Mortgage Professional Australia magazine Issue 11.11

CELEBRATING 10 YEARS

www.brokernews.com.au ISSUE 11.11

STANDINGOUT Australia’s leading independent brokerages identified and profiled TOP INDEPENDENT BROKERAGES P28

PRIVACY MATTERS THE IMPORTANCE OF DATA PROTECTION

NICHE BROKING SHOULD YOU SPECIALISE?

»

THE BIG INTERVIEW ASIC'S GREG KIRK IN PROFILE

CONTENTS / ISSUE 11.11

24

Carving your niche Diversification is a buzzword in the mortgage industry at present, but is there more to be gained from streamlining your offering?

46 Private and confidential Are you doing enough to make sure your client information doesn’t fall into the wrong hands?

WEEKLY INVESTIGATIONS NOW ONLINE: COVER STORY 28 | Top Independent Brokerages The top 10 non-franchise adviser groups ranked and profiled

2 | BROKERNEWS.COM.AU

Branding versus independence Lending panels Economic outlook » brokernews.com.au

CONTENTS / ISSUE 11.11

50

NEWS & VIEWS

PROFILES

8 | Round-up The latest market intelligence from the worlds of property, economics and mortgages

40 | Greg Kirk from ASIC discusses regulation, professionalism and broker evolution

12 | Product news A round-up of the latest rate changes and product launches to keep you up to date 17 | Viewpoint What visitors to our website are saying about deposit account switching

40

20 | Analysis An exclusive report from the recent Vow conference in Fiji

SMART BUSINESS 50 | Customer service Making the most of CRM systems 54 | Avoiding super bloopers Mistakes to avoid when managing your own SMSF

4 | BROKERNEWS.COM.AU

44 | Top 100 Broker Michael O’Reilly reveals the secret to his success

STATS 58 | This month’s statistics round-up looks at the cheapest suburbs across Australia 66 | Your Mortgage index The latest data from our sister website shows that the NSW property market is holding firm

LIFESTYLE 68 | A day in the life of…Lisa Claes, ING Direct 70 | My favourite things…Lisa Montgomery, Resi 72 | Words of wisdom…

Gerard Hermens on understanding your customers

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 5

CONTENTS / EDITOR’S LETTER

GOING SOLO Through our series of special reports we aim to shine the spotlight on the top achievers in all areas of the industry from banks to non-banks, aggregators to commercial brokers, diversifiers to young guns. Our famed Top 100 Brokers list recognises the individuals who have written the most business in the past 12 months, but we wanted to acknowledge the hard work and collaborative effort that goes into making truly great broking businesses by compiling a definitive list of the best independent brokerages in the country. That isn’t to say that there isn’t a whole host of successful franchise operations across the country – there are – but the purpose of this report was to salute those who have started businesses from scratch, weathered the hard times and are still successfully putting the customer first. Congratulations to this year’s top 10, including our inaugural winner Better Choice Mortgage Services from Balcatta. Thanks to all the aggregators who put forward nominations and to St.George for partnering with us to produce the report.

Elsewhere in the magazine there is plenty to get your teeth into.

We sit down with ASIC to find out the regulator’s intentions for the industry, investigate the sensitive issue of protecting confidential client information and look at the pros and cons of targeting different market niches. We also explain how to successfully harness the full potential of customer relationship management systems and look at the growth in popularity of self-managed super funds. Finally, the industry is nothing without people and we scratch beneath the surface of some of the mortgage market’s most well-known figures including ING Direct’s Lisa Claes and Resi’s Lisa Montgomery.

Enjoy the magazine and all the best for a busy month.

Barney McCarthy, Editor

COPY & FEATURES EDITOR Barney McCarthy CONTRIBUTOR Andrea Cornish PRODUCTION EDITORS Sushil Suresh, Carolin Wun, Moira Daniels

ART & PRODUCTION DESIGN PRODUCTION MANAGER Angie Gillies SENIOR DESIGNERS Paul Mansfield, Rebecca Downing

SALES & MARKETING COMMUNICATIONS EXECUTIVE Lisa Narroway MARKETING EXECUTIVE Kerry Buckley MARKETING COORDINATOR Anna Keane TRAFFIC MANAGER Abby Cayanan

CORPORATE DIRECTORS Claire Preen, Mike Shipley CHIEF OPERATING OFFICER George Walmsley PUBLISHING DIRECTOR Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Barney McCarthy tel: +61 2 8437 4790 barney.mccarthy@keymedia.com.au Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Account Manager Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@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. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

CONNECT

Contact the editor: barney.mccarthy@keymedia.com.au

6 | BROKERNEWS.COM.AU

Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 7

NEWS / ROUND-UP UNEMPLOYMENT

Jobless numbers could trigger rate cut Australia has seen a slight rise in unemployment, which could put pressure on the RBA to cut rates.

The jobless rate increased by 0.1% to 5.3% in August. The decrease in employment was driven by a fall in full-time employment as the economy shed 9,700 jobs. The fall was partially offset, however, by a 2,900 person increase in part-time employment.

Underutilisation also rose in August, up 0.1% to 12.3%.

In its cash rate decision in September, the RBA board said that reports of skills shortages had been largely confined to the resources sector. Westpac economist Bill Evans had predicted last month that Australia would see steadily rising unemployment in the first half of 2012. Following the release of the ABS figures, fellow Westpac economist Justin Smirk said the bank’s previous unemployment forecasts may have been too conservative.

“Prior to September our forecast was for the unemployment rate to rise to 5.5%. On current trends, that looks conservative and 5.75% is an entirely plausible outcome,” Smirk said.

This trend, according to Smirk, will force the RBA to reconsider its outlook for employment. “The RBA can no longer describe jobs as firm or the unemployment rate as ‘near 5%’,” he commented.

Improvement in housing affordability seen in the March quarter has proven to be short-lived, according to the REIA – Deposit Power Housing Affordability Report.

It has indicated affordability once again suffered in the June quarter, with a 0.4% increase in the proportion of average family income going towards home loan repayments. Families now spend an average of 34.6% of their income meeting their mortgage payment, and this proportion has now tracked above 30% since September of 2009.

New South Wales saw the largest deterioration of housing affordability.

In spite of the decline in affordability, borrowers appear to be reemerging. The study indicated a 10.6% rise in the number of new finance commitments for the quarter. The increase was the largest of any quarter since June 2009. However, Deposit Power national manager Keith Levy argued that the property market remained weak. “Confidence in the sector is subdued; the Government needs to provide homebuyers, particularly first homebuyers, with a sign that the property market is strong,” he said.

Subdued confidence aside, first homebuyers appeared to re-enter the market in the June quarter. The number of new finance commitments for first-time buyers jumped 13.4%.

Rental affordability, meanwhile, has seen improvement. The proportion of income devoted to rent fell to 24.8% in the June quarter, down from 25.1% in the March quarter and 25% in the June quarter of 2010.

REPAYMENTS

Affordability short-lived

CONSTRUCTION

SLOWDOWN HITS RESIDENTIAL BUILDING HARDEST Housing construction has hit a record low amid weak activity across the entire construction industry.

The Australian Industry Group Performance of

8 | BROKERNEWS.COM.AU

Construction Index, done in conjunction with the Housing Industry Association, has seen its weakest result in nearly two-anda-half years. The Index dropped four points to 32.1. Any score below 50 indicates a contraction in construction activity, and the index has now

tracked below 50 for 15 consecutive months.

House building recorded a reading of 29.6, with apartment building tracking even lower at 25.2. HIA chief economist Harley Dale said housing construction has followed a trend of decline throughout the latter half of the year.

STATS Turn to page 58 to find out which suburbs in each state have the cheapest property

NEWS / ROUND-UP MFAA

KANE SEEKS GRASSROOTS ENGAGEMENT FAST managing director Steve Kane has been elected president of the MFAA and has said he will focus on grassroots engagement on the promotion of industry professionalism to consumers.

Kane, currently presidentelect, will take office at the association’s annual general meeting in November, taking the place of current president Joe Sirianni. Kane said he believes the current overall direction of the MFAA is positive and will continue to develop its role in providing education and training, lobbying with the regulator in increasing the engagement of its membership with the MFAA. He added he would continue to focus on raising the profile of mortgage broking in the marketplace, and wanted to see

consumers made better aware of the increasing professionalism of the industry. He said while he will help to enhance the association’s approved broker campaign, he will focus on raising the profile of the industry in general.

“The important thing is to make sure mortgage broking is recognised more widely in the value it contributes to the overall industry,” he said.

As the profile of brokers and the services they offer is enhanced, Kane said brokers could see the way paved for fee-for-service. “I think as the industry matures and its services are broadened in the relationship between broker and the customer, we’re going to see fee-forservice. It’s not just the level of professionalism, I think it’s the overall value the broker offers to the customer,” Kane added.

OVERSEAS

US brokers cry foul over commissions US mortgage brokers have called on the Obama administration and the US Congress to encourage the nation’s Consumer Financial Protection Bureau to rescind its loan originator compensation rule.

The rule, introduced earlier this year to help arrest problems partially responsible for the global financial crisis, means that mortgage loan originators may no longer receive compensation based on the interest rate or other loan terms. Previously, originators could be paid higher compensation or commission, based on the level to which a rate was dialled up for a consumer.

Loan originators who receive direct compensation from a consumer are also now forbidden from receiving additional lender compensation, and originators may not steer a consumer to a mortgage loan not in their best interest just to increase the level of their compensation.

The National Association of Mortgage Brokers (NAMB) has said publicly that ever since the introduction of the Federal Reserve Board-inspired measure on steering and loan compensation, consumers have experienced “a dramatic increase in costs on their mortgages”.

CREDIT

CREDIT DEMAND SEES SHARP DECLINE Credit demand has fallen sharply in the June quarter, with mortgage enquiries driving the decline.

Veda’s Consumer Credit Demand Index has shown a 5.1% decline in demand for credit for the June quarter as compared to the March quarter. In year-on-year terms, demand for credit is up 2.8%, a result which Veda head of consumer risk Angus Luffman said shows weakening credit growth.

“The April to June quarter closes out what has been a very soft financial year for credit demand. The data in the final quarter reveals some positive trends in certain types of

consumer credit, but overall credit demand remains soft and is still behind pre-GFC levels,” he commented.

Mortgage demand has seen the most significant decline, falling 17.2% over the year. However, decline appears to be slowing, with the June quarter showing the lowest level of decline of the past six quarters.

“The contrast in the yearly and quarterly performance results suggests there is a levelling in mortgage demand, as year-on-year declines are beginning to slow and quarter-on-quarter results show signs of growth,” Luffman said.

BROKERNEWS.COM.AU | 9

NEWS / ROUND-UP COMMERCIAL

PENT-UP DEMAND DUE TO RELEASE The commercial market is quiet, but the next few months could see a flood of interest, according to Think Tank.

The commercial lender has announced a substantial increase in its funding capacity following wholesale funding negotiations, and the company’s executive director Jonathan Street said he expects a quiet commercial property market to heat up in the months ahead.

“On the transactional side it’s a little quiet in terms of people buying and selling commercial property. We believe this is causing pent-up demand,” Street said.

He stated that along with softer demand from borrowers, many commercial lenders are

also becoming more selective. Street added this causes difficulties for borrowers who do have an appetite for commercial finance.

“I wouldn’t say that credit is loosening up.

People are still having to refinance loans from lenders that are no longer operating, such as Challenger. They’re also having trouble getting a valuation to support the refinancing.

The valuations are coming in low,” he said.

In spite of a tighter commercial market, Street expressed optimism that borrowers will still be drawn to commercial property. As residential property sees declining median values, Street said the draw of positive yields in the commercial space should prove attractive to investors.

CONVEYANCING

Electronic transfers edge closer

STATS 10.2% – yearon-year home loan balance increase by mutual lenders.

Source: Abacus

10 | BROKERNEWS.COM.AU

E-conveyancing won’t require a significant adjustment on the part of lenders, according to Gadens Lawyers.

The firm has stated that national e-conveyancing has moved a step closer to reality with the launch of the Property Exchange Australia project to develop an online platform. Chris Fabiansson of Gadens said lenders and solicitors will have to adjust to the scheme when it becomes operational in 2012, but that the change should not be onerous.

“Once implemented, the transition to e-conveyancing is unlikely to require significant adjustment on the part of institutions. The scheme’s implementation will more affect lenders and solicitors whose processes will need adjustment,” Fabiansson said.

Ultimately, Fabiansson indicated the electronic system will introduce efficiencies that save time and money for companies. “Registration fees will still apply, so the cost savings will be due to shorter periods of time between an agreement and the eventual registration of a new property interest. There may also be a lower risk of fraud and errors as documents move from settlement instantly to lodgement for registration,” he added.

NEWS / ROUND-UP REFINANCING

MUTUALS

Rate cut won’t spur refis

MUTUAL LENDERS ON THE RISE

Most homeowners would not refinance their mortgage, even if interest rates fell, a Mortgage Choice poll has revealed.

It found only 36% of homeowners would be spurred towards refinancing by a fall in interest rates. Forty-one per cent of homeowners said they would not switch, as they were content with their current interest rate setting, while 9% said they were in a fixed rate facility and did not want to pay break fees and 14% said they can’t be bothered exploring refinancing options.

Mortgage Choice spokesperson Kristy Sheppard said: “Unfortunately a large proportion of property owners have no idea they could possibly save money or change to a more suitable home loan by taking advantage of special offers or re-negotiating their mortgage situation.”

Mutuals have outstripped major banks on lending and deposit growth during 2011, new data shows.

Abacus has indicated mutuals grew their home loan balances by 10.2% over the year, outstripping the 8.3% lending growth of the major banks. The mutual sector also saw an 8.2% increase in deposits for 2011, compared to 6.5% for the major banks.

Industry body Abacus has indicated the raw APRA figures are even higher, with APRA reporting credit unions grew their home lending 17.5%, and

building societies experiencing 14.9% growth in home lending to $18.3bn.

“Importantly, these figures reflect real underlying growth because we have removed the impact of reporting changes which show even higher growth rates,” Abacus spokesperson Mark Degotardi said.

BROKERNEWS.COM.AU | 11

NEWS / PRODUCTS ROUND-UP

PRODUCT NEWS A bite-size guide to the latest rate changes and product launches to keep you and your clients up-to-date

Who: Australian First Mortgage What: Flexible Option (full doc) products The spec: AFM has reduced its two- and three-year Flexible Option (full doc) fixed rates. The two-year rate has been reduced by 0.5% to 6.79% and the three-year rate has been cut by 0.55% to 6.84%.

What they say: “While some banks have reduced fixed interest rates recently, non-bank lenders such as ourselves are now competing with the major lenders, both in terms of product offerings and competitive fixed interest rates.”

- Ian Forbes, director

Who: Iden What: Fair Go range

12 | BROKERNEWS.COM.AU

The spec: Iden has further reduced its Fair Go fixed rate products. The oneyear fixed rate is now available at 6.74% and the two- and three-year deals have been slashed to 6.54%. Iden pays 0.60% upfront and 0.15% trail from day one.

There are no clawbacks and no DEFs on new loans.

Who: Future Financial What: Fixed rates The spec: Future Financial has launched a two-year fixed rate at 6.49% and a three-year rate available at 6.59%.

Both rates carry a LVR of 95% + LMI and offer extra repayments up to $20,000 without penalty.

What they say: “We always have and

always will remain dedicated to the broker network. This reduction in fixed rates along with our ‘no clawback, no DEF’ offer helps to maintain growth in this sector.”

- Troy McLaclan, general manager

Who: Mortgage Ezy What: Fixed rates The spec: Mortgage Ezy has reduced its two- and three-year fixed rates by 0.30%, meaning they are now available at 6.39% with no ongoing annual fees and including upfront and trail.

LAUNCHING A NEW PRODUCT? To be considered for inclusion on this page, send the details to barney. mccarthy@keymedia.com.au

NEWS / COMMENT

VIEWPOINT Each issue we select a story from Australian BrokerNews that has got intermediaries talking and publish the best responses.

This month –the government’s proposals to make deposit account switching easier

THE STORY: SWAN BRINGS IN BANK ‘TICK AND FLICK’

Federal Treasurer Wayne Swan has said the government will give consumers the ability to switch deposit accounts “with the stroke of a pen”, in announcing a plan to ease account movements. The measure, which the Treasurer said will remove the burden of having to change the details of automatic debit and credit transactions – thereby making it easier for consumers to swap banks – is to be finalised after industry consultation by 1 July 2012.

Customers will sign just one form that authorises their new institution to do all the ‘heavy lifting for them’.

THE ONLINE REACTION: JD on 22 Aug 2011 12:11 PM It would be great if the government made it just as easy to ‘flick’ the government every time they stuffed up and wasted taxpayer money. The pen would have run out of ink.

Paradime on 22 Aug 2011 12:11 PM Wayne, it will only be reviewed in two years if the coalition decides to review it because you won’t be around then.

WhistleBlower on 22 Aug 2011 12:41 PM I must admit, I love the way politicians drag out lame news and plant it in the media to cover one of their own. Good one Swannie and on a Sunday – awesome job.

Chris C on 22 Aug 2011 01:14 PM Everything else Swannie has

16 | BROKERNEWS.COM.AU

done ends up playing right into the banks coffers and costing us a fortune. I wonder how much this one will cost us? Banks will not do all this work for free. Lower deposit rates, higher fees or higher loan rates and fees across the board will be brought in to compensate. mortgageandlease on 22 Aug 2011 01:30 PM How is this supposed to work? BSBs will still have to be changed or we will have payments bouncing everywhere. As usual, this is some sort of spin to take off the Labor government’s ineptitude in most areas. I really can’t see how this will work. sidbroker on 23 Aug 2011 11:46 AM To mortgageandlease – has anything ever worked that any Labor governement has done? Possibly their credit cards do when some of the MPs wish to enhance their lifestyle at the taxpayer’s expense!

Much more of a concern for consumers.

NEWS / COMMENT

BROKERNEWS.COM.AU | 17

NEWS ANALYSIS / MULTIMEDIA

THE BIG STORY

Every week, Australian Broker News rounds up influential figures to discuss issues in the industry. Watch these bite-sized videos on our website.

Here we bring you highlights of the latest clips The subject Is the property market facing a crash?

The lowdown The globe has witnessed a period of turbulent economic conditions – but what does this portend for Australia’s housing market? Is buyer interest in property returning, or still in decline? What are the key current market opportunities for mortgage brokers?

Steve Keen, economist “It’s not just America that’s having a downturn, it is most of Europe including England as well as Japan. Out of those, you have most of

18 | BROKERNEWS.COM.AU

our trading partners having a diminished demand for our exports and the only country keeping us rolling is China.”

The subject Do lending panels offer enough choice?

The lowdown Aggregators have been criticised for being too slow to adopt new panel lenders to offer member brokers and their customers more choice. Have aggregators forgotten their roots, or are they being prudent in order to create the best lender mix available for their members?

Peter Bromley, LJ Hooker “One of the

Nicole Cannon, Pink Finance

things we often forget is we’ve got a great country – good infrastructure, a very sound banking system and the economy is built on more solid foundations than 20 or 30 years ago and we shouldn’t forget that. We often get influenced by factors from overseas.”

“I had a case where my aggregator had a new lender on their panel who I had a good relationship with via a BDM from their previous lender. I had put a loan through with that funder and it wasn’t until after the loan had settled that I was able to submit the commission enquiry because it took them so long to load the documentation and specs to our panel.”

Mark Bambagiotti, Mortgage Choice “We’ve seen a significant reduction in fixed rates, so that might lead one to think that the availability of funds for lenders is strong and they are able to pass on these rates to borrowers in the form of lower fixed rates. We’ve also seen continued discounting in the variable rate space as well, which is all good news for borrowers.”

PB “In the eastern states we’ve seen auction rates over 50% in terms of clearance rates and days on market come down. We’re seeing some encouraging signs, particularly in Sydney and Melbourne, so that’s positive. There’s steadiness in the market and the next step is where it goes from here.”

SK “When the bubble starts to burst in housing, it’s not like a stock market crash.

With stock market crashes you can lose 22% on one day, but with the property market what happens is people who don’t get their reservation price withhold the property on the market and don’t sell so you get an expansion of unsold stock.”

Andrew Russell, Mortgage Choice “We have a pretty big team in lending operations and they are currently reviewing our panel to ensure we’ve got the best of breed products.”

Tim Brown, Vow Financial “We’ve put on three new panel lenders and the key for us was we felt with the market contracting, we needed more competition in that space.

We do want to see the non-bank lenders, the regional banks and the foreign banks get more market share. The first thing I ask a lender who wants to be on our panel is how they are going to be different to the other lenders. The last thing we want is a panel full of the same offering.”

AR “You may have a product in terms of conscript that is identical, but the service or location proposition may be a benefit to our network or our customers.”

TB “Brand is important, so for regional banks they tend to get on the panel simply

because they’ve got a strong brand in a certain area, but we help them to grow in areas they might not be so strong in. There are a number of factors we look at and financial support is important – whether they have history and have been in the industry a while. We would be reluctant to support a new mortgage manager versus one that is established.”

NC “I have my own licence. My whole plan with Pink Finance is to potentially grow it and get some more brokers on board. So having my own licence gives me the flexibility to be able to do that under the Pink Finance philosophy. We’re passionate about what we do, we’re different with what we do and we didn’t want to have restrictions of just the panel if there was a need to go to another lender.”

with our franchisees and customers, so we take that on board and go through a process of assessing those lenders and see how their products stack up relative towhat we have on the panel.”

TB “There is the occasional mortgage manager who has a special relationship with a broker and as long as the broker comes to us and asks for permission we allow those sorts of one-offs, but generally they are only using the mortgage manager for one deal and it’s not worth the time and effort of putting them on the panel.”

This month’s guests...

TB “What we keep on telling our brokers is that no-one gets paid to be good at compliance and administration and they should move their ACL under our ACR – that’s what aggregators are here to do – make their job easier. We are seeing a slow transition of ACLs moving back under our license as they start to understand the broader requirements of holding a licence and all the compliance that is required to satisfy ASIC.”

AR “From my perspective, if you can leverage off the skills and the scale of being able to manage a license with the compliance, the audit, dispute resolution and so forth, that would allow me if I was in that position to utilise the licence such as our brokers do with Mortgage Choice.”

Steve Keen economist

Peter Bromley LJ Hooker

Mark Bambagiotti Mortgage Choice

Nicole Cannon Pink Finance

NC “[Aggregators should] consult the brokers more as to what is out there because we see it and have people not on our panel contact us quite often and explain their niches. Being able to provide that feedback to aggregators would be valuable so they could get an idea of what is out there.”

AR “Brokers are constantly giving us feedback and that’s one of the great things about Mortgage Choice having dialogue

Andrew Russell Mortgage Choice

Tim Brown Vow Financial

BROKERNEWS.COM.AU | 19

NEWS / ANALYSIS

A NEW VOW

Vow Financial recently held its second annual conference on the idyllic Pacific Island of Fiji – a good place for brokers to go in search of ‘blue oceans’. Ben Abbott reports

Whether it was the ‘blue oceans’ theme or the Fiji location that was chosen first, both meshed perfectly together in early September when Vow Financial brokers congregated for their second annual conference, only 15 months after the group’s formation. The conference marked a true coming of age for the new Vow Financial. With no mention of the former constituent entities National Brokers Group, the Mortgage Professionals and The Brokerage, it was down to business for members who were all now proudly Vow. The group’s CEO Tim Brown (pictured left) summed up the new group’s vision in his opening address, which heralded the birth of a new era of professionalism for the broking industry. He said the key for brokers and aggregators of the future would be to adapt to the changing environment, which was demanding more than a simple mortgage transaction. To be successful, he argued, brokers would need to go in search of new opportunities – for ‘blue oceans’.

THE NEW ‘BLUE OCEANS’ Brown outlined an ambitious diversification agenda for the aggregation group and argued that this agenda would position members for “riding the wave” of the changing market and client needs.

“Diversification is a big priority, and it’s essential not only to the growth of our business, but your businesses,” he said. The new initiatives include multiple business lines in financial planning (Vow Wealth), property, general insurance and conveyancing (Vow Legal).

Commenting on the group’s recent alliance with general insurer Allianz, Brown said members had embraced the partnership, with $100,000 worth of premiums written in three months.

20 | BROKERNEWS.COM.AU

Likewise, Brown said Vow Legal – which will enable member brokers to earn fresh revenue from a conveyancing referral relationship with Astills Lawyers – will boost broker revenue. Brown also committed to delivering on the group’s promise for a robust IT system, announcing

that it had finalised a deal with Pisces that will see it roll out the IT provider’s client and loan management platform – the Spectrum Suite – in October.

MASTER OF CEREMONIES Following Brown’s welcome – which included an adept use of the native Fijian ‘Bula’ welcome, as well as a calculation of the lethality of falling coconuts – Vow Financial launched into a program designed to give brokers the tools needed to expand their business horizons.

Professional speaker and master of ceremonies ‘Big’ Dave Staughton (photo above) commenced proceedings, with a detailed exposition on how brokers could improve sales techniques through relatively simple methods – such as phone technique, and deflecting the focus from price – in order to greatly increase their volumes and transactional value. He was followed by Vow Financial marketing manager Matt Mitchener, who entered the world of online media to detail ways brokers could harness the likes of Google and Facebook to boost business.

A panel of brokers – Grant Howe of Lending 4 U, Citywide Lending’s Rodny Ghalie, Ian Jordan of The Selector Group, and Redconcierge’s Sarah Wells – got down to the nitty gritty of fee-for-service models and outsourcing administration tasks.

Meanwhile, Vow Financial invited partners such as Blue Wealth Property CEO Tony Hayek and Astills Lawyers’ Rowan Astill to

NEWS / COMMENT

BROKERNEWS.COM.AU | 21

NEWS / ANALYSIS

detail how brokers could add to their income streams by assisting in the property investment decision, as well as keeping conveyancing in-house.

But the programme wasn’t all about work – it was also about inspiration.

Australian thought leader on innovation and creativity Gary Bertwistle urged brokers to make the time and space to think creatively, in order to do things differently – and successfully. Likewise, Paul De Gelder (photo below) – once a rebel, drug dealer and navy diver – gave his advice on turning things around, as well as improvising, adapting and overcoming challenges, something he has had to achieve since losing two limbs to a shark attack in 2009.

AFTER FIVE Vow Financial arranged a series of wellreceived events following daytime sessions, where brokers networked with their colleagues and enjoyed the best Fiji had to offer. At the welcome reception, brokers shrugged off rainy weather outside the resort to indulge in a local buffet in tune with the “Market on the Beachfront” theme. The night was capped off by traditional dance performances by local Fijian groups, while those who were game trusted the attendant snake charmer enough to hold a snake long enough for a photo. At the gala dinner, members dressed up for a similarly vibrant event, which included a rousing pre-dinner drinks attended by Fijian fire-twirlers, a series of awards for stand-out performers from the Vow network, as well as the obligatory consumption of the local ‘kava’ brew. At opposite ends of the conference, many brokers also participated in a golf challenge, and a series of ‘Adrenalin Fiji’ beachside activities, including paragliding and jet skis.

VOWING NEW GROWTH For Vow Financial, Brown told members the next 12 months were about continued growth, largely through diversification.

Brown said the group had managed a 3% annual rate of growth since inception, and that it had successfully signed 49 new broker agreements over 12 months. Brown demonstrated Vow’s continued attraction to the

22 | BROKERNEWS.COM.AU

And the winners ...

Award

Winner

Vow Financial ‘Rising Star’

Hayley Grant, Vantage Financial

Blue Wealth Property Award

Anders Osterberg, iQ Finance

Broking Group of the Year (Settlements)

Citywide Lending

Broking Group of the Year (Deal Volume)

Australian Property Finance (Charlestown)

Broker Partner of the Year

Citywide Lending

industry by announcing it had recently signed up Elders Home Loans, which includes 30 businesses writing $30m a month in total. Brown said the deal would increase the aggregator’s regional footprint.

NEWS / COMMENT

BROKERNEWS.COM.AU | 23

FEATURE / SPECIALIST BROKERS

GETTING CUSTOMERS

THROUGH

THE

24 | BROKERNEWS.COM.AU

FEATURE / SPECIALIST BROKERS

Increasing pressure to diversify has forced many brokers to be all things to all people, but some argue being a jack-of-all trades effectively means you’re a master of none.

Andrea Cornish asks if brokers are better off sticking to one target market

DOOR

M

Most mortgage brokers – especially new entrants – can’t afford to be picky when it comes to clients. But some argue opening the door to all customers dilutes your expertise and weakens your overall service offering. The alternative: niche brokering. By sticking to one segment of borrowers you can tailor your business to fit your target customers’ particular needs and make a name for yourself as the broker in that particular area of borrowing.

PROPERTY INVESTORS

MO’R Options Michael O’Reilly launched his business in 2000 with his wife Loretta. The broking pair leveraged off their own experiences in real estate to grow a business that caters to property investors. “We first began investing in real estate in 1984 and as a team have accumulated over 40 investment properties since,” he explains. “The knowledge and experience we have gained as a result has been recognised by our clients as invaluable. Investment finance is something we’re interested in ourselves – it’s a natural fit for our business.”

Also central to O’Reilly’s decision to focus on this particular target market was his desire to create a business that was not transactionally focused. “We’re about building strong relationships with our clients one step at a time, aiming to meet their needs over the next 50 years,” he outlines. “We recognised a long time ago that to be profitable, it’s better to assist the same client with 10 loans over the next five years than to assist 10 different clients with one loan each.” Diversification can be a useful strategy, O’Reilly acknowledges, but he has tended to specialise rather than branch out. “We want to be exceptional in our core service area rather than average at providing car loans, personal loans, business loans, commercial loans, non-conforming loans, leasing and insurance.”

That said, after a major review of his client needs last year, O’Reilly started a real estate agency specialising in property management so he could offer a property management service to his investor clients. “This business operates completely separately from MO’R Mortgage Options and has allowed us to provide a greater range of services to our clients,” he reasons.

BROKERNEWS.COM.AU | 25

FEATURE / SPECIALIST BROKERS

NON-CONFORMING Red Rock Mortgages in Melbourne specialises in providing tailored property finance solutions for borrowers with unique lending needs. Lending manager Melanie Burns says this target market encompasses borrowers who may be self-employed with limited financials or have large and complex financial arrangements or the need for niche lending products not readily available, as well as those borrowers who are sub-prime and are unable for various reasons to obtain funding from mainstream lenders such as the major banks.

Burns says there are several advantages to targeting this borrower segment. “Borrowers seeking niche type lending are, in our experience, more likely to be repeat customers and more likely to refer business,” she recounts. “In addition, we have found that these types of borrowers are not always driven by market forces and therefore, despite lulls in lending as a whole, we have remained consistently busy.”

Burns adds that by specifically marketing their services to these types of borrowers, you become known as a specialist provider in a particular area and attract business as a result. She notes that there are some considerations brokers should make before committing to this

Pros and cons of niche brokering ADVANTAGES

DISADVANTAGES

Less competition from other brokers

Increased complexity

Enhanced brand awareness Concentration of effort Greater marketing potency Customer loyalty Less transactional – long-term clients

26 | BROKERNEWS.COM.AU

Can’t afford bad word-of-mouth Loans are more timeconsuming Greater potential for error Increased need to build lender relationships Smaller pool of customers to draw on

strategy. “Often the loan process from submission to settlement can be a lengthy one, given the nature of the borrowers there are intricacies to the products we write that require a large amount of preparation on our part.”

EXPATS Director of Australian Expat Loans Andrew Krauksts has carved his niche by servicing the needs of expats, temporary residents and foreign investors – borrowers, he says, who are subject to a range of laws and lending policies that make obtaining finance more complex compared with standard lending to residents.

“For this reason, many mortgage brokers try to avoid this area because the work is more complex, requires more expertise and more things can potentially go wrong,” he says. “Precisely because many other brokers shy away from this line of work, we have chosen to specialise in this area. We enjoy the challenging and technical nature of some of the work and have designed our whole business around making it as easy as possible for expats, temporary residents and foreign investors to buy property in Australia with a minimum of red tape.”

In order to better service these clients, Krauksts spent a considerable amount of time meeting with each lender representative to find out how they treat Australian expats in terms of their lending policies and procedures. “Areas such as loan processing, identification, foreign documents and translation, documents exchange, fact finds and loan recommendation are all areas that had to be built into the business to allow for a smooth process for overseas clients.”

There are several advantages to working with these types of clients, according to Krauksts. One is that many Australian expats are high-income earners, and as business people they know what they want. Another advantage is that he is able to conduct the majority of interviews without ever leaving the office.

Krauksts warns it isn’t all plain sailing, however. “The fact that a lot of work is completed via email and post, and that most expats are looking to buy as an investment for capital growth or to be a future home can make a transaction progress very slowly,” he says. “There is a lot of back and forth before the matter progresses. This is very different to working with clients face to face where a recommendation and sign up will occur much sooner.”

As well as being known for as an expert in this area, Krauksts says that there is very little competition in this broking sector. “I don’t think there is a huge amount of competition given that there are about one million expats.”

How to become a specialist Jane Slack-Smith almost fell into a career in mortgage broking. She was working as a mining engineer specialising in explosives when she took $45,000 and turned it into a multi-million portfolio in just seven years. Her success prompted friends and colleagues to turn to her for advice, and in turn she started sharing her low risk/low LVR investment strategies. It was her own mortgage broker Rolf Latham from ASAP Financial who suggested if she wanted to share her knowledge and earn some money at the same time

she should get professional indemnity insurance and become a broker. As a result she started Investors Choice Mortgages in 2005.

Slack-Smith says she looks at every customer – regardless of where they are in their home ownership pursuit – as a potential investor. “The average time in a home is between seven and 12 years. So if a person had identified an area they like and there were three suburbs in that area, imagine if they applied the criteria for buying that an investor does?”

She suggests the client could

buy a $400,000 property and with the average annual growth in 10 years it would be worth $800,000, or with superior growth at 14% then the property is worth $800,000 in just over five years.

“That makes a whole lot of difference to their net worth and their future purchases. Imagine as a broker if we could not just assist them with this education but also we then have the opportunity to assist them into their dream home – with a larger loan?”

Slack-Smith has also turned her attention to helping brokers service this market. To this end, Slack-Smith created Your

Property Success – an educational resource for brokers, financial planners and accountants to help them assist property investor clients.

The program consists of three separate seven-week courses for brokers to guide their clients through the entire process of property investment – from setting goals, budgeting and developing a property investment strategy to actually locating a property and getting the clients to formal approval.

The course also covers negotiating, contracts and everything else a client needs to know.

“For those looking at introducing a fee for

advice, this fits the bill,” she claims. “For those whose aggregators will not allow fee for advice, I have a very healthy 50% commission for the introduction of the client to the courses, so the broker still gets the benefit with their current model and differentiates themselves. All in all the broker gets a bettereducated client who will buy sooner and possibly even buy so well they can repeat the process quickly. And the mortgage broker – whose role is stressed throughout the training as being a key to achieving this success – becomes positioned as the provider of a superior service.”

BROKERNEWS.COM.AU | 27

SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

STANDING OUT Brokerages come in all shapes and sizes, from one–man bands to huge franchise operations. In this special report, Barney McCarthy identifies and profiles Australia’s leading independent brokerages

28 | BROKERNEWS.COM.AU

P

Prospective brokers have the choice of joining a franchise or going solo and setting up on their own. There are pros and cons of both routes, but in this report we have chosen to shine the spotlight on the independent brokerages that have chosen to go it alone. In any industry it’s not easy setting up your own business, but particularly so in a field where you are not only competing against your counterparts, but also against high street banks offering competitive rates. What makes the achievements of the featured brokerages even more impressive is that they have continued to thrive in an uncertain economic climate against a backdrop of a number of distractions, such as preparing for the licensing regime, falling commissions and the exit fee free-for-all.

METHODOLOGY To begin our search for Australia’s top independent brokerages, we asked six leading aggregators to nominate their five best non-franchise broking firms. Of those nominated, we then removed those with less than five brokers to avoid too much conflict with our prestigious Top 100 poll. We then contacted the remaining firms to ask them for a range of figures including loan book size, annual volumes, conversion rates and what percentage of their business was returning custom. To avoid a scenario where size prevailed over all, companies were awarded a score in each of the aforementioned categories to produce an overall score and the top 10 made this year’s hall of fame.

Congratulations to those firms who made the list and hard luck to those who just missed out including Independent Mortgage & Finance Services in Perth, Home Loan Experts/Dargan Financial in Sydney and Lawform Financial Services which operates in a number of states. Before we profile the best brokerages, a word from our sponsor St.George.

“These brokerages have continued to thrive against a backdrop of licensing, falling commissions and the exit fee free-for-all”

Proudly supported by

The past year has seen intense competition in the mortgage broking industry, and that level of competition creates an opportunity for the best of the best to step forward. As the industry talks about a challenging economy, diversification, new revenue streams and reducing exposure to risk, 10 independent brokerages have stepped forward, and they’re standing tall.

St.George Bank, BankSA and Bank of Melbourne are proud to sponsor MPA’s Top 10 Independent Brokerages list, an accolade that acknowledges and recognises the very same values that underpin the St.George Banking Group. Working together as a team, delighting customers, acting with integrity, and being the best that you can be are surely some of the most important attributes required to realise a successful business of any size.

To be named as one of the Top 10 Independent Brokerages by MPA is to be acknowledged nationally as a team to be reckoned with. Being a successful independent brokerage in today’s competitive and dynamic environment is a balancing act between achieving great numbers, understanding your customers and building a business where the best people want to work.

Working as a mortgage broker within a high-performing team to build a strong reputation and a respected brand is both challenging and rewarding. Customer satisfaction and advocacy are key to achieving that success, customers need to feel valued, and they also need to feel confident that their broker is giving them the best possible advice.

At St.George we’re passionate about education and we believe that ongoing recognition of high-performing mortgage brokers will inspire others to do better, which can only be positive for our industry.

Congratulations to those who have made the St.George and MPA Top 10 Independent Brokerages list for 2011. We acknowledge your absolute drive and commitment, and applaud you for setting the standard.

Darren Little, acting general manager of intermediary distribution, St.George

BROKERNEWS.COM.AU | 29

SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

BROKERAGE

STATE

LOAN BOOK

VOLUME

BROKERS

VOLUME PER BROKER

CONVERSION RATE

% OF REPEAT BUSINESS

WA

$850m

$240m

8

$30m

88%

50%

VIC/NSW

$550m

$170m

5

$34m

85%

45%

WA

$1.2bn

$325.9m

8

$40.7m

80%

20%

1

Better Choice Mortgage Services

2

Property Planning Australia

3

Mortgage Solutions Australia

4

Oxygen Home Loans

NSW/QLD

$800m

$684m

21

$32.5m

82%

31%

5

Able Finance

NT

$504m

$125.2m

6

$20.8m

84%

62%

6

Buyer’s Choice Home Loan Advisory

All

$3.5bn

$914m

85

$10.7m

80%

47%

7

House & Home Loans

WA

$960m

$216m

8

$27m

80%

30%

8

Easy Loans

NT

$440m

$80.3m

7

$11.4m

85%

80%

9

Australian Lending & Investment Centre

VIC

$261.4m

$256.1m

5

$51.2m

83.50%

25%

10

Tassie Homeloans

TAS

$459m

$110m

7

$15.7m

95%

25%

10

Tassie Home Loans

Location: Hobart, Launceston, Devonport and Burnie – TAS Loan book size: $459m

Robert Brand

Annual volume (2010/11): $110m Number of brokers: 7 Annual volume per broker: $15.7m Conversion rate: 95% Percentage of repeat business: 25%

ROBERT BRAND, MANAGING DIRECTOR

Q: What’s the secret to a successful brokerage?

A: The biggest thing is that we’ve been trying to be a more complete provider of financial services to our clients and that’s why we’re continuing to do reasonably well despite the bad times. We’re continuing to add on more services so that we’re providing our clients with more than just filling in an application form for a home loan by expanding into insurance, conveyancing and real estate.

Q: How was the company started and what is the appeal for brokers 30 | BROKERNEWS.COM.AU

joining an independent brokerage and customers using one?

A: The company was set up 16 years

company adopting a fee-forservice model in the future?

A: We already have. As of 1 July we

ago, initially to manage government social housing portfolios. It evolved into a broking firm over a period of time, before it was as common as it is now. There was never a suggestion of going under someone else’s banner, it was set up as a private company. In Tasmania, it’s quite important to be seen as a Tasmanian firm with your own identity, so with a name like Tassie Home Loans, it’s selfexplanatory and people relate to it; I doubt we could have a better brand.

introduced a $200 application fee at lodgement that is only refundable if the loan is declined for reasons beyond the applicant’s control, such as an unreasonable valuation. If it’s due to a credit history they didn’t disclose or something like that, we don’t refund.

Q: Does that local loyalty account for a lot of new business and negate the need for much marketing?

A: We get a lot of referrals – probably 80% of our business is sourced that way.

Q: How does your annual volume figure compare to 2009/10?

A: Our volumes are down, but our market share increased by 1% during the year, so I guess we didn’t fall back as far as everyone else.

Q: As commissions continue to be squeezed, can you see your

Q: Do you see more brokerages following suit?

A: There are two very strong camps, one for and one against, but we have encountered zero customer resistance to our model.

Q: What effect do you expect licensing to have on your business?

A: Due to the fact we manage about 13 different loan portfolios on behalf of the state government, Bendigo Bank and St.George, we are regularly audited by these other bodies and we’ve always had high operating standards. The new legislation did bring in a lot of repetitive and superfluous regulation which we’ve had to comply with, but the leap is probably a lot less for us than it was for other people.

Proudly supported by

9

Australian Lending & Investment Centre

Location: Melbourne, VIC Loan book size: $261.4m Annual volume (2010/11): $256.1m

Mark Davis

Number of brokers: 5 Annual volume per broker: $51.2m Conversion rate: 83.5% Percentage of repeat business: 25%

MARK DAVIS, DIRECTOR

Q: What’s the secret to a successful brokerage?

A: It’s important to have an investment division that caters for top-end clients that leverage and invest in all markets.

Q: Why did you choose to set up on your own and not become part of a franchise?

A: I designed the idea for ANZ six years ago as a wealth management concept to lending. I left there two years ago and set up Australian Lending & Investment Centre (ALIC). I didn’t believe in paying commission to a franchise and I don’t believe the referral sources are

of the quality or type I would go after. It’s a lot more expensive to go the franchise route and I believe you should be able to back yourself. I rolled out ALIC with my business partner Kevin Agent and we’re the two directors.

areas. One of our beliefs is to be an expert at what you do, you need to focus on one thing. We bring our business partners into the equation and refer other business onto them.

We don’t believe in one-stop shops, but being the best at what you do.

Q: How do you go about marketing your business?

A: It’s mainly through word of

Q: What’s your stance on brokers charging a fee for service?

A: If that’s where we have to go, we

mouth, but we also market through our business partners. We pass on about 900 referrals to our external sources per year and expect to get about 450 back. We don’t even have a proper web page, but still wrote $256.1m in a year.

will. Most of our clients are investors who value what we do, so they won’t have any issue with paying a fee. It will be interesting to see whether it hurts the broker channel as customers will be able to go to a bank and get a home loan without paying that fee.

Q: As a fairly new company, I guess your volumes are continuing to rise at the moment?

A: We’ve only been around two years, but we’re on track to write $300m this year. Our ambition is to take that to $1bn in the next three years.

Q: Have you diversified your business beyond home loans?

A: We have an investment lending division and the home lending side, but we haven’t gone into other

Q: What effect do you expect licensing to have going forward?

A: The more licensing, the better for the industry. The industry has shed a lot of deadwood over the last two or three years and as margins have decreased, a lot of people haven’t been able to make a dollar to stay in the industry. I see that as an opportunity for good operators to come into the industry and that’s why we started at a time when a lot of people were exiting.

BROKERNEWS.COM.AU | 31

SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

8

Easy Loans

Location: Darwin, NT Loan book size: $440m Annual volume (2010/11): Mark Roesler

$80.3m

Number of brokers: 7 Annual volume per broker: $11.4m Conversion rate: 85% Percentage of repeat business: 80%

MARK ROESLER, DIRECTOR Q: What is the secret to a successful brokerage?

A: Only employ people who are

focused on service and come with extensive banking and finance backgrounds. Our loans managers include three former ANZ bank managers, an erstwhile NAB bank manager, a financial planner, an accountant and an experienced broker from another firm.

We offer over 140 years of collective industry experience and have a reputation for providing quality service and advice. We never have and never will pay a referral fee to an agent. Win the business based on your ability to provide quality service – not on your ability to pay a referral fee.

Q: Why did you choose to set up on your own and not become part of a franchise?

A: At the time established in 1996, the industry was in its infancy.

Aggregators and franchise brands were not commonplace. Being former bank managers, we had good industry contacts and arranged for direct accreditation with the banks themselves. It wasn’t until 10 years later that we joined PLAN.

32 | BROKERNEWS.COM.AU

Q: How do you market your business and how important are referrals?

A: We don’t spend any money on advertising other than Yellow Pages. Our book has been built based primarily on ref­errals from real estate agents and has since grown from within our existing client base. We are regularly in contact with our clients via various mail-outs and our goal is to touch base with every client at least three times a year. Referrals and repeat business are our life blood.

Q: How are your volumes tracking compared to 2009/10?

A: Our volumes are comparable to 2009/10. We are anticipating significant growth over the coming years with the LNG projects which are to come on line.

Q: Have you diversified your business or do you just offer home loans?

A: We have a commercial loan writer and also have arrangements in place for general and risk insurances. We also have a referral program in place with a financial planner.

A: In my opinion, charging a fee for service would be the beginning of the end of our industry as we know it today. Brokers would not be a competitive option for prospective clients compared to the bank branch networks. We would run the risk of the banks having the ability to be able to offer a free service as opposed to our fee for service model. We would be in the opposite position to what a broker can offer today. A free service is one of our competitive edges.

Morally I would find it difficult to charge a client a fee when I know that the local bank down the road can offer the same deal at no cost.

Q: What effect do you expect licensing to have on your business?

A: Licensing is a great thing for the industry, and I am a strong supporter of it. We all hope that the regulatory requirements restrict the ease in which inexperienced or unethical brokers can enter and continue operating in our industry as they have in the past.

Q: As commissions continue to be squeezed, can you see yourself adopting a fee-for-service model?

“We will never pay a referral fee to an agent. Win the business based on quality service – not on your ability to pay a referral fee”

Proudly supported by

BROKERNEWS.COM.AU | 33

SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

7

House & Home Loans

Location: Osborne Park, WA Loan book size: $960m Annual volume (2010/11): Rael Bricker

$216m

Number of brokers: 8 Annual volume per broker: $27m Conversion rate: 80% Percentage of repeat business: 30%

RAEL BRICKER, MANAGING DIRECTOR

Q: What is the secret to a successful brokerage?

A: We’ve stuck to a philosophy of employing people who have never worked in a bank, but have a strong finance background, and servicing our referral relationships.

Q: Why did you choose to set up on your own and not become part of a franchise?

A: I didn’t become a finance broker by design and my background was in corporate finance and venture capital. People started saying I did a good job of organising their business loans and asked if I could arrange their home loans. It was never an option to join a franchise as I’m fiercely independent – I’ve only earned a salary for three-and-a-half years of my life. I’m 47 now and I’ve worked for myself since I got my second Masters degree.

as adwords and social media and generates leads on one side of the business; and House & Home Life.

With House & Home Loans about 30–40% is repeat business and another 30% is referrals, so we don’t have to do much advertising.

Q: How are volumes tracking compared to 2010/11?

A: Volumes are up by around 10% year-on-year.

Q: Have you diversified or do you just offer home loans?

A: We have a business called House & Home Life which is a fully-licensed financial planning business; it handles risk insurance and strategic relationships with property sales.

Branching into financial planning is the correct thing to be doing under NCCP and responsible lending because you need to look at people’s risk profiles and insurances.

Q: What is your take on fee-forservice models and do you see your business going down that route?

A: I’m not a fan of charging a fee for service and even in our risk business we don’t have it, but I do think there is a place for a consulting fee for complex clients. We have introduced a clawback clause into our finance broking contract as opposed to an upfront fee. If we get clawed back within two years, we will invoice the client and we have recently issued the first of these.

Q: How do you market your business and how important are referrals?

A: Within our group we have three

Q: What impact do you expect licensing to have on your business?

A: I think it’s good and the strong will

businesses – House & Home Loans which is the licensee and the controlling shareholder in everything; Rate Detective Home Loans which is internet-driven using the latest technology and things such

survive. The idea of raising the bar of professionalism in the industry is positive and licensing will do that to some degree. It’s not the total answer, but it will go some way to getting rid of the cowboys.

34 | BROKERNEWS.COM.AU

Proudly supported by

6

Buyer’s Choice Home Loan Advisory Service

Location: National group Loan book size: $3.5bn Annual volume (2010/11): Mick McClure

$914m

Number of brokers: 85 Annual volume per broker: $10.7m Conversion rate: 80% Percentage of repeat business: 47%

MICK MCCLURE, MANAGING DIRECTOR

Q: What’s the secret to a successful brokerage?

A: Focusing on the client. The secret to the success of the group is focusing on providing great services for our members, but we’ve encouraged all our brokers to concentrate on the basics with their clients and provide quality service on an ongoing basis.

It’s about sticking with your client, becoming a trusted adviser and keeping in touch with them.

Q: What was behind your decision to set up your own brokerage rather than simply joining a franchise or existing group?

A: I was quite disenchanted with the various business models that were out there and I’m not a fan of franchising at all. With the partners I had around me, we wanted to create a model that supported brokers. As it says on our website, Buyer’s Choice is a business built by loan writers for the benefit of loan writers. It’s all about making sure our members are secure in terms of their environment, their clients and their commissions, and making sure they have support. The more things the group could provide centrally for the brokers, the more time they could spend with their clients. We initially wanted to become

a group of about 50, then we revised that to 150 over the years. We bring on new people quite slowly and that’s important because we can’t support lots of new brokers if they start at once. We don’t grow aggressively, we bring people on who are the right fit with a combination of experienced and industry newcomers.

Q: How do you market your business?

A: Most of our business these days comes from referrals from existing clients of our members. We have a website which is undergoing an overhaul. We were a very big Yellow Pages advertiser in the early days, so we got our initial momentum from those sorts of sources. We also have good referral arrangements with accountants and solicitors. These days most of the enquiries come either directly to the brokers from their existing client base as a result of things like e-newsletters.

Q: How are your volumes tracking compared to 2009/10?

A: We’re probably still 30% off our peak. Pre-GFC we were tracking round $130m–150m a month and we’re doing around $100m a month at the moment. The GFC certainly had a big impact, but nowhere near as much as we expected. The brokers that had good relationships with their clients and maintained those continue to get the business. These are confusing times for customers with the competition between the banks, so they are far more likely to ring a broker now than they were before.

Q: Have you diversified your business beyond home loans?

A: Nowhere near as much as we would like yet, but we have started.

We write a range of risk insurances, some where the brokers write it

themselves and some where they refer it off. We have property referral, wills and conveyancing arrangements through which we earn an income stream, but it’s still in its infancy. The core business is still 90% home loans with some commercial finance and leasing. The reason a lot of brokers haven’t diversified as much as they should have is that they’ve suffered through the GFC and regulation and just wanted to focus on home loans and worry about the add-on services later, but we’ve now arrived at ‘later’.

Q: What is your take on fee-forservice and do you see your company adopting such a model?

A: Charging a fee for advice we will put on the menu. A lot of our brokers are very cautious about it, but I think there is a justification for charging for the advice portion of the service. The banks are paying us for the service part, so that’s not so important. We will add that into the mix and it will be optional for our brokers. There will be cases where brokers have done an enormous amount of work for a client and have shopped all over town and a fee in those cases will guarantee commitment.

Q: What effect do you expect licensing to have on your business?

A: It’s already had some positive effects. We haven’t lost anyone and it’s brought a new focus on professionalism for all of our members and has sharpened up our IT software offering which includes templates and documents. It’s brought a better standard to all brokers so they follow set procedures.

The days of being a ‘hit and run’ broker are gone and I think that will lead to deeper relationships with clients. Brokers will need fewer customers as they will do more business with the ones they have.

BROKERNEWS.COM.AU | 35

SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

5

Able Finance

Location: Darwin, NT Loan book size: $504m Annual volume (2010/11): $125.2m

Number of brokers: 6 Annual volume per broker: $20.8m Conversion rate: 84% Percentage of repeat business: 62%

SHANE CROWLEY, MARKETING MANAGER

Q: What is the secret to a successful brokerage?

A: Putting the client’s objectives ahead of your own. We have a huge volume of returning clients and individuals that are referred by existing clients solely because we look after people. We do a lot of pro bono work where we know we’re not going to get anything, but we know that by helping out the clients you’re going to reap the benefits in the future.

Q: Why did you choose to set up on your own and not join a franchise?

A: The main thing was independence – not being told what to do and how to set things up. We’ve run the business how we wanted to and set it up our own way. We haven’t had to rely on someone down south telling us how to run a business in Darwin.

It’s a different socio-economic status in terms of the way people are and the economy itself.

the settlement which gives us a fair amount of volume back. We also send out our own personal newsletter as well as birthday and Christmas cards.

Q: How are your volume figures tracking compared to 2009/10?

A: As with the rest of the industry, we had a bit of a shortcoming at the start of the year. We weren’t doing the huge dollars that we were doing, but we were doing some good dollars. It’s a change of business towards refinancing and helping clients out.

In the last two months it’s really changed round again and first homeowners are coming back in. A lot of investors are seeing there is good value in the Darwin market too.

Q: How much have you diversified your business?

A: We started up a financial planning division two years ago and have branched into risk insurance. We’re in the initial stages of setting up a general insurance offering as well.

Q: Do you see your company adopting fee for service in future?

A: No, we don’t want to go down that route. In terms of valuing your service to a client – especially with the prevalence if the internet and other research tools – it would be hard to charge them. Even though we offer a huge amount of expertise, we can’t see fee for service working. If things go that way, the industry will show signs of weakening in the future.

Q: How do you market yourself?

A: We do a lot of TV advertising,

Q: What impact do you expect licensing to have on your business?

A: We’ve rolled with the punches and

mainly in scheduling areas where there is limited ad space between breaks, so thing like cricket and rugby. We also do referral vouchers, so whenever clients refer business to us we give them a $100 voucher for

have used it to our benefit. We’ve used it in our marketing to show the client more information about ourselves and it’s also a good way to try and weed out some of the rogues who are still around.

36 | BROKERNEWS.COM.AU

4

Oxygen Home Loans

Location: Offices across NSW and QLD Shane Crowley

James Green

Loan book size: $800m Annual volume (2010/11): $684m Number of brokers: 21 Annual volume per broker: $32.5m Conversion rate: 82% Percentage of repeat business: 31%

JAMES GREEN, GENERAL MANAGER

Q: What is the secret to a successful brokerage?

A: Combining a strong value proposition with top customer service.

Q: Why did you choose to set up on your own and not become part of a franchise?

A: We didn’t need the assistance of a franchisor. We wished to develop our own value proposition, procedures, values and culture.

Q: How do you market your business and how important are referrals?

A: We conduct a lot of face-to-face meetings with our referrers.

They account for 80% of our total business and are the fastestgrowing segment in our business.

“Licensing has made it a lot harder to do business, but it has made our industry more professional and reputable”

Proudly supported by

We also market via electronic direct mail and through industry media such as MPA and Australian Broker.

Q: How are your volumes tracking compared to 2009/10?

A: Our settlements are up 65% year-on-year.

Q: Have you diversified your business or do you just offer home loans?

A: We have diversified into

3

Alan Hancock

Mortgage Solutions Australia

Location: Offices in Doubleview, Kalgoorlie and Albany – WA Loan book size: $1.2bn Annual volume (2010/11): $325.9m Number of brokers: 8 Annual volume per broker: $40.7m Conversion rate: 80% Percentage of repeat business: 20%

financial planning and risk insurance, and we work closely with McGrath with regards to property management.

ALAN HANCOCK, MANAGING DIRECTOR

Q: As commissions continue to be squeezed, can you see yourself adopting a fee-for-service or commission refund model?

A: We have discussed both types

knowledge of the applicant, the broker’s knowledge of products that are available to service that applicant, attention to detail and empathy.

of fee-for-service models, but have not made a decision on either yet.

Q: What effect has licensing had on your business?

A: Licensing has made it a lot harder to do business and more time consuming for the customer, but it has made our industry more professional and reputable.

Q: Do you have your own licence or have you become a credit representative?

We have our own ACL and our brokers can either have their own licence or be a credit representative under ours. Being a credit representative is far more costeffective for our team as it costs only $99 per month for the whole package including professional indemnity insurance and being affiliated to the Credit Ombudsman.

Q: What is the secret to a successful brokerage?

A: The main ingredients are

Q: Why did you choose to set up on your own and not become part of a franchise?

A: I wrote the initial plan and concept for the company. We never considered anything else other than going alone. We associated with PLAN very early in the piece and worked in conjunction with its originators. We made the decision to go as brokers rather than mortgage managers in the early days.

again and the three months to September showed an improvement over the six months before that.

There was certainly a dip in the first six months of the last financial year.

Q: Have you diversified your business or do you just offer home loans?

A: We certainly have. The total business has got the number one selling real estate network in WA which provides a lot of referrals.

We also have financial planning and settlements businesses, so we’re a one-stop shop.

Diversification isn’t easy, but it’s a way to go and cross-selling will be a way of the future.

Q: What’s your take on the fee-for-service debate?

A: We’re working on the basis that if fee for service became the way to do it, we would have a value proposition that would support that from day one.

Q: What impact will licensing have on your business?

A: We’ve basically been ahead of the licensing requirements being in WA and we intend to remain a friend to the licensing regime. We’ve got a full licence and we were in the first dozen or so companies in Australia to get that organised.

Q: How do you source your business?

A: The starting point of the business was based on referrals and that has continued, but word of mouth has overtaken that as a bigger percentage.

Q: How are your volumes tracking compared to 2009/10?

A: We’re just starting to pick up BROKERNEWS.COM.AU | 37

SPECIAL REPORT / TOP INDEPENDENT BROKERAGES

2

Property Planning Australia

Location: Offices in Hawthorn, VIC and Bondi Junction, NSW Loan book size: $550m David Johnston

Annual volume (2009/10): $170m Number of brokers: 5 Annual volume per broker: $34m Conversion rate: 85% Percentage of repeat business: 45%

DAVID JOHNSTON, DIRECTOR Q: What is the secret to a successful brokerage?

A: Looking after your client and having integrity with the advice and service that you provide – making sure the client is at the centre of everything you do.

Q: Why did you choose to set up on your own and not become part of a franchise?

A: To have the ability to drive something ourselves, to be able to bring more creativity and ingenuity to it and not be constrained in what we could do. I’m not too good at being told what to do.

Q: How do you market your business?

A: We do some PR work in the consumer media such as Your Investment Property and we also run a property education course with Victoria University which helps us to get exposure. We get a lot of cross referrals internally from other areas of the business. Referrals from existing clients are a major source of business too.

Q: Have you diversified your business beyond home loans?

A: We have a financial planning arm to the business, as well as offering property and tax advice and risk insurance. We have a holistic approach to all our clients and offer a smorgasbord of services that allows them to pick and choose.

We incorporate the property decision-making process in everything we do.

Q: I know you use a fee-for-service model in other areas of your business, but do you envisage implementing it in your home loan division?

A: No, we haven’t. We associate value with the mortgage advice we give, but we don’t charge the clients a fee because they can still go down the road and do it at no cost at a bank.

“We have a holistic approach to all our clients and offer a smorgasbord of services that allows them to pick and choose” 38 | BROKERNEWS.COM.AU

Q: What impact do you expect licensing to have on your business?

A: It certainly increases the workload to the business and everyone within it. It will have a positive impact in terms of the way the industry is seen and we have started to see some of the less serious operators leave the industry.

As long as the regulation doesn’t become too onerous it can only be a good thing.

Proudly supported by

1

Better Choice Mortgage Services

Location: Balcatta, WA Loan book size: $850m Annual volume (2010/11): $240m

Number of brokers: 8 Annual volume per broker: $30m

Conversion rate: 88% Percentage of repeat business: 50%

SEBASTIAN SCURRIA, DIRECTOR

Q: What is the secret to a successful brokerage?

A: Consistency and not chasing the hobbyhorse of the day.

We’ve focused our business around real estate purchase and not zeroed in on a particular area within that – our referrals come mainly from real estate agents and existing clients.

We are focused on what we

do and haven’t taken our eye off the ball by becoming financial planners.

Q: Why did you choose to set up your own company rather than become a franchisee?

A: My business partner Vic Giannakis had been in broking for three years longer than me and identified me as someone he wanted to consolidate with. We shared the same business ideals and have similar backgrounds, even though we’re different types of people.

Q: How do you market your business in addition to the referral system you mentioned?

A: We’ve put a lot of money into internet-based advertising and our website, utilising things such as pay-per-click.

We do a lot of marketing to our existing database too. We really want to motivate our brokers to get out there and wear out some shoe leather calling on real estate agents, accountants, financial planners – they’re the people who are going to grow your business.

Q: How are your volumes tracking compared to 2009/10?

A: We’re still trying to recapture the glory days of 2006/7, but volumes are up from 2009/10.

Q: Have you diversified your business beyond home loans?

A: We’d rather outsource everything in that regard. We don’t want our brokers to become financial planners as we have one in our office that we refer to. Through our aggregator we have loan protection and general insurance available to us, so we believe that’s covered off.

We don’t want our brokers to be all things to all people, but experts at what they do.

Q: What is your stance on the fee-for-service debate?

A: I wouldn’t like to see us go down that path. The consumer has been used to not paying a finance broker for 20 years and trying to change that is going to be extremely difficult. Anyone who says that it’s not either hasn’t worked at the coal face as a broker or hasn’t researched the matter properly.

BROKERNEWS.COM.AU | 39

40 | BROKERNEWS.COM.AU

HEAD TO HEAD / GREG KIRK

BIG INTERVIEW THE

Greg Kirk is the senior executive leader, deposit takers, credit and insurers, at ASIC. Here he speaks to Barney McCarthy about regulation, professionalism and broker evolution Q: What was your background before you joined ASIC? A: I originally did arts and law at university, then had

Q: How many individuals and companies applied for a licence?

A: We’ve now licensed 6,081 entities and, in addition,

a year working as a Judge’s Associate. I then worked for a private law firm in Sydney – Clayton Utz – where I was mostly acting for lenders. I subsequently worked at the Consumer Credit Legal Centre, so I was working for borrowers at that point. I then had a few years doing consulting, which included doing work for some of the dispute resolution schemes both in insurance and banking.

I then worked for the Public Interest Advocacy Centre, which had less of a focus on financial services and centred more around human rights and discrimination, but we were involved in one major class action involving the government’s Home-fund loan scheme that ran into trouble. From there I came to ASIC, initially in the consumer directorate and for the last couple of years in my current role. I joined ASIC in 2001, so it’s been 10 years now, but there was a break in 2005/6 when I worked for the financial regulator in Ireland.

those entities have just over 24,000 credit representatives.

Q: What kind of split have you seen between brokers applying for their own licence or becoming credit representatives?

A: To some extent it’s difficult to say because we didn’t have a clear figure of the total population before this process started. We went round the states and to various industry bodies trying to get good data so we could prepare for this process, but because of the way they were regulated previously there was no definitive figure of how many mortgage brokers were out there. The registration process, which happened between April and June 2010, required everyone to register and at that point – and you could register unless you were intending to be a credit representative – nearly 15,000 entities registered. At that time there was a lot of debate among brokers about which was the best model to adopt – getting your own licence or being under the umbrella of

BROKERNEWS.COM.AU | 41

HEAD TO HEAD / GREG KIRK

a larger group licence. Certainly 15,000 was quite a high figure and as that debate continued, clearly a lot of people made the decision that they would prefer to be under someone else’s licence and let them manage and develop compliance systems. We’ve really come back from that figure of 15,000 to that figure of 6,000 who have licences and consequently we have a relatively high number of authorised credit representatives.

Q: Does ASIC have a stance on whether brokers should have their own licence or be a credit representative or is it a case of whatever suits them?

A: It’s designed to be a flexible model and the balance of credit representatives and individual licensees could change over time depending on peoples’ experiences.

People might start to see that having a licence on your own and meeting the compliance standards may not be as difficult or as bureaucratic as they thought and we still might see an increase in people who go out on their own. Alternatively, brokers might see that people who are acting as credit representatives haven’t lost their independence, still have their own identity and the benefit of someone else’s licence. The only state across the country that had a pre-existing licensing system that was equivalent to the new one was Western Australia and the percentage of licensees relative to credit representatives there is somewhat higher as they were used to meeting the license standards themselves.

Q: What advantages will regulation bring to the industry in terms of increased professionalism? Are the brokers who have chosen to stay in the industry the ones who were operating by the book anyway?

A: To some extent, for businesses that were already operating professionally, there won’t be huge change involved in this regime. They have to meet the standards of having fit and proper people managing them, they’ve got to meet competence and training standards, they’ve got to have adequate resources, they’ve got to have some sort of compensation arrangements in place, which is usually PI cover, and they’ve got to be a member of an external dispute resolution scheme. For a lot of good businesses, they already had all those things in place and a lot of them were already members of the Credit Ombudsman Service, they already had PI cover and were already meeting training standards mandated by the industry bodies. The difference is that this is now the standard across the industry, so the level of professionalism of the slower players is being brought up to speed. For the industry overall, that should ensure that good businesses are not undermined by the poor practices of a few getting a lot of bad publicity and should help enhance the level of consumer trust in

42 | BROKERNEWS.COM.AU

Out of office I certainly like travel. My wife, although from New Zealand, her family background is Chinese, so we’re heading off to Shanghai fairly shortly. Exercise wise, I like cycling and I occasionally try to combine travel and cycling and go cycling touring. The last one I did was through the Pyrenees, which was very nice. I’m also a long-term yoga practitioner and enjoy films and books.

brokers, both through the fact that consumers put some reliance on the fact there is a government regulatory system in place and people are licensed and then if their experience is consistent with that – that whoever you go to you get a good standard level of service – that’s going to be good for the industry overall.

Q: I know you said ascertaining the size of the broker population before licensing was difficult, but do you have any idea of how many brokers decided against becoming licensed and left the industry?

A: The anecdotal evidence is that before this regime came into place there were quite a few people who were very part time or very casual as brokers. These people may have had full-time businesses at some point and moved on, but were doing very little business yet still calling themselves brokers. I suspect some of them will have dropped out. We rejected 400 applications just because they didn’t include all the relevant documentation and an additional 637 entities withdrew their applications before they were finalised. A significant number of those 637 probably made a late decision to become a credit representative having already put in an application for a licence. A percentage of those that pulled out did so after we asked them for further information or compliance plans and realised licensing was more serious than they thought and that if they had to comply with the regime they didn’t want to continue. Thus, there was a significant sifting process through that licensing phase.

Q: Now the regime has begun, will there be an adjustment period before fines and bans are issued – a chance for brokers to find their feet?

A: At any time, our approach depends on a number of factors including how serious the misconduct was, whether it was inadvertent or deliberate or reckless, what the past record of the entity is like and whether they have taken any steps themselves to remedy any damage caused to the consumer by their misconduct.

Depending on those factors, we might take more or less serious action. The newness of the regime is an additional factor. It’s not going to be the sole determinant of our approach, but we regard it as a very relevant consideration, among those others, in deciding what the appropriate regulatory tool is to deal with the misconduct at hand. For players who are clearly trying to comply with the regime and have inadvertently misunderstood one of the requirements or they’ve had some sort of system breakdown, then the novelty of the regime means we’re more likely to focus on bringing them into compliance rather than punishing them for non-compliance. But if the misconduct was serious and

“We rejected 400 applications just because they didn’t include all the relevant documentation” there’s no evidence they were making legitimate and serious efforts to comply in the first place, then we might – even at this time – move straight into more serious deterrence, action or enforcement.

Q: In the UK when the Financial Services Authority began its regulation of the mortgage industry back in 2004, they adopted a similar approach to helping brokers understand the directives rather than taking action straight away.

A: That’s particularly true where either there was no damage to consumers or they are willing to do something to address any damage caused.

Q: What’s ASIC’s take on how the exit fee ban will affect the mortgage industry?

A: Our role there really is to ensure there is compliance with the ban, just as our role previously has been to ensure there was compliance with the restrictions on exit fees. To that end, we had put out regulatory guidance on the previous restrictions on exit fees and we’ve just updated that to include the ban. All existing loans are not subject to the ban but the previous restrictions still apply and we need to make sure that is understood. In terms of the impact on the industry, we monitor trade publications like your own and general feedback from the industry about what’s going on, and [we] will continue to look at that. From our perspective, there’s no reason to think that the sorts of energy and innovation that have been brought to the industry by the wider range of smaller lenders won’t continue.

Q: Can non-banks and second-tier lenders continue to compete with the Big Four or are we verging on a monopoly situation?

A: The current situation has been a product of the global financial crisis in terms of the difficulties for all lenders, but particularly smaller lenders and non-banks, in getting access to capital to lend. Those difficulties have already reduced somewhat and we would expect them to continue to abate. Our role is to monitor what’s going on to make sure people are complying with the law rather than to manage competition. To some extent we’re observers rather than regulators in that space. We have seen the smaller lenders bring a lot of innovation to the market and you would expect that to continue.

THINGS I’VE LEARNED In just over a decade, Michael O’Reilly has built a mortgage business that continues to go from strength to strength.

O’Reilly settled close to $96m in 2009/10 – an outstanding achievement that landed him seventh on the 2010 Top 100 list

Q: What do you attribute your success to?

A: I think that understanding why you’re in business is the key. If the why is meaningful enough, the daily activities that lead to success then become part of the overall process. The best piece of tongue-in-cheek advice I ever received from my father was, “aim high but be prepared for disappointment.” If you maintain a sense of humour about things, you’ll go a long way.

Q: What keeps you motivated?

A: Our business is all about family. My wife Loretta, daughter Kathryn and sons Daniel and Brendan work with me every day. When you are building something that will not only support them but their families well after you’ve gone, there is nothing more motivating. It’s easy to be motivated when you’re focused on helping others achieve their goals.

Q: What was the biggest turning point of your career?

A: Loretta and I started MO’R Mortgage Options in 2000, operating from home. In 2005, our sons Brendan and Daniel joined the business. This allowed us to get really serious about growing it into something special and the business really took off after that. Since then, we bought our office space (in 2006), hired support staff (in 2007), established MO’R Mentoring (in 2009) and set up our own property management business (in 2010). We also intend to open a second office over the next few years.

Q: Have you faced any professional hurdles and how did you overcome them?

A: For a business to continue long into the future, you need to ensure that no one person is irreplaceable. For the first five years it was just me – I was a loans consultant, receptionist, file driver, settlement coordinator, book keeper, accountant and marketing manager. As a result, all client relationships were with me personally. Since 2005, we implemented processes to ensure our clients have relationships with our business (and the team as a whole) rather than individual loan consultants.

Q: What kind of advice would you give to a new mortgage professional?

A: It’s important to get as much personal development training as possible because if you’re a mortgage professional looking for longevity, you’ll need dedication, lots of patience, determination and perseverance. A split personality also helps – you need to be good at getting people to like and trust you (having a sales personality) but once you’ve taken a loan application, you need to you present it to the lender in a way that it will be approved (having an analytical personality and an eye for detail).

Not many mortgage professionals are exceptional at both.

44 | BROKERNEWS.COM.AU

BROKER PROFILE / MICHAEL O’REILLY

Q: What are you doing differently from other mortgage professionals?

A: Our clients have reported that our knowledge of investment finance and advanced loan structuring techniques is far superior to other mortgage professionals they have encountered. This in turn has allowed many of our clients to grow property portfolios larger than they ever thought was possible.

Q: Are there any areas of your business you’re looking to improve?

A: Absolutely. We are always looking for ways to increase the level of service we provide and to operate more effectively as a business. To achieve this, we need to anticipate market changes and adapt as quickly as we can.

Q: Do you diversify and if so, in what areas?

A: We have tended to specialise rather than diversify. We want to be exceptional in our core service area rather than be average across the board. However, after a major review of our clients needs last year, we started a real estate agency specialising in property management so we could offer a service to our investor clients. This business operates completely separately from MO’R Mortgage Options and has allowed us to provide a greater range of services to our clients.

Q: What forms of marketing work for your business?

A: Ongoing marketing to our client base works really well for us – it’s about keeping our name top-of-mind for our clients. However, marketing won’t encourage a client to come back to us unless they were impressed by the level of service they received the first time. So we spend a lot of time ensuring the level of service we provide to our clients is exceptional each and every time we assist them.

Q: Do you feel fee-for-service is the way forwards?

A: We are only talking about this as an industry because commissions paid by the lenders are inadequate. I don’t understand how lenders state they can’t afford to pay more due to compressed cost of funds, but at the same time offer huge discounts on interest rates to consumers – much bigger discounts than when commissions were higher. This would indicate that possibly there is capacity for lenders to pay higher commissions. If the commissions paid were more reasonable, the debate about fee-for-service would possibly disappear.

Q: What is the most challenging issue facing the industry at the moment?

A: Survival. We’re all doing more work and incurring more costs (data entry, additional documentation, compliance and education and training). It’s a great industry that we’re in and the steps towards making it a more professional one is to be encouraged. Lenders must start to recognise the value we bring to their customers a little more and make changes accordingly. ++ Location: Mawson, ACT ++ Accolades: • 2010 MPA Top 100 broker – 7th • 2008 MPA Top 100 Michael O’Reilly • First Choice broker in Managing director ACT to write $400m MO’R Mortgage (1,970 loans) Options

Factfile

++ Business coaching: provides one-on-one and group training sessions to other mortgage professionals

as well as investors looking to grow their property portfolio ++ Guest presenter: speaker at leading sales and mortgage seminars, as well as property investor conferences ++ Education: B. Rur. Sc., Dip. Fin. Services, Cert IV in Mortgage Lending ++ Hobbies: Home building, dog training

BROKERNEWS.COM.AU | 45

FEATURE / PRIVACY

PRIVATE & CONFIDE

46 | BROKERNEWS.COM.AU

Top 10

privacy tips

NTIAL Mortgage brokers handle an incredible amount of private client information, but are you taking the necessary precautions to ensure that information is safe?

T

The mortgage industry has changed considerably since the early 1990s. In the early days, an application was handled by the broker, then sent by courier to the lender and copies were stored in filing cabinets. Then came the fax machine, which cut out the courier, but not the filing cabinet. And more recently there is the use of email, online portals and cloud computing.

Despite these technological advancements, the issue of client privacy has remained the same. Clients have always demanded security of their personal information. However, how the industry deals with these concerns and the risks associated with privacy continues to evolve.

BREACH OF SECURITY

The mortgage industry is not immune to breaches of security. In Canada, 14 data breaches occurred in the

1

Develop a privacy policy: you should have a clear policy in place for clients both on your website and in print, for clients without internet access. Inform clients why you need to collect the information, how you plan to use it and if you intend to disclose it. Your policy should also include contact information for clients with questions or concerns.

2

Stick to necessities: brokers should only collect the information necessary to conduct the loan transaction, and their privacy policy should outline this stipulation to clients.

3

Need-to-know basis: access to client information should be limited in the office to staff members dealing with those clients. Should disclosure be necessary ensure you have client authorisation.

4

Protection of files: files – both electronic and hard copy – should be safeguarded by the necessary means. These include: locked cabinets, alarm systems, secured premises, computer username/passwords, firewalls, cookie removers and encryptions.

Usernames and passwords should be changed regularly, and use a variety of letters, numbers and symbols.

Virus protection software should also be updated regularly.

5

Limit retention: information should only be kept for as long as it is required.

6

Update personal information: take reasonable steps to keep personal information current and should that information change update both hard copy and electronic files.

7

Client access: you have a duty to provide individuals access to their personal information in the form they request. Be mindful of the obligations under the Freedom of Information Act 1998, which provides grounds for denying access.

8

Training: staff should be aware of their responsibilities with regard to privacy policy.

9

Designate: you should consider making someone in your organisation responsible for privacy. This person should be willing and able to handle complaints and enquiries about your organisation’s handling practices, and be up-to-date with the regulations outlined in the Privacy Act.

10

Breach response: develop a plan to deal with a potential privacy breach. This should include: containment of breach and assessment; evaluation of risks; notification; and action to ensure similar breach does not occur in future.

BROKERNEWS.COM.AU | 47

FEATURE / PRIVACY

space of a few months in 2008. In each case, someone pretending to be a mortgage agent downloaded credit reports for people who hadn’t even applied for a mortgage. The personal information of thousands of clients was placed at risk. The breaches raised concerns about data security and as a result the Canadian mortgage industry underwent a nationwide audit. Despite the security scare, the audit revealed there were still concerns about data security, with haphazard storage of documents containing personal information, inadequate consent by clients and a general lack of understanding about, and accountability for, privacy issues.

DOMESTIC MATTERS But what are Australian brokers doing to make sure the same situation doesn’t occur here? According to Mortgage Choice CIO Neill Rose-Innes, the Australian mortgage industry has advanced significantly in the last 15 years. “Governance regimes have been put in place to protect those in the industry to protect everyone in the value chain – and I think that’s almost a natural consequence of a maturing industry,” he observes. “In terms of the evolution we’re not that different from any other industry.”

Despite technological changes in the way brokers conduct business, brokers’ approach to client privacy should fundamentally be the same. Rose-Innes says brokers can protect their clients and their businesses by having a clear policy and following it up with regular audits.

“A lot of it comes down to the protocols and practices in place around risk management and

48 | BROKERNEWS.COM.AU

governance against these kinds of breaches and it’s important to have clear policies and expectations around the management of personal and private details,” he says. “If you have those practices in place, it’s very important for that to be monitored and audited and checked, so that there is general and ongoing compliance in that regard.”

Increasingly, brokers are using cloud computing to store client information. While Rose-Innes is a big supporter of these types of services and solutions, he cautions brokers to perform proper and formal due diligence on service providers.

Full diligence around contract provisions, the underlying technology used, the people that are involved in that business, the protocol that they have in place to protect your asset – being your client – and protect your business, is extremely important, he says.

“Quite often it’s an area that’s overlooked – particularly in the cloud world,” he remarks. “Brokers often feel they can’t influence the contractual terms of my relationship with the service provider and that’s not true. The provider is really keen on having your business, therefore there is an element of influence over that contractual outcome. So it is important to have that conversation but it needs to be a specific and focused conversation. Quite often you get a contract and people scan through it and then just sign on the dotted line, but it needs to be more diligent than that, more formal and I would suggest that it needs to be documented and recorded in some formal manner by the broker so they can evidence if something unforeseeable does happen they can go back and point out that they have followed the right protocols in order to ensure the integrity of their service.”

To spend a few dollars on some professional advice to protect and insure your organisation’s sustainability and longevity is a small price to pay, Rose-Innes adds.

“Seek professional assistance, would be my clear guidance in that area.”

“If you have privacy protocols in place it is very important to monitor, audit and check them so there is ongoing compliance”

BROKERNEWS.COM.AU | 49

COLUMN / CUSTOMER SERVICE

Your customer relationship management (CRM) system could be the secret weapon your business needs – if only you could figure out how to use it. MPA asks IT professionals about the biggest mistakes brokers make when it comes to utilising their systems

P

“People rarely implement 100% of any software,” explains Chris Mills, managing director of Linx Software, “but there are a lot of things that people should be doing with regard to their CRM systems to improve their business.” It’s a sentiment that is echoed across CRM providers and aggregators alike. FAST managing director Steve Kane recently complained that despite investing more than a year’s worth of profit into its CRM system – which was also adopted by PLAN and Choice – many brokers are simply using their CRMs as “static repositories of information”.

While a variety of different systems are available through aggregators and direct from IT companies, there are some commonalities between the systems that brokers could be capitalising on to improve the success of their business. Here are some aspects of CRM systems that will not only help you manage your clients more effectively, but they could even generate leads that boost your bottom-line.

DATA MINING According to Stargate CEO Brett Spencer, data mining is the single biggest area of a CRM system that brokers fail to use effectively.

“Brokers are not using the data for simple things such as keeping in contact with customers on an annual basis, and the classic example that we use with the Symmetry platform is an annual letter around settlement,” he says.

“If a loan settles in September, then they can data mine their system every October to find what loans settled the previous year in September and it gives them the ability to keep in contact with their customer at least annually.

It may also give them an opportunity to review a fixed rate expiry period or a honeymoon rate period.”

50 | BROKERNEWS.COM.AU

HELP IS AT HAND

COLUMN / CUSTOMER SERVICE

BROKERNEWS.COM.AU | 51

COLUMN / CUSTOMER SERVICE

E-LODGEMENT

Top CRM tips

While aggregators are investing in CRM systems to improve their offering to members, some brokers are choosing to find their own solution.

According to Wayne Macartney, manager of sales and marketing at Loanworks Technologies, the introduction of NCCP has been a major catalyst for broker companies to sit down and review how they operate.

“The penny has dropped that if their data is solely stored in their aggregator system then it’s highly problematic if they choose to switch aggregators,” he warns. “Similarly, if they put some business through an aggregator but have direct accreditations elsewhere (such as with a commercial lender) and are also selling car finance, chattel mortgages and insurance, then this highlights the need for independent software.”

Whether you’re shopping for an aggregator that offers a better technological solution for your business, or simply just looking for a CRM alternative to what you’ve got, then these are the “must-have” attributes of a quality CRM system.

1

Industry specific: generic CRM/ marketing solutions will require configuration. Shoehorning your business into a generic CRM system is a false economy

2

Cloud-based: broker companies can minimise IT spend by effectively outsourcing hosting. This also means that the system is available anywhere

3

Portable: software should run on a tablet PC and have smartphone portals so that the broker can access information from his/her iPhone, Blackberry or similar

4

Automation: the software should be able to be configured so that workflow processes are tracked, follow-ups are automated and both the applicant and any third-party referral sources are kept in the loop

5

Document management: the software should enable the broker to generate and fax/email documents from the system, as well as to store supporting documents for compliance purposes

52 | BROKERNEWS.COM.AU

6

Integrated with broker tools: product comparison, scenario modelling and loan submission should all seamlessly integrate to minimise double handling of data

7

Both customer-centric and dealcentric: the software should allow the broker to drill-down on a piece of business with a given customer, but also give the total picture of that customer over time

8

Multi-user: as soon as you have staff, you need to be able to manage their workloads, monitor activity and measure performance

9

Marketing-savvy: brokers need to be able to readily access customer data for marketing, as well as being able to “slice and dice” for truly segmented marketing

10

Good support: a good system comes with good support that is able to respond to your questions and queries in a timely manner.

Sources: Loanworks Technologies and Linx Software

Spencer also indicates that many brokers are choosing online bank e-lodgement systems rather than the electronic gateway provided by their own CRM package.

“CMS systems have got e-lodgement partners generally and if a broker is not using that e-lodgement partner then the amount of time they’re losing in double data entering their applications, or spending time on the phone calling the lender, chasing down all of those sorts of follow-ups is really a waste of their time,” he points out.

“If they’re not using their e-lodgement platform, then they’re not getting the benefit of back channel messaging, of live updates, of instant feeds from the lenders on the statuses of their loans. And it costs them hours per loan, and if they look at the time that it takes from a cost perspective – how many extra loans could they write?”

CROSS-SELLING Using your CRM system to help you diversify your business should also be a no-brainer, according to Linx Technologies’ Chris Mills.

“I think this is one of the most important areas of a good CRM system,” Mills states. He advises brokers to look for a system that at least caters to risk insurance – a go-to area of diversification that many brokers are now adding to their business.

CHECKING COMMISSIONS Using your CRM system to verifying commissions could not only save you time, it could save you huge amounts of money. Mills points out that some aggregators have substantial orphan accounts – misplaced money that belongs to brokers. While you could check your commissions manually each month, the complexity of this exercise and the time involved means most brokers just rely on the lender and aggregator to sort it out. But according to Mills, one broker reported that by using his CRM system to make the calculations he was finding an average of $500-$600 in unpaid commissions each month.

SELLING YOUR BUSINESS Another huge advantage to effectively using your CRM system is the increased value it adds to your business – particularly when it’s time to sell.

“Your business will have a lot greater value if the information is neatly organised and not in a broker’s head,” Mills says. This last point is of greater significance to the older generation of brokers, who may be on the cusp of retirement. According to Mills, older brokers are more likely to under utilise their CRM system, than the younger, tech-savvy mortgage professionals.

BROKERNEWS.COM.AU | 53

SMART BUSINESS / SMSFs

AVOIDING SUPER BLOOPERS AVERAGE ASSETS HELD IN DIY SUPER FUNDS 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Source: ATO

HOW THE DIY SUPER SECTOR IS GROWING 450,000 400,000 350,000 300,000 250,000

In the latest feature from our sister title Your Money, we look at the growth in popularity of selfmanaged super funds (SMSFs) and the top mistakes to avoid when managing your own

D

on’t believe anyone who says being trustee of a self-managed super fund is simple and easy. This is not a set-andforget option for growing your retirement savings. If run properly, the rewards of an SMSF can be outstanding – lower fees and superior investment outcomes compared to many off-the-shelf super products. The big danger is you won’t have the time or expertise to do the job properly. Here are the most common stumbling blocks to DIY super success and how to get round them.

200,000

YOUR SMSF IS STRUCTURED INAPPROPRIATELY THE CHALLENGE

150,000 100,000 50,000 0

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

Source: ATO

54 | BROKERNEWS.COM.AU

SMSFs can have a corporate trustee structure or can be put together so each fund member is an individual trustee. The majority of funds use the

COLUMN / CUSTOMER SERVICE

individual structure. This means each member (between one and four people) is named in the trust deed and all the assets owned by the fund are registered in the name of each member.

The individual trustee structure is the cheapest and easiest to set up but it can cause problems down the track. If one member dies or leaves the fund, or another member joins the fund, all the assets have to be re-registered.

A corporate structure means a separate company is set up to be the trustee and all fund members must be directors of that company. Assets don’t have to be re-registered if fund membership changes, because all investments are held in the name of the trustee company.

Corporate trustees also enjoy succession benefits. For example, individual trustees must be replaced if they leave the SMSF. Let’s say Mr and Mrs Smith are in a fund together and Mr Smith passes away. If the individual trustee structure is in place, Mrs Smith must appoint a replacement trustee; but if a corporate structure is in place, with Smith Enterprises as the corporate trustee, Mrs Smith could act as sole director after her husband’s death.

Matters of contention in SMSFs using the individual trustee structure must be resolved by unanimous vote, but in SMSFs with corporate trustees a majority vote will suffice

THE FIX Funds using the individual trustee structure can be changed to a corporate structure if each member agrees.

This involves establishing a trustee company, solely for the purpose of managing the super fund, as follows: • If you already have a fund, check the trust deed to find out what documentation and consent requirements are needed to change to a corporate trustee • Set up a new company, or use an existing company if each director of the company is a member of the super fund • Appoint all the members of the fund as directors: they must consent to their appointment in writing and, within 21 days, sign a trustee declaration stating they understand their responsibilities • Notify the ATO within 28 days of the change • Change asset ownership by notifying relevant share registries and banks of the new ownership structure • A specialist SMSF administration provider can take care of all of this for you; fees vary

YOU HAVEN’T GOT THE SMSF’S ESTATE PLANNING RIGHT THE CHALLENGE Surviving fund members, relatives and their partners may all have good intentions, but money has been known to cause problems when a family member dies.

BROKERNEWS.COM.AU | 55

SMART BUSINESS / SMSFs

THE FIX

Family matters The importance of making a binding death nomination was highlighted by the case Katz Vs Grossman in 2005.

Ervin Katz was the sole remaining member of a SMSF after the other member, his wife, passed away. Mrs Katz had to be replaced as trustee in order to continue the fund so Mr Katz appointed his daughter. Before he died, he indicated in his will that he wanted his super benefits to be split equally between his son and daughter,

but he did not complete a binding death nomination.

After Katz died, his daughter appointed her husband as replacement trustee, giving the couple control of the fund. She then refused to pay her brother in accordance with their father’s non-binding request. The brother took her to court, but her actions were in line with the SMSF trust deed so she retained full control of the fund.

Blended families, with children from consecutive marriages, can be particularly troublesome.

On the other hand, if set up properly, an SMSF can be a more powerful estate-planning tool than a will, as it can be difficult to attack legally.

An SMSF is regarded as separate to a will in the eyes of the law. Trustees have been known to assume that their fund will become part of their estate, to be distributed amongst their chosen recipients, but this is not the case. Unless specified otherwise, surviving fund members or dependents will take control of the assets.

THE FIX Each SMSF member can make a binding death benefit nomination, which directs the trustee to pay the member’s superannuation benefits as nominated. The nomination must be made in writing, in the presence of two witnesses aged over 18 who are not beneficiaries.

Look very carefully at how the law applies to your particular SMSF deed when making the nomination, as it may otherwise be challenged down the track. A binding death benefit nomination within an SMSF can offer greater freedom than the beneficiary arrangements allowed in other types of super.

YOU HAVEN’T FOUND EXPERT AND RELIABLE ADVISORS THE CHALLENGE The complex nature of SMSFs means it is important that trustees seek quality financial advice. Advisors are not required to hold any specific level of expertise in SMSFs. This opens up the possibility that they will suggest investing in something that enhances their own interests.

For instance, many SMSF trustees are currently being advised to borrow money to invest in real estate. The problem is that advice is coming from real estate agents and property developers with a vested interest in making the sale. Think carefully if you’re being advised by a real estate agent or property developer.

56 | BROKERNEWS.COM.AU

Many SMSF trustees are retirees who have plenty of time and investment experience to apply to the day-today running of their fund. Some also have a background in finance or accounting so they have the “in-house” expertise to run the show. But what if you don’t?

If you don’t have the time, experience or expertise to be truly DIY with your super then perhaps an SMSF is not the best option for you. There are many low-cost super funds currently available offering competitive fees that require a much smaller time commitment.

If you’re determined to run an SMSF, the best way to ensure you get truly expert advice is to contact the SPAA (the SMSF industry association) for a list of accredited advisors who specialise in SMSFs. Talk to three or four recommended professionals before making a choice and ask for clear documentation about fees, charges and any relationships with financial product providers that may be incentive-based.

YOU DON’T GET YOUR INVESTMENT DECISIONS RIGHT THE CHALLENGE Investment choices can make or break an SMSF. The two biggest mistakes trustees make are breaking the ‘sole purpose’ test and having too many in-house assets.

The sole purpose test requires everything an SMSF does to be for the purpose of saving for retirement. An SMSF is not like a bank account with money or other assets such as property that you can use when you need to. Doing so will quickly put you on the wrong side of the tax office.

The other critical rule is that no more than 5% of the value of an SMSF’s investments can be for personal use.

For instance, your SMSF can’t purchase an investment property that is used as a family holiday house.

Art and collectables are particularly under the ATO’s spotlight. The value of such investments is largely contained in their display, but this is not allowed when they are SMSF assets. Paintings, antiques and so on can no longer be stored or displayed at personal properties.

They can be held in places of work but can’t be displayed.

To what lengths this rule will be enforced is uncertain.

Borrowing regulations are also strict and updated fairly regularly. You’ll need to establish a separate trust for the loan and the conditions can be onerous.

THE FIX SMSF experts strongly urge trustees to maintain separate accounts and avoid purchasing assets for personal use. Make sure everything your SMSF does is for the sole purpose of generating retirement savings.

Professionals recommend having enough investment diversity to cover periods during which returns are low.

Aim for a mix of assets across different markets to ensure the fund is liquid and can still continue to increase your retirement savings through market downturns.

YOU EXCEED YOUR CONTRIBUTION CAPS THE CHALLENGE The ATO is strict and can be unforgiving when it comes to contribution caps. They are the limits to the amount of money you can put into a super fund in any one year.

The two general types of contribution are: Concessional – contributions that are still subject to reduced-rate tax such as a contribution from an employer, salary sacrifice, or a deduction by a self-employed person.

The limits for these are $25,000 a year for people aged under 50 and $50,000 a year for those over 50.

Non-concessional – contributions made after tax, that come from a member’s own pocket or bank account. The limits for these are $150,000 a year or $450,000 over three years (two years can be brought forward with a lump sum) for under 65s, $150,000 a year for those aged 65-75, and zero for over 75s.

Professionals say that the end of the financial year is when many trustees run into difficulties. If they discover they have contributed too much and it is already June it is too late to adjust any further contributions to avoid exceeding the cap for the financial year.

If you do over-contribute, the excess will be taxed at 46.5%. Professionals agree the penalties seem large for such a small mistake but the ATO rarely revokes penalties. In the most extreme case, a breach of both concessional and non-concessional caps in the one year could see a member slapped with a 93% tax penalty.

Check with payroll to find out when your employer actually pays super contributions.

Actual payment can be up to three months later than when the amount appears on your pay slip. The difference can be crucial, especially near the end of June

THE FIX From July 2011, members have been able to breach contributions by up to $10,000 without penalty. This is not much help to those who have already been penalised.

The perfect example was the case of a 76-year-old man who went to withdraw $100,000 from his account online, but accidentally hit a button that contributed the money back into the super account instead of his own.

Despite this being an honest mistake, it cost him $46,500.

The unforgiving nature of the law in this area means that the best path for members is prevention. People need to realise how easy it can be to make a breach and be careful to stay on top of every single money movement that may result in an SMSF contribution.

This article first appeared in Your Money Magazine, a fellow Key Media publication. The latest issue is available from all good newsagents, or visit yourmoneymag.com.au for more personal finance news and tips

BROKERNEWS.COM.AU | 57

THEDATA

This month’s round-up looks at the cheapest suburbs in Australia

58 | BROKERNEWS.COM.AU

ACT

5

Cheapest suburbs in ACT

Curtin is the most affordable suburb in Canberra, with units in the area averaging $322,770. Before prospective buyers part with their cash, however, it’s worth noting that this figure has plummeted 15% in the past year, meaning those hoping for capital growth are likely to be disappointed.

Gungahlin to the north of the city may be a better bet. Units command the same sort of fee, but prices are on the up with a 6% increase over the past 12 months.

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

CURTIN

Unit

$322,770

-15%

GUNGAHLIN

Unit

$323,000

6%

FRANKLIN

Unit

$323,500

7%

CHIFLEY

Unit

$330,500

-6%

LYONS

Unit

$345,000

23%

Hit

NSW

5

Cheapest suburbs in NSW

Miss

Peak Hill in country New South Wales is the state’s cheapest real estate, with houses in the region going for as little as $70,000.

Average values have dropped by 24% in the past year though, so for those with a long-term view, it may be worth looking elsewhere. Hillston 260km to the west offers better bang for your buck, with prices improving by 7% since July 2010 to $94,000.

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

PEAK HILL

House

$70,000

-24%

BOURKE

House

$72,750

-19%

DARETON

House

$85,000

-10%

HILLSTON

House

$94,000

7%

BARRABA

House

$105,000

11%

Even

BROKERNEWS.COM.AU | 59

STATISTICS / FIRST HOMEBUYERS

NT

First homebuyers in the Northern Territory are spoilt for choice, with the five cheapest suburbs all experiencing price growth over the past 12 months. The territory’s fifth largest town is 1,000km south of Darwin – Tennant Creek – and it is the best spot for bargain hunters, with houses in the area selling for under $200,000, but soaring in value by just under a third since July 2010. Katherine, Gillen and Moulden are also worth a look too, with property available under $330,000 and experiencing positive growth over the past year.

5

Cheapest suburbs in NT

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

TENNANT CREEK

House

$198,000

32%

KATHERINE SOUTH

House

$261,500

1%

KATHERINE

Unit

$275,000

15%

GILLEN

Unit

$317,500

6%

MOULDEN

Unit

$325,000

10%

Qld

Cunnamulla, just north of the New South Wales border, is Queensland’s snip, with houses averaging a paltry $56,000. The service town lies on the Warrego River, has a population of just over 1,200 and has seen house values rise by 12% since July 2010. Queensland’s other cheapest suburbs don’t hold too much promise for first homebuyers as declining values detract from the pocket-friendly prices.

5

Cheapest suburbs in Qld

60 | BROKERNEWS.COM.AU

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

CUNNAMULLA

House

$56,000

12%

HUGHENDEN

House

$90,000

-22%

MOUNT MORGAN

House

$123,500

-18%

TEXAS

House

$125,000

-4%

JUBILEE POCKET

Unit

$127,500

-48%

BROKERNEWS.COM.AU | 61

STATISTICS / FIRST HOMEBUYERS

SA

South Australia’s four cheapest suburbs – Millicent, Coober Pedy, Peterborough and Whyalla Stuart – all have property available for $125,000 or less, but are all on a downward spiral in terms of values, so they are better ignored by first homebuyers hoping for asset appreciation. Gladstone, in the approach to the lower Flinders Ranges, is marginally more expensive, but offers better prospects, with an annual growth figure of 17% since July 2010.

5

Cheapest suburbs in SA

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

MILLICENT

Unit

$78,000

-6%

COOBER PEDY

House

$85,900

-16%

PETERBOROUGH

House

$95,000

-4%

WHYALLA STUART

Unit

$125,000

-15%

GLADSTONE

House

$127,000

17%

Tas

Rocherlea in the northern suburbs of Launceston is Tasmania’s gem for prospective homeowners, with an affordable average property price of $141,750 and a slight improvement in value over the last year. Zeehan and Rosebery have cheaper properties, but plummeting values, while Herdsmans Cove offers comparable prices, but waning values. Queenstown on the West Coast shouldn’t be ignored either. Property prices are half the price of Rocherlea, and values are stable.

5

Cheapest suburbs in Tas 62 | BROKERNEWS.COM.AU

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

ZEEHAN

House

$64,000

-39%

ROSEBERY

House

$67,500

-36%

QUEENSTOWN

House

$75,000

0%

ROCHERLEA

House

$141,750

1%

HERDSMANS COVE

House

$145,000

-1%

STATISTICS / FIRST HOMEBUYERS

BROKERNEWS.COM.AU | 63

STATISTICS / FIRST HOMEBUYERS

Vic

Birchip in the Mallee region of Victoria is home to the state’s cheapest property, but values have dropped by almost a third in the last 12 months, so the town isn’t the most promising location for first homebuyers. Sea Lake further up the A79 is a shrewder bet for fledgling owners, with the average property value standing at $70,000 after an annual increase of 24%. Kaniva and Dimboola are other affordable areas on the rise.

5

Cheapest suburbs in Vic

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

BIRCHIP

House

$59,500

-30%

SEA LAKE

House

$70,000

24%

COLERAINE

House

$97,500

-9%

KANIVA

House

$104,000

11%

DIMBOOLA

House

$105,000

28%

WA

First homebuyers in Western Australia are hardly spoiled for choice when it comes to affordable areas that are experiencing value growth, with four of the cheapest five suburbs experiencing losses over the past 12 months. Orelia in the southern suburbs of Perth towards Rockingham is about as good as it gets, with units commanding an average fee of $194,500 and values remaining stable. Rural Katanning is worth sidestepping as values have fallen by just shy of a quarter in the 12 months to July 2011.

5 Using RP Data’s comprehensive mine of information, we worked out the cheapest five suburbs in each state. We then rated these affordable areas a ‘hit’ if they had experienced price growth in the last 12 months and a ‘miss’ if they hadn’t. Taking your first step on the property ladder isn’t all about price, but it may be worth living in a less desirable suburb if you can make a profit over a couple of years.

64 | BROKERNEWS.COM.AU

Cheapest suburbs in WA

SUBURB

PROPERTY TYPE

MEDIAN PRICE

12-MONTH GROWTH

MOORA

House

$142,500

-7%

KATANNING

House

$172,500

-24%

ORELIA

Unit

$194,500

0%

KOJONUP

House

$215,000

-7%

PICCADILLY

Unit

$220,000

-4%

STATISTICS / FIRST HOMEBUYERS

BROKERNEWS.COM.AU | 65

STATISTICS / YOUR MORTGAGE INDEX

NSW property market holds firm

Attracting 150,000 visits per month, yourmortgage.com.au is one of the most popular resources for homebuyers and property investors seeking information. MPA is taking advantage of its sister publication’s user activity statistics to gain a unique insight into the sentiment among Australian borrowers Buyer activity by state 40.00% 35.00% 30.00% 25.00%

Aug 10 Aug 11

20.00% 15.00% 10.00% 5.00% 0.00% ACT

NSW

NT

Qld

SA

Tas

Vic

WA

Purpose of loan 60.00% 50.00% 40.00%

Aug 10

30.00%

Aug 11

20.00% 10.00%

RELEASE SPENDING MONEY

HOME RENOVATIONS

MOVE HOME

REFINANCING

INVESTMENT PROPERTY

0.00% FIRST HOME

H

Homebuyer activity in New South Wales remains strong, with borrowers from the state accounting for 34% of all enquiries to the Your Mortgage website over the past 12 months. The biggest increase in property interest comes from Queensland, which has seen a 2% increase in visits since 2010. At the other extreme, South Australian enquiries have fallen by 3%. First homebuyers still account for the lion’s share of all visits to the website, making up 52% of traffic.

The number of property investors has risen in the past 12 months by nearly 2% to 18.7%.

In terms of product types that consumers are looking for, fixed rates have risen in popularity by almost 4% over the past 12 months to now account for a third of all enquiries. The number of customers looking for standard variable rates has fallen by nearly 2%, but still stands at just over 52% of all visitors to the Your Mortgage website.

The average loan value continues to drop month by month. The typical mortgage size requested in August 2011 was $340,019 compared to $348,813 a year previously.

Type of loan 60.00% 50.00% 40.00%

Aug 10

30.00%

Aug 11

20.00% 10.00%

66 | BROKERNEWS.COM.AU

INTRO

FIXED

SVR

0.00%

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 67

LIFESTYLE / A DAY IN THE LIFE OF

A day in the life of…

Lisa Claes, executive director of customer delivery, ING DIRECT initiatives to the channel. Brokers comprise 75% of our mortgage production so it is important that the value proposition is constantly revitalised to remain competitive.

7:40am Breakfast at my desk – porridge with berries.

8am The executive committee of

the bank meets to prioritise the next wave of strategic initiatives to launch in 2012/13, all aimed at embedding ING DIRECT’s pay, save, borrow offering.

5am Hit the road, cold, dark and

alone for a quick 30-minute run around the suburb. Brain engaged, the legs struggling…

5.30am Enjoy a cup of hot tea with

the iPad, reviewing emails which have arrived throughout the night.

As part of a global bank, someone, somewhere is always awake. ING DIRECT Paris are asking if we could provide a paper detailing our multi-distribution platform.

6am Deliver the first curtain call for

my school-aged children so they are ready to leave the house at 6.45am to meet their debating and orchestral commitments.

6:45am In the car after overcoming

the spatial challenge of fitting two cellos and three humans into a very small space. A robust debate ensues between the 12- and 14-year-old about the appropriate age of consent for ear piercing.

7:15am With the Kirribilli drop off

behind me, I jump on the phone usually to the head of broker sales (an early starter) to check the progress of our service, risk and product

68 | BROKERNEWS.COM.AU

10am Meet with the head of channel support to review the key value measures dashboard for our business unit.

11am As a director of the ING

home loan specialist for 15 minutes observing their webchat traffic.

2pm Steering committee meeting

for a project which I sponsor. Our clients/brokers have been asking for an automated existing business solution to mirror the new business process. This is scheduled to be delivered early next year. I corner the project manager and IT architect to apply some gentle pressure in the hope of an earlier delivery.

3pm Pop down to the staff cafe for

a strong black coffee. While waiting I call home to go through the family’s schedule for the week. Back upstairs to meet with the head of PR and broker distribution to finalise the format for an upcoming event.

Foundation, we are preparing to allocate our funding for the financial year ahead. The manager of the ING Foundation outlines each charity group and how they align to our brand values. I am comfortable with the recommendation.

4pm Skim read the voluminous

12pm Cast an eye over incoming

6:15pm Leave the office to attend a

emails and return a few missed calls.

12:30pm Attend lunch with the

team leaders from our contact centres and direct mortgage business to talk about our performance. We spend a lot of time discussing customer feedback.

Webchat was launched recently for all product lines and I sit with a

papers for tomorrow’s management committee meeting. The head of financial planning pops by to request an urgent review of a proposal to place our cash products on a wealth management platform.

Chief Executive Women function.

It’s black tie, but what I’m wearing will just have to do.

11pm Arrive home to find my

12-year-old curled up in my bed, a note on my pillow to book the appointment for ear piercing on Saturday – her 13th birthday. She clearly won the debate.

“It is important that the value proposition is constantly revitalised to remain competitive”

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 69

LIFESTYLE / FAVOURITES

❤

Favourite things...

Lisa Montgomery, CEO, Resi

Celebrity: I don’t rate the

Book: My holiday read is usually a

concept of celebrity, but I do admire the fact that Doris Day is releasing a new CD in October at the age of 87. Now that’s entertainment.

good crime thriller to escape reality, but right now I am reading Better Under Pressure by Justin Menkes about great leaders in different industries

Music: My generation was the 1980s, but these days I am rarely without an Angelique Kidjo CD playing. I am a long-time fan – do yourself a favour and check her out.

Vacation spot: Shanghai, China, is a blend of tradition and innovation. I have been a regular visitor since 1998 and it still takes my breath away!

Food: My husband is in charge of the cooking, so anything he puts on a plate. I’m not silly.

Sport: The mortgage market

Drink: Champagne, which is

provides me with all the ‘sport’ I need – a fast-paced game with a variety of teams all playing to win.

seriously more affordable in a strong AUD environment.

Place to be: Paris – the food, the beauty, the romance, the lifestyle – magic.

Movie: Comedy – Young Frankenstein.

Golden oldie – All About Eve. Drama - The Green Mile.

70 | BROKERNEWS.COM.AU

Hobby: Boating – enjoying Sydney Harbour with friends, followed by a visit to the fish markets and plenty of sunshine and fresh air.

LIFESTYLE / MOTIVATION

Gerard Hermens of Strategic Learning Partnerships explains how the key to your customer lies with the number three

Gerard Hermens has provided educational and training programs in the mortgage-broking industry for over 20 years. He has collaborated with neuroscientists in publishing a number of scientific journal articles. He has also developed an emotional intelligence questionnaire

Neuroscience has added some remarkable insights on how we communicate with each other. Interestingly, a number of these insights focus on the number three.

The first of the ‘threes’ is the way the human brain has evolved. Scientists explain that the human brain is really made up of three brains. The first of these is the brain that evolved from the reptilian brain. Located at the top of the spine, it is responsible for our instinctive responses. Regulating our breathing, heart rate and muscle response, this part of our brain structure copes with over 100 million messages per second. How does this part of the brain cope with this huge volume of data?

It acts on exception. That is, we select things that either seek to maximise reward or avoid danger.

The second part of the brain is the limbic brain.

Sometimes referred to as the primate brain, it is responsible for four key functions – feeding, fighting, fleeing or sexual behaviour. Sometimes described as the four Fs, these basic functions are triggered as a result of signals processed by the reptilian brain.

The third brain is the neo-cortex or ‘thinking’ brain.

This part of the brain processes reflection, reason and speech. This part of the brain processes things long after the reptile brain has done its work.

So how does this help us understand our customers?

People judge you very quickly by using three senses – smell, sight and sound. Because the reptile brain processes information 8,000 times faster than our higher order thinking, we form judgments long before we have reasoned why we like or dislike people.

Our customers do this every day. We may not be aware – but we glance very quickly at eyes, eyebrows and mouth to sum up how we feel about someone. Also, voice tone and volume help us work out if we like or dislike someone. So what are some simple tips for unlocking the secret of the ‘threes’?

72 | BROKERNEWS.COM.AU

3

3

Use a real smile, not a ‘Pan-Am smile’ – people know a real smile by the small wrinkles next to our eyes.

Use sentence softeners such as “Would you mind if I explain this to you” Adopt an open posture – relaxed, facing the customer, hands slightly outwards and open Use a well moderated voice – avoid being strident and loud Adopt a collaborative approach – customers generally dislike aggressive, loud people Use positive feedback – nod, smile and respond with words that support and encourage. We need to know we are heard and understood Wait for cues – don’t try to force the pace of the conversation

smarter saving, in vesting, spending and livin g

SUBSCRIBE NOW www.yourmoneymag.com.au

On sale NOW

YourMoneyMag_MPA1111_Quarter_vert.indd 1

10/4/2011 7:59:40 AM