Australian Broker 12.10

MARCH MAY 2015 2015 ISSUE ISSUE 12.05 12.10

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS A DIVERSE LANDSCAPE

How brokers can bring diversity to their revenue and to their clients P10

+ OPINION CREDIT REPAIR WHISTLEBLOWING

An insider’s perspective on bad behaviour P12

+ ANALYSIS BROKERS IN THE CROSSHAIRS A consumer group’s campaign to sully the industry P14

Mark Bouris: OWNING SCALE Yellow Brick Road’s chairman on the franchise’s future growth plans

Y

ellow Brick Road has been an ambitious project from the start. The franchise brokerage sought to break the mould by serving as a one-stop shop, and growing its retail footprint quickly. Last year, the business branched out in distribution by acquiring wholesale aggregator Vow Financial and non-bank lender Resi Home Loans. YBR chairman Mark Bouris said it’s a strategy that’s set to continue.

FULL STORY PAGE 16

+ SPECIAL REPORT REGIONAL BROKERS

Some of the country’s best from outside the capitals P18

+ CAUGHT ON CAMERA AT THE MFAA’S ANNUAL CONVENTION P28

NEWS 2

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NUMBER CRUNCHING THE SIZE OF SMALL BUSINESS

CORNERING THE MARKET

NUMBER OF EMPLOYEES IN AUSTRALIAN BUSINESSES

BROKER MARKET SHARE FOR DIFFERENT BORROWER SEGMENTS

Source: Genworth

1-

EM PL OY E 5-

27%

EM

ES

4

EM PL OY E

61%

PL

OY E

ES

19

10%

A total of 54,686 home loans were approved over the month of March, up from 53,811 on the previous month and the highest number of home loan approvals since September 2009

NO

Proportion of recent first homebuyers who say they applied for their home loan through a broker

54,686

ES

65%

BY THE NUMBERS

S

2%

M T OR EM HAN E PL 20 OY 0 EE S

FAST FACT

6%

2 EM 0-19 PL 9 OY EE

1%

Source: ABS

2.5% OTHER

COMMERCIAL BORROWERS

14%

FIRST HOMEBUYERS

37%

OWNEROCCUPIERS

40.5% INVESTORS

Source: QBE

Source: IBISWorld

WHAT THEY SAID...

SIOBHAN HAYDEN

BRETT MCKEON

JOHN DICKINSON

PETER WHITE

“Going around the country and talking to brokers, they were very clear about the importance of consumers being educated about [their] professionalism” P4

“We believe listing on the ASX is the best avenue to ensure AFG’s sustainable growth” P4

“I would hope that credit repair companies who are not behaving correctly will either change their ways or get out of the way” P13

“I am confident that our members put the best interests of the customer first, and it is unfortunate that there are those in our industry that let usw down” P14

NEWS 4

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AFG readies IPO

■ AFG has lodged a prospectus with ASIC for an

BY THE NUMBERS

Siobhan Hayden

MFAA ANNOUNCES MAJOR CONSUMER AD CAMPAIGN ■ The MFAA has announced the

approval of a $1m consumer-focused marketing campaign.

Speaking at the MFAA National Convention in Melbourne, MFAA chief executive Siobhan Hayden said the association’s board had approved a $1m spend for a consumer focused marketing campaign.

“Going around the country and talking to brokers, they were very clear about the importance of consumers being educated about the professionalism of brokers. Based on that feedback, I went through the budget and have gone to the board with the request of $1m for a consumer awareness campaign,” Hayden told Australian Broker.

Hayden said the look and feel of the campaign and its execution was yet to be decided, but said initiatives such as a financial literacy campaign and research on broker professionalism and experience would underpin the campaign.

“We need to go to the market now with that $1m over the next 18 months to decide what we will deploy, but it’s very exciting,” Hayden said.

6.5% Business confidence dropped 6.5% in April to its lowest level since August 2011 Source: Roy Morgan

IPO on the Australian Securities Exchange. The aggregator said its IPO was expected to raise between $121.3m and $140.1m, based on a price range of $1.20 to $1.38 per share. Around $35m will be raised by the issue of new shares by AFG, while around $95.9m will be raised by the sale of shares by existing shareholders.

“We have received a number of offers for the company since we started operations more than 20 years ago, but we believe listing on the ASX is the best avenue to ensure AFG’s sustainable growth and to retain and attract brokers to our network,” AFG managing director Brett McKeon said.

McKeon said that the funds raised by the IPO would be used to purchase the equity of certain existing shareholders and to provide funding for operations and growth. McKeon forecast the group’s public offering would deliver benefits to future shareholders. “We have shown a consistent ability to generate profits through the residential property cycle and with almost 50% of our revenues being generated through trail commission on the existing AFG Loan Book, we believe we have an attractive mix of recurrent earnings and growth.”

Brett McKeon

ASIC CANCELS PROPERTY SPRUIKERS’ CREDIT LICENCE

■ ASIC has cancelled the credit licence of a property spruiker.

The regulator announced it had cancelled the credit licence of a company formerly called Heritage Financial Solutions Australia Pty Ltd and Heritage – Freedom & Security Pty Ltd. The company – currently called David Parry Finance Pty Ltd – was placed into liquidation on 26 March 2015.

ASIC said the cancellation was the result of an ongoing investigation into the conduct of a group of people related to Heritage Financial Solutions involving advice given to investors to establish an SMSF to invest in Queensland real estate. ASIC said that it had “concerns about the way the loans and property ownership have been structured”.

“Investors who obtained advice or finance from people associated with the company formerly known as Heritage Financial Solutions should contact their lender and if necessary, obtain independent professional advice to ensure that the loans to their SMSFs and their property ownership have been structured in compliance with the Trustees’ superannuation law obligations,” ASIC said in a release.

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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

Vow announces new referral program

WORLD NEWS UNITED STATES OF AMERICA

OBAMA AND CONGRESS SAY NO TO RAISES FOR FANNIE, FREDDIE CHIEFS

■ Vow Financial has announced the

launch of a new commercial referral program for brokers, which it says will help brokers diversify their business and keep their clients sticky.

Tim Brown Vow CEO Tim Brown said the commercial referral partnership will allow brokers to service the commercial needs of their clients, without having to take time out of working on their core residential business. “[The commercial referral partnership] means [brokers] can access someone who has the necessary commercial expertise who can complete the deal,” he said. “What we don’t want is our brokers getting tied up on corporate commercial deals that they don’t understand, spend a lot of time on, then lose the deal and potentially take the focus from what they do best which is writing residential.”

The commercial referral partnership will also offer brokers a referral fee for referring the client to Vow Commercial.

“What we are doing is giving [brokers] the ability to access that expertise and still earn something from the transaction,” Brown said.

DID YOU KNOW?

$44 The RBA’s 25bp cut decreases the average monthly mortgage repayment by $44, from $1,742 down to $1,698 Source: Mozo

Pepper expands Asian footprint ■ Pepper has announced it has purchased stakes in two leading consumer

finance lenders in Hong Kong and southern China markets, in another step towards developing its Asian network.

The non-bank has purchased a 12% stake in PrimeCredit Limited and Shenzhen PrimeCredit Limited. The acquisition broadens Pepper’s footprint in Asia and includes a team of 541 people in Hong Kong and 118 in Shenzhen focusing on origination of personal loans and credit cards, with assets under management of $US1.15bn.

The non-bank says PrimeCredit will extend its already strong Hong Kong market presence into the fast growing Chinese consumer finance market. It will also grow Shenzhen as a hub to build into other regions in China.

PrimeCredit is the leading consumer finance provider in Hong Kong across its peer group of deposit-taking companies and other non-bank financiers. It has a total customer base of more than 132,000.

“This is an exciting next step in the development of our Asian network.

Pepper’s team will work closely with our local strategic partner CTS [China Travel Financial Holdings Co] to provide strategic and operational advice to PrimeCredit management to further expand its microfinance business across the Chinese market,” Pepper’s co-group CEO Patrick Tuttle said.

US President Barack Obama and Republican lawmakers are agreeing on something. Obama’s administration has sided with Republicans – as well as Democratic lawmakers – in attacking a plan that could result in potential pay raises for top executives at Fannie Mae and Freddie Mac, according to a Bloomberg report.

The mortgage finance giants have operated with government backing since being bailed out in 2008. Their regulator, the Federal Housing Finance Agency, has said that Fannie and Freddie could submit proposals for new pay plans for their respective chief executives, Timothy Mayopoulos and Don Layton. Mayopoulos and Layton each made $600,000 last year, while some senior employees at the companies made even more, according to Bloomberg. FHFA Director Mel Watt said the current compensation plans at Fannie and Freddie limit their ability “to promote retention of their CEOs, to develop reliable CEO succession plans, and to ensure continuity of operations and organizational stability.”

But many lawmakers – and the White House – aren’t happy about the idea of raising the pay of CEOs whose companies are propped up by taxpayer dollars.

CANADA

MORTGAGES COULD BE EMERGENCY COLLATERAL

The Bank of Canada announced some proposals that are aimed at protecting the country’s financial system in the event of another financial crisis. The bank’s deputy governor Carolyn Wilkins announced the plans which it hopes will reduce the risk to financial institutions and cut taxpayers’ exposure. The BoC wants to ensure that all banks and mortgage lenders have ‘living wills’ to avoid a meltdown, and without such plans they would be ineligible for a state bailout. Mortgages may also be accepted as collateral against emergency loans for financial institutions. Wilkins stated: “We are adjusting the range of collateral we would accept as a last resort for emergency loans. This collateral could include mortgages, which would give a stressed institution more capacity to accept ELA in an emergency. To be clear, this would only occur after all other collateral had been exhausted.”

NEWS

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8

PEER-TO-PEER LENDER REPORTS STRONG BROKER SUPPORT

Aggregator claims record month

■ ThinCats Australia, launched last

performance continued during April with AFG processing a record amount of mortgages for the month.

The aggregator processed a total of $4.38bn in mortgages over April. This compares with $3.67bn in April 2014.

In keeping with seasonal trends, the figure is somewhat lower than the $5,236m recorded for March because of the Easter holidays, when property markets are typically more subdued.

The result reflected increasing Victoria investor activity, combined with already strong NSW investor activity. AFG processed a higher proportion of home loans for investors in Victoria last month Mark Hewitt than ever before at 40.9%, up from 36.7% in March 2015, and 36.9% in April 2014.

In NSW, the proportion of investor mortgages remained around its all-time high of 52.8% of applications.

“Investor activity in both Sydney and Melbourne is now at the highest levels we have recorded in 21 years,” Mark Hewitt, general manager of sales and operations at AFG said.

“Elsewhere it’s a different story – for example in Western Australia, where first homebuyers comprise a much larger proportion of buyers than elsewhere, property investment cooled somewhat last month.”

December as a challenger to the major banks in the SME lending market, said it has now signed up more than 80 finance brokers and 150 lenders to its platform. It has also completed its first three loans.

The P2P lender has delivered its first loans at interest rates ranging from 11.5% to 14% to a diverse SME base, including a stone importer for the building industry, a commercial solar energy systems supplier and an industrial and commercial auctioneer.

The ThinCats platform is a joint venture with ThinCats UK, which has completed more than $190m worth of secured business loans over the last four years and is one of the two leading peer-to-peer business lenders in the UK. CEO of ThinCats Australia, Sunil Aranha said the P2P lender has a strong pipeline now in place for 2015.

“We are delighted with the response from lenders, borrowers and brokers to our unique platform, targeting specifically the millions of small to medium businesses whose financial needs are often ignored by the big lenders.

“We have already found a good niche with the SMEs, which borrow about $73bn a year to finance their operations, and expect to build our portfolio of loans quickly as sophisticated wholesale investors discover the potency of our platform. We are also generating a lot of interest from finance brokers, who will be well rewarded as they bring loans to the platform.”

According to Aranha, the global market for P2P lending is currently worth over $6bn and doubling in value every year, as the concept gains broader understanding and acceptance.

■ The housing market’s strong 2015

FAST FACT 4.4% Increase in new home sales for March Source: HIA

Brokers outstrip other channels for ANZ

■ ANZ has reported a 17% growth in home

Sunil Aranha

loan sales, with growth in the broker channel outstripping that of the proprietary channel.

According to the major bank’s half-year results to March 2015, home loan sales across all channels increased 17%, to $30 billion.

The major bank has now achieved above system growth for the past five years.

ANZ’s broker channel is now growing at 1.3x system growth, while the proprietary channel is growing at just 1x system growth. According to the results, the broker market share in the bank’s main NSW and ACT markets increased by 1% over the 12 months to March, while the proprietary channel market share decreased by 1%.

Broker market share of ANZ home loans in NSW and ACT is now 47%, while the proprietary channel is slightly more, at 53%.

The results also revealed that owneroccupier loans make up 60% of ANZ’s home loan portfolio, 43% of mortgage holders are ahead on their repayments, 35% are paying interest only and the average loan size at origination is $376,000.

ANALYSIS 10

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Diversification: More than just products A new report has flagged diversification as a major issue for mortgage brokers Cory Bannister, La Trobe Financial

Peter Schembri, Eastwood Securities

Greg Pennells, Wealth Today

D

iversification is one of those perennial issues in mortgage broking that it seems will never go away.

Aggregators and lenders often tout the necessity for brokers to look outside residential mortgages in order to future-proof their revenue.

Now, a new report has added fuel to these claims.

The MFAA recently commissioned an Ernst & Young report on the mortgage broking industry. The report identified key areas that could emerge as threats to brokers in the future. Revenue concentration was a key concern, with the report stating that the current focus of brokers in providing a single product created potential risks. The concentration of revenue heightens risks associated with a dislocation in the market – whether this is due to a correction in property prices or regulatory intervention – as well as the fact that many customers prefer to take care of all their financial needs under one roof.

The report went on to urge brokers to take the opportunity to broaden the service they offer to their clients, and said there were a few logical areas in which brokers should look to involve themselves.

“Brokers should be looking to broaden the solutions they advise customers (with or without remuneration). The logical extension would be products associated with a mortgage, such as home and contents or landlord insurance.

Additionally, brokers can play a role in assisting lenders gain

MFI market share via transaction and savings accounts,” the report said.

Wealth Today managing director Greg Pennells argued that insurance products in particular constituted a missed opportunity for brokers.

“For the last 25 years mortgage brokers have just been delivering basically loan products to their clients. I was one of the first mortgage brokers in Australia 25 years ago. Coming back into the industry and having a look at it, I think one of the things we’ve missed and that still seems to be missed is that borrowers actually need a safety net,” Pennells said.

But more than just an opportunity for income, Pennells believes offering insurance is part of a broker’s duty of care.

“We’ve all been around long enough now to know we’ve given loans to customers, we’ve gotten them into debt. Life’s issues can come along. There could be death, there could be sickness or various reasons why people are not able to afford their mortgage anymore.

I actually think it’s part of the mortgage broker’s responsibility to step up and say, ‘Look, I’ve got you into debt. I’ve got you a loan. Let me provide you with an adequate safety net so that if anything does happen to you at least you’re going to be covered and the family is not going to lose the family home’,” he said.

MORE THAN JUST PRODUCTS

But diversification is about more than just a product suite. In addition to missing out on

DID YOU KNOW?

3x

Major banks are nearly three times more likely than brokers to cross-sell insurance to mortgage borrowers (56% versus 19%) Source: QBE

11

brokernews.com.au

DIVERSE DESIRES

MISSED OPPORTUNITY? Proportion of customers who say their brokers offered them insurance

7%

Home and contents insurance

6%

Landlord insurance

8%

Mortgage repayment insurance

10% Life/income protection

Products clients would be interested in being offered by their brokers

19%

Any insurance product

Source: QBE

opportunities to offer a broader range of products to their clients, Eastwood Securities executive director Peter Schembri said many brokers could be missing an opportunity to serve a broader base of clients.

“It’s probably pretty well established that there’s less than 30% of brokers currently that would deal with more than one non-conforming loan a year.

There are a lot more potential borrowers than that out there,” Schembri said.

Eastwood Securities, which is a specialist property funds management company, offers options beyond even traditional non-conforming lenders, Schembri said. He argued that brokers should be aware that such options exist if they want to diversify their client base beyond prime borrowers.

“It’s a case of really understanding more than just the regular non-conforming lenders that can then help them deal with more complex loans. The skillset is not greatly different. It’s just a case of asking questions in order to elucidate firstly exactly what it is that borrower is trying to achieve,” Schembri said.

“Really what we’re talking about is bridging finance. It’s short-term lending specialists. What we’re really looking for firstly is the ability to service the loan in the short to medium term, or perhaps there’s a really clear exit strategy. An option might be capitalised or prepaid interest.”

With this in mind, Schembri said diversifying a client base is as simple as being aware of the options available to a diverse range of borrowers.

“It’s not overly complicated. It’s a matter of understanding that there are private lenders that are specialists in this non-conforming field that can help, and really just asking questions of both those lenders and the actual borrower to understand how best to formulate a solution for their particular problem,” he said.

Raising this awareness is critical for lenders offering a diverse product range, according to La Trobe Financial head of distribution Cory Bannister. Bannister said the lender was employing a few important strategies to make brokers and borrowers aware of diversification opportunities.

“There’s probably three ways we can do that. The first is through product positioning. We purposely position our products in such a way that we capture the market that sits just outside the traditional bank lending space anyway,” Bannister said.

“The second is through our credit assessment policies. All of our loans are manually assessed. Often we pick up the loans that the automatic credit scoring models fail to approve. We can look at them on a case-by-case basis.

“Third, I think it just comes back to the old-fashioned service proposition.

Everybody is really active in this space, but it’s something we’ve been really strong on for 62 years now and will continue to be. It’s just trusting in what you’re doing and doing it well and the rest will come.”

For Bannister, this means that the onus for diversification isn’t completely on brokers. Just as important, he suggested, is for lenders to better communicate the diverse product ranges they offer and how these products can aid brokers’ clients.

“We feel as though we’ve got probably Australia’s broadest product suite now, particularly in the non-bank space. For us it’s really being able to articulate that message to brokers, understanding that, yes, we can do residential near-prime loans as we always have done. We can also do commercial, construction, self-manager super fund, non-resident, rural. The product suite is really broad, so our challenge this year is to be able to articulate that to brokers and for them to understand what we can do.”

32% Insurance products

32% Credit cards

22%

Savings accounts

23% Everyday transaction accounts

49%

None of these

Source: MFAA

OPINION

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12

Credit repair – blowing the whistle from the inside Clean Credit’s John Dickinson calls out bad behaviour of some credit repairers

T

here’s a lot of confusion about how credit repair works, or should I say how it’s meant to work. I feel the main reason for this confusion and perhaps why the industry has a questionable reputation is due to the behaviour of some so-called credit repair companies.

Let’s start by being very clear about what the aim of credit repair should be. Credit repair is the process of helping people get disputable credit listings removed from their credit file so they are able to move forwards with their lives again. The focus should be about helping people.

I won’t name and shame anyone in this article, however, I’m sure many reading this who have had a bad experience with credit repair, for either themselves or their clients, will identify with much of what I’m about to say. The sad reality is there are a number of credit repair companies whose sole intention is to take money from their clients and then do as little as possible, if anything, with regard to restoring their credit file. This behaviour is at best lazy and at worst deceptive and misleading. In many cases, these companies will offer people a guarantee that they can repair their credit file, when in reality no such guarantee can be given. This is all in the name of wrongly taking money from people.

I’ve heard of situations where a credit repair company has told its clients that they will call the credit provider that listed the default and see if the listing can be removed.

After 10 or 15 minutes they call the client back and say they can have the listing removed if they pay them a specified fee. Not only is it amazing that they have been able to run a detailed investigation in a matter of minutes, but they have been able to do so without a signed Privacy Act. I’m confident

that no call to the credit provider was made but upon hearing this news, many people part with their hard earned money, often never hearing from the credit repair company again.

There are also cases where people are told their credit file can definitely be repaired, and after the fee is paid they receive nothing more than a poorly produced and very confusing manual telling them to lodge a complaint with Veda Advantage. Can you imagine people’s disappointment and fully justified outrage?

Even when some credit repair companies attempt to resolve a credit dispute for their client, they will do so by lazily passing the matter onto the Ombudsman or Veda Advantage to run an investigation for them. More often than not, no foundation for removal is offered so is it any wonder this approach has a very limited success rate?

I know that much of the ill feeling towards the credit repair industry from the Ombudsman and the credit reporting agencies is due to the many frivolous and unsupported disputes lodged. The reality is many credit repair companies are not lodging these disputes with the intention of helping their clients; they’re doing this so they can tell their clients they are doing something when in reality they’re doing very little. I’m sure many of these companies measure success by the amount of money they get from their clients and not the number of credit files they repair.

Is there any wonder the industry is suffering from an identity crisis? It’s completely understandable that many mortgage brokers will not deal with credit repair companies.

I’m not saying this is how all credit repair companies behave, and I can state with certainty that there are companies doing the right thing, but sadly just not enough of them. The problem for the consumer is trying to work out who’s who.

LET’S COVER HOW THINGS SHOULD WORK…

The first amber light should be companies that say they can guarantee success and want large amounts of money upfront. People would be well advised to approach such companies with extreme caution, as these guarantees tend to become an empty promise and the client is left out of pocket and will receive nothing but frustration and disappointment.

In general, the only way to have a default removed from a credit file is to prove that the credit provider did not follow the required process prior to listing. This process is covered in the

brokernews.com.au

Privacy Act, the NCCP and Ombudsman position statements, and is comprehensive. The responsibilities of credit providers are many, and understanding these responsibilities is the key to effective credit repair.

Due to this, the focus of an investigation should first be with the party that listed the default.

This process starts with requesting supporting documents from the credit provider. At this stage, no allegation of wrong doing is made.

The credit provider is simply informed that we are acting for the borrower and we wish to research the subject listing. Documents requested can include a copy of the credit contract, letters or demand notices sent to the client, along with phone records and/or file notes.

These supporting documents are then compared with the relevant legislation so a case can be made for the removal of the offending listing.

Due to this, an intimate knowledge of credit reporting, along with the associated legislation is critical for delivering a positive outcome. Sadly, few credit repair companies carry the skills and knowledge necessary to conduct a detailed investigation and deal effectively with the listing party which reflects poorly on what should be a specialised and professional industry sector.

Relationships with credit providers are also very important; this approach is generally respected by credit providers and they typically react to the request for documents in a compliant manner as well as being

OPINION 13

open to the removal of the default given adequate grounds are established.

Many credit providers are sick and tired of dealing with aggressive credit repair companies who demand the listing is deleted before any foundation for removal is established. These same companies often threaten to report the matter to the Ombudsman if the credit provider doesn’t comply, knowing this will cost them time and money. There have been many complaints made by credit providers to the Ombudsman due to this sort of behaviour; in fact the Credit & Investment Ombudsman has openly refused to deal with a number of credit repair companies. Can you blame them? This pushy approach seldom yields a positive outcome and only drives a wedge between the credit provider and the credit repair industry.

The industry has caught the attention of the Australian Securities & Investment Commission (ASIC) and they are currently looking closely at reform. This attention can only be a good thing, as conformity and consistency is what the industry needs and this will no doubt come in the form of regulation at some point in the future.

I would hope that credit repair companies who are not behaving correctly will either change their ways or get out of the way so the industry may regain acceptance and credibility from the general public and mortgage professionals alike.

Forming and enforcing effective reform can be a challenge and ASIC will need to carefully consider how to apply this, as it’s important that companies that are operating in an honest and ethical way are still able to function within a regulated framework. If the industry was to disappear completely due to overly restrictive regulation, it would be a great shame as the ultimate loser would be the consumer.

Only time will tell how reform will unfold, however, I fear that until this is established more people will be misled and lose money as a result of unscrupulous companies. I know firsthand how credit repair, when offered correctly, can change lives and there is no doubt in my mind it is a viable and needed service.

John Dickinson is the director of Clean Credit Pty Ltd

ANALYSIS 14

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Brokers in the crosshairs

Brokers have been targeted by a new report, but its methodology appears highly suspect

B

rokers have found themselves in the crosshairs of a damning report recently, but the validity of the report has been called into question, particularly in light of a new survey that seems to debunk its findings.

Choice drew the ire of the industry recently when it released a report claiming it had found poor broker practices in a secret shop it conducted.

The group said it sent five homebuyers to three of the biggest mortgage broker businesses in Australia – Aussie, Mortgage Choice and AFG. According to the consumer advocacy group, the results suggest homebuyers should “take a close and critical look” at what their brokers come up with.

“Our sample was small, but we found few examples of good practice.

Instead, our borrowers encountered pressure sales tactics, inappropriate advice, lack of commission disclosure and up-selling with little consideration of risk,” Choice said.

But this small sample, together with the group’s lack of transparency surrounding the study, has drawn widespread ridicule from the mortgage broking industry.

Mortgage Choice CEO John Flavell said he had serious questions about the findings of the Choice investigation into mortgage brokers, calling it disappointing and inaccurate. He continued to say that these results lie in stark contrast to Mortgage Choice’s own investigation findings.

“The results of Choice’s broker shadow shop are disappointing and differ completely to our own research findings,” he said.

“Each year, we mystery shop our franchisees and check them against our compliance standards. According to our most recent mystery shopping exercise, Mortgage Choice continues to deliver an exceptional service as well as professional, trustworthy and compliant credit advice to all of our customers.”

When Mortgage Choice approached Choice about the investigation, the consumer advocacy group declined to provide any further details to the franchise, raising questions about the validity of the findings.

“I would seriously question the Choice report and its findings,” Flavell said.

“When we first heard about the report, we asked Choice if we could be provided with the names of our brokers who were mystery shopped, but were declined. While we appreciate industry feedback, we believe all feedback needs to be transparent so that we have the ability to deal with it accordingly.

“The fact that Choice refused to be transparent with us makes us seriously question the validity and credibility of their investigation.”

AN INSIDER’S PERSPECTIVE

FBAA CEO Peter White – who was a part of the Choice expert panel judging

HAPPY CUSTOMERS How customers rated their broker experience

48%

Very satisfied

44%

Fairly satisfied

5% Neither

2%

Fairly dissatisfied

PROMOTING THE CHANNEL Brokers’ net promoters

1%

Very dissatisfied

44% Promoters

42% Neutral

13% Detractors

Source: MFAA

Source: QBE

the investigation – has rejected a call by the consumer group for ASIC to undertake an investigation into the mortgage broker market.

White said he was disappointed in the way the brokers surveyed did not comply with the NCCP, and believes it emphasises the case for brokerages to provide ongoing education.

However, he said none of the brokers surveyed were likely FBAA members, and believes the survey would have produced a different outcome if they were.

“This survey only looked at brokers from three companies – Aussie Home Loans, Mortgage Choice and Australian Finance Group (AFG), and two of those companies are not FBAA members,” he said.

He said he gave a poor rating to many of the brokers surveyed because they didn’t follow the right procedures, something that FBAA brokers are required to do.

“I would call on those three companies to urgently review their internal processes for managing compliance under the NCCP, so that the public can have total confidence in our industry.

“I am confident that our members put the best interests of the customer first, and it is unfortunate that there are those in our industry that let us down.”

While White said he was happy to be a part of the expert panel, Choice had gone too far by thinking that three companies represented the industry.

EVIDENCE TO THE CONTRARY

Particularly contradictory of the Choice report is a new survey commissioned by the MFAA. The Ernst & Young report found 92% of broker customers were satisfied with the service they were provided.

Brokers also saw a net promoter score of 31, with 44% of broker clients saying they would recommend the broker proposition, versus 13% who said they wouldn’t.

The MFAA praised the result, and said there was still opportunity for brokers to further serve consumers.

“Although customers feel they receive a superior experience from brokers, a few areas were highlighted for further development. First, a small proportion of customers felt that the commissions received by brokers influenced the recommendation made, particularly where the broker had a relationship with the lender. Second, customers felt that the broker could play a broader role in arranging other financial products,” the association said.

THE COALFACE brokernews.com.au

15

TECHNOLOGY UPDATE

The bigger picture Anthony Bishop on adding a financial services arm to expansive Queensland real estate network, Coronis

I

n July last year, Coronis Financial Services CEO Anthony Bishop put together a team of mortgage brokers and financial planners, and is now running a successful financial services business under the Coronis Real Estate umbrella, with their services extending across its entire network.

Bishop wanted to engage with the business in a way that was significant to the buyer, the vendor and the agent.

“We’re providing all three parties a level of expertise that isn’t existent in the industry,” says Bishop, explaining that they make sure the buyer is in the strongest position to negotiate a property; the agent knows that there are no issues with the buyer and the vendor can be sure that they are negotiating with someone who can afford to buy the property.

“I think we’re the only one who’s actively working inside a corporatised business where we’re delivering that value consistently to all the people in our business,” he says.

Bishop started out as a lecturer in Anthropology at the University of Queensland after completing postgraduate study. “(Anthropology) is about understanding people, goals, culture and structure,” he says, knowledge which he took with him into a career as a Sydney broker where he ranked among the top 2% of lending specialists in the country.

So what drove him to take the helm of the ambitious venture with Coronis?

“It was exciting, it was different,” says Bishop. “I could see how businesses like real estate and finance could co-exist with a common purpose.

“I suppose it’s a bit different here (at Coronis Financial) for these brokers; there is a network, there are relationships, however, they have to really identify that they are on the same page as the real estate agents about their dedication to the client.

He says they look for passion above all else in their brokers, all of which are on staff.

“We don’t have any revenue measures on the brokers – it’s not about the deal size, it’s about how many clients have you engaged with this month who have understood your value and have agreed to work with you.

“None of the measures here are designed around remuneration according to revenue, it’s all designed around remuneration subject to your engagement with people.”

But he says that although there are challenges, the consistency of engagement he has seen makes it all worthwhile.

“The most rewarding thing is to see that our service is being embedded in that whole process, that it’s not about just selling the next loan.”

Tony Carn, NextGen.Net

Virginia Graham , Model Mortgages

Phil Riches, Model Mortgages

Volume records tumble with ApplyOnline ‘Supporting Docs’ Phil Riches, proprietor of Model Mortgages, confesses that although it wasn’t love at first sight, after a quick courtship (during which he overcame his mental block about technology) he is now smitten with ApplyOnline ‘Supporting Documents’ service.

Thanks to his proactive Model Mortgages partner and wife, Virginia Graham, Riches confronted his resistance head-on and is now a passionate and vocal advocate for ‘Supporting Docs’.

“We’ve been writing our biggest volumes ever since we’ve been streamlining our processes using Supporting Docs,” Riches says.

“Last week I put through an application with St George via ApplyOnline and Supporting Docs – a complete file. They picked it up Tuesday morning and within two hours I received unconditional approval.

“The client was beside himself – it blew his socks off! He said he told everyone he knew!”

Riches makes the point: “If you make it easy for clients, not only do they credit you, they also know that the bank really wants their business. If it takes weeks, a client gets the feeling that the bank doesn’t want their business.

Consequently, the bank can potentially lose the deal.”

NextGen.Net’s Supporting Docs service is fast acquiring a reputation as a ‘game changer’ due to its ability to slash turnaround times and lift Straight-Through Processing.

The service identifies and captures mandatory documents at Point of Sale and validates them against lender policy conditions.

Over the past 18 months, Supporting Docs has gone live with a large number of lenders, now reaching critical mass.

This month will see Connective Home Loans and LoanMarket offer Supporting Docs with a number of other lenders scheduled to go live in the near future.

NextGen.Net sales director Tony Carn says the positive feedback received in response to the ApplyOnline Supporting Docs service has been phenomenal, “particularly from the younger generation of brokers, who are technology focused and already running paperless offices, and actively

looking to introduce new efficiencies to their process”.

“It supports their brand and thinking and it’s extremely easy for administrative staff to use,” Carn says.

But as Carn stresses for anyone such as Riches, who isn’t technology-savvy, a short training session smooths out the kinks, reveals the simplicity of the system, and builds confidence.

One of Graham’s most significant contributions to the jointly-owned Model Mortgages is in the back-end of the business and the establishment of support systems.

“Virginia is passionate about financial literacy,” Riches says. “She trains and up-skills our team, and is always looking ahead to see what technology we can use.

“I probably wouldn’t be running my own business without the support system she has provided.”

Riches is now such a fan of ApplyOnline, he maintains: “I really believe that without NextGen.Net and Supporting Docs, banks would still have us faxing and emailing applications. I’ll never forget when we had large files to contend with by fax!”

ApplyOnline Supporting Docs delivers major benefits for brokers and lenders alike by decreasing turnarounds and reducing reworks and Missing Information Requests (MIRs); which in turn increases borrower conversion rate, and improves both borrower and broker/lender relationships.

“These are the reasons it’s being hailed as an revolutionary step in loan processing efficiencies,” says Carn.

Riches and Graham have invested time and initiative into incorporating the Supporting Docs service into their business – integrating information across Connective’s CRM software – and to ultimately help them achieve a paperless office.

“ApplyOnline Supporting Docs has freed up my time to generate new business and be more customer focused,” Riches says.

“I can’t tell you how satisfying and life changing it is to know that when I’m on the road I can send information to my assistants and have them prepare an application for me for submission.

“It means my time is spent generating sales, which is where it should be spent.”

NEWS 16

brokernews.com.au

CONTINUED FROM PAGE 1

Mark Bouris: Owning scale

Yellow Brick Road’s chairman on the franchise’s future growth plans

B

ouris said the company was interested in having a stake in multiple forms of distribution.

With its own branded branch system, Vow’s wholesale model and Resi’s branded product proposition, Bouris said YBR sought a channel to help suit any broker’s preference.

“We’re looking as a holding company at having an interest in whatever form of distribution works best for the broker,” he said.

The strategy has seen Vow help drive the group’s growth. The aggregator has recorded 56% growth

in settlements for the financial year to date, compared to ABS reported market growth of 15%. Bouris said Vow had been particularly strong in NSW, where it outperformed other broker groups four-fold. He said the company expected to become the third largest mortgage broking group in the country in the next six to 12 months.

“They have a far broader reach.

Their distribution has many people.

The more individuals you have on the ground talking to clients – assuming you get a good hit rate – the more volume is going to pass through your business,” he said. “You want to get as many of those in as many places in this country as possible. Vow does that. That’s why Vow grows at a faster rate than the rest of the business.”

As Vow’s scale continues to grow, it has driven greater scale for YBR as well. The group saw its book of broker loans grow by 700%.

“What we try to do is achieve economies of scale; scale is the game.

To be in this industry you have got to have scale, you can’t do it otherwise.

For us, you have to have scale or you have to be part of scale, which is why [brokers] join aggregation, because they become part of [Vow’s] scale,” Bouris said.

The growth by acquisition that YBR has seen through its moves with Vow and Resi is a strategy Bouris stands by. “What [Yellow Brick Road] likes to do is own the scale, and we have to have more scale… The more acquisitions you make, the bigger your scale becomes, the better your profitability becomes.”

YBR’s acquisition strategy tends to drive industry rumour. The Australian Financial Review recently reported YBR is believed to be in talks with Homeloans Ltd regarding a merger that could create a company worth more than $220m. The AFR has claimed the franchise brokerage is also eyeing off other deals to increase its footprint in the mortgage broking sector. YBR wouldn’t be drawn on the speculation, instead saying that the company often held acquisition discussions with other companies.

“The company is often in discussions with many parties on a range of matters. Any current discussions are incomplete and strictly confidential.

No agreements have been entered into which would require disclosure to the market,” YBR said in an ASX release.

Homeloans released a similar communique, saying it also regularly holds discussions “with various industry participants regarding a range of potential transactions, at both a corporate and asset level”.

Rumours notwithstanding, YBR’s acquisitions have thus far provided the companies it’s bought with the scale Bouris touts, while allowing the companies to continue operating separately. Bouris said that Resi branches were welcome to become

YBR branches, but it certainly wasn’t a requirement. “Any of those branches who want to come under the YBR brand is welcome to. There are no fees involved, you just become one. But if they want to remain a Resi branch they can do that as well,” he said.

SCALE DELIVERING BENEFITS

This kind of scale is becoming increasingly vital in the mortgage broking industry, Bouris suggested.

This is particularly true as the cost of doing business rises.

“We are pretty regulated these days: there’s credit licences, there’s compliance environments, there’s accounting environments… there’s HR environments, there’s occupational health and safety – all of which [brokers] have to do no matter what. So, it makes sense to run economies of scale and have central services to do those things,” he said.

After all, Bouris pointed out, solo operators bear the same cost burdens without the benefits of scale. “If you’re doing just one loan a month, you still have to have all those things.”

This is the strategy YBR is employing in its own drive for growth, and it’s a strategy that delivers benefits to the group’s brokers as well, according to Bouris.

“We are trying to bring to the game a whole lot of economies of scale and that allows us to add value to those things [brokers] require by distributing a few costs out or giving them a few services they didn’t have to broaden the appeal to their customers.”

TO BE IN THIS INDUSTRY YOU HAVE GOT TO HAVE SCALE, YOU CAN’T DO IT OTHERWISE

Part of broadening brokers’ appeal is providing them with resources to refer clients for a full suite of financial services. Vow has added legal services, commercial loan services and insurance services, while YBR covers a full range of financial needs.

Bouris said this doesn’t mean brokers have to be experts in these financial services.

“It’s a single person managing their needs, but it’s not a single person advising on their needs. The branch guy is responsible for everything, but he doesn’t give out advice on the insurance of the SMSF or wealth. He refers that in to the head office,” he said. “Stick to what you’re good at, and get an earning out of the things you’re not good at by referring them on to someone who is.”

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Regional brokers in the spotlight How some of the country’s most successful regional brokers have built their businesses

M

uch of the focus in reporting on the Australian housing market focuses on just a few urban centres, and when conversation does stray outside Sydney and Melbourne, it generally just includes the country’s other capitals. Yet, more than a third of the Australian population lives outside of the capital cities. Regional centres provide the country with its resources, its sustenance and much of the natural beauty that draws people from around the world. And, just like in capital cities, mortgage brokers in regional centres help people realise their dream of home WESTERN AUSTRALIA ownership.

Being a regional broker brings with it its own unique set of challenges and opportunities.

Australian Broker spoke to some of the nation’s most successful regional brokers to find out how working outside a capital city gives their business its own character.

NORTHERN TERRITORY ALICE SPRINGS

QUEENSLAND

TOOWOOMBA

SOUTH AUSTRALIA ORANGE BATHURST

NEW SOUTH BELMONT DUBBOWALES

BERRI

SHELLHARBOUR WAGGA WAGGA

BALLARAT

BENDIGO SALE

VICTORIA

SPONSOR’S MESSAGE

Regional brokers play a pivotal role in the third party channel, not only as business-owners but also as trusted advisers within their communities. They are integral parts of their local business community, as much as the local butcher or post office. As the third party channel continues to grow, regional brokers will play a key role in showing how broking is valued by all customers.

In regional and remote areas, consumers have less access to expertise when it comes to buying a home, and regional brokers play an essential role in providing advice to help these consumers and their local communities.

NAB Broker is pleased to recognise Australia’s top regional brokers for the excellent work that they do, both as an important business in their local communities, and as individual representatives in the third party industry. We remain committed to individuals and businesses that make the broker channel great, and believe regional brokers will always play a key role in the growth of the channel.

I would like to congratulate all the brokers featured, as well as all other regional brokers out there working to meet the needs of their local community.

Steve Kane

General Manager, NAB Broker

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19

MATT WRIGHT

CHOICE HOME LOANS DUBBO, NSW

KEY FACTS Choice Home Loans Dubbo FY14 settlements:

Around $35m

Dubbo median house price:

$320,000

Dubbo population (June 2014):

36,622

Source: Choice Home Loans, ABS

Starting out as a new broker trying to build a successful mortgage broking business in a regional area of Australia isn’t always so different from those in the capital cities, says Matt Wright, home loan specialist for Choice Home Loans in Dubbo.

“Certainly initially, building a reputation and gaining trust from the community can be a barrier.

Starting out, the age old adage of starting with friends and family is a no brainer, and from there, if you’ve done the right thing by people, the roots will spread.”

However, sustaining the success of your business can be a little more challenging. As the median house price in the sizzling Sydney market hits $850,000, brokers in regional areas may need to sell two or three houses for every house in Sydney.

“Loan amount and the subsequent related remuneration can often be an issue, with the average loan size for regional brokers generally being much less than those in the city,” Wright says.

“The median house price in

Dubbo has recently hit $320,000, so with our average loan amount easily being less than $300,000, country brokers generally need to work twice as hard to receive the same levels of commission as metro broker.”

But what may be lost in remuneration is certainly gained in developing meaningful relationships with clients. As a regional broker, Wright says the local community is at the centre of what you do, so getting involved and building trust is the foundation for building a successful business.

“In regional locations, you will learn that everyone knows everyone! It can take years to build relationships and seconds to burn them, so trust and integrity are non-negotiable.

“Dubbo is a growing regional city of just over 40,000 people.

Even in a city that size, there is never a day that you couldn’t walk down the street and run into one or more of your clients.

You want to be able to look them in the eye and know you’ve done the right thing by them.”

IN REGIONAL LOCATIONS, YOU WILL LEARN THAT EVERYONE KNOWS EVERYONE

DOUG BOHMER BFINANCE ALICE SPRINGS, NT

KEY FACTS Alice Springs population (2011 census): Median age

25,186 33

Median weekly household income:

$1,236

Median monthly mortgage repayment:

$1,300

Source: ABS

Doug Bohmer started out as a financial planner in Melbourne before becoming a mortgage broker and opening his own business, Bfinance in Alice Springs in January this year.

“I’ve always had a passion for maths, money and helping people understand their personal finances. After completing an economics and finance degree I wanted to work with people and their personal finances and joined a boutique financial planning firm. As I was working and learning I found myself to be doing mostly paperwork, not actually dealing with people. I thought as a mortgage broker I’d be able to speak with more people and be involved at exciting times of their lives, helping people make or not make crucial decisions.”

Any new broking business risks facing teething issues as it begins to build a client base, however moving from Australia’s second largest city with a population of over four million to a regional Northern Territory town with a

population of just under 30,000 would be a complete cultural shock. Settling in to his new community was a challenge, says Bohmer.

“The biggest challenge I faced was starting out and moving to a new town at the same time. My network was back in Melbourne and for the first three months at least half my ‘deals’ came from interstate contacts.

“In my opinion small town people are closed and distrustful of newcomers. You need to prove yourself to them as a person before they are willing to deal with you in business.”

Getting involved is the key to establishing yourself as a person and building trust within a regional community, says Bohmer.

But once you do, the reward of being a part of a small, close-knit regional community pays off.

“I get out there and talk to people. I seek out everyone I can in order to listen to what they have to say about the community, themselves and their business.”

GETTING INVOLVED IS THE KEY TO ESTABLISHING YOURSELF AS A PERSON AND BUILDING TRUST WITHIN A REGIONAL COMMUNITY

SPECIAL REPORT brokernews.com.au

20

JULIAN COLLINS MORTGAGE CHOICE TOOWOOMBA, QLD

KEY FACTS Mortgage Choice Toowoomba 2014 settlements:

$51.4m

The Toowoomba region covers:

12,973 km2

Toowoomba population:

140,220

Number of private dwellings:

57,250

Source: Mortgage Choice, ABS

Working in a regional centre like Toowoomba means Mortgage Choice broker Julian Collins faces some interesting geographical challenges. While capital city brokers may hone in on a specific suburb within their city, Collins’ territory extends well beyond the boundaries of his town.

“Our marketing area isn’t small. In fact, as a mortgage broker operating out of Toowoomba, I often find my clients will come from towns that are situated up to five or six hours away. As such, you have to be patient and know that some deals will move slower than others. Customers can’t just jump in the car and pop around to see me in five minutes,” he says.

Collins says keeping in contact with clients can also be a challenge.

“A lot of my customers don’t have consistent mobile phone reception or internet access, so it

can be hard for them to contact me, or send me certain documents in a timely manner.

In fact, many of my customers are forced to send me their loan applications by mail which can add a week or more to the loan process,” Collins says.

But Collins enjoys the unique benefit of being positioned in Toowoomba residents’ minds as a long-time expert in financial services.

“Having lived and worked in Toowoomba as a local bank manager for a long period of time, I am in the fortunate position that a lot of the local community already know who I am and the services I offer. Beyond that, as a regional broker word of mouth plays a critical role in the success of my business. In a small town everyone knows everyone, so if you provide a service that is second to none, you can be assured of generating repeat and referral business.”

AS A REGIONAL BROKER WORD OF MOUTH PLAYS A CRITICAL ROLE IN THE SUCCESS OF MY BUSINESS

IAN ROBINSON

ROBINSON SEWELL PARTNERS WAGGA WAGGA, NSW

KEY FACTS Robinson Sewell Partners FY14 settlements:

$96,697,000

Average deal size:

$3,900,000

Wagga Wagga population:

52,042

Families:

13,440

Source: Robinson Sewell Partners, ABS

Ian Robinson and his business partner Brad Sewell noticed a gap in the market in the Wagga Wagga and Dubbo regions.

Agribusinesses and regional commercial enterprises needed help sourcing finance to grow their operations and increase productivity, but often had little idea of how to obtain credit.

“The business started from the distinct recognition that there was a latent demand for specialised and professional credit advisory services for agribusiness and commercial businesses in regional and rural Australia. The Australian banking system has extended $60bn to Australian agribusiness alone, yet these businesses operate in remote areas without access to specialised services. We continually witnessed that the quality of credit submissions from clients were compromising their ability to access credit on the best available terms. There is a broad chasm in the knowledge gap between client and bank.

We close that gap to the benefit

of our commercial clients,” Robinson says.

Robinson says building trust and reputation in the community has been vital to the success of his business, which last year settled more than $96m.

“Success is measured from both an economic and intrinsic viewpoint. Bush culture is founded on reputation and integrity, and is cultivated by “word of mouth”. RSP has ensured that our service delivery is consistent, predictable, reliable and professional: every day with every touch point. These founding behaviours in conjunction with perseverance, tenacity and innovation have underpinned our strong growth.

From an economic viewpoint, we developed a profound value add proposition that was measurable and tangible: characteristics that are difficult to attain in the financial services industry. These are the two key drivers for our strong client engagement and profit growth.”

BUSH CULTURE IS FOUNDED ON REPUTATION AND INTEGRITY

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PHIL GALLAGHER AUSSIE HOME LOANS BELMONT, NSW

KEY FACTS Aussie Belmont FY14 settlements: Number of loans:

$60,221,992 178

Source: Aussie Home Loans, ABS

ANDREW DRUMMOND YELLOW BRICK ROAD BALLARAT, VICTORIA

KEY FACTS YBR Ballarat FY14 settlements:

Around $50m

Proportion of Ballarat homeowners with a mortgage:

34.1%

Median weekly income (families with children):

$2,020

Sources: YBR, ABS

LAURIE PARKES

FRONTRUNNER FINANCE SOLUTIONS BATHURST, NSW

KEY FACTS Bathurst population:

32,479

Male:

16,201

Female:

16,278

Median age: Source: ABS

34

For Aussie broker Phil Gallagher, being heavily involved in the local community is of paramount importance for regional mortgage brokers.

“I am actively involved in a local Surf Club and Running Group. People deal with people they know and trust so aside from financial support through sponsorships I personally get involved too. I have been the treasurer of the surf club and currently sit on the finance committee and also do patrols and other volunteer work. I also sponsor a Water Polo Club, the local school chess competition and a number of schools’ P&Cs. Small organisations like this really value the support. I also

have a branded marquee I loan for free to local community groups,” he says.

But living in a coastal community doesn’t mean Gallagher does all his dealings on the beach.

“Many people in our area think nothing of travelling long distances; you can have clients five minutes from the office and others who are literally thousands of kilometres away.

You need to be flexible, and technology has really helped. I have also done interviews on the bonnet of the car, in a hotel in the snowfields, in a tent, at the airport and in countless McDonald’s; whatever makes it easy for the customer,” he says.

Andrew Drummond believes working in a regional centre is all upside. While loan sizes may be lower than average, regional centres deliver far more benefits than liabilities, he suggests.

“I see being a regional broker as more of an advantage because I can get involved in the local community in things like sporting clubs. It’s easier to build your brand as well. There’s a good cross-section of clients, from first homebuyers and self-employed borrowers, right up to professionals. If I were sitting in a suburb in Melbourne, often the suburb would dictate the kind of clients you see,” he says.

Drummond says that while his business is mainly residential mortgages, living in a regional centre means being prepared to provide for a range of client needs.

“Our main focus is residential lending and we work on building volume there, but being in a regional centre and having clients who are business owners and clients who are self-employed and have commercial purchase and SMSF needs, we find we’re doing commercial as well.

We do financial planning as well, and being able to cover bother areas in a regional centre is advantageous,” he says.

Drummond recommended that regional brokers focus on building relationships with their clients, as it could yield dividends down the road.

“You come across a diverse range of people in a regional centre, and you don’t know what business is going to come out of those. Build on your referral networks, because they can open doors in different fields.”

YOU NEED TO BE FLEXIBLE, AND TECHNOLOGY HAS REALLY HELPED For Laurie Parkes, founder of FrontRunner Finance Solutions in Bathurst, there are very few challenges that come with being a country broker.

“The only challenges we have is that we don’t see relationship managers as often as people in the city would, and with some lenders we have postcode restrictions,” he says.

“But the advantage of working in a country area is that you become much more well-known.

The referral network I’ve got is just amazing. I have people coming to me and saying several of their friends have told them to come and see me.”

While it is common to hear about brokers working 18-hour days in large cities like Sydney and Melbourne, Parkes says one of the major benefits of being a

regional broker is you can achieve a better work/life balance, without having to sacrifice building trusted and reliable relationships with clients.

“There is also the benefit that we have an office; we don’t do any home visits. Everybody is really, really happy to come to the office.

Because of that, and because it is a smaller area, I never, ever have to interviews at night either... It’s more like a nine to five job.”

But that doesn’t mean that business is stagnant or boring.

Parkes has still been able to turn FrontRunner Finance into a successful, diversified business, leading the way in residential, asset and commercial finance.

“It’s really added a strength to our business that we didn’t have before.”

SPECIAL REPORT brokernews.com.au

22

KATRINA PARRINGTON ELDERS HOME LOANS ALICE SPRINGS, NT

KEY FACTS Alice Springs home ownership Owned outright:

15.7%

Owned with a mortgage:

37.2%

Rented:

41.9 %

Other:

5.2%

In a regional centre where mail couriers are sparse, organisation is vital, Katrina Parrington of Elder Home Loans says.

“It can be difficult to get docs in a timely manner and returned the same way particularly in Alice Springs or Katherine where flights and road transport couriers operate once a day,” she says.

“You also need to be organised, methodical and meticulous in follow up with banks and clients so that deals don’t get disorganised and do meet finance and settlement deadlines.”

This makes BDM relationships particularly valuable.

“Only dedicated banks see the benefit of regular contact with bank BDMs building

relationships, providing advice and support in a remote location. These BDMs can be a mainstay of support,” she says.

Parrington says she also works hard to engage with her local community, providing content for local media, as well as participating in local business networks and the Chamber of Commerce.

“Immerse yourself in your local community. Give of yourself and your expertise to your local community. Invest in your reputation; it will come back to you tenfold. As long as you are passionate about what you do you will build relationships with your clients, you will be the trusted financial partner and you will be their preferred banking partner,” she says.

Source: ABS

INVEST IN YOUR REPUTATION; IT WILL COME BACK TO YOU TENFOLD

STEPHEN BRITTON MORTGAGE CHOICE BALLARAT, VIC

KEY FACTS Average people per household :

2.4

Median weekly household income:

$988

Median monthly mortgage repayments:

$1,317

Median weekly rent:

$200

Average motor vehicles per dwelling:

When it comes to generating business, referrals are the most vital source for Stephen Britton of Mortgage Choice Ballarat. But he’s found another unique source of marketing as well.

“I co-host a real estate radio program each Saturday morning with some of the local real estate agents, which helps me to create a bit of a profile within the community.

“In addition, I write a column every six weeks for the local paper, which helps me to stay in front of customers,” he says.

Britton’s business mix is largely determined by the needs of Ballarat’s populace, but he ensures he fulfils any needs his clients may have.

“Most of my business is residential and that really comes down to the area I am in. There aren’t a lot of commercial business

opportunities in Ballarat, so I mostly service the home loan needs of my customers. In addition, I work with a financial adviser who can offer my customers financial advice,” he says.

Knowing that clients come from far and wide, Britton says it’s imperative to be well prepared to serve their needs.

“You have to be honest and transparent in all of your dealings with your customers.

Given that some customers have to travel quite a distance to see you (or vice versa) it is important to do your research, speak to the customer beforehand, get an understanding of their needs as well as their financial situation and let them know whether or not you are able to assist them.”

1.7

Source: ABS

YOU HAVE TO BE HONEST AND TRANSPARENT IN ALL OF YOUR DEALINGS WITH YOUR CUSTOMERS

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23

JEFF MCDONALD RIVERLAND LENDING SERVICES (RLS) BERRI, SA

KEY FACTS Midstate Financial Services FY14 settlements:

$36.5m

Orange median age:

35

Sources: Midstate Financial Services, ABS

STUART GARVEY

MIDSTATE FINANCIAL SERVICES ORANGE, NSW

KEY FACTS • $24m home loans • $34m business loans • $16m plant and equipment and motor vehicles (chattels)

RLS FY14 settlements: Berri population:

4,103

There’s very little opportunity to be anonymous in a regional community, according to Riverland Lending Services’ Jeff McDonald. This means he and his staff have to be cognisant of how they present themselves at all times.

“Base of our region, everyone knows everyone and they all talk! However, get it right and the word also gets around – which makes business easier when clients specifically seek our services,” he says.

McDonald says his business runs the gamut of credit provision for clients. RLS helps borrowers obtain residential, commercial, equipment and motor vehicle finance.

“We cover these four main areas for a number of reasons.

Our clients seek all of these services regularly, our staff have the skills to be able to deliver all of these products effectively [and] our regional footprint creates a strong demand in all of these areas,” he says.

While providing this range of services is important, McDonald reiterated that everything comes back to building trust in the community.

“Reputation is everything!

The smaller the community – the more important a broker acts with integrity to build trust.”

Stuart Garvey, founder of Midstate Financial Services in Orange, says the biggest challenge faced by regional brokers is the restrictions placed on different locations by lenders.

Regional brokers will often service more than one regional town – Garvey services Orange, as well as Parkes, Forbes, Dubbo, Bathurst and sometimes even Sydney and Canberra – so keeping up with lender restrictions can be time consuming.

“The biggest issue we have is postcode restrictions, so what some banks will do in one town they will not do in another. There

are different categories of locations, so you’ve pretty much got to know what your restrictions are for banks in those various towns,” he says.

But while lender restrictions can cause headaches for regional brokers, when it comes to clients Garvey says country brokers are more than just a local mortgage broker.

“Orange has got a population of about 48,000, but you still know everyone. I have been invited to house warming parties, I’ve been invited to a couple of clients’ weddings – because we become best of mates over the process.”

THE BIGGEST ISSUE WE HAVE IS POSTCODE RESTRICTIONS, SO WHAT SOME BANKS WILL DO IN ONE TOWN THEY WILL NOT DO IN ANOTHER

Sources: RLS, ABS

CHRIS CROOK

AUSSIE HOME LOANS SHELLHARBOUR, NSW

KEY FACTS Aussie Shellharbour FY14 settlements: Number of loans: Shellharbour population: Average number of people per household: Source: Aussie Home Loans, ABS

$52,220,308 138 63,605 2.7

When it comes to grabbing attention in the seaside town of Shellharbour, Chris Crook decided to put his Aussie storefront front and centre.

“When first looking to open a franchise and formulating the business plan, I made the decision instead of allocating funds to marketing that I would redirect those funds to the store rental and set up in a prominent high traffic position. We have never had a problem with lack of work or had to inform the community where we are; they can’t miss us. We try to offer a better service than our competitors so word of mouth spreads throughout the community,” Crook says.

One of the unique advantages of operating in a regional area is that clients tend to be more trusting, Crook says. But this also means regional brokers have

to be even more vigilant in providing superior service, he argues.

“I believe customers are more trusting, less suspicious and easier to deal with. They are attracted to friendly, efficient service with a good rate on top.

Our loan amount averages are comparable to city franchises, though the competition is not as aggressive. On the flip side, if it was to go wrong, I think in a smaller community reputation has a greater chance of being damaged. As such you have to absolutely ensure that you deliver the desired service,” Crook says.

For brokers operating in a regional area, Crook advises that location could be key.

“Pick a prominent, high traffic position to set up. Otherwise, city, regional, there is no difference. Just offer personal efficient service.”

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24

COLIN MCKEAN

MAINLAND FINANCE BROKERS BENDIGO, VICTORIA

KEY FACTS FY14 settlements:

$40.2m

Number of loans:

147

Bendigo private dwellings:

36,941

Median weekly household income:

$993

Colin McKean believes a varied background in financial services and a broad array of knowledge helps him to better serve the people of Bendigo.

“Having the background in mortgage, commercial and rural banking over many years gives me a strong understanding of client needs,” he says.

McKean’s business, Mainland Finance Brokers, has worked to set up referral relationships that mean he can help clients who have a variety of finance needs.

“I have built relationships with referral partners in and around central Victoria. This includes real estate agents and accountants. This gives me day to day knowledge on housing market trends at a local level. I have also been

fortunate to be associated with Mainland Equipment Finance Bendigo who have a mature client base that require my services to support investment property and commercial purchases. I have been able to provide an excellent range of finance products to our clients in accordance with their wishes,” he says.

McKean says regional brokers have the opportunity to build a particularly loyal client base.

“The country broker is fortunate in that the client thrives on service and communication. They are loyal, and once they have experienced the personal attention they are more likely to become great referral sources.”

Sources: NMB, ABS

THE COUNTRY BROKER IS FORTUNATE IN THAT THE CLIENT THRIVES ON SERVICE AND COMMUNICATION

TRACEY BLORE

ON TRAC MORTGAGE BROKERS SALE, VICTORIA

KEY FACTS FY14 settlements:

$41.3m

Number of loans:

208

Sale population:

14,258

Top industry in Sale: School education

6.5%

Median weekly income:

$955

Sources: NMB, ABS

Tracey Blore of On Trac Mortgage Brokers says being a regional broker means being prepared to deal with a very diverse client base with equally diverse needs.

“We deal with a real mix of clients with so many different lending needs so we need to ensure that we are extremely knowledgeable and up to date on every lender’s policies so that we can provide exceptional service and help our clients achieve their lending requirements,” she says.

One challenge regional brokers can face, Blore says, is being relatively isolated from their peers.

“Having a business in a regional location also means that it is extremely difficult to attend training sessions and industry events that are located in the city. While this is something we love to do, it is not always easy to close the office for a day or more to travel to these events.”

But what often makes up for this is the opportunity regional brokers have to embrace their local community.

“We are passionate about

supporting our local community and provide ongoing sponsorship for various community organisations including local primary schools, our hospital and numerous non-for-profit organisations. We also actively participate in local community projects and initiatives such as investment seminars, fundraising events and women in business activities. We believe in keeping business local and ensure that all of our business supplies including stationery, printing materials, signage and computers are purchased from other local businesses.

When buying gifts for our clients, vouchers are always purchased from businesses in town. We actively refer business to local conveyancers, insurance brokers, accountants and financial planners to ensure that business is kept in town.

Loyalty is extremely important in the country and business success is extremely reliant upon the strength of local relationships with most business being referred from members of the community.”

WE ARE PASSIONATE ABOUT SUPPORTING OUR LOCAL COMMUNITY

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, May 2014

Vow acquisition boosts YBR’s book

Last year’s surprise acquisition of aggregator Vow Financial by franchise brokerage Yellow Brick Road gave a massive boost to the company. The Vow acquisition added $18.5bn worth of mortgages to YBR’s $2.7bn loans under management – a boost of nearly 700%. At the time of the acquisition, YBR chair Mark Bouris said operations at Vow would continue as normal – it would function as a separate division within the YBR group, with Tim Brown remaining as its chief executive.

What’s happened since?

Yellow Brick Road has continued on its expansion path with the purchase of Resi Home Loans. The franchise has also been rumoured to be in talks to acquire non-bank lender Homeloans, a rumour neither company would confirm.

Bouris did tell Australian Broker, however, that the company would be open to further acquisitions. As mooted by Bouris last year, Vow has continued to function separately, with Brown still at the reins as CEO.

Naylor announces resignation Long-serving MFAA chief executive Phil Naylor shocked attendees at last year’s MFAA Convention on the Gold Coast when he announced that he would step down from the helm of the association. Naylor expressed pride in having seen the industry grow in professionalism, and in the way brokers navigated the regulatory landscape. After nearly 12 years in the role, Naylor said it was time to seek other opportunities.

What’s happened since?

Naylor was replaced by former Finware partner Siobhan Hayden, who embarked on a nationwide tour to meet with brokers and hear their priorities for the association and its representation of the industry. Hayden responded to broker feedback at this year’s MFAA Convention by announcing a $1m consumer-focused ad campaign, an online broker job board, and changes to the association’s onboarding process.

brokernews.com.au

Broker harnesses the power of LinkedIn

G

lynn Bruce, business development manager at Nationwide Capital and Chifley Securities, has harnessed the power of social media to generate business, saying he has written $11.2m worth of commercial loans for Chifley Securities through LinkedIn since the company’s launch in November 2014. Bruce says his LinkedIn page now features 2,500 followers and a database of 5,500 people.

“These days, most people, especially younger ones, are comfortable with social media as a method of securing finance, and we are leading the broking community in embracing this technology,” Bruce says.

“It is really quite simple to operate once you get comfortable with social media, which allows us to have constant contact with potential borrowers and lenders, providing tips and examples of how people can improve their financial position.”

Bruce says consumers really trust LinkedIn, which can give brokers credibility.

“I like LinkedIn for the fact that it allows me to see each individual update from each individual or company, which allows me to direct market subjects to what they’re interested in,” he says.

Bruce now generates about 50% of his business through LinkedIn. He says using social media makes business more personal.

“It gives you updates on birthdays, who’s changed a job, anything like that in the market; anything new in the market. From that you can create a direct approach,” he says.

While Bruce says he will often proactively connect with a potential borrower through LinkedIn himself, he also generates referrals by posting useful content, such as promotions or transaction scenarios.

“What I like to post on LinkedIn are recent transactions we’ve done and recent scenarios.

People have contacted us directly after viewing our posts we’ve put up on LinkedIn.” For the full interview, head to www.brokernews.com.au/tv

FORUM 27

brokernews.com.au

MFAA fast-tracks experienced brokers The MFAA has announced a major shift to its onboarding process

T

he MFAA recently announced changes to its member onboarding processes, which CEO Siobhan Hayden says will make it more streamlined for experienced brokers to become members of the association.

“The opportunity we’ve identified is [that] those with a Certificate IV with industry experience that may choose not to be a mentor customer, or mentee, can choose to do a fast-track assessment, which will allow us to understand that they are competent in relation to structuring a loan for a customer,” Hayden said. “…[I]f they commit to completing the diploma in 12 months, they can become a member of the MFAA instantly.”

Larz pondered whether the move was to compete with a strong showing from the FBAA. “Interesting to see with the changes to the CEO and the structure of the MFAA board the move away from the strategic plan that was put in place a few years ago.

Recent announcements such as the decision not to use the term ‘credit adviser’, the expenditure of $1m on advertising and now the first move towards reducing standards.

Also the reference to the FBAA and their requirements which indicates to me that the FBAA is starting to have have an impact on MFAA membership numbers and therefore they need to make it easier to join in order to compete for members. Let’s see what other announcements come out in the next few months.”

John NSW echoed the sentiments, perhaps more bluntly.

“What’s wrong MFAA, do you need to rake in some new members after we all jumped ship? Oh and yes I do have my diploma and had it long before you forced it upon us.”

Vee questioned the value of industry associations in general.

“What on earth did brokers do before some smart mouth decided to make money out of brokers and set up a ruling body? Oh, yes, that’s right. We just got on with business in a professional and competent manner.”

Jo said moving to the MFAA in the past was too arduous a process.

“I considered going back to MFAA from FBAA. The process was ridiculously drawn out and not worth the time. That was with a Diploma. I imagine it’s even more paperwork with these new conditions. I’m yet to see any value in either association. I’m just a member to satisfy our aggregator and donate money each year.”

But Steve McClure urged brokers who had a problem with the MFAA to take productive action rather than griping.

“I was elected to the NSW Advisory Committee, so I’m always available to take up issues on your behalf. Like you, I’ve had my differences with the MFAA, but feel we are better placed than ever to be heard. And we are. Don’t leave your valid concerns as part of an anonymous blog that passes at the end of the day. I come from the same place as you and represent your concerns.”

SILENCING

THE CRITICS

The MFAA’s move to fast-track experienced brokers looking to become members of the association drew criticism from some commenters. Stephen Dinte, however, pointedly took the naysayers to task over their negativity.

“There are two things about me that those people in this industry who know me are aware of: 1) I have strong opinions.

2) I am not afraid to share those opinions.

Unlike the losers, who continually whinge and whine about our associations and their respective CEOs, I am not afraid to use my name when making comments, nor do I bitch about the paltry amount of the membership fees (tax deductible) which I pay to support the work done by the associations in representing members. It is easy to take cheap shots when you hide behind pseudonyms.

My advice to the whingers is that you get off your collective butts and get involved with whichever association you belong to. All of us benefit from stronger and more vocal associations, and this will only occur if all brokers put in the effort to participate. Those association members, who think that being the CEO is a walk in the park, really have their heads in the sand.

I for one am grateful to both Siobhan and Peter for the hours of effort they put into the job.”

Stephen Dinte on 12/05/2015 at 1:29PM

BROKER INVESTIGATION DISAPPOINTING AND INACCURATE

Mortgage Choice CEO John Flavell recently expressed disappointment with a controversial report from consumer group Choice that claimed brokers were providing poor service. Flavell said Choice had refused to disclose details of its study to the franchise brokerage.

Patrick Marion on 11/05/2015 at 2:59PM “I wouldn’t be too concerned about Choice’s findings.

Their credibility is – to say the least – questionable, and I would even question their competence in assessing a broker’s business.”

Really on 11/05/2015 at 11:33AM “I investigated Choice and found the same thing, but I can’t disclose my data, or who I spoke to, or when I supposedly did it or even if I’m in the same country.”

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

CAUGHT ON CAMERA

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28

IN FOCUS

T

he MFAA recently held its National Convention in Melbourne, with presenters such as Movember founder Adam Garone and decorated soldier Ben Roberts-Smith. The association’s gala dinner took place at the Crown Palladium, and featured Australian comedy icon Bob Downe on emcee duties.

Photography by Simon Kerslake and Event Photos

brokernews.com.au

CAUGHT ON CAMERA 29

INSIDER 30

brokernews.com.au

The clothes make the broker A new study has found that your choice of wardrobe really can impact on your business success

TOPPING MAD A US man who alleged that he broke his partial dentures while eating at Pizza Hut has just won US$2,400, plus trial costs and interest, in a personal injury suit filed against the chain restaurant.

Everett Chatman claims he was enjoying a salad when “excessively hard croutons” caused harm to his dental work, according to Roane County News.

He initially tried to settle out of court, but Pizza Hut’s insurance company had no interest in participating.

“We tried to work it out with their insurance company, but they never wanted to talk,” Chatman’s attorney, Mark Foster, told the newspaper. “So we went ahead and filed.”

Foster argued that Pizza Hut had caused personal injuries and damage to his client’s specially fitted partial dentures as a result of “negligently serving at defendant’s restaurant excessively hard croutons”.

Other notable fast-food restaurant settlements, as outlined by PropertyCasualty360, include: • In 2005, David Scheiding discovered an inch-long sliver of human flesh on his Arby’s sandwich, which had been severed by a worker chopping lettuce.

He was awarded US$50,000.

U

ber-successful entrepreneurs like Mark Zuckerberg may have made jeans acceptable in the workplace, but one new university study suggests that casual dress codes might not be good for business.

“Putting on formal clothes makes us feel powerful and that changes the basic way we see the world,” said Abraham Rutchick, professor of psychology at California State University.

Rutchick’s claims come off the back of recent research, in which participants were asked to rate the formality of their attire before answering a questionnaire designed to understand their thinking process.

The study found that as participants donned more formal attire, the way they viewed things began to change. When casually dressed participants puts suits on, they became abstract thinkers, focusing on the bigger picture rather than on the minor details.

Michael Slepian, another of the

paper’s authors and a professor at Columbia Business School, said wearing a suit could also improve a person’s financial decisions, as it could potentially reduce impulse purchases.

Researchers also argued that wearing a suit could help in situations such as receiving negative feedback, because the person would be able to take a step back from the criticism.

And it’s not just suits that can have a psychological effect. The hue of our clothes matters too, according to colour consultant Jules Standish.

“Research shows that colours can have a psychological effect,” she says. “When we look at certain colours it triggers neurological responses in the brain, and causes the hypothalamus gland to release hormones.

“Looking at warm, bright colours, such as red or pink, releases dopamine – known as the ‘feel-good hormone’ – which can improve our mood, heighten attention span and boost our sex drive,” Standish says.

• A 1993 E. coli outbreak at Jack in the Box sickened 600 customers and caused the death of four children. The incident cost the fast-food chain more than US$15.6m.

• A McDonald’s customer sued the chain for US$50,000 when she bit into a McChicken sandwich and cut her mouth on glass shards. It is believed that a nearby coffee pot had exploded due to overheating.

• In one of the most frequently referenced lawsuits in North American pop culture, Stella Liebeck sought damages for burns sustained as a result of her coffee temperature being “too hot”. She was initially awarded US$2.86m, but that figure was reduced to less than US$600,000.

When asked whether Chatman was satisfied with his US$2,400 Pizza Hut award, his attorney answered, “I think so.”

ICE BUCKET CHALLENGE COULD PROVE CHILLING FOR ALLEGED FRAUDSTER The ALS/MND ice bucket challenge swept the world at the end of 2014 and helped raise millions of dollars for charity. However, one hapless participant could face a six-figure legal bill or time in jail.

Jamie Robinson, a police officer from Pasadena, California, has been charged with insurance fraud for allegedly participating in the ice

bucket challenge while claiming disability benefits for a lower back injury, according to the Los Angeles District Attorney’s office.

Robinson pleaded not guilty to four counts of insurance fraud dating back to 2012, with the state estimating total losses of up to $146,000.

The fraud was discovered when Robinson posted an ice bucket

challenge video online in July 2014, in which she picked up a five-gallon bucket of water and ice and poured it on a fellow officer.

KTLA5, a Los Angeles news station, reported that the bucket filled with water would have weighed approximately 20kg.

In a statement, deputy district attorney Arunas Sodonis of

the Healthcare Fraud Division said Robinson was accused of exaggerating injuries on two occasions to collect disability benefits.

If convicted of the charges, Robinson faces a maximum sentence of six years and four months in prison and is set appear in court later this year.

“Winning Broker of the Year - Productivity was a fantastic acknowledgment from the industry.

This award recognises the seamless, efficient and personalised approach I take towards new and existing clients. Being able to market myself further with the AMA award has seen a real increase in new business coming in the door.”

Mardee Thomas, 1st Street Home Loans, Broker of the Year – Productivity 2014

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