Mortgage Professional Australia magazine Issue 12.01

CELEBRATING 10 YEARS

DECK THE HALLS MAKING THE FESTIVE SEASON PROFITABLE brokernews.com.au ISSUE 12.1

FLOOD DAMAGE REVISITING QUEENSLAND ONE YEAR ON SUPER PROFITS INCORPORATING SMSFs INTO YOUR BUSINESS

WHO WILL SET 2012 ALIGHT?

CONTENTS / ISSUE 12.1

38

22

Toowoomba – one year on How businesses affected by the floods are coping 12 months later

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Surviving the holiday hiatus How to make the most of the festive slowdown

WEEKLY INVESTIGATIONS NOW ONLINE: Wealth management COVER STORY 26 | Hot list The movers and shakers who shape the mortgage market

Aggregator competition Broker segmentation » brokernews.com.au

CONTENTS / ISSUE 12.1

40

NEWS & VIEWS

PROFILE

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

40 | Steven Heavey Suncorp Bank’s new head of intermediaries discusses his move and his ambitious plans for the future

12 | Product news A round-up of the latest rate changes and product launches to keep you up to date 14 | Viewpoint What visitors to our website are saying about volume targets 16 | The Big Story A compilation of the top quotes from our weekly multimedia broadcasts

46

20 | Analysis An exclusive report from the recent PLAN conference in Darwin

COLUMNS 38 | Tis the season Gifting contacts can express appreciation at Christmas, but what is appropriate?

46 | Managing expectations Boost your business opportunities by buying property through self-managed super funds

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SMART BUSINESS 50 | Take cover The dos and don’ts of life insurance in our latest co-published article from Your Money Magazine

STATS 53 | Your Mortgage index The latest data from our sister website shows that fixed rates are becoming more popular

LIFESTYLE 54 | A day in the life of…

Damian Percy, Adelaide Bank 55 | My favourite things…Wendy Higgins, Mortgage Choice 56 | Words of wisdom…

Performance expert Tony Wilson on keeping focused in turbulent times

NEWS / ROUND-UP

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CONTENTS / EDITOR’S LETTER

SOME LIKE IT HOT It’s not just the weather that’s getting warmer as we head towards summer – this issue of MPA contains our annual Hot List. Our yearly rundown sees us identify the movers and shakers who are really making a difference in the mortgage market at the moment, whether it be bank executives, brokers or association figures. Despite global economic uncertainty, the Australian home loan industry is in relatively good health at present and it is in part down to the personalities we have profiled.

Elsewhere in the magazine, we look at how you can make the most of your time during the Christmas slowdown, whether it is appropriate to gift clients during the festive season and how businesses affected by the Queensland floods are faring almost one year later. We also explain the advantages of customers buying property through their super and take a look at life insurance. People-wise we catch up with Steven Heavey and talk about his move to Suncorp, find out what makes Mortgage Choice’s Wendy Higgins and Adelaide Bank’s Damian Percy tick, and hear some pearls of wisdom from Teamcorp’s Tony Wilson.

Finally, keen-eyed readers will have noticed a different face at the top of this column. I’ve taken over from Barney McCarthy, who’s relocated back to the UK. Some of you may recognise me from fellow Key Media publications Australian Broker and Your Investment Property, and I’m looking forward to taking MPA into 2012 and beyond. I’d also like to thank Barney for his sterling contribution to MPA, and wish him all the best for the future.

Kevin Eddy, Editor

COPY & FEATURES EDITOR Kevin Eddy CONTRIBUTORS Andrea Cornish, Barney McCarthy 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 Corben 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 Kevin Eddy tel: +61 2 8437 4793 kevin.eddy@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 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 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: kevin.eddy@keymedia.com.au

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

NEWS / ROUND-UP

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NEWS / ROUND-UP CREDIT

ECONOMICS

Appetite returning, but mortgages weak Consumer credit demand has taken an upward turn, but mortgage demand remains weak according to Veda’s quarterly Consumer Credit Demand Index.

It shows a 2.4% year-on-year rise in the demand for credit for the three months to September. The rise was driven by a 4.4% year-on-year uptick in personal loan demand. Head of consumer risk at Veda Angus Luffman said the results showed a recovery in credit demand after major declines following the GFC. “Overall, the demand for new credit is trending upwards year-on-year since the huge falls of 2009. The result for September is also significant in seasonal terms,” he said. “Historically, the trend is for consumer credit demand to fall in the September quarter following the end of financial year.” Mortgage demand, however, continued to decline. Home loan enquiries fell for the seventh consecutive quarter, down 6.7% year-on-year and 9.2% quarter-on-quarter. The year-on-year decline for the September quarter was the lowest rate of decline since the March 2010 quarter.

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APRA issues bank warning

STATS: This month’s data looks at residential land values across Australia. Turn to page 54 to check prices in your state or territory

Banks must come to terms with life in the slow lane.

In the regulator’s annual report, APRA chair John Laker advised banks they will have to readjust their expectations for growth in light of weakened consumer credit demand. Laker remarked that consumer wariness was likely to continue in the face of global economic turmoil.

“The cautious attitude of households and businesses in Australia, which will be reinforced by recent global developments, will very likely deny ADIs the strong volume growth that supported a sustained period of profit increases before the crisis,” Laker said.

Laker warned that banks and shareholders alike would have to adjust to lower returns on equity.

FHBS

PROPERTY

New borrowers return to market

House prices fall while sales plummet House prices have fallen while new home sales have seen their weakest result in more than 10 years.

Figures from the Australian Bureau of Statistics indicate house prices across capital cities declined 1.2% over the September quarter, for a year-onyear drop of 2.2%. Declines were most pronounced in Brisbane, which saw prices fall 5.2% for the year, while Sydney and Hobart fell only marginally, down 0.3% for the year.

New home sales also took a hit for the quarter. The number of new homes sold in September declined 3.5% for the month, and was down 14% for the quarter. The result put new home sales at their lowest monthly level since December 2000. Detached house sales fell 3.3% for September, to be down 15.3% for the quarter. Unit sales fell 5.5%.

First homebuyers are heading back to the market in droves, figures from AFG suggest.

Its October mortgage index showed a 40% spike in first homebuyer activity for the month, with new borrowers comprising 16.4% of all loans processed by the aggregator. The result represents the largest first homebuyer participation in two years.

First homebuyers were most active in NSW, accounting for 21.1% of all loans. Queensland and WA also saw strong first homebuyer participation.

Fixed rate loans have also seen an upsurge during the month, comprising 20.4% of all loans processed. The numbers echo those released by Mortgage Choice, which showed fixed rate products represented nearly 20% of all the broker’s approvals for October.

AFG general manager of sales and operations Mark Hewitt said: “Buyers are reaping the benefits of one of the most competitive mortgage markets we’ve seen in years. Discounted fixed rate loans appealed to all buyer types, but especially first homebuyers and those looking to refinance.”

VALUATIONS

BORROWERS ‘VICTIMS’ OF FALSE ESTIMATES

2.2%

Year-on-year property price falls across Australian capital cities Source: ABS

An online lender has joined a growing chorus of brokers expressing concern over falling property valuations.

A recent Loan Market poll found more than 60% of the company’s brokers had seen falling valuations in the September quarter.

Now, online lender MyRate has claimed conservative valuations are disadvantaging borrowers.

The lender has claimed a trend in

valuations coming in below borrower expectations, with some cases of valuations coming in below the purchase price for recently purchased properties.

In a statement, MyRate said valuers were becoming increasingly cautious and producing more conservative valuations.

“If valuers get it wrong they will often find themselves being sued by lenders

mortgage insurance companies who may be out of pocket after selling a property to recover funds lent on a loan that went bad,” the company stated.

MyRate claimed that a consequence of this is valuers feeling pressured to bring in more conservative valuations.

“Unfortunately, we see that borrowers are the victims of this situation,” the company said.

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NEWS / ROUND-UP STRATEGY

BUSINESS

Optimism returning for companies

Brokers lax in planning succession Mortgage broking businesses need to work harder to understand how they wish to exit their businesses when the time comes, according to a financial services consulting expert.

Comparator Business Benchmarking managing partner Sarah Brennan has said professionals not understanding what they want to do or achieve at the point of sale is the “number one thing” her business sees broking and planning businesses doing wrong during their industry exit.

“Succession is such a key issue, no

matter what stage of the business you are at,” Brennan said.

Brokers have been urged to put in place a succession business plan to prepare their exit strategy.

“That is different from a normal business plan – it’s a business plan about the future which asks in whatever period of time you wish to exit the business, how you are going to achieve that.”

Brennan said brokers might choose different strategies, such as exiting the business completely and not working in it anymore, or instead working in the business for a further three to five years.

Businesses are showing signs of optimism following months of gloom over the state of the economy.

Dunn & Bradstreet’s latest Business Expectations Survey has indicated firms are becoming more confident following a better than expected September quarter.

D&B said firms were predicting a pick-up in performance for sales, profits, employment and investment for the first quarter of 2012.

The survey also showed a 25% decline in the number of firms anticipating being impacted by interest rates.

Dunn & Bradstreet CEO Christine Christian said the increasing talk of RBA action has bolstered confidence, particularly among small businesses.

“Growing positive sentiment and a renewed interest in hiring staff and increasing investment amongst Australian firms indicates a refocus of efforts on growth rather than just survival – if only in the short term,” she said.

The survey found that sales and employment expectations are now at their highest level in 12 months.

Profit expectations have continued to recover after posting negative results earlier in the year, but are still 20 points below the same time last year. The outlook for selling prices was 16 points below the long-range average, echoing CPI figures indicating flat or falling prices for discretionary consumer goods.

PROPERTY

HOUSE HUNTERS REVEAL BIGGEST DETERRENTS Research by PRDnationwide has gauged the biggest deterrents to house hunters.

The survey found termite damage proved the most off-putting fault among people searching for a property, with 43% tipping it as their number one deterrent.

The poll also found 32% considered cracks in the foundation the biggest deterrent, while 22% tipped asbestos building materials as the most off-putting factor.

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PRDnationwide managing director Tony Brasier said many of the problems listed could lead to hundreds of thousands of dollars in repair bills. He urged prospective buyers to be wary of these issues when searching for a home.

“Often purchasing a home is a decision made with the heart – but to avoid heartbreak, these issues need to be evaluated before rushing to purchase,” Brasier said.

STATS

1%

– percentage of bank assets represented by profits Source: ABA

BANKS

PROFIT MARGINS Reported cash profits from the Big Four banks

CBA Westpac BANKS

ABA defends record lender profits The Australian Bankers’ Association has again sprung to the defence of bank profits in the wake of the reporting season.

All four of the major banks reported record profits, but ABA chief executive Steve Münchenberg has defended the results, claiming the profits are not excessive.

“There is no evidence banks are making excessive

profits. A standard measure of profitability – return on equity – shows banks are in the middle of the pack compared to other industries.

Of the 50 most profitable companies listed on the ASX, only two are banks,” Münchenberg said.

Münchenberg argued that bank revenue was “relatively low” compared to the size of the companies’

asset base. “Profits represent just 1% of bank assets,” he added.

“Bank shares are a mainstay of super fund investment given the stability of earnings and relatively high dividends. These returns help people earn income for their retirement. Banks have paid out $50bn of dividends to shareholders over the past three years.”

$6.8bn $6.3bn

ANZ

$5.65bn

NAB

$5.5bn

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NEWS / PRODUCT ROUND-UP

PRODUCT NEWS A bite-sized guide to the industry’s newest products and rate changes as they come out of the box

Who: Aussie Home Loans What: Three-year fixed rate The spec: Aussie Home Loans has slashed its three-year fixed rate to 6.29%.

What they say: “Over the years I have advised people to stick with variable and pay off as much as you can in order to pay the loan off faster. However, with these competitive rates, it makes sense for borrowers to lock away part of their loan as an insurance policy against global uncertainties. The cost of funding is quite high and while the current round of aggressive fixed rates may be good news for consumers, they may not last forever so it pays to look at your home loan now.”

– John Symond, executive chairman

Who: Liberty Financial What: Commercial low doc The spec: Liberty Financial has announced reductions to its commercial low-doc rates. Rates now start from 9.45% for low-doc loans up to $1m. These loans

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costs to make the Better Basics loan a nil-fee offer. The Better Basics loan has a maximum LVR of 95% and can be used for purchasing or constructing a new home or refinancing an existing loan.

What they say: “We’ve launched our Better Basics Home Loan to give consumers not only the best deal possible, but we’ve taken out all the fees and simplified the process to deliver a zero-fee home loan with ample flexibility.

The big banks are pushing hard to one-up each other, but the real competition lies with non-bank lenders like Yellow Brick Road. We challenge CBA, NAB, Westpac and ANZ to beat our Better Basics offer and make Australian mortgage holders the winners.”

– Mark Bouris, executive chairman

Who: Macquarie What: Fixed rates

do not require borrowers to supply any financials, BAS or bank statements, just a simple one-page income declaration provided by the borrower’s qualified accountant. Features include no cash out restrictions (including ATO liabilities), market-leading remuneration and flexible loan terms from 1–30 years.

What they say: “Liberty’s low-doc loans provide hassle-free access to finance at competitive rates to borrowers who may not be able to provide full documentation for a loan application.”

– Suresh Pillai, general manager of commercial finance

The spec: Macquarie has enhanced its fixed-rate range and is now offering one-, two- and three-year rates at 6.29%. A four-year fix is also available at 6.59% and a five-year product at 6.69%. New and existing borrowers are able to fix either all or a portion of their loans at these rates for no additional cost.

What they say: “Together with our competitive variable rates of 6.89% and 6.99%, we are continuing our commitment to our clients and distribution partners with a great product and service offering.”

– James Casey, head of product * Rates correct as of 25 November

Who: Yellow Brick Road What: Better Basics Home Loan The spec: Yellow Brick Road has launched its Better Basics Home Loan offer, which has a standard variable rate of 6.73%. The loan comes with no redraw fee, no monthly fee and no annual fee. For a limited time, Yellow Brick Road is also waiving the application fee and discharge

LAUNCHING A NEW PRODUCT? want it to be considered for inclusion on this page?

Send the details to the editor: kevin.eddy@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: broker reaction to Firstfolio’s introduction of a volume target

THE STORY: BROKER OUTRAGE AT FIRSTFOLIO FEE

Brokers have expressed outrage at a recent move by Firstfolio to impose a $150 per month fee on originators who don’t hit volume targets. The penalty will be deducted from the commission payments of brokers who have failed to settle at least three loans with Firstfolio in the past 12 months. Firstfolio claimed the fee had always been part of its agreement with brokers, and was only now being enforced.

THE ONLINE REACTION Glen Miller on 02 Aug 2011 12:22PM Brokers only need protest with their feet.

Move to a more proactive aggregator. sidbroker on 02 Aug 2011 12:36PM Fintrack/Connective did a similar thing to me after I used a different aggregator.

Garry on 02 Aug 2011 12:42PM I agree with this move. There are admin costs that must be paid for somehow. If the broker isn’t settling three loans a year or even a month then they aren’t really a professional broker. Maybe it is time they re-evaluated their chosen profession.

L Scott on 02 Aug 2011 12:59PM I am an affected broker and it is disappointing to see the cost put on the broker. Perhaps they should start employing brokers and see how much internal staff cost to run as opposed to brokers who have supported them with zero cost upfront to Firstfolio.

Not surprised on 02 Aug 2011 01:26PM I agree with Glen to move on, but they will still charge you $165 per month ($1,980pa) after you’ve gone. So the increasing “compliance cost

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to maintain a broker’s accreditation” doesn’t make any sense.

Whistleblower on 02 Aug 2011 02:32PM Folks, if they want to charge you a monthly fee, then ask them to remit 100% of all inward-commissions, and then on-forward those commissions to you with a monthly invoice. AFG tried this a few years back and it didn’t fly. If you let them get away with it, in a market of decreasing loans, FHOG applicants, significantly reduced new home constructions, and a two-tiered economy, then you deserve them. By the way, you do realise you can request the banks to remit your commissions directly?

Go on, write to the actual lenders…

Broker on 02 Aug 2011 04:53PM Three loans a year is hardly an unachievable target for a professional broker, much ado about nothing I say. oldBroker on 03 Aug 2011 10:11AM To publicly denigrate the very people that support your organisation is inexcusable. I am sure brokers have to field enquiries and issues that are rightly the responsibility of Firstfolio – it’s a two-way street.

Daniel Son on 03 Aug 2011 10:47AM Three loans a year? Surely unemployment benefits would be a more profitable option.

NEWS / COMMENT

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NEWS ANALYSIS / MULTIMEDIA

THE BIG STORY

Every week, Australian BrokerNews rounds up influential figures to discuss the major issues in the mortgage industry.

You can watch these bite-sized videos online in the multimedia section of our website, but here are the highlights from the latest clips

The subject Aggregator competition The lowdown As they deal with the pressures of the new regulatory regime, brokers are looking for more support from their aggregators John Kolenda, Finsure: “I’ve been in the

industry for 18 years and recently there has been a real lack of innovation and change.

What we bring to the table are two unique models – including one which has never been seen in Australia or globally – and they are compelling propositions for brokers. We’ve seen unrest among brokers in the few weeks since our launch: they are looking for viable alternatives.”

Sarah Wells, redconcierge: “To a certain degree brokers are dissatisfied with the industry as a whole at the moment and aggregators are bearing the brunt of that for a number of reasons. With increased compliance requirements, brokers are looking to aggregators for more support than they provided previously.”

Mardee Crane, 1st Street Home Loans: “At the end of the day, we’re all here to do a good job to the best of our ability, and to make a bit of money along the way is great.

Aggregator communication is key.”

JK: “If you have business opportunities

and models that brokers are attracted to, then they will vote with their feet and make the decision to move.”

The subject Broker segmentation The lowdown The latest developments regarding banks rewarding top-performing brokers Harry Hills, Suncorp: “We’ve been

working hard at building the whole broker channel and we didn’t want to go down the road of segmenting too much. However, we acknowledge the fact that the landscape is getting more competitive.”

Sarah Wells, redconcierge: “If you look at

it from a bank perspective, they are there to perform and give a return to shareholders.

If it’s a situation between spending an

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NEWS ANALYSIS / MULTIMEDIA

This month’s guests...

excess amount of revenue or capital in a particular area that gives them a greater return on their investment then I think they are going to do that.”

HH: “For those key brokers and people

who want to join Suncorp then we need to offer a value proposition for their clients and for them.”

SW: “[You have to ask if segmentation] is John Kolenda, Finsure

Sarah Wells, redconcierge

going to be a barrier to entry for new people coming into the industry and, ultimately, it is going to deliver a better outcome to consumers. If it is solely based on volumes, we may find that we’re forced to align ourselves with one or two lenders which I don’t believe benefits the consumer with why they come to see a broker in the first place.”

HH: “To me, it will be a mechanism or tool

to support those brokers who provide high volumes, but more importantly those who provide high quality loans and applications to the organisations.”

Mardee Crane, 1st Street Home Loans

SW: “A combination works well as it does give new entrants who have a good quality conversion the opportunity to compete on an even platform with those who are more established and have the volumes behind them.”

HH: “We’re taking advantage of technology Harry Hills, Suncorp

with upfront valuations and the ability to have documents emailed directly; and on top of that we’re not just providing consistent service, we’re also providing benefits around pricing and commissions.”

The subject The new age of NCCP TIm Brown, Vow Financial

The lowdown The deadline for NCCP disclosures by brokers to borrowers has passed. Was the industry ready?

Tim Brown, Vow Financial: “We took

Stephen Moore, Choice

Brett Abikhair, The Selector Group

brokers through our webinar which allowed them to come online and be taken through a formal presentation, ask questions and receive answers. The feedback was good, so generally most people seem comfortable as we transition to the next stage.”

Stephen Moore, Choice: “The main issue

is that this is new – new documentation and new processes. In the short term, it’s a

bit of a distraction as well. In the longer term, it’s a real positive.”

Brett Abikhair, The Selector Group: “The challenges we’ve found, not surprisingly, came from clients. They think we’re making their life harder, simply by doing what we’ve been told to do. We’ve had to manage client expectations to a greater degree than before which takes time and effort, and we’ve also had to spend a lot of time and money on developing systems with very little guidance from ASIC.”

SM: “We do think the sheer number of

documents required is onerous. The intent is right, but we’d like to see a streamline of the volume of paperwork to make it easier for brokers.”

TB: “For licensees it’s probably a bit less

clear as they have to make up their own processes and systems, but that’s the road they chose. We allow them to come back under our licence at any time, and more and more brokers are doing this as they want that guidance and uniformity so they don’t have to worry about it.”

BA: “When licensing started in the

financial planning arena we had a 100page-plus statement of advice, which was a bureaucratic nightmare, but over time it drifted back to 20–30 pages. It became far more client-focused.”

SM: “One of the great benefits of

regulation is capturing rich customer data.

It’s not only great to reinforce the proposition that brokers provide, but if you capture that information right in a CRM system, it’s an efficient way of doing business. You can capture the data once and use it right the way through the process in all the respective documents. It makes servicing the client more efficient, plus provides the opportunity to identify other needs as well.”

BA: “You can ask clients – ‘If you’ve taken

on this debt, have you thought about life insurance? Have you thought about estate planning? How does this tie into your 10-year plan?’ If you’re not able to ask those questions and direct your client to the right place, are you doing the right thing under NCCP?”

TB: “With the costs associated with

compliance, you can’t afford to be a parttime broker anymore. Regulation is one of those things we’ll look back on in a few years and ask what was all the fuss about.”

NEWS ANALYSIS / MULTIMEDIA

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NEWS / ANALYSIS

PLAN TAKES MEMBERS

TO THE TOP

PLAN Australia brokers recently converged on Darwin for the aggregator’s 2011 Member Conference, where they set their sights on being ‘Top End’. Ben Abbott reports PLAN Australia’s best of the best STATE

COMPANY

Vic/Tas

The Wealthsource Group

NSW/ACT

Lake Macquarie Home Loan Centre

Qld

Expert Lending

WA

Mortgage Solutions Australia

SA/NT

Easy Loans

Drums, didgeridoos and a crocodilewrestling Frankie J Holden welcomed PLAN Australia members to its national conference in Darwin in October. Following a long period of change for one of the industry’s premier aggregation groups, this year’s meet was all about creating a new vision for the future. The goal? It was about positioning its broker businesses to reach ‘the top’.

A NEW PLAN “We need to look for ways to grow our business, and to do that, we need to find

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ways to help you grow yours,” declared PLAN Australia’s CEO Trevor Scott in his opening address. He told PLAN brokers the business would leverage resources gained

by NAB’s backing to invest into the business and grow broker revenues in new ways.

Outlining recent initiatives, Scott detailed a wholesale restructure of the aggregator’s broker support team, which had boosted overall BDM resources. In addition, he flagged the continued expansion in distribution of its insurance product, PLAN Protect, the rolling out of fee-for-service flexibility, and the continued development of its Podium software platform. Scott also congratulated the compliance team, which had completed over 850 business visits.

Scott also detailed member survey findings which demonstrated extremely high pride among brokers in the aggregator’s brand and its professionalism.

Declaring himself “passionate” about third party business, Scott argued that the future is bright.

PROFESSIONAL DEVELOPMENT

Following Scott’s welcome, PLAN brokers heard from BT Financial chief economist Chris Caton, who diagnosed the pervasive economic pessimism surrounding the European debt crisis and the possibility of a US double-dip recession as “exaggerated”.

Next up was keynote speaker Mike Walsh – a professional innovator and futurist – who dazzled with his vision of the brave new technological world and the positive ways businesses could drive innovation to cope. Then Bill Lang, an expert in human performance, explained – and tested – the physical and mental boundaries of learning new skills, proving even ‘old dogs can learn new tricks’.

Likewise, the interest was clear when the co-author of Underbelly, John Silvester, told insider tales of murder and gangland mayhem in the streets of Melbourne.

SAND AND SUNSHINE For many it was a first trip to the Top End and PLAN Australia made sure brokers could sample the best of the city. From dinner at the Aviation Heritage Centre – where brokers ate and drank beneath the wings of a B-52 – to a stunning sunset at the famous Mindil Beach Markets, delegates celebrated the year’s successes. The gala dinner at the Convention Centre made for a ‘top end’ to the program.

NEWS / COMMENT

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FEATURE / TOOWOOMBA

O

On the morning of Monday 10 January 2011, Approveit Home Loans senior loans manager Chris Kelso remembers looking out the window and watching the rain come down outside his office, located about a kilometre from Toowoomba’s centre. At the time, he was oblivious to what was happening downtown.

Meanwhile, Mortgage Choice principal Anthony Ferro had a slightly better idea from his office, which is situated on the main intersection in Toowoomba at Ruthven and James streets. “What stood out for me was the intensity of the rain on the morning in question. It was deafening and just did not stop. The water was coming down so fast and hard that it met in the middle of the intersection. The intersection is high and slopes away and even in that situation there was half a metre of water in the middle of the road.”

But for both brokers the reality of what was happening didn’t hit home until they started receiving text messages and emails from clients, family and friends, and the media started broadcasting photos of the worst of the flooding disaster that was dubbed an “inland tsunami”.

“My wife had taken one of my sons to the movies that afternoon and the cinema was right next to the main flooding area. I couldn’t get in contact with her for an hour or so which had me very worried,” Ferro recalled.

“As it turned out she was in the movies unaware of the chaos going on. When she left the cinema for the car park she saw the water, the damage and the cars, and was just stunned.”

The brown deluge claimed 22 lives in South East Queensland and ruined hundreds of homes. And for small business owners it was devastating.

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The devastating deluge of water that submerged Toowoomba and surrounding areas in January 2011 destroyed the homes and lives of many, but nearly a year on there are signs of recovery, according to the region’s mortgage brokers

AFTER THE

Queensland floods FACT FILE More than 78% of Queensland (an area bigger than France and Germany combined) was declared a disaster zone due to the flooding in December 2010 and January 2011, with over 2.5 million people affected.

Some 29,000 homes and businesses suffered, and the Queensland Reconstruction Authority has estimated that the cost of flooding events alone will be in excess of $5bn.

O

In Toowoomba, December 2010 was the wettest December in 68 years. By 9 January, the combined water level in nearby Coobey and Perseverance dams were at 75.2%; after the flooding on 10 January, the combined water level sat at 127.2%.

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FEATURE / TOOWOOMBA

“Much has been said and written about the businesses and their owners who tragically lost their shops and stock and, of course, the devastating loss of life. Nothing, though, has been said about the businesses whose trade was decimated by the after-effects of the floods, even though they didn’t have any water through the front door.”

He adds that trade basically stopped for all of January and most of February. “I spoke to lots of business owners and the city seemed to go into shut-down mode. No one was buying lunches, or getting cars fixed, or shopping for retail goods and, in our case, looking for finance. In the first couple of months after the floods, every time it started to rain, you could see the traffic bank up outside as people headed for home. The phones would stop ringing and people were genuinely frightened.”

Ferro calculates that his business lost two months of revenue and it hasn’t been recovered. “We, like other businesses, had hoped for a corresponding bounce in trade when things settled down, but it never happened.

The general downturn in the economy and housing market then bit, so the bounce never happened. We have had to absorb that loss like everyone else but the government has not given due recognition to what I describe as the collateral damage of the floods.”

Kelso agrees that the town became a shell for about three or four months. “Certainly numbers were down, not only on the fact that we were in pretty quiet times anyway, but it certainly did slow down the whole residential real estate market while everyone sorted themselves out and came to terms with what happened.”

Both Kelso and Ferro were lucky in that the floods did not affect their business premises and homes, and their staff members also escaped the damage. However, a number of their customers were directly impacted.

“One client who lived at the bottom of the range told me how he had been doing some work on his house the day of the flood,” Ferro recalls. “He was so grateful that he had sent his wife and young child to stay with family out of Toowoomba for a few days, as he believed he would have lost them. He heard the water coming and just had enough time to get himself to higher ground. If anyone had been inside the house they wouldn’t have made it. I asked him what was left of his house and their belongings and he said ‘one brick’. Another client lived on a farm in the Lockyer Valley. They lost their two houses and their father to the floods. I have just recently settled their loan on a new home in Toowoomba. They are working to move forwards with their lives,” he adds.

CHANGE IN BUSINESS In the aftermath of the floods, Kelso took advantage of the slowdown to ramp up his business networking and

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“In the first months after the floods, when it started to rain, the traffic banked up as people headed home” – ANTHONY FERRO marketing through advertising. For Ferro, the floods were a reminder of how important his existing customer base is. “The GFC and the floods highlighted that much of the business written this year has come from the repeat and referral business areas,” he says. “I have also employed a staff member part-time to manage our ongoing customer relationships. Also, just prior to the GFC, I recognised that diversification was the right way to future-proof my business. While home lending was always going to be the cornerstone of the business, we needed to offer the full range of lending services to our clients whilst keeping within our core business model. It was diversification within complementary services and products, and not selling toasters with the mortgages.

We expanded our range into business lending, commercial and personal lending, and basic risk insurances through our partners at ALI. That was the right decision. We have all seen the statistics around the contraction in the home lending market across the country in the last two years or so. For me, whatever contraction I have experienced in the home lending area has been more than covered by the diversified offering.

It is madness to not embrace diversification.”

A NEW NORMAL According to Ferro, the city and region is still in recovery mode, but the atmosphere is positive and people are starting to rebuild their homes and their lives. While there is still a downturn in trade, both brokers attribute the conditions to a general downturn in the economy, rather than a direct reflection of the floods. Kelso indicates that his business has experienced an activity uplift in the last two months and he remains hopeful that this year will see a return to normality.

He notes that, ironically, the region had been plagued by drought in recent years which had kept the housing market in Toowoomba subdued compared to other parts of South East Queensland. “Before the flood, our dams were down to 8% capacity, so we’ve gone from famine to feast. But I believe we’ll see a good upside once we get some consumer confidence back.”

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SPECIAL REPORT / HOT LIST

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If a week is a long time in politics, a year is an age in an industry as fast-paced as the Australian mortgage market.

Barney McCarthy looks back at 2011 to see who is hot

R

eputations can be forged or destroyed overnight as X Factor starlets or Qantas executives can easily tell you. For those in the mortgage industry looking to build a high profile, it is a slightly longer road to the top, although some may argue there is less chance of being toppled once you get there. There may be some truth in the latter sentiment as a number of those featured in our fourth annual Hot List are regulars, but there is also a healthy dose of fresh blood this year to dash any suggestions that membership to the upper echelons of the mortgage industry is a closed shop. It’s not just high-ranking bank staff dominating proceedings either – brokers, aggregators and mortgage managers all feature, too.

This list has been the subject of extensive debate at MPA HQ, but we welcome differences of opinion.

Let us know if we’ve got it right – or if we’ve missed out any key players – on the Australian Brokernews messageboard or contact the MPA editorial desk.

Congratulations to this year’s inductees and read on to find out who has made our Australian mortgage market A–Z.

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SPECIAL REPORT / HOT LIST

THE YEAR’S

MOVERS & SHAKERS

Who: Ellie

Who: Huw Bough What: Head of franchise Where: RAMS

Comerford What: CEO Where: Genworth

Who: Meg Bonighton What: Head of broker distribution Where: ANZ Bonighton steered ANZ to second place in this year’s Brokers on Bank poll after the lender topped the pile last year. With general group profits in excess of $5bn unveiled in early November and a concentration on retail deposit growth, ANZ shows no signs of forfeiting its place in the hearts of brokers and consumers alike. As Bonighton told this magazine back in July: “ANZ has been a strong supporter of the broker channel from the beginning and we remain committed to building collaborative relationships and striving to truly understand what brokers need to run a successful business.”

Who: Mark Bouris What: Founder Where: Yellow Brick Road Bouris is squarely in the public eye at present, courtesy of his hosting duties on Nine’s Celebrity Apprentice, but away from the reality show, Yellow Brick Road (YBR) continues to bring the fight to the big boys. The group launched a no-fee home loan in October and Bouris challenged the majors to beat the rate at the time. YBR also diversified further into investment products in 2011 and is actively looking to grow its franchise network – something that should be achievable given its increased exposure through its partnership with Nine.

Comerford’s first year in charge of the Genworth reins has been a positive one as the mortgage insurer continues to be a major player in the LMI scene. Genworth was quick to the rescue of borrowers struggling as a result of the Queensland floods and unveiled an expanded hardship package for those still in difficulty some months later. The insurer’s International Mortgage Trends Report provides interesting snapshots of debt and mortgage sentiment, with Comerford commenting in June that first homebuyers are facing a worsening situation due to increased debt servicing.

Bough was on the move in 2011, departing Westpac and returning to RAMS where he served as head of broker business between 2004 and 2008. While RAMS endured a tough time during the GFC before eventually coming under Westpac’s wing, Bough says such resilience proves the strength of the brand. In his new role, Bough will directly lead a team of new and long-term franchisees and be partly responsible for driving increased value for stakeholders.

Who: Mark Davis What: Director Where: The Australian Lending & Investment Centre

Who: Tony Carn What: General manager of third party distribution Where: Homeloans Ltd

Homeloans Ltd swept the board in this year’s Brokers on Non-Banks poll, winning all but one category. Voting advisors felt the lender outshone its rivals in terms of service, products, rates and internet proposition. Brokers also recognised Homeloans Ltd’s increased marketing presence, much of which was centred on the view that non-banks are no longer a last resort but a genuine alternative.

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It’s probably fair to say that Mark Davis was far from a household name 12 months ago, but that has all changed due to a whirlwind year. The ex-ANZ man first came to prominence by virtue of his newly established firm being named as one of the country’s leading independent brokerages in our poll, before following that up by being named as Australia’s top individual broker after settling more than $170m worth of home loans. His true crowning glory came at the Australian Mortgage Awards in October when he collected two individual awards, and ALIC landed a brokerage prize. With an ambitious target of $200m in the coming year, Davis really is one to watch.

Who: Cameron Clyne What: CEO Where: NAB

NAB certainly hasn’t shied away from publicity in 2011, with its huge “break-up” marketing campaign garnering endless column inches and provoking much water cooler debate.

Kowtowing to consumers by paying exit fees incurred by customers of other banks moving to NAB and continuing to have the lowest standard variable rate of the major banks won the lender new fans, but it was at risk of alienating these converts by refusing to pass on the full 0.25% RBA cash rate cut in November.

Tony Macrae

Who: Tim Brown What: CEO Where: Vow Financial The vastly-experienced Brown took over as the chief executive of Vow Financial at the beginning of 2011 and was charged with helping grow the aggregator after previous CEO Jeff Zulman had overseen the assimilation of various constituent broker groups.

With a number of wealth management offices opening, plans to expand into Western Australia, a 3% annual rate of growth and a plethora of new broker agreements signed, Brown looks to be doing just that.

It has been a good year for CBA in the third party channel with the lender steamrollering the opposition in our Brokers on Banks poll by virtue of winning six of the nine available categories. The bank is well positioned to weather any further shocks to the global financial system too, with Cummings saying that its $6.8bn financial year profit and 61% funding from deposits proving it was “rock solid”. With two-fifths of its mortgages being sourced via brokers, intermediaries are well placed to take advantage of CBA’s strength in the year ahead. Cummings continues to champion the presence of women in brokerages and in the boardroom and leads by example in this respect.

Who: Kathy Cummings What: Executive general manager – third party banking Where: CBA

SPECIAL REPORT / HOT LIST Who: John Flavell What: General manager of distribution Where: NAB Broker

NAB Broker turned the corner in 2011 and Flavell’s stewardship is partly responsible for that. Improvements in the bank’s service platforms and lending policies have impressed brokers and Flavell reported back in May that NAB Broker had grown by 141% since March 2010. While he has long predicted strong competition in the Australian mortgage market as credit growth slows and foreign-owned banks seek a slice of the pie, Flavell believes there are still opportunities for lenders to reduce net margins by moving on rates while still securing strong returns on equity.

Who: Iain Forbes What: Director Where: Australian First Mortgage

Who: Gail Kelly What: CEO Where: Westpac Despite being consistently linked with top banking jobs in the UK and US, Kelly recently pledged her future to Westpac for the next three years. It’s no wonder, with the bank unveiling a cash profit of $6.3bn in 2011, up 7% year-on-year. Kelly is overseeing the institution’s move into stage two of its strategic plans, with the first stage – the integration of St.George – now complete. It is expected the next phase of Westpac’s plans will centre on efficiency gains and IT enhancements.

Who: Mark Forsyth What: CEO Where: Firstfolio The inimitable Iain Forbes retains his place on the MPA Hot List due to another strong showing by Australian First Mortgage (AFM) in our Brokers on Non-Banks poll. AFM followed up 2010’s first position with third place this time round and continues to provide a viable alternative to the major lenders. Its pricing remains keen – as two fixed-rate cuts in a week in August testifies – and with eight years in business now under AFM’s belt, expect the non-bank to go from strength to strength.

Who: Wendy Higgins What: Franchisee Where: Mortgage Choice Some people can’t help but be successful.

Withdrawing from the individual categories at the Mortgage Choice Business Excellence Awards to give other franchisees an opportunity in the spotlight, Higgins was instead inducted into the broker group’s hall of fame. Likewise, Higgins didn’t enter our Top 100 Broker rundown having scored top spot on a number of occasions, only to be recognised with the Golden Morgie award recognising lifetime achievement at the Australian Mortgage Awards. And did we mention that in June, Higgins became Australia’s first $1bn mortgage broker? Truly an advisor with the Midas touch.

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Iain Forbes retains his place due to AFM’s strong showing in our Brokers on Non-Banks poll

Having snapped up Club Financial Services and The Apple Group in 2010, Forsyth’s Firstfolio continued along the acquisition trail in 2011, taking a controlling stake in Calibre Financial Services. Such purchases helped the company to a 36% rise in revenues for the financial year 2010/11 and has led it to target further additions in 2012 alongside the roll-out of further white-label programs. Expect big things from Firstfolio once it has fully assimilated its acquisitions.

Who: Mark Haron What: Principal Where: Connective

Connective continues to grow at an impressive rate and featured in BRW’s Fast 100 list for the third year running. This remarkable achievement came on the back of five consecutive months of more than $1bn in settlements for the aggregator. Factor in expansion into WA, the launch of its white label range and a swelling of its credit services ranks and it’s been a productive period for Haron and his Connective colleagues.

Who: Ray Hair What: CEO Where: ALI Group In a year of many highprofile transfers, Hair was one of the personalities to hop on the merry-go-round in 2011, swapping PLAN for ALI Group after 10 years at the aggregator. As well as seeking a change of scenery, Hair admitted the timing of the move was pertinent too, with loan protection insurance becoming increasingly prominent under the new regulatory regime.

Who: Mark Hewitt What: Director of sales and operations Where: AFG

Hewitt leapt to brokers’ defence this year, warning the public that consumer group Choice’s One Big Switch campaign was not all it was cracked up to be and dismissing “sweeping pronouncements” it had made about the quality of financial advice in Australia.

AFG was also selected as a preferred partner

by LJ Hooker, helping the real estate giant meet its growth goals and cement its position as Australia’s largest independent aggregator.

Who: Steven Heavey What: Head of intermediaries Where: Suncorp Bank Heavey was another figurehead on the move in 2011, trading his role as head of intermediary distribution at St.George for a similar position at Suncorp Bank. Having helped relaunch the Bank of Melbourne brand in his former job, he immediately promised a “total strategic review” of Suncorp’s credit policies and broker processes. Heavey says he was attracted to the Suncorp position by its commitment to the third party channel and he will be hoping to raise the bank’s presence outside of its Queensland stronghold.

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SPECIAL REPORT / HOT LIST

Who: Phil Naylor What: CEO Where: MFAA

Who: Ian Narev What: CEO Where: CBA Narev is probably the newest name on the list given that he has only been ensconced in the CBA top job for a matter of weeks.

He has big boots to fill now that Ralph Norris has retired, but Narev is no stranger to big business or the mortgage market, having masterminded the takeover of Bankwest and CBA’s investment in Aussie Home Loans.

Given his background as a lawyer specialising in mergers and acquisitions, it will be interesting to see if CBA makes any headline purchases in the coming year.

Who: Tony MacRae What: General manager of third party distribution Where: Westpac MacRae made his way up the Westpac ranks in 2011, replacing Huw Bough as general manager of third party distribution after an internal reshuffle. Formerly NSW state general manager of Westpac’s commercial banking business, MacRae was drafted into the role due to his strategy, sales management and specialist knowledge in distribution business. He will be charged with further growing the lender’s third party distribution network, which already accounts for 45% of all its home lending business.

While it is ASIC’s responsibility to ensure brokers are adhering to the letter of the law, the MFAA’s focus has been more on trumpeting the professionalism of its members through its approved broker campaign. In conjunction with increased compliance standards, the drive will hopefully benefit consumers who can be confident they are receiving the highest quality advice possible. Naylor has also had his hands full with the ongoing debate around increased education requirements, another development which will ultimately protect the best interests of consumers.

Who: Steve Kane What: Managing director Where: FAST

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Not content with running the day-to-day operations of one of Australia’s most popular aggregators, Kane has also increased his standing within the MFAA, becoming president at the association’s annual general meeting in November. He has made public his desire to continue to develop the MFAA’s role in providing education and training opportunities, as well as lobbying with the regulator and government. On the FAST side of things, Kane has been vocal on the topic of brokers fully harnessing customer relationship systems after the aggregator ploughed vast sums into enhancing its offering.

Who: John Mohnacheff What: National sales manager Where: Liberty Financial

The charismatic Mohnacheff has helped oversee a successful year for Liberty Financial, including a solid second place in our annual Brokers on Non-Banks rankings. The lender hosted a successful set of national road shows with attendances well up on 2010 and is also in the process of developing its direct retail brand Liberty Network Services, a proposition it describes as the best of aggregator and franchise worlds. Mohnacheff also continues to champion the cause of university degrees for brokers to further increase professional standards.

Who: Matt Lawler What: CEO Where: Yellow Brick Road

Lawler resurfaced in 2011 as the chief executive of Yellow Brick Road, having disappeared off the industry radar on departing NAB Broker in 2010.

Teaming up with Mark Bouris in his new role, Lawler is charged with expanding the company’s product offering and cementing its position as a trusted, independent advice brand. With many brokers diversifying or becoming more like financial planners in terms of the products they offer consumers, Yellow Brick Road should be well placed to take advantage of this new brand of advice offering.

Lawler resurfaced in 2011 as the chief executive of YBR Who: Greg Kirk What: Senior executive leader – deposit takers, credit and insurers Where: ASIC With licensing fully underway, Kirk is one of the main mouthpieces at regulator ASIC. While he has admitted that there will be something of an ‘adjustment period’ while the industry adapts to the new regime, Kirk is also quick to point out that the regulator will quash serious misconduct regardless of when it takes place. Although ASIC’s remit is more concentrated on compliance with laws rather than taking decisions on competition and exit fees, the regulator has a huge part to play in the coming years, and Kirk is likely to be instrumental in that process.

Who: Stephen Moore What: CEO Where: Choice Aggregation Services 2011 represented Moore’s first full year in the Choice hotseat and he has settled in seamlessly at the aggregator. The past 12 months have seen Choice augment its lender panel, launch a business skills masterclass for its members and stand by brokers affected by the Refund Home Loans collapse. Moore is also keen to see a steady supply of new blood to the market, calling on the industry to source fresh talent from outside the mortgage arena, back in August.

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SPECIAL REPORT / HOT LIST Who: Damian Percy What: General manager of third party lending Where: Adelaide Bank

Who: Michael Russell What: CEO Where: Mortgage Choice Despite describing 2010/11 as one of the most demanding financial years in the company’s history, Mortgage Choice chief Michael Russell still managed to preside over a 7.4% increase in net profits and more than $2bn of loan book growth. The broker group also added 19 green field franchises to its armoury, as well as selling 19 existing operations. With expansion into vehicle finance as well as being home to Australia’s first $1bn mortgage broker, it’s been a busy year for Russell.

Who: Ian Rakhit What: Head of specialist lending Where: Bankwest

Bankwest performed admirably in this year’s MPA Brokers on Bank survey, landing the overall bronze as well as the honour of being the only non-major in the top three. This may have been in part due to a raft of loan discounts, commission initiatives and fee abolitions introduced to entice new business earlier in 2011. Such adaptability proves that there continues to be viable alternatives to the Big Four, even if Bankwest does come under the CBA umbrella.

Who: Rod Sims What: Chairman Where: Australian Competition &

Adelaide Bank – and Percy in particular – have long been staunch advocates of the broker channel and that didn’t change in 2011, with the man himself stressing the importance of third party business to the lender back in July. The bank may have slid down the Brokers on Banks rankings this year, but Percy is mindful of the challenges facing the lender, and it has been busy enhancing its online proposition as well as launching a new suite of basic products.

Scott assumed the PLAN reins in March and expanded its clout Who: Trevor Scott What: CEO Where: PLAN

Consumer Commission Sims replaced Graham Samuel as chairman of the ACCC in August, moving across from the Independent Pricing and Regulatory Tribunal of NSW. He’s had his hands somewhat full with the Qantas debacle of late, but second-tier lenders and nonbanks will be keen to ensure that Sims keeps his eye on the big bank ball before any possible monopoly situation is allowed to develop.

Who: James Symond What: Executive director Where: Aussie

Aussie enjoyed another strong year in 2011, but continues to forge ahead and look at the bigger picture. The broker group has targeted Western Australia as a big growth area for its business and is also looking to expand into wealth management in the future. Executive chairman John Symond continues to be the face of Aussie, but it will be his nephew James that helps drive the company to the next level before too long.

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Scott assumed the PLAN reins in March and immediately set about expanding the aggregator’s clout through a recruitment drive. The network’s white label roll-out has been a positive and Scott has been a vocal supporter of brokers diversifying their propositions, reminding PLAN members to take advantage of the aggregator’s referral program and investment in commercial professional development training. Scott acknowledged at PLAN’s national conference in October that there had been some member discontent over the course of the year, but allayed fears by reassuring that a wholesale restructure of the broker support team would keep PLAN’s service levels on track.

SPECIAL REPORT / HOT LIST Who: Ranjit Thambyrajah What: Managing director Where: Acuity Funding

Who: Wayne Swan What: Treasurer and deputy prime minister Where: Federal government Swan was lauded as the world’s best Treasurer by Euromoney magazine in September, no mean feat given the uncertainty currently plaguing the global economy. The accolade was presented for Swan’s “careful stewardship of Australia’s finances and economic performance both during and since the GFC”. Those who opposed Swan’s exit fee ban may not agree with the award, but his sensible handling of the nation’s purse strings cannot be questioned. He’s not afraid to bring the fight to the banks either, slamming NAB in November for not passing on the full RBA rate cut to borrowers.

Who: Patrick Tuttle What: CEO Where: Pepper

Tuttle has now spent a decade at Pepper and he shows no signs of letting up in his attempts to make the non-bank a force to be reckoned with. A $5bn residential mortgage portfolio acquisition from GE Capital in August can only help with those intentions as it intends to expand into niche segments of the prime market. It remains on the ball in terms of service too, claiming its $150 guarantee for turnaround times exceeding 48 hours has only been claimed once in the past 12 months.

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Who: Mark Woolnough What: Head of broker distribution Where: ING Direct ING Direct performed admirably in our 2011 Brokers on Banks poll, coming home fifth. The lender’s service proposition did come in for some criticism in the winter, but Woolnough took the unusual step of posting his contact details on the Australian BrokerNews website, inviting disgruntled brokers to contact him personally. Such transparency won the lender new friends and gave it a renewed purpose in its pursuit of the “best of the rest” mantle it covets.

Who: Michael Smith What: CEO Where: ANZ Smith has now racked up four years in charge at ANZ and the bank shows no signs of surrendering its position among the majors after its recent profit of $5.36bn. A reduced reliance on offshore wholesale funding and customer funding in excess of 60% means ANZ isn’t as exposed to the whimsies of global money markets as some lenders. Plans to grow the bank’s Asian business could see profits continue to soar.

Thambyrajah was named MPA’s Top Commercial Broker in 2011 for the second year running due to settling in excess of $200m worth of non-residential deals over the financial year. The intermediary attributed his success to a settling down in the commercial space, but admitted conditions remain tough. If the sector can continue to turn itself round, then not many would bet against Thambyrajah making it three on the spin in 2012.

Who: Glenn Stevens What: Governor Where: Reserve Bank of Australia Stevens ended the year a popular man after cutting the official cash rate on Melbourne Cup Day in November. The move – regarded by many economists as long overdue – was praised for helping release some of the pressure on stressed homeowners and it is hoped it will help stimulate the economy. The RBA has left the door open to further rate cuts in the coming months, citing the ongoing volatility of the world’s financial markets as a potential risk factor.

OFF THE BOIL Who: Julia Gillard What: Prime minister Where: Federal government

Just 12 months ago, it was Gillard who had forced Kevin Rudd into this section of the Hot List by virtue of overthrowing him as the country’s leader. A year down the line and Gillard clings on to power, but her popularity among the Australian electorate continues to wane. The introduction of a carbon tax impressed nobody and her valiant offer to the IMF to stump up extra Australian cash will unfortunately win her few friends domestically. Could Australia’s public enemy number one be the Prime Minister herself?

Who: Wayne Ormond What: Founder Where: Refund Home Loans No one likes to see businesses fail, but many felt the writing was on the wall for Refund Home Loans long before it finally bit the bullet in October. The brokerage’s strategy of partially rebating commissions to clients was a novel one, but with bank payments to brokers continuing to be squeezed, it was only a matter of time before the model became unviable.

Who: Nick Stace What: CEO Where: Choice The consumer group chief was reported to have described the quality of financial advice in Australia as “crap” amid plans to launch a model to rival brokers and following on from the One Big Switch campaign.

Strangely enough, not many mortgage advisors agreed with Stace’s putdown. With the industry more professional than ever, it’s really not surprising.

Could Australia’s public enemy number one be the Prime Minister herself?

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FEATURE / CHRISTMAS SHUTDOWN

W HIATUS SURVIVING THE HOLIDAY

Every year business grinds to a halt as Aussies gear up for the holidays and keep the party going until Australia Day. Andrea Cornish looks at how you can use the slowdown to your advantage

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Who needs just 12 days of Christmas when you can stretch out the good times for two months? Australia created the über-holiday by putting the festive season right in the middle of summer. While it’s a fantastic time of year, it can be detrimental to small businesses. MPA polled some of the country’s top business coaches for tips on how to survive the slowdown.

STRATEGISE: Use the time to organise an annual strategy and planning day for the coming year, suggests Linda Sultmann, principal consultant for White Room, a small business management and consulting firm.

“Review the year’s results against your budgets and expectations – what did you do well, what could you have done differently,” she suggests. “Analyse your capacity, client base and market channels. Create a plan that all your staff can participate in.”

CATCH UP WITH YOUR ACCOUNTANT: Sit down with your accountant and review your half-yearly financial performance, and revise cash flows and budgets.

STRATEGIC PARTNERS: Now is also the perfect time to solidify your relationships with strategic partners. A lunch or coffee date will go a long way in thanking the people who have supported your business with referrals.

According to Jon Dale, director of Small Fish Business Coaching, Christmas and the quiet time that goes with it is a good time to work on those relationships and to “reinforce the friendship, make sure they understand properly what you want from them, and make sure they know that you’d really like it if they helped you out with a referral”.

CLIENT COMMUNICATION: Sultmann also suggests servicing your clients. “Get some feedback from new clients and an update on longer-standing clients’ circumstances and needs in the coming year.”

STAFF REVIEWS: If you’ve got staff members, the slowdown is a good chance for everyone to catch their breath and take a look at their performance over the past year. Review salaries, key performance indicators, job satisfaction and employee goals.

Website resources There are a number of resources available to help businesses improve on their success. To start your investigation, check out these websites: • business.gov.au – This is the Australian government’s principal business resource (www. business.gov.au)

• SMExcellence – Provides free online short courses on various business topics and industries (www. smexcellence.com.au) • Queensland government – The Smart Skills Online resource provides free online courses on business planning, selling, negotiation and networking (www. business.qld.gov.au)

GIFTS: Christmas is a great time to reward loyal clients by sending them a token of your appreciation. See page 44 for more on giving gifts.

KEEP IN TOUCH: Make yourself available to clients throughout the holiday period: endeavouring to return calls and emails is a must in this business.

CRM TIPS AND TRICKS: Most aggregators and CRM system software developers complain that brokers utilise their systems in a very limited way. Making the effort to learn how to use your CRM system more effectively will not only save you time in the long run, but it could actually help you generate more business.

DISASTER-PROOF: Amid all the gaiety, you should take some time to think out some possible worst-case business scenarios for the coming year. Look at what the market is doing in your area and what you can do to survive any stagnation in the housing market, increased competition or changes in bank policy.

NETWORK: The holidays are a time for socialising, often with new people. Whether you’re at a party, travelling or at a kids’ event, you’ll invariably have the opportunity to do some informal prospecting. The trick is to leave the heavy sales pitch at home. Eventually the conversation will come around to you and what you do for a living. Use the opportunity to plant the seeds for future business.

MANDATORY LEAVE: Many companies with full-time staff should consider enforcing mandatory annual leave, as too much accumulation of leave entitlements can present a problem for your business down the road.

What busy brokers are doing this holiday season Even some of the country’s top brokers experience a slowdown over the holidays. 1st Street Home Loans managing director Jeremy Fisher never officially shuts up shop for the holidays, as he likes to make himself available to clients.

However, he expects enquiries to be down in January and February. To keep productive, Fisher will work on his database and use the time to plan

for the year ahead.“This will include making contact with my referrers and also getting in touch with any potential clients from the previous six to 12 months.”

Loan Market mortgage specialist Euan Brown also plans on using the time to fine-tune his business. The Toowong broker says he will work on “compliance and admin” over the December/January period.

FOCUS ON MARKETING: A slowdown is the perfect time to review your marketing activities and examine which ones are having the greatest impact. It’s also a good time to investigate new marketing or advertising initiatives.

Consider how to best reach your target market.

ADDITIONAL TRAINING: Focus on additional training for you or your staff – take an online course, or sign up for a sales seminar. Take time to read about the market.

OFFER SEMINARS: First homebuyer and property investor seminars are a great way to introduce your business to new clients. If you’ve been meaning to get around to this but just haven’t found the time, then here’s your chance to finally do it.

RELAX: Let your subconscious think about your business, and just take the time to recharge your batteries.

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HEAD TO HEAD / STEVEN HEAVEY

A PLACE IN THE SUN After six years with St.George, Steven Heavey is embarking on a new challenge with Suncorp.

Barney McCarthy catches up with him

Q: Today is only your second day on the job – still getting your feet under the table?

A: Yes. I’m up in Brisbane meeting all the major players.

Q: Have you relocated to Brisbane?

A: I’ll be based out of Melbourne as most of the aggregators are there, Sydney or Perth. There wasn’t much point in being based in Brisbane when most of the people I’ll be dealing with are interstate.

Q: Will you still be popping back to Brisbane on a regular basis to check in with your Suncorp colleagues?

A: Obviously all the other parts of the value chain in terms of what the proposition is – products, operations, credit – are all based in Brisbane, so I imagine I’ll spend 25% of my time in Brisbane, 25% in Sydney and 50% in Melbourne.

Q: Have you always been based in Melbourne?

A: No, I went to university in Brisbane. I’ve got a civil engineering background, but my first foray into the mortgage industry was being involved in setting up Mortgage Choice in Queensland 15 years ago. It was an interesting entry into the market given I had no experience in financial services, but the model of Mortgage Choice at the time was to acquire franchisees and build the network. My focus was helping them generate leads and educating them around the lending side of things which I did by using good quality lenders and franchisees that were very experienced and able to assist the new franchisees coming on board. I then relocated with Mortgage Choice to Sydney and became national lending manager. I had responsibility for all of the lender relationships, managed commissions and 40 | BROKERNEWS.COM.AU

reward recognition programs for Mortgage Choice nationally. I then got asked to go and set up a franchise business for ANZ which saw me relocate to Melbourne, and I started what is now known as ANZ Mortgage Solutions which is a franchise mortgage business where a bunch of owner-operators only sell ANZ products.

Q: Was it straight to St.George from ANZ? A: Yes, that was in 2005, so I spent six years at St.George as head of intermediaries.

Q: How did you end up at Mortgage Choice, given your degree was in a completely different field?

A: I had a couple of acquaintances who owned Mortgage Choice franchises back when it was a fairly new thing and the job was more of a general management type of role. It was more about selling the general proposition than actually lending, so I didn’t have to get involved in that myself, but obviously I got my head around things like pricing and policy in time.

Back then it was about getting franchisees on board, generating leads and converting them to sales.

Q: How did the Suncorp move come about?

A: The last thing I was involved with at St.George was

Out of office I have a tribe of five children, so they keep me busy and I love playing golf when I have the time. With my role being a national one, there is a lot of travelling to meet brokers involved and I believe that’s part of my value proposition – being accessible and in touch with what brokers want and minimising roadblocks for them.

the roll-out of the Bank of Melbourne brand into Victoria and at the end of that I just decided I was ready for a new challenge. Suncorp contacted me after the announcement I had decided to leave St.George and re-affirmed its commitment to the broking channel, which was nice to hear. They didn’t have a senior person running that channel nationally as they run a dis-aggregated model, so their willingness to bring me on board showed its dedication to distributing through brokers. Brokers want such commitment and consistency and that was a strong theme throughout my discussions with Suncorp. It has aspirations to be the number one choice among second-tier lenders and we want to get back some of the market share that has migrated to the majors over the GF period.

Q: So your role at Suncorp is a newly created position?

A: It is – head of intermediaries. They’ve given me an open mandate predominantly around growth, efficiency and improvements in processing, so my experience of

BROKERNEWS.COM.AU | 41

HEAD TO HEAD / STEVEN HEAVEY

“The individuals that are participating in the broking industry are knowledgeable and they need to get out and promote that more…” operating in a similar regional/second-tier space with St.George where you have to work harder will stand me in good stead. At such lenders you don’t get that underlying level of business that comes as a consequence of being a major brand so you have to get out to brokers and really communicate your proposition and make sure you have good, quick, consistent turnaround times. We’ll have a couple of announcements in the coming weeks around improvements in work flow and portal and loantracking accessibility. The goal is to simplify processes and make Suncorp easier to do business with.

Q: Given the domination of the majors, is the aim of lenders such as Suncorp to be the ‘best of the rest’?

A: We want to make sure we get consideration when a broker is sitting in front of a customer discussing where the business is going to be placed. We’ve got work to do to communicate to brokers who we are, what we’re about and what our proposition is. In the past, maybe that message hasn’t been getting across as there has been no one in my role. The feedback we have is that Suncorp has really good products, and the pricing is competitive but people aren’t always aware of it. We have to capitalise on that and back it up with good service.

Q: Given that St.George is owned by a major, will you have more freedom at Suncorp to bring the fight to the Big Four?

A: We’re obviously competing in the same sort of space.

One of the things I’ve noticed with Suncorp is that it is nimble in its ability and willingness to change, certainly with the work it has been doing around improving back-office processing. That will be the difference between second-tier players – how well they are able to articulate their proposition, how well they are able to deliver it and how consistent they are. It’s all about execution and awareness.

Q: Are brokers keen to support second-tier lenders and non-banks?

42 | BROKERNEWS.COM.AU

A: A lot of it is customer-driven. Post-GFC, consumers are a bit concerned and want to make sure they are dealing with strong, solid organisations. The key for me at Suncorp is to get the message to brokers that we have strength behind us in terms of funding and ratings and if they are aware of those things it makes it easier for them to sell Suncorp as a viable option to consumers. We need to help brokers with education around our organisation and capabilities.

Q: What direction do you see commissions going in? Is charging a fee for advice a workable model for brokers?

A: I think so and it’s for the broking industry to ascertain whether it is mature enough to command fees. It needs a united front – there’s not much point in 20% charging a fee if the other 80% aren’t doing it.

There needs to be an agreement on how the broking industry is projected and I don’t think that is for the lenders to determine.

Q: With brokers accounting for about 40% of the industry, have they reached their natural capacity or is there room for further growth?

A: I’ve always held the view that it’s in the hands of industry associations and brokers themselves to grow that percentage. What brokers deliver in terms of proposition to customers, a lot of banks can’t compete with – convenience, choice, trusted advice.

The individuals that are participating in the broking industry are knowledgeable and they need to get out and promote that more as they have a compelling proposition for consumers in a complex environment.

Q: What is your main target in your first year at Suncorp?

A: The main objective is to write more through the broker channel. We were a very strong player preGFC, and through a range of different circumstances things slowed down. The appetite for growth is now there and we want to make sure we’re growing our book, and no restrictions about mixes between first and third party business apply at Suncorp. One of the great things about the mortgage-broking industry is the percentage of new-to-bank customers that get delivered through this channel and a lot of lenders underestimate that. If you start to incorporate the revenue generated from other products sold, commercially it makes a lot of sense to originate through this channel. We also want to grow our first party network through increasing the number of branches we have in NSW and WA to begin with, and Victoria further down the track.

FEATURE / CREDIT REPORTING

BROKERNEWS.COM.AU | 43

COLUMN / GIFTING

‘TIS THE

SEASON A gift goes a long way to showing your appreciation to valued clients, referral partners and employees.

But, as Andrea Cornish reminds, bear in mind a couple of rules…

N

othing says Christmas like a whole hock of ham – or at least that’s what my sister-in-law’s boss believed. Very generously he gave each member of staff a sizeable portion of meat to take home over the holidays – the only problem was that my sister-in-law is a vegetarian. While it was a nice gesture, it came off as a little thoughtless. To her, it might have seemed like a waste of perfectly good pig, but to her Jewish or Muslim colleagues it might have actually been considered a bit rude. MPA finds out how brokers can get gifting right.

WORTH IT Giving gifts over the holiday season is a great way to express gratitude to the many people that have helped make your business a success during the previous 12 months, says Michael Griffiths, owner of My Small Business Marketing Guru.

“In today’s fast-paced society, you have to stand out from the crowd, you have to be different and you have to have relationships with people,” he explains.

“Relationship-based or appreciation marketing is the most successful way for business owners to stand out and foster true, long-lasting relationships with clients

44 | BROKERNEWS.COM.AU

and prospects. If you think about when you last received something in the post that you weren’t expecting, a phone call on your birthday, or a nice card, you automatically get excited and feel special.

That impression and feeling can do wonders for your business in referrals and being spoken about at the next dinner party. The key, however, is your mindset around why you are giving the gift. If you give gifts to purely get business then you will be far less successful than if you are giving gifts and keeping relationships because you care about your clients and prospects. The right mindset of value and appreciation will always pay 10 times more dividends then the mindset of thinking about yourself.”

While many brokers like the idea of giving gifts – especially at Christmas – it can be hard to swallow the cost, particularly when you’re expecting a slowdown in business come January. However, Griffiths suggests the benefits always outweigh the costs. “There is no doubt that the benefits outweigh costs when you think it might cost between $5 and $20 to make an impression versus the value of the lifetime of the client. Providing gifts of value is one of the best yet under-utilised marketing strategies a business has. Imagine having 10, 20 or 50 people talking about your business among their networks just because you have shown them that you care enough to send them a gift and keep a relationship.

That could be 500 referrals.”

01 02 03 GIVE FROM THE HEART

“Give the gift because you actually want to and that you care about that person and relationship, not just because you think it is the business thing to do,” Griffiths suggests.

MAKE IT APPROPRIATE

Put a little thought into your gift. Not everyone eats ham and many people forego alcohol for religious or personal reasons.

Consider cultural, religious and ideological differences.

BRAND IT

There’s nothing wrong with taking this opportunity to reinforce your brand. A professional product company or marketing consultant can help you come up with some ideas.

04 05 06 PERSONALISE IT A handwritten card with the gift also adds a great personal touch.

DELIVER IT

If you’re only giving a small number of gifts, why not deliver them personally?

That kind of consideration will really make a lasting impact.

BUDGET

Create a gift-giving budget and stick to it.

Don’t feel pressured to match previous years’ efforts, particularly if you’ve had a lean couple of months.

Tax advice on gifts and parties Brokers should also consider the possible fringe benefits and income taxes that may be applicable when providing entertainment to staff.

According to the Quinn Group, an integrated accounting practice, Christmas parties fall into the category of ‘entertainment benefits’ and as such will incur FBT unless specifically exempt or they fall under the ‘minor benefits’ exemption. A minor benefit is one that is provided to an employee on an infrequent or irregular basis and the cost is less than $300 inclusive of GST per employee.

“Holding the Christmas party on the business premises on a working day is usually the most tax effective,” it says. “Expenses such as food and drink are

exempt from FBT for employees with no dollar limit, but no tax deduction or GST credit can be claimed. However, where employees’ families (‘associates’) also attend and the combined cost for the employees and associates is $300 or more inclusive of GST, there is FBT only on the associates’ portion of food and drink, and a tax deduction and GST credit can be claimed on that portion. If only employees and clients attend — with only finger food or a light meal and no alcohol — then the entire cost is tax deductible.

There is no FBT and a GST credit can be claimed.”

The group adds that should you be holding your Christmas party off the business premises, it would only be exempt from FBT if the cost per head for

employees/associates is less than $300 inclusive of GST (ie, considered a minor benefit). If this is the case, no tax deduction or GST credit can be claimed.

Please note that associates are not counted in the ‘per head’ calculation, meaning that the $300 FBT minor benefits exemption applies to the combined cost of the employees and any associates who also attend the function.

The Quinn Group notes that non-entertainment gifts provided to employees separate from the Christmas party are exempt from FBT where the total value is less than $300 inclusive of GST. A tax deduction and GST credit can also be claimed. The ATO has indicated that if these types of gifts are given two weeks before the actual Christmas party, then

the gift and the Christmas function will be treated as separate benefits. This means that the $300 FBT exemption limit can be claimed twice.

Entertainment gifts (examples include theatre and movie tickets, tickets to a sporting event or providing a holiday) have different tax implications. If they are given as gifts to employees and family members and are over the value of $300, FBT is payable and a tax deduction is allowed. Where the combined cost for employees/ associates is less than $300 GST inclusive, there is no FBT, no tax deduction is allowed and no GST credit can be claimed.

For individually tailored information and advice for your tax situation contact The Quinn Group on 1300 QUINNS or visit quinns.com.au

BROKERNEWS.COM.AU | 45

COLUMN / SMSFs

Over 7,500 new funds are established each quarter

216,504 Australians have become members of SMSFs since 2007

One-third of super assets are in SMSFs (over $430bn)

Assets are protected from bankruptcy

The average value of assets owned by an SMSF is $960,636

{MANAGING}

EXPECTATIONS Tony Hayek explains how brokers can boost their business opportunities by buying property through self-managed super funds

46 | BROKERNEWS.COM.AU

I

nvesting in property through self-managed super funds (SMSFs) presents one of the biggest opportunities for mortgage brokers today. SMSFs are the fastest growing sector of the superannuation industry with over 7,500 new funds being created every quarter.

Over 850,000 Australians are members of SMSFs and collectively they hold one-third of the country’s superannuation funds. Since 2005, the number of Australians participating in the SMSF industry has increased by an average of 7.47% per year. To put this into perspective, Australia’s average annual population growth for the same period is estimated to be 1.44%.

The growth in SMSFs is not surprising. In the 10 years to 2010, managed funds (where most people have their super) have had unimpressive growth of: • 5.4% pa for conservative funds • 5% for balanced funds • 4.5% for growth funds And these funds are inclusive of dividends. With the institutions delivering poor returns, many Australians are now choosing to take control of their own super.

RETIREMENT WEALTH While managed funds have been providing poor returns, Australian property over the same period has grown at 8.6% pa (and this does not include rental income). In 2007, super legislation was changed to allow super funds to borrow to invest in assets. This means there is now an enormous opportunity for SMSFs to leverage into property. Not only is this a higher performing asset, but it allows investors to hold a larger asset base.

Smart investors are taking advantage of the clear benefits of this strategy, allowing them to build wealth faster in super through property, while savvy brokers are harnessing this opportunity to differentiate and add value to their services.

BROKER SOLUTIONS In the last two years, one in eight of property research house Blue Wealth’s sales was a SMSF. This is just the tip of the iceberg and there is enormous opportunity for brokers to build a highly lucrative business within this relatively untapped market sector.

The growth of this sector has been hampered by the number of professionals that are typically involved in servicing a client. A client that is keen to proceed will speak to their accountant, solicitor and financial planner and if any one of these professionals lacks experience and knowledge in this niche they can cast doubt on the transaction and derail the client. In many cases, it is the professional’s lack of knowledge in the area that

COLUMN / SMSFs

prevents a client from proceeding and this may not actually be in the best interest of the client.

Because the Australian mortgage lending landscape has changed dramatically over the past five years, today’s successful brokers have to reinvent themselves to remain relevant. Aligning yourself with a SMSF specialist whose team can provide a complete solution will open doors to expand business opportunities, and assist your clients to retire better and change people’s lives, while also increasing your bottom line.

OPPORTUNITY KNOCKS Leveraging into property could save Australians from retirement poverty. According to the latest Australian Bureau of Statistics figures, only 4% of retirees have a family income over $41,000 and 84% of retirees have an income under $21,000. Given recent negative activity in global share markets and retirement planning being a major issue, this practice is likely to gain in popularity and is the reason why professional scrutiny of advice around post-retirement is gaining more attention. Put simply, if you’re not talking about this space to your clients, you’re missing out on opportunities and risking losing their business.

One in 10 Australians over the age of 18 owns an investment property and 78% invest to fund their retirement, however most super is invested in a default fund, which is usually a ‘balanced fund’. While an SMSF loan is a financial product, it offers borrowers a lot more security, which allows them to control their life post-retirement.

This strategy allows your clients to: • achieve up to 35% better tax returns over 20 years compared to traditional borrowing outside super • use before-tax income to pay off a mortgage on an investment property • utilise traditional gearing strategies to generate tax-effective income • defer capital gains until retirement at which stage they become tax-free (subject to legislation) • take the risk of cash flow stress out of the purchase of an investment property • achieve asset protection from commercial and bankruptcy acts subject to anti-avoidance rules • take control of retirement savings and diversify a superannuation portfolio to reduce the overall volatility and risk associated with a traditional superannuation fund The advantages of this strategy is that as an investor, your client could purchase an investment property in their super fund, borrow against it up to 80% and not need to pull out extra funds for purchase or ongoing costs. With a SMSF, clients have total control of how

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COLUMN / SMSFs

their money is invested, can invest across asset classes and are able to borrow to invest in assets.

NEXT STEP Brokers need to realise that they can’t be all things to all clients. They should first identify the needs of their clients and introduce them to a specialist who will then work together with the broker, accountant, research analyst and financial planner to provide a completely tailored solution.

According to ASIC and the federal government, anyone who is advising or recommending the establishment of a SMSF or leveraging through a SMSF must hold appropriate qualifications or be licensed under the AFSL regime. That’s why having a good team around you is so vital. There are harsh penalties for getting it wrong, so it’s important to be clear on all requirements.

In summary, historical research shows us that over the long term, we can achieve significantly higher returns from property than shares, and this is enhanced because of the ability to gear property to higher levels.

We know that SMSFs provide clients with the control they want over their retirement savings, and now allow them to borrow to buy investment property. In many cases, the properties are cash flowed by money available

48 | BROKERNEWS.COM.AU

In many cases, it is the professional’s lack of knowledge in the area that prevents a client from proceeding … in the fund or covered by the employer’s contributions so do not require any personal contributions.

For brokers to take advantage of this emerging market, the focus should be placed on retaining and nurturing long-term relationships with their clients and by forming strong partnerships with SMSF specialists to leverage off this highly lucrative market.

Tony Hayek is a leader in the property industry and regularly presents educational seminars to investors and industry professionals. Blue Wealth Property specialises in the research and acquisition of investment property. As a national research and advisory investment team, Blue Wealth uses research to identify growth markets and investment opportunities.

BROKERNEWS.COM.AU | 49

SMART BUSINESS / LIFE INSURANCE

TAKE

COVER! In the latest feature from our sister title Your Money, we look at life insurance. With reports that many Australians have less life insurance than they need, we explain how to get the right cover at the right price in four easy steps

50 | BROKERNEWS.COM.AU

M

Most of the common misconceptions about life insurance date back to the 1960s and 1970s when policies were sold door-to-door by agents who promptly pocketed the money and disappeared leaving their ‘victims’ with less money and no life cover to show for it. “It’s a rip off”, “too expensive” and “too difficult to understand” are three common opinions about life insurance. Modern term life policies, however, are affordable and easy to understand and they can offer peace of mind if the worst happens.

STEP 1: DECIDE WHETHER OR NOT YOU NEED LIFE COVER According to the experts, the amount of life cover someone has seldom matches the cover they actually need. So how about you? Do you need life cover? To find the answer, first ask yourself the simple question ‘What do I want to happen in the event of my death?’, or ‘What financial situation do I want to leave my family with when I die?’ Many people with families want to make sure they don’t leave them in debt – saddled with a mortgage

they can’t pay off, for example. Others want to leave a pool of capital to provide income to their dependents for a set period of time, or to pay for education or emergencies. Even people without dependents may want to leave money to a charity or close friend.

STEP 2: CHECK YOUR EXISTING COVER If you decide to invest in life cover, the next step is to check your existing policies. Most super funds provide a minimum level of automatic life insurance to their members, so if you’re in a super fund, chances are you already have some cover. Call your super fund and check the terms and conditions of any life cover provided. When does the cover commence and cease? What exactly is covered and how much are you covered for? Are there any exclusions or limitations? What premiums are you paying? Gather this information in order to arrive at a decision about whether the cover within your super is adequate for your requirements or you need to purchase additional cover. It’s also a good idea to check whether your employer makes any life cover available. Some employers provide life cover for staff as an employment benefit.

If such a policy exists, gather the same information as you would for a super-based policy.

STEP 3: FIGURE OUT HOW MUCH COVER YOU NEED Now to figure out the amount of cover you’ll need. What lump sum will need to be paid out to cover your debts and support your family if you die?

How much will it take to support your children until they are financially independent?

Consider other sources of financial support that would be available to your family if you died – superannuation, your current savings, other insurance policies, and any investments in shares, bonds, property and other assets that you might have.

Types of cover TERM LIFE COVER is the most common. It provides the financial means to preserve your family’s way of life if you die. If the worst happens, a lump sum is paid to your named beneficiaries to pay off the mortgage and other debts, provide for children’s education, and secure your family’s lifestyle. The idea is that whatever happened financially before your death can continue to happen as a result of the life insurance payout.

TOTAL AND PERMANENT DISABILITY (TPD) COVER provides the costs of rehabilitation, debt repayments and the future cost of living if you are totally and permanently disabled. TPD cover is often bundled together with life cover.

TRAUMA COVER provides financial relief if you are diagnosed with a specified major illness or injury, such as cancer or a stroke, that will make a significant impact on your life. It is also referred to as critical illness cover or recovery insurance.

INCOME PROTECTION INSURANCE replaces the income lost through your inability to work due to injury or sickness.

ACCIDENTAL DEATH COVER is sometimes dressed up by providers of cheap policies to look like term life cover but in fact will only pay a benefit if your death occurs via a very narrow range of events.

If the cash available from these sources would be adequate to maintain your dependents’ current lifestyle, you probably don’t need life insurance; if it wouldn’t, consider taking out a life policy to cover the shortfall. Of course, you’ll also need to take into account your current level of debt (mortgage, credit cards and loans) and predictable major expenses like school fees.

STEP 4: LOOK AT THE FINE PRINT Term life cover is not that difficult to understand. You pay premiums now and your beneficiaries receive a

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SMART BUSINESS / LIFE INSURANCE

lump sum payout when you die. Policies don’t vary that widely, but it’s worth checking for hidden clauses and the finer points of detail.

• Is it term life or an imposter? Make sure you buy a fully underwritten term life policy with a straightforward explanation of the circumstances under which a death benefit will be paid to your dependents.

• Are there any exclusions? Under what circumstances (eg, suicide or within a waiting period) will the insurer refuse to pay the death benefit?

• How long does the insurance last for? You usually have to pay extra to ensure the policy continues for your entire life or up to a certain age.

• How are premiums calculated? They’re usually stepped, which means they increase as you get older.

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

Young, single and no children?

Young, single, no dependents and in good health? The last thing you’re thinking about is death cover. Unless you have financial dependents, the reality is you probably don’t need death cover just yet, but you should review the question if you get married, get a mortgage, have children, go into debt or start a business. Young singles do, however, need to think about income protection cover.

How would you support yourself if you could no longer work due to accident or injury? Income protection insurance pays a percentage of your salary in the event you’re unable to work due to illness or injury. It’s a grim prospect, but comforting to know you would be covered in such circumstances.

Buying life insurance – top tips

01

Get quotes from different insurers and compare what they offer Don’t be afraid to ask lots of questions

02

Write a list of the things you need and pick a policy that meets all your needs

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03

Policies don’t vary that widely, but it’s worth checking for hidden clauses and the finer points of detail

Work out how much cover you need Insurance company websites have tools to help you work this out

04

Be honest with the insurer Your ‘duty of disclosure’ means future claims may be denied if you leave details out

05

Check the costs You’ll always pay a regular premium for cover, but you may also need to pay an ‘excess’ on any claims

06

Check exclusions Always ask what is and isn’t covered

STATISTICS / YOUR MORTGAGE INDEX

Fixed rate demand on the rise 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 Type of loan 80% 70% 60% 50% 40% Oct 10

30%

Oct 11

20% 10% 0% SVR

FIXED

INTRO

Purpose of loan 60% 50% 40% Oct 10

30%

Oct 11

20% 10%

RELEASE SPENDING MONEY

HOME RENOVATIONS

MOVE HOME

REFINANCING

INVESTMENT PROPERTY

0% FIRST HOME

T

The latest user activity statistics from the Your Mortgage website show that demand for fixed-rate mortgages has soared in the 12 months to October 2011. In October 2010, just 18% of all loan enquiries concerned fixed-rate loans. This figure has now risen to 38%. Over the same time period, the number of website visitors looking for a standard variable rate fell by more than a quarter to 49%, showing that homebuyers are looking to take advantage of the attractive fixed rates currently available.

The lion’s share of enquiries continue to come from prospective buyers in NSW (35%), but there has been a surge of interest from borrowers in Western Australia (+3.37%) and Queensland (+3.28%).

Victoria has seen the biggest decrease year-on-year (-2.87%), but still accounts for just under a fifth of all visits to the site.

The average loan value visitors to the site are looking to get hold of currently stands at $350,516, an increase of $6,371 from October 2010. First homebuyers make up 50% of all enquiries, followed by refinancers (21%) and property investors (13%).

Buyer activity by state 40% 35% 30% 25%

Oct 10 Oct 11

20% 15% 10% 5% 0% ACT

NSW

NT

QLD

SA

TAS

VIC

WA

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LIFESTYLE / A DAY IN THE LIFE OF

A day in the life of…

Damian Percy is general manager of third party lending at Adelaide Bank 7:36am

Arrive at the office and note the profound practicality of living and working in Adelaide. Visit nearby coffee shop, purchase newspapers, Farmers Union Iced Coffee, and Vili’s Pie, and then settle down to catch up on events.

8:30am

5am

Awoken by knock on the door from the five-year-old, wanting to know if it’s time to get up. Explain in some detail the need to balance sleeping time and active time, and the broader implications of a tired and grumpy daddy.

5:24am

Awoken (again) by knock on the door from the five-year-old, wanting to know if it’s time to get up yet.

Explain in some detail the linear nature of time, how to decipher the clock placed next to his bed for just this purpose and the implications of a tired and grumpy daddy.

5.30am

Make breakfast for – and watch SpongeBob SquarePants movie with – five-year-old.

7:30am

Leave for the office.

“5am: Awoken by fiveyear-old, wanting to know if it’s time to get up” 54 | BROKERNEWS.COM.AU

Attend Group Pricing Committee review of the Group’s portfolios and goings on offshore. Brief the Third Party management team on the house view of the impact of developments in Europe and the US. Looks like I chose the wrong week to give up smoking. Remind self to buy more mints.

9:30am

Attend Steering Committee Meeting for our ongoing Third Party Lending Investment Program. Sign-off final design for new Adelaide Bank customer website and give inprinciple OK to new partner platform upgrade.

10:30am

Quick catch-up with the Portfolio Funding team to get an update on progress on a new wholesale facility we are putting together for a boutique lender. Congratulated on decision to give up smoking.

11:00am

Coffee with chief risk officer to discuss proposal from mortgage manager partner regarding niche lending opportunity. In-principle support gained, but at the price of two coffees and some sort of Nordic pastry. Buy mints.

12:00pm

Back at the desk and start ripping through the email inbox and returning calls. Team members discern presence in office and drop in to give updates on their

businesses and enquire as to progress on the non-smoking front.

12:30pm

Buy more mints. Lunch provided by vending machine upstairs.

Contemplate what part of the food pyramid Twisties fall into and decide it’s best not thought about.

2:00pm

Emails addressed and calls returned.

3:00pm

Meeting with my business partner from People and Performance area regarding recent staff survey. Couple of areas for improvement but results really positive… gotta love the team.

Suggest own morale would be much improved if P&P meetings were not scheduled for 3pm on a Friday.

4:30pm

Traditional ‘Soap Box’ update to the team and interested parties. Involves standing on milk-crate and giving an overview of the business and recent developments. Everyone is invited to add their two cents, ask questions or share gossip and news.

5:00pm

Tidy up more emails and have a look at diary for next week. On the road for four days visiting broker groups and mortgage managers and an MFAA meeting thrown in for good measure.

6:30pm

Fire up the mighty 1971 Datsun 240Z for the drive home.

6:45pm

Arrive home. Darling wife wants to know why I woke up the five-yearold to watch SpongeBob at 5:30am.

6:46pm

Remind self to buy more mints. Lots and lots of mints.

LIFESTYLE / FAVOURITES

❤

Favourite things…

Wendy Higgins franchisee, Mortgage Choice

Hobby: Jigsaw puzzles, the bigger the better

Food: Everything – especially when on holidays

Music: Tina Turner – simply the best Book: All of Lee Child’s Jack Reacher

Place: Nora Creina, near Robe in the south-east

books – I have read all 16 of them

of South Australia, is my favourite place in the whole world

Celebrity: John Howard, the best politician ever

Drink: Red wine, particularly a good pinot noir (or a Grange)

Vacation spot: Houseboating with family and friends on one of the Movie: Dances

unforgettable houseboats out of Mannum, SA

with Wolves, the buffalo scenes are unforgettable

Sport: Fishing at Nora Creina

BROKERNEWS.COM.AU | 55

LIFESTYLE / MOTIVATION

Tony Wilson of Teamcorp explains how to maintain performance levels in the face of uncertainty

Tony Wilson is a workplace performance expert.

He has spent over 15 years working with elite performers in business and sport, and focuses on helping teams and individuals perform at their peak more often and for longer.

I was talking to a friend of mine recently who is an elite athlete – one of those people you expect to be supremely confident and sure of their direction and purpose. But he has been overlooked for selection in the national team and his confidence is falling. No-one can really understand his non-selection. It seems unimaginable given his performances relative to those that have been selected in front of him.

The stress has been significant – although he wouldn’t show it outwardly – and for the first time in his life, he has been unable to focus on being as productive as possible at training. The thing that is damaging his performance so greatly is uncertainty. Uncertainty about his future and, importantly, uncertainty as to whether the effort he is putting in is worth it.

Uncertainty can be debilitating. And it seems that the more we listen to what’s going on in the world and in our industry, the more aware we become of just how uncertain the landscape is.

Whether you are a manager of other people, or you have to manage yourself, you and your team will be experiencing the same kind of uncertainty at work.

What does the future hold for me? Is all this effort worthwhile, or am I better off doing something else?

And, whether you know it or not, this uncertainty is stopping you from performing at your best.

This is not just anecdotal, it’s biological. Human beings crave certainty. We spend our lives in a state of prediction and expectation – we predict what we will see next and that shapes our expectations. When what we see (or experience) isn’t quite what we expected, our brains send an error signal. This is a trait leftover from our evolution – it allows us to spot unexpected threats.

When there’s too much error, or uncertainty, it causes an extreme response. In fact, the part of the brain that activates under these conditions is the same part that responds when we are physically threatened. As a result, we over-produce adrenaline, heightening our attention,

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but decreasing our ability to think at our best. Our brain capacity goes down along with our ability to control our behaviours and emotions.

One of the greatest performance-enhancers we can build is a feeling of control. We can’t control everything, but we can work harder to control the things we can. Here are some tips for gaining control:

Build a clear action plan – breaking things down into manageable parts stops us from getting overwhelmed and shows us that we have more control than we think

Write a list of the controllables – write down all the things that are controllable and all those that aren’t. Make a plan for the things that you can control, then tear up the list of uncontrollables – they don’t matter

Focus on inputs, not outcomes – like it or not, results are often out of our control (just like the economy), so focus on the inputs that you can control – how many calls you make, how responsive you are to emails, how you build relationships

Celebrate small wins – a feeling of progress and achievement helps us feel in control. Celebrate the small wins, even if it means focusing on completing the inputs

Get up again – the more you bounce back after a disappointment, the easier it becomes to do so the next time.

And the one thing that gets us out of negative feelings is taking positive action. Build a habit of doing something positive immediately after every setback