Australian Broker 13.04

NEWS ASIC flexes muscles Another wave of bans from the regulator P6

ANALYSIS Footing the bill Proposed changes to ASIC’s funding P12

BEST PRACTICE Mistakes that could kill your business Why 80% of new businesses fail in the first 18 months P20

FEBRUARY 2016 ISSUE 13.4

MARKET TALK The tax fight The tax changes that could hit homeowners P22

FINANCIAL SERVICES Banks behaving badly A new survey says Aussies want ethical banks P24

BRETT HALLIWELL Advantedge’s general manager on white labels and competition P18

FORUM Doom and gloom Brokers told to be less pessimistic P27

BORROWER SNAPSHOT 2

NEWS

ASSOCIATIONS

REGULATION

LENDERS

MFAA, FBAA take on ASIC funding P4

New rules could spook U.S. buyers P6

CBA boss bullish on future P8

BROKERNEWS.COM.AU

STATE OF THE MARKET

Fixed rates as a proportion of total home loans: January

EDITORIAL

SALES & MARKETING

Editor Adam Smith

Sales Manager Simon Kerslake

News Editor Julia Corderoy Journalist Maya Breen

QLD

NT

Queensland

31.12% NSW/ACT

24.07%

WA Western Australia

23.15%

SA NSW

20.3%

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

South Australia/NT

Victoria/Tasmania

VIC

Production Editors Moira Daniels Hayley Barnett

Account Manager Rajan Khatak

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

13.09%

EDITORIAL ENQUIRIES

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

TAS

SUBSCRIPTION ENQUIRIES

Source: Mortgage Choice

tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

COULD BURGEONING HOME LOAN DEMAND BE THROTTLED?

Shane Garrett

December appeared to be a great month for the home loan market. ABS figures show that 58,552 home loans were settled over December, the first time in eight years that more than 58,500 loans were settled in one month. But one property commentator is concerned recent actions by lenders could throttle the demand, especially among those looking to purchase new homes.

December’s new home lending figures are the best we’ve seen since November 2009, when a major government stimulus was underway. This time around, new home building is benefiting from record-low official interest rates, strong demographic demand and resurgent labour markets in New South Wales and Victoria,” Housing Industry Association senior economist Shane Garrett said.

“During November, the major banks unilaterally increased their variable mortgage interest rates. While today’s figures seem to suggest no immediate impact on new home lending, the risk remains that such tactics could undermine our industry’s ability to meet Australia’s long-term housing needs,” he said.

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

ASSOCIATIONS FIGHT FIXED FUNDING MODEL The FBAA and MFAA have come out swinging over a proposed change to ASIC’s funding model that they say could impact brokers. The new model will be financed directly by those industries that create the need for regulation, rather than the taxpayer, through a combination of annual supervisory levies and fees-for-service for specific services required as needed.

Under the new fees-for-service model, credit intermediaries will be charged a fixed fee of $5,700 to apply for an Australian credit license. According to the MFAA, this could see a broker’s application fees rise by more than 1,000%.

But FBAA chief executive Peter White has said private meetings with Assistant Treasurer Kelly O’Dwyer have allayed fears over the changes.

“I can’t say too much at this stage but I am told the proposed changes to the structure and tiering of fees for funding ASIC will not have an adverse effect on brokers themselves and I was heartened to hear the minister say they have listened to our concerns and reassessed this issue,” White said.

A rundown of the next fortnight’s events

MARCH

1

What: RBA Board Meeting Where: Sydney The particulars: The Reserve Bank will meet for the second time this year to decide on its cash rate policy. With growing economic pressures, will we see the RBA make a move?

WHAT THEY SAID...

MARCH

Peter Kell “The position of company director comes with certain responsibilities and when those responsibilities are breached, ASIC will take steps to remove directors from managing companies” P6

Ian Narev “With the Financial System Inquiry now concluded, all political, regulatory and industry participants need to be forward-looking and build on this prevailing strength of our economy” P8

Bill Shorten “[Labor] will put the great Australian dream back within the reach of the working and middleclass Australians who have been priced out of the housing market for too long” P22

2-10 What: WIMBN SOLD Roadshows Where: Various The particulars: The MFAA will hold its WIMBN roadshows across the country, highlighting the organisation’s four pillars of social responsibility, opportunities for women, mental health and wellbeing, and diversity and inclusion. The event is open to all brokers.

MARCH

9

What: FBAA Queensland Roundtable Where: Brisbane The particulars: FBAA Queensland State President Stephen Rasmussen and state councillors will join brokers to offer updates on issues facing the industry.

REGULATORY ROUNDUP 6

WORLD NEWS

THE STATE OF SUPER

APRA’s superannuation statistics Total superannuation assets

Total APRAregulated assets

$2.02 trillion Of which: total assets in MySuper products

Total selfmanaged super fund assets

UNITED STATES OF AMERICA NEW RULES COULD SPOOK BUYERS The U.S. Treasury’s recent announcement of its intent to crack down on money laundering conducted by unscrupulous individuals through high-cost real estate transactions has sent brokers and would-be sellers into a panic.

According to industry players, the new rules are meant to serve as a dragnet for offenders, but might very well end up spooking legitimate international and billionaire buyers instead.

“There are people that, for whatever reason, probably won’t buy apartments right now because of these new Treasury laws. I think there will be some lost business associated with this,” Elliman broker Raphael De Niro told Curbed.

“A wealthy individual isn’t going to risk ending up on a list somewhere. They can wait six months,” added Jonathan Miller, president of a property appraisal firm.

The Treasury’s geographic targeting orders would compel title companies to identify and disclose the actual individuals who are making all-cash purchases of properties worth at least, and greater than, $3 million and $1 million in Manhattan and Miami, respectively.

Big buyers aren’t the only ones that would be affected by the changes, which would go into effect on March 1 and will last until August 7.

Luxury brokers and those who are looking to offload their properties are also at risk.

“Additional regulation is the last thing that we need to hurt potential business that really creates jobs for American workers. This is another layer of difficulty that is going to potentially hurt further development,” Extell president Gary Barnett said, noting that criminal elements are more likely to funnel dirty money into artwork, jewellery, and gold than into real estate.

Exempt public sector superannuation schemes assets

$1.25 trillion

Balance of life office statutory fund assets

illion

$589.9 b $428.2 billion

$131.1 billion $56.1 billion

Source: APRA

ASIC FLEXES MUSCLES ASIC has had another flurry of enforcement activity in the past few weeks. The regulator seems to work in waves in its announcement of enforcement actions, and the latest wave saw ASIC disqualifying a Sydney property adviser and director of an authorised mortgage broking firm from engaging in credit activities for four years. Craig Eric Lynch was the director of Paramount Financial Services (PFS) and Paramount Finance & Investment Services (PFIS), which were authorised to act as mortgage brokers.

An ASIC investigation alleges that Lynch

had breached his duties as a director of PFS and PFIS. ASIC banned him engaging in credit activities and also banned him from managing corporations for four years.

“The position of company director comes with certain responsibilities and when those responsibilities are breached, ASIC will take steps to remove directors from managing companies,” ASIC deputy chairman Peter Kell said.

ASIC also banned mortgage broker Angie Skouras for four years and has had the Australian credit licence of his company, Global Edge Finance Group, cancelled.

LENDER UPDATE 8

BY THE NUMBERS

LENDER ROUNDUP

A rundown of the fortnight’s policy and price changes

PRODUCT

63%

Homeloans Launches a new near-prime home and commercial loan. The new product, Homeloans Envizion, is suited to both PAYG and self-employed borrowers and business owners seeking a loan where the borrower is considered on merit rather than their credit score. The product offers a number of variations based on varying levels of credit impairment, including mortgage arrears, defaults, judgements, writs, summons and bankruptcy. It is available for a range of purposes, including unlimited cash out, Australian Taxation Office (ATO) debts and business purposes. It is also available as a full doc, low doc or commercial loan.

LENDER DEFENDS PRODUCT FOLLOWING ASIC ACTION While it’s a common occurrence to hear about ASIC’s enforcement action, it’s rare to hear from those on the receiving end of it. But one lender decided to set the record straight following an ASIC ban on one of its products.

Paul Walshe, the managing director of Fair Go Finance, has defended the company’s banned Flexi Loan, saying the lender seeks formal legal advice from a reputable law firm regarding compliance of all its processes and consumer protections, and that the law governing SACCs did not prohibit the Flexi Loan.

“We created the Flexi Loan to give customers a choice when taking out a personal loan and to better meet the requirements of some customers.

Not only did the product give customers the flexibility to alter the amount and length of repayments without charge or being in default, it was on average $164 cheaper than the alternative SACC loan.”

However, whilst the product was not prohibited by the laws governing SACCs, Walshe did admit that the purpose of the loan may not have been transparent enough in hindsight and was removed immediately following ASIC’s review.

“In some cases customers paid back their loan quicker than they anticipated, which, in hindsight, meant a SACC loan could have been a better product for them. Had this been known at the time the customer took the loan, they would have either chosen or been offered a SACC loan,” Walshe said.

“It was not our intention to avoid these protections and put our customers in a worse position. We have an important relationship with our customers and it is essential we are transparent about the costs of loans.”

ASIC’s review found no concerns with any of the company’s other loan products, manuals, procedures and files.

DID YOU KNOW?

$1bn

Mortgage brokers are responsible for 63% of Suncorp’s $43 billion mortgage book

Source: Suncorp

Macquarie recently announced the acquisition of the remaining $1bn of ING Direct’s unbranded mortgage portfolio Source: Macquarie

TIME TO BUILD ON ECONOMIC STRENGTH Commonwealth Bank had a strong end to 2015, announcing a cash net profit after tax for the half year to December 31 of $4.8bn, up four per cent on the prior comparative period. Along with the

Ian Narev

strong result, CBA chief executive Ian Narev was bullish on what has been an uncertain economy.

Whilst Narev conceded that global volatility was a concern, he said the time had come for Australia to be optimistic about its financial future.

“We must be cautious, but also remain focused on the long term to ensure that Australia remains a great place to live and to invest.

Continued progress on key policy foundations, such as tax and infrastructure, will be critical to support business innovation and job creation.

We also have one of the strongest financial systems in the world, to underpin economic growth. With the Financial System Inquiry now concluded, all political, regulatory and industry participants need to be forward-looking and build on this prevailing strength of our economy,” Narev said.

10

ANALYSIS

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NEGATIVE GEARING BACK ON THE REFORM AGENDA CGT CHANGES COULD HIT FOREIGN OWNERS

The sale of Australian property by foreign owners could soon be covered by tougher capital gains tax legislation, however new laws would unlikely apply to the bulk of residential properties sold by foreign investors.

In May 2013, the then Labor Government announced that foreign residents disposing of Australian property would be required to hand over 10% of the sale price to the Australian Taxation Office.

The proposal is now before parliament as part of the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill 2015 and would come into effect from 1 July if it is passed into to law.

Under the new legislation the tax requirement would apply to all real property – land, buildings, residential and commercial – in Australia that is sold by foreign owners, as well as mining, quarrying or prospecting rights.

The negative gearing debate has been re-fuelled after both sides of the federal government announced proposals to reform the polarising tax NEGATIVE GEARING is under the microscope again after the coalition and opposition both announced plans this month to reform the polarising investment tax.

The Labor government started the debate when Labor leader Bill Shorten announced a proposition to limit negative gearing on property

argued limiting negative gearing under Labor’s plan will create up to 25,000 new construction jobs, lead to the construction of thousands of new homes and boost economic growth.

The coalition was quick to rubbish the proposal. Prime Minister Malcolm Turnbull criticised Labor’s proposition saying it is “not

“There seems to have been little or no regard as to the implications this would have on housing affordability” John Flavell, Mortgage Choice investments to new housing from 1 July 2017 under a Labor government. Shorten argued the current negative gearing policy and capital gains discount does not boost housing supply and will cost the budget over $10bn this year alone. He

a well-designed policy” and wouldn’t provide any short-term budget relief. However, the prime minister then went on to say the Liberal government wouldn’t rule out changes to the hotly debated property tax.

12

ANALYSIS Possible changes were later detailed by Treasurer Scott Morrison, who, speaking to the Australian Financial Review, hinted at plans to target the “excesses” of negative gearing by targeting high-end investors through capping the number of properties that can be geared or limiting the annual tax deductions of which can be claimed.

TOTAL NET RENTAL LOSS

A pragmatic approach

1.26 million

– The number of people who claimed a net rental loss

$12.04 billion

– The total amount of net rental loss claimed

Source: ATO Taxation statistics 2012–13

NET RENTAL LOSS BY INCOME

Earn more than $80,000

42%

58%

Earn $80,000 or less

Source: ATO Taxation statistics 2012–13

While property and construction lobby groups came out swinging against the proposed changes, there has been a more pragmatic response from people within the industry.

For Phillipe Brach, chief executive officer of Multifocus Properties & Finance, Labor’s proposal of halving the CGT discount is something he disagrees with as an investor, but

“With their plan, Labor is trying to create more jobs by stimulating the construction industry, but I’m not sure it’s going to lead to economic prosperity,” Harvey said.

“I think you’ll end up with a real dichotomy between new housing and existing housing. A lot of the time new housing isn’t really attractive to investors, you’ve got things like developer’s margins that impact prices and it’s often in areas that investors aren’t looking at,” he said.

Harvey also agreed that politicians were looking to negative gearing as it’s an easy way for them to secure political points.

“As an economist, I’d much rather see an increase to the GST as it’s a consumption based tax. Taxes on investments are generally negative for the economy.

“Negative gearing is one of those things

“In the absence of either the government or the opposition being politically bold enough to contemplate actually reducing government spending or addressing the issue of the shrinking tax base through an increase in the GST, both sides have immediately jumped to changes to tax concessions for property investment in order to plug the gaps” John Flavell, Mortgage Choice he has no philosophical objection to it.

“When you look at when negative gearing was first introduced it was supposed to be a tax deferral method, not a way to avoid paying tax.

The idea was that you defer the tax you pay and then when you sell the property you pay the whack of taxes,” Brach said.

“But then the 50% discount was introduced and it meant that people really were avoiding paying their taxes. So while as an investor I don’t like to see the discount cut, I don’t have any philosophical issues with it,” he said.

While Brach recognises the rationale behind Labor’s CGT proposal, he isn’t so enamoured with their plan for negative gearing.

“I think if you restrict negative gearing to new housing stock, then you’re going to spook the market. A lot of people are going to look at that and see that when it comes time to sell, the potential pool of buyers has been reduced,” he said.

“I think this is just a bit of a witch-hunt really.

Somebody has decided that we can’t have an increase to the GST and now they’re scrambling to find another area of the taxation system to change and unfortunately negative gearing is one of those areas where they can get some political kudos.”

Rich Harvey, managing director of Property Buyer, had a similar opinion of Labor’s negative gearing proposal.

that’s always bandied about and it’s always an emotional debate. It’s something that politicians seem able to use to score some cheap points.”

Both Harvey and Brach said it was difficult to comment on the Government’s proposal without more specific detail; however, Brach was sceptical that capping negative gearing in any way would deliver a revenue windfall to the government.

“There’s something like 1.9 million or 2 million investors in Australia and 75% of them only have one investment property. So there are probably very few people who a cap would probably impact,” he said.

“I think it’s one of those things that is politically palatable, but won’t have much of an impact.”

But while Brach and Harvey are in favour of retaining the negative gearing status quo, Antony Bucello, Victorian state manager for National Property Buyers, doesn’t believe changing the system would be the end of the world.

“It may affect some people, but the majority of our clients view negative gearing as a bonus. It’s a tax concession that helps out a little, but they’re in it for the capital growth,” Bucello said.

“Labor have said they want to level the playing field a bit to help first time buyers and I think we need to do that at the moment.

Right now they’re just losing out to cashed-up investors,” he said.

13

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Tired, old rhetoric Mortgage Choice chief executive John Flavell has criticised the federal government for using negative gearing to mask its failure to address the real issue of housing affordability in Australia.

“In 2015, all of the commentary from both sides of politics was in relation to housing affordability and what could be done to deliver greater access to affordable accommodation for all Australian renters and would-be owners,” Flavell said.

“This seems to have been nothing more than rhetoric.

In the absence of either the government or the opposition being politically bold enough to contemplate actually reducing government spending or addressing the issue of the shrinking tax base through an increase in the GST, both sides have immediately jumped to changes to tax concessions for property investment in order to plug the gaps.

“There seems to have been little or no regard as to the implications this would have on housing affordability.”

Flavell said the assumption that negative gearing plays to high-end, wealthy investors, enabling them to become even wealthier, is wrong. Negative gearing was originally introduced to ease the pressure on public housing.

“Given that the government has not been prepared, in the past, to commit more of the community purse to the provision of public housing, negative gearing was introduced to increase the number of investors, and therefore rental properties, in the market. In the past this has worked, providing investors with additional incentive to meet the needs of the rental market. That said, housing undersupply remains a critical issue.”

Rushing into any drastic changes, says Flavell, will only exacerbate housing supply shortages by deterring investors and putting upwards pressure on rents – which is what already happened in the UK housing market.

“Recent amendments to tax treatment in the ‘Buy to Let’ market in England are already creating negative downstream impacts for the housing sector, with access and affordability pressures building.”

Focus on the long term The proposals put forward by both sides of the government may not work in practice, according to a specialist property investment firm, but it is premature to rule out negative reforms – including the proposed reforms – altogether.

Neil Smoli, managing director of Aviate Group, said Labor’s plan to restrict negative gearing to new properties could work if there was a more robust structure around it.

“Applying negative gearing reforms that apply to all newly built properties in terms of their physical construction and occupation could have a knock-on effect whereby investors may ‘short-sell’ or ‘flip’ these properties in order to maximise their financial benefits.

“If it is to be successful, any well considered policy surrounding negative gearing should also take into account how long a property is, or has been, held by an investor.

“There has to be some kind of incentive for investors to take the universally respected view that property investment is most optimal when a long term view is held, rather than a short-term hold to turn a quick profit by selling when a market is at its cyclical peak.”

In addition to rewarding investors that hold onto their new properties for longer, Smoli says, there should also be a period of at least a year before any successful changes to negative gearing policy are implemented.

He also believes that a property should be viewed as ‘new’ when it is up to 10 years old to minimise any potential fallout or mass exodus from the marketplace.

TECHNOLOGY UPDATE

TEACHERS MUTUAL BANK’S TRAIL-BLAZING TECHNOLOGY UPDATE

Tony Carn

“Teachers Mutual Bank (TMB) has broken the mould,” declared Director of Sales at NextGen.Net, Tony Carn.

This month’s launch of TMB’s streamlined, all-in-one electronic lodgement and loan processing system can take the mutual sector to another level.

“By adopting ApplyOnline as its loan origination platform, a gold-plated solution for both electronic lodgement and workflow, TMB has become a pioneer in the mutual space,” Carn said.

Traditionally financial institutions have viewed electronic lodgement tools and loan processing platforms as two separate entities.

TMB has now blown that outdated concept completely out of the water by showing the mutual sector how it’s done.

TMB has upgraded the ApplyOnline electronic lodgement service and introduced online servicing calculations, Supporting Documents, mortgage processing and assessment as part of the one system.

“The way forward is to process everything within the application because that allows you to do things quicker, cheaper and more accurately. It’s the future,” Carn said.

NextGen.Net has provided a cohesive, seamless, economical solution for TMB from point of sale through to loan settlement.

“What that means for us is no more double handling,” said Theresa Mason, Chief Sales and Marketing Officer at TMB. “From a broker’s perspective, a submission no longer has to go through the hands of a credit assessor on our side to enter the information. It now goes straight through our system and the assessment process.”

TMB has been with NextGen.Net since it entered the broker market. A focus on growth led them to upgrade

Theresa Mason

and adopt ApplyOnline as the loan origination platform.

“In terms of growing greater capacity there’s obviously a related cost if you need to devote more man hours,” Mason said.

“So we made the system more efficient to enable us to take on extra capacity and still maintain the excellent service level promise we’ve made to brokers.”

Mason, who has over 25 years’ experience in the mutual financial sector, said TMB’s ultimate goal is to achieve “a fully integrated system”.

This, she said, “is the next step in our evolution of servicing the broker market”.

Previously TMB engaged in manual intervention to transfer applications from one system to another.

“That was expensive and inefficient for everyone,” Mason said.

“So we worked with NextGen.Net to develop our system so we could get the application straight in; and at the same time, develop our assessment processing capabilities so the system was more intelligent in terms of being able to house the deal. That means in terms of all the supporting documents plus all the decisions that sit around that.”

Carn applauds TMB’s pioneering spirit: explaining that in essence they have combined electronic lodgement and processing in one system, leveraging the fact that there is no hand off/integration into another processing system.

“The challenge for us has always been how to service our members right across Australia when we’re not investing in a high-street footprint,” Mason said. “Working with brokers was a natural choice.

“I view brokers as ‘a core competency’ due to their combination of pooled knowledge and technical capacities; and our ambition has been to make sure we provide sophisticated accessibility through our broker channel for purchasing home loans.”

14

ANALYSIS DISTRIBUTION OF ASIC’S TOTAL FUNDING

15%

SHOULD BROKERS FOOT THE BILL FOR ASIC?

Industry funded

85%

Government funded Source: The Australian Government, the Treasury

DISTRIBUTION OF INTERNATIONAL FUNDING MODELS

19%

Government funded

The Financial System Inquiry recommended ASIC move from a government funding model to an industry funding model, but industry associations are labelling this as unfair to brokers RECOMMENDATION 29 of David Murray’s Financial System Inquiry (FSI), released in December 2014, suggested the government introduce an industry funding model for ASIC. An industry funding model means the costs of ASIC’s regulatory activities would be financed directly by those industries that require the regulation, such as mortgage brokers, as opposed to government funding financed by taxpayers.

The main benefits of an industry funding model, according to the FSI, is greater transparency of

ASIC’s costs to industry participants and a decreased risk of funding cuts.

In August 2015, the federal government released a consultation paper outlining the proposed industry funding model for ASIC. Under the proposal, funds will be raised through a combination of annual supervisory levies and fees-for-service for specific services required as needed by the different industries under ASIC’s regulatory scope.

ASIC itself even backed the industry funding model set out in the government’s

consultation paper.

Currently, only 15% of ASIC’s regulatory costs are recovered through industry levies and fees, despite ASIC claiming its regulated population has increased and the cost of using resources has grown.

“It is about establishing a price signal for regulation which we think will drive economic efficiencies in the way resources are allocated in ASIC,” ASIC chairman Greg Medcraft said.

“And an industry funding model will also improve ASIC’s transparency and accountability. That

ASIC’S FORECAST REGULATION COSTS 2016-17

26%

Mixed funding

55%

Industry funded

$91m AFS licensees

Source: The Australian Government, the Treasury

$53m Companies

$24m

Credit licensees

$13m

Market infrastructure providers

15

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means business will better understand the job we do by having greater visibility of the cost of doing that job.”

Biased against small business However, in its submission to the government’s consultation paper, the MFAA said it is “strongly concerned” about the cost and competition burden this will place on brokers and it “strongly opposes” the proposal to move to an industry funding model.

Under the new feesfor-service model, credit intermediaries will be charged a fixed fee of $5,700 to apply for an Australian credit license, replacing the current fee schedule based on a sliding scale determined by the value of loans settled.

According to the MFAA, this is “grossly unfair” to small broker

$9m

Registered liquidators

businesses and could see their application fees rise by more than 1,000%.

“A fixed flat fee approach for the application of a credit licence is not only grossly unfair to smaller participants, it does not reflect the complexity of applications. In essence, it is a lazy approach to adopt such a calculation with the largest relative burden then being artificially placed on smaller participants,” the MFAA’s submission stated.

“It is unconscionable that large entities settling loans in excess of $2,100 million p.a. to see a reduction of 75% for a credit licence application, whilst a small business licence is expected to rise by 1078%.”

The chief executive of the FBAA, Peter White, also told Australian Broker that its submission also argued that the new fixed fee structure

$6m Auditors

Source: The Australian Government, the Treasury

was “not appropriate” to the industry. “[The FBAA] feels there should be multiple tiering structures… The cost to get a licence is far, far, far too high.”

According to White, the expensive fixed fee could place a significant barrier to entry on new brokers.

“On the old scale, $5,500 topped it out, but this is $5,700 from beginning to end. That doesn’t make sense. What we don’t want to see is barriers placed on newto-industry people coming into the market. To me, that sort of thing becomes a barrier to entry.”

Whilst the associations both disagree with the fees-for-service proposal, particularly in respect to credit license applications, they do differ when it comes to the proposed annual levy arrangements.

According to the government’s consultation paper, the proposed annual levy arrangements for credit intermediaries – or mortgage brokers – will be grouped into tiers based on credit volume.

The cost attached to the tiers will vary from $890 to $260,000.

The MFAA says this also “artificially skews against” small business owners. The association predicts small business will see a rise of 84% in their annual cost if these levies are adopted, which will “destabilise” the credit industry and eliminate competition.

“Small operators will seek ways to minimise licensing and levy costs. The industry is likely to consolidate considerably and this will in turn reduce competition significantly across the credit sector,” the MFAA’s submission stated.

However, White told Australian Broker that whilst it would require some tweaking, brokers should not be too worried.

“As far as the annual fee goes, at the bottom end of the scale it is probably not a million miles away from what is payable today. But still, the tiers and stages through it are wrong.”

16

BROKER PROFILE

FITNESS TO FINANCE How one Victorian went from personal trainer to top mortgage broker in five years Before Josh Bartlett joined the mortgage broking industry, he owned and ran a collection of gyms in Victoria. He made the decision five years ago to embark down a different career path and joined Loan Market to start his own mortgage broking

management app and received more industry accolades than any other Loan Market broker – including being named Franchise Broker of the Year for the past two years running at the annual Australian Mortgage Awards.

“In the past two months, I generated 321 leads through eBroker, lodged $43m and settled $30m” business – without any financial background.

In that time, Josh has grown to become the number one broker within the Loan Market Victoria network, launched his own lead

Speaking openly about his rapid rise through the ranks, Josh attributes his success to the support gained by working within the Loan Market Group.

“It’s been five years of hard work, but I wouldn’t change a thing. I’m grateful for Loan Market’s support as I’ve grown my business.

Since joining the Group, I’ve built a business based on real estate referral relationships and Loan Market have supported this model wholeheartedly. I now have 89 referral partnerships and my lead management app, eBroker, has allowed me to service each and every one of them at the highest level.

In the past two months, I generated 321 leads through eBroker, lodged $43m and settled $30m. eBroker was developed after Josh recognised a need within his business and came up with a solution that allowed him to better manage his leads and referral partnerships.

“Before I grew my team I needed support.

My capacity was increasing and my referral partnerships growing but I couldn’t keep up with the admin. The eBroker app was essentially my first assistant. It helped me keep on top of all my leads and it provided a greater and more transparent service to my referral partners which in turn strengthened those relationships,” Josh said.

“Loan Market’s encouragement and backing has provided me the platform for success – they encourage ambition and I’m proud to be a Loan Market franchise owner,” Mr Bartlett said.

18

COVER STORY GROWING ACCESS Advantedge earlier this year partnered with major real estate network LJ Hooker to launch a new white label home loan.

The new product, LJ Hooker Home Loan Connect, builds on Advantedge’s pre-existing white label products within its aggregation groups – PLAN Australia, FAST and Choice Aggregation – as well as other major partnerships with AFG, Connective, Smartline and Loan Market.

According to Advantedge, approximately 85% of brokers in the industry now have access to its white label home loans.

The LJ Hooker Home Loans Connect product comes with an annual fee of $120, however customers will benefit from no upfront fees and no application valuation or legal fees. In addition, customers get free EFTPOS and ATM transactions via NAB and rediATM networks.

Jeff Chapman, national product and marketing manager at LJ Hooker Home Loans, said the new product will allow brokers to provide customers with a full suite of LJ Hooker branded real estate services and lending solutions.

“LJ Hooker Home Loans Connect also allows our lending specialists access to a variety of marketing collateral, a consumer-facing website and branding on all client communications to support client conversations. They will also have support from expert Advantedge BDMs who understand their business, to assist as required.”

RAMPING UP THE COMPETITION Advantedge’s Brett Halliwell on how white labels are taking on the banks IN THE competitive landscape of mortgage lending, nonmajors are generally the lenders that position themselves as bringing the fight to the big banks. But in terms of actual volumes and distribution footprint, perhaps it’s time for a paradigm shift in how brokers view competition. When it comes to actually making a mark on the mortgage market, Advantedge general manager Brett Halliwell believes white label providers deserve to be part of the conversation.

“I think white labelling now is very mainstream and very well-known and understood by the broker market in general. Brokers might have to think of one of the four majors, or to look outside them to the tier two lenders.

I think white label fits fairly and squarely in the tier two competitive space,” Halliwell said.

Halliwell believes white labels have the potential for a strong growth trajectory in the year ahead. This comes on the heels of a year that saw the sector massively expand its footprint.

“White labelling during 2015 really came of age and became a significant competitive force within the market.

From an Advantedge perspective, our market footprint with the number of brokers who have access to our products grew from 35% to 85%. What that has meant is more brokers with access to our product range and enjoying the opportunity to be able to offer it to their customer. That breadth and reach has been an important driver for competition in the market,” he said.

Unlike the non-majors, Halliwell said white labels don’t depend on brand recognition.

“It’s not so much playing off the goodwill of the brand. It’s more the underlying product proposition and service proposition that makes it attractive for brokers,” Halliwell said.

In addition to the ease of service and competitive price, Halliwell suggested brokers could also capitalise on the perception of exclusivity in offering the products to their clients.

“Imagine the barbecue conversation of, ‘My broker helped me secure an exclusive product not available other than through brokers’. And they get a great product at a great rate that fits their needs.”

is convinced the sector stands apart from traditional mortgage managers. Moreover, the consolidation in the mortgage management space has actually led to greater strength for white labels, Halliwell suggested.

“I would make a distinction between mortgage managers who operate under their own brand and true white labellers. A number of the mortgage managers have consolidated, the most prominent being Resi into the Yellow Brick Road group and AFM into the NMC group, and from a wholesale perspective the announcement from Firstmac that it would no longer be a wholesale funder.

I think this consolidation of mortgage management will continue to occur. Where this has led is to greater prominence of white labels funded under aggregators, which now have significantly increased their market share,” he said.

This doesn’t mean that white labels are merely replacing mortgage managers, though.

“The market share capabilities and volume being driven out of white labels are significantly greater than those that have been driven by mortgage managers. It’s not replacing

“We believe the white label price position within the market should be at the pointy end of the pointy end”

A bigger slice While the concept of white labelling has sometimes been lumped in with mortgage management, Halliwell

one with the other. Instead, white labelling is taking a bigger share of a growing pie,” Halliwell said.

While white labels do provide competition to the banks, being funded through banks also means regulatory changes impact the sector. One such change was APRA’s tightening of capital requirements for investor lending. Halliwell said this has led to a shift in Advantedge’s balance sheet focus.

“Advantedge is funded off NAB’s balance sheet, so, in effect, the decision was made in the bank broadly that the 10% cap would apply within all the different business lines.

Advantedge has worked toward meeting that 10% investor cap. As a result, we’ve had a reshaping toward owneroccupiers and away from investors,” he said.

As those changes have come about, Halliwell said it’s been important to communicate to brokers the reasons behind them.

“During the course of last year, Advantedge and

19

NAB Broker did a series of workshops called Knowledge is Everything that explained some of the higher capital requirements imposed by APRA and the lowering of ROE by risk weights.”

But, in spite of impacts on ROE, Halliwell said white labels still maintained a competitive advantage where rate is concerned.

“We believe the white label price position within the market should be at the pointy end of the pointy end, and for us to remain competitive we have to look to achieve that where possible,” he said.

Looking forward In the year ahead, Halliwell said Advantedge will continue to expand its footprint by strengthening its proposition for mortgage brokers. He said the company had a number of enhancements planned for the year, all focused around better working with brokers.

“During the course of 2016, we expect to see continued change driven by regulation, so it’s important for all lenders to meet those challenges. For us, we’re also investing in a significant number of enhancement projects that will be rolled out over the course of the year. These are predominantly processing enhancements that will make it easier for brokers to do business with us,” he said. “Something we’ve put in place is underwriting teams who directly interface with brokers, and within the operations team we have a mantra that we want them to pick up the phone and talk to brokers.

That’s the customer service ethic within the operations team. We don’t have to create connections into the branch network or any other channel. We can focus on the mortgage customer’s needs directly.”

20

BEST PRACTICE EXPLAINING THE SMALL BUSINESS FAILURE RATE

Four common mistakes entrepreneurs make that can kill their business WITHIN THE timeframe of a year and a half, about 80% of new businesses fail, according to Bloomberg Business research.

And, throughout the past 30-plus years, the amount of new businesses has drastically declined, according to Gallup. During the economic meltdown of 2008, it was the first time in several decades in which more businesses failed than new ones were started. About 70,000 more businesses fail than are launched.

“We see it all the time in our communities – signs on doors that read, ‘Due to circumstances beyond our control we have to close our business…’ What business owners today don’t seem to understand is that what’s required, not only to survive but to thrive, is absolutely within their control,” says Pamela Herrmann, author of bestseller The Customer Manifesto: How Business Has Failed Customers And What It Takes To Earn Lasting Loyalty, which ranked No. 3 on the list of customer service books every business owner should read by Business.com.

“The truth is, what is required is way outside their skill sets. The typical business owner has no idea how to create leverage, how to utilise new technologies, how to strategise on any level that makes them competitive or how to stop the haemorrhaging of cash in the form of failed online marketing investments.

Herrmann is co-founder, along with Patty Dominguez, of CREATE Buzz (www.CreateBuzzNow.com), a Fortune 50 branding expert. Dominguez and Herrmann

review four mistakes – and ways to correct them – to keep businesses thriving: 1. They miss their biggest revenue opportunity “When we look at traditional marketing, so many solutions providers are focused on customer acquisition and how to get prospects into their marketing funnel – which is totally necessary and valid,” Dominguez says. “However, the biggest revenue opportunity is in knowing how to keep these customers, because that’s where the higher profits are in the lifecycle of a customer.”

“We teach our small business clients not only how to get new customers, but more importantly, how to keep their existing customers,” Herrmann says. “Most small businesses don’t have the foundational strategy for how to build their business for growth. Once you have that in place, marketing tactics, such as word of mouth online, can be fully leveraged, and that is the key to organic growth.”

2. Entrepreneurs not only track the wrong metrics, they don’t even know what they are In the absence of a strategy,

business owners make marketing decisions based on short-term data, such as how much money is in the bank or how many sales they made last month. This is reactive — not proactive.

“In life and in business, it’s often not the ability to answer a question, but rather whether or not you’re asking the right questions,” Dominguez says.

So, what are some of those questions?

The duo has come up with the following: • How many new leads did you get this month?

• How much did it cost you to acquire that new lead or customer (CAC)?

• What’s the average value of a single transaction?

• What is the lifetime value of your customer (LTV)?

3. Businesses don’t manage their message across all customer touch points Technology brings customers to us from so many sources.

Most businesses are not aware of all the ways consumers are using technology to find businesses to transact with.

Businesses should go through the process of creating a Customer Journey Map so that they can see all the touch points across all channels and first measure how well they are doing and then identify gaps and opportunities. The goal in this process is to know exactly what your customer is thinking, feeling and doing throughout their engagement at touch point. This one exercise alone will show you where your profits are being won or lost.

4. They don’t know the fundamentals of marketing that are the cornerstones to any growth strategy Just like an archer tries to hit the bull’seye, an entrepreneur tries to reach her customers. No matter how many arrows that may be in her quiver, if she doesn’t know how to aim, she’ll probably miss with each attempt. The same is true with marketing. You can spend vast amounts in a campaign, but you need to know the who, the how and the why of your aim.

Dominguez, a Fortune 50 business strategist, says: “You need to know who you’re marketing to. Why are you marketing to them? What are their wants and needs? What keeps them up at night? Are there emotional triggers that make your marketing relevant? What is your brand promise and what makes you different from the guy down the street?

And, when you do this, effectively, you shift from sinking money into fixing problems to growing your business through strategic decision making.”

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TEN TIPS TO AVOID RUINING YOUR NEW HIRE An author and business advisor has some tips around how to best induct a new employee without ‘ruining’ them IN A recent blog on The Huffington Post, author and business coach David Finkel shared the best ways employers can avoid “ruining” new staff.

Before you even hire, create a draft, written onboarding and orientation plan for how you’ll optimally bring that new hire on board.

“How will you orient them on their responsibilities?

The team they’ll work with? The company culture?

The market you serve? Your products and services?

Your internal company systems?”

1

Use your time spend roughing out your orientation plan as an opportunity to enhance your interviewing and selection process.

This will give you a more concrete sense of exactly who you need to hire, Finkel said.

“Talk about the onboarding and orientation process with your finalists for the position. Solicit their input and feedback about how they think they could best be onboarded.”

2

3

Have all the infrastructure set up before your new hire starts so that they walk in to a powerful first

“golden hour” of their first day on the job.

“The way you bring on your new team member that first golden day makes a difference.

It sets a mood and standard,” Finkel said.

To help you flesh out your initial training and orientation process, start with the job description itself.

“Use the job description as a checklist and lay out a timeline of how you’ll orient your new hire on each of the key responsibilities.”

4

With each new hire, refine your orientation process so that it becomes better, faster, easier, and more consistent.

“This is made easier because 50-70% of any new hire’s orientation will likely be standard across positions in the company.”

5

Early on, get your new hires to help you document and improve your orientation process.

Encourage your new hire to take notes, Finkel said.

“Not only will this make your system better for the next hire, but it will help your new hire pay

6

closer attention and learn the key information at a deeper level since they will be placed in the role of “teacher”, not just student.

Give your new hire the “day in the life” experience of your customer.

“This will give them an immediate context with which to make sense of the orientation training you’ve given them. It will also help them connect their work to the real value they’re creating directly, or indirectly, for your customers.”

7

Break your training into smaller modules.

Don’t try to do a three-hour marathon session – break your orientation down into 30-, 60- or 90-minute blocks, with breaks between to meet more of your staff, to get a tour of the office, and to get a rough start doing some meaningful, but simple, work for the company, Finkel said.

“This takes more thought than just flooding your new hire with hour after hour of information and dumping them back at their desk to ‘get to work’, but the results are worth it.”

8

Check back in with your new hire on a regular basis over the first 90 days of hire.

This can be with a formal meeting, a scheduled meal, or even just an informal drop-in visit to their workstation, Finkel said.

9

Get feedback from your new team member on how he or she thinks the orientation process could be improved for future team members.

At your check-ins, while it is still fresh in the mind of your new hire, ask them for their “liked bests” and “next times” to improve the orientation process, Finkel says.

“How would they make it more impactful?

Faster? Easier? More engaging?”

10

22

MARKET WRAP

MARKET TALK

CHANGES TO TAX STRUCTURE AHEAD?

Both the Federal Government and Opposition are tipping proposed tax changes that could impact homeowners THE LIKELIHOOD of changes to tax

DID YOU KNOW?

Cumulative change in capital city home values, 10 years to Jan - 16 Sydney

78.0%

Melbourne

100.0%

Brisbane

44.0%

Adelaide

41.7%

Perth

44.7%

Hobart Darwin Canberra Combined Capitals

17.1% 75.3% 48.1% 72.0%

Source: CoreLogic RP Data Home Value Index

arrangements such as negative gearing and the current capital gains tax discount seems to be increasing, with both the Federal Government and the Opposition revealing plans to overhaul the current system.

While speculation has mounted in recent months that changes to the arrangements could be made as the government looks to reform the national taxation system, last weekend gave the best indication yet as to what the two major parties are proposing.

Speaking at the NSW ALP conference, Opposition leader Bill Shorten announced that under a Labor government negative gearing would only be applicable to investments in new housing.

Shorten claimed the change was aimed at improving housing affordability.

“We’re doing this because 30 years ago, houses cost around 3.2 times average income — today it’s 6.5 times average income,” Shorten said.

“Labor will help level the playing field for first home buyers competing with investors and we will put the great Australian dream back within the reach of the working and middle-class Australians who have been priced out of the housing market for too long,” he said.

But Master Builders of Australia (MBA) chief executive Wilhelm Harnisch said his organisation

believed Labor was folding to a populist, but incorrect opinion of negative gearing.

“Our concern is that Labor’s policy is a populist response to those who demonise housing and negative gearing as primary cause of our fiscal and social problems. Investing in new private rental housing is not evil,” Harnisch said.

“The private rental market is a critical supplement to the public and social housing rental sectors.

“The private rental market also provides a valuable role in supplementing the retirement income strategy for mums and dads on low and middle incomes. Housing is an asset class just as shares and just as shares, interest deductibility in investment housing should remain as a tax feature,” he said While Shorten has publicly stated the Opposition’s stance on negative gearing, the Government’s position is somewhat less clear.

According to a report in the Australian Financial Review recently, the Treasury is currently considering two options: either a cap on the number of properties that can be negatively geared or a cap on the amount that can be claimed as a deduction through negative gearing.

Though the specifics of the Government’s proposed changes aren’t yet known, Harnisch said the MBA hoped they would be of benefit to everyday investors and the economy.

“What we are looking for from both major parties in the lead up to the Federal Election are policies that add to economic growth, create jobs and enhance the positive role that housing can play and that will at the same time improve the ability of mums and dads to make their contribution by providing rental housing and at the same time look after their own retirement strategies,” he said.

The possibility of an overhaul of negative gearing has attracted the most attention, but a victory for the Labor Party at the next election could have even further implications for investors, with Shorten also announcing his party would reduce the current capital gains tax discount for investment properties.

Under Labor, the current discount of 50% would be reduced to 25%.

“It cannot be rationally argued anything else but with a capital gains tax subsidy of 50%, that the whole system is accessibly distorted and overly generous in favour of income from capital instead of income from earnings,” Shorten said.

“We will grandfather existing arrangements for those properties so that investors who have invested under the current tax law will not be disadvantaged by the change and a prospective change.”

That proposal has also been met with criticism, with Housing Industry Association chief executive industry policy and media Graham Wolfe claiming it would worsen, rather than improve affordability.

“Yesterday’s announcement by the Opposition that it intends to halve the capital gains discount on investment properties will, in our view, not achieve these objectives. Reducing the CGT discount, which is an important measure to recognise the net present value of an asset, will push investment away from Australia’s housing sector,” Wolfe said.

“The Henry Tax review rightly concluded that addressing the supply side impediments to new housing had to be the priority focus, including: reducing stamp duty; alleviating land supply restrictions; addressing onerous planning controls; and delivering housing infrastructure in an equitable and timely manner,” he said.

23

DID YOU KNOW? MARKET TALK

PROPERTY NOT THE PLAYTHING OF THE WEALTHY A new survey suggests it’s not only the super affluent who invest in property ACCORDING TO CoreLogic RP Data, it seems investing in real estate in Australia is not just a pastime for the super-wealthy, with the results of a recent survey showing the household income for more than half of the country’s landlords is less than $150,000 a year.

According to the 2015 LJ Hooker Investor/ Tenant Survey, 37% of landlords have a household income of under $100,000 and a further 29% of respondents earned an annual income of between $100,000 and $150,000.

Amy Sanderson, head of property management at LJ Hooker, said the survey results show the accessibility of property as an investment class.

“Across Australia and New Zealand, LJ Hooker manages more than 150,000 residential properties for landlords, which underlines the importance and accessibility of real estate as an investment option for the wider community, not just the wealthy,” Sanderson said.

While property may very well be an investment avenue open to the majority of people, Helen Collier-Kogtevs, managing director of investment advisory firm Real Wealth Australia, said there still is a perception that it’s only for the wealthy.

“For newbies, they’re thinking that they need a lot more than they’ve got, but those that have actually started to dabble in it and start to get a little educated and learn a little bit more about what’s involved are more understanding of the power of their position,” Collier-Kogtevs said.

“I’ve got a lot of clients whose household income is under $100,000 and they’re able to buy one or two properties in a relatively short period of time.

Yet when they came to us they thought, can we buy even one?” she said.

For those who may be looking to invest while on a lower income, the first and most important step is a simple one.

“At the end of the day it’s about budgeting. You’ve got to do a budget to identify where there are gaps.

Simple things like that coffee you might buy every day at work, you’re paying $4.50 to $5 for a latte.

Just saving that can make a significant difference to the overall disposable income at the end of each year,” Collier-Kogtevs said.

“Another example I give clients is you can buy Bonds [underpants] at David Jones and you can buy Bonds at Big W and the reality is they’re the same Bonds, it’s just the price tag that changes,” she said.

While some simple budgetary changes can go a long way to helping people achieve their goals, Collier-Kogtevs said some people do take some more significant steps.

“Once people develop their strategy and realise they need to boost their income some of the things they adopt might be taking on a boarder or it may be reducing some of their bad debt so there’s less money going out paying those bad debt bills.

“I’ve also had clients that have decided to rent their own principal place of residence in order to get into investing, so they’ll go and rent themselves and rent out their own homes.”

According to the LJ Hooker survey, the majority of investors realise property is unlikely to be a get rich quick investment, with 58% of respondents saying they are looking for a balance of capital gains and cash flow, which Collier-Kogtevs said is an important point to remember.

“The general public wants get rich quick, without a doubt.

“My clients realise it’s going to be a long-term strategy. Would they like to retire in five years’ time instead of 20? Absolutely, but while that’s possible people are realising that when you understand your strategy that’s when you can shorten the process.”

50% Renovation costs at the end of the December 2015 quarter were 8.11% higher compared to the same period in 2014 Source: Service Seeking

REAL ESTATE AGENT JAILED FOR FRAUD A Victorian real estate agent will spend at least 20 months in jail after being found guilty of misappropriating around $1.9m in trust money.

Anthony Vito Brancatella pleaded guilty in County Court of Victoria to more than 60 charges of wrongful conversion and false accounts, relating to his time as director of McDonald Real Estate in Mulgrave.

As a result, Judge Carolyn Douglas sentenced Brancatella to 40 months’ jail time, with a non-parole period of 20 months.

An investigation by Consumer Affairs Victoria found that between December 2013 and June 2014 Brancatella siphoned money from the agency’s trust account in order to keep the business afloat.

Consumer Affairs Victoria found that in total Brancatella siphoned a total of $1,999,020 for his own use from 62 separate property transactions.

Director of Consumer Affairs Victoria Simon Cohen said abuse of trust-account management was unacceptable.

“Community confidence in how real estate agents deal with trust money is absolutely critical. Any real estate agent who breaches this confidence, and takes money from a trust account without proper authority, is committing a crime,” Cohen said.

“While most estate agents are doing the right thing, we will pursue any agent who is not meeting their legal obligations,” he said.

Brancatella’s conviction means he is also disqualified from working as a real estate agent for the next 10 years under the Estate Agents Act 1980.

Consumer Affairs Victoria has currently paid more than $500,000 to victims of Brancatella’s fraud from the state’s Victorian Property Fund, which was established to compensate any consumer who suffers a financial loss by reason of an estate agent stealing from a trust account.

24

MARKET WRAP MARGIN LENDING UP DESPITE FEWER INVESTORS

FINANCIAL SERVICES

AUSSIES WANT ETHICAL BANKS A new survey has found Australians want their banks to behave ethically Nearly half of Australians say they would change banks if they knew their bank was behaving unethically, new research shows.

The Oxfam Australia survey also found 75% of Australians believe banks shouldn’t lend to companies that behave unethically.

The findings come on the heels of an Oxfam report that claims ANZ, Commonwealth Bank, National Australia Bank and Westpac were connected to companies in Cambodia, Brazil and Indonesia that had been involved in illegal logging, forced evictions, inadequate compensation, food shortages and child labour.

“What is clear from our investigations is that, despite the big four banks claiming they’ve addressed the issue, no bank has done enough,” Oxfam Australia chief executive Dr Helen Szoke said. “The land grabs that we exposed two years ago continue to have devastating impacts on the lives of vulnerable people.”

Szoke said since the survey was first

conducted in 2014, more than 18,000 people had written to their bank and 20,000 had signed the petition to call for a ‘zero tolerance for land grabs’ approach.

“Australians hold a huge, and very direct, stake in the financial sector’s choices in how it uses our money – at home and overseas. Eighty cents out of every dollar that Australians have in their household bank accounts is with the big four banks,” Szoke said.

Szoke said Australians should take action to ensure their banks act responsibly, and urged consumers to sign Oxfam’s petition or to bring the issue up directly with their bank.

“We need banks to commit to zero tolerance for land grabs – this includes being transparent about their links to agriculture land deals, committing to increased due diligence, advocating responsible financing and supporting justice for affected communities,” she said.

Margin lending has seen growth over the past year, driven by strong performance in the direct channel.

New research from Investment Trends has found that, despite a falling number of clients, total outstanding margin debt has increased. The 2015 Margin Lending Investment Report found the number of active margin lending investors as of September 2015 was 67,000, down 3,000 from 2014. But in spite of the decline in investors, total outstanding margin debt increased four per cent to $12.3bn over the year to September 2015.

The report found the average loan size per margin lending client had grown by eight per cent from September 2014, to $180,000. The figure was slightly higher than the pre-GFC high.

“The margin lending industry grew year on year, despite turbulent market conditions,” said Recep Peker, Head of Research for Wealth Management at Investment Trends.

“The performance of the direct channel is underpinning the growth in total outstanding margin debt, while the intermediary/advised channel has remained relatively flat.”

The report said self-directed margin loans now comprise 45% of outstanding debt, up from 34% in September 2010.

HOLDING BANKS ACCOUNTABLE

80%

80% of Australians polled believe banks that have investments that harm a community should provide some compensation to that community

47%

47% of Australians polled said if they became aware that a bank was behaving unethically, it would strongly influence their decision about their choice of bank for future banking needs

75%

75% don’t think that banks should provide loans to companies behaving in an unethical way (such as forcing poor communities overseas off their land)

55%

55% of responders anticipated that they were going to need a mortgage or bank loan in the next five to 10 years Source: Oxfam

ACCOUNTANT FRONTS COURT OVER SMSF FRAUD A New South Wales-based accountant has appeared in court following alleged self-managed superannuation fund fraud (SMSF) worth more than $850,000.

Following an ASIC investigation, Nicholas James Ellis, of Valentine in New South Wales, appeared before the Downing Centre Local Court recently, charged with 23 criminal counts, including 12 counts of making false and misleading statements, nine counts of fraudulently misappropriating money, one count of fraud and one count of obtaining a financial benefit by deception.

ASIC alleges that Ellis used his financial planning business, 2020 Financial Solutions Pty Ltd, to advise a number of clients to open SMSFs. ASIC then alleges that between March 2009 and June 2010 Ellis made false

and misleading statements to his clients in relation to a property investment opportunity in a hotel at Tura on the New South Wales south coast.

ASIC claims Ellis used those statements as a means to raise funds from the SMSFs, and alleges he misappropriated $857,000 from investors.

ASIC alleges Ellis used more than $250,000 from the funds to pay out investors from a previous failed investment scheme he had run.

It is also alleged Ellis put the misappropriated funds towards the purchase of a home worth more than $3 million.

Ellis is scheduled to appear in court again on 22 March.

In 2013, ASIC banned Ellis from providing financial services advice for six years, due to dishonest conduct and misleading or deceptive conduct.

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26

SPOTLIGHT VIDEO SPOTLIGHT

ONE YEAR ON

AFFORDABILITY UNDER PRESSURE What a difference a year makes – or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago

Angelika Darbinian

23 JULY 2015 6 MARCH 2015

FSI head David Murray said Australia’s historically low interest rate environment was pushing up house prices and putting pressure on the financial system

HIA chief executive Graham Wolfe says an increase in the GST would destroy affordability in an already unaffordable housing market

16 DECEMBER 2016 3 SEPTEMBER 2015

The Adelaide Bank and Real Estate Institute of Australia Housing Affordability Report shows a glimmer of hope, with the proportion of income required to meet loan repayments decreasing by 0.5 percentage points to 30.3%

Mortgage Choice CEO John Flavell says while affordability is easing for mortgage holders, renters are facing a difficult market

15 FEBRUARY 2016

A survey by HomeStart Finance finds low rates are not helping first homebuyers facing affordability pressures and high upfront costs

THE STRENGTH OF FRANCHISE Brokers entering the industry are presented a variety of choices in how they wish to structure their business. They can build their own brand through a wholesale aggregator, choose from a number of branded hybrid models or opt into the franchise model.

Aussie Home Loans franchise owner Angelika Darbinian says one of the major benefits of being a franchisee is the reputability of the franchise brand. She recently told Australian Broker TV about her views on the benefits of the franchise model.

“Aussie is a reputable company and the support you get from the head office definitely helps,” she said. “I also believe Aussie has the number one training.”

Darbinian also said the marketing support provided by Aussie was a boon to her business, as was having a shopfront with which to draw in clients.

With recent moves that have seen investment lending pull back, the market can be challenging for brokers. But Darbinian said the changes in the market present a good opportunity for brokers.

“Every change is a challenge. It’s an opportunity for every broker to raise their hand and say, ‘Come to us. Give us the challenge and let us help’,” she said.

And Darbinian doesn’t foresee a drop-off in interested borrowers seeking out brokers.

As changes in the market cause confusion for consumers, she said brokers are well placed to help educate their clients.

“I think there will be people still interested to buy. As brokers, we need to be educated and make ourselves aware so we can communicate with the client.”

27

BEST COMMENT ONLINE

FORUM

STOP THE DOOM AND GLOOM Are brokers being too pessimistic in their public dialogue?

FBAA CHIEF executive Peter White recently expressed concern that brokers are becoming too negative about the industry in light of renewed regulatory attention. Brokers were sharply divided on the nature of their public discourse.

GC argued that brokers who publicly stated concern over regulatory changes were merely reflecting the truth.

“This isn’t doom and gloom speak. We are talking facts. If these issues are to be rectified, they need to be discussed in an open forum as they have been. Hiding these issues is not going to help anyone and certainly won’t help new entrants. They need to know the positives, as well as the negatives. If the FBAA and MFAA got off their backsides and did something then we may not be having these discussions.”

Sunny Coast, though, said brokers were ultimately responsible for their own success or failure.

“That’s so typical. Blame the industry associations. How about you take some personal responsibility for your own business, as all of us in the industry do. In the end, the associations (who seem to do a good job) can’t run our brokerages. Only we can do that.”

Broker said the industry’s negativity was due to perceived negativity from the regulator.

“Brokers write negative comments because we are concerned about all the negativity coming out of ASIC – and we have little faith in ASIC and the all mighty lenders to find common ground that does not result in brokers getting shafted. Some ongoing and effective leadership

from our aggregators, proactive direction and communication from the MFAA and FBAA might appease the masses in the short term (as a broker wrote last week, when it comes to brokers having a voice we are essentially a rabble – and that comment is correct). How did we get here, where the very organisation that we are licenced with is doing whatever is possible to destabilise this fantastic industry? You get the feeling that our associations and aggregators will have little influence in whatever the outcome is.”

And Steve McClure said brokers should spend more time speaking to their industry associations and less venting their frustrations in public forums.

“Peter is not advocating censorship. If you have a problem, take it to your association and it will be heard. Don’t waste a good idea on a blog. I wonder if those that complain have taken the step to submit their issues of contention and ideas to resolve them? Or, if they’ve taken the time to read or hear what the associations are doing? Siobhan and Peter are always trying to understand our views when they represent us.

I sincerely believe they’ve demonstrated that. In fact, I think it’s time that, as brokers, we all grew up a little and dealt with the realities of today’s regulatory and commercial environment.

“Sure, strongly address your issues directly, object and dispute, but don’t fight battles out in the street. It’s ugly. For example, if we, as consumers, saw companies publicly fighting Australian food standards, we’d think less of the companies, not the food standards.”

ASIC TARGETING BROKERS? While brokers are often critical of the work done by industry associations, one commenter lauded the FBAA and MFAA for their lobbying efforts on behalf of the industry.

“As a member of the FBAA, I have met Peter White and heard the efforts he is putting in for our industry, and whilst not a member of the MFAA, I have, through my aggregator, heard Siobhan Hayden express her views on the industry and the work she has already done and intends to do for us brokers. Both certainly seem to have brokers’ interests at the forefront. My concerns, and maybe Peter White’s – although he diplomatically did not say it – is where lender, aggregator and franchise heads are constantly out there talking concerns around commissions, reviews of commission structures and making ‘It’s done differently in other parts of the world’ comments. Peter, I understand, still operates his own brokerage, and change/reduction in commission structures affects him as it does any other broker. He is not saying, ‘Don’t discuss the issue of commission’.

What he is saying is, ‘Change the discussion to one that doesn’t talk down our industry to potential new brokers’. As we all know, you can make a very good living out of finance broking if you work at it. That is the message that should be going out.”

Tim H on 8 February 2016 at 2:34PM O’DWYER CONFLICTED? FBAA CEO Peter White recently said he had received assurances from Assistant Treasurer Kelly O’Dwyer that changes to ASIC funding wouldn’t hurt brokers.

“Assistant Treasurer Kelly O’Dwyer is a recent (2007 until elected) exexecutive of the National Australia Bank and, as such, I hold grave doubt that she is free of any conflict of interest in her current push in any financial services reform.”

Anonymous on 14 February 2016 at 12:14AM

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PEOPLE Scott’s training schedule of 27 hours per week spans five running sessions, four gym sessions, two technical running sessions, two bike sessions, two pool sessions, plus physio.

“I have one day off a week if I’m lucky,” he says.

“It depends how well I train.”

“Every four years you get your chance and so not only do you have to be adequately prepared for that moment but you’ve also got to put in the work that whole time to ensure that you’re going to give yourself the best shot possible by the time you get there.

“The thing I like about it the most is that essentially it’s honesty – in the sense you can’t hide behind anything and no one else is going to do the work for you. When it’s an individual sport like mine you’ve got to be the one out there on the track.”

GOING FOR GOLD This extraordinary young Australian and Paralympian is aiming for the 2016 Rio Games while paving a road in broking for when he’s finished running “HONESTLY, I hated running with a passion.

When I was 14 I did athletics and I would come last in absolutely everything.”

That’s not what one expects to hear from a two-time Paralympian and triple Paralympic Games medallist.

Western Australia was born with cerebral palsy and after taking up running in 2006, has since won silver in the men’s 800 metres in Beijing in 2008 in front of 90,000 people and a silver and bronze at London in 2012.

Scott also took up mortgage broking in

“I didn’t know I was a good runner until I gave it a shot” 27 year old Brad Scott is in the middle of training for his third Paralympics, the 2016 Summer Paralympic games in Rio de Janeiro, after recently winning silver for 1,500m at the World Athletic Championships in Doha, Qatar.

The middle distance runner from Bunbury,

September 2014 and somehow manages to juggle working alongside Aussie Victoria Park owners Shaun Brodison and Jay Drummond with his intense training schedule.

“It’s all looking good,” says Scott. “I’m probably as fit as I’ve ever been and as strong as I’ve ever been.”

Inspiring others Scott also finds time to do public speaking and coaching to help and inspire young athletes with and without disabilities to pursue what they want to do.

“I just want to go out there and inspire the next generation to go ‘you know what, I want to go out there and try,’ because then you’ll know. I didn’t know I was a good runner until I gave it a shot.”

This attitude of giving back to others probably stems from his upbringing as he expresses his gratitude for his parents and how his father could have made one of two choices when he found out his son had cerebral palsy.

“He could either use it as an excuse, hold me back and wrap me in cotton wool – or he could give me every opportunity under the sun like my two brothers and get me in what I call the ‘real world’ and experience the ups and downs. And I’m so thankful he did that because without that I wouldn’t have been able to achieve what I have.

“I was lucky that my parents gave me those opportunities in the beginning when I couldn’t comprehend what my disability was or how it would affect me. By the time I was able to I could take control of that.”

When it comes to being a broker, Scott says there are many similarities between broking and being an athlete.

“They are both similar in that you get back exactly what you put in. You can really only succeed if you have built a solid foundation in your training and have a really good support team behind you.

“I can see broking will also give me a life after sport. Right now, the best thing about being a broker with Aussie is that it gives me the support and flexibility to train for the Paralympics while also being able to work as part of a dedicated team of professionals.”

Scott says the event that stands out from the rest was the London Games. Not only because of his wins but because he had the rare chance to receive his medal with both his parents standing right in front of him.

“When I received my medal, I remember looking up and I looked straight at my parents in the eye.

I don’t think many athletes would have had that experience. That’s why London is so special, not only because of the crowd but because I got to share that moment so closely with my parents.”

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CAUGHT ON CAMERA Suncorp Bank recently hosted its first SMS Masterclass, which drew more than 300 brokers for an intensive, interactive workshop with the bank’s national small business manager Robynne Frost.

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PEOPLE HOT SEAT

REECE HOGAN Mortgage Choice broker Reece Hogan made the career jump from free-to-air TV to mortgage broking Who or what inspired you to become a mortgage broker?

I’d essentially carved a successful career in advertising working in A free-to-air television. There was no better industry to work in during the heady days of TV. However, the landscape has changed dramatically with the onset of digital and, to be frank, the future is uncertain to say the least. I spent a period soul searching as to what I wanted to spend the rest of my working life doing, knowing I still had much to contribute. I’ve always wanted to run my own business and I wanted to put my energies into an area where my skill set would transfer easily. Mortgage broking provided that opportunity for me. Naturally, there was much to learn and that’s ongoing so it’s been a significant challenge. But the concept of putting the customer at the centre of all your decision-making, whilst staying profitable, is as vital in mortgage broking as it is in media.

Q

What do you think will be the biggest innovation or disruption in the mortgage industry in 2016?

Futurists have identified a number of industries that will be obsolete A in 50 years and financial services is about number three on the list.

But I’m more optimistic than that because the underlying purpose of a mortgage is generally a deeply emotional experience for the consumer. At the risk of sounding clichéd, safety is the most basic of human needs and a home provides the shelter we require to exist, not to mention the fulfilment of the great Australian dream. So people generally like their hand held through that experience, whether that be by a mortgage broker or directly with the lender. I’m sure someone, one day, will find an algorithm to satisfy that human need, but I feel it’s still a long way away.

Q

If you were the head of the MFAA or FBAA, what would be your first priority?

If I was the head of the MFAA or FBAA my biggest priority would A be to ensure the mortgage broking industry is front and square in regard to any potential legislative changes affecting our industry. And that gets back to disruptive technologies that have the potential to affect our industry. Governments need to ensure these technologies provide benefits for the consumer.

And the MFAA and FBAA need to ensure we’re on the right side of the ledger in regard to harnessing these technologies.

Q

If you could have dinner with any three people (dead or alive), who would they be and why?

I’m a bit of a movie buff and I enjoy a A good comedy. Anything with Will Farrell has me in stitches. I’ve enjoyed observing the Clintons over their political careers and the fact Hillary is on the brink of achieving what no woman before her has achieved is an honour to witness. And Einstein has always intrigued me. Not only was he a genius, but having read a fair bit about him he seemed like a genuine and good fun person. So a bit of politics with Hillary, some intellect from Einstein and a few laughs with Will would make for an excellent dinner.

Q

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