Mortgage Professional Australia magazine Issue 12.02

brokernews.com.au

Trail

European debt crisis

imminent?

First home owners

Wholesale funding

The big 4

Consolidation

Non-banks

Franchises

Rate reductions Sales volumes

boost Where to buy

Cross-selling

Monetary policy

Market share

Lending criteria

Credit licensing

Clawbacks

Social media Mining

industry European

debt Consumer crisis Refinancers confidence Interest rates – up or down

Efficiency Productivity House price stabilisation

Commission cuts

Diversification

Units or houses

D E R E RentalANSW yields SMSFs

Lending criteria

Social media

Credit licensing

Where to buy Exit fees

Fee-for-service

S N O I T S E U Q G HEdocBI ASIC TLow

Broker segmentation

First home owners

Property investors Election

Rental yields

Big Four

Crossselling

Technology

Exit fees

Upgraders

Rate reductions

Interest rates – up or down

Honeymoon rates

Commission cuts Units or Monetary policy houses Non-banks

loans

Clawbacks Commercial

Lending criteria

ISSUE 12.2

Honeymoon rates

Aggregators Productivity

NAB Broker Your partner for growth in 2012

The satisfaction results speak for themselves.

So do our brokers.

At NAB Broker, we’re continuing to invest in our business to deliver market-leading products and outstanding service. And brokers are already seeing the results – with overall satisfaction in Homeside service achieving 83% in November 2011*.

Grow with us in 2012 visit www.nabbroker2012.com.au or call 1300 622 276

*Source: Homeside Service Survey September – November 2011.

NAB Broker and Homeside Lending are divisions of National Australia Bank ABN 12 044 937 Australian Credit Licence and AFSL 230686. Terms and Conditions and Fees and Charges apply to all Homeside products.

overall satisfaction in Homeside service

Isn’t it time you spoke to NAB Broker?

“I trust and value my BDM and believe Homeside provide access to people who are experienced and knowledgeable about the loan process and policy. This helps us immensely with the loan application process.”

Murray Kent Pacific Home Loans, QLD “You truly are providing online, upfront vals and delivering on the promises of 2 hour and 4 hour fully assessed unconditional loan approvals. Congratulations.”

Katrina Rowlands Mortgage Success, NSW

“The improvements in service are excellent, we actually receive calls from Homeside’s credit managers which means my Homeside loans are processed quickly and any issues are dealt with in a timely manner. These service enhancements mean I provide a great experience for my clients.”

Ashley Koenig Mortgage Choice, VIC

Delivering outstanding service so you can grow your business in

Over the past two years, NAB Broker has been well-recognised for our competitive pricing. But we’re most proud of the improvements that are providing outstanding service to you and your clients, including: Providing access to proactive credit managers who’ll pick up the phone instead of sending you an email.

Significantly reducing the time to unconditional approval including giving all brokers the ability to order up-front valuations online.

Giving you a personal, professional service through one of the largest and most experienced network of BDMs and support staff.

In 2012, we will continue to invest in delivering the best product, price and service solutions in the market. For you, that means faster turnarounds and even happier clients.

Grow with us in 2012 visit www.nabbroker2012.com.au or call 1300 622 276

“NAB Broker & Homeside are miles in front. People just have to give them a chance and give their processes a chance to work and they will see the difference.”

Danny Chronopoulos Choice Mortgage Solutions, NSW

CONTENTS / ISSUE 12.2

46

Insurance and diversification Your guide to successfully integrating insurance into your business

brokernews.com.au

2 | BROKERNEWS.COM.AU

Franchises

Rate reductions Sales volumes

boost Where to buy

Cross-selling

Lending criteria

Lending criteria

Credit licensing

Social media

Mining industry European

debt Consumer crisis Refinancers confidence Interest rates – up or down

Efficiency Productivity House price stabilisation

Units or houses

Non-banks

Market share

Clawbacks

Rental yields

The big 4

Consolidation

Where to buy Exit fees

Fee-for-service

Wholesale funding

Diversification

Social media

First home owners

Commission cuts

The virtual broker Can Skype and the cloud replace real human interaction?

imminent?

NS QUESTIO Low E docBIGASIC TH Monetary SMSFs policy ED RentalANSWER yields Credit licensing

22

Crossselling

Property investors Election

Technology

Rate reductions European debt crisis

Broker segmentation

First home owners

Upgraders

Big Four

Trail

Honeymoon rates

Commission cuts Units or Monetary policy houses Non-banks

Interest rates – up or down

Exit fees

loans

Clawbacks Commercial

Lending criteria

ISSUE 12.2

Honeymoon rates

Aggregators Productivity

OFC + spine.indd 76

1/23/2012 2:33:31 PM

COVER STORY 26 | The 2012 forecast Key players give us their predictions for the year ahead

WEEKLY INVESTIGATIONS NOW ONLINE: White labelling Class actions Property investors » brokernews.com.au

CONTENTS / ISSUE 12.2

52

NEWS & VIEWS

PROFILES

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

42 | Clive Kirkpatrick St.George’s new broker head on service, segmentation and commissions

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 NAB’s commission moves 16 | The Big Story A compilation of the top quotes from our weekly multimedia broadcasts 20 | Analysis The lowdown on ASIC’s report into low-docs and responsible lending

42

SMART BUSINESS 52 | Managing succession How to get it right if you’re getting out

54

4 | BROKERNEWS.COM.AU

54 | Katrina Rowlands Australia’s top female broker explains the secrets to her success

STATS 56 | Your Mortgage index The latest data from our sister website shows surprising results for first homebuyers 58 | This month’s statistics round-up looks at the best suburbs for first homebuyers

LIFESTYLE 62 | My favourite things… Steve Weston, Advantedge 63 | A day in the life of…

Mark DeMartino 64 | Words of wisdom… business advisor Sue Hirst

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 5

CONTENTS / EDITOR’S LETTER

STORMY WATERS AHEAD? Heading into 2012, the world seems more uncertain than it has since the GFC struck. The European debt situation is casting a pall over the global economy; closer to home, a subdued housing environment has seen the mortgage industry endure some tough times.

Volatility and change seem to be the bywords for the current environment: still, that doesn’t mean that it’s all doom and gloom. A more benign interest rate environment seems to be sparking interest from borrowers – current and new – and intensifying competition amongst lenders of all shapes and sizes is good news for all.

It’s hard to steer a course through the next week, let alone the next year – and that’s why we’ve gathered the industry’s biggest names and brightest brains to quiz them on all aspects of where the mortgage industry is going in 2012. We’ve obtained forecasts from all parts of the mortgage world about what the game-changing issues are, where interest rates are headed, what market segments will be the most important and how you can position yourself to make the most out of the year ahead.

Elsewhere in this issue we’ve carried out an in-depth investigation into diversification into insurance products – and how to integrate this service into your business seamlessly. The relentless advance of technology also comes under MPA’s beady eye, as we look at whether broking can become truly virtual and if services like Skype can really replace the face-to-face client interview. Add to that the regular mix of news, columns, data and people, and it’s a packed issue to kick off the new year.

Kevin Eddy, Editor

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

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

SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak BUSINESS DEVELOPMENT MANAGER Lisa Tyras ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Kerry Buckley MARKETING COORDINATOR Anna Keane TRAFFIC MANAGER Jessica Jazic

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 4790 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 www.keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto www.brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

CONNECT

Contact the editor: kevin.eddy@keymedia.com.au

6 | BROKERNEWS.COM.AU

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

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 7

NEWS / ROUND-UP PROPERTY

DIVERSIFICATION

Renos bait more buyers

Renovations continue to spur building activity as homeowners pass up new purchases in favour of adding value to their existing homes.

ABS figures show renovation work grew 0.9% in the September quarter to be up 6.3% on last year. HIA acting chief economist Andrew Harvey said renovations were the “shining light” of the building industry.

“This trend of growing renovations is likely to continue not only because Australians love to renovate but also as households increasingly prefer to direct excessive property transaction costs towards improving their existing homes rather than trading up,” he said.

New home building, meanwhile, fell 1.5% in the September quarter, and was down 5.2% on the same period last year. Harvey said new home building was on a “consistent downtrend”.

Cross-selling ‘the holy grail’ of 2012 Cross-selling will become a necessity in the mortgage lending environment in 2012.

Deloitte’s 2012 Australian Mortgage Report has argued that low system growth and heavy discounting in 2012 will force lenders to focus on cross selling wealth and insurance products. Deloitte called cross-selling “the holy grail” of mortgage lending in 2012.

“Typically a high touch model, this will involve lenders needing to rethink the current simplistic approach of ‘would you like insurance with that?’ which is done post-approval by often inappropriately trained staff,” the report said.

Instead, banks will have to integrate mortgage lending with their planner operations. It indicated that banks which do this, as well as understand “the role of education and needs-based advice with the mortgage sale”, will succeed in cross-selling.

Deloitte predicted 2012 will see system growth at 5% rather than the double-digit growth that defined the 1990s and much of the 2000s. The company predicted that strong price discounting will continue throughout the year, placing a strain on profitability.

8 | BROKERNEWS.COM.AU

FIRST HOMEBUYERS

OUTLOOK GLOOMY FOR FHB DEPOSITS

STATS:

$1.1trn The value of

outstanding Australian mortgage lending in 2011 Source: Deloitte BANG FOR YOUR BUCK THIS MONTH’S DATA LOOKS AT THE MOST AFFORDABLE CITY SUBURBS ACROSS AUSTRALIA. TURN TO PAGE 58 TO CHECK PRICES IN YOUR STATE

More than a third of renters don’t believe they’ll be able to save a deposit any time soon, and close to half believe they’ll have to find a better job to afford property.

An ING DIRECT survey has revealed only 21% of prospective first homebuyers believe they will be able to save a deposit within the next three years. Of those who are renting or do not already own a home, 36% indicated there was “no way” they would be able to save a deposit in this timeframe. Forty-one per cent said they would have to find a better job or even take on a second job

in order to save a deposit.

Potential first time buyers living in capital cities showed even less prospect for saving a deposit, with only 13% saying they could do so within three years. This is less than half the proportion of regional first homebuyers.

The poll also revealed disparity between high income earners and low earners. Forty-one per cent of respondents with household income of more than $100,000 expected to be able to save a deposit, as compared to only 8% of those with household income below $40,000.

Median property prices, capital cities Darwin $458,250

Brisbane $402,000

ECONOMICS

Perth $443,000

Australian economic growth set to trump OECD countries

Canberra $475,000

Hobart $310,000* Source: RP Data, October 2011 *Hobart figures from September 2011

REGULATION

Projected GDP, 2012

Licence renewal more than ‘ticking boxes’

Australia New Zealand US Euro area UK Japan China 2

Sydney $498,000

Melbourne $458,500

Australia’s economic growth is expected to be among the highest in the developed world next year thanks to mining investment and booming commodity prices, according to a report from the Organisation for Economic Co-operation and Development.

But the report suggests interest rates might need to come down again if Europe’s economic woes deepen. The semiannual Economic Outlook pegs Australia’s economic growth at 4% in 2012, with unemployment hovering at around 5.25% for the next several years. According to the OECD, growth numbers are projected to be slightly less rosy in 2013 at 3.2%, though inflation should stay right on target at 2.5%.

The report says developments in Europe are of particular concern, and that its outlook for Australia assumes a baseline case that Europe manages to “muddle through” and avoid any major collapse. The OECD warns, however, that the Reserve Bank should be prepared to drop interest rates.

0

Adelaide $370,000

4

6

8

10

Source: OECD

Renewing an ACL may be a simple process, but it’s more than just “ticking boxes”.

As the first round of credit licences comes up for renewal, Advantedge’s Steve Weston said licensees will need to be certain they have the documentation to back up their renewal applications.

Though the renewal process is easy, Weston said, ASIC will be carefully scrutinising the claims of licensees.

“I have had feedback from brokers who hold their own

licences to say the renewal process is simple. There’s nothing to it, and if you just tick the boxes, you did right. But ASIC has made it very clear they are going to be reviewing the annual compliance certificates and they will be coming to speak to licence holders to say, ‘You’ve ticked the boxes to say you have these policies and processes in place, have these manuals in place. Show them to me’. Now that’s where the rubber hits the road,” he said.

BROKERNEWS.COM.AU | 9

NEWS / ROUND-UP PROPERTY

MORTGAGES

Mining towns top Qld best performers list

Rate cut causes mortgage volume spike

Rockhampton suburb Gracemere has topped the list of best performing suburbs in Queensland, according to a PRDnationwide research report.

The report, which researched the 20 best and worst performing suburbs in terms of sales activity in Queensland in the year up to June 2011, showed Gracemere sales have increased 63%, with prices up 3%.

PRDnationwide research director Aaron Maskrey said that most of the best performing suburbs were in mining areas.

“These regions have attracted new residents [who] require accommodation in a market that has a distinct undersupply,” he said.

“The growth of these markets is a direct result of strong investment and the availability of high paid employment within these areas.”

On the other side of the scale, Maskrey said that 17 of the 20 worst performing suburbs were in South East Queensland. This was a result of tradesmen leaving the Gold Coast area in the wake of a winding down in the construction industry over 2010.

BEST PERFORMERS LOCATION

SALES ACTIVITY JANJUNE 2010

SALES ACTIVITY JANJUNE 2011

ANNUAL CHANGE (%)

VOLUME CHANGE

Gracemere

59

96

63%

+37

Calliope

52

78

50%

+26

Tannum Sands

29

55

90%

+26

Dysart

21

45

114%

+24

Capella

6

29

383%

+23

10 | BROKERNEWS.COM.AU

Mortgage volumes increased by nearly a fifth following the November rate cut, according to new statistics.

AFG’s mortgage index for November has revealed that the aggregator processed $2.9bn of mortgages in the month, its highest figure since March 2009, and an 18.4% increase over October figures.

“While November is seasonally a strong month for mortgages, the rate cut has certainly stimulated demand,” said Mark Hewitt, AFG’s general manager of sales and operations. “We’re experiencing the paradox that weaker global economic conditions and lower rates is good news for Australian property buyers – at least for now.”

Hewitt also highlighted that investor interest surged after the rate cut, with property investors accounting for almost two out of every five mortgages sold in November.

HOUSING

HOUSING COSTS SKYROCKET FOR MORTGAGORS STATS

38.4%

The proportion of mortgages sold to investors in November 2011 Source: AFG SUDDEN SPIKE WHICH MARKET SEGMENT HAS SUDDENLY STARTED LOOKING FOR MORTGAGES? CHECK OUT THE YOUR MORTGAGE INDEX ON P56 TO FIND OUT

Mortgagors have seen their housing costs skyrocket over the past decade, new figures show.

Data released by the ABS indicates that households with a mortgage have seen their housing costs shoot up 42% over the last decade, equating to an extra $120 a week.

Mortgagors were found to have higher housing costs than renters, averaging $408 per week versus $305 a week for renters.

Mortgages are also becoming more common. The proportion of households that own their home outright fell over the decade, dropping from 39% to 33%. The proportion of households with mortgages, meanwhile, increased from 32%–36%.

M&A

BROKING

SMARTLINE AND THE MORTGAGE GALLERY TO MERGE Smartline will merge with WA-based brokerage The Mortgage Gallery in a move the businesses say will provide scale in a tough market.

The companies will look to merge by April, with The Mortgage Gallery retaining its branding and management team.

The Mortgage Gallery founder John Bignell said the move will allow the company to compete amid

tough market conditions in which scale is incredibly important.

“Everyone’s probably in recent times looked at their cost structure as we have done. There’s a requirement to continue to improve on technology capabilities as well. To us that was one of the major attractions to the Smartline brand; their undoubted ability in that area,” Bignell said. “We felt we

weren’t large enough to be considered one of the major players, but we were a little bit too big to be considered a boutique operator,” he said.

With many aggregators and franchise brokerages targeting expansion in the WA market, Bignell added that the merger will give Smartline a foothold which will deliver an edge on its competitors. The merger will yield a combined group with more than 240 franchisees, settlements of $4bn a year and a combined loan book of more than $17bn.

Broker industry to see ‘new blood’ in 2012 The exodus of brokers from the industry that marked 2011 may be stemmed in 2012.

MFAA chief executive Phil Naylor told Australian BrokerNews he expects broker decline to taper off and new blood to enter the industry.

“The good news is that while there have been a reasonable number of exits from the broker sector, there are many new entrants continuing to join the industry,” he said.

These new entrants will be subject to higher educational requirements in 2012, however. By 1 July, the MFAA will require all members to hold either a diploma in financial services or finance and mortgage broking management.

Naylor said 2012 would see the association continue its push to bring brokers up to speed, and to position the industry as one of increased professionalism.

BROKERNEWS.COM.AU | 11

NEWS / PRODUCT ROUND-UP

PRODUCT NEWS A bite-sized guide to the industry’s newest products and rate changes – straight out of the box Who: Genworth What: Graduate package The spec: Genworth’s new package relaxes some LMI requirements for recent graduates to help them get on the property ladder – notably extending acceptable loan terms to 40 years and removing restrictions on high-density properties. Applicants must hold a university degree, be employed in an occupation related to their qualification and earn over $50,000 pa.

Maximum LVR allowed is 95%.

What they say: “We recognise all lending segments are facing a tough time as first homebuyers continue to be held back by affordability issues and consumers remain cautious.

Our graduate package acknowledges many first homebuyers are tertiary educated with high income growth potential but due to the short time in their career haven’t been able to save for a deposit.”

– Ellie Comerford, CEO

Who: Citibank What: Fixed-rate home loan

LAUNCHING A NEW PRODUCT?

If you are launching or updating a product and want it to be considered for inclusion on this page, send the details to kevin.eddy@keymedia.com.au

12 | BROKERNEWS.COM.AU

The spec: The fixed-rate race to the bottom continues apace, with Citibank lowering its three-year fixed rate to just 5.75%. The move follows similar rate cuts by rivals including Firstfolio (5.89%) and Aussie (5.99%). The Citi product also features a 60-day rate lock.

What they say: “We conduct ongoing reviews of our rates (fixed and variable) based on the most recent cost of funds. We may be getting close to the end of this ‘dropping’ cycle for fixed rates, and they can climb fairly quickly if the yield curve reverses.”

– Aaron Milburn, head of broker distribution, mortgages

Who: Mortgage House What: Fixed-rate home loan The spec: Non-bank lender Mortgage House is also getting in on the fixed-rate action, cutting rates on full-doc and low-doc products for the second time in three months.

New business fixed rates start from 6.17% pa for a one-year term. Other features include a 60-day rate lock, 100% offset accounts, redraw and additional repayments of $20,000 pa.

What they say: “Fixed interest rates are proving to be an increasingly popular home loan option for our customers with home loan interest rates lower than standard variable rates in many cases. Customers welcome the evolving flexibility now offered by our fixed rate products, including the ability to make extra repayments during

the fixed term without incurring additional fees and the functionality of having an offset account on a fixed loan.”

– Sarah Roberts, managing director

Who: Vow Financial What: Online conveyancing and legal services The spec: Aggregator Vow Financial has launched Vow Legal, a new service providing online conveyancing and related legal services for its broker and financial planning network. Vow Legal is being managed by the Astill Legal Group, a group with a national presence founded almost 40 years ago. It will have a particular focus on matters regarding property, finance, self-managed super funds, wills, estate law and relationships law, as well as assisting with commercial and technical advice for all business dealings and structuring needs.

What they say: “Over the past decade there has been an increase in the level of complexity and skill required to complete a property transaction. Our practitioners have more than 40 years of collective property law experience, providing an exemplary professional service. As well, our bespoke systems software allows the brokers to track the progress of the conveyance online, to provide peace of mind for clients.”

– Rowan Astill, managing director, Vow Legal All rates correct as of 18 January 2012

NEWS / COMMENT

VIEWPOINT What’s the story on Australian Brokernews that got tongues wagging most?

This month it was NAB’s moves on commissions

THE STORY:

NAB Broker announced in late November it was revamping its star rating system, upgrading all accredited brokers to ‘4 Star’ level from 1 January. While this brings benefits such as being able to order upfront online valuations and access 90%+ LVRs, the biggest impact will be on wallets: all brokers will be eligible for 65 basis points upfront commission, rather than the previously stepped commission structure. Did the industry approve?

THE ONLINE REACTION Tim McQueen on 28 Nov 2011 02:13 PM They really need to come to the party on ‘trail payments from day one’, too. NAB or HSL have a good product, but the process leaves a bit to be desired.

Paul Gollan on 28 Nov 2011 02:17 PM Nice work NAB Broker. Banks spend a lot of time asking brokers “what do we need to do to get more business”. Clearly NAB Broker has identified one of the answers. 65 basis points upfront plus their stepped trail structure is finally starting getting broker commission rates back to where they should be. Brokers and their families were smashed by banks during the GFC with banks citing margin squeeze.

Notice net margin on mortgages has got very little airplay this year, while pricing committees at banks have been throwing around discounts like drunken sailors.

Sydney broker on 28 Nov 2011 03:00 PM Reading the comments posted I can’t believe you guys have forgotten so quickly about the lender/broker loyalty. NAB and some of the other Big Four [lenders] cut first year trail and introduce “star ratings” while brokers are doing it tough. Naturally, brokers

14 | BROKERNEWS.COM.AU

stop sending business, and now they decide they need us brokers to send them business. No! What goes around comes around! There are plenty of competitive products out there.

Broker on 28 Nov 2011 03:20 PM At least a major bank lender is providing some income certainty, it would be great to hear some comments from the rest, but I won’t be holding my breath!

Scott Hawkanson on 28 Nov 2011 03:48 PM Those calling for trail from day one, have you done the numbers? Average trail after five years is 0.25%, from that point you get paid 0.35% Why don’t we display some positivity about moves like this rather than bagging them?

ChrisC on 28 Nov 2011 04:00 PM Sorry Scott, I am with the rest of them: how long until they re-write their policy and take commissions from us AGAIN? They are in and out of the market only to suit themselves.

Sydney broker on 28 Nov 2011 04:00 PM @ Scott Hawkanson: you must have some very stable and loyal clients willing to stay with the same lender and product for more than five years. You are one lucky broker!

NEWS / COMMENT

BROKERNEWS.COM.AU | 15

BIG NEWS ANALYSIS / MULTIMEDIA

THE

STORY

Every week, Australian Brokernews investigates the burning issues affecting the mortgage industry. You can find these bite-sized videos online in the multimedia section of our website – and here are the highlights from recent stories

first homebuyers are so important to our market. We’re really pleased to see first homebuyers returning in the numbers that they are.

Mark Bambagiotti, Mortgage Choice: It’s coming back to higher than natural levels at present, and we’ll see it return to more natural levels later. We’re probably seeing a higher number of enquiries than we’d normally see in relation to first homebuyers in the current timeframes.

Gerard Hansen, Home Loans Ltd: There’s

The subject First homebuyers return to the market The lowdown After years in the wilderness, it looks like first homebuyers are coming back to the market.

How can brokers take advantage of this?

Chris Slater, AFG: We’re in an

environment where interest rates are low, so affordability is up, borrowing capability is up, we’re seeing vacancy rates low and housing prices down. It’s a perfect storm for first homebuyers, and

16 | BROKERNEWS.COM.AU

still a bit of cautiousness out there. We had a couple approved yesterday for $530,000 which they can afford to pay, but they wanted to drop it down by $100,000 because they wanted to feel comfortable.

They weren’t sure where the market was going to go, whether rates would stay around that 6–6.5% mark: they didn’t want to extend themselves too much. That’s a sign that the first homeowner market is more educated than two or three years ago.

MB: First homebuyers tend to mix in the

same circles as other first homebuyers, so if brokers are providing that service then they’re going to get referrals from the clients they’re speaking to at the moment.

Using real estate agents and other referral partners is another way to tap into increasing the number of first homebuyer enquiries that we’re seeing in the market.

G BROKERNEWS.COM.AU | 17

NEWS ANALYSIS / MULTIMEDIA

This month’s guests...

Chris Slater, AFG

Mark Bambagiotti, Mortgage Choice

The subject A super opportunity?

brokers’ agendas recently – is 2012 the year it comes of age?

The lowdown Self-managed super funds are making big waves in property investment circles. Are they the best thing since sliced bread?

James Hickey, Deloitte: What we’re

Tony Hayek, Blue Wealth Property:

Eighty-four per cent of Australians are retiring on less than $21,000 a year. If a broker is in a position to educate their clients, they can potentially change their life. If you can do this, what impact does that have on your business?

Peter Burgess, SMSF Professionals Association of Australia: There was some Gerard Hansen, Home Loans Ltd

Tony Hayek, Blue Wealth Property Peter Burgess, SMSF Professionals Association of Australia

Jason Nelson, Niche Lending

uncertainty around the way that these limited recourse borrowing arrangements worked before [a recent ATO] draft ruling.

There was certainly a lot of confusion over whether you could improve the asset, and that was a big deal for people wanting to purchase properties through these arrangements. As a result of this ruling, that’s been clarified, and the ATO has relaxed its stance on some of those issues.

Jason Nelson, Niche Lending: Many

accountants we deal with are wanting to talk further about SMSF lending. They’ve got existing clients, business owners, that already own commercial properties within their own names. Quite a few of them are looking at transferring their property into a self-managed super fund. SMSF seems to be an attractive offer for clients who are buying a new commercial property for their business too.

TH: It’s not something that might happen, James Hickey, Deloitte

Ken Sayer, Mortgage House

it’s happening. We sell hundreds of properties every year to investors all around the country: three years ago, one in 20–25 properties was to an SMSF. Now one in six-and-a-half is to an SMSF – and we sell a lot more properties than we did three years ago! It’s a massive trend. The mortgage broker is uniquely positioned in the market to take on the responsibility of guiding their clients in new directions.

The subject Cross-selling: the Holy Grail?

Julio Labraga, Capital Fusion

The lowdown Diversification has been creeping up on

seeing is a lot of groups saying ‘well, we’ve tried cross-selling in the past albeit in a relatively amateur way – we’ve got to get a bit more professional about how we cross-sell and understand a lot more about the needs of the customer’. Brokers are now finding that NCCP has raised the bar in terms of the level of advice-based discussions that they are having with clients. I think brokers are realising that they can do more than just sell a mortgage.

Ken Sayer, Mortgage House: All they

[brokers] have to do is start with customer outcomes or customer desirable outcomes, and the rest is easy. There seems to be a limiting component to conducting business: ie, if there is no financial gain, there is no incentive to supply product. It’s all about the complete total value proposition.

Julio Labraga, Capital Fusion: Earning

the customers’ trust before cross-selling a product or service is key: trust is something which is personal and not institutional – it’s not transferable. The focus, especially by the lenders, is mainly product-based and not needs-based. The timing of when that is introduced is sometimes not appropriate, and many of the lenders are limited to providing products they own, as opposed to what’s best for the customer.

JH: We looked at the propensity for

general insurance, life insurance and wealth management products to be crosssold by a broker. While brokers may think that general insurance is the most obvious link to the mortgage – house and contents insurance – many found that the hardest.

Reason being that consumers can go home, do a Google search and get half a dozen quotes within five minutes. There’s a natural reticence about buying general insurance directly from the broker if there was only one product. We found there was more traction around life insurance, purely because that was a needs-based discussion where you sit down with the customer, establish how much cover they need, and explain why they need it. Based upon that emotive and needs-based discussion, brokers are getting greater cross-sell with life insurance.

For more on how to successfully integrate insurance sales into your business, see p46

NEWS ANALYSIS / MULTIMEDIA

BROKERNEWS.COM.AU | 19

NEWS / ANALYSIS

LOW DOC = HIGH RISK? ASIC has blasted the treatment of low-doc borrowing in its first investigation into adherence with responsible lending rules.

Can low-doc borrowing survive?

Brokers need to carry out more detailed checks when assessing borrowers for low-doc loan applications under the new credit protection laws.

That’s the view of ASIC, which has recently released its first report on how brokers are adapting to the new regulatory environment. While its first report into compliance with responsible lending conduct generally gives brokers a clean sheet, it highlights ‘additional risks’.

Transgressions included not recording a consumer’s requirements and objectives beyond the immediate home loan, not taking steps to verify a borrower’s income, not making proper inquiries into living expenses and not recording an assessment of repayment ability. ASIC senior executive

20 | BROKERNEWS.COM.AU

leader – deposit takers, credit and insurers told Australian Brokernews that there was ‘room for improvement’.

“I think an element of a number of these risks is making sure that enquiries are made and are in fact documented,” Greg Kirk said. “Because if a borrower later comes along and raises a question with ASIC or an EDR, and says this loan was inappropriate, and a broker has made reasonable enquiries but doesn’t have the records to show it, then they are very vulnerable in that sort of dispute.”

DISPUTES Industry participants have taken issue with ASIC’s assessment. A key area of dispute was accountants’ letters. While

ASIC acknowledged that letters from accountants are a “suitable verification of income” for low-docs, it urged brokers to adopt “best practice”– namely, verifying the consumer’s actual level of regular income and the basis on which these income statements are made.

The MFAA, through Gadens Lawyers, argued that brokers should be seen in tandem with lenders, with brokers fulfilling only ‘preliminary’ assessment.

“Lenders often take the ‘base’ information provided by brokers, and make further enquiries, and then conduct their own verification and credit assessment,” the MFAA response said. “It will be very inefficient – and indeed unworkable – if brokers are expected to duplicate these additional enquiries.”

Kirk was unswayed by the appeal, however, responding that it is not possible under responsible lending to ‘contract out’ the responsibility of making an assessment.

“Best practice would be to make sure that what is coming from an accountant includes or specifies what the borrower’s income is and, better still, attaches the source document for that,” Kirk said.

“It is not enough to get a certificate from an accountant which says that a borrower can afford a loan without saying anything about the assessment of a borrower’s financials and circumstances.”

Meanwhile, Pepper Homeloans COO David Holmes suggested that the industry is already moving on, and that lenders and aggregators are now spending “many hours” training brokers on responsible low-doc lending.

The ASIC report itself acknowledged that it was carried out at a point where the industry was in transition. It also highlighted that, in general, brokers were largely aware of the new responsible lending obligations.

“I would stress that we were looking at the first six months, and the regime had only just begun, so the responsible lending requirements were very new,” added Kirk.

“There’s been a lot of ground to cover in 12 months, so we are definitely pleased to see the level of consciousness in regard to responsible lending.”

NEWS / COMMENT

BROKERNEWS.COM.AU | 21

FEATURE / TECHNOLOGY

THE

VIRTUAL BROKER 22 | BROKERNEWS.COM.AU

FEATURE / TECHNOLOGY

Technology has allowed mortgage brokers to expand their client reach, but are regulation and lender policies stuck in the Stone Age? Andrea Cornish reports

I

In 2008, Telstra showcased what it billed as the ‘latest high-speed broadband technology’ to transmit an image of its chief technology officer, Dr Hugh Bradlow.

The live hologram of Bradlow addressed a business conference in Adelaide from his office in Melbourne. At the time, Telstra’s David Thodey indicated that the technology has the potential to revolutionise how Australians do business – given time.

While a Star Wars-style of teleconferencing is still a pipe dream for most firms, Andrew Hunter, owner of IT consultancy group KeyChange, says the relentless advance of technology is already making a big impact on the mortgage industry. “Because of where I live, every single deal I do has to be done virtually: there’s no face-to-face at all,” explains Hunter.

Hunter lives in Dorrigo, a rural town about one-and-ahalf-hour’s drive from Coffs Harbour, and has been a long-time advocate of using technology to further employment opportunities for Australians living in regional areas. While born in Sydney, Hunter has spent the last 33 years living in the bush. He became a mortgage broker nine years ago and has expanded his client base through internet leads and word of mouth. Hunter now services clients throughout Australia, as well as from the UK, the UAE, Africa, Central Europe, Kazakhstan, Singapore, China, Japan, Thailand and the US. Hunter interacts with clients via the internet, email, VoIP (Voice over Internet Protocol) and Skype. The benefits of being a completely virtual broker are many, he says. There are cost savings due to not running a bricks-and-mortar operation, the flexibility of working

outside business hours and the comfort of being able to show up for work in your pyjamas. However, Hunter notes that there are many benefits for customers as well.

“One of the primary benefits is that the client initiates everything and has control over the deal. There’s no pressure on the client to ‘sign now’,” he says. “So when we talk to the client, we find out their situation, we give them some suggestions and we try to win their confidence with our knowledge, our ability to listen and interact and ensure that they realise we understand their needs. Then we present a range of options to the client in writing as an email – normally very quickly – within an hour or two of the discussion, which is quite detailed and specific to the client.

“The client can sit back and take their time to think about it and come back to us for more details, whereas with a face-to-face the pressure is on from the broker, because the broker doesn’t want to keep coming back.

If the broker needs to get a signature, they will want it right now.”

CONFIDENCE TRICKS Operating in a virtual environment is not without its challenges. One of the biggest obstacles, Hunter says, is winning the client’s confidence.

Skype interviews – top tips MAKE SURE YOUR ENVIRONMENT IS SUITABLE FOR A SKYPE INTERVIEW. If possible, make the background space a white or clean wall, so the client does not get distracted during the interview. Think about your outfit – patterned or white clothing can be problematic – and it’s best not to wear a shirt with your pyjama bottoms, just in case you need to go and get something during the conversation.

BE WARY OF NOISE. Close windows so outside noise is not audible; if you’re in an open-plan office, it may be best to move into a private room. Turn off other programs (other than those you’ll need for the conversation) so the alerts do not distract the client or you during the interview.

LOOK INTO THE CAMERA. When you’re looking at your monitor it can make the client feel as if you’re looking away. Instead, look directly at the video camera you’re using for your interview. Also, if you can’t resist looking at the little image of yourself in the corner of the screen, turn it off.

COMPENSATE… FOR… DELAY. Video and audio can experience delays on slower connections, so allow a little extra time when replying and avoid interrupting if possible. If the connection is unbearably slow, it may be worth cancelling the call and reconnecting.

RECORDING. Don’t forget you can record Skype conversations: this can be useful both for follow-up actions and for credit protection legislation purposes.

BROKERNEWS.COM.AU | 23

FEATURE / TECHNOLOGY

Craig Vaughn

Andrew Hunter

“Often when clients contact us, they don’t realise we’re not going to meet them – it’s usually one of the very first things we discuss with them.

“If a client really wants a face-to-face meeting, then we just say, ‘look we’re sorry, we’re just not the right broker for you’. But, for the majority of people, when we explain the way that we work and that we deal with people from all around the country – in fact, all around the world – most think it’s a good idea.”

Hunter admits that with internet-based leads there are also a high number of tyre kickers, but you can design your system to weed them out. Managing virtual staff can also be a challenge. Hunter has had more than 30 staff over the years and he has never met a single staff member face-to-face. Unlike running a bricks-andmortar office, Hunter evaluates staff on their output as opposed to their hours logged. To do otherwise “is a waste of time,” he says.

20TH-CENTURY THINKING One of the greatest challenges for virtual brokers is the insistence from some lenders on face-to-face meetings.

Both NAB Broker and ANZ require brokers to meet clients in person and sight original documents.

Declarations confirming the same must be made as part of the broker’s loan application. ANZ will consider exceptions to this rule that are requested via BDM. Meanwhile, CBA does not require brokers to meet clients if geographical restrictions are a factor and will allow telephone or Skype as a meeting substitute.

Both NAB and ANZ’s insistence on face-to-face meetings is not only frustrating for virtual brokers, it’s a double standard, Hunter says.

“ANZ provides non-face-to-face service direct to Australian expats. And they’re not even doing video, they’re just doing telephone discussions. We’ve lost clients to them because they’re doing it but they won’t let us do it. And NAB is running UBank – an entirely virtual operation.”

Meg Bonighton, head of broker distribution at ANZ, defends ANZ’s policy. “We’re okay with mortgage brokers using Skype when communicating with existing ANZ customers,” she says. “But, in complying with current ‘Know Your Customer’ legislation, we do not introduce new customers via Skype – which is protocol for all customers joining ANZ through any channel.”

Even so, Hunter fails to see how face-to-face meetings provide greater security against potential fraud. In more than 12,000 client enquiries and nine years of broking, he says he has never had an ombudsman complaint or action against him. If he suspects something isn’t right with a client, Hunter says he simply doesn’t deal with them.

24 | BROKERNEWS.COM.AU

“When we have to deal with clients who are less than forthcoming, we walk away” – ANDREW HUNTER

“Some clients can be less than forthcoming and when we have to deal with somebody like that, we walk away.”

Hunter has contacted ASIC and Austrac (Australia’s anti-money laundering and counter-terrorism financing regulator) regarding the need for face-to-face interviews in compliance with AML and NCCP, and contends neither regulator have it as a requirement. MPA also contacted ASIC for its view, but had received no response at the time of writing.

FACE VALUE Managing director of MAP Mortgage Brokers Craig Vaughn also specialises in servicing expats and nonresidents. His clientele are located in Dubai, London, Abu Dhabi, Singapore, Hong Kong, Qatar, Japan, China, New Zealand, Oman, Germany and Switzerland. Like Hunter, Vaughn communicates with clients via email and Skype; however, after initial communication he tries to arrange a face-to-face meeting in their country.

While travelling to meet face-to-face is expensive, Vaughn says it mitigates some of the risks of dealing with overseas clients.

“For clients that we cannot meet in person, we only use lenders whose policy clearly states that a face-toface meeting is not required. This does not mean that we can only show such clients a select number of lenders.

However, because we do considerable business with those particular lenders that do not require face-to-face, we can generally provide better deals to the client which match or beat what is on offer with those lenders that do require face-to-face contact.”

According to Vaughn, it is possible to mitigate the risk of fraud – if you know what to look for.

“Because we specialise in this area, we know what documents to look out for. For example, payslips, ID, bank statements all look very different to what we see in Australia. One thing we do for all clients is obtain three months’ bank statements to confirm salary deposits, conduct a number of searches on the client and their employer, and of course obtain certified copies of income and identification documents.”

Lending criteria

COVER / 2012 FORECAST

Broker segmentation

Wholesale funding

Rental yields Commission cuts

Consolidation

Non-banks

Diversification

SMSFs

Franchises

Rate reductions Sales volumes

boost Where to buy Cross-selling

26 | BROKERNEWS.COM.AU

The Big 4

ASIC

Low doc Units or houses

First home owners

First home owners

Monetary policy Market share

W to E fe

Lending criteria

Cr lic

cl

S m Mining industry

Consum Refinancers confiden Interest rates – up or down

Efficiency Product House price stabilisation

Social media

Credit licensing

immine

Fee-for-service

European debt crisis

Propert investor Electio Lending criteria

Trail

Crossselling

Technology

Big Four

Honeymoon rates

Exit fees

Upgraders

Rate reductions

Interest rates – up or down

loans

clawbacks Commercial

Commission cuts Units or Monetary policy houses Non-banks

Honeymoon

Aggregators Productivity

ty rs on

ent?

Where o buy Exit ees

redit censing

Rental yields

lawbacks

Social media

European debt mer crisis

nce

tivity

n rates

INDUSTRY FORECASTS THE INSIDE TRACK ON WHAT THE NEXT 12 MONTHS HOLD Top minds from all parts of the mortgage industry tell Kevin Eddy what’s in store for the year ahead

L

Licensing. Diversification. A shaky property market.

The possible return of first homebuyers. The relentless march of technology. The European debt crisis. The year 2012 promises to be a complex and volatile one – and that’s even before you add in the fact that it’s an Olympic year, too.

That complexity and volatility means it can be tricky to plan ahead. That’s why MPA’s gathered the mortgage industry’s best and brightest and has picked their collective brains on the issues that will matter most, the industry players to keep a beady eye on, and how you can steer a steady course through the months ahead.

BROKERNEWS.COM.AU | 27

COVER / 2012 FORECAST

BANKS

THE VIEW FROM…

JOHN FLAVELL

GENERAL MANAGER, BROKER DISTRIBUTION, NAB What will be the ‘game-changer’ issue in 2012?

What are your company’s own targets and objectives for 2012?

There’s no doubt that it’s a very competitive market out there, and I don’t see that changing any time soon.

There’s going to be a lot of competition around price and lending policies, and there will be special pricing from some.

We set ourselves the objective last year that between one in four and one in five broker mortgages should be written on our paper – we’ve largely delivered on that.

In 2012 and beyond, we’re looking to continue growing our share. We also want to continue to deliver a strong proposition to brokers and their customers from a price and features perspective.

What will the cash rate be at the end of 2012?

I don’t think anyone can accurately tell you where the cash rate is going to be in a year. Domestically it looks solid, but internationally it’s very dynamic and volatile.

If I had my wish – and it’s a wish, not a projection – the cash rate would be largely where it is now.

Which company or individual should we keep an eye on?

I’d keep an eye out for one of our BDMs, Nick Murray, who was shortlisted for BDM of the year at the Australian Mortgage Awards.

28 | BROKERNEWS.COM.AU

What will be the most important thing mortgage brokers can do to help their business?

The more complex and the more volatile the environment, the more people are going to want good quality advice. Brokers are in a wonderful position to sit down with their customers, hear what their needs and challenges are, understand the things they’re fearful of and provide some good advice.

Going out and spending time with customers in difficult times will position brokers well to grow their part of the pie.

Market talk What will be the general story for the Australian property market in 2012?

Charles Tarbey of Century 21 Real Estate gives his predictions The coming year should see a stabilisation of house prices, with modest growth in dwelling values. I believe that next year, the commentators will say that August/September 2011 was when the market levelled out.

I expect the first homebuyer market to improve, having gained momentum as a result of the November 2011 rate cut, which will likely increase should rates be reduced once again.

First homebuyers have already begun to enter the market mainly due to the fact that interest rates are low, rents are rising and rental properties are becoming harder to find.

Second and third homebuyers may also look to make purchase decisions and relocate or upsize over 2012. Activity in the top-end of

BROKER SNAPSHOT the market will be largely contingent on how the situation in European financial markets plays out.

There is little doubt that Australia’s natural resource areas will provide much of the opportunity in the property market over 2012, as the combined impact of increased government spending on infrastructure as well as the commencement of significant resource projects will see burgeoning populations, and thus the need for residential property will quickly increase in these towns.

Having said this, many of these areas still represent high risk: first-time investors should be very cautious.

In terms of specific property type, the lower-to-medium price range of $400,000 to $800,000 is currently performing well, with record sales occurring in this price range over the last few months. I suspect this will continue over 2012.

What will be the ‘game-changer’ issue in 2012?

The game changer issue for the mortgage industry will be consumer confidence. There is currently uncertainty in the market, therefore many buyers have become cautious and will sit on the sidelines and wait.

Once the buyers are comfortable with where the market is heading, their sentiment will change.

Justin Doobov, Intelligent Finance

BROKERNEWS.COM.AU | 29

COVER / 2012 FORECAST

BANKS

THE VIEW FROM…

KATHY CUMMINGS

EXECUTIVE GENERAL MANAGER, THIRD PARTY AND MOBILE BANKING, COMMONWEALTH BANK What will be the ‘game-changer’ issue in 2012?

The cost of funds: the continued instability in Europe and the monetary environment will cause money markets to tighten, thus putting increased pressure on the already diminished margins in the mortgage business.

Which market segment will be the most important?

Upgrades and investors. If rates continue to fall due to global monetary events and slowing economic conditions, there will be good opportunities for cashed-up segments.

What will the cash rate be at the end of 2012?

Economists believe that there may be more scope for an easing of monetary policy. Their consensus view is that there may be one or two more rate cuts over the next year. However, the indexed swap market has priced in the cash rate falling to around 3.3% by late 2012. It is too unpredictable to call, and it largely depends on your views on the situation in Europe.

28 | BROKERNEWS.COM.AU

Which company or individual should we keep an eye on?

In banking, it would be the new CEO of Commonwealth Bank, Ian Narev.

What are your company’s own targets and objectives for 2012?

Increased productivity to deliver growth; enhanced efficiency by focusing on simple solutions and getting it right first time, every time; and cost containment.

BROKER SNAPSHOT What will be the ‘game-changer’ issue in 2012?

The game changer for me will be that consumers will favour brokers over dealing with banks direct and the percentage of broker-orientated loans will rise well above the 50% mark. This will be fuelled by a consumer backlash against the majors with potential customers wanting to see more competition and further rate reductions.

Paul Bieg, Club Financial Services Norwood

COVER / 2012 FORECAST

BANKS

THE VIEW FROM…

LISA CLAES

EXECUTIVE DIRECTOR, DELIVERY, ING DIRECT What will be the ‘game-changer’ issue in 2012?

With so much global uncertainty in the second half of 2011, a lot of the activity in 2012 will depend on how the domestic and international markets perform economically. I also think technology will play a big part in 2012, both in the lending and broking spaces. The growing influence and integration of technology into everything that lenders, brokers and customers do will drive a lot of value in service and communication in the year ahead.

Which market segment will be the most important?

The refinancing segment has, and will, continue to offer a growing opportunity in lending in Australia. Given aggressive competition from lenders, as well as the current falling interest rate environment, customers are being very proactive in chasing a better deal for their home loan.

Investors will be a growing segment, given many are taking advantage of the current market to make more strategic investment purchases.

28 | BROKERNEWS.COM.AU

What are your company’s own targets and objectives for 2012?

We set some really important goals around service which we believe will positively impact our broader business goals. We want to capitalise on changes made in 2011 which were a result of feedback from the broker channel. We have made broker service a priority by re-allocating our team to allow for better desk-based support to complement the groundwork of our BDMs. We have healthy growth targets for 2012 and want to cement our position as a true competitive alternative to the ‘Big Four’ banks. Making brokers advocates of our products and service is key to our business model, so we’re keen to see that increase even further in 2012.

What will be the most important thing mortgage brokers can do to help their business?

We would like to see brokers put more focus on addressing the unhealthy dominance of the major banks in Australia and presenting second tier and non-bank lenders into the mix when comparing loans.

COVER / 2012 FORECAST

FRANCHISES

THE VIEW FROM…

MICHAEL RUSSELL CEO, MORTGAGE CHOICE

What will be the ‘game-changer’ issue in 2012?

I think the challenge for the industry will be to continue to increase market share in another year of subdued housing credit growth. The second challenge will be to make sure we continue to refine our implementation of NCCP requirements and look to overcome some of the productivity setbacks that brokers have incurred.

What will the cash rate be at the end of 2012?

I’m game to look to the middle of this year, and am reasonably confident that we’ll see one or maybe two further 0.25% cuts in the cash rate.

What are your company’s own targets and objectives for 2012?

We want to continue growing our core mortgage broking market share. We’re also working at growing our brand to extend into the financial planning space. We aim to deliver a specialist financial planning solution for our customers across risk, superannuation and wealth management.

28 | BROKERNEWS.COM.AU

What will be the most important thing mortgage brokers can do to help their business?

This year’s going to be very challenging, given the housing credit environment we’re operating in and the threat of further overseas economic turmoil. But, when you look at the key growth drivers for the industry today, such as home loan commitments and consumer sentiment, they’re healthier and are improving. The key will be sticking to your core business and working hard to increase your market share, constantly refining your processes and procedures to create an increased productivity capacity, and using that capacity to write more home loans and diversify your business income.

BROKER SNAPSHOT What will be the ‘game-changer’ issue in 2012?

I see the biggest game changer over the next 12 months being based around a temptation for our major banks responding to the global market by making the criteria for lending in Australia much tougher to obtain.

Gerard Tiffen, Tiffen & Co

What will be the ‘game-changer’ issue in 2012, in your view?

The major industry game changer for 2012 will be rate changes, and we will see multiple RBA movements, combined with majors, regionals and others adjusting to new margin pressures. The result will be a great deal of market uncertainty about where the best deal lies.

Which market segment will be the most important?

A reducing rate market always sees an increase in refinancing enquiries. Given recent changes around exit fees and responsible lending, it will be interesting to see how much of this converts to legitimate business.

What will the cash rate be at the end of 2012?

There seems no doubt that the cash rate will reduce over the next 6–12 months.

ANDREW CLOUSTON EXECUTIVE GENERAL MANAGER OF RETAIL DISTRIBUTION, FIRSTFOLIO

BROKER SNAPSHOT What will be the ‘game-changer’ issue in 2012?

In 2012, property and the finance game could change dramatically on a number of fronts. After we adjust to the ‘shock’ of the PIIGS, the US and possibly China faltering, here at home interest rates will continue to fall. It won’t be pretty! People need to realise that low interest rates are not a signal to the herd to rush out and buy more useless stuff. Low interest rates are a signal to rein in your consumer spending, pay down existing ‘bad debt’ and become as debt free as possible.

Kevin Lee, Smartline and Smart Property Advisor

What will be the most important thing mortgage brokers can do to help their business?

Focus on their customers and come to terms with the fact that true professionals welcome adherence to a process that leads to a fully compliant industry.

By the numbers Refinancers and investors are clearly pegged by our mortgage bigwigs as the most important market segments in 2012: it looks like we may be waiting a little longer for the return of first homebuyers in significant numbers.

BROKERNEWS.COM.AU | 29

COVER / 2012 FORECAST

What will be the ‘game-changer’ issue in 2012?

AGGREGATORS

THE VIEW FROM…

I think brokers’ ability to adapt to the changing face of social media, the way the next generation of homebuyers like to communicate and using new technologies to improve business efficiency will all be very important.

Which market segment will be the most important?

We have seen investors hit record levels in November so they, along with the continued re-emergence of first homebuyers, will be the market segments that we see performing the best.

What will the cash rate be at the end of 2012?

I think I need the crystal ball and dart board for this one… I will go for 4% on the basis that the troubles in Europe look like dragging on for a while.

MARK HEWITT

GENERAL MANAGER, SALES AND OPERATIONS, AFG

Which company or individual should we keep an eye on? iSelect have successfully expanded into mortgages this year and have some very exciting things on the horizon.

What will be the ‘game-changer’ issue in 2012?

ASIC reviews: we believe there is still some confusion and in some cases complacency on the requirements of credit licence holders. The number of brokers feeling overwhelmed or realising that they are not committed to changing their business practises will increase.

What are your company’s own targets and objectives for 2012?

To increase our broker recruitment nationally. The recruitment of brokers will be in our three key market segments of residential, commercial and asset finance.

What will be the most important thing mortgage brokers can do to help their business?

First, embrace the regulatory changes now in place and use the new documentation required under NCCP to review and document the customer value proposition.

Second, as consumer sentiment may still be an issue through 2012, it will be an ideal time to have a proactive customer contact program to review customers’ current circumstances and look for opportunities to improve their mortgage and banking situation, or seek additional cross-sell opportunities.

28 | BROKERNEWS.COM.AU

DAVID O’TOOLE

NATIONAL SALES MANAGER, FAST

 By the numbers

Where did our pundits think the cash rate will be at the end of the year?

Despite global volatility clouding crystal balls, the consensus seems to be that the cash rate will fall.

  

BROKERNEWS.COM.AU | 37

COVER / 2012 FORECAST

FINANCIAL PLANNER

THE VIEW FROM…

MICHAEL STEPHENSON CEO, WEALTH TODAY

What will be the ‘game-changer’ issue in 2012?

We see diversification coming to the fore. It’s at the point now where brokers will start to be able to generate significant revenues from that vested client value that they have. There’s been a natural progression and diversification in its various forms is becoming more accepted. It’s a continual progression which will come to fruition this year.

Which market segment will be the most important?

It’s very difficult to call, with all the uncertainty at the moment. There are probably good buying opportunities around at the moment, and therefore investors who are coming off a relatively low base.

Which company or individual should we keep an eye on?

I would suggest that Connective will emerge as players that have their brokers’ success at heart – this will stand them in good stead in a fast changing environment.

28 | BROKERNEWS.COM.AU

What are your company’s own targets and objectives for 2012?

To double the number of authorised representatives that we have on board. We’re also looking at growth in throughput of those we already have. We’re optimistic in terms of growth in both number and volume.

What will be the most important thing mortgage brokers can do to help their business?

Diversify! And to look at fee-for-service modelling – in the broadest sense, and consider that the service offering may be a little different to what they’re used to providing.

BROKER SNAPSHOT What will be the ‘game-changer’ issue in 2012?

Brokers’ ability to embrace licensing as an opportunity to get closer to clients. The key will be taking a step past the basic NCCP requirements and finding out what drives the client with the intention of adding insight and value-driven services to enable clients to achieve their longer-term goals.

Nicole Seagren, Vision Finance

COVER / 2012 FORECAST

2011 flashback Michael Russell wanted to see “Indexation of the First Home Owner Grant and backdating to 2000 – bringing it to around $14,000” There was no move on the First Home Owner Grant, despite calls from many parts of the industry. However, with an election looming in 2013, could this change soon?

Iain Forbes wanted to see “A decline in interest rates” At the beginning of 2011, everyone expected interest rates to go up, up and up: well, global volatility has changed the picture and the RBA finally cut rates by 0.25% in November. Parties ensued around Australia, and not just because of the Melbourne Cup. Justin Doobov wanted to see “Second and third tier lenders come back into the market” Despite funding challenges and the banning of DEFs meaning travails for smaller lenders, it seems that borrowers are willing to consider those outside the Big Four. AFG’s Competition Index in November shows that non-majors held a 19.6% share of the aggregator’s market in October.

Tony Carn wanted to see “The Wests Tigers win the NRL” Unfortunately for Tony, the Tigers got knocked out in the second week of the semi-finals – with the Manly Sea Eagles taking the honours by a 2410 victory over the New Zealand Warriors.

40 | BROKERNEWS.COM.AU

THE VIEW FROM…

THE BROKER

What did our pundits from last year want to see happen in 2011 – and did their wishes come true?

JEREMY FISHER

1ST STREET HOME LOANS What will be the ‘game-changer’ issue in 2012?

Many brokers will find it challenging to meet the NCCP requirements and some may be forced out of the market.

On the positive side, lower rates will encourage borrowing and this should fuel the property market.

Which market segment will be the most important?

Many of my clients have growing families and I am expecting a significant proportion of them to refinance, enabling them to upgrade to larger properties.

What are your company’s targets and objectives?

To continue to grow in both loan volume and number of loans written. I am always looking for experienced and well-respected brokers to join us.

What will be the most important thing mortgage brokers can do to help their business?

It is paramount for brokers to work closely with their clients to ensure that the most suitable outcome is achieved each and every time.

What will be the ‘game-changer’ issue in 2012?

NON-BANKS

THE VIEW FROM…

KIM CANNON

MANAGING DIRECTOR, FIRSTMAC

Firstly, if Europe doesn’t get its act together in 2012, we could have a credit crisis worse than GFC1. A lot of the financing for resources projects comes out of Europe, so if those banks fail, then it could affect what’s going on resources-wise.

Secondly, it is the customer and online buying attitudes. I predict that some banks will walk away from third party distribution in 2012 and go straight to online.

Which market segment will be the most important?

I think there’ll be more anti-bank sentiment in the new year: we can see what the capital markets are doing. I think refinance will be a strong market.

What are your company’s targets and objectives?

To still be here in 2013! We survived GFC1, we’ll survive anything – to keep an eye on the threats and opportunities, and react very quickly, but don’t rest on our laurels. It’s a dangerous time. There’s still volatility.

What will be the most important thing mortgage brokers can do to help their business?

If you’re smart and understand the new world that’s on the horizon, you’ll be building your own brand and your own private label away from the aggregators.

What will be the ‘game-changer’ issue in 2012?

By the numbers

It is the uncertainty in the global financial markets in Europe, and in particular if the European debt crisis has a flow-on effect onto Australian financial institutions.

What’s the consensus on the gamechanger issues for 2012?

The European debt crisis clearly comes out on top for our industry experts and broker commentators, closely following by licensing.

What will the cash rate be at the end of 2012?

I expect the cash rate to be down at the end of 2012.

Which company or individual should we keep an eye on?

Mark Bouris and Yellow Brick Road. They could be a major player in 2012.

What are your company’s own targets and objectives for 2012?

To: continue to grow the portfolio organically; invest in training, and improve the productivity of the staff; build quality products for our mortgage brokers; continue to offer competitive pricing; improve on our existing policy of ‘excellence in service’; and explore any worthwhile business opportunity that will fit the AFM culture and business model.

IAIN FORBES

DIRECTOR, AUSTRALIAN FIRST MORTGAGE BROKERNEWS.COM.AU | 41

HEAD TO HEAD / CLIVE KIRKPATRICK

SERVICE WITH A

SMILE St.George’s new head of third party talks about improving service levels, running a multi-brand platform and the future of the broker channel Career path 1980

Begins studying Economics at the University of Sydney

1984

Joins Westpac as a graduate trainee, where Clive carries out a number of different roles in areas including business banking, consumer banking, strategy and financial planning

2004

Joins Clearview Retirement Solutions, part of MBF. Responsible for running that dealership and launching the MBF Life dealership

2008

Joins Bankwest’s financial planning arm for a three-month stint

2008

Joins RAMS, in the mortgage broking area, then transfers to run the franchise business

October 2011

Joins St.George as general manager of broking

42 | BROKERNEWS.COM.AU

Q: How are you settling into the new role?

A: Very well! We’ve just finished our latest wave of going out to aggregators and brokers and getting their feedback. At the same time, I rode out to introduce myself and ask for feedback.

The response was crystal clear: we’re just too difficult to deal with. That’s what I’m focused on right now. We’re doing a lot of work with our operations area, our call centre Mortgage Central, to get that quality level more aligned with business expectations.

We’ve been able to get some quick wins: we’ve cut average wait times from 14 minutes to four minutes in six weeks. Our aim is to be better than that: we want to be answering 80% of calls within 30 seconds. We’re not there yet but we’ll get there.

The other thing that came out is that brokers wanted access to BDMs, which we’d previously only promoted to our Flame and Gold brokers. We’re softening that approach and offering BDM access to all brokers.

Q: The Mortgage Central call centre has been both applauded and derided. What has the response been in general? Is it accepted as a concept, or do brokers just want to talk to BDMs? A: It’s the same as when you talk to a call centre at Telstra. If you get really good service first time, it doesn’t matter. However, the service levels [at

Out of office I’ve got three girls who are 18, 16 and 13. All three play soccer, and I manage one of the teams. I also cycle a fair bit, but I’m struggling to keep rubber side down.

I’ve had two accidents this year!

BROKERNEWS.COM.AU | 43

HEAD TO HEAD / CLIVE KIRKPATRICK

Q: How many BDMs do you have in the field now?

A: We’ve got 26 – nine in NSW, six in Victoria, four in

Changing of the guard Kirkpatrick’s appointment as head of third party at St. George comes amidst a couple of other high-profile appointments within the group.

Melos Sulicich

Huw Bough

First, RAMS CEO and Westpac head of thirdparty distribution Melos Sulicich was appointed head of intermediary distribution for the St. George group of brands last July. This appointment saw RAMS also join the St. George brands under the heading of the St.George Banking Group. Kirkpatrick was appointed as general manager of broking in October, joining from RAMS.

Kirkpatrick was subsequently succeeded as RAMS head of franchise

by Huw Bough, who previously headed up St. George’s parent company’s broker network.

Tony McRae has taken up the Westpac hot seat of general manager of third-party distribution.

Mortgage Central] were so poor that brokers were looking for alternatives.

We are going to provide the BDMs anyway, so if you prefer face to face contact, if you want to ask a tricky question or if there’s a particular scenario you want to work through, a BDM will be available to you. On the other hand, if you want to get something dealt with quickly, the phone’s there. But having BDMs available will take some of the pressure off in the short term.

There are other things we’re doing to improve the call centre. We carried out a wastage analysis on Mortgage Central, and identified 26 issues to be ‘repaired’. Eight of those were quick wins. For example, we’ve moved the credit scenario people into Mortgage Central, whereas before they were on a different floor.

Now they’re right there, and it doesn’t involve a separate phone call.

A major improvement we’ve made is to the web portal. Out of 20,000 calls last month, 12,000 were asking about the status of loans. We’ve fixed the communication between our credit assessment system and the portal system, so loan status updates are appearing. That wasn’t always happening as it was done manually before. By fixing core issues like that, everything flows on from there.

44 | BROKERNEWS.COM.AU

Queensland, four in South Australia, and three in Western Australia. That’s six more than at the end of September. We’ve doubled the number of BDMs in Bank of Melbourne, and added more in Queensland and WA. I think St.George may have had a history of ‘inout, in-out’ [with the third-party market]. What we’re trying to demonstrate now is that we’re in the market for third party, and we need third party in order to be successful, particularly in Victoria, Queensland and WA.

Q: That’s a good opportunity to talk about Bank of Melbourne and the multi-brand strategy at St.George and Westpac. Are the brands consciously being positioned very differently or is it simply a case of ‘a rose by any other name’?

A: Yes and no. The first thing is that, strategically, St. George is now St.George Banking Group. All of the non-Westpac brands [St.George, Bank of Melbourne, BankSA and RAMS] sit underneath the St.George Banking Group, and Westpac is Westpac.

Strategically, where the brands sit, RAMs is focused on first-time investors, first time buyers and low-doc; Bank of Melbourne is targeted more at high net worth individuals, but the brand resonates so strongly with Victorians that it’s across the board – the retail guys are saying that people are walking into branches with old Bank of Melbourne passbooks saying, ‘We knew you’d be back’; BankSA’s a trusted brand in SA that attracts customers to it because of loyalty and stability. St.George is a great brand name in NSW; in Qld and WA, where we’re putting in the St.George brand, we are a ‘challenger’ brand and we don’t have a big market share there: hence the importance of the third party to grow the brand in those states.

Each brand attracts different customer bases through default: from my perspective, it’s around us trying to promote our product and service proposition to brokers so we’re top of mind when you’re talking to the customers. It’s both allowing the customer to make the choice and direct the broker into what brand to choose as well.

Q: Last year St.George brought in commission changes, which saw some criticism from the industry, and subsequent tweaks. What’s the general view now – have you got the balance right?

A: The changes were really about clarity, transparency and consistency. We changed it from being multi-

“I rode out to introduce myself and get feedback. The response was clear: we’re too difficult to deal with” layered, to a fairly simple upfront commission with a kicker if you hit over 80% conversion. A number of groups are [hitting that target] now. We also reintroduced first year trail.

However, it seems to sit pretty well in the current market, and the feedback from aggregators is that it’s easier to understand and easier to distribute when it comes in. But, we’ll keep our ears out and listen to what the brokers are saying and what’s happening in the market.

Q: You mentioned Flame and Gold brokers earlier. St. George was one of the industry pioneers for broker segmentation: what’s your reading on how that might develop further?

A: Even though we were pioneers, I think the market has caught up with us – we need to look at how we treat and differentiate our top end brokers, and how we might be able to differentiate ourselves again. For example, by opening up BDMs to accredited brokers, I don’t want to diminish the service to our top brokers – which we won’t – but we need to think about ways to improve it.

Q: You were talking about the third party as an important route to new customers. Is that something you believe strongly in? Is St.George, as you put it earlier, ‘in the market’ to stay?

A: We, like the broker, are just servants of the customer. The customer gets to choose who they deal with. If that’s someone who sits in a branch, they’ll choose that person; if they want independence, they’ll talk to a broker. It’s up to us be out there via the various channels to provide that choice to the customer.

With home lending, people still want to talk to real people. There are opportunities for online, but a lot of customers like to go belly to belly. It’s such a major decision, particularly for first homebuyers, that they value the advice.

Q: How do you think the industry will change, particularly third-party, in the light of credit regulation and increasing professionalisation?

A: Gen Y and Gen Z or Gen Next, whatever they’re being called, will determine new methods of interacting. But I still have a gut feel that, in really big decisions like buying your first home, they’ll gather information on the net, try to educate themselves online, but will want to talk to an individual to get advice on what type of loan suits their needs.

Whether the broker share can grow… From what I hear, the MFAA’s broker numbers are decreasing.

I’ve come from a financial planning background, so we’ve been through this: it did carve out a lot of people but it also lifted professionalism in the industry. Once that happens, fee for service and issues like that become more of an easier sell, because you’re costing your advice rather than just the product. I would see that’s the way brokers will probably go in the future.

FEATURE / INSURANCE

STRI Brokers no longer need to be sold on the merits of diversification. Expanding your service to include insurance is not just a great way to boost your bottom line; indeed, many would argue that it’s a broker’s duty of care.

The real question is ‘what’s the best way to incorporate insurance into your business?’ While some brokers have decided to get the necessary education and licence requirements to offer insurance themselves, others have decided to refer insurance to someone else for a commission. MPA looks at the merits of each strategy, and compares various insurance providers.

WRITING IT YOURSELF Loanmarket’s Daniel Pym has been a mortgage broker for 12 years. When he decided to add insurance to his service offering to customers he investigated several options, but in the end decided he’d rather write the policies himself than refer customers to an insurance provider.

46 | BROKERNEWS.COM.AU

INGS BOW TO YOUR

The question is no longer should you add insurance to your service, but rather how should you build it into your business? Andrea Cornish investigates the available options

$2,000

$100k

Cost of a financial planning diploma

Potential extra annual income from insurance sales

BROKERNEWS.COM.AU | 47  

“It’s definitely made me a better mortgage broker.

I understand that it can be distracting, but it’s worthwhile, as long as you can keep up to date with what’s required from both industries” – DANIEL PYM In 2008, he completed his Diploma of Financial Services in Financial Planning and Finance, and in 2010 added an Advanced Diploma of Financial Services in Financial Planning to his arsenal.

The cost of getting your Diploma or Advanced Diploma runs for around $2,000 per course, although it varies by provider. In terms of time commitment, Pym did 12 days of face-to-face learning for his Advanced Diploma and about 100 hours of reading. The end result, he says, was well worth it.

“In terms of a career achievement, it’s a good thing to have, but it also allows you to make quite a bit more [money],” Pym says. He estimates there’s potential to earn upwards of $100,000 on top of what you’re making as a mortgage broker.

While some argue it’s impossible to wear two hats successfully, Pym disagrees.

“It’s definitely made me a better mortgage broker. I do understand that it can be distracting, but I think it’s worthwhile, as long as you can keep up to date with what’s required from both industries.”

On top of education and licensing requirements, Pym is required to complete 30 hours per year in insurance CPD points. Pym operates under Insure & Invest Market as an authorised representative of PIVOTAL Financial Advisers Limited.

UTILISING REFERRAL PARTNERSHIPS Ist Street Home Loans Jeremy Fisher is recognised as one of the industry’s highest-earning brokers – settling more than $131m in residential mortgages last financial year. But adding to that outstanding achievement is his ability to successfully incorporate insurance to his offering. In 2010/11, Fisher wrote more than $105m in insurance.

Two years ago, Fisher says he found that both his clients and business could benefit from a referral approach to insurance. He is currently aligned with several financial planners, who he recommends on a case-by-case basis.

Fisher acknowledges that, after completing a Diploma of Financial Planning, he considered handling insurance himself. “I specialise in home loans and although I would like to do everything, I leave insurance 48 | BROKERNEWS.COM.AU

to the experts in that field. I have been fortunate enough to have a high volume of loans to submit, so time constraints are also an issue.”

His referral fee generally ranges from 20 to 50%.

Despite the success of referring insurance to his strategic partners, Fisher says he is considering bringing insurance in-house in 2012.

John Minihan

Daniel Pym

ALIGNING WITH AN INSURANCE PROVIDER For the last seven years, Professional Finance Mortgage Brokers’ John Minihan has been offering ALI’s loan protection insurance to his clients.

According to the Port Macquarie broker, the insurance provider’s offering ticks several boxes.

Jeremy Fisher

Types of insurance There are three main types of insurance that tend to be most lucrative for brokers: life insurance, income protection and home insurance.

1»

LIFE INSURANCE is designed to protect your loved ones financially when you pass away. Upon your death, your beneficiaries or your estate will be paid a lump sum amount according to the sum insured. This money can be used to pay off any outstanding debts, your mortgage, funeral costs, and can be given to family or friends as seen fit. The most common type of life insurance is Term Life Insurance.

2»

INCOME PROTECTION INSURANCE is designed to offer you a monthly income if you become sick or injured for an extended period of time. The funds from an income protection insurance benefit payment can be used to pay rent or mortgage, and living expenses while you focus on getting better. Typically, income protection insurance will pay up to 75% of your income until you can go back to work again or up until the maximum benefit period. Similar to income protection insurance is TPD insurance and trauma insurance, which pay out a lump sum if you become seriously sick or injured.

3»

HOME, CONTENTS AND LANDLORD INSURANCE is designed to look after your property and/or possessions in the event of disaster, theft, loss or malicious damage. Landlord insurance is a specialist policy for property investors which also guards against loss of rent.

FEATURE / INSURANCE

“First, it covers our duty of care to raise this important issue with our clients. Secondly, I like the way it fits into our loan process – a straightforward option, no complex interviews, but provides an insurance package that suits a large proportion of our clients. Thirdly, the trailing commission and incentive program are a bonus, providing us with another revenue stream.”

As well, Minihan notes that he’s had a couple of clients make claims over the years and he’s been satisfied with the way in which they were dealt.

Minihan was initially introduced to ALI by his first aggregator, and has continued with the relationship despite switching. The accreditation process was simple, he says, and adds that his BDM, Linda Hayes, provides regular training and updates.

While the additional revenue is “not enough to retire on,” he says, “being a regional broker, we need to have good arrangements in place to generate commissions from the collateral business we organise for our clients in addition to the loan. As life insurance commission increases over time, it certainly helps supplement our lending commissions and has now become a core part of our business.”

PI cover In weighing up which insurance model works best for your business, you should also consider what effect adding insurance would have on your PI cover.

Advisernet Australia’s Darren Loades indicates that his group does not charge any extra for cover where the broker gets a referral commission on an insurance product.

“But I do stress that the broker should declare this to his/her respective insurer (as it is a material fact) and should also ensure that their client has been made fully aware (preferably in writing) that the broker may receive a referral commission, so as to avoid conflict of interest and other disclosure issues.”

As for writing insurance yourself, Loades advises that his group can include cover for an insurance agent’s activities for an additional premium of $500 plus GST and stamp duty.

“However, some of our competitors may either charge quite a lot more than this and/or not want to offer this extension of cover at all,” he says.

BROKERNEWS.COM.AU | 49

FEATURE / INSURANCE

SUPER-MODELS

A number of aggregators and franchisers have aligned with insurance providers or developed their own model to make it easier for their members to add insurance to their client service. Here’s what’s available…

ALI GROUP Launched in 2003, ALI Group has established itself as a specialist risk insurance business for mortgage brokers and their clients.

The group offer two loan protection products through brokers: Loan Protection Plan and Loan Repayment Protection – both of which cover for involuntary unemployment occurring during the first 12 months of policy. The benefit includes cover for the selfemployed and people on fixed-term contracts. As the insurance is sold via a no-advice process, authorised representatives are only allowed to offer one or the other.

Accreditation includes an application form that allows the group to conduct an ASIC search and background check. Once the broker is deemed eligible, they must attend a product training session with an ALI Group BDM, which helps brokers identify the product best suited to their client base. At the end of the two-and-a-halfhour training session, brokers are tested.

Once they pass, they are issued an Authorised Representative number registered with ASIC and are able to offer protection.

According to ALI Group, there are several benefits to its model, including: • Broker controlled process – they get to maintain and strengthen their client relationship • The more products a client has through the one broker, the ‘stickier’ they are – a client for life

50 | BROKERNEWS.COM.AU

• Brokers can provide protection for their client in a timely fashion with guaranteed acceptance rather than a referral which can be a lengthy process often resulting in a client being left underinsured • In the context of responsible lending, brokers have a duty to ensure their clients have the capacity to service their loan without undue hardship • Peace of mind – for both the broker and the client • Attractive remuneration, diversifying their income Commission is via a combination of upfront and trail, or trail only.

Its standard commission is 30% upfront of the annualised premium for each loan protection policy when the customer makes two premium payments and 10% trail. ALI says that, on average, brokers can earn $181 upfront and $60 trail per policy for a single person, and $331 upfront plus $110 trail per joint policy.

ADVANTEDGE Advantedge has developed three different options for FAST, Choice and PLAN brokers looking to offer insurance.

The group launched its referral model, allowing brokers to refer insurance business to a purpose-built call centre in early 2010. Head of Advantedge Financial Solutions, Craig Saville, indicates that take-up of the offering has been good, with just over 1,000 brokers accredited to refer its loan protect debt insurance product.

Saville says brokers can benefit from this referral model. “Many brokers today

are trying to be both an advisor on the insurance end and a mortgage broker. And the requirements under NCCP and the financial planning legislation are quite intense. Our program allows them to concentrate on what they’re really good at.

“So the broker is only spending about 10 or 15 minutes with the client. They’re outsourcing it in the true sense of the word, they don’t have to maintain all the current legislation, letters of authority, CPD points, their software, or the licensing costs associated with being an advisor. They can outsource that to us, we pay them a commission rate in return, which we disclose to the client as well.”

For brokers that choose to be remunerated upfront, they receive 40% of the premium upfront the first year and 12% ongoing. Premiums average $1,000, so brokers typically receive $400 upfront, and $120 ongoing. The accreditation process takes about 90 minutes, and Saville says there is ongoing education for brokers that need help integrating insurance into their sales process.

An alternative option is Advantedge’s “partner planner” model, which allows brokers to refer business to an Advantedge-licensed but independent financial planner, and share a commission. The financial planner is connected to a pod of 5–10 brokers.

LIFEBROKER Lifebroker has been offering insurance through mortgage brokers for two-and-ahalf years and gives brokers access to life insurance, income protection, trauma insurance and TPD cover.

According to the provider, there is no accreditation process because it designed its model to be as easy as possible for brokers.

In speaking about its benefits, a spokesperson for the insurance provider stated that the Lifebroker model “enables brokers to confidently offer their clients added financial security and protection, and it heightens revenue, increases client contact, enhances professionalism and supports a robust business model.”

COLUMN / SUCCESSION PLANNING

EXIT THIS WAY

It’s said that the best time to think about getting out of the business is the day you start. Here’s how to maximise the sale value of your business

T

he silver tsunami is officially underway.

The first wave of the Baby Boomer generation turned 65 in 2011, and many more will soon approach retirement.

While all industries will experience a drop in numbers, the situation could be particularly acute in the mortgage industry, as many turned to broking as a second career. “[Many brokers] worked in banks or real estate, and then went into mortgage broking ,” says Jeff Zulman, managing director of Book Buyers Brokerage Services Australasia. “But now it’s getting to a maturation point.

If a person left the bank in their 40s when mortgage broking took off, they’re now in their 60s.”

While the number of brokerages for sale is on the increase, the number of buyers is not. Therefore, buyers can afford to be picky. As a result, sellers need to have a

52 | BROKERNEWS.COM.AU

Jeff Zulman

solid succession plan in place if they want to realise the maximum value of their business, says Craig West, principal of Succession Plus.

“Buyers are looking for businesses that are wellprepared, well-documented and properly structured.”

TIMING When should you start planning your succession?

“Yesterday!” Zulman says. “It’s a multi-year strategy.”

West’s advice is five years. “If you want to sell a business, you can probably do it in as little as six months, but to get the maximum price you want to be planning and preparing for at least three years – ideally five.”

The best approach, he adds, is to begin your business with the end in mind. This allows you to implement a strategy that reflects your end goal. For instance, if your goal is to sell your business to an employee, then your hiring process will reflect that desire.

The worst thing you can do is to leave it until it’s too late. “Don’t underestimate how much work is involved and how much time it takes – not if you want to maximise value,” says West. “If you want to do it quickly, you’ll get what you get. It’s the same as going to a real estate agent today to sell your house this weekend.

They’ll do it, but you won’t get a very good price.”

Succession planning: step-by-step There are several different exit strategies available to mortgage brokers – sell to family or friends, sell your book only, or sell to other shareholders.

According to Succession Plus’s Craig West, one of the most lucrative is to sell the business to existing key staff. But how?

1 Develop a strategy The biggest mistake business owners make is not allowing enough time to plan or implement their exit strategy. Your strategy should also be constantly monitored and reviewed as your business matures.

 2 Maximise the value of your business Identify where your business is positioned on the business spectrum – are you operating a boutique business, a scale-based business, or somewhere in-between? The competitive advantage for boutiques comes from offering a premium product or service, at a premium price, to a select clientele. The key growth strategy for boutique businesses is to further exploit this pricing advantage by becoming even more boutique – more premium and selective. Scale-based businesses, on the other hand, gain a competitive advantage through volume. The key growth strategy then is to increase volume – more clients and greater service. If your business is somewhere in-between, your goal is to gravitate to one of the spectrum or the other.

 3 Choose your successors The most effective way to ensure a smooth transition of ownership is to identify and select the most suitable buyers. For small to mediumsized businesses, management buy-outs are a very effective sales strategy. Not only does this strategy make it possible to identify potential successors from within the company and transition the new owner into a central role over a long period of time, but it also gives the current owner certainty over the future of their business. In addition, employees are in a good position to see both the strengths and weaknesses of the business and already be fluent in the company’s culture and values.

 4

Implement an equity matrix Because an ideal succession plan is a gradual transfer of ownership over a long period of time, it is important to ensure everyone is getting a ‘win’ at all stages. An equity matrix charts the process for transferring equity and responsibility for management of the company from current to new owners.

Done properly, it ensures the value received by both parties is greater than the cost.



Craig West

5 Secure funding Funding is not just the buyer’s problem. Young and upcoming successors tend to lack the necessary capital. One option for owners is to fund the purchase themselves. The business could use its overdraft facility to borrow money specifically to enable the purchaser to buy shares from the current stakeholders or to allow the new owners to sacrifice part of their salary to fund the purchase.

 6 Smooth transition Allow sufficient time for the new owners to upskill across all areas of the business.

Thoroughly documented systems, processes and procedures can help bridge the skills/experience gap. As well, clients need time to become comfortable with the change in ownership.

 7 Expert tax advice There are tax benefits to implementing a proper succession plan. Getting an expert on board to help you develop your plan can help you realise all of the tax implications and benefits.

 8 Communicate Providing staff with an abbreviated version of your succession plan and keeping them abreast of progress through regular meetings is a key component to acceptance. Staff need to know why the succession plan is being implemented, its key features, how it will affect them and what the benefits will be to current and new shareholders as well as staff.

 9 Advice Gather a team of quality advisors to help you with succession planning. Members of your team could include a project manager, accountant, lawyer, insurance expert and business coach.

Source: Succession Plus – successionplus.com.au. For a more complete guide, contact Succession Plus on 1300 665 473

BROKERNEWS.COM.AU | 53

BROKER PROFILE / KATRINA ROWLANDS

Q: What keeps you motivated?

A: I honestly love what I do and truly believe I make a difference for my clients and business partners. The recognition of our standing as a business in the industry and in my local region also brings great pride and a confidence to keep pushing for the level of excellence we strive for as a team. The support of a great team also helps keep me going personally, through family and with business strength gained, again, from a great team.

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

A: In all honesty I have had a few! Having twin daughters started it all in 1998; winning the MPA Inaugural Broker of the Year was a huge kickstart.

Starting our own business of Mortgage Success in 2004 and also joining AFG the same year were huge points.

Joining and being State Council member for the MFAA was also a point. But I will just leave it at that or I could go on for quite a while…

Q: What are the advantages/disadvantages of being a woman in the broking industry?

A: I honestly think there are more advantages than disadvantages. I love being a woman in this industry.

Katrina Rowlands is a stalwart of the Illawarra area and the upper echelons of the MPA Top 100. MPA finds out what it takes to continually stay on top

STAYING POWER 54 | BROKERNEWS.COM.AU

My ability to communicate is a huge advantage in my view, knowing about family considerations and the needs as a woman also helps in assisting decision processing for clients. I love the ability to be the best I can be without any holdbacks in this industry. I really can’t see disadvantages in all honesty.

Q: In what ways has the industry changed for the better since you started broking?

A: It has become so much more professional as an industry. It has had some ups and downs and I am looking forward to more ups in the coming year.

Some banks have really engaged the relationship of the broker network, and those that continue to do so will definitely benefit with growth through the channel next year, as our percentage of the market grows.

Q: In what ways has it changed for the worse?

A: Undelivered promises of online lodgment and a lack of delivery of promised turnaround benefits. It has worsened in the rewards of payment for the amount of work we now deliver to the bank for their financial reward. Some banks have worsened in their nondelivery of consistent service. Saying that, one or two are delivering on their promises and the rewards will come for them and in the way they are embracing the industry in an honest move towards true partnership business.

Q: Have you embraced technology and social media in your business?

A: Yes, but not in an automatic, standard way. We have carefully chosen our preferred methods of contact and technology advancements after very earnest and real discussion of our positioning and vision for the

Fact file

Katrina Rowlands Mortgage Success ++ Location: Wollongong, NSW ++ Total settlements 2011: $89,876,654 ++ No. of loans: 295

business. We have put a huge spend into our communication methods and are currently re-doing our contact sites.

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

A: Yes, in many areas: in insurance sales, deposit bonds, commercial business offerings, leasing, personal loans, etc. We really try to cover off what our clients’ changing needs become and let our direction of diversification be challenged and directed based on their changing needs.

Q: What forms of marketing works best for your business?

A: I love my organic referral business from our clients as it’s my number one marketing choice. It always has been my most successful and most enjoyable marketing result. We use many other forms to try to capture attention and audience but I especially love the involvement we have with the local region in sponsorships of sporting groups and events that normally bring a good result to charities. It brings real warmth of thought and word for the business and I love that result from our marketing and exposure, too.

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

A: The usual answer of the last couple of years has been ‘compliance’ but I don’t believe that needs to be a challenge, really. It is just something we need to keep up with – we can accept that we don’t know it all yet nor have got it all perfectly right yet, but the intention needs to be clearly demonstrated to all, in and out of the industry, that we are willing to listen, with the aim of getting it perfect.

BROKERNEWS.COM.AU | 55

STATISTICS / YOUR MORTGAGE INDEX

Buyers moving into position More than 150,000 visitors use www.yourmortgage.com.au every month – and its user activity statistics provide a unique insight into Australia’s borrowing trends Purpose of loan 60.00% 50.00% 40.00%

Nov 10

30.00%

Nov 11

20.00% 10.00%

MOVE HOME

REFINANCING

FIRST HOME

INVESTMENT PROPERTY

0.00%

How soon do you want a mortgage?

50.00% 40.00%

Nov 10

30.00%

Nov 11

20.00% 10.00%

NEXT FEW MONTHS

NOT IMMEDIATELY

0.00% RIGHT NOW

W

What a difference 0.25% makes. If the interest rate cut in November was intended to reignite the flagging first homebuyer market, it looks like RBA governor Glenn Stevens can call it a success.

The latest Your Mortgage Index has revealed that enquiries from prospective first homebuyers rocketed by more than 15% in November 2011 compared to the same period last year. In fact, first homebuyer enquiries made up 50.9% of all enquiries over the month, with refinancers coming in a distant second at 23.7%.

Investment-related enquiries remain subdued at 13.3%.

Even so, it seems that buyers aren’t rushing to market. Forty-five per cent of enquiries highlighted that a mortgage would be required ‘in the next few months’, not straightaway – although a very healthy 38.5% are looking for a mortgage straightaway. There has also been a small rise in the proportion of enquiries for introductory rate loans, an indication that new borrowers are being drawn to the honeymoon rates. Fixed-rate loans also continue to draw 32.5% of enquiries, again potentially due to excellent deals on the market at present.

Looking across Australia, NSW still draws the lion’s share of enquiries with a third of all searches, followed by Victoria (24.5%) and Queensland (19.7%).

However, enquiries are up over 2% on November 2010 in Queensland – a positive sign for the Sunshine State after a rough year.

Buyer activity by state 35.00% 30.00% 25.00%

Nov 10 Nov 11

20.00% 15.00% 10.00% 5.00% 0.00% ACT

NSW

NT

QLD

SA

TAS

VIC

WA

Type of loan 70.00% 60.00% 50.00% 40.00% Nov 10 30.00%

Nov 11

20.00% 10.00% 0.00% SVR

56 | BROKERNEWS.COM.AU

FIXED

INTRO

First home buyers are coming back!

Here’s where you’ll get some bang for your buck

ACT

South-western Canberra is the hot spot for affordable units within the federal capital, with three of the most affordable suburbs – Curtin, Chifley and Lyons – all in this area. With land at a premium in Canberra, it’s no surprise that all of the most affordable medians relate to units.

5

cheapest suburbs in ACT

THEDATA

SUBURB

58 | BROKERNEWS.COM.AU

NSW

HOUSE/ UNIT

MEDIAN PRICE

CURTIN

U

$322,700

FRANKLIN

U

$323,500

LYONS

U

$326,000

HAWKER

U

$340,000

CHIFLEY

U

$342,000

If you want bargains in Sydney, head south: the majority of the suburbs with the most affordable median prices are located either north or west of Botany Bay. The exceptions are inner west suburbs Lewisham and Croydon Park. Like Canberra, tight land supply means that units dominate the list.

5

cheapest suburbs in NSW

SUBURB

HOUSE/ UNIT

MEDIAN PRICE

CROYDON PARK

U

$366,500

HILLSDALE

U

$390,000

EASTLAKES

U

$395,000

ARNCLIFFE

U

$397,500

LEWISHAM

U

$403,000

Source: All data from RP Data, October 2011

NT

North of the airport is the bargain zone in Darwin, with coastal suburbs Coconut Grove and Nightcliff the pick of the bunch. Falls in unit prices over the last year in Darwin also means there are great bargains to be had at present – especially as the massive Inpex project takes off.

5

QLD

cheapest suburbs in NT

SUBURB

HOUSE/ UNIT

MEDIAN PRICE

MALAK

U

$337,500

NIGHTCLIFF

U

$376,000

MILLNER

U

$385,000

MARRARA

U

$390,000

COCONUT GROVE

U

$395,000

The suburb with the cheapest median price in Brisbane is also one of those that was worst affected by the floods, so choose your property carefully. The remainder are all clustered around the airport: however, the development of the Airport Link could see values increase in future due to improved access to the CBD.

5

cheapest suburbs in QLD

SUBURB

HOUSE/ UNIT

MEDIAN PRICE

ROCKLEA

H

$280,000

WOOLOOWIN

U

$332,500

LUTWYCHE

U

$341,250

CLAYFIELD

U

$345,000

NORTHGATE

U

$346,000

BROKERNEWS.COM.AU | 59

STATISTICS / FIRST HOMEBUYERS

SA

Northern suburbs dominate the Adelaide list, although city centre suburb Keswick actually has the lowest median price.

5

TAS

SUBURB

HOUSE/ UNIT

MEDIAN PRICE

KESWICK

U

$242,000

ENFIELD

U

$247,500

FERRYDEN PARK

U

$251,000

WOODVILLE NORTH

U

$255,000

CLEARVIEW

U

$256,000

You can buy a house for less than $200,000 within 10km of the Hobart CBD – but to be fair, you won’t be in Hobart itself. Units in Glenorchy and Montrose offer good accessibility to the city and attractive price points.

5

60 | BROKERNEWS.COM.AU

cheapest suburbs in SA

cheapest suburbs in TAS

SUBURB

HOUSE/ UNIT

MEDIAN PRICE

CLARENDON VALE

H

$155,000

RISDON VALE

H

$180,000

MONTROSE

U

$201,600

ROKEBY

H

$209,000

GLENORCHY

U

$218,000

VIC

You could be forgiven for assuming that all of Melbourne’s affordable properties would be in the unfashionable west – but they’re not. City centre apartments make an entry on the cheapest suburb list, but don’t expect them to be large: Gardenvale, near Brighton and St Kilda, may be a better option.

5

WA

cheapest suburbs in VIC

SUBURB

HOUSE/ UNIT

MEDIAN PRICE

GARDENVALE

U

$342,000

FLEMINGTON SOUTH

U

$370,000

KINGSVILLE

U

$375,500

MELBOURNE

U

$382,500

ALPHINGTON

U

$419,000

Perth’s northern suburbs may not be as desirable as the southern beachside locations, but easy access to the CBD and northern beaches as well as significant urban regeneration – plus the price falls across Perth in recent months – means there are good buying opportunities in Wembley, Glendalough and Osborne Park.

5

cheapest suburbs in WA

SUBURB

HOUSE/ UNIT

MEDIAN PRICE

BAYSWATER

U

$272,000

WEMBLEY

U

$290,000

GLENDALOUGH

U

$306,600

OSBORNE PARK

U

$309,000

MAYLANDS

U

$309,500

BROKERNEWS.COM.AU | 61

LIFESTYLE / FAVOURITES

❤

Favourite things...

Steve Weston Advantedge Vacation spot: We recently travelled to the US, and New York was incredible

Music: Hunters and Collectors. My favourite song is ‘Throw Your Arms Around Me’. Troy Phillips and Brett Hartley do a great rendition

Food: Lobster

Celebrity: Australian hurdler Sally Pearson.

She is a fellow North Queenslander who was recently voted best female athlete in the world – Usain Bolt was voted best male athlete, so she is in good company

Movie: The King’s Speech – it’s a moving story that makes you feel proud to be Australian

Sport: Rugby

Drink: Rum

league – I was a former rugby league player in North Queensland. My favourite side is the North Queensland Cowboys

and coke

Book: I enjoy reading autobiographies on holiday

62 | BROKERNEWS.COM.AU

Place to be: Spending time with my family

Hobby: Getting whipped by my wife on the tennis court!

LIFESTYLE / A DAY IN THE LIFE OF

A day in the life of…

Mark DeMartino is national sales director at Loan Market 8:30am

Meeting with three of our top NSW brokers, to discuss strategies around building their referral business. I love coaching brokers in a group like this. Great people achieve great results and these guys are really sharp. Some good outcomes are achieved including referrers to target and effective scripts shared by all.

11:00am

6:00am

Hotel wake up call. I’m in Sydney today, finishing up a few days of meetings with key lenders and brokers. After a check of my overnight emails I’m ready for the day.

7:00am

Check out of hotel but leave my bags with concierge to pick up later tonight for my flight back to Melbourne.

7:15am

After checking out of the hotel I arrive at my favourite Sydney coffee shop across from our office to start the day’s work. With a short macchiato to get things moving, I write down today’s action plan and work on emails received overnight. I’m developing an updated Broker Induction program for roll out nationally.

“A short macchiato gets things moving, as I write down today’s plan”

Meeting with our NSW broker trainee manager to discuss new broker pathways and the progress of recently-inducted trainee classes.

It’s great to see so many new people entering our industry.

They all seem so positive and rearing to go!

12:00pm

Meeting with Paul from Intellitrain to discuss broker training which includes eLearning modules and how Loan Market can contribute content. The new technology is exciting and I can really see brokers learning outcomes improving markedly. We also discuss revised diploma upgrade content for our senior brokers.

2:45pm

Late lunch. Take-away salad should do the trick!

3:05pm

Meeting with our NSW administrator for 15 minutes regarding an upcoming state conference. We discuss the Awards Night winners and run sheet. I’m really impressed with the results these brokers have achieved in a testing year. Also put the final touches on a surprise event on the night itself.

3:30pm

Drive to the office of one of our brokers to discuss Loan Market shopfront branding size and position. The guys are keen to discuss the next phase for their business and their real estate referral partners. A great meeting.

4:35pm

Had to pull into a Coles parking lot as a broker calls regarding a problem with a loan approval. Call the bank to escalate. Pretty sure I’ll win this one as the broker has a strong case.

4:55pm

Still in the car. Called three brokers to say hello and see how the week’s going. Team is pumped.

So many leads coming in from the call centre and real estate referrers after the [November] rate drop.

5:15pm

Teleconference with the management team around a new lead generation initiative for our brokers. Very exciting!

6:30pm

Arrive at a social gathering for brokers and real estate high performers at our executive chairman’s house. It’s a beautiful night overlooking Sydney Harbour, with over 100 people here.

8:55pm

Arrive at airport with five minutes to spare and return some calls whilst waiting to board.

9:50pm

Depart Sydney on a delayed flight – and the spare seat next to me caps off a great day.

BROKERNEWS.COM.AU | 63

LIFESTYLE / MOTIVATION

Sue Hirst explains how to choose a great business advisor It can be extremely valuable for a business owner to have someone from outside their business help them to work on the business, as well as in it - but there are traps for the unwary!

There are literally thousands of people offering business advice. They can be fantastic or they can be dreadful. Here are some tips on how to find the best and how to work with them.

You need to have…

Someone who has the passion to work with you to achieve your goals and who delivers more value than they cost.

A good advisor should be able to help you create improvements that deliver several times their cost onto your bottom line and add to cash flow as well as create efficiency. They should also be able to quantify the value outcome of working together.

Someone who doesn’t just give you loads more work to do.

You need someone who is ‘hands-on’ who will actively participate in the implementation of strategies with you and your team. They should also be clear about how you can implement actions and not leave you to figure it out for yourself.

Someone who speaks your language – plain english rather than jargon.

Don’t feel stupid if you don’t understand what they’re saying – if you’re paying the bill, you’ve a right to understand.

Sue Hirst is director and cofounder of CFO On-Call Advisors, a team of financial and business advisors who work with open-minded people committed to business growth and achieving success. Visit their website CFOonCall.com.au

Someone who understands the key drivers of your business.

Key performance indicators (KPIs) are a fantastic way to measure improvements in all areas of business.

Someone who is prepared to learn about your industry but not charge you for their learning.

They don’t necessarily already need to have knowledge, as a good advisor can be a generalist in all types of businesses.

64 | BROKERNEWS.COM.AU

Someone who has good credentials and a proven track record.

Ask about what they’ve helped other clients to achieve, and how they did it, and ask for references.

Someone who ‘walks the talk’ and demonstrates what they are advising you to do.

Have a look at how they present their service, how they market themselves and handle sales, how they operate and handle the financial side, how they work with their own staff, and how they handle customer service.

Someone who is accessible and available.

If you’re working together as a team with them, you need to be able to communicate effectively and you need to bounce ideas off them readily. Having said that, it’s best to be organised about communication and plan for meetings, but occasional ‘ad hoc’ calls shouldn’t be a problem.

Someone who doesn’t just push their own hobby horse.

It could be that their area of interest is not your problem, yet this is what they want to focus on, because it’s what they know best.

Someone who understands all areas of business, especially the financial side.

Getting your financials right helps you understand the impact of changes in other business areas, such as sales and marketing.

Top sales are great, but the cash flow at the right time to fund them is critical to success.

BROKERNEWS.COM.AU | 65