Australian Broker 12.05

MARCH 2015 ISSUE 12.05

$4.95 POST APPROVED PP255003/06906

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

+ ANALYSIS THE ONLINE THREAT

Are digital mortgages undercutting your offering?

P10

+ SPECIAL REPORT THE FSI AND SMSFS

What the Murray inquiry could mean for SMSFs P12

+ BEST PRACTICE DO YOU PASS THE GOOGLE TEST?

Search results could be hurting your business P20

Steven Degetto:

TRANSPARENCY AND CONSISTENCY Suncorp’s head of intermediaries says the bank is breaking new ground in its transparency towards brokers

I

n September of 2013, Suncorp introduced a bold service guarantee.

The non-major said it would offer initial credit assessments within 48 hours or refund brokers’ customers $500. Then, in spring last year, the bank launched its ‘Big News’ campaign. With a flood of broker business, Suncorp made the decision to withdraw its service guarantee, but in a move atypical of many lenders, it was entirely up front about its intentions.

FULL STORY PAGE 16

+ BIG IDEA WELL NIGH

A new wholesale funder just for brokers P28

+ CAUGHT ON CAMERA THE MFAA’S EXCELLENCE AWARDS P29

NEWS 2

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NUMBER CRUNCHING UNDER PRESSURE PROPORTION OF FAMILY INCOME NEEDED TO MEET LOAN REPAYMENTS: DEC QUARTER 2014

36.2%

NSW

FAST FACT

33.4%

VIC

28.4%

$16.6bn

QLD

Value of online retail sales in the year to January 2015

WA

26.1%

TAS

25.9%

Source: NAB

ACT

27.8%

SA

28.1%

NT

AUSTRALIA

20.4% 31.5%

BY THE NUMBERS

HAPPY HOME LOAN CUSTOMERS

$5,000

HOME LOAN CUSTOMER SATISFACTION

The government’s newly released Options Paper proposes an application fee for foreign property buyers of $5,000 for properties under $1m, and $10,000 for properties valued between $1m and $2m, with $10,000 increments for each additional $1m in value

90.2%

88.6% 81.3%

BENDIGO SUNCORP WESTPAC BANK

80.9%

NAB

84%

ST.GEORGE

82.6%

CBA

84.6% 79.1%

ANZ

ALL BANKS

Source: REIA Source: Bendigo and Adelaide/REIA

Source: Roy Morgan

WHAT THEY SAID...

GLENN GIBSON

MICHAEL RUSSELL

KIM CANNON

KEN SAYER

“We’ve been listening to our brokers, we’ve taken their feedback on board, and hopefully they’ll be very pleased with what we’re about to deliver” P6

“Whether it’s their health or their financial health, [consumers] are deserving of specialist advice” P8

“The type of customer we’re seeing in the online space is, 99% of the time, not the same customer that brokers see” P10

“Mortgage House Broker may be a ‘no-frills’ competitive loan, but it comes with all the high-tech behind it” P28

NEWS 4

brokernews.com.au brokernews.com.au

MFAA chief calls on lenders to stump for brokers ■ MFAA chief executive

BY THE NUMBERS

190,000 Peter White

FBAA OFFERS BROKERS PHONE REBATE ■ The FBAA has said its members

can receive a rebate on their phone account equivalent to 20% of their annual FBAA membership fee by switching their current telecommunications provider to MOVOX, a company the association has formed a new alliance with.

MOVOX chief executive Rohan Doyle said the company’s core service was voice over internet (VoIP), along with virtual PBX and mobile VoIP. “Every call within the virtual PBX is free, and if you’ve got a mobile sales team, they can call head office and vice-versa for free from anywhere in the world using a mobile app,” Doyle said.

FBAA CEO Peter White said the association’s members could take part in a free telephone bill analysis to identify areas of savings and productivity improvements.

“If you’re spending hundreds of dollars a month using outdated technology, it might pay you to get MOVOX to run their eye over your telephone bill,” said White.

Sydney is forecast to face a shortfall of new homes of more than 190,000 by 2024 Source: Property Council of Australia

Siobhan Hayden has urged Siobhan Hayden lenders to play a more active role in educating the wider media and consumers about the role and rigour of brokers.

While moderating a panel of lenders at the Australian Mortgage Innovation Summit, Hayden asked the panel – consisting of Suncorp, Commonwealth Bank, Pepper and Advantedge – what their reaction is when they see anything in the media that misrepresents the broker channel or the performance of the channel.

“I was quite surprised when The Australian published an article about four weeks ago in response to the ASIC investigation into the Mya Financial debacle – $110m in fraud. After 25 years, the senior finance editor seemingly had very little understanding of what brokers do. So, outside the broker channel, as lenders and brands in the market, what are you doing to help educate people in the media and people outside our industry in relation to the rigour around what we do?” Hayden asked.

Hayden, who did meet with the editor at The Australian to clarify his understanding about the broker market, has now urged lenders to play a bigger role in this type of education – more than just discussing prudent lending with regulators.

“If the channel is so big and there is such an appreciation of it in the lending environment, do we have a bigger voice than just mine to identify these challenges?” she asked.

Firstfolio sees profit driven by broking, aggregation ■ Firstfolio Limited has reported $2.3m in underlying cash net

profit after tax in the half year to December 2014, with strong results from broking and aggregation.

Average monthly settlements in aggregation and broking have increased 21.9% over the past 18 months.

The lender says its new growth strategy, announced in November 2014, has been a key contributor to their profitable outcome, after a tough year beset with debt and loss.

Firstfolio chief executive Peter Andronicos says they are still in a challenging business environment, although important progress had been made in positioning its brands for growth, particularly its eChoice online mortgage platform.

“We have made important changes that are starting to show in improving business metrics,” he said.

“This builds a stronger foundation for the business heading into the remainder of 2015.”

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

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6

AMP vows 2015 focus on brokers ■ AMP Bank’s yearly results showed their operating profit

was up 10% to $91m, and head of sales and marketing Glenn Gibson has told Australian Broker the bank remained committed to brokers.

“We are very dedicated to the third party channel,” he said.

“A very high percentage of our business comes through either the direct broker channel or via our advisor channel and we don’t see that changing any time soon, to a point we are investing in the growth of our mortgage capacity through our advisor channel.”

Gibson said AMP will soon roll out new system enhancements which have been in the works for a number of years.

“We’ve been listening to our brokers, we’ve taken their feedback on board and hopefully they’ll be very pleased with Glenn Gibson what we’re about to deliver.”

Gibson said a quarter of AMP’s mortgages are now written by their advisor channel.

“Having a quarter of our business coming through our own sources is a fantastic result because it highlights that our planners and advisers are giving whole of life advice to our customers, not just simply looking at superannuation or insurances; they’re now looking at home loans and debt as well.”

P2P lender promises competitive broker commissions ■ InvoiceBid, founded by ex-bankers Charlotte Petris and Andrew Petris, is an online marketplace for trading invoices. The P2P platform matches businesses that have invoices to sell with investors who bid against each other to offer finance to the borrower. Invoices are funded by investors who are high net worth individuals, family offices, hedge funds and SMSFs. Charlotte Petris, chief executive of InvoiceBid, said the P2P lender is not a traditional full factoring or whole turnover arrangement, allowing business owners to be completely in control of their

own finances.

“You [SMEs] pick which invoice, you set the price, you sell it, and you bring in exactly the amount of money needed for your business,” she said.

“Because we don’t discriminate by business size or sector, we have been able to help growing businesses that have never had access to finance before. And for those that do use invoice finance, we have been able to reduce their cost of finance by up to half.”

Petris also told Australian Broker that brokers can earn up to 40bps of ongoing commission for every invoice financed.

DID YOU KNOW?

80.44%

Variable rate demand for February hit 80.44%, a twoyear high Source: Mortgage Choice

WORLD NEWS UNITED STATES OF AMERICA

DISTRESSED SALES AT SEVEN-YEAR LOW The US housing market continues to improve, new figures show. The share of distressed sales in December reached a seven-year low, according to the latest data from CoreLogic.

The data reported distressed sales (REO and short sales) accounted for 12.8% of total home sales nationally in December 2014, a 2.8 percentage point decrease from December 2013, and a 1.2 percentage point decrease from November 2014.

The distressed sales share in December 2014 was at its lowest percentage since December 2007. REO made up 8.8% of total home sales in December, and short sales were 4%.

Distressed sales totalled 32.4% of all sales in January 2009 (with REO sales making up 28% of 32.4%).

“The ongoing shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount than do short sales,” CoreLogic reported. “There will always be some amount of distress in the housing market, so one would never expect a 0% distressed sales share.”

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NEWS

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8

Broker loans more than double retail growth for non-bank ■ Growth in home loans settled through brokers more than

Michael Russell

‘YOU WOULDN’T ASK YOUR DENTIST TO CHECK YOUR PROSTATE’ ■ Mortgage Choice CEO Michael

Russell has said diversification is critical as the broking industry has shifted into a mature market phase.

However, there is a right and wrong way when it comes to tackling diversification for your business.

According to Russell, the franchise has experienced record growth since it diversified into financial planning in October 2012. However, while Russell says diversification makes for a better business model, he maintains that broking and financial planning should remain as separate job functions in brokers’ businesses.

“The Mortgage Choice model [of diversification] is one of specialist advice. When we developed the model, we wanted to make sure that we knew that our clients were both demanding and deserving of specialist advice, not ‘GP advice’,” he said, addressing the Australian Mortgage Summit last week.

“When you’re seeing your GP and they are looking down your throat, you probably wouldn’t ask if they’ve got a minute to see if you’ve got any cavities and if you’re in the dentist chair, you wouldn’t ask your dentist to check your prostate. So whether it’s their health or their financial health, they [consumers] are deserving of specialist advice.”

doubled the growth in the retail channel over the past six months for a non-bank lender.

According to Homeloans’ half year results to December 2014, loan settlements through the third party channel grew 13%, while loans settled through the proprietary channel grew just 6%.

The lender’s total loan portfolio remained steady at $7.6bn; however, its branded loans under management increased 2.3% to $3.1bn. The non-branded loan portfolio reduced slightly to $4.3bn.

Homeloans’ CEO Scott McWilliam says this is a positive result, especially given the intense competition in the market.

“To date in HY2015, we have continued to focus on growing lending volumes and building on the positive momentum from the second half of FY2014. We were especially buoyed by strong settlements in the pre-Christmas period of 2014.

However, market pressures continue to impact on margins, which, in turn, has marginally reduced profit levels compared to previous periods,” he said.

CIO denies broker request to name excluded credit repairers DID YOU KNOW?

$18.97m Payday lender The Cash Store and loan funder Assistive Finance Australia were recently charged with $18.97m in penalties, the largest civil penalty ever obtained by ASIC Source: ASIC

■ The credit ombudsman has declined a broker’s request to

release the names of two credit repair agencies barred from using its services.

The Credit and Investments Ombudsman (CIO) – which was formerly known as COSL – last week announced it would be barring two credit repair agencies from using the ombudsman’s services. CIO said the two companies were well-known, but declined to name them.

“In both cases, our decision was based on evidence that these third parties had pursued multiple complaints for an improper purpose within the meaning of our Guidelines,” CIO said.

In an email obtained by Australian Broker, CIO declined a NSW broker’s request to identify the two credit repair firms, so as to not unknowingly direct clients toward them.

CIO manager of client services Huong Nguyen told the broker there was “no obligation on us to provide this information”.

“As credit repair agencies are not captured by licensing requirements where they are required to join an external dispute resolution scheme, we consider that naming particular agencies may cause consumers and the community to mistaken that we endorse other credit repair companies,” Nguyen wrote.

Scott McWilliam

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anz.com ^Not all features are available on all loan types. Terms and conditions, fees and charges apply. All applications for credit are subject to ANZ’s normal credit approval criteria. Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. Australian Credit Licence Number 234527. ANZ’s colour blue is a trademark of ANZ. Item No. 91195 02.2015 W427900

ANALYSIS 10

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Online lending: friend or foe Online lenders who operate solely online and distribute direct to the consumer are the next big digital disruptor in the broking industry. So, how can brokers protect their value proposition in an online world?

Kim Cannon, Firstmac

T

he term ‘digital disruption’ has become the latest buzzword surrounding financial services. It refers to changes brought about by technology that fundamentally shift established ways of thinking and doing business.

Digital disruptors vow to make the consumer experience cheaper, quicker and more convenient.

When it comes to the financial services industry, one of the biggest digital disruptors is the online lender – lenders who operate solely online and distribute direct to the consumer.

Online lenders may not offer the personalised service that a broker can, but they can pass their savings on overhead costs onto consumers in the form of much cheaper rates – and can offer it all from the comfort and convenience of the consumer’s couch.

So, how can brokers protect their value proposition in an online world?

ROOM FOR TWO?

Kim Cannon, founder and managing director of non-bank lender and third-party distributor Firstmac and founder of online-only lender loans.com. au, says there is room in the market for both broking and online lending.

“The biggest thing I find is that they [brokers] don’t understand what online is or where it is heading,” he told Australian Broker.

“It really comes down to the customer and what their level of comfort is. The type of customer we’re seeing in the online space is, 99% of the time, not the same customer that brokers see. When we started this business [loans.com.au], the average age of our customer was between 40 and 50 years old. They were

in affluent suburbs and had had a loan before. They had been there and done that, so they wanted to keep it simple.

“Whereas, consumers will go to a broker for education and information.

Consumers use brokers to gain knowledge and to have someone hold their hand through the process. Those types of consumers will always be around and will always need somewhere to go to.”

While Cannon says brokers will always hold an undisputed role in the market, he also believes online lenders do too – by aiding competition and challenging the major banks.

“There is a lot of competition out there, but the majors are still getting the majority of the business,” he said.

“We [Firstmac] are still locked out of a lot of broking and aggregator groups because they are bank-owned. So there are a lot of customers out there not getting the benefit of a great Firstmac, or other non-bank loan.

“If anything, the big bogeyman that is coming is the four majors spending millions on online facilities to catch the client, then cutting every other lender out while they have the client in front of them.”

While Commonwealth Bank had to shut down its online mortgage business, HomePath, in 2008 after failing to attract enough new home loan customers, NAB launched its own online-only lender, UBank. In 2011, UBank launched its first home loan product. It has now won Money Magazine’s Cheapest Home Loan Bank for three consecutive years – 2013, 2014 and 2015.

ING Direct’s head of third party distribution, Mark Woolnough, says he is not surprised that online lenders are gaining traction in the market. ING Direct itself is no stranger to digital innovation, being Australia’s first branchless bank when it launched down under in 1999.

“There is significant digital disruption, which is just a fact of life,” he told Australian Broker.

“The new generations want greater flexibility, accessibility and control of their decision making – whether that be travel, retail or financial services.”

However, like Cannon, Woolnough says it is unlikely that online lending will challenge the broker proposition.

In fact, he says it is the proprietary channel that will be affected.

“Customers go to see a broker for choice and I don’t think [customers] will ever move away from those principles,” he said.

“Importantly for us, we believe the impact of the online channel will be more for the branch or proprietary institutions. Our research does not suggest that it will come at a considerable cost to the broker value proposition. What you may find is that existing customers of a bank – once they are settled, once they understand the product and service, and once they understand the process on offer – they will choose to do the next loan by going online.”

SINK OR SWIM

DID YOU KNOW?

83%

of all Australian households have access to the internet

76%

of all Australian internet users use it to shop online Source: Australian Bureau of Statistics

As the market continues to forge a place for both online lenders and brokers, the savvy broker should acknowledge these changes and learn to adapt if they want to survive.

“There will come a time where brokers will have to make a decision not to fight over online lenders, but essentially look to share the customer.

There will always be a segment of the Australian community who will have a clear preference for their channel of choice,” said Woolnough.

While the broker value proposition – being able to offer choice and guidance – won’t change, Woolnough says brokers should adapt by changing their service proposition.

“Brokers have over the years built up a tremendous understanding of the industry, the lenders and the nuances of policy and product. I don’t think consumers will ever lose the need for that type of service,” he said.

“The question is whether that service will still be necessarily provided face-to-face. Whether it is in an office or in a lounge room, or whether the broker themselves moves their value proposition into a digital world.

“Also, this prevalence of a DIY culture – rather than a ‘you do it for me’ but an ‘I’d like to do it myself or let’s do it together’ approach – brokers will become in our [ING’s] view, a validator or a financial coach.

Brokers will become almost like a co-pilot for consumers.”

Digital disruption may even present new opportunities for brokers, according to Woolnough, rather than threats. As the online world breeds accessibility and accessibility breeds choice, consumers may need brokers more than ever.

“There may come a time where there is too much information and too much choice for the consumer. That pendulum might swing and they will be overwhelmed and need the broker more. They will look for, and truly value, the need to talk to a professional or a specialist. However, to get to that point, they will do so electronically or through technology.”

BEST PRACTICE 12

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Suresh Pillai, Liberty

The FSI and SMSFs The Murray Inquiry has recommended scrapping limited recourse borrowing arrangements for SMSFs. How will the plan shake up the selfmanaged super market?

T Cory Bannister, La Trobe Financial

Per Amundsen, Thinktank

he recent Financial Systems Inquiry has cast a spotlight on SMSF borrowing, and created doubt about its future. The Murray Inquiry advised the government to prohibit certain direct borrowing arrangements by superannuation funds.

The report recommended that the government should restore the general prohibition on direct borrowing for limited recourse borrowing arrangements (LRBA) by superannuation funds by removing Section 67A of the Superannuation Industry (Supervision) Act 1993.

According to the Inquiry, there is an emerging trend of superannuation funds using LRBAs to purchase assets. Over the past five years, the amount of funds borrowed using LRBAs increased almost 18 times, from $497m in June 2009 to $8.7bn in June 2014.

According to the Self-Managed Superannuation Funds: A Statistical Overview 2012-13 report released late last year by the ATO, the number of SMSFs has ballooned by 29% to 534,000 in five years – and the majority of them are in

lending, lenders can charge higher interest rates and frequently require personal guarantees from trustees.

“In a scenario where there has been a significant reduction in the valuation of an asset that was purchased using a loan, trustees are likely to sell other assets of the fund to repay a lender, particularly if a personal guarantee is involved.”

THE IMPACT ON AUSTRALIANS

Eliminating or limiting SMSF borrowing could have a significant impact on Australians looking to take control of their retirement, industry figures have suggested.

Thinktank commercial property finance director Per Amundsen said one of the troubling aspects of the FSI’s recommendation was its sweeping nature.

“The very broad approach taken to this issue by the FSI is at the heart of the negatives that would result from implementing the recommendation as it has been made. There are many positives derived by members of SMSFs that go directly to the ‘sole purpose

LET’S NOT FORGET THAT THESE ARE STILL RECOMMENDATIONS AND THAT THE GOVERNMENT IS STILL CONSULTING WITH STAKEHOLDERS

SURESH PILLAI, LIBERTY

“accumulation phase”, whereby members are working to amass their superannuation investment portfolio. Although the level of borrowing is still relatively small, if direct borrowing by funds continues to grow at high rates, Murray warns it could pose a risk to the financial system over time.

“Borrowing, even with LRBAs, magnifies the gains and losses from f luctuations in the prices of assets held in funds and increases the probability of large losses within a fund. Because of the higher risks associated with limited recourse

test’ of providing for their retirement benefits. It enables a long-term savings plan to be implemented in an asset class that might otherwise be out of reach for many individuals but is used extensively by larger industry funds being direct property. To simply ban outright any use of gearing in an SMSF seems to us to be a gross over-reaction to what have been limited instances of either poor or ill-informed advice having been provided to individuals.

This very often seems to have been in cases of relatively small

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funds being established for the express purpose of being smaller residential investment properties,” Amundsen said.

La Trobe Financial vice president and head of distribution Cory Bannister said the recommendation could also hit business owners hard.

“Apart from the immediate impact to lenders, brokers, accountants and financial planners by way of reduced business, if the government chooses to adopt ‘Recommendation 8’, small to medium enterprises are likely to be the hardest hit, as borrowing through a SMSF has allowed thousands of business owners to purchase the property from which they operate their enterprise from, taking advantage of the beneficial tax structure an SMSF offers,” Bannister said.

One of the reasons given by the FSI for its focus on SMSF borrowing was the practice’s growing prevalence. Rather than viewing this as a problem, Liberty Financial general manager of commercial finance Suresh Pillai said the popularity of SMSF borrowing demonstrated a need in the marketplace. And the ability to diversify into property, Pillai suggested, could keep SMSF

trustees from diversifying into riskier asset classes.

“The Financial System Inquiry raised concerns about SMSF borrowing arrangements largely in response to the strong growth within the sector. This growth may suggest that Australians, given a choice, elect to align their retirement futures with property. It

consumers, and called the recommendation “throwing the baby out with the bath water”. “[It is] simply ignoring the positive outcomes for many others who might choose to use these borrowing arrangements to build their savings for retirement through commercial property investments.

The negative is not so much the

TO SIMPLY BAN OUTRIGHT ANY USE OF GEARING IN AN SMSF SEEMS TO US TO BE A GROSS OVER-REACTION

PER AMUNDSEN, THINKTANK

would be a great shame if the recommendation is implemented in its current form as it will deprive Australians of a viable investment choice. Further, as highlighted by former Treasurer Costello, the proposed recommendation may just end up shifting the gearing into more risky investment areas,” he said.

Amundsen agreed that the recommended prohibition would eliminate choice for Australian

direct impact on property markets but rather the removal of choice from individuals who wish to manage their own retirement savings which is the whole purpose behind SMSFs. If you reject the systemic financial instability claim of the FSI then better targeted regulation would seem capable of resolving the problem and at the same time eliminating any negatives to implementing a more sensible recommendation based on

BEST PRACTICE 14

the facts as we know them to be,” Amundsen said.

WILL IT ACTUALLY HAPPEN?

DID YOU KNOW?

$8.3BN* Assets held under LRBAs increased to $8.3bn, or 1.68% of total SMSF assets in 2013, up from $497m or 0.15% of total SMSF assets in 2009 Source: ATO

Of course, all this depends on the government actually implementing the FSI’s recommendations. And the likelihood of this is still very much in question, Pillai said.

“Let’s not forget that these are still recommendations and that the government is still consulting with stakeholders. Interestingly, in a recent speech the Assistant Treasurer acknowledged that whilst the inquiry recommended a complete ban on borrowing, the government would “need to continue to explore the full range of options in this area”. An optimal solution is a balanced outcome where SMSFs are still able to borrow but with additional restrictions in place,” he said.

Amundsen also expressed doubt that the government would accept the recommendation part-andparcel, but said there could still be constructive changes made to SMSFs. “We are increasingly of the opinion that the Federal Government’s response will be a measured one that takes into account the positive features of LRBAs that are in line with the very reason that SMSFs were initially allowed to be established. Personal choice within the bounds allowed by the regulator, the ATO, is at the very heart of selecting an SMSF as the vehicle for your retirement savings and future income. We think it would be very difficult to justify a total ban but at the same time can see this as an opportunity to make some constructive changes with respect to the further licensing of the provision of advice. Related party borrowing as an element of LRBAs also looks to be an issue to be addressed. Two areas that have been mentioned publicly but that we think are unnecessary are those of restrictions on member guarantees and loan to valuation ratios. Both have an impact on pricing and we believe are best dealt with by the market and lenders’ own risk assessment processes,” said Amundsen. “With respect to pricing and SMSF member preference, Thinktank offers certain LRBAs without member guarantees but at an additional cost. Invariably members are happy to provide their personal guarantees in order to obtain the lower price. The lower price adds to their retirement savings and what could be more in keeping with the sole purpose test of an SMSF trustee.”

Bannister said a direct prohibition of LRBAs would cut against the very ideal of SMSFs. “We would be surprised if the government adopts all of the

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recommendations in entirety, prohibiting direct borrowing by superannuation funds altogether, and believe that banning LRBAs goes against the fundamental principles of being able to ‘selfmanage’ your superannuation fund – it is your retirement nest-egg, therefore you should be able to choose how you manage it,” Bannister said. “Property is an asset

individuals looking at an LRBA should get good professional advice from those licensed to provide it.

Individuals certainly should be aware of the FSI recommendation and that is publicly available and given its brevity it is pretty easy to read and understand. Equally so is the comment by the Federal Treasurer that the Government would be considering the

WE SEE PLENTY OF OPPORTUNITY IN THIS SPACE IN THE SHORT TERM, AS SPECULATION AROUND THE PRODUCTS’ FUTURE IS LIKELY TO SPUR A MINI-BOOM

COREY BANNISTER, LA TROBE

class that most Australians are comfortable with, they understand it, which we think is a much safer outcome than allowing consumers to invest in asset classes they aren’t as familiar with.”

But Bannister agreed with Amundsen that there was room for meaningful change in the regulation of SMSFs. “Rather than prohibiting direct borrowing by superannuation funds, there are a number of options the government should consider that mitigate the risks raised in the report if indeed they feel compelled to act at all, such as introducing a limit on leverage within an SMSF, introducing limits on asset class mix to ensure diversification, and [removing] the ability for SMSFs to borrow from related parties,” he said.

WHAT IT MEANS FOR BROKERS

But if SMSF borrowing is indeed slated for the scrap heap, what should brokers be telling their clients? Amundsen said there was little need for panic, as the recommendation – if implemented – would not apply to LRBAs currently in place.

“It has surprised us how little impact the FSI final report has had on LRBA inquiries and actual transactions. Part of this is no doubt because it was made clear that any changes would not be retrospective and would only apply to any new transactions from when legislative changes were actually implemented.

There certainly has been plenty of comment from the industry on the issue and press commentators seem to have something new to publish on it just about every day,” said Amundsen. “The result from our observations, however, is that it has not had much impact on individuals considering proceeding with an LRBA for a direct property investment in their SMSF. As we always tell our introducer network,

recommendations and it seems that recently appointed Assistant Treasurer Josh Frydenberg has been given that job. It has also been made clear that no change would be made retrospectively so properly structured LRBAs put in place under existing regulations will not be impacted.”

Pillai agreed, and said brokers should – for the time – stay the course with their advice to clients on SMSF borrowing.

“At the present time, the proposed changes, if they become law, look like they will only apply prospectively and that arrangements put in place beforehand are unlikely to be impacted. Continuing to encourage clients to be properly advised before considering any SMSF borrowings is ideal,” he said.

Bannister echoed the sentiments, and said it could be some time before any changes come to pass. Moreover, he said it was doubtful that SMSF borrowing would end up being banned entirely.

“There is still time before a course of action is likely to be taken by government and we don’t believe SMSF lending will be banned entirely, so it is still, in our opinion, a very worthwhile option to pursue and brokers should continue to promote it as a viable product for their clients to consider – particularly SME clients who are currently renting their place of business,” he said.

And the FSI recommendation could have a silver lining, Bannister suggested. With the axe hanging over LRBAs, demand could be pulled forward.

“We see plenty of opportunity in this space in the short term, as speculation around the products’ future is likely to spur a mini-boom of sorts in SMSF property investment, as business owners and investors look to take their chance to leap through what may be a closing window of opportunity,” Bannister said.

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NEWS 16

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CONTINUED FROM PAGE 1

Steven Degetto: Transparency and consistency Suncorp’s head of intermediaries says the bank is breaking new ground in its transparency towards brokers the bank’s values and priorities.

“We want to continue to identify good-quality brokers who are focused on the customer and open to change.

If they’re not open to change, they’re probably not going to use a non-major.

When we ran our campaign, one third of the market used us over that period of time. Now it’s about how our team gets smarter to focus on the right brokers and the right conversations,” he said.

REWARDING BROKERS

T

BY THE NUMBERS

88.6%

Suncorp chalked up an 88.6% satisfaction rate among its home loan customers in January, the second highest of any bank Source: Roy Morgan

he lender’s head of intermediaries, Steven Degetto, said the key to keeping brokers’ business was consistency and transparency. This, he said, was why Suncorp chose to be forthright about its service levels.

“Consistency and transparency is really crucial. Before we extended the timeframes, we told brokers and aggregators that we were going to do that. The feedback supported that decision well. It enabled brokers to manage their customers’ expectations,” Degetto said.

The problem that led to the withdrawal of the service guarantee is a good one to have. Degetto said the bank had planned for massive broker uptake of its promotional campaign.

Yet the lender saw demand from brokers that far outstripped even its optimistic projections.

“We’ve done a lot of work behind the scenes to get ourselves in a position to deliver on that campaign. With that campaign, we had nearly 4,000 brokers nationally lodge with us during a 12 week period. For us, that really demonstrates that both brokers and their customers are open to genuine alternatives,” Degetto said.

Degetto said Suncorp had ended up bringing its BDM team in to answer phones and handle broker queries.

And while demand may have been far greater than anticipated, he said the lender had now adjusted to dealing with the volumes it received from brokers.

“We held service levels for most of the campaign, and then extended timeframes out toward the end of the campaign. We’ve been back at a two-day turnaround now for several

weeks. Our job now is to work with the brokers who had a good experience and see the value of our customer-centric proposition. It’s important to look to deal with brokers who have a similar alignment of values,” Degetto said.

INCREASED TRANSPARENCY

In spite of having to withdraw its service guarantee, Degetto said feedback from brokers was overwhelmingly positive. He put this down to the fact that the lender was honest and upfront with brokers when volumes overwhelmed its capacity.

This has led to a decision by Suncorp to continue to be transparent about its service levels, Degetto said.

“We’re going to expand that transparency around service levels, so that from the time a loan gets lodged with us to when the documents are returned we’re fully transparent in publishing what our current SLAs are,” he said.

Degetto claimed this approach was unique in the industry. He said it enabled brokers to manage client expectations and make informed decisions when dealing with Suncorp.

“If we see brokers as business partners, we have an obligation and responsibility to tell our business partners where we are so they can make the choice whether or not to put a deal with us,” he said.

Degetto said another benefit of the volume the bank had received during its Big News campaign was the introduction of brokers who hadn’t previously used Suncorp. In the wake of the campaign, he said Suncorp would be working to identify brokers whose businesses aligned well with

Brokers have been responsible for a significant amount of the bank’s growth, Degetto said.

“About 70% of our new business in H1 was via brokers. That reflects growth interstate, and it also reflects consumer behaviour around the use of mortgage brokers. Consumers are looking for advice, choice and convenience. Those are the three things that are crucial to the broker proposition for the customer.”

And Degetto said the bank would look to better reward brokers who introduced sticky customers.

“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.

As a result, Degetto said Suncorp would change its commission structure for loans settling from 27 February 2015, 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.

“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.”

Degetto indicated that Suncorp would also look for ways to reward brokers for quality.

“For us in the future, we’ll look to reward brokers who give us better-quality transactions of strong A1 credit combined with straight-through processing. We’ve undertaken a review of our own usability for brokers, so that we ask for the right type of information up front. Brokers don’t submit a transaction for it to be declined, and they don’t submit it to be touched twice. Our goals and their goals are aligned.”

THE COALFACE 18

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Sign-posting the path to financial freedom Leanne Clune had a calling for finance along with an irrepressible desire to guide others toward financial security

L

ike many seeking a tertiary education, Leanne Clune self-funded her way through her uni days on a tight budget. Unlike most of her fellow graduates, however, she and her husband easily saved a whopping $30,000 in her first year as a working professional, while others spent up to their limits and became bogged down in debt.

It was then that she knew she had to join the finance world and help people reach their financial potential.

“I felt like I was ‘winning the lotto’ every fortnight, every time I got paid, because I was used to living off nothing – and they were all wasting it,” says Clune.

“I became fascinated in talking to them that none of them had any money.

They all seemed to have bought new cars and gotten themselves into high interest consumer debts.”

But before her drive and self-starter outlook would see her become a successful business owner, Clune’s talent in the sciences and maths in school led her to gain a degree in marine biology from James Cook University in Townsville.

Hailing from Geelong, Victoria, Clune hopped over state borders again from Queensland to settle in Western Australia.

“I’ve always been interested in finance, always,” says Clune and although working for the Department of Agriculture WA in 1999, her intrigue in her peers’ not-a-penny-tospare situations prompted her to study financial planning alongside full-time work.

“This is how I got really interested and intrigued in the financial planning side of things and I thought ‘I just want to make my money work for me’.”

While Clune and her husband were both working full-time and kids were a while off, they invested their savings in real estate and leveraged it.

Clune began broking soon after completing her Certificate in Finance (mortgage broking) in the new millennium.

“The more I studied it and talked to people, the more I thought, ‘I really need to help people with this because they don’t understand it’.”

Another memory that only strengthened her resolve to help people through their monetary maze was a chance visit from a financial planner while she was still working for the WA government.

I’VE ALWAYS BEEN INTERESTED IN FINANCE. ALWAYS

At this stage Clune had studied a great deal on financial planning, had those substantial savings and was set on investing them.

“He was clearly just chasing the high income, pre-retirees and I didn’t even notice that because I was only young,” says Clune.

The planner had made an assumption of her financial standings based on her young age and told her to come back when she had some money, unaware of what she had sitting in the bank.

“So I started to see I could really help people and just thought I could do a better job actually.”

And Clune clearly knows her strengths as she now has a successful business that is rapidly expanding, so much so that Leanne Clune and Associates, based in Mundaring, Perth Hills has brought on two personal assistants to help share the load.

“I have two brokers coming on board within the next few weeks and I partner with Wealth Today for the financial planning aspect of my business.”

Although Clune studied financial planning, she began her business as a mortgage broker as it was easier to start out and build from there to financial planning services, due to its demanding compliance levels.

She says Wealth Today was instrumental to the successful growth of her business, their BDM often making the 90-minute return trip out to the Hills to visit her office.

“Wealth Today provided me immediately with a business coach who met with me fortnightly and absolutely changed my whole business. I also had access to the coach by phone at any time. It was instrumental in growing my business to where it is today.”

Clune also credits the success of her business to a mentality where a client’s needs always take priority.

“I have always focused on customer service and the holistic approach rather than volume of loans to be written.”

Since her school days, Clune says she was always the person people could come and talk to and open up to about things and this has flowed on through her career and become a useful attribute to have as a broker and financial planner.

“There’s a lot of the counselling aspect to [the work] and you’ve got to be able to empathise with people and understand and

put yourself in their shoes.”

She says many financial planners are ignoring the normal, everyday people looking for advice.

“It was always my intention to work with normal, average people, not just chase high-net-worth clients,” says Clune.

“I actually prefer to work with normal mums and dads and especially love working with my young clients, because I know what we did for ourselves and I know what I can do for them – and the younger I get them, the more of an impact I can have and it’s huge.

“I’m really passionate about working with them and they’re my broking clients, so it goes hand in hand. If I’m changing their financial position through the broking then we need to look at the whole picture and that’s what my business is all about.”

Although a thriving business now, it wasn’t easy at the beginning.

“I didn’t have any existing clients, I started from scratch,” says Clune. “It was very challenging.”

She also had young children at the time and balancing both was difficult but Clune embraced it and recognises those challenges led to success down the track.

“It can be really tough in this industry but we have a lot of fun in the office and the clients pick up on that and they just love it.”

Referring back to her first experience with a financial planner, Clune says it’s important to let projections and assumptions go.

“Really let the clients talk and really listen to them, because they know what they want and don’t want and there’s no use trying to give them something they don’t want – they’re not going to be happy.”

BEST PRACTICE 20

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Do you pass the Google test?

Business strategist Julie Broad says the way you show up – or don’t show up – in online searches could be hurting your business

“

Are you sure he’s a mortgage broker?” I said to my husband as I clicked through links on the computer screen in front of me.

“All I see on his Facebook page are pictures of him camping and hunting.

He likes beer, too.”

A friend was asking for a mortgage broker and my husband had suggested she contact a guy he played hockey with. The problem was that I wanted to send her more than his name, so I searched on Google for his website.

All I found was a Facebook page that didn’t make me want to refer my friend to him. In fact, because of his personal settings, I couldn’t even see where he worked, so I wasn’t even certain my husband had it right.

I didn’t refer him to my friend because he failed my Google test. Do you pass the Google test?

Let’s make sure you don’t miss out on business because of what someone sees when they Google your name.

Firstly, can someone even find you

when they Google your name? I would have passed along this guy’s website if I had found it, but I didn’t. Even if he has a website, it wasn’t showing up when I searched for his name.

He didn’t have a complicated name either. The situation gets even worse if your name is hard to spell or difficult to remember.

YOU NEED TO COME UP WITH A WAY TO BE REMEMBERED

A realtor friend of mine in Ontario has

BEST PRACTICE brokernews.com.au

created a brand that makes it easy for people to refer him and remember him.

He works in the market of Hamilton, wears a Hamilton Tiger-Cats jersey to all networking events, and calls himself ‘Mr Hamilton’. His website is MrHamilton.ca.

It’s simple. His last name is tricky (Szeto), but Mr Hamilton is easy.

If your name is not easy or memorable, come up with another way for people to remember it and refer you easily. Then make sure they can find you if they type that into Google.

Secondly, what shows up when you Google your name? When was the last time you Googled your own name? Go ahead: try it right now.

What shows up on the first page of the search results? Is it you? If it is you, are you happy with it? Does it reflect your profession as a mortgage broker, or is it more obvious that you love craft beer?

A personal touch is OK. In fact, a personal touch really helps other people connect with you, but they also need to be certain you’re the person they are looking for and that you are a professional.

If you aren’t showing up in the first three links when someone searches your name, then you need to do a better job of controlling your online real estate. If you do show up, but it’s not reflective of your ideal brand image, do everything in your power to change it or bury it.

You don’t have to be overly active on social media to take advantage of the opportunity it offers to control more Google search results. Grab your personalised URLs for Facebook, Twitter, LinkedIn, and even YouTube if you create videos.

Create a professional-looking profile, and occasionally post something just so someone who searches for your name can find you. It’s better if they arrive at an active social media profile, but the most important thing is that you own your name and control what shows up under it.

If someone else owns your name online right now, especially if it’s the .com or .com.au version, get creative with your branding and then buy whatever URL you can get that fits for you (like MrHamilton.ca). Do your best to optimise your web pages for your name, mortgages, your city and mortgage broker, and then watch for when your full name becomes available. JulieBroad.com was used by a psychologist in Australia for a while, but I kept checking back every month or so and after a few years I was able to grab my name.

There is more to showing up on the first page of Google than this, and we can get into search engine optimisation (SEO) another day. For now, here are three things you can do to boost your results for your own name. First, ensure that your name and keywords show in the URL of your main site. For example, if your website is NanaimoMortgageBroker.com, then you also want at least one page that is NanaimoMortgageBroker.com/ YourName. Second, you need to create some lengthy (more than 1,000 words) high-quality content on your website that

21

contains your keywords in the first few sentences. Additionally, in that post, ensure that the keywords show up in the H1 tag on that page. The H1 tag is the largest heading on your web page and tends to be the heading at the top of the page. It only takes a few carefully placed words on a high-quality content page for Google to start giving you your rightful place at the top.

GET CONTROL OF YOUR ONLINE REAL ESTATE

If this is too much for you right now, that is OK. Focus on getting control of your online real estate, and make sure it reflects who you are as a real estate agent.

Make sure that is the image showing up.

Thirdly, do people connect with you easily from what they find?

This means two things – can they physically find your contact information, and can they see themselves as your client?

There’s a lot more to cover when it comes to creating a website that connects with clients, but you’ll want your picture to be on the front page, as well as your contact details and some information so they know if you can help them.

Ask friends and colleagues what they think when they Google your name. Is it easy to find your contact information? Do

YOU DON’T HAVE TO BE OVERLY ACTIVE ON SOCIAL MEDIA TO TAKE ADVANTAGE OF THE OPPORTUNITY IT OFFERS TO CONTROL MORE GOOGLE SEARCH RESULTS they quickly get a sense of who you are and the kind of service you offer? If you have access to private lenders, do you make that clear? If your primary focus is first-time home buyers or real estate investors, are you clearly connecting with that person when they land on your website?

Think about who your ideal client is.

What are they going to want to see when they search your name? Is that what you have available online?

After you pass the Google test and you’re better set up to connect with your clients, set an appointment in your calendar for every 30 days to Google yourself again to ensure nothing has changed. Clear the cache on your computer or do it from different computers to check. Google is dynamic – the results are always changing, so you need to make sure you’re showing up with the right message for your past, present and prospective clients.

Julie Broad can help you get more done in a day and have more influence in everyday conversations. She’s an Amazon #1 Best Selling author, has published over 400 articles online and offline, and is a sought-after speaker on real estate investing and having more influence. For monthly webinar training and more impact and influence tips, visit HaveMoreInfluence.com.

MARKET TALK

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22

Macro-prudential tools may not cool off housing A leading economist believes macro-prudential tools may not be enough to contain the housing market

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FAST FACT 29% Average proportion of income devoted to mortgage payments

prominent economist has said he doubts that macroprudential tools will have any effect in containing the housing market in a low rate environment.

Speaking at the Australian Mortgage Innovation Summit, HSBC’s chief economist Paul Bloxham said Australia will likely need more than macro-prudential policies to have any sustained effect on the housing market.

This comes after the Reserve Bank governor Glenn Stevens noted that the central bank has been in discussions with APRA over managing potential risks in the housing sector, following the decision to cut the cash rate by 25bps earlier this month.

Bloxham said the Reserve Bank should take a lesson from New Zealand, which implemented macroprudential policies in the form of LVR caps, in late 2013.

Source: finder.com.au

FAR AND AWAY, HISTORY TELLS YOU THAT WITHIN AUSTRALIA, THE BIGGEST EFFECT ON THE HOUSING MARKET IS INTEREST RATES

“Those tools were effective for a very short period of time, but then the RBNZ followed up with lifting interest rates,” he said.

“We had the RBNZ lift interest rates by 100bps last year between March and July. It was really probably that lift in interest rates that was the main thing that kept the housing market contained in the end.”

Although APRA and the RBA are not expected to follow the same macro-prudential route as New Zealand – instead more likely to enforce additional capital requirements on lending to investors – Bloxham says he still has doubts.

“Now, will that be successful?

I have some doubts. I think they [APRA] may have to do a little bit more if they really want to have some effect. Far and away, history tells you that within Australia, the biggest effect on the housing market is interest rates.”

However, Bloxham said the only housing market that the RBA and APRA need to be cautious of is Sydney. “…In Sydney, this is going to be quite a challenge. The rest of the market doesn’t look over inflated.

I don’t think there is a housing bubble in Australia. I think that if Sydney sees the same trends as we have seen over the last year or two, that is house prices running at an annual inflation rate of 13% year on year, then if that continues for very much longer you will need to see prices at some point come down.”

BUYING STILL TRUMPS RENTING New research reveals buying a place to live in is twice as hard as it was 30 years ago, but there is a silver lining.

A comparison between cost of living in 1984 and 2014 by finder.com.au has revealed the average property value is eight times higher than 30 years ago.

However, the upside for those looking to enter the property market is they can expect the average property of $580,000 to be worth $4.6m in another 30 years’ time, based on current trends.

“It’s a good time to buy property before prices rise further,” says finder.com.au money expert, Michelle Hutchison. “As the finder.com.au Reserve Bank Survey shows, another cash rate cut is on the cards within the next few months, which is likely to fuel property prices.”

The study showed the average mortgage size for Baby Boomers was just twice the price of their average income in 1984, whereas today, it is four times the price. The average income to mortgage repayments was 23% in 1984 compared to 29% in 2014.

“This side by side comparison of the cost of living now compared to 30 years ago shows that the average borrower is much closer to mortgage stress, which is when mortgage repayments make up 30% or more of your income,” Hutchison said.

Although the average mortgage size is eight times bigger than in 1984, average salaries have only increased by 316%.

“The concerning part is that interest rates are half of what they were 30 years ago, with the average standard variable rate currently about 5.5% compared to 11.5% in 1984,” Hutchison said.

But Australians are still set on obtaining homeownership and taking on a mortgage, with almost four times more households with a mortgage than 30 years ago.

“Even if it takes you another five years to save for a deposit, it’s worth getting into the property market when you can if you compare it to the past 30 years of returns,” she said.

FINANCIAL SERVICES 24

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Major bank home loan manager convicted of fraud

HOUSEHOLD DEBT HITS THREE-YEAR HIGH

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former major bank home finance manager has been banned from providing financial services after being convicted of fraud.

Former Westpac home finance manager Ravinesh Singh – who worked at Westpac’s Market Street branch in Sydney in 2011 and 2012 – has been permanently banned by ASIC after pleading guilty to eight charges of dishonestly obtaining financial advantage by deception.

According to ASIC, throughout 2011 and 2012 Singh withdrew over $113,000 from ATMs after obtaining eight credit cards using false names.

ASIC Commissioner Greg Tanzer said Singh had demonstrated that he lacked the high standards of honesty, integrity and judgment required of individuals working in the financial services and credit industry.

“Consumers need to have confidence and trust in those providing financial and credit services. Individuals who fail to operate with integrity and in the best interests of their clients will be removed from the industry,” he said.

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

DID YOU KNOW?

$101.4BN Borrowing on credit cards and personal loans has hit $101.4bn combined, as at December 2014 Source: APRA

NON-MAJOR ANNOUNCES BANKING ALLIANCE

Australian households’ credit card and personal loan debt has hit over $101bn.

Borrowing on credit cards and personal loans has reached $101.4bn combined, as at December 2014, according to the latest APRA data. This is the highest level of personal loans and credit card debt since October 2011, when the combined debt totalled $102.7bn.

During the GFC, the combined Australian household credit card and personal loan debt reached a peak of $112.6bn in May 2008.

A study of more than 500 personal loan applications submitted last month through comparison website Finder.com.au found that more than half (53%) needed the cash to cover bills. This was followed by borrowing to buy a car (21%), and funding a holiday (9%).

Michelle Hutchison, money expert at Finder.com.au, said the debate over whether to put debt on a credit card or a personal loan was a common financial hurdle at this time of year.

“Australian households are often struggling with expenses at this time of year, following an overspending period over summer,” she said.

However, with more than half of those looking for personal loans last month needing the cash to cover bills, Hutchison said Aussie consumers needed to be cautious about adding further financial pressure by borrowing money when they were already struggling.

a

A new banking alliance between one of Australia’s largest regional lenders and four Australian credit unions vows to create greater competition in the banking and finance market.

The alliance was developed by Bendigo and Adelaide Bank, together with the AWA, BDCU, Circle and Service One credit unions. The balance sheet transfer of the alliance partners’ more than $540m in loans and $620m in deposits took place in early March.

The alliance partners also relinquished their ADIs, and as of 1 March 2015 are operating as agents of the Bendigo and Adelaide Bank under its banking licence.

Service One CEO Peter Carlin said the alliance model was an exciting advancement that would enable them to foster greater competition in the market, while remaining independent.

“This new model received overwhelming support from our members as it will enhance our ability to offer greater competitive choice and provide our members with access to a wider range of products and services,” he said.

“Many businesses are trying to meet the demands of increasing regulation and new technologies. By aligning with the bank [Bendigo and Adelaide Bank] we can free ourselves from prudential capital and funding challenges, minimise our regulatory requirements and costs, and successfully overcome these disruptors.”

INTERNATIONAL CYBER SECURITY EXPERT WARNS AUSSIE BUSINESSES

A global leader in cyber security has warned that Australian businesses must develop and implement plans for a cyber attack as hackers are targeting the country with more frequency.

Mikko Hypponen, chief researcher at cyber security firm F-Secure Corporation in Finland, told the Australian Financial Review that hackers were not only increasing their targeting of Australian businesses but also the sophistication of their attacks.

“The criminals have been targeting .com.au addresses and have a fairly convincing story,” Hypponen said, referring to phishing-style attacks that trick unsuspecting users into opening infected emails and exposing their computers to hacking software.

Hypponen stressed that it was not only an isolated, computer-by-computer threat, but once hackers gained access they could infiltrate an entire business network and hold all documents for ransom or release them online.

“It is worse for a corporate environment where the malware will mount everything it can see, so in a large corporate network it will encrypt not only the files of one user but everything that user’s computer can see.”

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

Big bank gets new deputy amid succession rumours

Westpac last year appointed its finance head Phil Coffey to the newly created role of deputy CEO, sparking rumours that CEO Gail Kelly would soon announce her retirement. The new position was said to have been created in response to the waves of change sweeping through banking, including changes in technology and regulation. Analysts flagged Kelly’s most likely successors as the boss of Westpac’s flagship Australian division Brian Hartzer, or institutional boss Rob Whitfield.

What’s happened since?

The analysts made the right call. In November of last year, Kelly announced her retirement. She stepped down from her role on 1 February, and was replaced by Hartzer. Kelly praised Hartzer’s ascension to the role, saying, “Brian and I have worked closely during the past two and a half years. He is a proven leader and a wonderful fit for the Westpac culture. This is an exciting time for the group.”

Bank may be looking to buy out major aggregator Rumours began to swirl last year that Macquarie was completing due diligence on an acquisition of aggregator Vow Financial. Macquarie already owned a 20% stake in the group, as well as a 25% stake in Connective. A Vow spokesman told Australian Broker at the time that the aggregator was not in a position to comment.

What’s happened since?

While the buyout didn’t come from Macquarie, a buyout was indeed on the cards for Vow. In May of last year the aggregator was acquired by Yellow Brick Road. The move saw YBR increase its loans under management by nearly 700%. YBR also went on last year to buy out non-bank lender Resi.

brokernews.com.au

No loan experience ‘an advantage’ for new brokers

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he team at Australian Credit and Finance had no loan writing experience at all when they started the brokerage in 2013, and yet by the end of 2014 had submitted $1bn worth of loans. They recently told Australian Broker TV they believed their new model would revolutionise the industry.

Australian Credit and Finance managing director Sebastian Watkins said being able to look at the mortgage industry “from the outside in” was an advantage for him and co-founder and fellow managing director David Hyman. Hyman agreed, and said their lack of experience in the mortgage industry allowed them to challenge presumptions. “[We could] ask questions like, ‘Why not?’ and ‘Why can’t we do this?’ ” Hyman said.

Australian Credit and Finance’s model has broken down the loan process into three steps, with each step handled by a dedicated team.

Hyman and Watkins said this ensured consistency, efficiency and compliance.

“We’ve got a very consistent loan pack that goes to every single lender, because it’s a systemised thing and it’s not broker-by-broker. Our brokers aren’t able to submit directly to the lender, so we’ve got a view at any given time on what every single broker is doing. From a compliance perspective it allows us to not only rest easy, but our ongoing auditing and requirements are very straightforward, because a lot of that work has been done on a deal-by-deal basis,” Watkins said.

The pair also believe their model allows their brokers to develop a higher skill level.

“What you’ll find is that by giving people fewer tasks and asking them to do them more frequently, they actually become better at that task, because as human beings we learn by repetition,” Watkins said.

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

FORUM 27

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CIO keeping quiet on credit repairers The Credit Ombudsman has declined to name two credit repairers it excluded from its services

CIO NEEDS TO LIFT THE VEIL

The Credit Ombudsman has refused to release the names of two excluded credit repairers. Phil Johns of the Financial Services Federation believes the CIO’s move is unacceptable.

“Since CIO (COSL) announced they were no longer accepting cases from two so called ‘credit repair’ firms, the National Financial Services Federation has also made two requests of the Ombudsman to reveal the names of the entities involved. Our requests have been denied. It is inconceivable that a ‘member’ based entity will not tell its own members who they have banned. This simply allows these entities to continue with impunity with the past practices of ‘black mail’ threats to credit providers into removing valid defaults or we will send you to CIO. This is a bad decision

by CIO, who are more worried about other unregulated/ unlicensed credit repair firms and not the consumers and licensed credit providers who are being ripped off by these firms. Maybe the regulators should be focused on unregulated entities like credit repair firms, causing vast detriment with these practices, than Australian Credit License holders working hard to do the right thing.”

Phil Johns on 2/03/2015 at 1:35PM

FBAA CHIEF DEMANDS CHANGES TO NCCP FBAA chief Peter White has called on the NCCP to change the rules relating to LMI and to bring regulation to bear on commercial lending.

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he Credit Ombudsman has declined a broker’s request to release the names of two credit repair agencies barred from using its services. The Credit and Investments Ombudsman (CIO) – which was formerly known as COSL – said naming the companies could run the risk of standing as an endorsement of companies that it hadn’t excluded.

Merri Mansfield, the lead adjudicator for Princeville Credit Advocates, said the move ran the risk of casting aspersions on good credit repair companies.

“I guess the Ombudsman may have to be careful about defamation. Clients that come to Princeville Credit Advocates may have been the victim of credit repair operators that are less than ethical, but we do not think it is our place to expose these operators because it is not a great look and also may leave us open to a defamation case. Consumers are disadvantaged by

dealing with some credit repair companies, so it is a good move to reduce their ability to negatively impact consumers and companies.

Yes, it may even be brave.

However, this also means that there are a number of credit repair companies that are doing a good job for consumers and companies.

Princeville Credit Advocates is one of them.”

Melbbroker claimed the CIO was shirking its responsibility.

“This says to me that the CIO doesn’t want to take responsibility for monitoring these businesses but is happy to see consumers and brokers continue to deal with them at their peril.”

And Vic Regional Broker said the move would make it harder for brokers.

“This is a plainly ridiculous stance. We as brokers frequently see people with credit problems who want to get the matters resolved. How can we suggest a firm to go to if we have no knowledge as to who is reputable or not? ”

QEDRisk on 3/03/2015 at 11:37AM “I completely agree with Peter on this one. Small businesses, at the heart of it, are run by people who are no different to consumers and they’re the ones who will have to fit a commercial loan into their lifestyle. So why not put commercial credit brokers on the same playing field as your average mortgage broker?”

Ken Crawford on 2/03/2015 at 2:15PM ”If you are a broker you would be telling every client about LMI. I have been for 11 years, and every broker I have personal contact with does it as part of the home loan process.

Why does everything need to be regulated, or are we to assume very broker is not honest unless we have regulations to tell them what they should and should not do?”

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Mortgage House Broker: keeping mortgages simple Mortgage House has launched a new home loan funder and mortgage manager which promises cheap, simple and competitive home loan products exclusively to brokers

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ajor non-bank lender Mortgage House has launched an exclusive broker-only home loan funder and mortgage manager, Mortgage House Broker.

Founder and chief executive of Mortgage House, Ken Sayer, says the decision to launch Mortgage House Broker was another way to further support the broker channel and to help eliminate channel conflict.

“The broker doesn’t want channel conflict. Mortgage House Broker is an exclusive broker channel which will never ever take a call from a retail client,” he told Australian Broker.

“As a broker, there is always that paranoia about the customer hanging up, ringing the bank direct and negotiating their home loan direct with the bank. Mortgage House Broker is exclusive to brokers and no one else, so there can be no channel conflict. I used to be a broker so I understand that frustration. It drives you crazy when you do all the work then the customer goes direct through the bank.”

The bread and butter of Mortgage House Broker will be “no-frills” prime loans with a very competitive

MORTGAGE HOUSE BROKER MAY BE A ‘NO-FRILLS’ COMPETITIVE LOAN, BUT IT COMES WITH ALL THE HIGHTECH BEHIND IT – K EN SAYER, MORTGAGE HOUSE

interest rate.

“What is available right here, right now is a prime product that’s cheaper than everybody else,” Sayer said.

The Mortgage House Broker prime product will offer an interest rate of 4.49% on loans of up to $1m and up to 80% LVR. Although, the funder will also offer non-prime loans up to 95% LVR with higher rates.

Along with competitive rates, brokers can also earn competitive commission, including trail commission from day one.

“For our prime product, because the rate is so low, we pay normal commissions at 0.6% upfront and 0.15% trail – which is what everyone is paying,” Sayer said. “We are not ripping the broker off, it’s very straight forward. What you see is what you get – it is a very, very cheap loan.

I looked at our competitors and it’s right up there.”

In a move which Sayer says will further support the broker channel, Mortgage House Broker will also give brokers the flexibility to choose how they brand the loan.

“If the broker wants to sell a product which is more known in the market, they can sell that product on an exclusive basis branded with Mortgage House. They also have the option to white label that product or sell that product under the Mortgage House Broker brand – so it can be ABC Home Loans, it can be Mortgage House Broker or it can be Mortgage House,” he said.

“We are the bank. We own it right here, right now and the broker can wear three hats. It depends on what they want and we can customise it to what the broker wants.”

Despite the fact Mortgage House Broker will offer competitive and simple “no-frills” prime loans, Sayer says the service proposition will be anything but.

“Mortgage House Broker may be a ‘no-frills’ competitive loan, but it comes with all the high-tech behind it,” he said.

“We’ve designed an application so the broker can lodge a deal on their smartphone or their tablet device, all while they are in a coffee shop. I am giving brokers a tool where they can run their business 24/7. Brokers can open up the application in the middle of the night and check the status of any loan in real time. It allows them to run their business on the go.

“The system is very intelligent, it is underwriting in real time. It can give you an approval on the spot, not 24 hours later, if the inputs are correct. If you give me accurate information, I’ll give you an approval right now.

“This is exclusively what brokers want. They don’t want to be tied to a chair. When they are with a customer in a coffee shop, they can look it up on the spot. Brokers think it is hot.”

Mortgage House Broker credit is also operating in full functionality six days a week – Monday to Saturday.

Although, Sayer says his dream is to make credit available seven days a week later on in the year.

Last year, the funder was added on its first panel of lenders, for leading boutique aggregator Outsource Financial. While Sayer says brokers can expect to see Mortgage House Broker on the panel of all the major aggregators, the funder is focused on prioritising quality over quantity.

“Outsource is our number one cab off the rank, and we want to get that right before we start going out to every aggregator,” Sayer said. “I am meeting with other aggregators over the coming weeks, but I just want to talk to people slowly and launch through aggregators one at a time.

“What I want to avoid is doing a mass launch, get flooded with business and then have my SLEs [service level expectations] blow out. I’m not desperate for business, but I want the business, so I’m going to go bite size.

We will roll out one at a time.”

CAUGHT ON CAMERA 29

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IN FOCUS

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he MFAA Excellence Awards were recently held in Melbourne, honouring brokers and businesses in the mortgage and finance industry. The night featured entertainer Tim Campbell serving as MC and musical entertainment.

INSIDER 30

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Take the stairs to reduce stress A new study shows a significant proportion of workers are frightened of lifts

• Talking on a cell phone – 35% • Not holding the door open when others are running to get on – 33% • Standing too close when there is plenty of room – 32% • Squeezing into an already crowded lift – 32% • Not stepping off to let other people out – 27% • Holding the doors open for an extended period of time – 26% • Cutting in line to get on – 23% • Taking the lift up just one or two floors – 20%

• Pushing the wrong button – 17% • Facing away from the lift door, instead of towards it – 7% So it seems there’s an easy solution to reducing workplace stress (even if it is just by a little bit) – take the stairs!

On a slightly less infuriating note, the survey also asked respondents to share the most unusual things they’d ever seen in a lift. Some of the more memorable submissions include: • “Pantsing” a co-worker • Changing a baby’s nappy • Flossing teeth • Clipping fingernails • Fist-fighting • Dancing throughout the ride • Showing someone a rash and asking for a diagnosis • Moving the entire contents of a co-worker’s office into the lift, including the desk And our personal favourite...

• A woman with her arms full of papers using her head to keep the doors of the lift from closing.

$50,000 FOR A LITTER BOX Peter Cohen, co-founder of Trillium Enterprises, loves his 14 cats – so much so that he spent around $50,000 to transform his Santa Barbara, California, home into a cat paradise.

The 278sqm house now has a series of high walkways, tunnels, ramps and perches designed to make his favourite felines feel comfortable and entirely at home. It also includes 22 litter boxes – all located in ventilated closets – and five autonomous robotic vacuum cleaners that are switched on almost every day in order to pick up the cats’ hair.

“Our house was built for us and our cats. The catwalks are fun for the cats, giving them lots of places to explore, hang out, etc.,” Cohen told the Daily Mail.

“But the catwalks are also for me.

They’re architecturally interesting to me in the colors and we always try to do something interesting with the shape.”

Photo: simpsons.wikia.com

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rokers who are keen to reduce workplace stress could benefit from telling employees to take the stairs, says one new survey.

That’s because, according to CareerBuilder, 16% of workers are worried they’ll get stuck or the lift will malfunction – that’s an awful lot of employees starting their day with an unwelcome bout of anxiety.

And it seems that’s not the only stressful thing about taking the lift – the survey also identified other lift behaviour that could be irritating your employees before they’ve even clocked on.

Here are just some of the things employees said were cause for concern: