Australian Broker 13.03

NEWS The global value of property Real estate outstrips other assets worldwide P2

ANALYSIS Business in a cooling market How brokers can build their business regardless of the market’s temperature P10

BEST PRACTICE Building referrals The cost-effective way to build your network P14

FEBRUARY 2016 ISSUE 13.3

SPECIAL REPORT The year for commercial Predictions for the commercial sector in 2016 P18

MARKET TALK Arrears on the rise?

Delinquencies could be heading up in the year ahead P22

BRENDAN WRIGHT FAST’s CEO on how 2016’s headwinds are also opportunities for brokers P16

FORUM A frank look at NCCP A broker has called for a strong discussion about regulation P27

BORROWER SNAPSHOT 2

NEWS

ASSOCIATIONS

REGULATION

Brokers shooting from the hip?

ASIC’s red tape cuts

P4

P6

Alternative finance growing P8

BROKERNEWS.COM.AU

STATE OF THE MARKET

Where the Aussie housing market stands for the three months to January HIGHEST RENTAL YIELDS: Darwin houses with gross rental yield of 5.3 per cent and Hobart units at 5.3 per cent

LENDERS

WEAKEST PERFORMING CAPITAL CITY: Sydney -2.1 per cent

Darwin

MOST EXPENSIVE CITY: Sydney with a median dwelling price of $776,000

EDITORIAL

SALES & MARKETING

Editor Adam Smith

Sales Manager Simon Kerslake

News Editor Julia Corderoy Journalist Maya Breen Production Editor Roslyn Meredith Hayley Barnett

Account Manager Rajan Khatak Marketing and Communications Manager Lisa Narroway

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Designer Lea Valenzuela Traffic Coordinator Lou Gonzales

Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

Sydney

EDITORIAL ENQUIRIES

Adam Smith +61 2 8437 4792 adam.smith@keymedia.com.au

Melbourne

BEST PERFORMING CAPITAL CITY: Hobart +3.0 per cent

Hobart

MOST AFFORDABLE CITY: Hobart with a median dwelling price of $332,500

LOWEST RENTAL YIELDS: Melbourne houses with gross rental yield of 2.9 per cent and Melbourne units at 4.0 per cent

Source: RP Data

BORROWERS HUNGRY FOR PROPERTY WORLDWIDE Global real estate advisory firm Savills has released what it claims is world-first research into the total value of the world’s developed real estate assets.

According to Savills, world-wide developed real estate was worth US$217 trillion in 2015, 2.7 times the value of the world’s GDP. Yolande Barnes, Savills’ head of world research, said the world’s real estate is currently worth more than 30 times the value of all gold that has been mined.

“To give this figure context, the total value of all the gold ever mined is approximately US$6 trillion, which pales in comparison to the total value of developed

property by a factor of 36 to 1,” Barnes said.

According to Savills, worldwide developed residential real estate is worth $162 trillion, or 75% of the total value of global real estate.

The remaining 25% of the global value is split relatively even between commercial real estate ($29 trillion) and agricultural and forestry real estate ($26 trillion).

According to Savills, current low interest rates across the world have helped global real estate reach a point where it accounts for 60% of mainstream global assets.

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ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, Toronto, Manila This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry 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.

ASSOCIATION HAPPENINGS 4

DATES TO WATCH

DANGEROUS TO ‘SHOOT FROM THE HIP’?

Australian Broker’s online forums have always been a place of robust debate and some very, very strong opinions. Brokers sound off passionately on moves by lenders, aggregators, regulators and associations. But could a careless comment end up coming back to bite the industry? Some industry commentators think so.

MFAA chief executive Siobhan Hayden recently urged brokers to think twice before posting on forums. “[Mainstream press are] looking at our internal blogs and trade press so any article you write or comment on, my challenge to members broadly is if you have got something to shoot from the hip, imagine you are sitting in front of Peter Kell and Kelly O’Dwyer,” Hayden said.

“Your opinion from the hip is taken and it is noticed and, if it isn’t well informed, it is being scrutinised. If you want to shoot from the hip and be passionate about something, think twice before you go to press.”

Commenter Steve McClure echoed Hayden’s remarks on the Australian Broker forum, and urged discretion from his industry colleagues.

“A comment might also come from frustration, or having a bad day.

So, if it’s an industry issue, take it up with your association first. I know from experience that both Peter White and Siobhan Hayden will always ensure they address it and respond.”

A rundown of the next fortnight’s events

FEBRUARY

15-18 What: The 3rd Women in Banking and Financial Services Leadership Summit Where: Parkroyal Darling Harbour, Sydney The particulars: This professional development and networking seminar for women in the banking and financial services sector features speakers from MetLife, Commonwealth Bank, HSBC and NAB, among others.

WHAT THEY SAID...

Ben Kingsley “Regulation has been in place in financial services of many years and their move to such a level of professionalism is a good sign of an industry trying to be a high performance profession” P6

Angus Luffman “The quality of applicants approaching nontraditional finance providers has been steadily improving over the past two years” P8

Lee Wisniewski “The corporate world taught me that you have to have a purpose for everything that you do and I was able to reflect and realise that my purpose is to empower others” P28

FEBRUARY

17 What: Queensland Build a Referral Business in 100 Days event Where: TBA The particulars: An event aiming to teach brokers to build a sustainable referral business. The FBAA-endorsed event is conducted by newsletter service ULetters.

FEBRUARY

23 What: FBAA SA PD Breakfast Where: Fullarton, SA The particulars: FBAA South Australian State President Joff O’Shannessy and state councillors will share association updates and other industry matters impacting brokers and their businesses.

REGULATORY ROUNDUP 6

WORLD NEWS

THE REGULATOR’S DEREGULATION

ASIC recently released a report on its measures to cut red tape.

This is what the regulator has accomplished:

2,100

$470

ASIC received more than 2,100 applications for relief

In the two years from September 2013 to September 2015, ASIC reported deregulatory savings of more than $470 million per year

CANADA UPGRADERS HIT BY NEW HOUSING RULES Supervisors from the US Federal Reserve, the Office of the Comptroller of the Currency, and Federal Deposit Insurance Corp. will be paying special attention to banks’ “rapidly growing” commercial loan portfolios, as well as the safeguards lenders have in place, Bloomberg has reported.

In a joint letter from the three regulators, the agencies said they were ready to impose tough new rules should banks be found to have dangerously lowered their credit standards.

“Financial institutions should maintain underwriting discipline and exercise prudent risk management practices that identify, measure, monitor, and manage the risks,” the regulators said in a statement.

According to Bloomberg, banks that have seen substantial growth in commercial loans, or those whose expansion strategies call for such aggressive growth, will find themselves under the most scrutiny. Commercial real estate values in the US have skyrocketed since 2010 in the midst of low-cost loans, foreign investment and lenders’ quests for yield in a low interest rate environment.

x x x

147 Of these, only 147 were refused

2 - 1.5 Simplified product disclosure statement to reduce time to complete from 2 hours to 1.5 hours

Source: ASIC

A RISING EDUCATIONAL TIDE Proposals are on the table that could see the educational barriers to entry for advisers increase.

The Federal Government is considering a proposal to require advisers to hold a degree. It’s a plan that both the Financial Planning Association of Australia and the Association of Financial Advisers have warned could see thousands of advisers leave the industry. But could similar requirements be brought to bear in other industries?

Property Investment Professionals of Australia (PIPA) chair Ben Kingsley has said that while property investment advisers shouldn’t yet be held to the same educational standards as planners,

regulation is necessary for the industry’s maturity.

“Regulation has been in place in financial services of many years and their move to such a level of professionalism is a good sign of an industry trying to be a high performance profession,” Kingsley said.

“I’d firstly like to see our industry get regulated with a baseline entry level qualification and then, as the property investment industry matures and moves with the time, I’d like to see it being added as a syllabus option or specialisation within the financial services degree at some point into the future.”

LENDER UPDATE 8

ALTERNATIVE LENDERS MOVING TO THE MAINSTREAM?

LENDER ROUNDUP

The past year has seen the rise of a number of alternative and peer-to-peer lenders breaking into the Australian market. Now, new credit demand figures show these lenders are gaining a foothold with borrowers.

Veda’s latest Quarterly Consumer Credit Demand Index shows that credit demand for the December 2015 quarter rose 9.7 per cent. Personal loan applications were up 11.9% year-on-year, and Veda general manager of consumer risk Angus Luffman said much of the growth in personal loan demand has come through alternative lenders. Luffman said the type of clients approaching alternative lenders was shifting.

“Interestingly, the quality of applicants approaching non-traditional finance providers has been steadily improving over the past two years, as evidenced by the increase in applicants’ average credit scores, or VedaScores. The average age of borrowers using alternative lenders is creeping up as these lenders shift from being primarily a channel for younger consumers. The age of applicants is now on par with the market average,” he said.

“It’s still early but, if this trend continues, it may be an indication that alternative lenders are becoming a more mainstream option for borrowers,” Luffman added.

Angus Luffman

DID YOU KNOW?

The value of the Australian mortgage market hit $1.4 trillion in 2015, after a surge in new owneroccupied home loans drove an 8.5 per cent increase in the total loan book over the year Source: APRA

PRICING Newcastle Permanent Effective 25 January 2016, Newcastle Permanent’s investment home loan fixed rates will be dropped in line with its owner occupied home loan fixed rates.

This means investment rates will be cut by up to 30 basis points with fixed rates starting from 3.79 per cent for a one-year fixed loan to 6.59 per cent for a 10-year fixed home loan.

The mutual lender made the decision to remove the differential pricing after its actions to cool investment lending in line with APRA’s recommendations “proved very effective”.

Newcastle Permanent has also confirmed the establishment fee will continue to be waived for owner occupied home loans, however, the fee will continue to apply to investment home loans.

GROWING THEIR BOOKS

Major banks’ owner-occupied mortgage book growth for 2015

8%

GEN Y WANTS TO BUY

$1.4 trillion

A rundown of the fortnight’s policy and price changes

21%

23%

14%

23% of Generation Y are saving to buy a property to live in and 25% intend to buy a property to live in in the next 12 months Source: ME Bank

5.1% Source: APRA

10

ANALYSIS QUARTERLY CAPITAL GAINS & LOSSES

2.1% - Sydney 0.1% - Melbourne 0.8% - Brisbane 0.9% - Adelaide 1.9% - Perth 3% - Hobart 1.4% - Darwin

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OFF THE BOIL: BUILDING BUSINESS IN A COOLING MARKET Australian Broker investigates how brokers can build their businesses in a simmering residential property market

1.2 - Canberra THE PROPERTY market is coming off the boil. So how

0.6% - Combined capitals Source: Corelogic RP Data January Home Value Index

ANNUAL CAPITAL GAINS & LOSSES

10.5% - Sydney 11% - Melbourne 2.8% - Brisbane 1.1% - Adelaide 4.1% - Perth 2.3% - Hobart 2.5% - Darwin 6% - Canberra 7.4% - Combined capitals Source: Corelogic RP Data January Home Value Index

can brokers insure their business in the face of a cooling residential housing market in 2016?

though. However, expanding across borders could allow a broker to focus on residential lending, yet still diversify their business.

According to a recent poll conducted by Australian Broker, 53% of brokers agreed that overseas expansion would be a good way for them to diversify their services this year.

Josh Gilbert, the managing director of a Loan Market franchise in St Kilda, Melbourne, is one of these brokers.

Gilbert, who diversified his services to Malaysia last year, told Australian Broker that the current property market conditions are ideal to tap into the foreign investor market.

“With an oversupply coming for off-the-plan property I think it is a really good time to look at that market,” he said.

Cash will be king The chief executive of aggregator Vow Financial says debt management should be a major focus for brokers this new year. Speaking to Australian Broker, Vow CEO Tim Brown said debt management will be particularly important for consumers in a slowing property and financial market.

“I think cash will become king as the market starts to slow and people who are in a better position with a strong capital flow and strong equities positions – in other words, paying some debt down – will be in a stronger position to select an opportunity moving forward,” he says.

Debt management will also be a major focus for the aggregator this year after it launched Vow Money Manager as a pilot at its annual conference in South Africa in October. According to Brown, the software will sweep a client’s bank accounts and bring current information into the client’s budgeting process, allowing them to understand where they Tim Brown, Vow Financial are spending money.

“The launch of our new cash manager will help brokers help clients better manage their budgets Speaking to Australian Broker about his experiences in to achieve their goals and objectives.

Malaysia, Gilbert said there are plenty of opportunities for “It also highlights where potential discretionary spends brokers to continue to grow their residential pipeline in a are occurring and how they can better manage that to simmering Australian market. make sure it doesn’t affect their long-term financial goals.” “[Malaysians] are definitely comfortable with the Not only will the new software help brokers expand their Australian property market. There is a little bit of political service offering and retain existing clients, Brown says, but unrest in Malaysia at the moment so they are very keen to it will also put a broker front and centre of a consumer’s shift some of their wealth out of the country. A lot of it also financial journey. ties in with better lifestyle and education opportunities.

“A broker needs to become like a builder and control the “There are a lot of Malaysian nationals who have future relationship [with the client]. Brokers should be the ones plans to migrate to Australia and a lot of them already have to bring specialists in at different times, such as taxation, children who are over here studying and working. financial planning, conveyancing or property advice.”

“So there are options for people buying investment properties for their assert portfolio and also buying Diversifying without diversifying property – working with migration agents as well – with Diversifying your service offering isn’t for every broker, the opportunity to move across to Australia.”

“A broker needs to become like a builder and control the relationship [with the client]. Brokers should be the ones to bring specialists in at different times...”

12

ANALYSIS THE MENTORING DEBATE Solid mentoring programs are indispensable to training the next generation of brokers, but is it ethical to charge a fee?

INVESTED TRAINING and mentoring programs are vital for the future of the mortgage and finance broking industry. These programs equip new-to-industry brokers with the tools and knowledge they need to succeed and be the next generation of mortgage brokers. They also highlight the commitment to professionalism and best practice in the industry, which is particularly important in an increasingly regulated and scrutinised sector. So whilst there is no debate on whether mentoring programs are necessary or effective, there is debate over whether new-toindustry brokers should be expected to pay for it.

A question of ethics Supporters of free mentoring programs argue that it may deter new entrants from joining the industry, and for those it doesn’t deter, it is a lot to ask given the income struggles new brokers already face in their first year of business.

One of the biggest supporters of keeping broker mentoring programs free of charge for new brokers is the chief executive of Outsource Financial, Tanya Sale. Speaking to Australian Broker, Sale says fee-for-service programs create massive amounts of churn in an industry which is already struggling to attract and retain new brokers.

“For years we have tried to encourage new entrants to join our industry, but when we get them in, they are not being treated or mentored correctly so they are gone again within six months.

“They come in, pay large slices of money to be mentored and are not receiving the professional outcome they expected so they leave. Then we are back to square one.”

Not only are fee-for-service programs wrong for the monetary strain they place on new brokers, but Sale says it is also unethical. “[Fee-for-service] providers look at it like a money making exercise when in fact it shouldn’t

be a money making exercise... It should be about the new entrant.

“In our eyes [at Outsource], if the new entrant or the member makes money, then so does Outsource. It needs to be like a partnership.”

You get what you pay for However, Karen Hambleton-O’Grady, an ex-broker and current principal mentor and founder of fee-for-service mentoring company, Simply Mentoring, told Australian Broker that free mentoring programs are just not viable in the modern mortgage broking industry.

“Once upon a time somebody would take you into their business and they would mentor you but mostly it was because the people that would come into your business would have some lending experience working at a particular lender and the mentoring they needed was small,” she told Australian Broker.

“Whereas now we are attracting people who have never worked in a bank or maybe have never even walked into a bank given the technology today. They are genuinely interested in the sale of mortgages. We are attracting sales people to the industry, because we are in sales and not finance, so those people need a full mentoring package.

“A busy broker cannot spend the time with someone who has very little knowledge base. It needs to be a structured approach.”

Hambleton-O’Grady also argued that free mentoring not only devalues the mentor, but it also devalues the mentee.

“If [a mentee] joins a brand or a group whose speciality is one particular type of lending – residential, construction, commercial, etc – and [they] are being trained by them, then [they] are only going to be trained in one area,” HambletonO’Grady told Australian Broker. “[They] are not going to get that full scope of training.”

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STRAW POLL 53% of brokers believe mentoring should be free for new-to-industry brokers

47%

53%

47% of brokers believe a fee-for-service mentoring program delivers better outcomes Source: Australian Broker

VOW LAUNCHES NEW MENTORING PROGRAM Vow Financial recently launched a new mentoring program aimed at new-to-industry brokers.

Vow Mentoring is a two-year program that includes a tailored business plan, marketing plan and three months’ free email marketing service and support. It also includes lender accreditation and ongoing training on product, sales processes, compliance and software.

The two-year program, which incurs a $1,000 one-off entry cost, is an evolution of the existing MFAA approved program which allowed Vow brokers to become mentors to new brokers within their brokerage.

The chief executive of Vow, Tim Brown, says this program will go a long way to fill an education gap overlooked by wholesale aggregators.

“There has been a growing number of new market entrants over the past few years and yet wholesale aggregators are not catering to their needs. The new broker generally goes through a short induction program and then enters the market on their own without the level of training, tools and support they initially need.

Many of these businesses will fail in the first two years unless they receive additional mentoring,” Brown said.

“By providing more support services, we can help more for enthusiastic new brokers who might just need a boost to learn the ropes, build momentum and ultimately set themselves up for success.”

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BEST PRACTICE is that it’s pretty easy to convert the sale. When someone passes on a referral, the prospect is often ready to buy immediately, with a much shorter time-to-sale than average.

The prospect has identified that they have a problem. They have then sought information from a range of potential service providers on the expertise they need. And now they have asked around to see if anyone they respect can refer someone.

Understanding your priority targets Most small and mid-sized businesses serve one or several easily identifiable local communities or even regional socio-economic categories.

Understanding who your top-priority target markets are is crucial to being able to target them specifically, and walk them through a structured and logical process that – if delivered with honesty, integrity and energy over its entire life cycle – will be sure to generate word-ofmouth referrals. And when you know who your ideal targets are, it’s easier for you to communicate to your existing satisfied clients who they should refer you to.

Building evangelists

BUILDING YOUR REFERRAL BASE Stretch Marketing’s Rebecca Wilson on an affordable strategy for building referrals WE ARE taught early in our business degrees that we can build a business by being a technical expert, hanging a shingle and waiting for clients to walk through the door.

Many professional service providers diligently fulfil their qualifications, maintain their professional development, and serve the customers who trip over their businesses. They do OK. But with well-targeted marketing, you can do better. You can, in fact, build your business around the market that you want to work for, and have them drive your customers to you by referral.

friends, colleagues and community, creating a self-perpetuating buzz.

Selling trust To grow a business you have to consider the fact that your business is selling a tangible, yet human, service. You are selling trust. You can’t advertise trust on a billboard, or print it in a magazine. Trust has to be earned in order to grow your clients and expand your revenue.

Picture this. The phone rings on Thursday afternoon with an excited person wanting to meet with you. They have to get a new broker

“When you know who your ideal targets are, it’s easier for you to communicate to your existing satisfied clients who they should refer you to” Good referral-based marketing will compel your ideal target audiences to voluntarily pursue your firm’s services. And, if done right, not only will you achieve a growth in revenue from your ideal types of clients but you will also drive them to refer your business to their

as soon as possible. They got your name from their long-time friend Rob, who says you helped him sort out all his mortgage issues and find a great buy far more suited to his risk-tolerance.

I hope you have received a call or two like this in your career. The exciting part of a call like this

There are five stages to building a customer, from no awareness to full-blown evangelist. Get it right and you’ll only have to go through the initial campaigns once or twice to build yourself a base of satisfied customers extolling your virtues by referral. This process takes the client on a journey from their first point of contact with your business, inspiring them to reach out and refer your business time and time again.

1. Raising awareness When you know exactly who you want to target as your primary clients, it’s easy to broadcast your message to them. You can get involved in industry associations or local community groups, do guest speaking, write articles, advertise, do good PR, attend tradeshows, or run an integrated campaign of activities.

But let’s face it, this step is a hard, often cold part of the sales process, so we only want to do it once or twice. We eventually look to skip the awareness phase by using active referrers to bring ideal clients directly to us.

2. Courting interest As an ideal target is developing their interest in your business, it is important to “court them” diligently to build their interest into hungry desire. Successful courting requires that you get to know your targets as human beings and be personal, engaging and interested in their success, building trust.

There are a whole host of clever ways to do this. You could use content marketing, hold topical briefings and personal breakfasts, and write regular newsletters or even blogs. Or you could invite people to accompany you to events or fit in some good old personal interaction, remembering that people always buy professional services from people.

16

COVER STORY HEADWINDS MEAN OPPORTUNITIES FAST chief executive Brendan Wright says there’s a silver lining in market uncertainty AS BROKERS enter 2016 and begin

EDUCATING BROKERS ON COMMERCIAL FAST recently announced a new scholarship program for brokers as part of its sponsorship of the new MFAA Equipment and Commercial Finance Education Series.

The FAST scholarship will be available for up to 10 FAST brokers nationwide and includes the first module of the program, which covers four online units including market, products & services, and business practices. Brokers will be awarded four CPD hours for completing the first module.

Wright says education is crucial in staying ahead in an increasingly competitive market.

“With the start of the New Year, many brokers will be considering how they can further expand and diversify their businesses with new revenue streams as competition continues to heat up.

“Business finance represents a real opportunity for growth. The education series offers the best place for brokers to learn how to meet the broader needs of their existing clients, as well as grow their client base, strengthen their offering and enhance their consultancy skills.

“We encourage all brokers to consider whether this MFAA education series fits with their business strategy and, if so, they should apply for the scholarship or make the investment to attend.”

The online training program will consist of three modules divided into beginners and intermediate, advanced, and master class – starting from $400, plus GST, for the beginners and intermediate.

gearing up in earnest for another year of business, uncertainty swirls around both the economy and the regulatory landscape. For brokers navigating this uncertainty, it can seem a worrying time.

But FAST chief executive Brendan Wright believes for every headwind brokers face there’s an equal opportunity.

“Headwinds and opportunities are the same. We have operated for some time – and appropriately so – in a highly regulated environment. The knock-on effect of things like the FSI from an industry perspective could provide headwinds, but also provide opportunities,” he said.

The FSI in particular has caused some consternation for brokers. ASIC has been tasked with investigating certain areas of the third party channel. But the silver lining in this, Wright said, is that it demonstrates the maturity of the industry.

“This is a good news story. Things like the FSI, and particularly the parts of the third

rate to the client is highly competitive,” he said. “The mindset is about value, and they really do create value for their clients. The value is how they understand their clients’ needs, package it up and help them acquire certain assets in their personal and business lives. Sure, the broker earns an upfront and trail, but the client gets an appropriate rate and help, guidance and advice.”

So while the landscape may seem daunting, Wright said brokers can navigate it and identify the opportunities – with some help.

“It just takes time and brokers working with their aggregator to digest what it means for them and their business. It is a good news story, but brokers need help working through that.”

Brokers aren’t alone in some of the uncertainty facing the market. Wright said while consumers are better educated than ever, the complexity of the market also means that brokers have a stronger proposition than ever.

“Things that happen economically, both domestically and globally, create confusion and uncertainty for clients, and that’s an opportunity for brokers to help them move through the fog” party channel the FSI is looking into, just shows how relevant and mature the third party channel is,” Wright said.

And as ASIC looks specifically into broker remuneration structures, Wright said brokers should remember the value they’re already providing to clients.

“Brokers have always been required to be clear about the revenue they might earn from any part of a package they might put in front of the client. They just have to continue to be clear about that. And we have to remember that at the end of the day the end

“Clients, consumers, property buyers and business owners are more educated and well informed. They do their research first. But also, it can create more confusion for them.

That’s when they need the guidance, advice and direction of what it means for them in their business lives,” he said.

Market ambiguity and complexity means brokers are well-positioned to help clients make sense of a shifting financial landscape, Wright said.

“We’re operating in a more and more ambiguous environment. Things that

17

happen economically, both domestically and globally, create confusion and uncertainty for clients, and that’s an opportunity for brokers to help them move through the fog.”

Looking toward business clients FAST has always had a particular focus on brokers serving SME clients. Wright said this is not at the expense of traditional residential brokers, though.

“It’s an ‘and’ story. We’ll continue to work with the brokers in our industry around opportunities to move into different revenue streams, moving from mortgage into business lending and vice versa. There are also plenty of commercial-only business lending brokerages that have decided to do home loans as well. So we’ll continue to work through with that,” he said.

Nevertheless, Wright said there are strong opportunities for brokers to help business clients in 2016.

“We’ve all seen what’s playing out in the mortgage space, and it’s playing out among business owners as well. They’re coming to finance brokers to have their needs met,” he said.

For their part, Wright said FAST will be launching a new product soon which will help provide finance to business clients.

“We will be launching a white label asset finance product in the next couple of months. We will announce the funder then, but it’s a major bank. We’ve all seen what’s happened with white label home loans, so there’s demand in the marketplace for moving into white label asset finance,” Wright said.

“It’s very similar to the uniqueness of white label lending. You need to be very clear about what the product is and what it isn’t. It’s for vehicles and light commercial up to $150,000 purchase price.

It’s a traditional asset finance product. There’s remuneration for the broker, but it’s designed around the priority being a much sharper rate for the client. We’ve communicated with our brokers on this and they’ve told us that makes sense.”

And Wright said aggregators and lenders will be making business loans a simpler process for brokers in the year ahead.

“The real opportunity in 2016, and beyond, is real innovation around product

and platform. So lenders and aggregators are working on making it easier for brokers to lodge business lending applications through the aggregator platform, and through the lender, in the same way that happened in home loans. There’s a lot of work happening in that space, and it will all play out very quickly in 2016,” he said.

But to truly take hold of the opportunities that exist in 2016, Wright said brokers need to ensure they’re meeting the needs of their clients, both residential and business.

“The reality is, anywhere from 10-40% of those customers could be self-employed, and if those finance brokers don’t start looking after the business needs of those clients, then someone else will and they run the risk of losing the client.”

18

SPECIAL REPORT STATE OF THE MARKET: COMMERCIAL Where the commercial market is headed, the segments you should be looking at and how to get involved WHILE PLENTY of opportunity still exists for residential brokers, it’s hard to argue with the sentiment that the market is slowing.

APRA’s investor lending crackdown took much of the heat out of the housing market, and even recordlow interest rates have had a hard time wooing many owner-occupiers back. As one market slows, however, another is set to remain strong. The commercial market could be one of the biggest untapped opportunities for brokers in 2016.

State of the market Commercial lenders are bullish on the market for the year ahead. There’s good reason for this, according to Thinktank CEO Jonathan Street.

“The yields widely achievable are still outstripping most other mainstream investments while for owner-occupiers,

the advantage of lower for longer interest rates are providing the best borrowing environment in decades to acquire property and create wealth. We also expect to see a continuation in the ongoing growth in business owners using SMSFs as a vehicle to borrow and buy business and investment premises since the federal government rejected the proposed ban in the Murray Inquiry,” Street said.

And APRA’s investor lending crackdown may have actually brought about unexpected benefits for the market, ING Direct national partnership manager third party commercial John Kolyvas said.

“Investors who have traditionally focused on residential property are looking to balance their portfolio and commercial property is climbing their list. This provides an opportunity for brokers,

not only for the purpose of expanding their income stream but, more importantly, diversifying their proposition to help ensure they stay relevant through all market cycles.

Building relationships with a commercial client base is an opportunity not to be ignored,” Kolyvas said.

And La Trobe Financial vice president and head of commercial Steve Lawrence said there is a convergence of forces underpinning a strong commercial market in the year ahead.

“Firstly the continuing low interest rate environment, a competitive Australian dollar and lower petrol prices are all contributing to encouraging employment growth and confidence in spending. Secondly, the continued strong population growth in most states is expected to underpin certain parts of the commercial sector and in particular the retail sector. Thirdly,

investment demand for Australian commercial real estate is expected to continue being driven by investors seeking yield,” Lawrence said.

Finding a niche The commercial market is hardly a homogenous one.

It encapsulates property, assets, equipment, vehicles and various other niches.

Lawrence said one of the niches that presents the biggest opportunity for brokers is in selfmanaged super.

“The hot product at the moment is the Commercial SMSF loan. Commercial property sits well with Australia’s self-employed sector and we have experienced strong demand for this product over the past

SHIFT IN SENTIMENT

Capital growth expectations for commercial property over the next 12 months well outdo residential property

Change in sentiment: 12 months to March 2016

Hotels: 9.5

Retirement: 7.0

Retail: 3.3

19

12 months, typically from SMEs looking to purchase the premises from which they operate their business, and we expect strong growth in this product to continue in this coming year,” Lawrence said.

Street agreed, and said alternative doc commercial finance presents another opportunity.

“Outside of this,

Office: 0.6

commercial finance is now much easier to access on an alternate verification basis than it has ever been, with borrowers not needing to produce full financial statements and tax returns in order to get loans up to $2m and a 70-75% LVR from top tier lenders,” Street said.

Kolyvas said brokers should also pay attention to the lower end of the commercial market. This is a segment Kolyvas said has thus far been underserved.

“There is a huge opportunity for brokers, particularly in the sub $1.5m category. This is the lower end of the commercial market and often overlooked, but it’s also where a broker can add an enormous amount of value for a borrower. At this end of the market, the borrower is often someone who is not a regular commercial investor, or is a small business owner investing in premises, and these clients can benefit greatly from a broker guiding them through the process and products, negotiating with lenders and ensuring a smooth journey,” Kolyvas said.

A complex relationship In seeking out commercial clients and the opportunities they present, Kolyvas said it’s important to be cognisant of the complexity of the relationship.

“The relationship a business banking customer has with their bank is very different to that of a personal banking customer; business

Residential: -24.8 Source: ANZ/Property Council of Australia

20

SPECIAL REPORT A BANK’S TAKE ANZ chief economist Warren Hogan on the bank’s view of the commercial market for 2016: “Leasing conditions across commercial property sectors have broadly improved in the past year, however Australian commercial property markets continue to reflect patchy economic conditions across regions and property grades. While tenant demand is strong for major CBD prime office towers (e.g.

International Towers Sydney T2, Barangaroo), other markets including the Perth CBD office market (with net absorption falling by 42,000sqm in the past year) are finding conditions challenging.

“The pipeline of commercial property construction is growing, but ever-sogradually. As reflected in the ANZ-Property Council Survey, retail property and tourist accommodation have driven commercial property building approvals and planned commercial property construction. In contrast, planned commercial office and industrial property construction have fallen away and present a softer outlook. This aligns with ANZ Research’s expectations that non-residential building construction will provide little-to-no boost to GDP growth in 2016.

“Capital growth has strengthened across most commercial property sectors. The ANZ-Property Council Survey indicates that the property sector’s expectations of capital growth are strongest in retail and tourist accommodation property in the coming year. While solid foreign investor demand for Australian commercial property has supported capital growth in recent years, particularly in the commercial office market, ANZ Research is cautious of the view that foreign investor capital is Australian commercial property’s ‘magic pudding’. In line with views from the latest ANZ-Property Council Survey, we think capital growth across a number of commercial property markets, including commercial office, will soften in 2016.”

customers may have more regular borrowing needs and their day-to-day transactional volumes are higher,” Kolyvas said.

“Commercial lending is bespoke. Each deal has its own nuances. Lenders need to have dedicated commercial teams who know the market, and the broker, and can work closely with the broker to get the deal across the line as efficiently as possible, all the time respecting the broker/ client relationship.”

This means brokers need to ensure they’re well-informed about the latest developments in the commercial market, Kolyvas said.

“Brokers need to keep on top of the various commercial offerings in the market, building relationships across a variety of lenders so they can help their clients navigate the commercial lending market and identify the most suitable deal,” he said.

Lawrence argued, though, that no difference exists between the relationship La Trobe has with its commercial clients and its residential clients.

“That is because our processes for residential and commercial lending are the same and all customers are serviced with a solution-focused approach,” Lawrence said.

“La Trobe Financial has

an experienced group of commercial lending decision makers who understand the requirements in this area of lending, and with whom brokers can directly speak on a daily basis at any stage of the loan.”

But Street said one of the unique aspects of the commercial client relationship is the role lenders continue to play.

Residential brokers often have primacy in the client relationship, with lenders outsourcing ongoing service to the broker.

But in a commercial relationship, lenders remain an important part of the

Steve Lawrence

picture, Street said.

“There is typically more of a three-way working relationship between the parties when it comes to commercial transactions as a result of the subtleties and occasional complexities that can arise. While resi loans mostly fall within a matrix of product options across lender segments and the credit process follows a set path, the variety of situations and deal-specific considerations are much broader and less predictable in commercial. This means lender relationship managers need to be able to offer a broad knowledge

21

behalf and may also get involved in the annual loan reviews process that banks will insist on for larger commercial connections, all of which leads to a much deeper relationship,” Kolyvas said.

base to the broker and borrower in order to bring deals together, clearly communicate what may be required under different situations and why, then liaise with Credit to achieve a timely and satisfactory result,” he said.

Kolyvas agreed, and said the broker often works as a mediator and liaison in the client’s relationship with their business bankers.

“Commercial clients are more likely to have two or even three banking relationships. The broker usually positions themselves to manage all of these relationships on the client’s

Finding the business Brokers looking to take hold of the opportunities present in the commercial market often need look no further than their current client base, Lawrence said.

“Brokers already have all of the lead generation tools to make the transition to commercial lending.

Brokers should review their CRM to identify clients who already hold commercial property and see if there is an opportunity to refinance it for them, particularly if they have held the property for some time. We often see untapped equity sitting in a customer’s Asset and Liability statement tied to commercial property,” Lawrence said.

Kolyvas agreed, and added that referral relationships could also be invaluable in finding potential commercial lending clients.

“Brokers should also look at the relationships they hold with accountants and solicitors. These are two professions that regularly come into contact with

business owners, and may present a good opportunity for a referral relationship,” Kolyvas said.

Street said brokers should also pay attention to their existing residential clients, and identify which of them are self-employed. Then, he said, brokers should take the time to get to know their clients’ business.

“Begin by short listing 5-10 self-employed clients you know well, review your past dealings with them and refresh your knowledge of their business and plans for the future. Go see them at their place of business to get a good feel of their operation, how they are functioning there and what needs they might have for property, equipment or other forms of finance such as inventory or debtor finance. Offer to take a look at how you can help them or add value by reviewing their financial position to propose new or better borrowing options and borrowing capacity.

Look at both their personal and business circumstances and see where there are opportunities to improve their situation such as better product, lower rate, longer term, no annual reviews, debt consolidation or utilise a self-managed super fund in conjunction with their wealth management plans,” Street said.

Jonathan Street

John Kolyvas

22

MARKET WRAP SYDNEY COULD STILL SEE GAINS IN 2016 MARKET TALK

ARREARS DUE TO RISE? A credit rating firm has predicted 2016 will see a rise in mortgage delinquencies CHANGING ECONOMIC conditions at home and abroad will result in an increase in the number of Australian mortgage delinquencies in the coming year according to one credit rating firm.

According to the latest monthly review of the performance of Australian prime residential mortgages by ratings firm Moody’s, delinquencies in excess of 30 days rose to 1.20% in November 2015 from 1.14% in October 2015.

Moody’s puts that monthly increase down to seasonal factors such as household overspending in the run up to Christmas, but still believes 2016 will see a higher number of delinquencies than 2015.

“The housing market has shown signs of cooling over recent months,” Moody’s assistant vice president – analyst Alana Chen said.

“Strong housing market activity in both Sydney and Melbourne helped foster relatively strong economic performance in the respective states of New South Wales and Victoria in 2015.

“But a slower pace of house price growth will mean a slowdown in economic activity and will contribute to a deterioration in mortgage performance in 2016 from current exceptionally healthy levels,” she said.

Moody’s predicts the slower growth of house prices will continue as the Australian economy faces some challenges through 2016.

“Slowing growth in China, Australia’s biggest export market, and declining commodity prices, which are at or near multi-year lows, will also put pressure on the Australian economy and contribute to below-trend growth and a soft labour market

in 2016,” Chen said.

But while Moody’s predicts a growing number of borrowers are at risk of becoming delinquent, not all are convinced that will be the case.

“With all respect to Moody’s, who have a number of economists working on this sort of thing, I find it difficult to believe we’re going to see a real rise in the number of delinquencies,” Jane Slack-Smith, director of Investors Choice Mortgages, said.

“I’ve been a broker for 10 years and a property investor for a long time too and that’s given me a lot of experience in reading the market and I can’t really see anything at the moment that’s going to cause a rise [in delinquencies],” Slack-Smith said.

Slack-Smith believes the period of low interest rates has allowed a large proportion of Australian borrowers to get in position where they are comfortable with their financial commitments, while others have been prevented from getting in over their heads.

“With the lower interest rates we’ve had I think a lot of people have taken advantage of that. A lot of people have built up their redraw or offset account so they’re in a position where they’re pretty comfortable with everything.

“The other thing is that the APRA and ASIC changes have quelled a lot of irresponsible lending that might have happened,” Slack-Smith explained.

“It was a pretty heavy handed approach, but the fact that people were assessed on a 7.5% interest rate and the servicing criteria was made tougher means there’s already been a buffer built in so that people can manage if we see interest rates start to move up.”

While Sydney may have seen its median house price suffer a record fall recently, the head of a major real estate franchise believes homes in the harbour city will still be more expensive in 12 months’ time.

Angus Raine, executive chairman of Raine & Horne, said real estate in Sydney will continue to grow in 2016, albeit not at the same rate it has in recent years.

“The market might not achieve the double digit returns of the past three years; however, many Sydney real estate markets will achieve capital growth by the end of 2016,” Raine said.

“Many of the same fundamentals remain in play, such as Sydney’s continued population growth, as well as our strong economy, improved employment figures, and low interest rates. Around 50,000 people move to Sydney annually and they all need somewhere to live, while there is a good chance we’ll see more rate cuts in the middle of the year,” he said.

Rich Harvey, managing director of buyer’s agency Property Buyer, agrees with Raine’s outlook for 2016.

“It’s definitely not going to be the same as it was but we are going to see some growth this year,” Harvey said.

“It will probably be around the 5% mark, though it’s hard to put a single number on it because there are so many different markets across Sydney and some of them are vastly different,” he said.

Harvey said Sydney’s suburbs with mid-tier price ranges would likely be the best performing suburbs this year, helped by attention from buyers looking to upgrade their primary place of residence.

While he also agreed that Sydney’s employment prospects and population growth will help the city’s market continue to improve, Harvey said there is another major positive in the Sydney market at present.

“There is a massive amount of money being spent on infrastructure, especially transport infrastructure, in Sydney at the moment and that’s a great thing for the market.

“The government has received a huge windfall from stamp duty in the last few years so they’ve got the money for projects like the light rails and metro systems and hopefully we see even more money directed to projects like those.”

DID YOU KNOW?

50% Of those looking to buy in 2016, 50% are now owner-occupiers, representing a 5% increase over the last half of the year Source: ME Bank

23

MARKET TALK

MELBOURNE MOVING AHEAD The Victorian capital is pulling in front of Sydney in house price growth THE START of 2016 has been a positive one for Melbourne’s real estate, with figures from CoreLogic RP Data showing the Victorian capital is pulling ahead as Australia’s strongest market.

According to CoreLogic RP Data’s latest Hedonic Home Value Index, the 12 months to the end of January saw Melbourne become the nation’s leader in terms of capital growth.

The index shows the past 12 months has seen the median dwelling price in Melbourne increase by 11% to $595,000.

While Sydney’s median dwelling value remains significantly higher at $776,000, values have only risen by 10.5% in Sydney over the last 12 months.

“While still a high rate of annual growth, Sydney’s annual rate of capital gain is now at a 29-month low and has been progressively softening since peaking at 18.4% in July last year,” CoreLogic RP Data research head Tim Lawless said.

“Melbourne’s housing market has been more resilient to slowing growth conditions which has propelled the annual growth rate to the highest of any capital city, with dwelling values 11% higher over the past 12 months. The latest data reveals Sydney’s housing market is now playing second fiddle to Melbourne’s, at least in annual growth terms,” Lawless said.

Over the three months to the end of January, Sydney’s median house price declined by 2.1%, while Melbourne saw a quarterly fall of just 0.1%.

For Miriam Sandkuhler, buyer’s agent and the director of Melbourne-based Property Mavens, the resilience in Melbourne’s market can be put down to the affordability it offers in comparison to Sydney.

“At the moment we’re dealing with a lot of interstate buyers who are seeing better value in Melbourne as well as a lot of local buyers who still see the market has something to offer,” Sandkuhler said.

“Competition for anything priced up to the $600,000 mark is really strong, with real interest from owner-occupiers, investors and self-managed super investors as well. Even for the $600,000 to $800,000 price range in the middle and inner rings there is a lot of interest,” she said.

“In that market there’s a lot of interest for people looking to invest through their SMSF and from downsizers who already own their primary residence but are looking for

somewhere to live in 10 or 15 years.”

While Sandkuhler said the Melbourne market would still be classified as a seller’s market given that demand has banked up over the Christmas period, she does believe the market will balance out somewhat this year as more stock goes up for sale.

Sandkuhler also said Melbourne’s relative affordability had helped it weather the storm brought on by changes to investment lending.

“The APRA changes haven’t seemed to knock everyone out the market,” she said.

“Those that have the equity or a slightly bigger deposit are still looking around and they’re seeing there’s more bang for their buck in Melbourne right now.”

Outside of Sydney and Melbourne, there is somewhat of a drop off to the next best capital growth performers.

Over the past 12 months, Canberra has had the third highest rate of capital growth, with the median dwelling value up by 6% to $587,500, followed by Brisbane’s 2.8% increase to $478,200.

The median dwelling value in Hobart increased 2.3% to $332,500, while Adelaide saw a 1.1% increase to $420,200.

Perth was the worst performer over the past 12 months, with the median dwelling value declining 4.1% to $515,000.

Darwin also saw its median dwelling value deteriorate, falling 2.5% to $520,000 over the past 12 months.

While the past 12 months have brought positives for owners in the majority of markets thanks to positive capital growth, landlords haven’t enjoyed similar growth conditions for their rental returns, with no combined capital city rental growth recorded in the 12 months to January.

“There hasn’t previously been a 12-month period when rents didn’t rise across our combined capitals index,” Lawless said.

“With dwelling values rising substantially more than rents in Sydney and Melbourne, this ongoing effect has created a compression in gross rental yields to the extent that gross yields in these cities are now only marginally higher than record lows.”

The flat rate of rental growth was caused by the tough conditions in Darwin and Perth currently, where rents have fallen by 13.4% and 8.6% respectively in the last 12 months.

Rents have also fallen in Brisbane (-0.7%) and Adelaide (-0.4%).

AUSSIE CITIES AMONG WORLD’S LEAST AFFORDABLE Housing prices in Australia’s two biggest real estate markets have been ranked among the world’s least affordable, according to a recent survey.

Sydney and Melbourne recently both received the dubious honour of being ranked inside the top 10 least affordable major metropolitan housing markets in the latest edition of the Annual Demographia International Housing Affordability Survey.

Sydney claimed the number two position on the list, with the survey claiming a median home in the city will cost buyers 12.2 times their median annual income.

Compared to the previous edition of the survey, buyers in Sydney now require an additional 2.4 times their median income to afford a median home, which is the largest annual increase recorded in the survey’s 12-year history.

Sydney’s increase pushed Vancouver to third place, with buyers requiring 10.8 times their median income to afford a median-priced home.

Melbourne, in a three-way tie with Auckland and San Jose, claimed fourth place on the list, with a median home in the Victorian capital requiring 9.7 times the annual median income.

Hong Kong claimed top spot on the list, with a median home in the Chinese city costing 19 times a buyer’s median income.

GROSS RENTAL YIELDS, HOUSES AND UNITS Houses Combined capital cities Canberra

Units 3.4% 4.0%

Hobart Adelaide Brisbane Melbourne Sydney

Canberra

5.3% 5.1%

Darwin Perth

Combined capital cities

3.8% 4.1% 4.3% 2.9% 3.2%

Darwin Hobart Perth Adelaide Brisbane Melbourne Sydney

4.3% 5.1% 5.1% 5.3% 4.3% 4.9% 5.2% 4.0% 4.1%

Source: CoreLogic RP Data

24

MARKET WRAP FINANCIAL SERVICES

INSURER TO REFUND CUSTOMERS FOLLOWING ASIC CONCERNS An insurer will refund policy holders for one of its products following ASIC concerns ACE Insurance will refund all current and previous policy holders for one of its insurance products following concerns raised by ASIC. The regulator raised separate concerns about the Priceline Protects Bill Protection Insurance Policy and Tigerinsure travel policy, with the former prompting the refund.

The Priceline Protects Bill Protection insurance policy was promoted on the Priceline website as providing “up to $2,500 cover per month” with “competitive premiums from $2.80* per week”, but to access this maximum cover, premiums cost $13 a week, more than four times the advertised price.

ACE no longer sells the Priceline product but will contact all current and former policy holders to offer a full refund of premiums paid following ASIC’s concerns.

In a separate matter, Tiger Airways has removed misleading promotional statements from its websites following concerns by ASIC. ACE and Tigerair promote the Tigerinsure travel insurance product with claims that the policies cover flight cancellation and amendment, loss of deposits and cancellation charges, however it was found the cover excluded cover for Tigerair delays, cancellation or rescheduling.

ASIC was concerned that website

representations were not consistent with the cover offered and ACE and Tigerair have removed the misleading representations, the regulator confirmed in a statement.

Chris Newing, ACE travel and consumer business manager, Australia & New Zealand, said that the business will improve information for its customers.

“Our team continuously looks for ways to improve our products and our communication with customers and we have cooperated and responded to ASIC’s concerns, improving the information made available.”

ASIC deputy chairman, Peter Kell, said that the moves will help promote consumer confidence in insurance and financial products.

“Insurance and other financial products should not be promoted in a way that misleads consumers about the price and benefits of the product,” Kell said.

“Consumers should be confident that they are paying the price and getting the benefits that they understand they are getting. ASIC will continue to monitor advertising to ensure it is not misleading.”

ASIC acknowledged the cooperative approach taken by all parties involved in responding to its concerns.

Vaugh Richtor

ING DIRECT CHIEF TO RETIRE The chief executive officer of ING Direct has announced his retirement after 24 years with the non-major bank.

Vaughn Richtor, the CEO of ING Direct Australia and CEO of ING Retail Banking Asia, has decided to retire from the bank mid-2016.

Richtor was the founding CEO of ING Direct Australia, creating Australia’s sixth largest retail bank within 10 years between 1996 and 2006. He remained on the board while pursuing his career with ING in Asia before returning to Australia as CEO three-and-a-half years ago.

Richtor has also been a major contributor to the success of ING beyond Australia, having led India’s ING Vysya as managing director and non-executive director through a major turnaround between 2006 and 2009.

In addition, he led ING commercial and retail banking operations across Asia between 2009 and 2012.

“Vaughn will be leaving a highly successful bank that he guided with passion and enthusiasm from the very first day of business,” ING Direct chair Michael Katz said.

Succeeding Richtor at the helm of the non-major will be Uday Sareen, who is currently president of operating management committee at Kotak Mahindra Bank India.

FAST FACT

24%

Increase in investment lending for 2015

Source: APRA

BOUNCE IN BUILDING APPROVALS WON’T STOP DOWNWARDS TREND The chief economist of a leading ETF provider has said a small bounce in building approvals won’t convince the market.

BetaShares chief economist David Bassanese has said a small uptick in ABS building approvals numbers won’t change the market’s downward momentum.

“After a 12.7% slump in November for building approvals, markets will be looking if the indicator bounces back,” Bassanese said. “Although a modest bounce back of, say, 3% to 4% is a reasonable expectation, that would still imply that the downwards trend – evident since early 2015 – remains firmly in place,

undercutting an important source of economic growth for 2016.”

But Bassanese said some good news may be on the horizon. Retail sales figures show consumer spending remained reasonably firm over the Christmas period.

“Weaker petrol prices and solid employment growth are positives for consumer spending, while soft wages growth and signs of a topping out in house prices are emerging negative forces. Heightened share market volatility is a further risk for consumer spending during the month of January.”

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26

SPOTLIGHT wVIDEO SPOTLIGHT

ONE YEAR ON

2015’S CLAMPDOWN ON INVESTORS What a difference a year makes ... or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago

Daniel Foggo

10 FEBRUARY 2015

Peer-to-peer lender ThinCats says it has seen quick uptake from the broker channel, registering 134 brokers and lenders and completing its first two loans

11 NOVEMBER 2015

Luke Deer, a postdoctoral research associate at the University of Sydney, predicts a rapid rise for peer-to-peer and alternative lending platforms in Australia

11 DECEMBER 2015

Peer-to-peer platform SocietyOne announces it has passed $60m in loans, with year-todate loan volume already tripling the company’s loan originations during 2014

3 FEBRUARY 2016

In announcing $50m in new funding, Spotcap managing director Lachlan Heussler predicts 2016 will see all the major banks and smaller financial services businesses announce partnerships with alternative financiers

BREAKING THE SHACKLES OF THE BIG BANKS While alternative finance platforms such as peer-to-peer lending have already majorly disrupted global markets, they’re just beginning to gain traction in Australia.

But RateSetter Australia chief executive Daniel Foggo recently told Australian Broker TV the domestic market was ripe for a similar disruption.

“I think one of the reasons is regulation, and that when we launched here we already had the right regulatory framework in place,” he said.

Foggo said RateSetter set the groundwork for its launch with two years of consultation with ASIC to ensure this regulatory framework was right. As such, he said the lender occupies a unique space in the market.

“We’re still the only peer-to-peer lender open to retail investors,” he said.

In spite of the long lead-up, Foggo said growth in the Australian alternative finance market has been rapid.

“If I look at the growth we’ve experienced versus, say, the UK in the first 12 months of operation, we’re actually growing more rapidly than what the experience was in the UK. I think that’s indicative of what the whole peerto-peer lending market will be in Australia,” he said.

Foggo said alternative finance lenders played an important role in offering consumers greater choice in a market dominated by the big four lenders.

“Attached to that, the reason I think they’ll succeed and prosper is through delivering value and being much more customer focused.”

27

BEST COMMENT ONLINE

FORUM

FRANK DISCUSSION ABOUT NCCP OVERDUE A broker has demanded a ‘frank conversation’ with regulators about the NCCP

MARIA RIGONI, founder and owner of Universal Wealth Management, has penned an open letter to the regulators, government and central bank demanding a “frank conversation” about the National Consumer Credit Protection Act (NCCP) and the role of the regulators.

Rigoni said ASIC’s recent crackdown on interest-only lending was the last straw for her, especially when she was not able to refinance a responsible client into an interest-only loan for their benefit.

Warren Winters questioned whether APRA’s continued regulatory tightening meant the bank regulator knew something Australians didn’t.

“Since Federation, the regulations APRA is forcing on Australians are more onerous than ever. Does APRA know something that the rest of Australia doesn’t? Are we headed for a Depression worse than the 1930s?

If we are, then APRA should be telling us that! If we aren’t, then APRA should butt out!”

Stephen Dinte said the NCCP had shown little appreciable benefit for clients.

“I would hope and pray that both Siobhan and Peter (MFAA & FBAA) take these issues on board and work with our regulators to resolve what is a real problem. It is true to say that not all borrowers are financially savvy, but that does not mean that those who are should be hindered from achieving their goals and objectives. I fail to see in my everyday activities as an ACL holder how the NCCP is beneficial to the majority of my clients. Certainly I am not alone, as similar comments are voiced regularly at meetings by experienced and professional brokers.”

Mel said lenders had used APRA tightening as an excuse to slug investors with rate hikes.

“Lenders have gone on a massive money grab through increasing existing investment loan rates for no good reason. It’s not as if many people will be selling their investment property because rates increased so increased rates should only have applied to new investment loans if APRA actually want to rein in investment lending. No one has given any good reason for existing loan rates to increase.”

ASIC TARGETING BROKERS? ASIC has been tasked with a review into broker remuneration structures. Some brokers are sceptical that the regulator will take an unbiased approach in its investigation.

“Brokers are basically paid for performance, our clients are obviously happy with the proposition that we offer as they are voting with their feet. It is rather disheartening to see ASIC, on almost a weekly basis, continuously and unfairly targeting our industry as being dishonest, self-serving and not acting in the best interests of our clients. Do they seriously believe we want to sabotage our own businesses that we have built up over many years by not doing the right thing by our loyal clients? Our market share is increasing for a very good reason. I am sick of the ill-informed dribble that comes out of ASIC, the continued silence and lack of leadership that comes out of our industry associations and the collective uselessness of all our aggregators. What is so wrong with the current commission structures? We have never heard a word out of the MFAA and FBAA and how they will be representing the brokers that keep these two organisations afloat. I feel that ASIC is on a mission to harm our profession long term and I would hope that the people that we rely on ensure we don’t get completely screwed keep up their end of the bargain, but I suspect that won’t be the case.

Brokers have no voice whatsoever and that is why I get restless!”

Broker on 29/01/2016 at 09:53 AM AGGREGATOR LAUNCHES MENTORING PROGRAM Vow Financial has launched a new mentoring program aimed at newto-industry brokers.

“Interesting approach. Other aggregators seem to be behind here, with many electing to use costly external service providers. I can see the aggregator picking up many new-to-market brokers at the expense of other aggregators unless they catch up with internal programs.”

Regional Broker on 29/01/2016 at 8:53AM DEGREE PLAN COULD SEE ADVISERS EXIT Industry bodies have warned thousands of financial planners could exit the industry over a plan to require a degree qualification.

“Regulators trying to keep their jobs by making work for themselves. What fools. Does our government ever consider the future? It seems our politicians have the intellectual capacity of a grape!

How about a degree to represent the Senate first?”

SEQ Broker on 25/01/2016 at 12:09 PM

28

COALFACE use my finance skills, my property passion and my skill with people and let’s just do this’.”

Giving back Wisniewski’s brokerage model is designed to help the community in two ways – getting them the home they always wanted and helping those in need through his foundation, which was under development at the time of writing.

“I wanted to start a business that mattered and changed people for the better.”

Ten per cent of every dollar that Red Hotel generates goes straight into the foundation to help those that are disadvantaged.

“The corporate world taught me that you have to have a purpose for everything that you do and I was able to reflect and realise that my purpose is to empower others,” says Wisniewski.

“Philanthropy and giving back is a really important part of my journey and will be moving forward. We’re dedicating a whole team to [the foundation] eventually.”

CREATING OPPORTUNITY FOR OTHERS New to industry broker Lee Wisniewski explains how his business model goes beyond mortgages to help those who need it most YOUNG BROKER Lee Wisniewski joined Loan Market’s Accelerated Mentoring Programme in July last year, which lives up to its name as Wisniewski started writing loans full-time by September, and December saw him writing an average of $1m in loans per week while welcoming on board two staff in the process.

Servicing East Melbourne, West Melbourne, Williamstown and surrounding suburbs, Wisniewski brings over 13 years’ finance and

So I thought, ‘what is the next best thing?’, because I wanted to sell something, so I decided to sell cars.

“I’ve written 2,000 car loans in my life – that’s a lot of car loans.”

But Wisniewski continued to stoke his passion for property and by the time he hit age 30, he and his wife had bought and sold five properties.

“We learnt a lot over that course of time and the reason is because that’s where our passion lies –

“I wanted to start a business that mattered and changed people for the better” insurance experience to his brokerage, Red Hotel Financial Services, although originally he wanted to sell houses since he was 18 but couldn’t because he wasn’t old enough.

property and people,” he says.

“Amalgamating both was a perfect fit, so when it came time to back myself and become a broker, I did. I just took the plunge and said ‘I’m going to

Overcoming adversity Wisniewski has created a successful brokerage in a short amount of time but an incident in 2008 played a big role in his commitment to help others beyond broking.

When he was 25 years old, Wisniewski had a severe headache for a number of days and a scan showed he had brain hemorrhage that would have been fatal within 24 hours.

“I went into emergency surgery and they saved my life,” said Wisniewski. “What followed was months of recovery and it wasn’t until I was well again that I realised things had to change; since then I’ve changed my lifestyle and my career and it’s all for the better.”

After the ordeal, his desire to go and follow his property ambitions was stronger than ever.

This year he plans to expand his business from residential, commercial and automotive loans to include a property management division and potentially a rental agent so customers will have all their needs covered in one place.

Improving processes to accommodate growth is also high on his list, and employing the right people to develop them.

For other new brokers looking to kick-start loan volumes this year, Wisniewski says just work on yourself and understand policy.

“The biggest piece of advice I’d give to someone is everyone has the same products, lenders, rates, fees – everything is the same. The only thing we have to differentiate ourselves is us, so you have to be pretty clear about what your service offering is.

“I’m dumbfounded when someone’s not using a broker, given the value that we can add to them.”

He also is set on hitting some pretty big targets.

“I’ve already made a commitment to Loan Market that I’ll be the fastest broker to ever graduate the Academy. That’s a pretty big call but that means I’ve got until the end of March to settle my first 12 million.”

And this year he aims to make Loan Market’s Elite as well.

“To do that in your first year out of the Academy is a really big achievement and is something I think I can do given the volumes that I’m writing already. I’m very competitive,” he says jovially. “I just like a challenge.”

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PEOPLE

CAUGHT ON CAMERA eChoice recently held its annual conference on the Gold Coast.

The event featured Australian Olympic gold medallist Steven Bradbury, as well as a visit to Dracula’s Cabaret Restaurant and the Gold Coast’s Sky Point Observation Deck.

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PEOPLE HOT SEAT

RUAN BURGER The director of AMA-winning Time Home Loans on making your own luck What do you think is the biggest misconception about mortgage brokers?

That clients have to pay for our services and A that every broker holds the same outcome or level of expertise for a client’s situation; it is not hard to prove (when we get in front of a client) to clients that our proposition is based around our clients’ needs and objectives and that the transaction only happens in light of that. I love the opportunity to meet up and truly connect with a potential client, to share in their thought processes and educate them to be better suited for the path ahead of them – this could be the biggest single transaction they have in their lifetime.

Q

If you were named Prime Minister of Australia, what would be your first priority?

Increased and more frequent assistance/ A education/intervention for disabled kids or as I like to think of it, kids with different needs.

As parents we will do anything for our children; having a child with unique needs you often feel you are running in circles to seek out new ways to assist their needs. This help normally comes from parents experiencing the same life path, not from the medical field we pay so dearly for in our taxes and private health insurances. Roadblocks such as these can make the journey a more testing and emotionally draining one. Fortunately, as a parent of two uniquely different children I know that the journey we take with all our children is diverse and constant revelation that impacts upon our growth as well as theirs, which is why assistance and intervention at an early stage is vital for future learning.

Q

If you could have one super power, what would it be and why?

Healing – it would be great to help so many A people in pain and/or mental issues. Money comes and goes, but our wellbeing is the one thing that can break you as a human being. It would be great if every individual had the ability to rise up each day without pain, without disability, without body or mind issues that may set them back or make life harder for them then the next person.

Q

What do you see as the biggest opportunity for brokers in 2016?

The year of the Monkey – money, money, A money. We make our own luck and getting out there more often and more frequently, you should have no issues setting the world on fire.

We are in a great industry that not only allows our clients choice, and fosters personal development but one that allows us to grow our businesses at the speed in which we commit to – what we put in is what we get back.

Q