Australian Broker 12.08

MARCH APRIL 2015 ISSUE 12.08 12.05

$4.95 POST APPROVED PP255003/06906

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

+ COALFACE GRAND DESIGNS

Citywide Lending is living up to its name P12

+ BUSINESS

INTELLIGENCE

LEADING TRANSFORMATION 5 tips to enacting change P18

+ BEST PRACTICE THE STORIES PROSPECTS TELL How to avoid timewasting clients P20

Peter Kell:

ASIC’S BUSY AGENDA S ASIC’s deputy chairman lays out some of the regulator’s priorities for the year ahead

ince the global financial crisis, the Australian mortgage market has almost doubled. According to APRA statistics, housing loans held by all ADIs totalled $1.3trn in December 2014, compared to $715bn in December 2008. However, as the saying goes, “with great power comes great responsibility”, and the increasing strength of the housing market has been matched by increasing regulatory surveillance.

FULL STORY PAGE 14

+ MARKET TALK THE POPULATION MYTH

Population and house prices don’t always correlate P22

+ PEOPLE ROAD TRIP WITH A REASON One broker’s epic scooter trek P28

NEWS 2

brokernews.com.au

NUMBER CRUNCHING VACANCIES STILL TIGHT

AUSSIES’ CREDIT CONUNDRUM

VACANCY RATES FOR MARCH

NEW FINDINGS ON AUSTRALIANS’ CREDIT SAVVINESS

Adelaide – 1.4%

FAST FACT

772,000 Number of Australians who have been the victim of identity theft over the past 12 months Source: Veda

88%

DID YOU KNOW?

Perth – 2.7% Melbourne – 2.1%

79%

Brisbane – 2.1%

65%

say day-to-day expenses, rent or mortgage repayments, groceries and bills are the most common roadblocks to paying down debt

incorrectly believe contributing to superannuation or saving money can have a positive impact on their credit score

Canberra – 1.5% Sydney – 1.6% Darwin – 3.4% Hobart – 1.4% National – 2.1% 0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Nearly four out of five Gen Ys prefer to see a mortgage broker or head into a bank branch when applying for a home loan Source: KPMG

19%

pay only the minimum repayment on their credit card

Source: SQM Research

23%

understand what a credit score is and how it is used to grant credit

33%

are nervous about their ability to access and manage credit

Source: Experian

WHAT THEY SAID...

BRETT HALLIWELL

JAMES SYMOND

KIM CANNON

STUART WEMYSS

“Brokers will choose us if we demonstrate what they need” P4

“We don’t plan to take our foot off the gas any time soon” P6

“A lot of brokers can see the marketing opportunities that are waiting for them in social media and online technology, but getting started can be the hard part” P8

“You need to look for the signs or hints that indicate what story a prospect is telling themselves” P20

NEWS 4

brokernews.com.au brokernews.com.au EDITOR Adam Smith

CONFLICT OF INTEREST CLAIMS BOGUS, CLAIMS FUNDER

MFAA UPGRADES BROKER TOOLS ■ The MFAA has announced

an upgrade to its consumer loan calculators, making them compatible with mobile phones.

Ten out of the MFAA’s 20 online calculators are now mobile friendly. This upgrade occurs only three months after the initial launch, and will be available at no additional cost to brokers.

The mobile calculators can run on all modern smart phones including iOS, Android, iPhone4+/iPad, Samsung, HTC, Sony, Huawei, LG and Microsoft Windows phones.

Siobhan Hayden, chief executive of the MFAA, says this new function will soon be extended to the remaining 10 calculators, giving its members who have already purchased the online calculators mobile versions that will keep consumers connected to their websites.

“Calculators are one of the key search items that residential and business customers use to discover a broker. Not only are ours priced at $99 per annum – which is a minimum $300 saving for many members; they also now align to key consumer mobile and tablet search behaviours,” she said.

■ Bank ownership of aggregators

BY THE NUMBERS

65%

Research shows 65% of Australian mobile users action an online search for goods or service providers daily Source: MFAA

or aggregator white label products does not create a conflict of interest for mortgage brokers, according to Advantedge general manager of distribution, Brett Halliwell.

Halliwell has spoken out after Suncorp urged the government in Brett Halliwell its response to the Final Report of the Financial System Inquiry to act on recommendations to improve transparency in the mortgage broking industry, as major banks are “increasingly taking control of the broker-originated home loan”.

Halliwell, who runs white label distribution for Advantedge, which is part of the NAB Group, says ownership structures would play very little on the broker’s mind, as the role of an aggregator is a background role in the broker’s business.

While Advantedge is very open and transparent about its affiliation with NAB, Halliwell says neither brokers nor consumers really care about who owns who.

“Brokers will choose us if we demonstrate what they need, and that is usually about the right price for the customer, the right product, the right service levels, the relationships where they feel comfortable dealing with the lender,” he said.

Non-major announces loyalty scheme ■ ING Direct has announced a new loyalty

rewards scheme, offering consumers cash back on home loan repayments.

Effective 1 May 2015, existing and new Orange Advantage customers will receive 1% cash back based on monthly mortgage repayments of up to $3,000.

To be eligible for the home loan loyalty reward, Orange Advantage customers must also have an Orange Everyday transaction account and deposit Lisa Claes their salary (of $1,000 or more) into it each month.

The home loan rebate will be paid into their Orange Everyday transaction account at the end of each month.

Lisa Claes, executive director of customer delivery at ING Direct, said the rewards scheme was a way of saying thank you to customers.

“We are focused on becoming the primary bank for our customers and over the past few years we have been expanding our product and service offering to meet the broader financial needs of Australians, whether they’re looking for a transaction account, home loan, savings account or superannuation,” she said.

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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

Aussie breaks monthly record

WORLD NEWS

■ Aussie Home Loans generated over 15,000 customer UNITED STATES OF AMERICA

BUYING CHEAPER THAN RENTING FOR MOST AMERICANS A recent analysis from RealtyTrac has found that the monthly house payment on a medianpriced home is more affordable than the monthly fair market rent on a three-bedroom property in 76% of US counties.

The analysis included 461 counties with a population of at least 100,000 and sufficient home price, income and rental data. The combined population analysed was 217 million.

On average, fair market rents as set by the US Department of Housing and Urban Development represented 28% of the estimated median household income, while monthly house payments on a median-priced home – with a 10% down payment and including property taxes, home insurance and mortgage insurance – represented 24% of the estimated median income.

“From a pure affordability standpoint, renters who have saved enough to make a 10% down payment are better off buying in the majority of markets across the country,” Daren Blomquist, vice president at RealtyTrac, said. “But factors other than affordability are keeping many renters from becoming buyers, a reality that means real estate investors buying residential properties as rentals still have the opportunity to make strong returns in many markets.”

BY THE NUMBERS

-1.4% Job advertisements fell 1.4% in March following nine months of rises Source: ANZ

enquiries for its brokers in February and almost 16,000 in March – an increase of 7% on its previous record set in October 2014.

Aussie chief executive James Symond says the record breaking streak is thanks to the success of its national Smart to Ask campaign launched in January.

The campaign targets the almost 50% of Australians who don’t use a mortgage broker, urging them to get a James Symond “free” and “expert” second opinion from a broker on their home loan.

“The unprecedented low interest rate environment has certainly played a part in these results, but the success of Aussie’s extensive marketing programs and, in particular, the launch of our Second Opinion campaign, contributes strongly to this demand. Consumers are responding with their feet and their fingers by visiting our stores, calling in and going to our website,” he said.

Symond said the franchise will also continue to focus on its recruitment drive.

“We don’t plan to take our foot off the gas any time soon, so we are continuing our focus on recruiting quality mobile brokers and franchisees. This is the most competitive mortgage market I’ve seen in 23 years, but that is also what makes it so exciting, and we want motivated brokers up for the challenge to join our thriving team.”

Stevens says credit growth moderating ■ The Reserve Bank

governor has allayed concerns over growth in housing credit after the central bank left the cash rate unchanged in April.

In his statement of monetary policy, governor Glenn Stevens said credit Glenn Stevens growth is stabilising, particularly in the closely-watched housing market.

“Credit is recording moderate growth overall. Growth in lending to investors in housing assets is stronger than to owneroccupiers, though neither appears to be picking up further at present.”

However, Stevens noted that lending to businesses has been strengthening recently.

While he acknowledged “strong” price rises in the Sydney property market, he said it is important to note that “trends have been more varied in a number of other cities”.

However, the bank will still be working with other regulators to assess and contain risks that may arise from the housing market.

As the Australian economy continues to grow at below-trend pace while the Australian dollar remains slightly elevated, Stevens says the board will continue to assess the case for further cash rate cuts in the future.

“Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target,” he noted.

NEWS

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8

Mortgage Choice rejects commission report ■ Mortgage Choice has denounced recommendations calling for an overhaul of “conflicted”

Steven Heavey

CONNECTIVE UNVEILS WHITE LABEL PARTNERSHIP

commissions in the life insurance sector.

The Trowbridge Report, produced in response to ASIC’s review of retail life insurance advice, has recommended that the industry introduces a $1,200 cap on upfront commissions for life insurance advice and limits remuneration to a 20% level commission.

However, Mortgage Choice Financial Planning’s general manager Tania Milnes said the proposed recommendation could potentially harm consumers.

“While Mortgage Choice is extremely supportive of the need for change, highlighted by the fact that we have already mandated a hybrid commission model, if Mr Trowbridge’s specific recommendations relating to adviser remuneration are ratified it would make life insurance more expensive for Australian consumers. And as a result, fewer Australians would be able to access affordable insurancerelated financial advice.”

Further, Milnes says these recommendations contravene some of the ideologies behind the FoFA legislation.

■ Connective has unveiled a new white

label partnership with Macquarie and Advantedge under its ‘Connective Home Loans’ brand.

While the two new product ranges will officially be launched in a national campaign in mid-May with broker accreditation to begin soon after, Connective’s general manager of strategy distribution and digital, Steven Heavey, says the group has worked hard to reengineer its white label offering.

“Following extensive consultation with our membership, we have created a solution that gives them access to some of the most competitive products in the market – presenting opportunities for them to write more deals, at the right price,” he said.

“With an integrated dual funding approach, we have provided a broad solution to our members so they can best service their client’s needs. Our aim is to deliver the best possible lending experience for customer and broker.”

Brokers increasingly headed online ■ Brokers are increasingly seeing the benefits social media and DID YOU KNOW?

6.7% The proportion of first home buyers signing up for loans with the bank who have the backing of a family member has lifted to 6.7% from 4.8% in 2010 Source: NAB

online technology can have on their business, according to non-bank lender Firstmac.

Last month, Firstmac launched a six-part series for brokers, providing information on quick ways to establish and improve their online marketing.

As the first series draws close to an end, Firstmac managing director Kim Cannon said more than 650 brokers have tuned in to the Broker+ program, proving that mortgage brokers are keen to take their businesses into the digital age.

“We know a lot of brokers can see the marketing opportunities that are waiting for them in social media and online technology, but getting started can be the hard part,” he said.

“We’ve started with a free series of six videos to take brokers through the process of identifying their best options for digital marketing, how to get started, and how to sustain a digital marketing campaign.

“Data analytics for digital marketing can look like gobbledygook until it’s explained, but then in small steps it all comes together to form a new way to reach customers and get information on how they are using media.”

Kim Cannon

ANALYSIS 10

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Negative press for negative gearing Property pundits have leapt to the defence of negative gearing

N

egative gearing has long been a divisive issue. While some commentators claim the policy does nothing more than encourage speculative investment and unsustainable house price appreciation, others insist it supports housing availability.

The policy has again been put in the spotlight with the release of a recent report.

The Australian Council of Social Service (ACOSS) is urging the government to restrict tax deductions for negatively geared property investments, saying these tax breaks are “feeding a fire which the Reserve Bank and APRA are trying to put out”.

The ACOSS report, Fuel on the fire: Negative gearing, Capital Gains Tax and housing affordability, dispels the myths that negative gearing makes rental housing more affordable and that the benefits mainly go to ‘mum and dad’ investors on middle incomes.

“Negative gearing and the tax break for capital gains don’t improve housing affordability;

IT’S NOT YOUR AVERAGE MUM AND DAD INVESTORS ON MIDDLE INCOMES WHO ARE BENEFITING FROM THE GENEROUS TAX CONCESSIONS - C ASSANDRA GOLDIE, ACOSS

they make it worse by fuelling home price booms like the one in Sydney right now. Less than one tenth of negatively geared housing investments are for new properties, the other nine tenths bid up the price of existing housing,” ACOSS CEO Dr Cassandra Goldie said.

“These tax breaks also make it more difficult for the Reserve Bank to manage the economy.

Over-heating in housing markets is making it harder for the Reserve Bank to cut interest rates when this is needed. The tax breaks are feeding a fire which the Reserve Bank and APRA are trying to put out.”

According to the report, tax breaks such as negative gearing and the capital gains tax discount have inflated housing costs in every housing boom since the 1980s. Since the cut to capital gains tax in 1999, lending for investment housing has risen by 230% compared with 165% for owneroccupied housing.

Goldie says it isn’t the average ‘mum and dad’ investors who are benefiting from the tax breaks anyway.

“It’s not your average mum and dad investors on middle incomes who are benefiting from the generous tax concessions that have allowed two thirds of individual rental property investors, or 1.2 million people, to report tax-deductible ‘losses’ of $14bn in 2011,” she said.

“The reality is that over half of geared housing investors are

in the top 10% of personal taxpayers and 30% earn more than $500,000.”

THE PROPERTY LOBBIES FIGHT BACK

Not surprisingly, property lobbies have taken issue with ACOSS’ claims. The Housing Industry Association says research shows targeting negative gearing would take its toll on housing investment, affordability and rental pressure.

“Independent research has found that changing residential negative gearing would reduce housing affordability, and under the current housing policy settings, would lower Australian living standards,” the Housing Industry Association’s executive director, industry policy and media, Graham Wolfe, has said.

“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.”

Wolfe said with negative gearing, housing supply would be reduced and rental costs would increase.

“It is important to remember that negative gearing is not the domain of so-called ‘wealthy investors’.

“Official taxation statistics for 2011/12 show that over 79% of those with a rental investment property have a total income less than $100,000 and around three quarters earn less

ANALYSIS 11

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INDEPENDENT RESEARCH HAS FOUND THAT CHANGING RESIDENTIAL NEGATIVE GEARING WOULD REDUCE HOUSING AFFORDABILITY - G RAHAM WOLFE, HIA

DID YOU KNOW?

230% Since the cut to capital gains tax in 1999, lending for investment housing has risen by 230% compared with 165% for owneroccupied housing Source: ACOSS

than $80,000.”

Wolfe said it was most important to abolish stamp duty on residential property conveyances, resulting in more affordable housing for renters and owner-occupiers.

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

“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.

“Private investment in residential property should not be seen as a cash cow to fund the supply of affordable housing,” Wolfe said.

And it appears the housing lobby has the support of government. Prime Minister Tony Abbott recently declared the government would not make any changes to negative gearing policy. The Property Council of Australia supported the comments, and argued that negative gearing was not the sole domain of wealthy investors.

“The data is conclusive – negative gearing in Australia is primarily used by average workers who in the majority, own only one investment property,” executive director, Nick Proud said.

“It is great to see the Federal Government providing certainty for the hundreds of thousands of average workers whose modest investments are contributing to housing supply and rental affordability.”

Proud says there is no evidence to suggest that negative gearing drives up house prices. In fact, the opposite is true.

“As all parties recognise, the key to making houses more affordable is to increase the supply of new housing stock to better meet demand,” he said.

“New housing supply needs capital to get off the ground, and investors (both foreign and domestic) as well as owner

occupiers are a critical source of that capital. Negative gearing unlocks an important source of finance to boost new supply.”

Proud says ATO figures refute the claim that only the wealthy benefit from negative gearing.

“The ATO Tax Statistics clearly show that of the almost 1.26 million Australians who declare a net rental loss, 883,325 people earn around $80,000 per annum or less and around 79% of them negatively gear.

“Suggestions that 30%, or 561,000 people, with a geared property earn over $500,000 don’t stack up.”

ANOTHER WAY FORWARD

South Australian government backed lender HomeStart’s chief executive John Oliver admits there is a strong case to be made for abolishing negative gearing.

“The benefits of negative gearing, in particular, make property a very appealing option for investors. It would be difficult to argue that is hasn’t had some impact on driving up property prices and making it harder for first homebuyers to break into the market,” he said.

“Research has shown that start-up costs are one of the biggest barriers to home ownership. It is very difficult for a first homebuyer to compete in a market against investors who have significant backing in the form of assets and equity.”

However, Oliver says abolishing negative gearing altogether could have other implications on the property market.

“As with any decisions on housing, they need to be made with balance. There is a risk that modifying CGT or negative gearing benefits would impact on the supply of rental properties in the market. This may push up rents and make housing even more unaffordable for many renters,” he said.

According to Oliver, the solution lies within smart reform to negative gearing, rather than abolishing it altogether.

“The solution may lie somewhere in between, where negative gearing isn’t scrapped entirely but is modified in some way to make buying a home as an investment less appealing.

This may achieve a middle ground where there is sufficient investor activity in the housing market balanced with a clear pathway into home ownership for first homebuyers.”

THE COALFACE 12

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Bringing a grand design to life True to its name, Citywide Lending has many offices throughout Sydney, but its vision is ultimately to see it expand to a national reach

W

hen Rodny Ghalie decided to join the ranks of the mortgage industry, he didn’t just want to be a broker – he wanted to create, from the ground up, a brand that would one day challenge the likes of franchise giants Aussie and Mortgage Choice.

“That’s been the vision from day one,” says Ghalie.

And with their eighth office on the way and aiming to reach 10 by year’s end, Citywide Lending is well on its way to realising that vision.

Next year it will celebrate a decade as a multi-award winning business and during that time seven offices have been planted throughout Sydney, supporting 5,000 clients and a team of close to 40, including 25 brokers.

The two directors, Sydney locals Ghalie and best friend Jason Mikhail, founded the company in 2006, despite warnings from those around them that

I WANT TO CREATE A COMPANY TO RIVAL THE BIG GUYS

it was the wrong time to start up, with an oversupply of mortgage brokers.

After finding their feet in the first few years, the GFC happened.

“We just persevered during those tough times,” says Ghalie. “If anything, the GFC and even compliance and responsible lending were great for us.”

He says the result was that only the most resilient were left to compete for clients. “Our business probably grew 300–400% every time the industry had a bit of a shake up.”

After the GFC, their business saw a huge jump in growth, after which it grew steadily until 2012, and since then they have been breaking record after record.

PASSION FOR PROPERTY

So, how did it all begin?

“I’ve always had a passion for property,” Ghalie says and after hearing about a colleague’s plans to become a broker during his time at Optus, he set out to become a qualified broker himself.

Mikhail was in property valuation at the time and interested in Ghalie’s vision. “I told him, ‘I want to create a brand – I want to create a company to rival the big guys’,” Ghalie says.

“Jason’s not only my best friend, he’s got a lot of key strengths. We utilised my strengths and his strengths and we brought the business together and we went from there.”

And they certainly did. In the past year, the brand has changed to Citywide Lending, Property and Insurance and its services include not only home loans but car and personal loans, property management and sales, construction and development and accounting.

Diversifying happened gradually and cross-selling along with it, after clients mentioned they would happily choose Citywide Lending for products A or B if they were to offer them.

“It’s fairly easy [to cross-sell],” says Ghalie. “The hardest thing is to get someone’s mortgage. When someone knows that you’re aware of what they want to achieve and they trust you to give you private and confidential information, the rest is pretty easy.”

That’s where good training comes in.

DEVELOPING NEW BROKERS

“It comes down to our induction program and our training of new brokers on how to generate leads.

Mortgage broking is all about longevity.

It’s about building relationships which

takes more time, but once you get it right, your business is a lot more valuable.”

The training is all in-house, guiding brokers through a combination of one-on-one sales, one-on-one monthly meetings, fortnightly sales meetings and quarterly personal development.

Ghalie advises new brokers to align themselves with a company that understands how to attract clients for the long term.

“You want to make sure that the company teaches you how to draw business so that way clients are chasing you and you’re not door knocking people and I think that’s the hardest thing.”

And they know their training pays off, Ghalie explains, as they rarely lose a client from their trail book and their brokers not only do one loan with a client, but with their family, friends and their network.

But nothing great is ever achieved without some challenges along the way.

“One of the biggest roadblocks would have to be keeping brokers motivated and driven through the downside because especially in the first two years of a broker’s career, it’s very inconsistent and they don’t have the trail to fall back on.”

When they are bringing onboard a new broker Ghalie says they look for passion, drive and vision.

“I really believe, especially in our industry, everything can be taught. But you can’t teach someone to have drive – you’ve either got it or you just don’t and that’s what we look for.”

And drive is something that a team needs to have as a whole to be successful. “The success of Citywide isn’t just because of Jason and myself,” says Ghalie. “It’s because of a lot of brokers who have sacrificed, to help build this dream to make it what it is today.”

He says the success comes from the brokers working together with those who often don’t get their due recognition – the support staff who look after everything from compliance to loan submissions and the combined effort reaps the end rewards.

“We’ve saved people from losing their house by consolidating them; we’ve helped people who are just newly married get into their first home and it’s their number one investment,” says Ghalie..

“You’re basically helping or teaching someone how to create wealth and when you do that people have this connection with you that goes a long way.”

BROKER DIARY 13

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Location, location, location

In the second entry of their broker diary, first-year brokers Phil Barton and Natalie Duong explain the importance of their shop front

H

aving a shop front in a busy shopping centre like Warwick, we have the benefit of consistent foot traffic walking past our door each and every day. This was a deciding factor in our choice of location when compared to a high street or work from home model that are available within the mortgage broking profession.

The centre itself is not huge with 76 retail outlets and for this reason it retains a friendly and local community feel; this is a positive in my opinion when offering the trusted services from a brand which promotes the values of family and the goal of home ownership.

Having an iconic and easily recognisable brand behind the store provides familiarity that connects us with the potential clientele within our area.

Much of our business is drawn from this market and on the whole most of our walk-in client base is good quality, knowledgeable and stable.

The walk-in clientele takes a small amount of pressure away from running a new business but it is up to us to build on this market and develop a reputation for service and professionalism that will draw a new home loan client away from dealing with the unknown lender at the banks.

We cannot, however, sit and wait, which is why Aussie provides every franchise store with a Retail Business Consultant (RBC) to assist and in many instances offer advice. Our RBC, Guy Sanders, has

LEAD GENERATION IS ALWAYS ON THE AGENDA, ALTHOUGH OUR LOCATION IS THE FOUNDATION OF THE BUSINESS

been with us from day one and has offered support and mentoring in many aspects of establishing and running an Aussie Franchise. The help has ranged from contractual understanding, implementation of best practices and analytical perspectives on monthly performance. We base our performance on our own business plan which we developed with Guy before the business opened; it caters for worst, conservative and best case scenarios.

Key reports are only a fingertip away and having the ability to discuss conversion ratios, lead generation, projections and marketing with a third party cannot be underestimated. It genuinely gives perspective when looking at segments of the business generated from company sourced leads, walk-in leads and self-sourced leads.

I am writing this on the eve of one of our monthly meetings with Guy, which are pencilled in for generally three hours in duration. Three hours of our time out of the business in one day is significant and it has to add value and offer an open approach with a view to improving performance.

In my opinion having a monthly meeting with Guy turns the microscope on us and our business. It doesn’t just highlight weak areas before they become concerns but motivates our ambitions further by recognising what is working within the business.

In that respect lead generation is always on the agenda, although our location is the foundation of the business and the marketing territory that we have has great potential. The question for me is how do we dedicate time to implement marketing plans and strategies to capitalise on our resources at hand whilst servicing our store clients? I look forward to sharing the answers with you after our next meeting.

NEWS 14

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Peter Kell: CONTINUED FROM PAGE 1

ASIC’s busy agenda

ASIC’s deputy chairman lays out some of the regulator’s priorities for the year ahead

O

ver the 2014 year, corporate regulator ASIC proved its ongoing focus on tackling serious white collar crime, taking enforcement action against 138 cases relating to financial services. In fact, ASIC almost doubled the number of financial services white collar crime cases it took enforcement action against in the six months to December 2014, compared to the six months to June 2014 – 90 cases versus 48 cases.

WHAT SHOULD BROKERS LOOK OUT FOR? ASIC deputy chairman Peter Kell told Australian Broker that as the housing market continues to warm up, the corporate regulator will be keeping a narrow focus on loan fraud.

“ASIC has a clear commitment to tackling loan fraud involving false loan applications and related documents,” he said.

“Since taking over national responsibility for credit in 2010, ASIC has taken a strong stance against brokers submitting fraudulent loan applications and similar behaviour.

“The decline in the Australian property market after the global financial crisis meant turnover collapsed for brokers, who were now under greater pressure to secure loan commissions. They went through some very lean and tough years, and this creates risk for people to push the envelope when things warm up again.”

Last year, ASIC also announced it will begin an investigation into the provision of interest-only loans, after

interest-only loans as a percentage of new housing loan approvals reached a new high of 42.5% in the September 2014 quarter. In the latest APRA statistics for the December 2014 quarter, released after this announcement, the proportion of interest-only loans crept even higher, making up 43% of new housing loan approvals.

“ASIC, working with members of the Council of Financial Regulators, has decided to probe the recent growth in interest-only home loans, particularly by owner-occupiers,” Kell told Australian Broker.

“Given the current state of our property market and the sustained low-interest rate environment, regulators are working together to ensure that lenders have sound residential mortgage lending practices.”

While Kell says it is too early to detail the regulator’s findings of the investigation at this stage, he did reveal that the probe will be investigating three important risk areas: whether the borrower can only afford a loan because it is interest-only, whether the borrower can afford principal & interest repayments at the end of the interest-only period, and whether the borrower understands the impact of not making principal & interest repayments.

“As part of ASIC’s focus on responsible lending more generally, we are seeking to ensure that consumers are receiving loans that are affordable and that meet their requirements and objectives.

“Although interest-only loans can be appropriate in the right circumstances, they can raise a number of risks,” he told Australian Broker.

Kell says ASIC will be ready to publicly report on its findings in the second half of this calendar year.

SHOULD ASIC HAVE MORE POWER?

In a submission to David Murray’s Financial

System Inquiry, ASIC argued that it should be granted powers for proactive “product intervention”. The power to intervene in banks’ product design and marketing, it argued, would allow the regulator to address systemic issues rather than focusing on individual banks and transactions.

“There is currently too much emphasis placed on generic disclosure requirements without considering the use of other regulatory tools,” Kell said.

“This places a burden on industry participants without improving outcomes for consumers. A product intervention power would allow ASIC to address significant market problems that disclosure can’t address. It would enable ASIC to be more proactive and allow for more timely intervention.”

ASIC has even asked for the power to be extended to allow the regulator to ban certain banking products.

“Banning a product would be a rare occurrence, but the power to intervene is nevertheless important to have – even if it is rarely used, the existence of the power would encourage better market outcomes,” Kell said.

Giving ASIC the power to meddle in banks’ product design and marketing has attracted concern from some, who fear it could stifle innovation and subsequently hurt consumers.

However, Kell says that the power would not be used frequently enough to become a deterrent.

“The FSI report highlighted that product intervention powers should be used for the purpose of reducing significant detriment to consumers and to build consumer confidence and trust in the financial system. These powers would also help ASIC address marketwide failures that individual firms cannot fix on their own.

“The report aligned with ASIC’s view that the power is expected to be used infrequently. On this basis, if used effectively, the power should not reduce innovation.”

WHAT ABOUT COMMISSIONS?

In an investigation into life insurance advice conducted by ASIC last year, it was found that more than a third (37%) of the advice consumers received failed to comply with regulation governing a consumer’s best interest. ASIC identified that commission and remuneration structures may be the catalyst, after the review found that high upfront commissions are more strongly correlated with non-compliant advice.

In response to ASIC’s investigation, the Trowbridge Report – a comprehensive review of the life insurance sector commissioned by the Financial Services Council – called for an overhaul of “conflicted” remuneration. The report, released last month, recommends that the industry introduces a $1,200 cap on upfront commissions for life insurance advice and limits remuneration to a

DID YOU KNOW?

37% An ASIC investigation into life insurance advice conducted in October found that more than a third (37%) of the advice consumers received failed to comply with regulation governing a consumer’s best interest Source: ASIC

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15

20% level commission.

Also released last month was the Reserve Bank’s Financial Stability Review, which claimed that the more banks use brokers, the greater the risk is that a misaligned broker incentive structure would generate “significant amounts” of lending that is outside their risk tolerance or is otherwise inappropriate.

As commission structures have again been cast under the spotlight, brokers have found themselves in the cross fire. While mortgage brokers are governed by the NCCP, which ensures they act in the best interests of their clients, Kell says it isn’t always that black and white.

“Credit licensees, such as mortgage brokers, have various obligations under the National Credit legislation which directly impact on commissions.

These obligations include having adequate arrangements in place to ensure that their clients are not disadvantaged by conflicts of interest, and appropriately disclosing commissions paid or received.

“However, there may be broader structural conflicts in the industry which affect the outcome for consumers without directly conflicting with a licensee’s legal obligations. These conflicts may arise out of commission structures and other forms of conflicted remuneration.”

Nevertheless, Kell says that as long as brokers continue to deliver quality service that consumers can place their confidence in – mortgage brokers do now make up over 50% of the market – then remuneration structures become irrelevant.

IRRESPECTIVE OF THE REMUNERATION MODEL ADOPTED BY MORTGAGE BROKERS, IT IS IMPERATIVE THAT THEY MAINTAIN CONSUMER CONFIDENCE IN THE QUALITY OF THEIR SERVICE “Some credit licensees have adopted a fee for service model and sought to use this as a means of differentiating their services from that of other brokers. If consumers see additional value in these services, and demand for these services increases then we may see a greater move in industry towards this model,” he said.

“There are many factors which consumers consider when choosing a service provider, including price as well as the quality of the service.

Irrespective of the remuneration model adopted by mortgage brokers, it is imperative that they maintain consumer confidence in the quality of their service.”

TECHNOLOGY UPDATE

Pauline Worthy Channel development manager, BT Financial Group

Tony Carn Sales director, NextGen.Net

Technology revolutionises insurance cross-selling

By Jill Fraser

“Easy” was the standout word in BT Financial Group’s brief for an insurance cross-sell module.

“The whole concept was to come up with something so incredibly simple it was just ‘tick and flick’,” said BT Financial Group’s channel development manager, Pauline Worthy.

BT Financial, one of Australia’s leading investment managers and wholly owned by Westpac, approached leading electronic lodgement service provider NextGen.Net to develop a crosssell insurance module which would provide brokers with an effortless way of electronically referring a customer.

“Our brokers stressed it had to be easy: make it easy and we’ll do it,” said Worthy.

The system-generated ApplyOnline module went live last October.

Once again, technology has put the broker into “a position of power”, said NextGen.Net sales director Tony Carn.

Brokers aware of the existence of the cross-sell module love it. Now Worthy is intent on spreading the word “so brokers who want to make sure their customers are protected can see how simple it is to refer”.

While NextGen.Net has developed a number of ApplyOnline modules for add-ons for credit card and risk insurance products, BT Financial is pioneering new territory and the innovative system-generated module is the first for general insurance products.

Worthy was reluctant to reveal details of lead conversions but was persuaded to do so purely so brokers would be aware of her referral team’s success.

“Our team converts well in excess of 60% of our leads, which is an exceptionally high success rate,” she said.

“With some brokers, who secure contact times, the conversion rate is much higher. We have some brokers converting 80 to 90%.”

Westpac through BT Financial wanted to provide a tool to make brokers’ lives easier and simpler.

ApplyOnline is the market standard for electronic lodgement. It was the perfect union.

Ensuring the online referral process was straightforward, was Worthy’s focus.

“The less work for the broker, the better,” she said.

“A flag alerts brokers that a menu tab is available and a message is displayed saying, do you want to refer for other products?”

Once permission is granted, information collected on the loan application is forwarded to Worthy’s team.

“In the past brokers had to fill out a separate form and send it in. The ApplyOnline cross-sell module reuses the data already in the loan application,” said Carn.

“It’s seamless,” Carn added, admitting he’s speaking from experience.

“I’ve used the service and I can vouch for it,” he laughs.

The ApplyOnline cross-sell module is an effective tool to enable BT Financial to sight relevant information before speaking to the customer.

“So when we get on the phone to the customer we have a very clear understanding of their property and what it is we’re selling them,” said Worthy.

Cross-selling remains a massive opportunity for brokers; but while the numbers are increasing, Carn notes that in New Zealand and the UK the levels are far higher than in Australia.

“Now the process is becoming easier, the challenge is easy for more to take advantage of it,” he said.

OPINION

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How can the same person have two different credit scores?

John Dickinson of Clean Credit Pty Ltd explains how new credit reporting could cause scoring anomalies credit providers very little information to base a decision on and given the conservative nature of most credit providers, this lack of information no doubt leads to credit declines.

With comprehensive reporting, both the good and the bad will be displayed.

It is possible that a good repayment history may help offset a past negative credit listing and at least give an applicant a chance to secure the credit they seek. It’s early days and how this actually plays out is yet to be seen, however my view is more data in a credit file is a good thing.

DIFFERENT SCORES, DIFFERENT OUTCOMES

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he introduction of comprehensive credit reporting has raised many questions from credit providers and consumers alike, with one of the most intriguing questions being how a person’s credit score is determined and the differences between the older style Veda 1.1 credit files and the new comprehensive version.

One significant difference we have noted between the two types of reports is they can carry different credit scores. That’s right, a person’s credit score can differ depending on the type of report. Confused? You’re not alone!

While conflicting credit scores may not be a problem if a person’s credit score is high, it could be a real issue if the person’s score is marginal. Before I cover the possible ramifications of having conflicting credit scores, let me explain how this is possible.

Veda Advantage has recently introduced comprehensive credit reporting. These credit reports are more detailed than the older style Veda 1.1 reports which are still being offered, however Veda does intend to phase these out over time. Phasing

Until the older style Veda credit reports are phased out a credit provider has the option to purchase either the older 1.1 credit report or the new style out the older-style reports does make comprehensive report. As there is more sense, as more and more credit data taken into account when providers are turning to the new determining a credit score with the new comprehensive reports as they comprehensive reports, a person’s credit contain more data which generally score can be different from one report means better credit decisions. to the next.

One of the biggest changes between This situation potentially means that the older style reports and new an applicant could make two comprehensive platform is the applications for the same item, let’s say inclusion of a person’s repayment a credit card, and each credit provider history. While not all credit providers could be looking at a different credit are currently supplying repayment score; different credit scores could histories to Veda Advantage, I’m sure mean a different outcome. most will over time.

We recently witnessed this with a I’ve heard concerns that the client’s credit score being 93 points inclusion of repayment histories in a lower on their comprehensive report credit report may lead to more people than their 1.1 report. You may say that being declined for finance, as even if 93 points is not a lot, but what if the someone has no negative listings but client’s credit score was marginal? Let’s has an inconsistent payment history, say a credit provider triggered their this may give a credit provider reason automated credit systems to decline to question the application. While this applications where the credit score was is possible I see things in a more less than 700. Depending on which type positive light. While displaying of credit report the credit provider was repayment histories in a credit file viewing this difference could be the may lead to some credit providers difference between a system decline forming a negative view of an and an approval. application, it could also have the It’s unclear how many credit opposite effect. providers are still relying on the older Prior to comprehensive credit 1.1 Veda credit files, however I’m sure reporting only negative listings and that not everyone has migrated to the enquiries were displayed; this gave newer reports so this situation could be happening regularly.

I’m sure Veda is well aware of this and they feel the issue is transitional, meaning it will be less of an issue as the older credit reports are phased out.

However, in the meantime, I wonder how many credit providers are viewing different credit scores for the same person?

WITH COMPREHENSIVE REPORTING, BOTH THE GOOD AND THE BAD WILL BE DISPLAYED

CONSUMERS’ LACK OF CREDIT SAVVINESS

19%

of Australians incorrectly believe that having multiple lines of credit open can positively impact their creditworthiness

40%

of Australians have up to three lines of credit available to them that they use infrequently

60%

of people said their bank is meeting or exceeding their expectations on providing information about their credit profile, compared to just 45% in February 2014

Source: Experian

BUSINESS INTELLIGENCE 18

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qualities for leading transformation Leadership experts Jim Kouzes, Barry Posner and Michael Bunting share the steps you’ll need to take to lead your business through change

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rue leaders, great leaders, have the foresight to keep their people engaged, especially when it comes to the challenge of transformational change. During change leaders need to get their communications right, new processes in place, consult with key stakeholders, organise training, etc.

However, there is one key element in the change process that is all too often overlooked and undervalued.

Leadership authors and researchers Jim Kouzes and Barry Posner call it ‘Modelling the Way’, meaning: Are the leaders in the organisation modelling the behaviours needed for the challenge of change to succeed? Are they open to feedback? Do they resist the God complex and admit they are learning too? Are they totally and unrelentingly honest with themselves when they are unwittingly roadblocking change? Without the engagement of the hearts and minds of your people, successful, efficient change is nearly impossible.

Unfortunately, the moment people see their leaders failing to ‘Model the Way’, a secret resistance begins and the leaders are usually the last to know or understand this resistance.

SETTING THE EXAMPLE

Does Modelling the Way make a difference? You bet it does.

Barry Posner recently analysed more than 950,000 leadership assessments, and the data revealed that of all five practices in ‘The Leadership Challenge’ framework, the practice of Modelling

the Way – defined as walking the talk and role modelling what you expect of others – accounted for the most variance in a leader’s impact on the engagement and performance of colleagues and direct reports.

Additionally, scientific research now recognises that there are “mirror neurons in widely dispersed areas of the brain”, which program our emotions to mimic those of others.

These “mirror neurons” help followers take cues from their leaders, mimicking their behaviours not only consciously but also subconsciously.

In other words, as a leader, whether you like it or not, your people will be highly likely to mimic your behaviour, and if you are not modelling the behaviour needed for successful change, it’s likely they won’t be either.

THE CHALLENGE OF TRANSFORMATION

Transformation is a daunting and painful process. In effect, it is the death of one thing and in its place the birth of something else. This is classically represented by the caterpillar becoming a butterfly. The problem for the caterpillar is that it literally has to die, to go through the messy process in the cocoon, and what comes out, a butterfly, does not eat the same things as a caterpillar, does not see the world from the same viewpoint, and does not even have remotely the same body. That is true transformation.

Most people want to become caterpillars with wings. They want the benefit and the beauty of the wings,

but they are not prepared for the tough and usually brutal process of transformation. They want the pill, a quick fix, to somehow circumvent the messy and difficult process of the actual transformation itself. This is all too often true of organisations, but wise leaders know differently.

Great leaders know the key is to inspire change through vision, transparency, humanity, authenticity and deep listening, but they also know the process is painful and challenging and their people want and need to see them going through the process with them – in other words, change done with them, not change inflicted on them. If you want to guarantee that your change efforts fail or flounder, then just send your people the message that they need to change but you don’t.

Let’s talk about a few simple leadership strategies to keep your people engaged and really put rocket fuel into your organisational transformation efforts.

BE CURIOUS

Swap all defensive, blame-based reasoning for open-ended questions. Be curious, not defensive. Ask others for feedback, but ask it from genuine curiosity. That is not easy to do, especially if you fear difficult or challenging feedback. It’s no accident that the worst-scoring question on our 360 assessment is, “Asks for feedback on how his/her actions affect people’s performance”.

And it isn’t an intellectual challenge.

BUSINESS INTELLIGENCE

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I have never met a leader who does not intellectually understand that asking for feedback and listening is important. It’s an emotional challenge.

It’s about getting past your need for good news on how wonderful you are.

If you can develop the emotional stability and strength to keep listening, to keep opening in the face of uncomfortable feedback, then your learning curve will grow more rapidly than you ever imagined. More importantly, you will be modelling the very behaviour you desperately need from your organisation. A mindset of curiosity is the cornerstone of innovation culture, and every organisation needs innovation.

Rationalisation, defensiveness, denial and blame are the enemy of progress on every level.

MINDFULNESS

It’s time to understand that your behaviour matters in this very moment. This is where true personal transformation meets the real world.

We are often unaware of what we are doing in any given moment. We are so good at operating this way that we can drive to work and not remember the journey, walk out of a meeting and not remember much of it at all.

Behaviour change is next to impossible if you cannot self-observe from a clear, uncluttered mind. If you are not noticing mindfully what is happening in your attitude, your speech, your actions, you are playing Russian roulette with the engagement of your people. It takes a few small bad behaviours to put people offside. When you lack mindfulness, it’s too easy to be ruled by reactivity, denial and blame. To cultivate mindfulness you need to commit to bringing yourself into the present more and more.

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It sounds easy, but when you are challenging a lifetime of obsessive, distracted thinking it can be far more challenging than you realise.

INTEGRITY

I once coached a CEO who was struggling with implementing change in his organisation.

His people just did not follow through on their change commitments. He could not understand it. It turned out the problem was his example: he said yes to nearly everything – to his board, his executive team, to nearly everyone, and that was putting a huge strain on both his time and his people’s time.

Inevitably they missed deadlines, performed below standards, and their change efforts just never got off the ground. Turns out his behaviour was linked to a strong need to be liked and approved of. This is all too common in Australian leaders. He could not put clear boundaries in place and say no when he needed to. In effect, he was out of integrity; he violated the truth for his favourite addiction – being liked and approved of. Once I taught him some basic mindfulness and took him through the painful process of getting out of the addiction, his leadership changed and his organisation finally got focused.

This CEO was a man of integrity; he was committed to values and honesty, but saying yes to things that you quietly know you cannot possibly deliver, even though you want to believe you can, is a violation of integrity too, and in this case it was having a serious impact on his organisation.

200% RESPONSIBILITY

Consultants will tell you the world over that every client wants you to come in and ‘fix

5 POTENTIAL PITFALLS YOU’LL FIND ALONG THE WAY

1. Moving on to the next ‘cool thing’ too quickly. In an information-addicted culture, this is really tough to avoid. Stay the course with simplicity and accountability.

2. Not making the links for the new behaviour to the desired organisational outcomes. If people don’t know their ‘why’ for the tough challenge of changing behaviour, they will very quickly give up.

3. Not preparing leaders for the actual transformation process. Though it may be intellectually easy to understand, it’s unbelievably difficult emotionally and awareness-wise.

4. Getting the right support. If you get support from someone who has not done their own transformational work, it is inevitable that you won’t get the results you want. Ideally, you as the leader need to model this understanding.

5. Prepare for casualties. There will inevitably be leaders who do not take on the new behaviours. If the leader tolerates this behaviour, their entire organisational efforts will fail or be heavily watered down. Stand behind the importance of leadership behaviour.

things’, but what they rarely realise is that an important aspect of ‘fixing things’ is for leaders to first take responsibility for their own behaviours.

In the case of another struggling CEO, I found that he became emotionally abusive when people did not meet his expectations, then angrily took their workload on himself.

Ironically, he brought us in to help him develop real accountability and performance in his business. But he wanted us to change his people, change the system, change anything but himself. He just could not see the links between his behaviour and the organisational outcomes. In fact, like so many leaders, he was not even aware that his behaviour was supporting the exact opposite of what he was trying to achieve.

We made an agreement based on the concept of 200% responsibility, meaning he was 100% responsible for changing his self-sabotaging behaviour, while his team was 100% responsible for delivering their outcomes. It was a contract of trust and responsibility, with clear consequences and accountability for change. Five years later his team’s revenue and profit has nearly doubled, and he is no longer engaging in his self-sabotaging behaviour.

REACH SUCCESS WITH INTROSPECTION

Having the resilience to look at yourself, time and again, and not shy away from asking yourself and others how your own behaviour is supporting or blocking change, is a skill that great leaders embody.

When you can learn to cope with the emotional discomfort that comes with transformation, you’re more able to cultivate personal growth and by extension the growth of your people.

Challenge is a great teacher, and a potent motivator, but changing or improving your leadership behaviour is the epitome of personal progression.

Never stop looking at your shortcomings and finding ways to overcome them. Never stop acknowledging your strengths too; it gives you the resilience and fuel to keep looking at the tough stuff. Do that and your people will always respect and admire your leadership, and above all, they will be engaged – the research proves it.

Jim Kouzes and Barry Posner are the co-authors of the award-winning and bestselling book, The Leadership Challenge. Michael Bunting is a co-author of Extraordinary Leadership in Australia and New Zealand: The Five Practices That Create Great Workplaces , from which portions of this article are excerpted. Michael is also the founder of leadership development consultancy WorkSmart Australia (www.worksmart.net.au).

BEST PRACTICE 20

How to stop wasting time on frustrating prospects Broker Stuart Wemyss shares how to recognise time-wasting prospects

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n October that same year, the so-called ‘Mona Vale inferno’ in Sydney’s northern beaches was a devastating trucking accident caused by workplace fatigue. The human cost was tragic: two dead, five injured. Add to that the environmental damage caused from leaking fuel and massive business costs: Cootes Transport Group was hit with more than $50,000 in fines and penalties, incurred $9m in compliance costs, lost major contracts and restructured from being one of Australia’s largest transportation groups into a small, specialist transport company.

If I stand in front of the ferry terminals at Circular Quay in Sydney and hand out $50 notes, it is likely that most people will be reluctant to take the notes from me because we all tell ourselves a story. That story might go something like this; “no one would hand out $50 for no reason at all. They probably want something in return and I don’t know what it is. I’m scared. I’m not taking the money. I’m better off without the $50 than taking the risk

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of getting hassled or stooged or something like that”.

There is very little we can do to change the stories that people tell themselves. For example, I could put up signs saying that the “money is free and without obligation”… but people probably still wouldn’t believe it. Stories are shaped by our upbringing, our personality, our experiences, our belief and value systems and so on.

Would you take a $50 note from a total stranger?

People tell themselves stories about investing, property and mortgage brokers, too. Things like: • I don’t need any help. I am just as smart as they are. I can work it all out myself.

• Brokers are just in it for themselves. You don’t care about me. You only care about yourself.

• Property is too expensive. The market is going to crash.

Or • I’m hopeless with money and really need help.

• I’m not an expert and don’t have time – I need to find someone to work with.

• I have procrastinated for too long – I’m ready to take action.

I had an experience with a new prospect recently. He was a retired professor with plenty of wealth and wanted to understand if he should borrow to invest in another property.

He booked a meeting with me via a staff member in my office. He then called me the day after and asked if he really had to come into the city because it’s a pain and secondly, is it worth meeting or is it going to be a waste of his time? I didn’t promise I could add value (how do I know until I meet him?) but said it would be worthwhile and yes, he’s got to come into the city. He emailed through his financial information after the phone discussion.

He emailed me at 6pm the night before our meeting to cancel and requested a phone call instead. I told him a face-toface is better and to contact me after he returns from his six-week holiday when he has more time. He called me after he received my email response to complain – saying that I was rude and didn’t value his potential business (he told me he used to be the Dean of his university, that he knows everything, that I probably couldn’t think of any ways to help but he was open to listening in case I did, etc., etc.).

It was clear to me that this prospect was telling himself a story. His story goes something like: • He is smart. He is wealthy. He is a professor.

• No advisor is smarter or knows more than he does.

• His time is more important than mine and it’s not worth travelling into the city.

• He doesn’t really think anyone can

help i.e. he doesn’t really have a ‘need’ – something we can help him with.

There were plenty of signs of the ‘story’ he was telling himself. Little hints, the way he spoke, the words he used, the questions he asked, what he did, the statements he made and so forth. He’s probably been telling himself the same story for many years. It’s almost certain that there was nothing I could do or say to change this story.

WHAT STORY ARE THEY TELLING THEMSELVES?

The point is, you need to look for the signs or hints that indicate what story a prospect is telling themselves. And you must understand that there is nothing you can do to change their story.

Instead, find the prospects that are already telling themselves a story that is congruent with the service and advice you offer and provide a narrative for them to use (and to attract them).

For example, a prospect might be telling themselves that “they are hopeless with money, need help and want to find someone they can trust”.

Your narrative (marketing story) then should be something like (for example) “X% of Australians are poor at managing their money. You help your clients grow their wealth by doing X, Y and Z. You have literally 100s of testimonials from happy clients you have worked with for the last eight years”. This narrative will appeal perfectly to this prospect.

FIND THE PROSPECTS THAT ARE ALREADY TELLING THEMSELVES A STORY THAT IS CONGRUENT WITH THE SERVICE AND ADVICE YOU OFFER Mortgage brokers waste too much time trying to convert poor quality prospects and get frustrated in the process – the prospects get frustrated too because you are trying to sell something they don’t want to buy. I believe that it is the prospects that you choose NOT to deal with that determine how much profit you make – not the other way around. Not every prospect is going to want to buy what you are selling. Spend most of your time with the prospects that are telling themselves the right story.

And help the other prospects to move onto another broker or bank that suits them better.

Stuart Wemyss is an experienced mortgage broker and publishes a free sales and marketing blog written exclusively for Australian mortgage brokers. To subscribe, go to www.brokerrevolution.com.au

MARKET TALK

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The myth of population growth While most housing pundits would correlate population growth with rising house prices, the reality may not be so simple 1. Diversified economies vs isolated towns

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f you think a growing population automatically equals growth in property values, you’ve got it all wrong, according to a property research analyst.

Jeremy Sheppard, creator of DSRdata.com.au, says that while a growing population should suggest more demand for properties and force prices upwards, the reality is quite different.

“For decades property investors have been taught that population growth is one of the most important drivers of capital growth. Not only is population growth the most overrated indicator of capital growth, but it can be an indicator of negative capital growth,” he says.

“The problem is perpetuated by many property investment advisers, educators and so-called experts. They incorrectly interpret property data, passing on their misunderstanding to investors.”

Sheppard explains that the problem with relying too heavily on population growth figures is that there is often a gap in the data.

Not only is census data only updated every six years but it seldom categorises what has actually happened to cause the population to increase. Among other indicators such as previous price growth, population data tends to lag behind.

“People don’t move into an area and live on the streets waiting for their new dwelling to become available. Instead, they move into an already vacant dwelling.

Then the population growth figures are updated and then you and I hear about it,” Sheppard says.

“Investors need to consider population growth in terms of where people are going to move, versus where census data shows they have already moved to.”

He says this is often accessible at a local level – some councils provide population projections – but it is a difficult science.

This is especially so when projecting to the next 20 to 25 years, the average length of a mortgage.

While Sheppard believes that population growth data can be an indicator of future capital growth in some circumstances, there are many cases where the data is virtually useless to property investors. And there are some cases where the data is downright misleading.

“Rather than try to discern one case from another, you should use more effective statistics such as vacancy rates. Vacancy rates don’t suffer from issues with geographical inaccuracy, low sampling rate, or unknown data breakdown. A very low vacancy rate is an indicator of imbalance.

The balancing act is for either rents or dwelling supply to increase. If supply is limited, then there is only one option,” he explains.

WHEN DOES POPULATION GROWTH WORK? Sheppard says population growth does influence capital growth in some cases.

The most notable scenarios are: 1. When the data is for an isolated regional town 2. When the data is at a macro level, eg Australia-wide 3. When a crowd draws a crowd

NOT ONLY IS POPULATION GROWTH THE MOST OVERRATED INDICATOR OF CAPITAL GROWTH, BUT IT CAN BE AN INDICATOR OF NEGATIVE CAPITAL GROWTH – J EREMY SHEPPARD, DSRDATA.COM.AU

“Job density for an area with good transport nodes and a broad reach of external residents does not immediately affect prices in the town itself. It does, however, have some impact.

“There will always be those who couldn’t be bothered battling traffic and would rather move closer to work. If some of those commuters actually move to the same suburb in which they work, then yes, the increased jobs will affect prices,” Sheppard says.

“Isolated regional towns do not have a massive pool of workers to draw in from surrounding suburbs. Obtaining employment in isolated towns often necessitates moving there. For this reason a rise in population in an isolated town is more likely to be an indicator of capital growth potential than in locations that have many neighbours.”

But even in this situation a better indicator is reducing vacancy rates rather than increasing population. Vacancy rates are more sensitive to a rise in demand if supply is limited.

2. Macro-level data

Sheppard argues that macro-level data can show a clear correlation between capital growth and population growth. But he offers the caveat that such macro data is of little use to investors on a practical level.

“Investors can’t buy Australia. They can’t buy Victoria. They can’t buy Brisbane.

Investors can only buy one house in one street of one suburb of one postcode of one LGA of one statistical division of one region of one city of one state in Australia. The macro data is so far removed from the data investors need to know that it is virtually useless,” he says.

3. A crowd draws a crowd

An initial wave of population growth can bring with it the need for secondary services such as shops, entertainment, education, tradesmen and so on. This can bring with it a second wave of growth, Sheppard says.

“The secondary services bring with them the potential for secondary jobs. Assuming the employees move to the area, they place pressure on local housing.”

But relying on this strategy to correlate to capital growth can be risky, he indicates.

“It can take a long time for the impact of the secondary wave of population growth to affect prices. Investors using the first wave as an indicator of the second wave are taking a risk. They must firstly establish that the area is undersupplied in these second-wave services. And secondly, investors must know that the provision of such services will indeed impact housing demand.”

MARKET TALK brokernews.com.au

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What you need to know about guarantee loans As FHBs struggle to enter the market, more and more are turning to guarantors

T

he number of first home buyers turning to their parents or other family members to guarantee their home loans is on the rise, a new survey has revealed, as increasing house prices continue to lock them out of the market.

According to NAB, the proportion of first home buyers signing up for loans with the bank who have the backing of a family member has lifted to 6.7% from 4.8% in 2010, Fairfax reports.

NAB’s executive general manager for consumer lending, Angus Gilfillan, told Fairfax that increasing price pressure and vigorous competition from investors had led to a rise in guarantor home loans for first home buyers.

“It’s getting a lot tougher for first home buyers to enter the market. The rise in house prices has been pretty well documented,

HELP FROM MUM AND DAD Bluebay Home Loans offers a home loan called ‘Parent Assist’ which lets parents help their children apply for a loan without becoming liable. This means the children end up with two loans – one from the bank (for up to 90% of the house value) and the other from the parents (for a minimum of 10% and a maximum of 20%).

The bank manages the repayments, security and paperwork for the parents’ loan for the deposit.

The children make regular repayments on both loans, with the interest rate on the loan from the parents’ being half that of the main loan.

particularly in Melbourne and Sydney, where prices have increased by circa 50% since 2008,” Gilfillan said.

“All of this means that first home buyers need a larger deposit, and we’re seeing that first home buyers are, effectively, being crowded out of the market.”

The proportion of first home buyers in the home loan market lifted from a 10-year low of 13.6% in January to 13.7% in February, according to the latest housing finance figures released by the ABS. However, first home buyer loans remain well below the long-term average of 19.8%.

With first home buyers increasingly turning to their families for help in raising a deposit, a Perth-based lender which specialises in first home buyers has told Australian Broker what brokers need to know about family assistance.

WHAT BROKERS NEED TO KNOW

Director of Bluebay Home Loans Don Crellin says brokers must be careful to ensure each party knows their obligations before entering into a guarantee loan.

“I think in most cases guarantee loans work out fine for both parties. But it is really, really important that the parent or guarantee does truly understand what the obligations are – it is not just as simple as signing a paper and saying it will be OK,” he says.

“You need to look at things such as separations between parties and what happens to the properties in those particular circumstances, or if all of a sudden [your client] can’t afford to repay the home loan and the guarantor is called up and what their obligations are. In that small number of cases where things don’t go as planned, it is really important that the guarantor has been provided that opportunity to fully understand the obligation.”

Crellin even advises brokers to recommend their client seek independent legal advice.

“In terms of legal factors that can occur, particularly with guarantee loans, that’s where a very strong recommendation of that customer going through independent legal

AROUND ABOUT HALF OF ALL FIRST HOME BUYER APPLICANTS COMING THROUGH [BLUEBAY] ARE HAVING THEIR PARENTS’ HELP IN SOME WAY OR SOME FORM – D ON CRELLIN, BLUEBAY HOME LOANS

advice is really important for a broker to be able to disclose,” he says.

“You have got to be very careful as a broker, because you can’t give legal advice but you should certainly make sure that you make a very strong recommendation that all parties sit down and do understand it.”

However, guarantee loans aren’t the only option for the increasing number of first home buyers needing help to raise a deposit. “[I]f I look overall, around about half of all first home buyer applicants coming through [Bluebay] are having their parents’ help in some way or some form. Guarantees are certainly one of them, but parents helping out in terms of gifts or informal loans are certainly on the rise too.”

While Bluebay has seen more and more first home buyers relying on different types of family assistance to get into the housing market, Crellin says it is crucial that lenders continue to come up with innovative ways to help first home buyers get onto the property ladder.

“We have seen more and more coming through, but the challenge will be in the deposit gap and lenders being able to come up with innovative ways to be able to help them into the marketplace,” he told Australian Broker.

“I hope to see a whole lot of product development there, to further help first home buyers get into the property market.”

FINANCIAL SERVICES 24

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MAJOR BANK DUBS COMPREHENSIVE CREDIT REPORTING INEFFICIENT

CONSUMER ANXIETY ON THE RISE The NAB Consumer Anxiety Index rose to 61.8 points in Q1 of 2015 (60.1 in Q4/14), after a brief improvement in the previous quarter.

Government policy has overtaken cost of living as the single biggest cause of consumer stress, with higher concern evident in all categories except health.

“Government policy is now the single biggest cause of anxiety for consumers, just ahead of cost of living, while job security continues to cause the least stress,” NAB chief economist Alan Oster said.

With the increase in anxiety, consumer priorities are shifting to allocating a bigger share of the household budget to paying off debt, utilities and medical bills, while cutting back on many “nonessentials”, such as entertainment and household items.

“In terms of their overall household financial position, however, not having enough to retire on, being able to provide for the family’s future, and meeting medical costs were causing the greatest concern,” Oster said.

Mortgage, rent and housing costs scored over 50 on a scale out of 100 where 0 = ‘not at all concerned’ and 100 = ‘extremely concerned’.

The Q1 survey also showed anxiety was most pronounced among self-employed, lower income earners and consumers in Victoria and Queensland.

Those who reported a fall in anxiety were professional workers, part-time workers and consumers living in Tasmania, NSW/ACT and rural towns/bush.

FAST FACT

14TH Australia’s ranking on the FM Global ranking of businesses resilience to risk Source: FM Global

Bad managers scaring off their employees

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new study of over 7,000 working-age adults has revealed that nearly half of all workers are unhappy in their job and oftentimes, managers are to blame.

According to the survey, conducted by Gallup, half of all employees in the US have quit their jobs at some point in their career to get away from their boss.

It was also revealed that managers are also often unhappy; just 35% of managers said that they were engaged at work, while 14% admitted to actively switching off at work. Fifty-one per cent said that they were disengaged.

“I’m continually surprised at these numbers – they’re a lot lower than they need to be,” said Jim Harter, Gallup’s chief scientist of workplace management and well-being.

“When managers aren’t engaged, it affects their employees, which in turn affects productivity, whether people stay or leave, how often they’re absent, and then ultimately productivity.”

He added that considering how much time is spent in the workplace, the results could suggest that work could take a toll on a person’s wellbeing.

A major bank says mandatory Comprehensive Credit Reporting (CCR) recommended in David Murray’s Financial Services Inquiry would be costly and inefficient.

The Final Report of Murray’s Financial Systems Inquiry recommends industry efforts to expand credit data sharing under the new voluntary CCR regime. However, if participation is inadequate over time, the government should consider legislating mandatory participation.

According to Murray, this will give lenders access to an expanded range of information on borrowers through supporting efforts to expand credit data sharing between each other. The report argues that it will also ensure higher quality data, which will “lead to better credit decisions and improved credit conditions for borrowers.”

The new rules will allow credit providers to share individuals’ positive credit history data, such as loan repayment history, as well as negative credit events, such as an individual’s history of defaults.

However, in Westpac’s submission to the Final FSI Report, the major bank says that mandatory CCR would impose additional costs to the industry compared with the current model.

“For example, lenders under a mandatory approach would be required to provide all credit data for all portfolios by a specified date. This would remove the opportunity to evaluate areas of greatest benefit and to drive efficient investment in those portfolios where CCR will drive most improved decision making,” it stated.

“In contrast, a voluntary approach allows lenders to direct investment where most benefit will be realised.”

The major bank also argues that mandatory CCR would be inefficient and a waste of time.

a

AUSTRALIA FALLS ON GLOBAL RISK SCALE Australia has taken a 10-spot tumble down an FM Global ranking of businesses resilience to supply chain risk, falling from 4th to 14th.

The Resilience Index is compiled annually using three core factors of business resilience to supply chain disruption: economics; risk quality; and qualities of the supply chain itself.

Using GDP, political risk, vulnerability to oil shortages and price shocks and natural hazard exposure, amongst other metrics, FM Global is able to create a relative measure of a country’s resilience to supply chain risk.

Australia ranked 14th overall, its first ranking outside of the overall top 10 since 2011, and a spokesperson for FM Global noted that the ranking drop was related to a number of factors.

“Supply chain risk is one of the most unknown forms of risk facing many businesses today.

“Australia dropped 10 points this year due to a number of contributing dimensions of a nation’s resilience to supply chain disruption. Vulnerability to an oil shock (shortage, disruption, price hike), quality of natural hazard and fire risk management, and the inherent exposure in the country and perceptions of local supplier quality all dipped this year.

“Other countries may have made bigger gains, relatively speaking, in their overall resilience, which would also have pushed Australia down in the overall rankings.”

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, March 2014

APRA could put speed limits on the housing market

In light of a rapidly heating housing market, APRA last year said it could use macroprudential tools to cool property activity. The regulator said a “more heightened response” could involve the use of macroprudential tools such as “speed limits” on high loan-to-value lending, floors on housing loan risk-weights and early implementation of the Basel III countercyclical capital buffer.

What’s happened since?

The spectre of macroprudential tools has yet to abate, albeit it also has yet to materialise. While APRA and the RBA have continued to mention the measures as an option should housing growth become unsustainable, the IMF has also suggested the use of macroprudential policy to slow housing growth. Some of the rhetoric around the measures has died down, however, as house price growth has slowed.

HIA thinks first homebuyers will return soon The Housing Industry Association claimed last year that the low share of first homebuyer participation in the mortgage market was a “temporary phenomenon”.

The group rubbished claims that investor activity was squeezing first-time buyers out of the market, and touted the return of first homebuyers as housing market confidence grew.

What’s happened since?

The mooted return of first homebuyers has yet to eventuate. In fact, first-time buyer activity hit a 10-year low at the end of 2014. ABS data released in February revealed that first homebuyers’ share of new loans fell 0.1% to 14.5% in December. This figure was the lowest since May 2004 and showed a steady decline since May 2012.

Moreover, the figures confirmed that growing investor demand could be responsible for pushing first-time buyers out. Investor demand surged 6% in the month and the segment accounted for approximately 41% of all new loans written.

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RBA’s cash rate hold will have investors thinking

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he Reserve Bank’s decision to hold the cash rate at 2.25% at its April meeting was a surprise to some. But reporting around Sydney’s rocketing house prices may have been a factor in staying the RBA’s hand.

CoreLogic RP Data’s executive general manager of commercial Craig Mackenzie said the Sydney property market would have factored into the RBA’s decision.

“Certainly, the Sydney property market experienced a very strong month in March with values up 3%. We’ve seen clearance rates over 80% in Sydney now for about a month since the February rate [drop], so certainly the heat in the Sydney property market at the moment would have played a role in the Reserve Bank’s decision to keep rates on hold,” Mackenzie said.

Mackenzie predicted that the RBA’s move would bring a degree of temperance to the market.

“I think people perhaps might not have quite the degree of exuberance they would have had had rates been reduced. I still think the rate of growth will continue to slow, but I think we’ll still see modest value growth across most Australian capital cities,” Mackenzie said.

As for investors, Mackenzie said many would be thinking carefully about where to put their money.

“Obviously, there are lifestyle choices, there are investment return choices. In terms of the property market, with rental yields in Sydney around 3.5%, investors obviously would be factoring in capital growth opportunity in the years ahead.

I think, though, when making the choice between property or superannuation or managed funds or fixed interest or the share market, the returns in each of those other markets are relevant in deciding whether to invest in the property market or not,” he said.

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

FORUM 27

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Suncorp says majors control broker market The non-major has claimed the big four are taking control of the third party channel

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uncorp has urged the government to act on recommendations to improve transparency in the mortgage broking industry, as major banks are “increasingly taking control of the broker-originated home loan”.

In its submission to the Final Report of the Financial System Inquiry (FSI), Suncorp argued that greater transparency and pre-sale disclosure be introduced to ensure consumers understand the level of independence, or otherwise, when using mortgage brokers.

EQ Broker argued that the only end result that mattered was whether or not the client got a good deal.

“While I agree that the big banks are increasingly taking ownership of smaller lenders and aggregators, I deny the premise that this is at the value proposition of a broker. Yes, the profits may be more and more ending up in the hands of the big four, but what does my customer care where the profits go, so long as the loan is suitable to them and a good deal for them?”

John Whitten said bank ownership of aggregators had no influence over where brokers chose to direct clients.

“My aggregator is owned by a big bank, and that has no influence on where I put my loans. My concern is always what is best for my client. If my aggregator directed me to put loans to a specific lender, I would leave them immediately. In saying that, I have no problem advising clients that my aggregator is owned by a major bank. Maybe if Suncorp improved their service proposition to brokers, they might get more business from us and not have to resort to this rubbish.”

Craig Budden claimed that Suncorp’s issue was due to its policies rather than the influence of the majors, and that the lender was getting more broker business due to

recent changes. “I think Suncorp needs to look a little closer to home if they’re not getting their share of the market. They dropped off the radar for a long time, as their product/rate offering wasn’t competitive.

Only recently have they sharpened their pencil to attract business under 80% LVR, so they have started getting some business from us again where appropriate.

“When you’re not doing very well, sometimes the easiest thing to do is blame everyone else for your short comings.”

James agreed, and said narrow policies – not the influence of the big four – kept brokers away from non-majors.

“I think Suncorp needs to take a long hard look in the mirror. Lending policy and LMI agreements have a far bigger impact.

Many smaller lenders such as Suncorp have too narrow a view on what they will and won’t look at lending wise.”

And Carlo said that, while transparency was important, most aggregators had some measure of bank ownership. He said this did little to effect brokers’ decision making.

“Transparency is key; however, any professional broker would show you in words and actions that the customer is placed with the best loan for them. If not, then the broker market and customer satisfaction would not be as healthy as it is. The vast majority of brokers have a bank or lender on their register, and the brokers will tell you that the influence is nil. CBA have interests in Mortgage Choice, Aussie and NMB. Macquarie has interests in Connective, AFG, Vow (through YBR) and others. NAB has interests in PLAN, FAST and Choice. Even Resimac has interests in John Kolenda’s FinSure group. This is all nothing new and does not seem to affect the product decisioning. However, true transparency for the consumer is a must.”

SETTLE DOWN

ABOUT SYDNEY PRICES

AMP economist Shane Oliver has said Australia’s high house prices have put households in a vulnerable position. Amid talk of unsustainable prices in Sydney, one commenter pointed out the fundamentals underpinning the market.

“Why do so many people think Sydney prices are unsound? Is it simply because they can’t afford them? If so, that doesn’t make them unsound.

Unaffordable, yes. Unsound, no.

Common sense dictates that if you have a population of 4.5m people all trying to live within a 10–20km range of the CBD, prices are going to be pushed up by those with deep pockets who can afford the prices, at the expense of those who can’t.

Land in inner city locations is a finite resource. Once it’s gone, it can’t be replaced. It doesn’t sound like speculation gone mad to me, simply a supply and demand equation. Oh, and while I’m on the subject, how about we stop referencing the incometo-price ratio, and start comparing house buying costs to rental costs.

Because looking in from the outside where I’m sitting, it is cheaper to buy than rent. I’d much rather pay my ‘rent’ to the bank so I own an asset in 30 years rather than pay off someone else’s asset. But then again, I choose not to live in Sydney, so I don’t face the problem! Perhaps it’s time for those trying to buy in Sydney to start looking at their lifestyle choices and the potential for living elsewhere.”

Tom on 13/04/2015 at 10:51AM

ADVANTEDGE RUBBISHES CONFLICT CLAIMS Advantedge’s Brett Halliwell recently dismissed claims from Suncorp that bank ownership of aggregators or white label funders represented a conflict of interests.

Regional Broker on 10/04/2015 at 8:55AM “I am a PLAN broker and his comments are spot on, yes, we use the white label product, but it is not our major source of loans. We are not pushed or forced to use them and their commission structure is not set up to give me an incentive. It is a good product.”

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

PEOPLE 28

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Road trip for a reason: postie scooter style Mortgage Choice Unley’s Greg Campbell is travelling the expanse of Australia to support children’s cancer charity, Camp Quality

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hen not running his busy Mortgage Choice branch in Unley, Adelaide, franchise owner and loan consultant Greg Campbell donates much of his time to Camp Quality.

On 4 May, dressed appropriately as storm troopers for Star Wars Day, he and three clients will take their commitment even further by embarking on a two-week, 5,000km journey from Perth to Sydney, using postie scooters to get them there, carrying swags to rest in at night.

“One of the things that I’ve always wanted to do was ride a postie bike from Perth to Sydney – don’t ask me why!”

So he decided to combine the trip with a good cause and has had overwhelming support from his clients and contacts within the mortgage industry.

He’s had donations from clients, banks, BDMs and even from client and professional racing cyclist Jack Bobridge. The Westpac Mortgage Centre and their staff have raised $4,500 which the bank will match dollar for dollar. The Commonwealth bank has donated signed cricket bats and signed pictures through their

IT’S ALL ABOUT THE HEALING POWER OF LAUGHTER

Australian Cricket sponsorship, and Campbell’s contacts in the AFL have given them Adelaide Crows memorabilia to auction off.

“Our industry is a good industry to network within because all the people in our industry are generally fantastic,” says Campbell.

Client Burson Autoparts just called him out of the blue and said, ‘Greg, we’ll sponsor you.’

The trip will be entirely self-funded with a goal to raise $50,000, and it’s looking good with ‘bogan bingo’ nights and charity auctions selling out.

Camp Quality receives no government funding and relies entirely on fundraising done by volunteers like Campbell.

But it’s not only about raising money for the charity, but about raising awareness, says Campbell, who will keep having fun riding his bike with all the Camp Quality stickers on it after the trip is over.

Being a volunteer with Camp Quality for 16 years, it was a natural step for Campbell to choose it as his charity to support.

“Camp Quality is a children’s charity which is all about fun and laughter and ‘Laughter being the Best Medicine’,” says Campbell. “It’s so much fun and the kids have such a great time.”

After completing the Kokoda track for charity, he also does local talks about the experience, and as a camp leader organises mini-camps for 4–6 years olds of Camp Quality.

“You get to have lots of fun. The kids have fun which makes it fun.”

Campbell recognises the parallels between the values of his business and those of Camp Quality.

“Most of my clients and my staff will tell you that you’ve got to have fun when you’re at work, and with Camp Quality being all about fun and laughter, this is very much how I try and model our business and our staff; so they’ve got to have fun. I ask them probably once a week if they’re having fun. Because if you’re not having fun, what’s the point?”

His business, along with many of the Mortgage Choice franchises, also supports Ronald McDonald House, which a lot of the campers at Camp Quality use.

A Camp Quality doctor dared Greg to dress up as a different super hero every day and is donating $25 per super hero outfit. Check out Greg’s Facebook page below: https://www.facebook.com/ pages/Coast-to-Coast-for-CampQuality-2015/913785888674415

And with a new recruit and three loan writers in the business, Campbell can set out on his adventure knowing his clients will be in good hands.

“Whilst I’ll be gone, the wheels should still keep turning. I find that when you actually say you’re going to do something it makes you do it. It’s the same in business; if you say you’re going to do something, you write your list, you put it out there, then you’ve got to do it – you’re committed.”

For more information and to support Greg visit: https://give.everydayhero.com/au/greg-robbo-jaijules-go-postal-for-cq http://www.campquality.org.au/

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CAUGHT ON CAMERA 29

IN FOCUS

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estpac’s broker distribution team recently held its Broker Roadshow event at Randwick Racecourse.

The County Fair-themed event featured sack races, egg and spoon races and face painting, as well as a presentation from Young Australian Entrepreneur of the Year Brad Smith.

INSIDER 30

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Your home is your castle

For those who take the old saying literally, there are several literal castles up for grabs

CRAZY EXEC PERKS Employee perks are a great way to show your workers you care, but forget fitness subsidies and extra vacations – these companies have taken tailored benefits up to the next level.

Commuting in the clouds

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ost kids dream of living in a castle – the draw bridge, the expansive grounds, the magical forest and, if you’re lucky, the moat.

Well, for those grown-ups who haven’t let the dream die, here are the best castles up for grabs.

USA: • Tiffany Castle, Kansas

This 4,200-square-foot castle was built by Kansas City’s first optometrist. The good doctor loved European castles so much that he designed his own. And clients with $600,000 lying around can call this place home.

• The Woodstock Castle, Connecticut

While most castles make you think of fairy tales, this castle is something straight out of a horror movie. It was built by the eccentric great-grandson of Chicago industrialist Clayton Mark Sr., quickly developed a sad history involving a bitter divorce, a weird modelling gig and a dead camel (Curbed has more on that). Still, your client can buy the place for $45 million.

CANADA: • Woodleigh Replicas, Prince Edward Island

The countryside castle comes with two ponds, a courtyard, two bridges and a craft shop, all over 20 acres. The best part, though, is the price: $289,000.

• Castle Manor, New Brunswick

OK, so technically your clients missed the boat on this New Brunswick castle. The 19,000

square-foot abode has its own chapel among another 58 rooms, and it was a steal – listed at just $699,000. However, the listing agent said the castle could need up to $1.5 million in renovations.

Covering travel expenses is a huge incentive for some employees – especially so for senior executive Barry Diller, of Expedia. The business magnate racked up a $1.28m bill in personal flight time – all covered by the company.

• Argyle Castle, Ontario

This property has everything your clients could need in a castle: sitting rooms, libraries and parlour (oh my!), as well as six bedroom suites, a coach house, 10 fireplaces, private balconies, and your run-of-the-mill castle gardens and ponds.

• Île Gagnon, Quebec

Who needs a moat when your castle is built on a private island? That’s how you’ll sell this 24,000 square-foot property to your castle-seeking clients. And when you show this six-bedroom, six-bathroom house, you’ll be able to drive over the private bridge and past the security post at the entrance (your clients’ very own border patrol). Or, you can just fly in: there’s space for a helipad.

EUROPE: • Siena, Italy

This is, by far, the most impressive castle on our list – and the $53 million listing price proves it. The 154,139 square-foot 12th Century medieval castle is located on 630 hectares, surrounded by 1,500 olive trees. It also comes with 115 bedrooms, 100 bathrooms, a handful of Tuscan farmhouses, a courtyard with a tower, a chapel, marble floors, painted ceilings, gardens and several pools.

Executive dude ranch

Insurance company Fidelity National Financial spent $453,382 entertaining executives at the ‘Rock Creek Cattle Co’ – a 28,000-acre, working Montana ranch.

But this was no dry ranch…

Fidelity also coughed up $55,000 at nearby wineries.

Top-notch tax preparation

Accounting support, particularly for busy executives, seems a fair enough perk to put in place – but the benefit ballooned to outrageous proportions at SandRidge Energy. CEO Sam Ward reported receiving $783,533 worth of accounting support from employees in just one year.

MEETINGS SUCKING THE LIFE FROM YOUR TEAM Team meetings, check-ins, employee updates – whatever you call them, and however often you have them, there’s one thing they have in common: your employees hate them – but it might surprise some employers to learn just how much.

In a recent Harris poll, 46% of respondents said they’d prefer to do almost anything else than sit in a lengthy team meeting. Some of the

more humorous examples include:

17% would rather watch paint dry 8% would rather endure a root canal 7% would rather get a mullet hairstyle 6% would rather move to Antarctica Perhaps what’s most worrying of all is the amount of time employees admit

is wasted. The average employee spends four hours a week in meetings and an additional 4.6 hours preparing for them – but a huge 35% said they were “a waste of my time.”

In other words, these meetings cost the average company one day a week of work time per employee. A company or team that eliminated them could see productivity increase by about 20%.

Housing allowance

Almost unheard of for most employees but Bermuda insurers Platinum Underwriters Holdings spent $432,000 on housing for its CEO and a further $800,000 for three other high ranking team members.

“Being recognised as one of the industry’s best is a massive honour.

I come from a relatively small regional centre where volume and loan size aren’t what they are in metro areas so it just goes to show that if you work hard and keep your client at the heart of everything you do then anything is possible.

Winning the Australian Young Gun of the Year award has provided some outstanding publicity and has really improved the profile of my business.”

George Farmer, Aussie Bundaberg, Australian Young Gun of the Year

Friday 30th October 2015 The Star Sydney Event Partner

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