Australian Broker 12.04

MARCH 2015 ISSUE 12.04

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS THE DIGITAL REVOLUTION

Four big trends changing the world P10

+ BUSINESS

INTELLIGENCE

ROADBLOCKS TO IMPROVEMENT

The thinking that could hold back your business P14

+ BEST PRACTICE GO BIG ON BRANDING

Branding your business for success P15

+ MARKET TALK

Matt Lawler:

DECONSTRUCTING ADVICE M The Yellow Brick Road CEO discusses scaling advice to suit the consumer

uch has been made about the convergence of financial services, with the one-stop-shop model continuing to be a source of heated debate in the mortgage broking industry. While detractors say merging financial planning and mortgage broking isn’t viable, Yellow Brick Road has spent the past four years doing just that.

FULL STORY PAGE 16

THE TRUTH ABOUT DESKTOP VALS

Technology getting you to ‘yes’ faster P22

+ PEOPLE GOING BACK FOR GOLD

NextGen’s Greg Phillips on his return to the pool P28

NEWS 2

brokernews.com.au

NUMBER CRUNCHING DID YOU KNOW?

VACANCIES TIGHT AS RENTERS RETURN

89

NATIONAL VACANCY RATES, JANUARY 2015

BY THE NUMBERS

$43.7bn Of the $93.7bn increase in mortgage lending in ABS Housing Loan statistics, brokers accounted for $43.7bn comparing the four quarters ending December 2013 and the four quarters ending December 2014.

2.6%

ADELAIDE

2.8%

MELBOURNE

2.4%

BRISBANE

2.0%

CANBERRA

1.8%

SYDNEY

3.3%

DARWIN HOBART

1.3% 2.2%

NATIONAL

0.00

.5

1.01

.5

2.02

.5

3.03

.5

In the six months to June 2014, ASIC took enforcement action against 48 cases of white collar crime related to financial services. However, the corporate regulator almost doubled that in the six months to December, taking action against 89 cases of white collar crime in the financial services sector.

SELLERS’ MARKET? 12-MONTH CHANGE IN CAPITAL CITY PROPERTIES LISTED FOR SALE, WEEK ENDING 8 FEBRUARY

SYDNEY -9.1% MELBOURNE -10.4% BRISBANE -0.3% ADELAIDE -4.0% PERTH 11.9% HOBART -9.1% DARWIN 29.2% CANBERRA 7.6%

-15- 10

-5

05

10

15

20

25

30

Source: ASIC Source: SQM Research

Source: RP Data

WHAT THEY SAID...

STEVE DEGETTO

JOHN KOLENDA

SIOBHAN HAYDEN

CRAIG JAMES

“Happy customers staying with us longer is good for us, it’s good for the customer and we want to share some of that value” P4

“APRA has said one of its specific areas of prudential concern is when lenders increase their investor lending by more than 10% during a year” P6

“Customers continue to select brokers despite a slight drop in share of the marketplace” P8

“Simply, Australia is growing at a far slower rate than its potential.

So the Reserve Bank can cut rates without fear of generating inflationary pressures” P24

You

r

KER BRO nd Bra

NEWS 4

brokernews.com.au brokernews.com.au

Brokers responsible for half of mutual’s record lending ■ CUA has lent its customers a DID YOU KNOW?

SUNCORP ANNOUNCES COMMISSION CHANGES

Steve Degetto

■A non-major bank has announced

changes to its commission structure which it says will reward brokers for customer retention.

Suncorp has announced it will change its commission structure for loans settling from 27 February to reward brokers for keeping customers with the bank. The lender said it would increase its trail commission from year four onwards from 20bps to 25bps.

Suncorp head of intermediaries Steven Degetto told Australian Broker the lender was focusing on customer retention through its broker partners.

“One thing we’re focusing on into the future is how we can work with brokers to keep the customers they bring to us and grow those customers’ products with us. Customer retention and extension of loan life is crucial in our relationship with brokers,” he said.

Degetto said the bank had a competitive home loan package, and high customer satisfaction.

“Happy customers staying with us longer is good for us, it’s good for the customer and we want to share some of that value brokers are creating by keeping customers aligned with us,” he said.

63% Kitchens and bathrooms are the most popular rooms for renovations, with 63% of renovators saying they would overhaul the rooms Source:Westpac

record $1.8bn in the second half of 2014.

The value of new loans to customers over this time was up by 75% ($800m) from the corresponding six-month period the previous year.

General manager of products and marketing Jason Murray said: “In December alone, we issued $373m in new loans, with more than 95% of that being for housing. That is the highest value for new lending in one month that CUA has ever achieved in our 70-year history.”

Murray said they started topping records in October after lending $350m in new loans.

The record was broken again in November with $357m before December topped them both.

Murray said mortgage brokers were generating almost half of their new loans.

“Consumers are increasingly using comparison services and brokers for everything from hotel bookings to insurance, and banking is no different,” he said.

“Customers are shopping around for better value and are tired of being charged high interest rates and excessive fees.

Panthers home ground renamed for Pepper ■ The home of the NRL’s Penrith Panthers has been renamed

as Pepper Stadium, after partnering with leading non-bank lender Pepper.

Patrick Tuttle, co-group CEO of Pepper, says the partnership marks a significant step in Pepper’s commitment to Western Sydney. The non-bank is already a major partner of the Western Sydney Wanderers.

“The Panthers’ on-field success, combined with its strong community engagement programs, is very impressive and the club has been in our sights for some time,” Tuttle said.

“To be the naming rights sponsor of the club’s iconic home ground not only gives us great exposure but will also help us to further engage within this vibrant community.”

The 22,500 seat Pepper Stadium will welcome fans for the first home game on Sunday 8 March 2015 where the Panthers are set to host the Canterbury Bulldogs.

EDITOR Adam Smith PUBLISHER Simon Kerslake COPY & FEATURES JOURNALISTS Julia Corderoy, Maya Breen PRODUCTION EDITORS Roslyn Meredith, Moira Daniels ART & PRODUCTION DESIGN MANAGER Daniel Williams DESIGNER Lea Valenzuela SALES & MARKETING SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak MARKETING & COMMUNICATIONS MANAGER Lisa Narroway TRAFFIC MANAGER Abby Cayanan CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Adam Smith tel: +61 2 8437 4792 adam.smith@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8011 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Auckland, Toronto, Denver, Manila brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss.

Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS

brokernews.com.au

6

FHB error could cost homebuyers, Kolenda claims ■ The significantly under-reported Australian Bureau of Statistics first home

John Kolenda

buyer figures could have a “serious impact” on lenders and push up interest rates, says a prominent aggregator head.

The ABS admitted it had made an error when calculating loans to first home buyers, leading it to revise its most recent data upwards by more than 25%.

John Kolenda, managing director of 1300HomeLoan, says the ABS underreporting had created a false impression that the home finance market was dominated by investors, which then prompted APRA to talk about regulatory action.

“APRA has said one of its specific areas of prudential concern is when lenders increase their investor lending by more than 10% during a year,” he said.

“While APRA says going above that threshold is not wrong or warranting action, it has indicated it will be an important risk indicator for APRA supervisors when considering the need for further action.”

Any action by APRA could see banks forced to stop lending to the investor market, or having to hold more capital aside if they continue to do so. Both outcomes, says Kolenda, have the potential to push up interest rates.

Credit agency touts new tool for lenders ■ Veda has announced the launch of its

VedaScore Apply service, which it says will help lenders better assess the risk profile of loan applicants by utilising new comprehensive credit data the agency can now collect. Veda’s general manager of consumer risk Angus Luffman said the tool will help lenders leverage off the more comprehensive data available.

“The early insights from New Zealand demonstrate how the superior predictive power of VedaScore Apply scoring models can help strengthen lenders’ credit decisions, reduce risk and benefit consumers by allowing their recent positive credit behaviour to speak louder than any blemishes they may have had in the past,” Luffman said.

Banks have been hesitant to adopt comprehensive credit reporting, with the Australian Bankers’ Association claiming the regime would add cost and complexity to lenders’ credit assessment processes.

But Luffman claimed changes to comprehensive credit reporting in other markets have benefitted consumers.

“Early observations of the changes taking place in New Zealand show credit applicants who would have been declined under negative reporting are starting to be approved under comprehensive reporting and vice versa. Our initial study of the New Zealand market revealed that, at the account level, comprehensive data resulted in a change in lending decisions 20% of the time,” he said.

BY THE NUMBERS

14.4% The total number of home sales for 2014 was 14.4% higher than in 2013 Source: HIA

WORLD NEWS UNITED STATES OF AMERICA

DEVELOPER UNFRIENDS MARK ZUCKERBERG Mircea Voskerician, a real estate developer who had owned the rights to property adjoining Mark Zuckerberg’s backyard in 2012, is suing the Facebook founder on grounds he didn’t live up to his promises made in the sale.

Voskerician said he sold the rights of that property to the Facebook founder at a discounted price of $1.7m (after receiving a $4.3m offer from another developer) and claims Zuckerberg said he would introduce him to his Silicon Valley network of friends and associates and provide referrals to help boost his business, according to CNNMoney.

Voskerician said he had planned to use the lot to build his new mansion that would block the view from Zuckerberg’s master bedroom. However, being the “good neighbour” he is, he offered to sell the California lot to Zuckerberg.

Zuckerberg’s lawyers said that no concrete promises were made and Voskerician is using “extortive” measures.

Nothing was put in writing.

NEWS

brokernews.com.au

8

Stevens warns on effectiveness of rate cuts ■ The Reserve Bank has

Siobhan Hayden

BROKERS LEAD MORTGAGE GROWTH ■ Mortgage brokers were

responsible for 64.7% of the growth in the mortgage market, according to research commissioned by the MFAA. The research showed that of the $93.7bn increase in mortgage lending in ABS data, brokers accounted for $43.7bn comparing the four quarters ending December 2013 and the four quarters ending December 2014.

During the same period, the total business attributable to brokers was $158.5bn and represents growth of 28%, materially out-pacing total housing finance commitments which grew only 17%.

During the December 2014 quarter, brokers settled $43.7bn of retail, residential loans which is a 6% increase on the previous quarter compared to an 8% increase in the total market size on last quarter.

“The 64.7% contribution to growth indicates that customers continue to select brokers despite a slight drop in share of the marketplace,” MFAA chief executive Siobhan Hayden said.

However, the data reveals the broker market share decreased slightly to 50.5% in the December quarter, from the previous quarter of 51.5%. Hayden is still pleased with the solid result, indicating brokers still account for more than half of the total market share.

admitted concerns that low rates may have lost their firepower, following the board’s decision earlier this month to cut the official interest rate by a further 25 basis points.

Addressing the House of Representatives Standing Committee on Economics, governor Glenn Stevens said that the Board is “very conscious” of the possibility that monetary policy’s power to stimulate growth in demand wouldn’t be as effective as it has been in the past.

“A decade ago, when there was, it seems, an underlying latent desire among households to borrow and spend, it was perhaps easier for a reduction in interest rates to spark additional demand in the economy,” he said. “Today, such a channel may be less effective.”

However, Stevens does not believe that monetary policy has reached the point where it has no ability at all to boost demand, and argued that a further cut was necessary in the current environment.

“At its meeting in February the Board considered that this revised assessment – that is, sub-trend growth for longer, a higher peak in the unemployment rate, slightly lower inflation – warranted consideration of some further adjustment to monetary policy, after a fairly long period during which the cash rate had remained steady,” he said.

Mortgage delinquencies at lowest level since GFC ■ Mortgage delinquency rates are the lowest they have been since the global

FAST FACT 50.5%

Mortgage broker market share for the December quarter, down slightly from 51.5% the previous quarter Source: MFAA

financial crisis, according to a major mortgage insurer, reinforcing the strength of the mortgage sector in a shaky economic environment.

LMI provider Genworth reported a 26.5% increase in its net profit after tax for the year to December 2014, largely off the back of the strength in the mortgage market.

According to the insurer’s full year results, closing delinquencies were down 0.1% to 4,953 in December, representing the lowest delinquency ratio since 2007 at 0.33%.

Genworth CEO Ellie Comerford said the overall business was supported by the favourable loss experience in the portfolio throughout the year.

“During the second half, the loss ratio of 18.4% … continued to reflect a strong housing market which resulted in lower levels of delinquent loans, fewer delinquent loans converting to claim, and an overall lower average claim amount. For the full year, the loss ratio of 19% is down from 32.1% in 2013.”

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Contact your ANZ Commercial Broker Manager or call 1300 385 269 today.

ANZ has been awarded 2014 Best Value Small Business Bank by CANSTAR. This was awarded on the basis of ANZ’s strength across selected price and product related categories. All applications for credit are subject to ANZ’s normal credit approval criteria. Terms and conditions, fees and charges apply. ANZ’s $2 billion lending pledge applies to new small businesses, whether or not you currently bank with ANZ. ANZ’s $2 billion lending pledge commenced February 2014. Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. ANZ’s colour blue is a trade mark of ANZ. (1.15)

ANALYSIS 10

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The four digital trends shaping the mortgage industry How changes in the digital marketplace will impact the way you do business in the future

T

he world is changing at what can seem like a dizzying pace. Along with new advances in technology come seismic shifts in culture that can change the way customers do business and what they expect from

their service providers. As change increases, the pace of change is accelerating. So how can brokers hope to keep up and continue to add value for their clients, particularly when what their clients expect is shifting so rapidly. Dan Huggins, Commonwealth Bank’s general manager of home loans, says it’s crucial to identify the trends that are shaping our culture. He recently told the RFi Australian Mortgage Innovation Summit in Sydney that four trends were changing the way

companies did business, and smart companies would find new ways to harness these trends.

MOBILE

Huggins pointed to the proliferation of mobile devices as one of the major trends shaping the consumer landscape. He said not only were mobile devices increasingly common but that we were devoting an increasing amount of time to them. “What we are seeing is that internet-enabled mobile devices have

ANALYSIS brokernews.com.au

11

become the norm. Everybody has these devices, and they spend huge amounts of time on these devices,” Huggins said.

A huge amount of time translates to an average of four and a half hours a day, he said. Australia is one of the top 10 adopters of mobile technology, with 85% of Australians owning an internet-enabled smartphone. Huggins said mobile devices were far outstripping other forms of technology in their proliferation.

“We’ve seen really in the last four years since 2010 that the number of mobile devices being produced and shipped globally has grown exponentially. There [have now been] 1,500 million mobile devices shipped in the last two years. That’s four to six times more than the number of PCs and TVs being shipped,” he said.

As mobile devices become more common and people spend increasing amounts of time using them, the way people communicate and connect is changing, Huggins said.

THE AMOUNT OF INFORMATION WE HAVE NOW ABOUT EVERYTHING IS MASSIVE, AND THE SOURCES OF DATA ARE GOING UP EXPONENTIALLY

SOCIAL

This leads to the second trend that is dominating the consumer landscape: social. Social networking is ubiquitous, and has become an intrinsic part of people’s daily lives, Huggins said. “People are connecting differently. They’re using these mobile devices to connect continuously using social networks.”

And this constant connection means people are placing more importance on the opinions of their peers, which they can access more readily. He said an increasing number of consumers were turning to social networks to make their choices on consumption.

“The interesting thing we’ve seen emerging lately is social networks beginning to change behaviour.

Global research suggests that right now about 30% of referrals are coming through some sort of social network.”

Huggins used the example of his wife, who belongs to a Facebook group for young mothers in Sydney’s Eastern Suburbs. This group influences his family’s buying decisions, he said.

TECHNOLOGY UPDATE

Finsure’s growth boosted by best-in-class technology

By Jill Fraser

JOHN KOLENDA The Finsure Group is riding high.

Founded by John Kolenda in 2011, Finsure’s principal objective was to become the best aggregation business in the industry. Kolenda says his retail finance brokerage is set to achieve its primary goal as broker numbers swell.

Finsure recently announced it had over 700 brokers and a loan book of over $10bn.

Confident this growth will continue, Kolenda says rolling out the industry’s leading electronic lodgement service, ApplyOnline, late last year was a key factor in his strategy.

“Over 50 lenders are available through ApplyOnline, which means our brokers can send applications via our proprietary software system directly into lender partners,” Kolenda says.

“Aligning our brokers under our CRM platform with sophisticated electronic lodgement through ApplyOnline has fully integrated the whole system because everything is now bundled together.

“This is of enormous benefit regarding both the compliance and application process.”

Finsure has migrated all its brokers to its new CRM platform and invested in NextGen.Net’s ApplyOnline to provide the best value proposition.

“Launching ApplyOnline means we now have a fully integrated end-to-end system,” Kolenda declares.

“The experience is a whole lot easier and empowering for brokers because it enables them to get everything correct upfront, which in turn equates to being able to deliver to consumers much more rapidly.

“It has also improved Finsure’s overall efficiency. So it completes the triangle of interaction: customer, broker and lender.”

According to Finsure Group managing director John Kolenda, key advancements in its technology offering have resulted in the company being well on track to crack the top 10 BRW fastest-growing companies in Australia this year.

Last year, BRW magazine’s annual ‘Fast Starters’ list had Finsure ranked at number 18 of the 100 fastest-growing companies in Australia. Finsure was also listed as the third fastest-growing business in the financial services sector after growing its revenue by

140% over the 2014 financial year.

NextGen.Net sales director Tony Carn refers to Finsure as “a dynamic, fast-growing and technology-savvy business”.

“ApplyOnline is a key block in any serious value proposition in the thirdparty Australian market,” Carn says.

“One of the key things in Finsure’s growth scenario was to ensure they had key functionality, and John [Kolenda] recognised the need for ApplyOnline.”

Kolenda was surprised at the ease with which Finsure switched its electronic lodgement service to ApplyOnline.

“For us it’s become a new age of efficiency,” he says.

Kolenda talks of the implementation of an ApplyOnline Broker Centre and the value-added features of ApplyOnline+ (serviceability calculations maintained in real time by lenders and the ability to upload and validate supporting documents, all at the point of sale), giving Finsure an end-to-end system that helps support the whole value chain and each stakeholder within that chain.

“We’ve gained countless efficiencies and improvements, and at the heart of it is the fact it allows the broker to seamlessly interact with numerous stakeholders at any different stage,” he said.

“Plus it enables brokers to customise the system to utilise it in whatever way best suits their own process.”

Finsure is now turning its attention to integrating its other business verticals, like insurance and financial planning, into the one technology solution for all business partners to create one fully integrated one-stop shop for broker clients.

Finsure is on track to be a premier aggregator, and Kolenda points to the need to keep up with the speed at which the world is moving.

“There’s a lot of fantastic innovation happening, to deliver better business outcomes and more efficiencies, and if you want to have access to that, ApplyOnline is the natural solution,” he says.

“NextGen.Net is constantly innovating, evolving and developing some really impressive and neat stuff, and if you’re not on board with it, you should be!”

ANALYSIS 12

brokernews.com.au

AUSSIE DIGITAL ADOPTERS 85% of Australians have smartphones BIG DATA GETTING BIGGER

90%

of all the data that has ever existed was created in the last two years

83% of Australians have internet access in their homes

The amount of data

DOUBLES EVERY TWO YEARS

Mobile sensors have increased

10 TIMES SINCE 2006

Source: Commonwealth Bank

Australians spend an average of 270 minutes per day on their smartphones

“Whenever she wants to buy new toys or wants advice, she can go to this small, closed community which is operating very much like neighbourhood communities used to operate,” he said.

Referrals from a social network community can ultimately decide which service providers receive business. Huggins said he had seen this at play in his own decisions on service providers.

“When we had to repair a window at home, the referral for the person we used came from Facebook.”

And Huggins isn’t alone in seeking out referrals from social networks.

He said the vast majority of consumers now turned to social networks for referrals from their peer groups before making purchasing

decisions. This applied equally to financial services.

“What we’re seeing in financial services is 83% of people saying ‘I want to see some user-generated content, and I want to see referrals before I make a decision,” Huggins said. “People are using these communities to get advice on how they make purchasing decisions and on who they should use for those purchasing decisions.”

DATA

With social networking increasing the amount people share about themselves and their purchasing habits, and mobile devices increasing the touchpoints for those bits of information, Huggins said data was another major trend shaping

the global marketplace.

“The amount of information we have now about everything is massive, and the sources of data are going up exponentially. We’re getting information out of social networks, and we’re getting information out of the smartphones that people are carrying around,” he said.

The amount of data is growing exponentially. Huggins said 90% of all the data currently in existence worldwide had been generated within the last two years, and this amount would double every two years.

“There were four zetabytes of data in 2013, and there are six zetabytes now,” he said.

The idea of a zetabyte may seem abstract, but Huggins put the figure in more concrete terms.

“If you converted six zetabytes of data into high-definition data, and took all 23 million people in Australia and had them listen to and watch their individual piece of that data, they would be watching for nine and a half years to get through all the data we have in the world today. The problem is in two years there would be nine more years of data and in four years there would be 26 more years of data, so you can never get through all of it.”

This is an extraordinary amount of data, but another major trend means that it’s also an amount that can be harnessed, Huggins said.

COST

The fourth trend changing the marketplace is the precipitous decline in the cost of computing.

“Computing costs have fallen massively, so we can now actually make sense of all the data, which is kind of a new development,” Huggins said.

In fact, computing costs have decreased exponentially over the past 20 years. In 1992, storing a gigabyte of data cost $589. Storing the same amount of data today costs $0.02.

Once again, Huggins put the figure in context.

“To put that in context, if house prices fell like that – and no one is saying they will – if you bought a

ONLINE ORIGINATIONS OF FINANCIAL PRODUCTS CATEGORY

2010

2014

Savings accounts

16%

59%

Consumer finance

12%

47%

Term accounts

9%

43%

Investments

11%

28%

Mortgages

4%

10% Source: Commonwealth Bank

ANALYSIS brokernews.com.au

THE CHANGING POWER OF CONSUMERS

13

disproportionately captured value.

Now the person who owns the customer experience is actually going to create and capture value. That has fundamentally 1900–1960 changed a whole lot of industries, and it Age of manufacturing changes the way we talk about mortgages going into the future.”

Huggins used the example of the music industry to illustrate the change in where value is captured.

1960–1990 “In the 1900s, the artist or singer would Age of distribution capture the value of music, and they’d be paid directly for a live performance.

That shifted over time to the distributor or music label, and it’s shifted again to Apple and 1990–2010 more recently Spotify.

So the person who Age of information owns the customer experience captures the value.”

So what does this mean for lenders and brokers? It means creating user experiences will 2010–PRESENT become more important and vital Age of the customer to capturing value than manufacturing or distributing products.

And, ultimately, brokers shouldn’t worry that they’ll be cut out of the supply chain, Huggins argued.

“We’re not seeing that. We’re not seeing brokers cut $700,000 house in Sydney right now out of the supply chain. We’re seeing today, in 20 years it would be worth customers still see this as a very $65. That’s the type of fall in costs we’ve complex, substantial transaction. What seen in the last 20 years in computing.” we are seeing is that the research that The falling cost of computing means customers do upfront and online is that the massive amount of data being increasing,” he said. created and shared can now be He said brokers, therefore, should captured, analysed and acted upon. expect consumers to have done their research well and be better informed.

THE IMPACT And while Huggins said he hadn’t yet All this has served to fundamentally seen any new players offer serious alter where value is created and disruption to the mortgage market, he captured, Huggins said. warned this could change quickly.

“The impact has been to shift where “One thing you can be certain of is value is created and captured. In the you’ll be wrong when making some early 1900s, manufacturers created statements about the future, so though value. That shifted around the 1960s we haven’t seen disruptors come in, a and into the 1980s to the distributors. few years ago no one would have seen The person who owned the distribution Airbnb coming to disrupt the hotel networks and the supply chains industry.”

BUSINESS INTELLIGENCE 14

The

paradoxes preventing improvement

Continuous improvement of your business is possible if you fight against these paradoxes, Joakim Ahlstöm says

S

ucceeding with Continuous Improvement has proven harder than expected for many organisations. One big reason is that there are a few challenges most organisations sooner or later encounter and where your intuitive responses actually prevent you from succeeding.

CONTINUOUS IMPROVEMENT PARADOX #1 – SIMPLICITY

A common reaction to failed improvement initiatives is going for a more advanced solution.

Go the other way! Simplicity will stand the test of time.

For your organisation to succeed with Continuous Improvement you have to make it a natural part of the everyday work of every employee. For that to become reality your approach can’t be complicated.

If it is, new employees will need special training to understand your improvement method, you will need additional support resources to keep progressing, and backing it up will demand a great deal of your managers’ time.

Time is probably your most limited resource, and in the long run you won’t be able to afford not to use everyone’s creativity.

Kill two birds with one stone; keep it simple to both save time and give everyone a chance to contribute.

CONTINUOUS IMPROVEMENT PARADOX #2 – FOCUS

A common reaction to recurring problems is bombarding them with solutions. Go the other way! Focus and dig deeper to find the real cause of the problem.

Imagine what would happen if I took you and 10 of your colleagues to a junkyard and asked you to build whatever you wanted.

The most common reaction would probably be to just stand there looking around, not sure

brokernews.com.au

what to do. Imagine instead that I asked you to build a vehicle that could transport all of you at least 10 yards without any of you touching the ground. Now your heads would probably fill with images of wheels, axles, planks to stand on, and steering wheels to guide you along the way. Instantly you would become more creative and could start to organise and divide the work among you. Some people think that creativity grows best when all boundaries are removed. The opposite is true.

When we limit and clarify the task it becomes easier for everyone to contribute.

The same principle applies to problem-solving. When you zoom in, dig deeper, divide into smaller pieces and discard the unessential, the Aha! moment will come, and that’s when you find easy-to-implement solutions with great impact.

CONTINUOUS IMPROVEMENT PARADOX #3 – VISUALISATION

A common reaction to lack of initiative is pointing out problems that need to be fixed.

Go the other way! Visualise good

IF YOU START

BY VISUALISING GOOD EXAMPLES AND POSITIVE RESULTS INSTEAD, YOU WILL CREATE A POSITIVE ATMOSPHERE examples and positive results first to inspire action.

In an environment in which managers constantly tell or show people in what way they are inadequate, nobody wants to be the centre of attention.

To draw focus away from themselves people will start pointing out faults they see around them instead, and before you know it you have developed a culture of blame.

If you start by visualising good examples and positive results instead, you will create a positive atmosphere and give people a chance to adopt a behaviour worthy of praise. But even more importantly, when you continually highlight progress made and focus on the strengths people have, you also

create a safe environment in which improvement potential can be expressed without people becoming defensive.

CONTINUOUS IMPROVEMENT PARADOX #4 – OWNERSHIP

A common reaction in crucial situations is adopting a command and control approach.

Go the other way! Ownership is a prerequisite for using one’s full potential.

If you are told exactly what to do when it really matters, you will start to question your own ability to handle difficult situations. What’s worse, when you are confronted with challenges in the future it is likely that your insecurity will prevent you from making good decisions or even acting at all.

For a manager it’s a good idea to monitor how many questions he or she asks, compared to the number of statements he or she makes. What is your questionstatement ratio? Do you try to be more interested or more interesting? If you double your question-statement ratio, you will both learn more and get more out of your colleagues.

CONTINUOUS IMPROVEMENT PARADOX #5 – SYSTEM

A common reaction to shortage of improvement ideas is launching an idea campaign. Go the other way! Only a systematic approach builds organisational improvement competence.

Running an idea campaign is a popular method for tapping into the creativity of an organisation. There is only one problem with them. They kill creativity! If there is an unmet need to be listened to in an organisation, an idea campaign might create a surge of ideas, a surge so big that only a fraction of all ideas can be implemented.

This means the majority of people will get yet another confirmation that no one listens to their ideas, and next time they are less likely to contribute.

A systematic approach should not only make sure that improvements are made and problems are solved daily but also increase the improvement competence of your organisation every day. When you have a SYSTEM like that you will Save Yourself Stress, Time, Energy and Money!

Joakim Ahlstöm is the author of How to Succeed with Continuous Improvement: A Primer for Becoming the Best in the World, available at Amazon. For more info, visit www.SucceedwithCI.com.

BEST PRACTICE 15

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Go big on branding Branding your business can attract employees as well as customers

H

ow much time and effort does your organisation invest in its employer brand?

According to international research by Employer Brand International, 65% of companies are planning to increase or maintain their investment in employer branding initiatives in the coming year.

The study also found that the movement by companies to shift recruitment spending into social media during the past three years has continued, with 76% of organisations using social media as the main way to communicate their employer brand and engage with potential candidates.

Eighty-seven per cent of companies believe that a clearly defined strategy is the key to achieving employer branding objectives, but only 17% actually have such a strategy in place, research by Employer Brand International shows.

The study also found that 76% of organisations surveyed used social media as the main way to communicate their employer brand and engage with potential new recruits.

EMPLOYER BRANDING STRENGTHENS AN ORGANISATION’S ABILITY TO ATTRACT AND RETAIN TOP TALENT – S HANNON GILLESPIE, AURECON Career development was the most important attribute for a company to promote when attracting talent, according to 87% of study respondents, followed by leadership at 86% and work environment at 83%.

Engineering and technical services company Aurecon won Best Employer Branding at last year’s Australian HR Awards, and employer brand manager Shannon Gillespie said that people were the foundation of organisations, regardless of sector.

“Employer branding strengthens an organisation’s ability to attract and retain top talent, so you can better build and

maintain a workforce with the right people, the right skills and the right cultural fit. For professional services firms in particular, like Aurecon, the ability to build a workforce of engaged top talent is vital, as the expertise of our people is essentially the product we sell to our clients.”

Aurecon was formed in 2009 through a merger of three engineering firms in South Africa and Australia.

The company began by establishing an employee value proposition (EVP) that reflected its overarching brand proposition and was aimed at three audiences – experienced professionals, executives and graduates/students.

It then reviewed all of its employer brand communication touchpoints to look at when and where the employer brand reached its target audiences.

Aurecon came up with a range of tactics to launch its EVP globally, including using a range of media platforms and industry events.

Gillespie said an employer brand needed to have the “right balance of aspiration and reality”.

“It should inspire and motivate people, but also be a true reflection of what it is like to be part of that organisation. All stages of the employee life cycle – from awareness through to recruitment and on to the employee experience – should support the employee value proposition, or you will find a gap between the brand promise and the reality of employment, which leads to disengagement and increased attrition.

“It’s also important that the whole organisation owns the employer brand.

An employer brand is not purely established through marketing channels, but more so through every interaction your staff has with other people, both internal and external. Your employees can be your strongest employer brand ambassadors.”

NEWS 16

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CONTINUED FROM PAGE 1

Matt Lawler: Deconstructing advice The Yellow Brick Road CEO discusses scaling advice to suit the consumer

Y

ellow Brick Road has had a busy year, acquiring Vow Financial and Resi Mortgage Corporation, signing a five-year strategic marketing agreement with Nine Entertainment and announcing significant expansion plans.

While many may have doubted the possibility of merging mortgage broking and financial planning, YBR has spent the year making the model work.

Chief executive Matt Lawler recently told the RFi Mortgage Innovation Summit that the key was the ability to scale the level of advice available, and deconstructing the idea of financial planning.

“There is no doubt when the customer sits in front of us and takes on what these days is a bigger and bigger debt, they are completely financially exposed,”

I HAVE A BACKGROUND IN FINANCIAL PLANNING, SO I KNOW HOW COMPLEX IT CAN BE. BUT I ALSO KNOW HOW SIMPLE IT CAN BE

he told the summit.

“We deal with 30- to 40-year-olds, so we try to deconstruct financial planning.”

Lawler explained the term, saying that financial planning is scalable, and not a one-size-fits-all proposition.

“I have a background in financial planning, so I know how complex it can be. But I also know how simple it can be. I think to say that financial planning is one amorphous mass is to not understand what financial planning is actually all about. It’s not respecting the customer, that the customer may not want the full Mercedes-Benz service thrown at them when they go to see someone,” Lawler said.

Yellow Brick Road’s clients tended to fall within a certain demographic, Lawler indicated, and understanding this demographic was key to understanding the type of financial advice they required.

“The profile of our customer is a 30- to 40-year-old, and when they go see someone they probably have a young family; they probably have a couple of kids.

They’re either buying their first house or they’re refinancing to their second house. They have $400,000 to $500,000 of debt on average, and they’re completely exposed on the insurance side.

They have an industry super fund, and they’ve probably got a dollar-a-week insurance which is probably $70,000-80,000. If you find the simplest way you can address that or refer them to someone who can address that, then you fulfil that need. You don’t have to do a full financial plan with the client the first time you meet with them,” Lawler said.

Instead, Lawler said this initial meeting allowed YBR’s brokers to build a relationship that could grow and mature throughout a client’s financial life cycle.

“What you can do is build on that [relationship] with the client over time. Once you have that

client relationship, [it] allows them to grow up with you to be able to do more and more with them down the track.”

Lawler said it was important to make sure advice grew with the client, rather than outpacing the client’s needs or desires.

“If you deconstruct advice, you can actually put in front of the client the right advice at the right time. If you sit in front of a 30-year-old and put them with a CFP who charges $6,000 for a statement of advice, they’ll run a mile because they can’t afford it.

What you have to do is put in front of that 30-year-old the right level of advice for where they are, and then grow with them over time.

THE POWER OF THE STOREFRONT

BY THE NUMBERS

700% The acquisition of Vow Financial increased YBR’s loans under management by nearly 700% Source: YBR

Just as clients had different needs for different levels of advice, Lawler said the company’s branches had different needs for different levels of expertise.

“All of our branches haven’t got a full financial planning licence,” Lawler said.

Rather, Lawler indicated that the level of financial services on offer was tailored to the needs of the branch’s customer base.

“We can actually give [the branches] segments of authority that allow them to suit the needs of the customer they’re dealing with. We take a lot of the risk of financial planning away. A lot of the risk is around investment advice. We can take a lot of that risk away by using model portfolios,” he said.

Lawler also explained the company’s commitment to the storefront branch model.

“The way we think about retail shopfronts is that when you’re investing in the brand and when you’re letting people know who you are and what you do, you won’t maximise your spend in marketing dollars if you don’t have retail shopfronts.”

Lawler said this was because of the psychology of marketing.

“Not a lot of people are going to jump off their couches straightaway when they see your ad, but if you do the ad and it sticks in their mind and then they’re driving by and see your store, it triggers them to take action.”

BROKER BUSINESS PROFILE

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18

Australian Credit & Finance: Pushing boundaries Australian Credit & Finance is the new Sydney brokerage redefining the mortgage process and taking the broking industry by storm

D

avid Hyman and Sebastian Watkins had no experience writing loans before they co-founded Australian Credit & Finance (ACF) with consultants Martin Lam and Mark Kalajzich in February 2013. However, two years has been long enough for these two serial entrepreneurs – and members of the founding team who developed leading online deals site, LivingSocial – to build a mortgage broking business that is fast becoming one of the biggest forces in the mortgage market.

“Having never written a loan before was the biggest advantage we ever

BROKER BUSINESS PROFILE brokernews.com.au

19

opportunity came from. It was understanding that from a broker perspective, this sort of model didn’t exist.”

Taking inspiration from Quicken Loans in the US and bolstering it with their experience in online sales and marketing, ACF has broken down and streamlined the loan settlement process, centralised it to one Sydney hub and leveraged off the Internet.

“Looking at a lot of the models which exist today, there has not been a lot of innovation. For the most part, they are operating a very similar sort of franchisee/licensee type of model, where essentially you’ve got microbusinesses operating within a business. If you drill down into it they are doing their own paperwork, they are answering the phones, they are receiving the leads, they are calling their customers, they are giving scenario advice, they are processing their loans – they are being the butcher, baker, candlestick maker,” Watkins explains.

“We centralise all the marketing and back-office support. We have a sales team that qualify all of our online leads into real opportunities and turn them into a face-to-face or phone-based appointment for the broker. We also have a production team that performs compliance checks and sends the loan application to the lender.”

BREAKING IT DOWN

AC&F director Martin Lam

had,” says Watkins, ACF’s sales director. “Having never worked at a bank [and] having no financial services experience, we were able to have a look at the industry from the outside in.”

Without being constrained by preconceived ideas, Hyman and Watkins say they had the freedom to question the way the mortgage industry worked, which eventually developed the model on which ACF was born – and the reason behind its success.

REDEFINING AN INDUSTRY

The cogs began to turn back in 2009

for Hyman and Watkins, who both share a strong background in sales and marketing. Realising the potential in the $1.3trn home loans market, they found themselves asking what they could offer the broking industry. “… [We} were comparing the industries that we had worked in before and the ways that we supported our sales staff – through marketing, back office support and that whole end-to-end process,” says Hyman, ACF’s managing director.

“We looked at these brokers and we saw that they didn’t have that support. That was really where the

The ACF model has broken down the loan settlement process into three main steps – lead generation, loan processing and application, and compliance. Each step is handled by its own dedicated team.

The sales team handles lead generation, brokers handle loan processing and application, and the production team handles compliance. Hyman and Watkins say this ensures consistency and efficiency across the business.

“We have a very structured process which is all stitched together quite seamlessly. Everyone has their own part to play in the process and what you find is that by giving people fewer tasks and asking them to do it more frequently – which is the opposite to the current model where you are doing every task less frequently – you actually become better at doing those tasks,” Watkins explains.

Leveraging off the Internet and both Hyman’s and Watkins’ online sales marketing experience, ACF generates leads for its brokers through online advertising. These leads are followed through by the sales team, who vet them, qualify them and pass them on as tangible opportunities to the broker.

“We are certainly not the first people to leverage online in the mortgage broking space, but I think where the difference applies is that

BIG DATA GETTING BIGGER

ACF

opened its doors in February 2013 The team submitted

$1BN in loans by the end of 2014

The average age of its brokers is

33

ACF

is a member of Connective

BROKER BUSINESS PROFILE

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20

HAVING NEVER WRITTEN A LOAN BEFORE WAS THE BIGGEST ADVANTAGE WE EVER HAD. HAVING NEVER WORKED AT A BANK [AND] HAVING NO FINANCIAL SERVICES EXPERIENCE, WE WERE ABLE TO HAVE A LOOK AT THE INDUSTRY FROM THE OUTSIDE IN – SEBASTIAN WATKINS, CO-FOUNDER AND SALES DIRECTOR

L- David Hyman, R - Sebastian Watkins

we have a centralised model…

Right now we are operating through a number of funnels through traditional networks like Google, Facebook, Bing, Yahoo, etc.

Underneath each of those channels, there are multiple campaigns that are talking to different customer scenarios,” Hyman explains.

“The consumer in 2015 is logging a lead with Aussie, Australian Credit & Finance, Mortgage Choice and their local bank. It really comes down to taking that customer out of the market, so if you’ve got a team focused on doing that, it allows the brokers to be brokers and provide a great experience for the customer.”

Domenic Circosta, a senior mortgage broker at ACF who started as a new-to-industry broker with the team in August 2013, says this type of support is revolutionary, especially for new brokers.

“One of the biggest problems out there for brokers is generating new leads, particularly new-to-industry brokers. To become a good mortgage broker you need the knowledge, and the only way you can get the knowledge is by getting in front of

somebody, but you need somebody to get in front of first. So, a broker would have to spend massive amounts of time prospecting on the phone, trying to get in front of people. Then once they were in front of a client, there would be another six hours’ worth of administration and paperwork and making sure all the boxes are ticked.

“Whereas here at ACF, the sales team qualify all of our new clients for the broker and book the appointment.

The broker will do some prep work before the appointment based on the client package they have received from the sales team, so when they go out and see the client they can focus on actually finding the best loan that suits them.”

This model means their brokers are getting in front of 10 to 30 new customers every single month, says Watkins, and not only is it getting their pipeline moving along, but it’s making them better brokers.

“I don’t think there will be many brokers that will come into the industry fresh and see up to as many 30 client visits in their first four to six weeks. Just by pure definition of seeing that many customers and just

by engaging in that process of going away, finding a solution and coming back in a timely manner, their knowledge base is increasing significantly. Our support structure lets them do that.”

Hyman says it also ensures their brokers are constantly increasing their scenario knowledge and avoiding complacency.

“It also addresses the risk of getting a concentration of particular customer scenarios. If you’ve got a broker who relies on an accountant or financial planner or a particular real estate agent or developer for lead flow or customer volume every month, then they are typically going to be focusing on one particular customer niche.

They become very good at that, but then when they see someone who would be slightly outside of that, they don’t know what to do.

“Given our brokers don’t have

BROKER BUSINESS PROFILE brokernews.com.au

control over where their customers are coming from, they are seeing a broad cross-section of consumers in Australia.”

Once the broker has processed the loan, it is then sent to the production team who do a compliance check and send the application off to the lender. The broker never submits a loan application directly to a lender. Hyman says this provides extra comfort around compliance, and also makes the settlement process quicker. “… [T]hey [the production team] go through and ensure that the disclosure documents are given to the customer, that there’s an electronic version of it and that all the documents are correct.

If there is an issue with the deal, they’ll suggest restructuring, and work with the broker to go back to the customer and restructure the deal. If nothing is required to be done, they effectively package it up and send it to the lender.

“What happens out of that process is we’ve got a very consistent application or loan pack that goes to every single lender because it is a systemised thing and it is not done broker by broker… From a compliance perspective, it not only allows us to rest easy but it makes our ongoing auditing straightforward because it is being done on a deal by deal basis as it goes through the system.”

Eric Mirzayan, a senior mortgage broker at ACF who also joined the team as a new-to-industry broker in May 2013, says the production team was his lifeline as a new entrant.

“What supported me the most as a new-to-industry broker was the help of the production team. It allows you to write more loans because you can spend less time worrying about the

21

back-end stuff. It definitely fasttracked everything for me.

“If you’ve got something wrong or you haven’t got a particular document, it doesn’t go out to the lender until they’ve checked it first.

It is a fantastic sort of check. They are on it within 24 hours and will come back to me straight away if something isn’t right. That isn’t only beneficial for the customer, but for me too because it will still be fresh in my head, which helps me learn quicker and remember it for next time.”

PREPARED FOR GROWTH

By the end of 2014, ACF had already submitted $1bn in loans to its panel of lenders, with a settlement rate between 60% and 80%. Now, the Sydney brokerage says it wants to originate $3bn in loans by the end of 2015.

According to Hyman and Watkins, this number will be achieved with continued investment into their current brokers as well as an aggressive recruitment drive.

Currently there are 90 brokers filling the open plan office in Pitt Street, but over the next six to 12 months they would like to double – or even triple – the broker headcount.

Hyman even hinted at diversification plans for the brokerage’s future.

“There are definitely some financial services verticals that we are looking at. As we’ve grown, our customer or prospect database has grown significantly as well and so for us, offering a complementary product

or service to our customers is a natural progression.

“We are evaluating a couple of different verticals now, like life insurance and super that are quite complementary to the mortgage offering.”

ACF has just closed a $6m capital raise to support these impressive growth plans. The highprofile backers include Sportsbet founder Matt Tripp and BetEasy founder Tom Carroll along with JumpOnIt founders Colin Fabig and James Gilbert.

Hyman says it is a combination of a hunger for growth, being prepared and having the right backing that has allowed them to achieve maximum growth with minimum growing pains.

“Growing quickly is something we have done in previous businesses before so typically, the same sorts of growing pains occur whether you are in online advertising, telecommunications or finance. For us, it is about planning for these growing pains – making sure you’ve got that foundation within the business so people are supported, making sure you have a big enough office space, making sure that you’ve got the capital adequacy to keep growing and also understanding the cash flows along the way.

“For us, that was something we had done a few times before and I guess we have been lucky enough to get in front of some investors… That’s been integral to us, having people who really believe in the model and have been there before as business owners as well.”

MARKET TALK

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22

So what exactly is a desktop valuation?

RP Data’s Chris Spanos on the ins and outs of EVRs

A FAST FACT

12.6% Increase in lending for the construction and purchase of new homes in 2014 Source: ABS

s more and more lenders rely on valuation products other than traditional full valuations, it is an opportune time to review what desktop valuations are, why they are used, and what you should expect.

A desktop valuation, like CoreLogic’s EVR product, is an assessment of a residential property’s value performed at a valuer’s computer desktop without travelling to the property’s address for an actual inspection. To make this possible, the valuer receives a rich data packet, with attributes such as bedroom, bathroom and car space counts, imagery including street and aerial imagery, and additional data elements such as the contract of sale price or customer’s estimate. In addition to this data, valuers are given access to a platform that allows for the searching of comparable sales and preparation of the desktop valuation report.

A desktop valuation is not a wholesale replacement for short forms or ‘full valuations’. Given that an inspection of the subject property is not performed, either internally or externally, a desktop valuation has stricter rules regarding its use. For example, a lower LVR limit is generally applied to desktop valuations than in cases where a lender demands a full valuation. Additionally, desktop valuations do not include any professional indemnity (PI) coverage that a lender may rely upon.

A useful way to think of desktop valuations is that they are analogous to automated valuation models (AVMs) – lenders will trade PI insurance and the additional rigour of an actual inspection in exchange for a faster turnaround time and stricter lending rules.

This begs the question – why are desktop valuations used if they have such compromises, especially in respect of PI insurance? The answer lies in the variability of mortgage applicants. For example, a loan applicant may have a 25% deposit and be buying a house in metropolitan Sydney where prices have been historically buoyant. In such circumstances a lender would not want to wait the average three days it takes for a full valuation to be completed and risk losing the customer.

Getting to ‘yes’ faster has been a principal driver of new property valuation technologies such as AVMs and desktop valuations. While they may also be cheaper (desktop valuations cost a lender approximately half the full valuation fee), these new technologies are embraced by lenders because they enable workflows that would be impossible any other way.

If an AVM is unavailable, perhaps because its expected accuracy is low (ie a high FSD), and the loan applicant has a significant deposit, do I really want them to wait for three days and consider other options? In the past I could order a ‘kerbside’, but all a lender would receive is a value estimate, or range, and a photo of the property that the valuer drove past.

Without any other information, the lender lacked a proper audit trail if future loss was suffered.

With the rise of ‘big data’ and its liberation through internet technologies, lenders have access to more valuation types than ever.

Understanding what a desktop valuation is can help you set prospective client expectations when this type of valuation product is ordered by a lender.

RECORD LENDING FINANCE POINTS TO SUSTAINED CONSTRUCTION GROWTH Double-digit growth in lending finance for the construction of new homes points to much-needed sustained construction growth over 2015.

Lending finance figures released by the ABS reveal a 9% increase in lending for the construction and purchase of new homes in December, and a 12.6% increase for the 2014 year.

The Property Council of Australia’s executive director of residential, Nick Proud, says this result will see residential development activity remain at peak levels throughout at least the 2015/16 financial year.

“The recent decision by the Reserve Bank of Australia to cut the official interest rate will likely drive these lending finance figures higher still, eclipsing the current record levels.

“No other sector in Australia’s economy is demonstrating such robust and sustained growth. This is welcome news in the context of a decade-long high in unemployment and a slowing rate of economy-wide growth.”

However, Proud says concentrated and targeted national reform in 2015 of supply-side efficiencies in land release, development assessment and reform of inefficient taxes such as stamp duty is urgently needed if we are to continue to create prosperity, jobs and strong communities.

“We simply can’t afford to see growth stall in this key sector of Australia’s economy: the ramifications on employment, housing affordability and government revenue would be extremely concerning,” he said.

MARKET TALK brokernews.com.au

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Sydney continues to lead property charge Sydney continues to outperform in property price growth

R

esidential property prices rose by 1.9% across Australia’s eight capital cities in the December 2014 quarter, with only one city seeing a fall in values.

All apart from Darwin (with a drop of -0.6%) saw an increase in average property prices.

Sydney led the charge (up 3.4%), followed by Brisbane with 1.4% and Melbourne with 1.3%.

Only modest gains were seen in Hobart (1%), Adelaide (0.8%), Perth (0.3%) and Canberra (0.2%).

While concern about a possible ‘housing bubble’ remained on the radar, the recent residential property price index showed some indications to the contrary.

Housing Industry Association economist Geordan Murray said the continuing rise in property prices was beginning to level out.

“The pace of home price growth peaked in early 2014.

Since then the rate has been slowing,’’ he said.

“In most markets the price growth remains comfortably positive and at sustainable rates.’’

However, markets like Sydney, which rose 12.2% through the year to the December quarter 2014, continued to cause concern.

The latest onthehouse.com.au research revealed that the Sydney market was out of reach for first time buyers.

It is now considered to take just under 60% of the median Sydney family’s weekly income to meet mortgage repayments for a home.

“Sydney is the obvious exception, where despite some easing in growth throughout the year, the rate of home price growth remains high and this is something that policymakers are watching closely,” said Murray.

The RBA cut the benchmark cash rate to a record low 2.25% from 2.5% earlier this month in response to soft inflation pressures and stalling growth in the economy.

“The RBA noted some concern about Sydney home prices, but also that Australia’s regulatory framework has the capacity to manage risks that may arise from the housing market,” said Murray.

Murray said a sharp reversal in recent price growth would only come from some sort of economic shock.

“A deterioration in the wider economy would need to cause a widespread and prolonged deterioration in labour market conditions, and a sharp increase in the unemployment rate stemming from job losses,” he said.

Murray added that housing prices should continue to grow at a far more modest pace while interest rates remain low.

“This looks like it will remain the situation for some time yet.”

PROPERTY PRICES ON THE RISE December quarter 2014 property price growth

3.4%

BRISBANE

1.4%

SYDNEY

1.3%

MELBOURNE

1%

HOBART

0.8%

ADELAIDE

0.3%

PERTH

0.2%

CANBERRA

-0.6% DARWIN Source: HIA

FINANCIAL SERVICES 24

brokernews.com.au

Good credit behaviour could pay off

ECONOMY SHOWS LITTLE MOMENTUM

A

ustralia’s positive credit reporting system is set to make an impact on borrowers over 2015 as lenders can record and share detailed information about individuals’ credit history.

Smartline personal mortgage advisers have said changes to the Privacy Act have allowed more data to be recorded, and it will be used to assess credit applications.

Previously, only negative information about a customer’s credit history could be reported, and the change will allow for a ‘positive’ system, giving credit providers more “comprehensive information that should assist them to make better lending decisions”, Smartline says.

“Most of Australia’s lenders have agreed to provide [borrowers’] data to the credit reporting agencies. If a lender does not report this information they do not get to see the information from the other lenders, so we would expect that it’s just a matter of time before every licensed credit provider shares this information,” Smartline’s executive director Joe Sirianni said.

Whereas before the Privacy Act change lenders could only see a customer’s defaults, insolvency history and certain details of credit applications, over time they will be able to know if the application was approved, how much credit was used, the closing date of a credit account, and two years of month-by-month minimum repayment history.

“It’s likely that we will start to see situations where clients with good credit ratings will be offered a better deal,” Sirianni said.

“People will be able to recover faster from financial adversity, and it will be quicker to establish a credit report.

“As a result, keeping your credit rating clean has never been more important.”

FORMER RBA HEAD RETIRES AS NON-MAJOR CHAIRMAN The chairman of ME Bank has stepped down from his position after 15 years in the role.

Bernie Fraser joined ME Bank in April 2000 when the organisation was only six years old and operating as a simple securitised mortgage provider.

A former governor of the RBA, Fraser has provided a depth of banking knowledge and experience which has overseen the transformation of the non-major into a rising force within the banking industry.

During his tenure, Fraser also oversaw ME Bank’s acquisition of a full banking licence in 2001, a move that allowed the lender to expand its product portfolio, grow its customer base, and diversify funding sources.

ME Bank chief executive Jamie McPhee says Fraser leaves the lender in a very strong position, with double-digit profit and customer growth, and with new technology systems that will be a key enabler for further growth.

Fraser will be replaced by current director Garry Weaven as chairman.

“It has been a privilege to serve ME Bank and the industry super funds for many years, but I am now looking forward to a bit more time for my other interests,” Fraser said.

BY THE NUMBERS

12,200 The number of jobs fell by 12,200 in January after rising by 42,400 in December Source: ABS

NAB’s January Business Survey reflects an economy with ‘little momentum’ and ‘weakish confidence’.

The survey shows business conditions fell slightly from December, with a decline in sales and profits over January, while employment remained soft.

Business conditions were described as “increasingly below long-run average”, and apart from mining and wholesale most industries had deteriorated, with manufacturing at the lower end.

In light of the recent cash rate cut, the NAB says: “Our view is that the RBA will sit back and watch for a few months to see if more needs to be done.

“Fundamentally we still see the need for another cut to counter lower commodity prices and other domestic headwinds.”

Business confidence had increased, although it was still below long-run averages and remained weak in mining.

a

JOBLESS SPIKE COULD SEE MARCH RATE CUT A spike in the unemployment rate in January could see the Reserve Bank make another cash rate cut as soon as this month.

The latest labour force statistics released by the ABS show that the unemployment rate rose from 6.1% in December to a 12-year high of 6.4% in January. This means the number of jobs fell by 12,200 in January after rising by 42,400 in December. Full-time jobs fell by 28,100 over the month, while part-time jobs rose by 15,900.

CommSec chief economist Craig James said the 0.3% spike in unemployment was a result of dampened business confidence.

“When assessing the latest jobs data it is always important to look at all the latest estimates and trends, rather than focusing on one or two key indicators. And the trends suggest that Australian businesses have become cautious about taking staff on. In the latest month, part-time workers rose, full-time jobs fell and hours worked lifted to seven-month highs,” he said.

“So businesses are working existing staff more intensively and taking on part-timers to fill gaps. But with the focus on efficiency and productivity, businesses are reluctant to take on full-time staff.”

On this basis, James said there seemed to be no barrier to the Reserve Bank cutting interest rates again at the March board meeting.

“Simply, Australia is growing at a far slower rate than its potential. So the Reserve Bank can cut rates without fear of generating inflationary pressures.”

However, James also added that there was little reason for the Reserve Bank to go further in cutting rates over the year, and consumers should not be too worried.

“The problem is one of confidence rather than lack of incentives or weak economic ‘fundamentals’. With dwelling starts at record highs, and the Aussie dollar weakening, it is clear that the economy has scope to pick up pace.”

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

ASIC seeks harsher penalties

Last year ASIC told the Senate Inquiry into its performance that it needed harsher penalties to dole out to “amplify the fear” potential wrongdoers felt.

Chairman Greg Medcraft lamented the lack of strong penalties available to the regulator. “It is frustrating – both for us and the public – when the penalty available to respond to misconduct is much less than the profit someone made in the process,” said Medcraft.

What’s happened since?

ASIC’s lack of power to dole out punishment was a common theme over the year, with Medcraft continuing to complain that the regulator needed harsher penalties at its disposal. Labor senator Sam Dastyari claimed that the issue was not the regulator’s lack of power but the fact that it was not using the powers it already had.

Nevertheless, the watchdog took action against 89 cases of white-collar crime in the financial services sector in the six months to December 2014. This included unlicensed or dishonest conduct, fraud and theft.

Broker head predicts rate drop FBAA CEO Peter White last year made bold predictions that 2014 would be a year of change, education and reform. The industry veteran said he believed that low interest rates would benefit brokers and that he saw rates as “dropping by around 0.25 per cent” in 2014, though he said there was a “good possibility of a rise in the fourth quarter”. White said he also expected to see new entrants to the broking market as more customers turned to brokers.

What’s happened since?

While it may not have come in 2014, White was correct about the RBA dropping rates. The Reserve Bank shocked many economists at its February 2015 meeting when it chose to reduce the cash rate to 2.25%. High unemployment could potentially see the bank move on rates again. White was also correct about the increased use of brokers, with 2014 seeing the channel crack through the 50% market-share barrier.

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What digital trends mean for your business

T

he digital age has caused massive disruptions to many industries, and financial services is no exception.

Australian Broker TV recently sat down with ING Direct’s Lisa Claes, who said digital trends were driving new consumer behaviours.

“The most dominant [trend] that has the most impact on financial services is this reduction in information asymmetry. It sounds a rather complex term, but it simply means that the powerbases have shifted squarely into the hands of the consumer.

What digital has done is made information accessible and available anywhere, anytime, and usually – because you’re pitching information to a small screen – in a way that’s succinct and easy to understand.”

Claes said this trend had educated consumers about “areas in their lives that were previously complex”.

“The playing field in terms of information and understanding has got even now, and that has a profound impact,” she said.

Claes said the implication of digital trends was that customers would be less loyal. She said providers should ensure they were accessible by digital means, and remove friction in their interactions with customers. She said brokers must also examine all the data they held on their customers in order to give more personalised advice.

“Mortgages are the last thing on their mind. They want a home and they want to pay it off. What you need to be doing – given that you have a lot of information about their finances – is use it to your benefit,” she said.

She pointed out that lenders also had information on the value of customers’ homes.

“That is a wonderful source of information for you.”

Claes said brokers also had access to information on their clients’ financial priorities.

“Why wouldn’t you, knowing those few simple but critical attributes, be using the data you have?”

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

FORUM 27

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Are online lenders a threat to brokers?

An online lender says it has more than doubled its home loan applications since dropping its interest rate in the wake of the Reserve Bank’s decision to cut the official cash rate

WHITTINGHAM FACES COURT

Banned trail book dealer Mark Whittingham is accused of dishonestly obtaining nearly $1m through the sale of trail books and rent rolls, and fronted court in Melbourne recently charged with 50 charges of Obtain Financial Advantage by Deception.

“They will need to lock him up to stop him and then we will need to be ready when he is released.

Unfortunately he seems to have found a constant source of people who are willing to hand over money without any due diligence; while these people are around people like Mr Whittingham will be exploiting them. So, how long will this take and what do you think the punishment will be?

July before the case finishes and a three-year good behaviour bond.”

Dave Robinson on 15/02/2015 at 8:21AM

K

im Cannon, managing director of Firstmac – the lender behind loans.com.au – says the online lender has had an increase of “more than a hundred per cent” in applications since the RBA’s rate cut. Data compiled by the online lender and released late last year revealed that 53% of customers borrowing for property were refinancing an existing home loan and were increasingly opting for “convenient” online lending.

Coast Broker said online lending was not a threat, due to the lack of service it provided customers.

“A big fat no as they provide no customer service and no after sales service. As I say to prospective clients, the biggest thing people do in life outside of relationships and children is to buy a property and therefore the next biggest thing is having the right mortgage.”

Awesome Albert lamented the disparity between the rate offered through online platforms and the one available to brokers and their clients.

“Why doesn’t Kim Cannon offer the same product to mortgage brokers? If the clients really are ‘increasingly opting for convenient online lending’, then he wouldn’t need the price difference in the product offering.

The truth is that the low rate is the main reason people use this product. Sorry but you get what

REAL ESTATE LOBBY URGES GOVERNMENT TO KEEP NEGATIVE GEARING you pay for and when you take the advice out of what we do, you are left with a lot of people borrowing more than they should and with loans that aren’t the most suitable.”

CharlieX said the loans.com. au platform ran the risk of alienating brokers from Firstmac.

“Interesting concept by Firstmac. I thought one of the rules of the lenders is not to shoot themselves? What will happen if brokers stop sending applications to Firstmac? Is its single distribution channel, loans.com. au, going to generate enough volume to cover operating costs of the company?”

Tim Slarke agreed, and called the platform “channel conflict of the highest order”.

Pav said consumers would still look for advice on a decision as big as a home loan.

“It’s not about buying a $1,000 airplane ticket. It’s their life’s savings. Smart people always want to get the best advice on different products and specialty after service. At the same time, these online products should be offered to brokers.”

And Michael Kent said the existence of loans.com.au changed his view of Firstmac.

“As a broker I certainly don’t support (as in put any deals to) Firstmac. I lose a lot of business to loans.com.au as I cannot beat 4.23%. Then we have a BDM from Firstmac on the phone trying to drum up business!”

The REIA has urged the government to retain negative gearing to encourage property investment and keep downward pressure on rents.

Mark on 10/02/2015 at 11:43PM “Shame on these vested interests. I believe around 90% of all NG concession is utilised by buyers for established housing investment. To reward investors who engage in loss-making investments by shuffling money from the same tax payers who are then priced out of the market due to increased investor competition in the established housing space, to said investors, is completely unethical and inequitable.”

Ron Clarke on 9/02/2015 at 12:19PM “Negative gearing on new house builds has a positive impact upon the economy, that is obvious. I am yet to see an articulate positive argument for gearing into established property. Effectively, negative gearing skews the market and gives an advantage to investors over homeowners.”

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

ARE ONLINE LENDERS A THREAT?

43.5% POTENTIALLY

14.5% YES

42% NO

THE COALFACE 17

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Brokering and balancing the best of both worlds Rogan Yates’ love of the broking industry is reflected in the success of his award-winning branch and the downtime he enjoys

R REELING IN THE REWARDS YBR Sydney CBD has won the franchise’s Branch of the Year for NSW, ACT and WA, and also the General Insurance award, Branch Support Person to Eva Kharoufeh, and Top Branch of the Year for Revenue.

ogan Yates took a road less travelled to become branch principal and wealth manager of Yellow Brick Road Sydney CBD. “My dream was to play rugby league,” says Yates, never imagining he would become an accolade-garnering member of the finance industry.

In his mid-20s, after playing football for the Roosters didn’t work out the way he wanted, he became the first adult apprentice in engineering at Qantas.

“I had no real interest in aeroplanes; I didn’t really know what I was interested in,” says Yates. “As I got older I worked out that I was more interested in finance and stockbroking.”

So after 11 years in engineering, he started studying to be a stockbroker, and then a twist of fate set him on track to make his mark in financial planning and mortgage broking.

A friend advised him to do some work experience at a newly launched finance company with Mark Bouris, who would become his mentor over the next 15 years.

“I did work experience with Mark at Wizard, and never left,” says Yates.

“I’ve been with Wizard for 10 years and YBR for five.”

Yates says he had instant success with the mortgages he did during his work experience, and felt like it was just meant to be.

“When I had the experience of mortgage broking, where someone walks into your office and asks you for

ALWAYS PUT THE CLIENT FIRST. IT’S AS SIMPLE AS THAT

money and you don’t charge them – and you do them a service of getting the money, and they walk out happy as anything and it hasn’t cost them any money – there’s no downside. It’s a first-class industry to be involved in.”

On the bad rap brokers sometimes get, Yates says it completely baffles him.

“I’ve built my business on the success of two things, and that is, I always put the clients’ needs first, which I don’t think is a hard thing to do. The second part of it is my preparation for work.

If I’m going to be prepared for work, I prepare like I’m preparing for a football game.”

Yates says that being physically, mentally and emotionally prepared for work is as important as knowing the industry inside out. It can be a demanding job but it has its rewards, particularly for those with young families looking for flexibility and a healthy work-life balance.

With a young son himself, Yates has cut back on visiting clients outside the 9 to 5 norm.

“I don’t mind Saturday morning and I don’t mind one night during the week.

Eleven o’clock on a Saturday morning is not a bad time; you can still get up, do a bit of exercise, have a bit of brekky and then go and see a client.”

And even with his busy schedule Yates has found downtime to relax and explore. A keen traveller, he has been to Bali over 30 times, where he was recently married; America four times; and he has clocked six trips to Europe.

And it’s all the more rewarding if you have a job you enjoy coming back to.

“I love the fact that you get paid for helping people. I actually believe that I sincerely improve their life when they come to see me, and I get paid well for it. So I think, ‘What a great business!’

I love the fact that there’s no downside to what we do, other than hard work.”

Yates hit $94m in settlements last

year and has a personal average he likes to reach of $6–7m per month, but he says the success of his branch is thanks to his great team of five, including a financial planner.

He says YBR is about brand and culture.

“Running off YBR as a brand is really valuable. They are really well respected within the financial world, and there’s also the family culture of YBR. Because I come from a sporting background, I love the team environment.”

Their leads are 100% referral and their clients span everyone from first home buyers to very wealthy clients to high-profile people.

“Whoever walks in the door and needs a hand, I’ll help them, no matter what the loan amount.

“In 2015 we’re looking to really increase the wealth side of our business and we want clients to know the value of having everything under the one roof.”

Most of Yates’ clients come to him for mortgages because of his reputation, but he says they love hearing about all the other services on offer.

“To do financial planning properly is not rocket science. It’s about getting a person organised. It’s about understanding what their future needs are and what their current financial position is, and then working through that.

“I believe the makeup of financial planning can be clearly explained, and I love clients understanding what they’re doing. They need to understand. If a client walks in with us, we give them as much information as we can; we do not hold back or try and play games – that’s not our culture.”

Yates says offering the client as much information as possible builds goodwill and reassures them that you actually care.

The monetary side is not the first thing, but it comes back; it always comes back. If you put in, you get out.

It’s not about trying to identify how much you’re making out of each client; it’s about having a culture that just says, ‘We’re here to help; no problem’, and the money follows itself.”

He says no matter who walks in, they’ll help them.

Yates advises young brokers to prepare for at least two years of dedication, not in learning the trade but in physical, mental and spiritual preparation to achieve your best at work – without, of course, forgetting about the clients.

“Always put the client first,” says Yates. “It’s as simple as that.”

PEOPLE 28

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Greg Phillips produces swimming comeback gold Greg Phillips’ ‘double life’ is paying dividends.

Jill Fraser reports

GOOD LEADERSHIP IS GOOD LEADERSHIP, WHETHER IT’S IN A SPORTING OR BUSINESS CONTEXT

N

extGen.Net sales executive Greg Phillips recently took the plunge to return to competitive swimming after a 10-year hiatus.

Phillips got back into the water as a serious contender in November 2012.

He was returning to a sport in which he held major titles. He was world ranked in the 100m butterfly, UK National Champion in the 50m butterfly and USA National Champion in 4x100 freestyle.

After only six months back in the pool he won three national titles in the 2013 Australian National Masters Championships and was ranked in the top 10 in the world (FINA World Masters rankings for age group).

Boosted by his success, Phillips decided to step up and compete in Open meets, where he was up against former titleholders like James Magnussen.

His return to Open level showed that he still had what it took. He raced at the 2014 NSW Open Swimming Championships in September and won gold in the 4x50m freestyle and silver in the 4x100m freestyle, and he broke the state record in the 4x50m freestyle (open).

Phillips broke his own record for the 50m freestyle and 100m freestyle events in 2014.

His target now is to get back to his National Masters times of 10 years ago.

“My performances at the Nationals in Adelaide in November 2014 put me within a

whisker of this – around 0.8 seconds to go on the 100s and 0.2 on the 50s – so it’s not far off,” he says.

The only thing that suffers in his workswimming-family equation is “sleep”.

“It’s tough because I’m up at 4.12am every morning to train,” he says.

But the hours lost in bed are overridden by his elite-level fitness and focus, and the fact that his goals in swimming and business complement each other.

Comparing the approaches of head coach Justin Rothwell at the Carlile Swimming Club (which provides an elite program for Australia’s future swimming champions) and financial services leadership, Phillips says both are about instilling self-empowerment.

“Good leadership is good leadership, whether it’s in a sporting or business context,” he says. “There is a clear correlation between all high-performance environments.

“Tony Carn, sales director at NextGen.Net, is totally non-hierarchical. He adopts a consultative approach. I have the autonomy in terms of making business decisions and taking accountability.

“The same scenario occurs in swimming.

It’s trust based, and my club know I’m not after an easy ride, because I’m shooting for my best optimal performance.”

Phillips notes the synergies between his role at NextGen.Net and swimming.

“The importance of planning and preparation – setting short-, medium- and long-term goals; driving efficiencies – is a cornerstone of NextGen’s value proposition and also important in the pool, ie an efficient stroke is of paramount importance, along with nutrition, strength, conditioning and flexibility, time management and surrounding yourself with people who are high performers, which challenges you to learn, step up, adapt and perform,” he says.

“It’s exactly the same patterns in sport and business. If you haven’t prepared for your race, it’s going to show in your results. Likewise in any business scenario.”

He admits that juggling his dual career with his family life can be hard.

“I’d be lying if I said it wasn’t,” he laughs.

“It’s challenging, both physically and mentally.

“I get through it because I know what my goals are, and my mindset is that it’s all about long-term goals.”

His two career paths help him to keep perspective. “If it becomes challenging in one area, I break it down into doable milestones and take baby steps.

“I’ve been very fortunate with Tony and Justin. As mentor and coach they help me to realise my potential by challenging and pushing me.”

But ultimately, he says, it’s all about “driving efficiencies, which is the same message I take to senior business leaders on behalf of NextGen.Net”.

“Driving efficiencies is a cornerstone of NextGen’s value proposition. It’s now also the cornerstone of my philosophy.”

MOVERS AND SHAKERS

RAKHIT TO MOVE TO INSURANCE ROLE Bankwest head of broker sales Ian Rakhit has told Australian Broker he will be departing his position at the bank to take on a role in the insurance industry. Rakhit said he had accepted the role primarily to reduce his interstate travel.

In a note to broker group heads, Rakhit said he valued his time at Bankwest.

“I am incredibly proud to have helped Bankwest grow into a national business, now with a $50bn loan book, two-thirds of which originates with brokers.”

Rakhit will remain in the role until the

end of March. He thanked brokers for their support of Bankwest during his tenure.

“I’d like to thank my broker partners who have made Bankwest the largest lender outside of the big four banks for broker-originated lending,” he said.

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IN FOCUS

O

rigin Finance recently held its annual staff party in North Sydney, hosted

by Choice Aggregation Services.

Choice CEO Stephen Moore delivered a keynote speech at the gathering, which was attended by Origin Finance, Chan & Naylor Finance, Mortgage Mart and Walker and Miller Training.

CAUGHT ON CAMERA 29

INSIDER 30

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Dream house becomes a nightmare An American woman who lost a bidding war for her dream house took some drastic measures for revenge

MCCARTNEY’S CHILDHOOD HOME IS BEING SOLD FOR A SONG In 1985, a Canadian businessman paid $2.23m for John Lennon’s 1965 Rolls Royce Phantom V. The drum skin featured on the cover of Sgt. Pepper’s Lonely Hearts Club band sold for $1.07m in 2008. A year later, George Michael paid $2.1m for the Steinway Model Z piano that Lennon wrote ‘Imagine’ on.

By those amounts, the $150,000 price tag for Paul McCartney’s childhood home in Liverpool is a bargain.

That’s right, McCartney’s former abode is up for sale, and the interior looks like it could very well be unchanged from the time little Paul lived there with his parents throughout the mid-1950s.

The terrace house has a dining room, a kitchen and a lounge on the main floor, and three bedrooms and a family bathroom on the second floor. The backyard and front lawn are both fenced.

The home is set to be auctioned off later this month at Liverpool’s Cavern Club, the selfprofessed “nightclub birth place of the Beatles”.

L

osing out on your chosen property can leave you heartbroken, but could it also drive you crazy?

Probably not, but a San Diego woman was sentenced for stalking a married couple who she had lost to in a bidding war for her “dream house”.

“I had put so much hope into this house,” Kathy Rowe told ABC News in an interview that aired on ABC News’ “20/20.”

“When I walked in, it felt like my house... it’s almost like, you know, you hear bluebirds sing and music play.

I walked in, it was my house.”

A “devastated, heartbroken” Rowe, 53, decided to start playing what she calls pranks on the couple, Janice Ruhter and Jerry Rice, who had a young child and another baby

on the way when they moved in.

Her pranks included: billing the couple for $1,000 worth of adult diapers and magazine subscriptions they didn’t order, advertising a fake New Year’s Eve party at their home, and sending Valentine’s Day cards to neighbours’ wives with the Rice’s name signed to them.

Rowe even had their mail stopped, listed the house for sale online and posted online ads for sex with Ruhter that instructed anyone interested to come to the house during the day.

She pleaded guilty to stalking in November and was sentenced in January to a year of home electronic surveillance, five years of probation, and ordered to stay away from the couple for 10 years.