organisation Kids Under Cover to raise awareness and support for the prevention of youth homelessness in Australia.

The three-year partnership was announced to coincide with Homeless Persons Week, held each year in the first full week of August.

“We are very pleased to support the important work of Kids Under Cover. Both ALI Group and Kids Under Cover have a strong focus on preventing hardship and ensuring the ongoing security of a home,” said Huy Truong, CEO of the ALI Group.

Truong said the insurer would also work to include brokers in its efforts to combat youth homelessness.

“Moreover, we look forward to sharing this initiative with the broking community. Our authorised representatives, who seek to protect their clients when establishing their loans, often speak about the importance of helping to keep people in their homes. The work of Kids Under Cover really reinforces why ALI group and its brokers do what we do,” Truong said.

Kids Under Cover chief executive Jo Swift praised the partnership, and argued that the initiative would help to attack some of the systemic issues behind youth homelessness.

“We firmly believe the most effective way to reduce the number of young people experiencing homelessness is through prevention and early intervention – shelter, education and mentors help young people stay connected to their family, to education and with their community. With the support of progressive and community-minded businesses like ALI Group, young people will be able to build a brighter future,” Swift said.

Kids Under Cover studios provide housing for disadvantaged young people

A LOOK AT THE NUMBERS

105,000

25

& under

550

3,000

Number of Australians living homeless on any given night

Nearly half of Australia’s homeless are aged 25 and under

Number of disadvantaged young people assisted last year by Kids Under Cover

Since its launch in 1989, Kids Under Cover has assisted nearly 3,000 disadvantaged young Australians

Source: Kids Under Cover

VOW HIRES HEAD FOR PLANNING EXPANSION Vow Financial has appointed Michael Clifford as head of wealth management. The company said Clifford would look to grow the aggregator’s financial planning footprint across Vow’s 700-strong broker network, and was already looking to recruit experienced financial planners.

“The opportunity within the Vow network for professional partnerships with financial planners is immense. All Vow brokers will be given the opportunity to work with financial planners if they choose, and not at the direction of Vow. Personally, working in a business with solid mortgage foundations, a great culture and a fantastic opportunity to integrate experienced, professional financial planners with the existing broker network was a key reason for my involvement. I look forward to working with the entire Vow Financial group over the coming years,” Clifford said.

Clifford has 23 years’ experience in financial planning, with another five years’ experience in business coaching within the financial services industry.

INSIDER 30

brokernews.com.au

Zombies need insurance too Just because they’re undead doesn’t mean zombies aren’t at risk of injury

W

hat could be scarier than a zombie invasion? For a group of zombie fans from Regina, Canada, the answer could be a personal injury lawsuit.

The organisers of the Regina Zombie Walk were preparing for their event downtown, only to be told that, because it would take place in public parks and squares, they were required to get liability insurance, CBC News reported.

The undead fans, who were using the walk to raise donations for the Regina and District Food Bank, didn’t want participants to have to pay a fee to cover insurance, so they turned to crowdfunding website Indiegogo to raise the $750 premium.

One living dead organiser, Jessica Bickford, said their usual sponsorship arrangement hadn’t worked out, but she was against the idea of the

alternative of imposing a fee for participants.

“The walk should be free to participate in for those who want to shamble, and who may not be able to afford the price of a ticket. On top of that, we want to make sure that everybody who comes brings a sizeable donation for the Regina Food Bank – that

is why we do this, after all!”

The fundraiser successfully reached its goal and the walk went ahead on 28 September in downtown Regina. Bickford said the public would have seen some very well-behaved zombies.

“Nobody’s been eaten on the walk,” she said. “It’s gone very, very well.”

BURNING BRIDGES… AND OTHER STUFF There’s perhaps no more dramatic – or bridge-burning – way to leave your job than by swearing and quitting live on national television.

Recently, Alaskan journalist Charlo Greene quit her job in precisely this sensational, career-ending fashion.

The TV reporter left her job in order to make a stand for the legalisation of medical marijuana.

After delivering a news piece about a medical marijuana club, she told viewers: “I – the actual owner of the Alaska Cannabis Club – will be dedicating all of my energy for fighting for freedom and fairness, which begins with legalising marijuana here in Alaska.

And as for this job, well, not that I have a choice but … **** it, I quit.”

The camera quickly turned to a stunned colleague, who apologised and told viewers: “All right, we apologise for that … we’ll be right back.”

Her employer later apologised on Twitter, posting: “Viewers, we sincerely apologize for the inappropriate language used by a KTVA reporter on the air tonight. The employee has been terminated.”

While Greene’s reporting career may have gone up in smoke, her parting words have since gone viral, which will help raise the issue of medical marijuana legalisation, which Alaskans will vote on in November.

DIRECTORY AGGREGATOR/ WHOLESALE BROKER Ballast 1300 270 942 www.ballast.com.au frank@ballast.com.au Page 15

BANK

ANZ 13 13 14 www.anz.com.au Page 9

COMMERCIAL

ThinkTank 1300 781 043 www.thinktank.net.au deal@thinktank.net.au Page 17

FINANCE

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

LENDER

AMP 1300 300 400 www.amp.com.au/distributor Page 13

Homeloans Ltd 13 38 39 www.homeloans.com.au Page 19

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

Liberty Financial 13 11 33 www.liberty.com.au Page 3

Macquarie 13 62 27 macquarie.com.au/mortgages Page 32

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

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 4

National Australia Bank www.nabbroker.com.au Page 5 and 7

SHORT-TERM LENDER

Eastwood Securities 08 8408 0800 eastwoodsecurities.com.au admin@eastwoodsecurities.com.au Page 6

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

WHOLESALE

Resimac 1300 764 447 www.resimac.com.au Page 11

OTHER SERVICES

Deposit Power 1800 678 979 www.depositpower.com.au Page 8

RP Data 1300 734 318 Page 23 Trailerhomes 0417 392 132 Page 26

Who will win at this year’s Mortgage Awards?

Follow #mortgageawardsAU and #bestdressedbroker throughout the evening to keep up with the “mortgage event of the year”

International hit show Boys In The Band

Featuring TV presenter and former star cricketer Michael Slater as MC

Performances from soul sister act The Diamonds

Friday 17th October 2014 | Sydney Town Hall www.austr alianmortgageawards.com.au EVENT PARTNER

AWARD SPONSORS

EVENT CHARITY

media partners