Australian Broker magazine Issue 8.03

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ISSUE 8.03 February 2011

Franchises mull ‘no go fee’ first step

Chris Acret

 Commission

reductions force the hand of the industry’s largest players The mortgage market’s largest franchises are considering the introduction of a refundable ‘no go

fee’ for customers, as a first step in the transition towards fully fledged fee-for-service.

In what would be a fundamental change to the market’s free service offering in Australia, both Smartline and Mortgage Choice have confirmed the fees are currently being considered.

Symond on CBA

One other major franchise is also understood to be consulting with its members on the issue.

A ‘no go fee’ would seek to reimburse brokers for the time and out-of-pocket expenses incurred in the event that a client qualifies for a loan but elects not to proceed with the broker. If the client does proceed, then the fee would be refunded upon settlement.

Mortgage Choice CEO Michael Russell told Australian Broker this fee model is in the group’s “line of sight”. Likewise, Smartline managing director Chris Acret has said that the introduction of such a fee would be considered “over the course of this year”.

However, both groups have refrained from committing to the introduction of a fee, or suggesting a timeframe. Russell ruled out the no go fee in the short term, while Acret said the group would prefer to “tread carefully” on the issue, rather than rush into it.

Broking franchises have, like independent broking businesses, come under revenue pressure due to commission reductions from lenders following the global financial crisis.

Given this contraction in lender commissions, Russell said it is “commercially inevitable that the industry will need to charge a fee for advice at some future point in time”. Acret agrees brokers should be adequately reimbursed for their advice and time in cases where a client does not proceed with a loan Page 16 cont.

>>

‘Aussie John’ defends GFCinduced stake and Aussie’s independence Page 2

>>

Planners eye broking

ACLs give financial planners a foothold in the mortgage market Page 4

>>

Feasting amid famine

Top brokers celebrate while industry faces unhappy new year Page 6

>>

Inside this issue Analysis 18 LVRs on the rise Viewpoint 20 Online revolution examined Opinion 22 Why CPD is no chore Insight 24 Holding your own on the phone Market talk 26 The real state of affordability Caught on camera 29 nMB gathers for national conference Insider 30 Bonnie Doon “Castle” under hammer

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News Symond defends CBA’s Aussie stake Aussie’s executive director John Symond has defended the sale of a 33% stake in Aussie to CBA during the financial crisis, saying that adapting to this change at the right time in the market was required for the group to grow.

Speaking at the Mortgage Processing Summit in Sydney in mid-February, Symond said that he has “always been fiercely and aggressively independent”.

“If someone had asked me three years ago, could I ever see a big bank being on our share registry, I would have laughed at them – I would have said no way – what are you smoking?” Symond said CBA was an even more unlikely partner, as “they were the bank we went head on with for our first six or seven years – blood and guts”.

However, Symond said had he not adapted to this change, he would not have been able to grow the business to the same extent through the financial crisis.

“When the GFC was in its early stages no one knew what the outcome was going to be other than there was going to be a lot of devastation, and notwithstanding that our business was very profitable and that we’d get through it, I’ve always believed that when times are uncertain, that’s the time to grow,” Symond explained.

“The Commonwealth Bank was very keen – they approached me about taking a position – but we had to make sure that it was a position that wasn’t going to stifle our ability to compete, our

Broking to become ‘young person’s’ industry Mortgage broking will become a “young person’s” industry within 10 years due to the increasing impact of technology, according to John Symond.

In a recent speech on innovation, Symond said that the next few years will involve “radical” changes to the market, and one of these will be the impact of technology. “We are going to see unbelievable changes in technology,” Symond said. “I often say to my people, that mortgage broking over the next three, five, or 10 years will be a young person’s industry, because it’s going to revolve around technology and stellar personal service.” He predicted the non-bank sector would also become the abode of youth, while online direct mortgage sales would grow. “I’m predicting that the direct channel – which Aussie hasn’t got at the moment but we will have – the direct channel to consumers is going to have to happen to get costs down.”

EDITOR Ben Abbott COPY & FEATURES JOURNALIST Adam Smith PRODUCTION EDITORS Carolin Wun, Moira Daniels ART & PRODUCTION

John Symond

licence doesn’t mean ASIC won’t knock on your door,” he commented.

Brokers must now begin the task of becoming credit advisors, and assuring NCCP compliance for every customer interaction. “I’m surprised more people haven’t moved into the new role of credit advisors. Brokers are now making credit decisions on the customer’s behalf. We can’t just write loans and assume the job is done.”

The upside of licensing, Foley remarked, is the positive perception

DESIGNERS Lucila Lamas, Doug Jeans SALES & MARKETING

ability to criticise, our ability to deal with other banks and institutions, and they agreed to it all,” he said.

The result of the 33% sale was a “quick payback”, according to Symond, as it allowed Aussie to snap up Wizard Home Loans.

“They [CBA] said yes we’ll stick by you, which enabled us to go and buy the Wizard business and distribution, because we wanted scale, and we weren’t big on shopfronts,” Symond said. “GE paid close to $500m for Wizard four years earlier, and we got it at a discount of 95%.”

Symond added that it is hard to grow market share and recruit good people when things are “going gangbusters”, so “when there is uncertainty, that is the time to act” providing there are strong foundations in place. For views on direct mortgage sales, see Viewpoint on page 20

Challenges still to come, says Foley Brokers have been warned not to rest easy in the fact they have filed for or received their licences.

National Mortgage Brokers MD Gerald Foley has told the group at its annual conference in midFebruary that ongoing compliance will be the challenge for 2011.

“On licensing, the real work does begin now. We’re really just at the starting line,” he said.

According to Foley, brokers can expect ASIC audits in the year ahead. “The fact that you’ve got your

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it will create among borrowers.

“Licensing has raised awareness of brokers among customers,” he said.

Foley also Gerald Foley predicted financial planners would further cut in on the broker marketplace in 2011. To alleviate this, Foley suggested brokers contact financial planners with whom they have a relationship and set up a referral arrangement.

SALES MANAGER Simon Kerslake ACCOUNT MANAGER Rajan Khatak SENIOR MARKETING EXECUTIVE Kerry Buckley MARKETING EXECUTIVE Anna Keane COMMUNICATIONS EXECUTIVE Claire Costigan TRAFFIC MANAGER Jessica Jazic CORPORATE DIRECTORS Mike Shipley, Claire Preen MANAGING EDITOR George Walmsley PUBLISHING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil

Editorial enquiries Ben Abbott tel: +61 2 8437 4716 ben.abbott@keymedia.com.au Advertising sales Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media www.keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto www.brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor.

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

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

This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

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ACLs will give planners a mortgage foothold Financial planners are expected to heat up competition in the mortgage broking field in the near future, following the actions of many mid- to large-sized planning groups applying for Australian Credit Licences.

The Financial Planning Association’s policy and government relations general manager, Dante de Gori, said that a 2008/09 survey of the professional association’s membership showed that 35% were involved or intended to get involved in mortgage broking.

However, he said the transition to the ACL regime had provided recent “impetus” for an increased planning representation in the field. Financial planners were also looking for new revenue streams, following a legislated industry move to fee-for-service by 2012.

“There would have been a real push this financial year with the credit licence changes, so we would

expect an increase,” he said.

De Gori said that planners advised on debt as part of the normal course of their advice, and this had forced groups to apply for ACLs under NCCP to ensure compliance with the new legislation.

Though the initial purpose may be to ensure compliance, De Gori said these licensees may have a more long-term view of expanding their services and exploring the opportunities presented by that licence.

De Gori expects the main movers into mortgage broking will be the mid- to large-sized financial planning groups who have applied for ACLs out of risk management necessity, rather than one-man bands, who are unlikely to see the move as a priority for their businesses.

However, he said the FPA’s membership consists of a range of business models that often combine aspects of financial

planning with tax advice and accounting, as well as mortgage broking, with advisors increasingly aiming to cater for a client’s full spectrum of advice needs.

Financial planning is currently moving towards a compulsory industry fee-for-service model as a result of the Future of Financial Advice reforms announced in 2010

by the former minister for financial services and superannuation Chris Bowen, which will see commissions banned by 2012.

De Gori said planners would be considering the commissions still available in the mortgage broking field as a way to diversify their revenue streams and businesses, though he said it would not be an “inundation” of planners.

Trainer tips one-stop shop future Mortgage brokers have an opportunity to become a client’s main point of contact for personal financial advice if they re-skill and re-educate themselves in the new legislative environment, a leading trainer claims.

Jeff Mazzini, managing director of MFAA-approved trainer AAMC Training Group, said there is a growing convergence between financial services advice Jeff Mazzini professionals. Mazzini said the future would be one of one-stop shops, where clients could access a range of financial services needs – including mortgages and loans – through one advice professional.

“I think it’s a great opportunity for brokers. It’s a big opportunity to reskill, retool and re-educate, and rise to a higher level,” Mazzini said.

ASIC investigation sends ponzi broker to prison As part of ASIC’s bid to crack down on rogue operators in the mortgage broking industry, a Victorian broker has been sentenced to four years and nine months in prison after pleading guilty to running a ponzi scheme.

Hazel Bucello, who pleaded guilty in March to five counts of obtaining property by deception and one count of obtaining financial advantage by deception, was the sole director of Victorian Finance Broking Services in Kew.

An ASIC investigation found that between 2004 and 2006, Bucello gained five investors who pumped $2.5m into a fund Bucello told them would provide bridging finance for other clients. The investors were promised a return of 4–5% interest per month.

Bucello, however, used the investors’ own funds to make interest payments to them, while using their capital to meet her company’s financial obligations and for her own purposes. None of

the investors’ capital was repaid, while investors who came on board with the scheme later received less money in interest payments than those who first joined.

Bucello was sentenced to serve a minimum of two-and-ahalf years in prison, and has been ordered to pay more than $1.2m in restitution.

ASIC has recently become the government’s watchdog over the credit industry, and has been

actively undertaking surveillance activity since last October to enforce its new powers over mortgage brokers.

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Floods submerge mortgage market in January

January was the worst month for the Australian mortgage market since 2004, according to the latest figures from aggregator AFG, being a direct result of Queensland’s devastating floods.

The $1.3bn in loans processed

by AFG in the first month of 2011 was 40% below the average monthly volume that was recorded in 2010, and is the worst total since the launch of its Mortgage Index in 2004.

Queensland was the hardest hit state, with the number of mortgages processed only 48.9% that of December last year.

However, other states were similarly subdued, with monthon-month sales down 39.6% in Victoria, 33.6% in South Australia, 31.8% in NSW and 28.6% in WA. AFG executive director Kevin Matthews said the negative impact of the floods on mortgage volumes was expected, and that in times of national crisis, “people

hunker down and put off major buying decisions”.

“The flooding in Queensland is a human tragedy of major proportions,” Matthews said.

“As we may have expected, the floods have dealt a significant blow to the local property market. But the disaster has affected sentiment across the whole country.”

Matthews continued to say that

consumer confidence was also being hit by “huge discrepancies between so-called experts on where property markets are heading”.

Despite the gloom, AFG’s Mortgage Index showed a slight spike in first homebuyer activity when compared to previous months, claiming a 14.1% share of new mortgages, up from 11.4% in December.

Unhappy new year: AFG’s mortgage findings Month

Total number

Total amount

Average size

Property First-time Refinance investors buyers

Jan 10

4,426

$1,547m

$349k

33.7%

12.9%

36.2%

July 10

5,698

$2,111m

$370k

33.6%

11.1%

39.4%

Dec 10

5,472

$2,076m

$379k

35.5%

11.4%

41.5%

Jan 11

3,583

$1,310m

$365k

34.7%

14.1%

36.1%

Top brokers feasting amid famine Some of the industry’s best mortgage brokers have just finished a bumper month of January, despite the impact of flooding and recently released figures which suggest the month was the worst in the industry’s history since 2004.

Earlier this week, AFG released its Mortgage Index for January, which found loans processed during the month were 40% below the average monthly volume recorded in 2010, and the worst total since 2004.

However, Troy Cameron from Stratique Finance in Wembley, Western Australia, and Ed Nixon from Trilogy Investment Property Funding in the ACT, both managed to achieve busy months in January, bucking the current pall hanging over the economy.

“We’ve had a bloody crazy January. I’m still trying to catch up with the amount of volume that

we did. It was an insane month,” Cameron said.

Much of Cameron’s January business came as a result of refinancing enquiries, following last year’s round of interest rate rises from the major banks.

“There were a lot of new enquiries from clients saying ‘I’m sick of the majors, I want to start to have a look around’, so we have been doing quite a few reviews,” he said.

Cameron said his business had benefited from clients starting the new year with “their mind set that they want to do something”.

“January, February and March tend to be really crazy times for us.

We don’t do any marketing or advertising; all our business comes from word of mouth,” he said.

“A lot of clients talk to friends over the Christmas break, and that’s where most of our business has come from. Over that

Christmas period is when people take the time to think about what they want to do in the next year.

And they think ‘well, I’m not going to wait for another 12 months, I’m going to do something about it right now’.”

Cameron said the Perth investor ‘buyer’s market’ was also generating activity for the business, which added to the January boost.

Nixon said January is typically the month that he encourages staff to take annual leave as it’s always “dead quiet” – but not this year.

“We took a lot of enquiries and wrote just above average month in lodgments,” Nixon said.

Nixon puts this down to the company undergoing marketing that started four months before seeing these January applications.

“We did some calculated marketing in September, October, November and December, to see if

we could have a strong January for the first time in eight years.

It worked,” he said.

Despite the general downward impact of flooding on the economy, both Cameron and Nixon are expecting a similarly good month in February.

“I’m finding the market at the moment is either feast or famine.

You are either really busy and writing great volumes or you are not,” Cameron said.

“We put that down to being strategy focused and relationship focused, rather than product focused,” he said.

Nixon said forward marketing is key to generating business in slow months. “Business might sometimes just come through the phones and by referral, but you cannot expect that to happen each month,” he said. “I only wish it was as easy as focusing on the month and having it all happen then.”

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Connective hits all-time settlement record Aggregator Connective had a bumper December 2010, with settlements valued at over $966m.

Connective principal Mark Haron put the record figure down to December being a traditionally busy month, 2010 growth in its broker numbers, and the hard work of its broker members.

“While there is no shortage of challenges in the current market, there are also plenty of opportunities for proactive and focused brokers to write business, and our December figures demonstrate this,” Haron said.

Haron told AB that the group experienced an average growth of

30 brokers a month during the calendar year 2010, with current numbers sitting at just over 1,200.

However, the record would have been based on its 1,050 head count in September, due to the lag in loans achieving settlement.

Haron said brokers were also distracted by licensing during December, which means the group is positioned well to crack the $1bn mark this year when brokers give business their full attention. “Our broker numbers continue to grow and we believe we can reach the $1bn milestone in 2011.”

Connective is hoping to exceed its record in March this year, after

onnective’s Top 5 lenders by volume – C Dec 2010 Bank

Loan amount

a traditionally flatter January and February. However, Haron warned the market is softer, which could stymie the efforts of brokers.

The aggregator has revealed that Westpac continues to lead the major banks among Connective brokers in 2010, with the lender doubling the size of its loan book with Connective over the past 12 months. The Westpac loan book now sits in excess of $4bn.

Connective unveiled a number of improvements and tech upgrades to its member brokers at its conference late last year. At the time, Connective principal Glenn Lees spoke about the future of IT

and the need for intermediaries to utilise the latest programs to best serve their clients.

Chief among the announcements was an upgrading of its mortgagebroking software Mercury to give advisors further benefits. A range of template documents needed for issue to customers during the advice process are now available and can be customised with brokers’ company logos. Lees made note of the security of the data management, highlighting that it was virtually impossible for any confidential client information to be accessed given the encryption techniques used.

onnective’s settlement values by month C (July–Dec 2010) July

$823,439,494

Westpac

$192,288,363

August

$805,096,034

ANZ

$178,623,600

September

$748,195,173

NAB/Homeside

$181,421,748

October

CBA

$118,372,631

November

$842,835,362

$67,753,658

December

$966,073,191

Bankwest

$741,771,178

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Homebuyer caution turns critical as cost of living surges A new survey from Homeloans Ltd has found that 45% of Australian homebuyers plan to delay purchasing property in 2011 due to interest rate worries and cost of living concerns.

The Homeloans Home Buyer Barometer, which surveyed 2,000 first homebuyers, homeowners and property investors, also found that of the respondents who planned to delay property purchases, 74% have reconsidered the amount they are willing to spend and 52% plan to save for a larger deposit.

Homeloans CEO Tim Holmes said the consumer caution indicated by the survey was due to a range of economic factors.

“There are now so many variables which have a profound effect on the Australian economy and consumer confidence, such as the recent floods and the justannounced flood levy tax. These obviously create some uncertainty,” Holmes remarked.

In light of the Reserve Bank’s decision earlier this month to leave rates untouched, most analysts are predicting a freeze for the first half of 2011. However, Holmes stated consumers are still cautious about the prospect of further rate rises making mortgage repayments unsustainable.

“Mortgage repayments account for a substantial portion of household income, and the risk of such repayments becoming unaffordable – whether that’s due to rising interest rates, an

Homebuyers: Will you delay purchasing property in 2011 due to rising interest rates?

Yes No

Source: Homeloans

increase in other living expenses, change in employment circumstances, or other factors – is something that all borrowers must consider,” he said.

Holmes’ comments have been echoed by a recent JPMorgan survey, which indicated cost of living concerns for Australians could skyrocket should the RBA choose to tighten on interest rates.

The report predicts the Reserve Bank’s trend of rate hikes is “far from over”. JPMorgan has claimed the high level of household debt relative to income leaves Australians disproportionately exposed to rate rises, and that the trend of rate hikes could be further exacerbated by surges in fuel, produce and electricity prices over the year ahead.

Will you delay other major financial purchases in 2011?

Yes No

Brokers ‘pivotal’ amid consumer ignorance Only 7% of mortgage industry professionals believe mortgage borrowers have gained significant product knowledge before taking out a loan, through conducting thorough research and gaining information on available options in the market.

A survey conducted by mortgage insurer QBE LMI of 1,000 mortgage industry professionals found that 25% of respondents said borrowers had very little knowledge, while most respondents – 67% – agreed that borrowers had “some knowledge” on products.

In a boon for brokers, the Mortgage Opinion Survey rated them the top source of borrower knowledge and information on residential loans, closely followed by lenders direct, family and friends, and online forums.

QBE LMI CEO Ian Graham said the results indicated brokers play a “pivotal role” in the mortgage market.

“Borrowers are relying on mortgage brokers to guide them through the mortgage application process and assist them in finding an appropriate home loan to meet their needs,” he said.

Respondents, who included representatives from banks, non-banks, brokers and mortgage managers, said borrower knowledge was being changed by

Ian Graham

the impact of the internet and media, though they still lacked comprehensive product knowledge.

QBE LMI said that many respondents indicated consumers were increasingly obsessed by lowest interest rates, rather than the whole product package.

On other topics, the survey found the industry expects mortgage lending to grow steadily, with 44% expecting volumes to increase by 10– 20% during 2011, with a further 8% expecting an increase over 20%.

Consumer confidence was expected by industry participants to either remain the same or increase, with 41% expecting a slight improvement, and 23% expecting consumer confidence levels to remain the same. Thirty one per cent expected a decrease.

Variable rate loans reign supreme QBE LMI’s Mortgage Opinion Survey suggests variable rate home loans will continue to be preferred in 2011, with the majority of respondents agreeing this product will be the top choice among borrowers, followed by pro packs and fixed rate loans. QBE LMI CEO Ian Graham said variable rate home loans usually provide options and flexibility, but they can ride the swings and roundabouts of interest rate movements. “The choice of loan will often be determined by the borrower’s situation and financial priorities,” he said. “It is difficult for borrowers to make decisions about the long-term direction for interest rates – so a borrower’s choice needs to be made with their own financial goals in mind.”

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Rising rents a boon for brokers, investors Rising rental prices could spell opportunity for both brokers and investors, one broker has said.

MPA Top 100 Broker Lisa Sanders, director of Gold Coastbased Loan Management Services, said recently released RP Data numbers showing a 7% rise in unit rental prices and a 4.3% rise for house rental prices for the year could be good news for brokers and those looking to enter the property market.

As the monetary gap between mortgage and rent payments closes and house prices stagnate, some renters may be well positioned to enter the property market, she said.

“It will depend on the area and affordability, however, for those wanting to enter the housing market there are certainly a lot of good opportunities, especially with the current property market being flat or at the bottom in some areas,” Sanders commented.

Sanders said brokers can help renters decide if a move into home ownership will benefit them.

“It is always eye-catching to a consumer to see weekly costs versus interest rates. This allows the clients to run the numbers on the spot,” she remarked.

While RP Data figures showed a relatively flat quarter for rental prices in some areas of the country, RP Data’s Tim Lawless said the sluggishness is expected to be seasonal, and rents most likely to continue on the trend which has

seen a 45% increase over the past five years. Likewise, AMP senior economist Andrew Wilson has predicted significant growth for unit and housing rentals should return by mid-year.

Sanders said rising rental costs mean many borrowers could be well positioned to enter the investment property market.

“Some areas are at the bottom of the market or just recovering, so

property investors can pick up a fantastic bargain and capitalise on the increase in rental return at the same time,” she said.

“Our business model is based on repeat buyers. We are currently doing a review of all our existing clients’ portfolios and arming them with the tools and information that allow them to understand how to maximise their equity to further build their portfolio.”

Capital city rental growth Houses

Units

Median rent

Quarterly change

Annual change

Five-yr change

Median rent

Quarterly change

Annual change

Five-yr change

Sydney

$450

0.0%

0.0%

28.6%

$425

0.0%

3.7%

32.8%

Melbourne

$360

2.9%

2.9%

41.2%

$350

1.4%

6.1%

52.2%

Brisbane

$365

1.4%

1.4%

37.7%

$350

0.0%

0.0%

40.0%

Adelaide

$325

1.6%

4.8%

30.0%

$285

1.8%

5.6%

46.2%

Perth

$385

1.3%

1.3%

60.4%

$330

0.0%

0.0%

69.2%

Hobart

$335

3.1%

3.1%

n.a

$285

3.6%

5.6%

n.a.

Darwin

$520

0.0%

0.0%

48.6%

$430

0.0%

0.0%

53.6%

Canberra

$490

0.0%

4.3%

44.1%

$420

2.4%

7.0%

44.8%

City

Source: RP Data

Industry applauds new year RBA rate freeze Brokers and industry bodies have praised the Reserve Bank’s decision in February to leave the official cash rate untouched, while cautioning against future rises.

In its statement, the RBA said it was satisfied with the underlying inflation, and believed the inflationary impacts of widespread flooding would be negligible.

Loan Market chief operating officer Dean Rushton applauded the decision, and urged the bank to resist any rate hikes in the immediate future.

“It is understandable that the RBA has resisted increasing rates this month, with the nation trying to recover from natural disasters in Queensland and Victoria.

“The RBA could do a lot to restore consumer confidence by remaining on the sidelines, at least for the first half of this year,” Rushton said.

MFAA chief executive Phil Naylor expressed optimism at the Reserve Bank’s outlook.

“It looks like the RBA is saying that for the time being the inflation outlook is benign, and therefore we are entitled to expect that the cash rate will be on hold for many months, maybe most of 2011,” Naylor said.

Mortgage Choice spokesperson Kristy Sheppard, however, said she is not as confident the Reserve Bank will leave rates untouched for the entire year.

“The RBA has been looking medium term rather than focusing on the immediate future so I wouldn’t be surprised if we see one or two pre-emptive cash rate rises later this year,” she said.

“Leaving the flood effect out of the equation, Australia continues to have low unemployment and is facing a resources boom, which pushes wages growth and improves consumer and business confidence. Hence, we are still looking at strong inflationary pressures for the medium term.

“Regardless, we’d be delighted to see the cash rate remain on hold for the entire year to help improve the housing finance market,” said Sheppard. And despite the RBA

decision, she said out-of-cycle rate rises cannot be ruled out.

“I hope lenders don’t make further out-of-cycle rate moves, but it is always possible, and more likely these days now that the link between the cash rate and variable interest rates is loosening,” Sheppard commented.

“Many lenders’ longer-term funding costs are still rising, albeit slowly, which could result in them moving independently of the Reserve Bank decisions.

“Borrowers should be aware of this and watch their lender closely to see what moves it makes. Any lender that makes the first move will suffer a heavy blow to its reputation,” she said.

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Aussie economists defend current housing heat Leading economists from two of Australia’s biggest banks have defended the Australian housing market, in the face of continued international predictions of a potential dire downturn in average house prices.

Westpac global head of economic research, Bill Evans, and Paul Braddick, head of property and financial system research at ANZ, have both argued that while prices have entered a period of slower growth, no immediate serious correction in prices is likely.

Speaking at the Mortgage Processing Summit in Sydney in February, Evans said that international investors were often concerned when comparing the recent trajectory of Australian house prices with those of the UK and US, which experienced considerable corrections during the financial crisis.

Evans said that the unemotional investor overseas would think “it’s only a matter of time” until Australia experienced a

comparable correction, and that from an international perspective this was a “not unreasonable argument”.

However, Evans said that such projections were erroneous because they were based on “exaggerated” house price-to-income ratios, which place Australia’s ratios among the highest in the world. Evans said such figures are biased, as they don’t account for the many dwellings in Australia that are apartments, which are cheaper and more affordable, particularly when combining two incomes.

Evans said Australia also has a “huge imbalance” between underlying demand and supply, due to population growth and a shortage of dwelling stock, which would further support the market in future.

Evans acknowledged the housing market had entered a “dismal” period of growth, and expects the impact of a slow down in house price appreciation will last for some time. However, he said while Australia was not

immune from big cyclical corrections, current conditions did not indicate this.

ANZ’s Braddick said the biggest constraint on recognised “subdued” house price growth in the current market was affordability, and said ANZ was predicting Reserve Bank rate rises of 100 basis points over the next 18 months, which he expects will keep a cap on house prices.

However, he said any forced selling from mortgage holders would remain at the very margins of the market, as continued economic growth and low unemployment would ensure its continued strength.

Evans was more subdued in his predictions of interest rate rises in the coming year, arguing that he foresees only one rate rise before the end of the year, and is even “toying” with the idea of calling no rate rises at all. While the market had priced in two rate rises and the RBA had indicated it would seek to raise rates, Evans said it was unlikely they would receive the excuse to do so.

Both economists said the mortgage industry would have to adapt to much lower volumes than they were used to over the past few years, with credit growth of between 5% and 7% for some years to come.

Rate rise threat real: Bankwest A senior economist has predicted three rate rises for 2011, in spite of the RBA’s decision at its February meeting to leave rates on hold. Tim Crawford, senior analyst for Bankwest, has predicted the official cash rate will climb 75 basis points to 5.5% by the end of the year. “The Reserve Bank will be showing restraint in the near term, but we see a longer-term trend of higher inflation on the back of higher wages,” Crawford told the National Mortgage Brokers conference in Melbourne. He predicted the rate rise could take place any time after the first quarter. “Any time from April is possible,” he commented.

12 www.brokernews.com.au

News

For all the latest mortgage industry news, visit www.brokernews.com.au

Brokers urged to renew their sales techniques Leading Australian sales trainer Peter McKeon has said sales has entered a more authentic age, and mortgage brokers will need to refine their telephone sales techniques if they are to succeed in turning leads into clients over the phone.

McKeon, founder and managing director of industry leading Salesmasters International, told Australian Broker that “as the

world has shifted, so have all the sales processes”.

“There are principles on the telephone today that need to be in play that weren’t in play even as recently as three or four years ago,” he said.

McKeon, who does business with some of the largest selling organisations in Australia, said these businesses are aware of the

McKeon’s three telephone sales principles 1: Forget about making the sale Replace the traditional sales goal of “making the sale”, with the new goal of discovering the truth of this potential client’s situation, through engaging in a conversation 2: Stop defending yourself Stay on the front food with potential clients by not trying to be all things to all people. Don’t provide a knee-jerk list of benefits of using your business – move to authentic consulting 3: End the chasing game Don’t intrude on the personal lives of clients by endlessly following up.

Seek permission for follow-ups, and client buy-in for the next step of the sales process

shift, and that “the way that they have been doing it in the past simply doesn’t work.”

“People want more, expect more, and quite frankly deserve more, and if you don’t give them more – if you don’t give them a reason to meet you – you can guarantee that your competition will,” he said.

McKeon said brokers can start by letting go of the traditional sales goal of making the sale, or setting up a meeting, and replace it with the new goal of discovering the truth behind the potential client’s situation.

“Instead of ringing up and thinking I want to lock them into a mortgage, we should delete that out of our heads and think ‘I am going to make a telephone call to this person and discover what is the truth of the situation’,” he said.

A second principle is to “stop defending yourself”, McKeon argues, saying instead of having

the knee-jerk reaction of listing the benefits of the service being provided, brokers should instead take a more consultative approach, with the aim of having a conversation with a client.

“It’s very, very much just having an authentic and transparent conversation, and the more that you do that, the more aligned people are to you.”

McKeon said brokers should also end the “chasing game”. “In sales it’s like follow-up, follow-up, follow-up, until they buy or die,” he said.

However, McKeon said the best approach is to have a conversation with a potential client by gaining a client’s permission, rather than being seen as an intruder by following the more traditional sales techniques. For all of Peter McKeon’s advice on converting phone leads, see Insight on page 24

Fixed rate hunger eases in new year After four consecutive months of increases, the demand for fixed rate home loans appears to have steadied according to Mortgage Choice.

New data from the broker shows fixed rates accounted for 15.3% of all home loans it approved in January, as compared to 15.2% for December, 11.2% in November, 7.7% in October and 3.7% in September. While uptake for the loans increased by an average of 2.2% in most states, Queensland saw demand for fixed rates fall 2.9% while WA saw a decline of 2.8%.

Mortgage Choice spokesperson Kristy Sheppard indicated demand for the loans may have slowed due to a perception of greater interest rate stability.

“Australians’ appetite for fixed rate home loans has risen consistently over the past six months, but that pace slowed right down in January. One has to question whether the demand for this more conservative loan type has steadied now it looks likely that the next cash rate rise has been pushed back to mid-year or later,” Sheppard commented.

Sheppard remarked that the company saw the biggest demand growth for ongoing discount loans, which overtook basic variable loans as the second-most sought after loan. “Of all the mortgage types, ongoing discount loans – where the interest rate is discounted over the entire loan term usually in return for an annual fee – experienced the biggest increase in demand.

They accounted for 25.3% of our January approvals, having risen 8.4 percentage points in the last two months,” she said.

Standard variable rates continued to be the most popular

home loan, accounting for 30.7% of all approvals. Line of credit home loans saw a decline in popularity, to 4.8% of approvals from 5.4% in December. Introductory rate loans continued to be the least common, accounting for 0.24% of approvals.

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13

Lender BDMs face flat employment market Third party channel business development managers will continue to face the ‘standard’ market in evidence since the onset of the global financial crisis, with no ramp up in employment prospects or salaries in the sector expected by recruiters this year.

Nick Jones, sales and marketing manager for recruitment agency Robert Walters, said “there has not been a huge amount of new employment” in the third party BDM and relationship management arena, in contrast to banks’ business and corporate lending areas.

Jones said while employment was on the whole buoyant, the third party channel was not receiving any greater focus this year. “We would consider that new employment has been at a standard level over the last couple of years, and don’t expect an increase,” Jones said.

BDMs can continue to expect to get between $80,000 and $120,000 for base salaries, depending on their experience and their industry networks, though Jones said remuneration packages will continue to include large bonus components that depend on the amount of business the BDM achieves.

Jones said while the market spiked prior to the GFC, when large mortgage teams were looking to grow new products, as soon as the GFC hit many of these were rolled back.

He said over the last 12 months some had entered the market in the “soft sense”, but none have invested in a way that has impacted potential employment for BDMs. A recent global salary survey conducted

by Robert Walters found that banking and financial services institutions were expected to grow headcounts and increase salaries in 2011, due to improving market conditions following the financial crisis.

However, the survey suggested the majority of institutions would take a cautious approach to hiring and focus on recruiting quality rather than quantity.

Robert Walters’ Australian managing director James Nicholson said more candidates would also enter the market.

“We expect more professionals will be looking to pursue new opportunities in 2011, after putting their job search on hold during the global financial crisis. In particular, we predict that turnover in the Sydney market in early 2011 will be at some of the highest levels we have seen,” he said.

Savings trend could benefit brokers

A trend of increased savings in 2011 could have an upside for brokers, it has been claimed.

Loan Market chief operating officer Dean Rushton has commented that as households increasingly save due to wariness over the economy, pressure on interest rates could decrease. Rushton referred to a recent Loan Market survey which found 76% of respondents intend to increase their savings in 2011, while only

14% intend to refinance their home loan.

“It indicates that the short term environment will continue to be tough for lending but also that the RBA’s rate movements are having their desired effect which should take the pressure off rates in 2011,” Rushton commented.

According to Rushton, a freeze on interest rates could bolster consumer confidence in the months ahead, and that an increased emphasis on savings will mean more borrowers are positioned to enter the property market.

“A period of rate stability will bring more borrowers back into the market, and the medium term upside is that at the other side of the cycle borrowers will have a stronger savings and equity position.

First homebuyers in particular will return in 2011,” he predicted.

Rushton said brokers should take advantage of periods of interest rate stability to advise clients who may be geared toward savings about their financial options for the year ahead.

“There’s definitely opportunities with existing customers who are currently deleveraging to find out whether that changes their finance needs and what their next steps are. It’s also extremely important to stay in contact with prospects who may not have been in a position to act due to savings requirements, but are now assessing their options,” he said.

14 www.brokernews.com.au

News Real estate agents labelled unreliable referrers

A top sales coach has warned that brokers can no longer rely on real estate agents for referrals.

David James, principal of Salescoach (Australia), told brokers at the nMB national

conference in Melbourne that real estate agents are not a reliable source for leads anymore.

“Real estate agents have no idea and no respect for what you do, and we’re just not getting the referrals from them that we used to,” James commented.

Instead, James said brokers should seek out other opportunities in order to generate referrals. He remarked that brokers should build relationships with small businesses and seek out employees who may be considering a move into the property market.

“Get your foot in the door with a small business. It won’t be hard to see who’s thinking about buying a house. They’ll be on real estate

websites all day,” he remarked.

According to James, landing a client who works at a small business can lead to more referrals than brokers may see from real estate agents.

“You have another 20 potential buyers. It’s an opportunity to get more referrals,” James said.

James also commented that brokers should embrace social media as a networking tool, and use technology to generate their own leads.

“You should be databasing all your customers now,” he said. “If you’re not competitive and don’t start doing it now, you’re going to be competing with every other broker in your neck of the woods

for those customers.” According to James, brokers must adapt to the changing way that new generations communicate.

“I think the best thing I’ve bought in the last six months is an iPhone. That’s how this generation communicates. There’s a big opportunity in thinking the way your clients think.”

However, James warned against becoming overly reliant on technology and losing personal contact with clients.

“E-marketing is fantastic, but I think it’s made us lazy. You didn’t get into this business to send out email newsletters. You came into it because you’re a likeable person.

Don’t hide behind screens.”

Interest rates will dictate home values: RP Data

Christopher Joye

Australian dwelling values saw a slight rise for December, according to RP Data-Rismark. The RP Data-Rismark Hedonic Home Value Index showed a climb of 0.4% seasonally adjusted over the

December quarter, with a 4.7% rise over the year.

The index shows that the housing market in Australian capital cities peaked in May of last year. Over 2010, Melbourne and Sydney saw the most significant rises of 8.4% and 6.6% respectively. Perth saw values drop 2.4% while home values declined 1.0% in Brisbane.

According to Rismark managing director Christopher Joye, aggressive interest rate moves over 2010 were responsible for the weak result.

“The RBA’s four interest rate hikes in 2010, which were topped up by a fifth via the banks, conspired to snuffle out capital growth during the remainder of the year,” Joye said.

RP Data director of research Tim Lawless believes the growth of the housing market over 2011 will hinge on interest rates.

“If borrowers only have to wear one rate hike between now and

March 2012, Australian dwelling values have a good chance of realising higher-than-expected capital gains. If, however, the RBA raises rates several times in 2011, we think dwelling values will struggle to obtain much forward momentum over the year,” Lawless said.

However, ANZ senior economist Ange Montalti believes a buyer’s market created by flat prices could present an opportunity for brokers to help property investors move into the market.

“In my view, it probably is a good time to get set,” he remarked.

While a buyer’s market presents opportunities, though, Montalti commented it will come with its own risks.

“The risks are that flatness lingers. The rental markets may not tighten as soon as expected.

If you believe this is a risk, then there’s probably no rush to get in,” Montalti said.

Whether or not the market remains flat, Montalti stated it is not expected to experience significant declines any time soon. “We have pretty much discounted major falls in house prices now.”

A buyer’s market …

RP Data’s Tim Lawless has commented that flatlining home prices and auction clearance rates will give buyers the advantage at the outset of 2011.

“The selling environment is certainly less than ideal,” he said. “Prior to Christmas, auction clearance rates were bouncing around the high 40%s, the average time to sell was increasing and vendor discounting was also rising. There are fewer buyers and more stock to choose from which means it is well and truly a buyer’s market.”

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15

Commonwealth cops a beating from customers The Commonwealth Bank has again taken a beating from customers in the latest Roy Morgan Research Bank Customer Satisfaction Report. In further customer backlash over CBA’s decision to move first in the November round of out-of-cycle rate rises, the bank fell 17.4% in customer satisfaction over November and October.

The Roy Morgan poll showed satisfaction among CBA’s home loan customers fell to their lowest levels in five years. The result dropped Commonwealth Bank from second to third among the Big Four in terms of satisfaction, with only NAB performing worse. The other major banks were not immune to customer anger either, with ANZ falling 8.2% over the same period, Westpac posting a 7.6% drop and NAB declining 0.6%.

Roy Morgan communications director Norman Morris said CBA may find customer satisfaction levels lagging for some time.

“If the Westpac experience is anything to go by when they received bad publicity for their home loan rate increase at the end of 2009, it is likely to take some time for CBA satisfaction to recover. Westpac has yet to return to its November 2009 home loan customer satisfaction level, and

it is worth noting that the Westpac satisfaction decline at the time was also not as severe as we have seen for the CBA,” Morris said.

Morris commented that there was little doubt CBA’s move on rates was to blame for the dramatic slip in customer satisfaction.

“Looking more closely at the reasons for this decline by the CBA it becomes obvious that it is due to its above-market move in its home loan rate at the beginning of November 2010,” he remarked.

“In the six months up to October 2010, the satisfaction level of CBA home loan customers was 73.9% and since the interest rate increase in the beginning of November this year has declined to a 56.5% average for November and December, which is the lowest for any period over the last five years.”

Among the major banks, ANZ leads customer satisfaction at 76.6%, followed by Westpac at 74.3%, CBA at 73.5% and NAB at 71.7%. Credit unions and building societies continued to perform well, with Credit Union Australia snaring an 87.8% customer satisfaction rating and Heritage Building Society coming in at an enviable score of 90.9%.

Major bank customer satisfaction Dec 2010

Nov 10 – Dec 10

Sep 10 – Dec 10

June 10 – Dec 10

Dec 09 – Dec 10

ANZ

76.6%

↓ 0.2%

↓ 0.4%

↑1.1%

↑ 1.8%

Westpac

74.3%

↓ 0.1%

↑ 0.7%

↑ 3.7%

↑ 1.4%

CBA

73.5%

↓ 0.9%

↓ 1.6%

↓ 0.5%

↑ 1.5%

NAB

71.7%

↓ 1.0%

↓ 1.0%

↑ 0.2%

↑ 2.5%

Total Big Four

74%

↓ 0.6%

↓ 0.6%

↑ 0.7%

↑ 1.6%

NAB grows mortgage books amidst depositor exodus According to new figures released by APRA, NAB has bested its Big Four competitors in home loan growth for December.

The APRA statistics indicate NAB’s residential mortgage book grew by 1.3% in December, while ANZ saw 0.8% growth, Westpac increased 0.55% and CBA 0.2%. For the year to 2010, NAB posted 11.3% growth.

The result brings NAB’s loan share to $106.5bn in owner-occupied loans and $50.24bn in investment loans, though both Commonwealth and Westpac have larger overall mortgage books.

The APRA figures indicate NAB saw a 0.3% increase of market share for the mortgage sector, bringing its share to 15.4%. ANZ gained 0.4% to total 15.9% market share, while Westpac remained unchanged at 27.1%. CBA continued to experience consumer backlash over its highly-publicised out-of-cycle rate rise in November, dropping 0.9% in market share to 24.6%.

Despite growth in its mortgage portfolio, the APRA figures show NAB experienced a 1.8% drop in deposits, totalling a loss of $5bn. The fall has largely been blamed on the bank’s November technical fiasco which left thousands of NAB customers without access to their accounts. The bank last month suffered another breakdown which left telephone and internet banking unavailable for several hours. NAB’s deposit woes come as major banks compete for a larger slice of the deposit market to ease their reliance on overseas wholesale funding markets.

Second-tier and regional banks performed sluggishly over the year, with Bendigo and Adelaide Bank losing 0.36% of market share, and Bank of Queensland remaining largely unchanged. The results bring major bank market share of owneroccupied and investment loans to 83%.

However, second-tier lenders have seen a surge in the popularity of their home loan products, according to Stargate’s Product Review Index. The company’s January index saw the major banks experience a 20% decline in volume, while second-tier Bankwest increased enough to take second place in the index.

16 www.brokernews.com.au

News

For all the latest mortgage industry news, visit www.brokernews.com.au

Refinancing easier than most expect: RAMS

Justin Doobov

A new survey by RAMS Home Loans has identified that three out of four respondents found refinancing their home loan easier than expected.

The results follow a recent poll cont. from cover

>>

through a broker. “We would take the view that it is very fair and reasonable for the broker to earn some sort of fee in those circumstances.”

However, Acret said Smartline is “hastening slowly” on introducing a no go fee due to the complexity of the issue. “The complexity is in understanding when and under what circumstances it is reasonable to charge a fee, and how you introduce that,” Acret said. It would also mean a wholesale change to the existing broking model. “I think any fee is quite a fundamental change when you have had a free service proposition.”

The issue is also a “polarising” one for franchisees, Acret said.

“Many of our franchise owners are quite interested in it, but just as many don’t want to touch it with a barge pole. It is something that

by ING Direct which found that in spite of widespread consumer dissatisfaction with home loans, only 31% of mortgage holders were considering refinancing.

According to the RAMS survey, those who followed through on refinancing their home loans experienced positive outcomes in addition to merely reducing monthly payments.

“Some people are telling us they are happier, can sleep better at night, have fewer arguments with their partner and are generally experiencing a better quality of life,” RAMS chief executive Melos Sulicich said.

The survey has also painted a picture of refinance customers, finding that those most likely to refinance their mortgage are between the ages of 35 and 44, have incomes above $100,000, work full-time and have children.

It also indicates that married Australians are more likely to refinance their loans than singles.

Oxygen Home Loans general manager James Green believes many people avoid refinancing because of the associated costs.

“The main reason why people don’t refinance with us is due to either a change in their personal circumstance like their employment status, or due to fees such as LMI or break costs,” he remarked.

MPA Top 100 Broker Justin Doobov of Intelligent Finance said many borrowers may have misconceptions about the process of refinancing.

“The biggest misconception is that many new customers think that the main reason to refinance is to get a cheaper variable interest rate,” he said. “However, I believe the most important reason

creates very mixed feelings.” He said some brokers with strong client bases and very large loan books may not see it as a business imperative, and may instead regard it as a threat to their customer proposition. “Other brokers are thinking: ‘I’ve just spent all this time with the client.

I’ve done my job but I haven’t earned a cent for it.’”

Russell said moving towards fully fledged fee-for-service prematurely would put at risk the percentage of home loans being written in the third party channel, as consumers who are not sufficiently educated about the worth of a mortgage broker’s service will go direct to lenders.

“Unfortunately we are not yet sufficiently mature as an industry and as such need to undertake far more consumer awareness marketing to emphasise the value proposition,” he said.

Both brokerages have made it clear they expect any introduction

of a fee in their business models to come in addition to lender commissions, rather than replacing them.

“Mortgage Choice agrees with the MFAA that a fee should not be charged for the work undertaken in lodging a loan application for which we are paid by the lender,” Russell said. “On the other hand, the value of our advice in undertaking a prior and thorough needs analysis is easily monetised and should one day be recouped – but only when there is a general understanding of this value by consumers.” Acret said the introduction of new customers to lender clients is also valuable.

“Customer acquisition is incredibly expensive and valuable from the lender’s point of view – plus brokers are interviewing the customer, packaging the loan, submitting the loan and they are following it through.”

Acret said franchises will not have a business if they don’t match

to refinance is to get a better structured loan that is at a competitive interest rate. There is no point moving a loan to a cheaper lender and the new lender does not have the flexibility that the client needs, such as making extra lump sum payments, offset account, redraw or not have competitive fixed interest rates.”

In spite of an expected stall in the property market for 2011, Doobov does not believe refinancing will be the only opportunity for brokers in the year ahead.

“Refinancing will definitely count for a higher proportion of our loans this year. However, we still have many clients who we are getting pre-approved to buy properties as a sluggish property market will create great buying opportunities for our clients,” Doobov said.

Michael Russell

a “strong client proposition” with the success of their member brokers. As a result of commission reductions, Smartline has been forced to introduce other ways to boost revenues, such as a risk insurance product, as well as new efficiencies, like putting in place a group discounted PI policy.

Until a no go fee is introduced, it appears franchises will pursue these measures. “Sometimes it would make sense to take a small step rather than change completely,” Acret said.

18

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Analysis

Moving on up: LVRs on the rise LVRs at 95% and above have made a big comeback. Why the sudden demand and what will it mean for borrowers?

H

igh LVR loans seem to be blazing a trail back to the market as the GFC winds down.

What was once considered a risky venture for lenders is now becoming industry standard, with all four major banks setting LVRs at 92% or above, and non-banks and second-tiers such as ING Direct and National Finance Club upping their LVRs to 95%. Confidence seems to have returned to the lending market, with low-doc and non-conforming loans also seeing a comeback.

“The market seems more comfortable with what are viewed as higher LVR settings as compared to the past few years,” ING head of mortgage products Ray Esho said.

National Finance Club general manager Andrew Clouston has praised the return of the products, hailing them as a way for young buyers to enter the market sooner. “These are very competitive offers designed to help first homebuyers take that leap into home ownership sooner by requiring a smaller deposit.

“It will be a welcome move around the country as rising interest rates have had a significant impact on this section of the market,” Clouston said.

But what has driven the return of higher LVRs? MPA Top 100 Broker Gerard Tiffen of Tiffen & Co believes the return of these loans could be due to smaller lenders trying to increase their competitive standing as they return to the market. “I think it’s a market share move more than anything. With money loosening up a little, there are more players coming back into the game and this is driving competition,” Tiffen remarked.

Clouston believes the return of the loans signals a return of market confidence. “We believe confidence is returning post-GFC. As confidence has returned, the employment market and general economic conditions have also improved, and there is willingness by some lenders to increase credit risk appetite – not to pre-GFC levels, but to more balanced and sustainable levels. Also, following the surge in first homebuyers there had been a natural fall-off in first homebuyer loans in recent times, and lenders are now looking at ways to attract new customers from this market segment. An improved funding and margin environment has also enabled lenders to compete more assertively for loans in this market segment,” Clouston remarked.

However, Aussie Home Loans founder John Symond has warned borrowers to be wary of the loans. In October, Symond cautioned that though the return of high LVRs may seem enticing, they come with hidden costs.

“High LVRs can equal thousands of dollars in lenders mortgage insurance,” Symond remarked.

Another danger inherent in high LVRs, Symond believes, is the uncertainty of interest rate movements.

The higher the LVR, the less of a buffer the borrower has when rates go upward, Symond indicated.

“Having a high LVR also gives you less room to move, particularly if rates go up, and if housing values dip you may end up owing more than what your house is worth.”

With interest rates tipped to rise by as much as 100 basis points by year’s end, could high LVR borrowers find themselves at risk of being underwater, as Symond suggested? Clouston believes there are safeguards in place to avoid this.

“We do not believe this concern is warranted given that loan assessment rates are currently 200 basis points above current variable interest rates. On that basis the majority of borrowers, unless faced with an unforeseen life event, should find rate increases to be affordable within current economist predictions,” Clouston commented.

Furthermore, Tiffen said brokers should mitigate the risk of negative equity by advising borrowers to expect unforeseen circumstances.

“If I see a tight deal at the moment that would struggle if rates jumped half a per cent, I’m definitely advising them to fix a portion of it,” Tiffen said.

Credit Ombudsman Raj Venga said the loans may be suited well to some borrowers who have a large amount of assets tied up in investments such as shares, and, while they may not have cash for a deposit, would not face difficulty repaying the loan. However, he believes some borrowers attracted to high LVRs may not fit this profile.

“If a person can only get a loan at 100% LVR, I’d be a little worried,” Venga commented. In the best case scenario, he said the “not unsuitable” clause in NCCP regulations would mitigate borrowers being offered high LVRs if they are in danger of not being able to service their loan should interest rates or cost of living rise.

Though high LVRs are gaining in publicity, Tiffen believed they may not be easy deals for brokers to close.

He commented that the products are often harder to qualify for than advertised.

“Although the sales force or BDMs seem to be out driving sales and growth, you have most credit teams still assessing quite hard with strict guidelines,” he said.

“It seems the left hand and right hand may eventually need to chat. Although the banks are offering them, it doesn’t mean they’re available.”

 Big banks, big LVRs Westpac – 92% ANZ – 97% NAB – 95% Commonwealth Bank – 95%

Gerard Tiffen

Although the banks are offering them [high LVRs], it doesn’t mean they’re available

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19

INDUSTRY NEWS IN BRIEF Genworth faces ratings hit LMI provider Genworth may find its financial strength rating downgraded by Moody’s.

In February the ratings agency released a statement saying Moody’s will examine the rating in light of Genworth’s financial exposure to its US-based parent company. The review follows a $133.6m net operating loss for the US company in the fourth quarter of 2010.

“The review will focus on the degree to which Genworth Australia’s financial flexibility and business operations may be affected by weakness at its parent,” Moody’s vice-president and senior analyst Wing Chew said. The ratings agency has commented that losses in the US business could impact the stability of the company’s Australian business.

YBR launches term deposits Non-bank lender Yellow Brick Road has partnered with Gateway Credit Union to launch a term deposit product, making YBR the first non-bank in Australia to do so. YBR executive chairman Mark Bouris has pointed out that the company’s partnership with an ADI allows it to offer products with a government guarantee.

“As the first non-bank in Australia to offer term deposits, we’re continuing to close the gap between the big banks and independent lenders,” Bouris said. The product offering comes as other non-banks eye the ADI market. During the Senate inquiry into banking in December, non-bank FirstMac stated that it had been actively seeking access to an ADI licence.

NAB prepares UBank offering NAB has scheduled its frequently delayed online home loan offering through web banking arm UBank for the end of March, it has been reported. According to the Australian Financial Review, the bank has prepared the UHomeloan product for launch after technical glitches in NAB’s online banking system forced its delay.

The direct-marketed product is expected to launch with a discounted variable interest rate below 7%. Major banks have faced obstacles in the past with direct online mortgage sales.

Both Commonwealth Bank and ANZ cancelled their online home loan offerings. However, NAB’s group executive of personal banking Lisa Gray told the Australian Financial Review: “We’ve learnt a lot from overseas about what works and what doesn’t in online mortgages.”

Recovery six months and counting Australian Property Monitors has tipped the housing market will return to growth in the second half of 2011. In its December Quarterly Housing Report APM said the fundamentals of the property market remain sound and that a strong economy, rising incomes and an ongoing housing shortage would see a recovery in the second half of the year. “2011 will be a year of stabilisation and modest growth for most capital city housing markets, with Sydney in particular expected to lead with growth to begin by mid-year, particularly in the mid-range and top ends of the market,” APM senior economist Andrew Wilson said.

The predictions follow flat price growth in the December quarter, with APM figures showing 0.7% national growth for houses, and a 0.8% fall in prices for units. This put annual growth at 6%. Melbourne led national growth with a 14% increase in house prices during the year, and a 7% rate of growth for units.

NMC supports Intellitrain appeal National Mortgage Company has renewed its engagement with Intellitrain to provide staff

with mortgage broking qualifications via the Queensland-based training company, following a recently announced flood appeal. In January, Intellitrain committed to donating $50 from every Certificate IV and Diploma enrolment until the end of February, with the aim of raising a total of $10,000 to assist the victims of Queensland’s floods. “We are really pleased to know that by enrolling our latest group of employees we will be helping the Premiers Flood appeal,” NMC head of retail mortgages Jeff Chapman said. “We’ve already made our own contribution, but the ability to choose a training provider who is also supporting the appeal makes them that much more attractive.”

AFG signs up WA builder Mortgage broker Australian Finance Group has announced the signing of WA builder Summit Home Group as a client to provide mortgage products to prospective home buyers.

AFG WA state manager Alan Walker said the builder will form its own finance arm, Westgate Financial Services, which will “become a member group under AFG, employing its own financial specialists. We’re the aggregator.” He remarked that by providing integrated brokers, Summit would help customers and support the third party channel. “What Summit is doing is providing a holistic approach to its clients. In that way it may be enhancing the third party market because of the fact the customers are going through a broker.”

 Bankwest talks commercial property Bankwest has launched a continuing education initiative to educate brokers on the commercial property market. The second-tier lender said it will run regular education sessions as well as a national roadshow to help brokers. “We are seeing a greater number of brokers diversify from solely residential brokerage to commercial brokerage. As a lender we wish to support brokers in that transition,” Bankwest Aaron Milburn head of commercial broker sales Aaron Milburn said.

Milburn commented that as more brokers seek to diversify their income through entering the commercial market, more education will be needed to ensure the quality of loans being written.

“In order to support this trend we will provide platforms for regular contact and support. This will improve our relationships, speed-up deals through the system for both brokers and clients and improve the quality of those deals,” Milburn said.

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Comment VIEWPOINT

In last issue’s cover story, industry insiders predicted direct mortgage sales via the web could threaten brokers. We asked for reactions and more predictions regarding online sales

Allan Savins COO, RESIMAC

‘saves me from researching a range of lenders and loans myself’, while the number two was that ‘a professional broker is an expert in mortgage products, whereas I am not’.

To date, the predictions surrounding online application and fulfilment have failed to fizz and I for one wouldn’t advocate holding your breath waiting for this to change anytime soon.

Mark Hewitt sales and operations general manager, AFG

The internet has become an important medium for consumers, mainly in respect to researching home loan options, but increasingly to make enquiries or apply for a new loan. The younger generation of consumers have grown up using online tools such as Facebook and technologies like the iPhone; so it is expected that the next 10 years would see a marked increase in online mortgage distribution. To cater to this market, mortgage brokers will need to include the internet in their marketing mix, making it work for them rather than considering the internet as a form of competition.

Michael Russell CEO, Mortgage Choice

I’ll never forget that over 10 years ago mortgage brokers were issued a warning that consumers would soon be applying for their home loans online and that the percentage share of the mortgage broking industry would soon begin to subside. Every year since, the story makes it to the headlines, and every year… well you get the picture!

What we have seen is CBA close down Homepath, ANZ close down ANZ One Direct and Virgin Money close down its online home loan business.

The fact remains that while the internet is increasingly being used for the richness of its education and research avenues, consumers are still wanting to sit face to face with a home loan professional and take advantage of the pre- and post-care services these professionals so willingly provide. Mortgage brokers have a vested interest in the wellbeing of their customers. I’m not sure websites can replicate this care factor.

The Mortgage Choice 2010 Consumer Sentiment Survey completed in November 2010 found that the number one reason for why consumers used a mortgage broker was that it

can advise them and help them through the process. That’s why mortgage broking has thrived over the past 15 years.

If anything, getting a home loan is more difficult today than it was 20 years ago. There’s much more paperwork, the products are more complicated with more fine print and the NCCP is just going to add another layer to that.

Online mortgage applications will probably grow but we don’t see them transforming the market anytime soon.

What has changed is that with two out of three borrowers doing some form of research on the web, it’s critical for brokers to have an effective internet presence.

Ray Hair CEO, PLAN Australia

I don’t think the internet will play as big a role in the fulfilment of mortgage transactions as many people seem to think. AFG has seen major banks and other companies launch and subsequently close their mortgage internet operations because they failed to gain engagement with consumers. The fundamental reason for this is whilst people are increasingly willing to make comparably small ticket purchases and conduct research for things like mortgages over the internet, when it comes to major commitments like signing up for a mortgage, they want to talk to someone and look them in the eye.

The companies that can succeed in this space are those that already have the trust of their client base through other internet-based services, who staff their call centres with experienced brokers and have fulfilment staff on the ground to guide people through the process whilst satisfying NCCP obligations.

Chris Acret managing director, Smartline

I remember that there were predictions at least 12 years ago that mortgage brokers would become redundant as mortgages went online.

That hasn’t happened, with maybe 1% of all home loans currently arranged online. It’s our view that with a complex and important transaction, like arranging a mortgage, that the majority of people want to deal with someone that they can trust. Someone who

There has been some recent discussion on the adverse impact of online mortgage strategies on the future of mortgage brokers. And, like all competition, it is true that there will be some impact but I am confident online mortgage strategies are not the death knell of mortgage broking.

To date, online mortgage strategies have primarily delivered information to consumers and/or lead generation. Fulfilment online with respect to loan applications and the approval process has been cumbersome and time consuming, with reliance on call centre resources and cost. It is notable that ANZ and CBA closed own their online mortgage offerings in 2008; whilst recently Ubank announced the introduction of an online offering. This channel will continue to experience varying levels of investment, experimentation and success for some years.

The essence of mortgage broking is the relationship with consumers and the provision of advice; not the application process. There is an increasing appetite for the convenience of online mortgage services and these services will meet the needs of an increasing segment of customers.

For those brokers focused on transactions rather than customer relationships, online mortgages are a very real threat.

Competition and change are ever present in our industry; and this has contributed to new and evolving industry participants. I think any suggestion that mortgage brokers will be relegated to minor bit players is grossly exaggerated. Many other competitors will emerge over time and each will have an impact on existing players. One example may be that banks may choose to provide choice of lender (and products) through their mobile or franchise distribution models (as they currently do for financial planning).

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FORUM The Financial Planning Association has suggested that more financial planners will diversify into mortgage broking, causing discussion early this year

Trail books have been increasing in price this year, as buyers abound and sellers fail to materialise. One of our regular readers had this to say about the demand

It’s only a matter of time before a client will go to one trusted advisor to secure all their services in one place. Most clients are time poor, and only having to tell one person their information and have all their solutions solved is the way of the future. Diversification is a must and not an option anymore.

Jeff Mazzini – AAMC Training Group on 01 Feb 2011 01:05 PM

This makes sense. Why would a well-established broker with a good book want to sell a cash flow that will help through the tough times and create really good profits in the good times? I suspect brokers who have small direct books who have elected to become credit representatives may want to sell as it will be far too hard to manage the direct book. PLAN have pushed the credit representative model and have done the correct thing in helping brokers sell. It will remain to be seen if there is a high volume of sales in the next 90 days – I suspect not. As a broker with a full licence I see no sense in selling off a good cash flow. countrybroker on 28 Jan 2011 01:49 PM

I am just wondering if the financial planners applied for licences so that they can advise their clients of the type of loans they should use in their investment strategy rather than actually engage in providing mortgage products to their clients. Has this research been done?

Derek Miles on 01 Feb 2011 01:32 PM In response to Derek Miles’ comment, from our experience in these areas, we are at this stage noticing more planners having the ability to talk freely about loan products without the fear of breaching regulations. Whilst others are now starting to set up their own in-house mortgage advising and processing services. We feel more will follow this pathway as the process becomes more clear to them. A trusted advisor does not need to do all the paperwork but gathers information from the client and then has a supportive back office or referral partner to finalise the paperwork. The trusted advisor then presents the completed paper work for the clients to sign after confirming it meets the clients requirements.

Jeff Mazzini – AAMC Training Group on 01 Feb 2011 02:53 PM

Poll: Fee-for-service Following recent commission cuts, are you planning a transition to fee-for-service?

Yes (88%) Yes (88%) No (9%) No (9%) Undecided (2%) Undecided (2

Total votes: 405 Poll date: 14/01 – 10/02 To vote in our latest online poll, visit our online home page at www.brokernews.com.au

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Comment OPINION

Do you see Continuing Professional Development as a chore?

Peter Heinrich debates the pros and cons of CPD point accumulation Professional institutions require their members to engage in CPD. A few institutions go no further than recommending that their members engage in CPD. Others (ASIC) set specific requirements, in many cases requiring members to submit records of their development activities. Some professional institutions specify particular activities or areas of learning in which CPD is required; others leave this to the judgment of the individual.

Whether or not an individual is a member of an institution which requires and monitors CPD, a committed professional should see CPD as primarily about maintaining and building knowledge and competence for their own personal career development rather than just a chore to satisfy external requirements.

CPD can add to an individual’s knowledge (eg, of regulations), improve their skills (eg, in managing clients) or both (eg, of managing clients without breaching regulations). Often professionals engage in CPD without realising (for example, by attending seminars, engaging in research and investigation in relation to a current property issue, participating in webinars, learning from the advice of colleagues and even reading a journal).

For newly qualified professionals, continuing or building upon some of the activities they engage in as part of their initial learning curve could be CPD. Therefore, individuals who are not currently consciously engaged in CPD might find it easier than they think to commit to a CPD plan – as they are already doing CPD. However, if individuals plan, record and review their CPD this will help them to give some structure to and assist in maximising the benefit of their CPD. This will help ensure they engage in CPD activities which meet their needs.

Why is CPD needed?

Competent professionals, and the professional institutions that represent them, understand the importance of CPD. • Management and communication skills gaps: A large number of employers experience problems with staff proficiency and skills gaps. Issues identified relate to time management, communication, literacy, problem solving and client handling skills.

• Technical and practical skills gaps: Despite nearly three quarters of the professional services workforce being qualified with a Certificate IV, employers still continue to identify a range of skills and competence areas where capability is an issue. These include professional IT skills, professional marketing programs, client acquisition, client communication, client retention and lender relationships.

• Skills gaps in existing staff: Problems with existing staff are often perceived as higher in practical skills, IT skills, management and other customer handling skills.

Institutions encourage CPD because they want to help their members to perform as well as possible and because doing so can help to improve their reputation. CPD is often prescribed for members in Codes of Professional Conduct, which places an onus on the individual to act in an ethical and competent manner.

With many brokers choosing credit rep contracts under ACL, they will need to take increasing responsibility for their own careers and development (the authority holder will insist on it) to maintain employability, and consequently should treat CPD point accumulation as an opportunity and not a chore.

Peter Heinrich is the managing director of MFAA-approved industry training provider The National Finance Institute

A time for caution, as arrears levels rise How can you help your clients avoid credit file faux pas? Joseph Trimarchi explains 2011 will bring many challenges for the mortgage and finance professional, and one of the biggest will be advising clients on how to deal with the prospect of being in arrears with their loan repayments. January and February are traditionally the months where most people experience difficulty in meeting their loan repayments. In addition to the traditional reasons for falling behind – namely the Christmas holiday period with its increased pressure on expenditure – this year many Australians are faced with the aftermath of natural disasters.

By falling behind on loan repayments, your clients are exposed to the threat of legal action, as well as adding a blemish by way of default being noted on their credit file.

It is part of a mortgage broker’s job to ensure that if their clients experience difficulty, they are advised on how best to protect their interests.

The Consumer Credit Code, which regulates domestic or household lending, may provide such relief by affording consumers hardship provisions that place the onus of assisting any consumers falling on hard times on the lender.

Should clients experience difficulty they should immediately do the following: • Contact the lending institution and advise them of the problem and request access to leniency based on hardship • Formulate a plan to catch up with the arrears as soon as possible • Look at ways to decrease their debt • Log with precision any and all communications they have with a lender

• Ensure they adhere to the strict terms of an alternative payment plan Prevention and early intervention is the key. Most clients are not aware there is legislation in place to assist them; therefore, the finance professional should play an integral part in the education process.

Should clients take advantage of hardship provisions this may assist in: • Preventing legal action for the recovery of the arrears • Preventing the creditor in some instances from listing the arrears by way of default The integrity of a client’s credit file should be protected, for a listed default of judgment may prevent them from future borrowings for a period of up to five years, and in some instances seven years. Being aware of your client’s situation and advising as to preventative measures shall serve you and your clients well.

An individual’s financial circumstances – like most things – are subject to the vicissitudes of life. Crucial to clients’ financial wellbeing is how the individual emerges from the hardship suffered. The information referred to above is for educational purposes only, and should not be relied upon as legal advice. For more detailed advice on how to best help your clients, speak with a qualified lawyer who understands this area of law.

This article is written by Joseph Trimarchi, solicitor and principal of Joseph Trimarchi & Associates, a law firm specialising in Australian credit reporting law and credit repair.

For more information email: joe@josephtrimarchi.com.au

Peter Heinrich

Brokers choosing credit rep contracts will need to take responsibility for their training

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One year on…

What a difference a year makes… or not.

Australian Broker reflects on the punditry, breaking news and influential trends that made headlines in the magazine 12 months ago

Issue: Australian Broker issue 7.3 Non-banks show signs of life (Cover) What we reported: Positive signs are emerging which indicate non-banks and mortgage managers could reclaim some of the territory lost to banks as a consequence of the GFC. Four of the more prominent players in the space have all announced positive developments recently, while the government’s support of securitisation via the AOFM initiative will also help with funding. Top of the list is securitisation pioneer Resimac, which launched its new retail lending business Hemisphere Financial Solutions on 8 February, following a successful pilot.

Besides the launch of the new business, Resimac was also one of three non-banks due to receive AOFM investments in their RMBS issues.

Resimac along with FirstMac (as well as second tier banks AMP Bank and Members Equity Bank) will receive up to $3.4bn in government investment.

What has happened since?

Non-banks have criticised moves by the federal government which they say could weaken their competitive position in the marketplace. The banning of deferred establishment fees and a smaller-than-expected $4bn injection into the RMBS market left many nonbank representatives crying foul over government moves intended to increase banking competition. Aussie Home Loans founder John Symond called the $4bn pledge “chicken feed”, and said the government failed to consult non-banks in crafting its reform package.

Resimac chief operating officer Allan Savins, however, has remained optimistic about the future of the non-bank sector. Savins told AB in November that the market may be positioned to see a resurgence of nonbank lenders reminiscent of the 1990s.

Macquarie makes tentative return to lending (page 4) What we reported: In what could signal a return to fullscale lending through the broker channel, Macquarie Bank has revealed it is trialling a new product through select broker relationships.

The lender quietly introduced the bundled Macquarie Bank Mortgage

Solutions product to the market in December. Currently it is only available through Macquarie-backed broker groups – AFG and the recently-launched consortium Vow Financial.

The bank scaled back its Australian residential mortgage business in March 2008 due to high funding costs and “deteriorating conditions” in the wholesale securitisation markets.

At the time Macquarie’s portfolio accounted for 2.5% of all outstanding housing loans in the country.

What has happened since?

In July of last year, Macquarie conducted a large-scale launch of its Mortgage Solutions product suite amid mixed broker reactions. While some brokers praised the bank’s competitive rates and credit policies, others said they would shy away from the lender due to the problems faced by borrowers and brokers after Macquarie pulled out of the market in early 2008. In spite of criticism, Macquarie said it remains committed to the broker channel. The bank also issued its first public securitisation since July 2008 with a $750m float.

Warning: banks closing gap on service (page 8) What we reported: While brokers continue to rate higher on customer service than the major banks, they have been warned not to be complacent, as banks look to sway customers with new advertising campaigns. The warning was issued

by MFAA CEO Phil Naylor on the back of the latest Bankwest/MFAA Home Finance Index, which found that satisfaction with mortgage brokers is now at 7.4 out of 10, with banks rating 7.1.

But Gerald Foley, MD of National Mortgage Brokers, said he believed banks still have a long way to go in winning over customers. He told AB the major banks in particular had brokers to thank for helping customers forget how much they actually disliked them.

What has happened since?

Advertising campaigns by major banks to woo back customers seem to have largely fallen on deaf ears. Following November’s out-of-cycle rate rise, the Big Four became the target of criticism over their perceived oligopoly in the banking sector, with each experiencing declines in customer satisfaction in Nov/Dec. With the Senate inquiry and Wayne Swan’s proposed reforms, it seems unlikely they will enjoy the public’s good graces any time soon.

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Insight EXECUTIVE COUNSEL Provident Capital’s Steve Sampson endeavours to be a step ahead of the market, and has made successes out of greenfield organisations.

He tells Australian Broker how important initiative is to success, and why he won’t die wondering Steve Sampson

Name a business leader you admire. Why? Well, he’s probably not really a business leader, but then again running a country is pretty big business. Nelson Mandela is a person I admire greatly. A large part of leading a successful business is based around effective communication, resolving the big issues and being an example to others as well as portraying academic knowledge. Nelson sure ticks all of these boxes and he even won a Nobel Peace Prize to boot.

What main goal/s got you to where you are?

I always endeavour to look to the future of the market and be a step ahead, which probably determines why many of my achievements have revolved around setting up greenfield and growth financial organisations.

Is success due to talent, hard work, or luck?

All of them. Talent isn’t always what you learn at school or university. Talent is developed within.

There is no success without hard work and if there ever is it is short lived. I can’t say that I’ve met too many successful business people who don’t work hard.

Luck is always nice to have but don’t count on it, and as they say, ‘it’s amazing how much luck happens when you’re working hard and focused on your task’.

The major trait that I look for in younger talent is initiative, spades of it.

What character trait has helped you most in business?

I have a strong determination to succeed and am always excited by the future. I always give my best shot and learn from my mistakes. Plus, I really like people.

What is the key to great business relationships?

There is no one key, but communication and working together to achieve objectives that all parties benefit from is a good boiler plate.

Holding your own on the phone ‘Salesmaster’ Peter McKeon is at the cutting edge of phone sales. In this first of a two-part series, we get his advice on how to turn leads into clients over the phone

A

s the world has shifted so have all the sales processes.

‘Salesmaster’ Peter McKeon does business with some of the largest sales organisations in Australia, and what he knows is that the phone sales techniques used in the past simply don’t work anymore.

These days, as McKeon explains, “People want more, expect more, and quite frankly deserve more, and if you don’t’ give them more – if you don’t give them a reason to meet you – then you can guarantee that your competition will.

There is no question about that”.

So how can you succeed in turning leads into customers over the phone?

In this two-part series, McKeon explains three principles, and the first of 10 tips for success.

What’s the first thing to look at when growing a business?

What have we got currently and how can we improve, expand or alter the direction to grow the business?

What are the key principles?

What’s the best piece of advice you’ve ever received?

Don’t die wondering.

1. Forget about making the sale: The first principle we educate professionals in is letting go of the traditional sales goal of making the sale, and replace that with a new goal – and that is to discover the truth of this potential client’s situation.

So instead of ringing a client up and thinking ‘I want to lock them into a mortgage’, we need to delete that out of our heads, and instead think ‘Ok, I’m going to make a telephone call to this person to discover what is the truth of their situation’. This mindset includes questions like: Do they want help? And if so, do they want my help? This works very

What trend are you currently watching?

The housing market, interest rates, the European economy and RMBS issues.

Simple, but very important to our business. I am worried about the shortage of housing in Australia and the impact it will have on future generations to financially secure their families.

What is your next big ambition?

To drive Provident Capital to a position of being recognised as Australia’s pre-eminent non-bank.

There are three principles that need to be in play on the telephone that weren’t in play as recently as three or four years ago.

effectively, because it lets go of any of that reluctance or fear of rejection, which is born from people having a fear of failure or a fear of loss. You are ringing someone up with the goal of having a conversation, and the goal for both parties to discover the truth. When you are accepting that we are not all things to all people, that different people have different needs and want to do business with different organisations or individuals, you can have a conversation with people and drop the sales objectives. That will go a long way towards humanising the situation.

2. Stop defending yourself: The second principle is to stop defending yourself. If someone asks: ‘Why should I take a mortgage through you, as opposed to someone else?’, most brokers will say: ‘Well we offer this, and we offer this, and we offer this’ – but no one is buying that. A better response would be: ‘Well, at this early stage, if you asked me that question, I’m not totally convinced you should take a mortgage through me. I’d like to have a conversation with you, identify what it is that you’re looking for, and at the end of the call you’d be in a position to make a decision as to whether or not you saw any value in that’. See how it’s changed, when compared with defending yourself? It’s very much about having an authentic and transparent conversation with the person.

And the more you do that, the more aligned people are to you.

3. End the chasing game: In sales, it’s always follow-up, follow-up, follow-up, until they buy or die. If you are going to have a conversation with someone, maybe

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we could say: ‘Well look, most of the people that we speak to who are in the exploration stage such as yourself, do appreciate a quick courtesy call from us in a couple of days just to answer any questions that they may have. We have a policy here at ABC Brokers not to call people unless we have their permission to do so, and wanted to know whether you would feel comfortable in taking a call from me’. So we get permission, as opposed to just ringing and intruding on the customer.

What are the steps to telephone success?

Because of the amount of competition in the marketplace, and access to information from consumers, today, customers don’t really even have to talk to a broker. Brokers have to think about why people resist engaging with people selling products and services. The reason for that is the mindset of customers that it is all about the broker, or the person who is selling. What they want it to be about – and rightfully so – is to make the conversation all about them.

1. The myth of call reluctance – don’t fear the telephone! If you pick up the telephone, and your primary motivation is to try and sell someone something, that will paralyse a lot of people. You’ll just get rejection after rejection after rejection. So the mindset needs to be: ‘What I am going to do with these leads is I’m going to pick up the call, and I’m going to identify how best, if at all, I am going to be able to assist them.’ It is a total shift. When you are truly in that space, you can have a very authentic conversation with people.

This comes about from choosing to shift my sales strategy, from making it all about me, to being all about the person on the end of the phone.

Customers can sense this based on the dialogue or language that you use. If you are ringing someone after they have an enquiry and asking how you can help them, maybe the language should be: ‘Jack, thanks very much for your enquiry,

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and if you are comfortable, we’ll open up with a couple of questions to identify how best, if at all, I might be able to help you’. The language is all about the customer, as opposed to Peter McKeon the broker.

2. What happens after “Hello”?

• State the reason for the contact – Be very, very clear. And use soft language.

What we want to do is change it from a sales dialogue, and make it more into a conversational dialogue.

• Give a ‘General benefit statement’ – This is a set of words that a broker could use to engage a customer. An example: ‘First off, before I begin, can I say from the outset I am not sure how best if at all I can help you.’ See how that is a general benefit for the customer, and for me, the broker? There is no sale going on, and there are no assumptions that I am the broker for you.

• Seek permission – Ask a series of qualification questions. In other words, a needs analysis.

• Seek buy-in – On the back of your qualification questions, seek a client’s buy-in as to what they felt was the next step from here. For example: ‘Jack, on the back of that, I think there is maybe an opportunity to put a face to a name, so I wanted to get your feedback as to what you felt might be the next step from here’. It lets the customer say yes.

Rather than saying, ‘What I would like to do is I would like to organise a meeting.’ This is about them, not me.

Peter McKeon is the founder and managing director of Salesmasters International, which offers modern sales skills training.

The second part of this interview – including the final eight steps to telephone success – will be published in the next issue of Australian Broker

Top broker tips: Brad Nolan, director, Eastern Financial Solutions “My best telephone technique is simply shut up and listen. Too many brokers talk too much. What I like to do is listen to everything the client has to say without interrupting. Then, once I have a picture, I simply reiterate to the client what I will do for them, virtually just going back over what they have said, only in a varied format. More often than not the client leaves the conversation thinking we fully understand their needs and are really happy to meet with us. I also use openended questions which human instinct will ensure means I get far more information in return. This is an old technique from my past life as a detective.”

Brad Nolan

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Market talk The housing affordability trap Is Australia in a housing affordability crisis? The answer is more complex than it seems

T

he issue of housing affordability seems to vary wildly depending on who’s speaking. We’re told by property investment firms and real estate agencies that now is the perfect time to buy with house prices flattening out through the year, while industry associations like the HIA and REIA indicate the lack of affordable housing has reached crisis levels for average Aussies. A recent study by Fitch Ratings claimed Melbourne and Sydney are now among the least affordable cities in the world. Within hours of the study’s release, property investment firms like Blue Wealth rubbished the report and said its criteria were too simplistic. While the HIA has issued calls for immediate action on affordability, CommSec chief economist Craig James last year published an article in which he claimed incomes had tracked steadily with house prices over the last four years and urged readers to ignore claims of a lack of affordability.

Is the affordability issue overstated, then? ANZ senior economist Ange Montalti believes it may be.

“I do believe the issue of affordability is overstated, at least as a systemic issue. While there is clearly a case to provide affordable housing, this really needs to be handled within a social policy context,” he said.

However, Montalti commented that affordability depends upon the measure being applied to it. The issue is a complicated one to argue, Montalti said, because whether house prices track with income changes is based upon the point of comparison.

“Over the longer term, house prices have risen faster than average incomes. It depends on your starting point. I think if you start at 2003 you might be right, and over the past four years, yes, probably. If you start at 1985, no.”

HIA senior economist Andrew Harvey takes a somewhat moderated view on affordability.

“At the aggregate level I’d agree with Craig James’ assessment that the housing affordability problem in Australia is sometimes overstated,” Harvey said. “It’s also worth noting that there are many measurements used to quantify housing affordability as well as many aspects of affordability that can be measured. HIA’s Housing Affordability Index has measured housing affordability in Australia for over 25 years, showing that affordability fluctuates over time and varies across regions. However, notwithstanding that fairly static price growth through the second half of 2010 did aid affordability, overall affordability is quite low.”

Whether or not affordability is worsening, the HIA has been clear in its calls for federal action. In a budget submission to the government, it called for a range of

I do believe the issue of affordability is overstated, at least as a systemic issue – Ange Montalti, senior economist, ANZ

measures including the removal of stamp duty and allowing buyers to access their super funds for first home purchases. However, would such measures really address affordability? The First Home Owner Grant seems to have done little to alleviate rising prices, and handing prospective buyers more money could actually drive prices up as vendors re-price to account for extra buyer capital.

Montalti believes this is the case, and that these measures do more harm than good when it comes to affordability.

“Many buyers don’t realise it, and you can’t prove it, but some will pay $20,000 or $30,000 more just to get the $7,000 from the government. For stamp duty, the effect is working in the same direction,” Montalti stated.

The only solution, then, seems an increase in supply.

This, above all other measures, is what industry bodies like the HIA are calling for. “The solution to improving Australia’s housing affordability lies in improving the responsiveness of the supply side of the housing market,” Harvey said. “There is a range of issues, including inefficient taxation, slow land release, credit constraints, slow planning and approvals processes, and a heap of other constraints that basically stop the nation from being able to supply a sufficient number of houses to meet demand.”

The HIA wants a streamlining of land release and development approval processes to bolster supply. While it may seem such a sudden glut of supply could cause a significant decrease in prices, Montalti remarked this would not happen any time soon. “We’re so far behind the eight ball that even if there was short-term market indigestion from a supply-side boom, it would not take long to absorb. If the economy and income are growing at the same time, I don’t think it means prices will fall sharply.”

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NUMBER CRUNCHING Established housing prices quarterly change (%)

Best performing regional areas for 2010

(December quarter 2010)

Worst performing regional areas for 2010

Area

State

Growth

Area

State

Growth

Pilbara

WA

25.0%

North West

Qld

-49.3%

Arerage: 0.7

Far West

NSW

18.5%

Southern

Tas

-24.4%

Darwin: 0.0

Central Highlands

Vic

15.3%

Lower Great Southern

WA

-14.0%

South East

SA

13.5%

West Moreton

Qld

-8.2%

Barwon

Vic

12.9%

Goulburn

Vic

-6.9%

NSW

-5.7%

Canberra: 1.9 Hobart: 1.1 Perth: -3.2 Adelaide: 1.1

Gippsland

Vic

12.1%

Central West

Eyre

SA

11.8%

East Gippsland

Vic

-5.6%

South Eastern

NSW

10.0%

Wide Bay-Burnett

Qld

-5.6%

WA

-5.3%

Vic

-4.9%

North Western

NSW

6.9%

Central

Hunter

NSW

6.3%

Ovens-Murray

Source: RP Data-Rismark Home Value Index

Brisbane: 0.7

At a glance…

Melbourne: 1.3 Sydney: 1.6 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0

0.5

1.0

1.5

Source: Australian Bureau of Statistics

2.0

$800,000

The amount recently paid at auction for a reportedly unliveable, termite-infested Sydney house Source: Sunday Telegraph

MARKET NEWS IN BRIEF Construction declines for seventh month Construction activity has taken another dip in January amid Queensland’s floods. The Australian Industry Group-Housing Industry Association gauge of construction performance has shown a 3.6 point decline in January to 40.2. The January decline represents the seventh straight month of falls for the gauge.

Perth sales maintain low trend Turnover of stock in the Perth market has maintained its ongoing nine-month low.

The Real Estate Institute of WA said preliminary data for the December quarter shows both houses and units continued to experience sales turnover at around 30% below the 15-year average. Late settlements from the September quarter pushed the metropolitan median price up to $489,000 for that period, but it dropped back during the December quarter to settle at around $480,000.

REIA calls for federal action on stamp duty The REIA has put forward a pre-budget submission to the federal government, calling for a range of measures to benefit the property market and building sector.

The submission asks the government to retain current arrangements for negative gearing of property investments, commit to no levy of capital gains tax on owner-occupied homes and no increase for investment properties, remove stamp duty and allow first homebuyers to use their super funds for home purchases.

Blue Wealth questions affordability claims Investment property research group Blue Wealth has criticised a survey which ranked Sydney and Melbourne among the world’s least affordable property markets.

Fitch Ratings’ Demographia International Housing Affordability Survey, which ranked 325 global property markets in terms of affordability, placed Melbourne at 321 and Sydney second-to-last.

Blue Wealth has questioned the survey’s methodology, calling its findings “simplistic and misleading”.

REIA slams NRAS cuts The Real Estate Institute of Australia has slammed the government’s proposal to make cuts to the National Rental Affordability Scheme (NRAS) in order to pay the estimated $5.6bn repair bill to rebuild flood-affected regions across Australia.

Under the NRAS, the government provides tax incentives to property investors and owners to offer their property to low and moderate income households at 20% below market rates.

As a result of rebuilding needs throughout flood-affected regions, the scheme is to be wound back as a money-saving measure.

2010 prices up, but growth slowing A report by Residex has found Australian property values on the whole improved over 2010, but growth in the market slowed toward the end of the year. In the company’s Market

Wrap report for 2010, capital cities across Australia saw median price growth from 2009/10, with Melbourne topping the list at 9.2% annual growth. Brisbane was the poorest performer among capital cities, but the report believes housing prices in the city have bottomed out and will see gradual growth over 2011.

Flat housing despite rates reprieve Figures released by ABS show subdued growth for house prices in the December quarter of 2010. The data indicates established house prices grew 0.7% for the quarter, posting a 5.8% rise since December 2009.

The results showed increases of 1.6% for Sydney, 1.3% for Melbourne, 0.7% for Brisbane, 1.1% in Adelaide, 1.1% for Hobart and 1.9% in Canberra. Darwin was flat over the quarter, while Perth saw a 3.2% decline.

Banks too reliant on offshore markets: Fitch A special report by Fitch Ratings has claimed the four major banks need to decrease reliance on wholesale funding markets, particularly those offshore.

The report indicates the Big Four are well-positioned heading into 2011, but that their reliance on wholesale funding is unlikely to diminish in the short or medium terms. It pointed out that Australian banks have increased their focus on gathering deposits to reduce their reliance on wholesale funding.

The findings come as NAB posted a $5bn loss in deposits for December amid technical glitches.

28

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Feature OFF THE CUFF

John Flavell General manager, broker distribution NAB What was the last book that you read?

I spent much of the summer with Leo Tolstoy and worked my way through Anna Karenina. I had heard that this was one of the great classics. It certainly did not disappoint.

If you did not live in Australia where would you live and why?

There are many places I keep going back to when I travel, including France, Japan and Italy, but I can’t think of anywhere that I would rather live than Australia, in particular, Sydney. You can get up in the morning, go to the beach and still be in the heart of the corporate world by 8:00am.

You usually have to compromise on location when choosing to be in the corporate epicentre, but in Sydney you can do it all from a career perspective and still finish the day with sailing on the harbour or doing laps in the North Sydney pool. That takes some beating.

What do you do to unwind?

Get up and go surfing at first light. If I haven’t surfed or been in the ocean for much more than a week then I just don’t feel right.

What is the most extravagant gift you’ve ever bought yourself?

A set of Voiki snow skis. They were horribly expensive. I really had a million other things I should have spent the money on at the time but these skis just begged me to have them; they are brilliant.

What CD is currently playing in your car stereo?

Songs for Dad Volume 2; my 14-year-old daughter Olivia burnt it for me to listen to on a long drive recently. It is good having a teenager that can introduce me to some bands that I otherwise wouldn’t know about.

Other than that I am going through an Eddie Vedder phase, lots of good acoustic guitar and mandolin.

If you could give anyone starting out in business one piece of advice what would it be?

Seek counsel from the most intelligent and successful people you can find, and be prepared to listen to and act upon the same.

If you could sit down to lunch with anyone you like, who would it be?

With my family somewhere on the beach; I couldn’t just choose one of my four girls (my wife and three daughters) because that would just get me in trouble.

If I was not working in the mortgage industry, I would be …?

Most probably flying aeroplanes. I had a point there where I was flying recreationally and was going to push on to a commercial licence but opportunities were opening up for me in mortgages and I took that path.

As it happens with my role I think I fly almost as often as most pilots.

What was the first job you ever had?

Going door to door selling subscriptions for the Global Mail newspaper in Toronto, Canada. I think my accent gave me an edge as I did pretty well at it (I was nine).

Where was the last place you went on holiday?

Byron Bay. I have been going there with my family for the last eleven years and I never tire of it. It is an incredible part of the world and quite conveniently that area is home to some of the best waves on the planet.

MOVERS & SHAKERS NAB Broker names WA state manager

AFG recruits Victorian managers

NAB Broker has appointed Royden D’Vaz as state manager for Western Australia. Royden joins from Advantedge, where he worked on the broker platform side of the business for four years. Prior to this role, he held senior management positions with Bluestone Mortgages and AVCO Finance.

General manager of NAB Broker distribution, John Flavell, said D’Vaz’s connections within the West Australian broking community would Royden D’Vaz be “invaluable” to the team. “He has a fantastic track-record of success in servicing the market in the state and has a clear passion for helping brokers to achieve their goals,” Flavell said.

D’Vaz said he would work closely with brokers to help deliver outstanding service.

“I’ve been in origination for the last 12 years – this has been my key focus and will continue to be so in this new role,” he said. “I’m very committed to the broker business and have forged many strong relationships, especially within the WA broker market. I’m really looking forward to helping them grow their business,” D’Vaz said.

AFG has recruited former Linx Software national business development manager Tim Ford into the role of recruitment and portfolio manager in its Victorian business.

Following his relocation from the Sunshine Coast, AFG expects Ford to put to use his background in franchising, property investment and technology in helping existing AFG members grow their businesses, as well as recruiting new members in the state.

The group has also transferred Matt Cusworth to Victoria from its Perth office, where he will also work as a recruitment and portfolio manager. Cusworth was previously a relationship manager in WA, and will focus on recruiting new members, as well as building existing members’ businesses in Victoria.

Tim Ford

Send your appointments to the editor at ben.abbott@keymedia.com.au

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29

Caught on camera National Mortgage Brokers held its national conference in style earlier this month in Melbourne, with guests including Kazakhstan’s very own ‘Borat’. The gathering was designed to get brokers geared-up for the coming year.

3

1

2

4

5

6

8

7 IMAGE 1: Anne Quick (Lynch Financial Group), Vera Jovanovic (nMB), Genelle and Gavin Cox (Mortgage Advice Plus) IMAGE 2: ‘Borat’ and Anthony Boulos (nMB) IMAGE 3: Christa Malkin & Julie Nguyen (Bankwest) IMAGE 4: John Bignell (The Mortgage Gallery), Gerald Foley (nMB), Peter Catramados (PLG Finance) IMAGE 5: Gerard Heffernan and Alison Whittle (Tiffen & Co), Steve Bourne (NAB Broker) IMAGE 6: Jodie Hainey (nMB), Tony Wood (Homeloans), Tracy Williams (nMB), Samara Tree (The Rock) and Anne Quick (Lynch Financial Group) IMAGE 7: Peter Wotherspoon (nMB Broker of the Year) IMAGE 8: Sam Boer (CBA), Mardee Crane (1st Street), Petta Basile (ANZ) and David Newham (Core Mortgage Brokers) IMAGE 9: Song Ye (nMB) wishes everyone a Happy Chinese New Year IMAGE 10: Robert Trewin (Robert Trewin Mortgage Broking), Mardee Crane (1st Street)

9

10

30

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Insider

Got any juicy gossip, or a funny story that you’d like to share with Insider?

Drop us a line at insider@ausbroker.com

No friend of Facebook

I

So much serenity

I

t’s said a man’s home is his castle, and now a Victorian real estate agency is taking that adage a step further for potential property buyers. RT Edgar is offering up none other than Aussie battler Darryl Kerrigan’s lakeside holiday home from the iconic film The Castle. Now homebuyers have the opportunity to enjoy the serenity at the famed Bonnie Doon shack, which is situated on Lake Eildon. The property also comes with props made famous by the film, including the mosquito zapper, Tracey’s Sunshine TAFE hairdressing diploma and even a set of jousting sticks. With the buzz of the power lines, the smell of two-stroke in the air and plenty of room to practise kickboxing manoeuvres, the house practically sells itself. And at $195,000, Insider thinks the place is a steal.

The real estate office, however, has evidently been inundated with calls from prospective buyers who tell them they’re dreamin’.

“Is very nice”

T

he recent National Mortgage Brokers convention in Melbourne

had a bit of everything: fancy dinners, luxurious golf outings, a chance to hobnob with brokers and lenders alike. It also had a guy pretending to be a fictional Kazakhstani journalist. That’s right, everyone’s favourite mustachioed lunatic Borat Sagdiyev showed up on the conference’s opening night cocktail party. In what had the potential to be a cringe-inducing smorgasbord of awkwardness, Insider was pleasantly surprised to find the faux-Borat had the accent down pat, looked the part and actually inspired uproarious laughter from everyone in attendance as he mercilessly roasted nMB’s head office team.

Much to Insider’s relief, the famous mankini was nowhere to be seen, and Borat instead sported his trademark grey suit. Much to Insider’s dismay, he didn’t even make a cursory attempt to wrestle anyone. Cheers to nMB for providing an eyeopening cross-cultural experience.

Here’s hoping Borat was able to take home some cultural learnings of mortgage broking for make benefit glorious nation of Kazakhstan. Wawa-wee-wa!

nsider hates to have to turn his attention to CBA once again in this column – after all, there are three other big banks that deserve a turn at having their dirty laundry aired on this page.

However, CBA just keeps giving him excuses. Here’s hoping the bank does better?

This time, CBA has managed to earn itself the ire of its employees – those on a salary, rather than commission – for its draconian, and dare we say slightly Orwellian, Facebook policy. Since Facebook took off – propelling its founder Mark Zuckerberg on to the cover of TIME Magazine as its Person of the Year 2010 – Australian corporates have

CBA was seen as one such ‘savvy’ media player – that is, until now. The bank’s social media policy, according to media reports, requires that employees cannot comment on, post or store any information about bank-related matters, or speak negatively about the company. One might say such a requirement is fair – though the last does impinge on every employee’s right to have a whinge about their job. What caused the most ire is that it also requires staff to report any negative comments on social networks by other people, including nonemployees, and help remove or delete the seemingly branddestroying material.

Is it just Insider that thinks the media storm of outrage that this caused has probably done more damage to the bank’s image than the average staffer – or their friend – on Facebook?

And the bill comes to... $26,000

B

Be careful who you are connected to: CBA

largely seen the need to adapt to the new social networking phenomenon, employing new media gurus to manage their social media exposure, leading to an ever-widening stream of corporate Twittering.

ravo supermarket, New York. Not the place you would expect to be defrauded – then again, it’s probably not the place that you would look to source a mortgage either. Not so one unsuspecting couple, who while out shopping for their staple necessities such as bread and milk, were duped by a supermarket employee posing as a mortgage broker. The employee – who was not licensed – allegedly offered to help the couple find finance to buy the home they were renting. He then proceeded – in between the vegetable and frozen food aisles no doubt – to encourage them to pay him a total of $26,000 over a period of months, which he said was required to finalise the loan. Some grocery bill, Insider thinks. Needless to say, no loan materialised, and the supermarket broker has been charged.

Mortgages may be commoditised in many ways, but Insider wouldn’t recommend sourcing them from a supermarket.

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Services

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at www.brokernews.com.au COMMERCIAL Banksia Financial Group 1800 333 114 www.banksiagroup.com.au Page 9 Acuity Funding 02 9484 0609 www.acuityfunding.com Page 14 Fundcom 07 5555 2754 www.fundcom.com.au Page 10 Think Tank 1300 781 043 www.thinktank.net.au Page 31 LENDER Homeloans Ltd 1300 787 866 www.homeloans.com.au Page 15 Liberty Financial 13 11 80 www.liberty.com.au Page 3 MKM Capital 1300 762 151 www.mkmcapital.com.au Page 2 Provident Capital 1800 668 008 www.providentcapital.com.au Page 4

31

SHORT TERM LENDER Interim Finance 02 9971 6650 www.interimfinance.com.au Page 30

MORTGAGE MANAGER / NONBANK National Finance Club 1300 327 600 www.nationalfinanceclub.com.au Page 19

Mango Media 02 9555 7073 www.mangomedia.com.au Page 1

Vault Mortgage Corporation 1300 798 676 www.vaultmortgage.com.au Page 16

NCF Financial Services Pty Ltd 1300 550 707 www.ncf1.com.au Page 8

OTHER SERVICES Trailerhomes 0417 392 132 Page 26

Quantum Credit 08 9325 6255 www.quantumcredit.com.au Page 11 Rapid Capital 07 5562 2485 www.rapidcapital.com.au Page 6 AGGREGATOR / WHOLESALE BROKER LoanKit 1800 466 085 www.loankit.com.au Page 12 PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 5

www.residex.com.au The House Price Information People

Residex 1300 139 775 www.residex.com.au Page 21 RP Data 1300 734 318 www.rpdata.com Page 25 WHOLESALE Resimac 1300 764 447 www.resimac.com.au Page 17 DEBTOR FINANCE Key factors 1300 884 100 www.keyfactors.com.au Page 13

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