Mortgage Professional Australia magazine Issue 12.06

ON DISPLAY THE PROS AND CONS OF SHOPFRONTS COMMON WEALTH FACE TO FACE WITH KATHY CUMMINGS

MPAMAGAZINE.COM.AU ISSUE 12.6

THE STATE OF LOW DOCS PLUS A COMPREHENSIVE PRODUCT GUIDE

FULL

SPEED

AHEAD THE STATE OF AGGREGATION AND HOW IT AFFECTS YOU SUPERBROKERS 2012 PAGE 26»

CONTENTS / ISSUE 12.6

48

Face the fear Are low docs a risk worth taking?

22

Quality control Are brokers unfairly bearing the blame for loan application problems?

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WEEKLY INVESTIGATIONS NOW ONLINE: Interest rates COVER STORY 26 | Super brokers Australia’s aggregators speak about the current challenges in the market

The Diploma debacle Aggregation M&A » mpaonline.com.au

CONTENTS / ISSUE 12.6

56

NEWS & VIEWS

PROFILES

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

42 | Kathy Cummings on Diamond brokers, quality, women in broking and the next 12 months at CBA

12 | Product news A round-up of the latest rate changes and product launches 16 | The Big Story A compilation of the top quotes from our weekly multimedia broadcasts – and broker feedback 20 | Analysis Buyer confidence – up or down?

SMART BUSINESS

42

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56 | The generation gap How to segment your customers by life stage 60 | Setting up shop The pros and cons of a shopfront

61 | Scott Marshall Reveals the secrets to his success

STATS 64 | The data Which suburbs tick both capital growth and cash flow boxes? MPA investigates

LIFESTYLE 68 | A day in the life of…

Charles Tarbey, Century 21 70 | My favourite things… Tony Pennells, Wealth Today 72 | How to leave the office on time … according to Cindy Tonkin

NEWS / ROUND-UP

MPAMAGAZINE.COM.AU | 5

CONTENTS / EDITOR’S LETTER

INTERESTING TIMES? I’m very fond of pithy little sayings and proverbs.

One of my favourites is an (allegedly) Chinese saying, which goes ‘May you live in interesting times’. The thing that amuses me most about the saying is the fact that no-one seems entirely certain if it’s a blessing or a curse. My take is that it’s a bit of both.

I have a suspicion that the men and women running Australia’s aggregation businesses understand that saying very well at the moment. Aggregators in particular are certainly experiencing ‘interesting times’ at present, and are being confronted with a whole range of issues – tight markets and squeezed margins, investment in rapidly advancing technology and diversification, to name just a few.

One thing’s becoming clearer, though: size matters. In this environment, economies of scale are becoming all-important – hence the ongoing trend for consolidation. But is that an entirely good thing for the mortgage industry? Is there even a place for small independent boutique aggregators any more, or does market might now equal right? All the answers from the key players, as well as the latest updates on how they’re performing, are on page 26.

Elsewhere, Commonwealth Bank’s Kathy Cummings opens up in the third of our head to head chats with the top brass in the Big Four banks, as well as an indepth investigation into the rights and wrongs of submission quality. Add to that more product info – including a comprehensive guide to low docs – and the usual mix of profiles, news and analysis, and it’s another packed issue of MPA. Kevin Eddy, Editor

COPY & FEATURES EDITOR Kevin Eddy CONTRIBUTOR Andrea Cornish PRODUCTION EDITORS Sushil Suresh, Danielle Chenery

ART & PRODUCTION DESIGN Paul Mansfield, Ginni Leonard

SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Kevin Eddy tel: +61 2 8437 4793 kevin.eddy@keymedia.com.au Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Account Manager Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto mpaonline.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

CONNECT

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

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

NEWS / ROUND-UP

MPAMAGAZINE.COM.AU | 7

NEWS / ROUND-UP MORTGAGE BROKING

BANKING

Broker success 80% ‘belief and confidence’ Former top broker Stuart Wemyss has said the majority of mortgage broker success can be put down to belief and confidence in the value delivered to clients.

Now operating a training course for brokers in addition to his mortgage business ProSolution Private Clients, Wemyss said too many brokers say to themselves “they are not good enough”.

“For example, very few brokers target high-end clients, and the reason is they say to themselves they are not good enough to talk to them, so they stick to first homebuyers and mums and dads.”

Wemyss said that in fact, there is not much difference between a broker who writes $30m a year and an $80m broker – just confidence, backed by the other important 20% – a system.

“If you talk to a $30m broker, typically they have a lack of belief – they can’t believe you can take your business to $80m and work the same hours or less,” he said. “These same brokers don’t think you can ask clients to come and see you; they are driving all over town because they don’t think their value proposition is strong enough.”

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Genworth loss forces IPO stall Genworth has announced it will post a loss for the first quarter on the back of more delinquencies heading to foreclosure.

The mortgage insurer has delayed its mooted IPO as a result. Genworth’s American parent company last year announced it would offload a 40% stake in its Australian business

to offset financial losses in its US division. The IPO was slated for the second quarter of 2012, but has now been rescheduled for early 2013.

The company claimed that its liquidity and risk buffer plans were not dependent on the IPO, and that it held a sufficient amount of cash to delay the offering.

FIRST HOMEBUYERS

12.2%

RATES NO DETERRENT TO FHBS

BEST OF BOTH WORLDS THIS MONTH’S MARKET ANALYSIS LOOKS AT CITY SUBURBS WITH GROWTH POTENTIAL AND GOOD CASH FLOW. TURN TO PAGE 64 TO FIND OUT MORE.

Lack of a deposit – not interest rate movements – is keeping first homebuyers out of the market.

A survey by Loan Market has found interest rates were the single least influential factor in whether first homebuyers chose to enter the property market. Just 5% of brokers tipped interest rates as a factor keeping potential first-time buyers from purchasing.

STATS: The average required deposit expected by first homebuyers.

Source: QBE LMI

Saving for a deposit has proven the most common hurdle for first homebuyers. Fifty-two per cent of respondents said a lack of genuine savings is proving the biggest barrier to potential buyers.

NON-BANKS

CONSUMER CONFIDENCE

FAST HEAD SEES SURGE TOWARDS NON-MAJORS FAST’s acting chief executive has said the company’s brokers are seeing strong refi activity signalling a move away from the majors.

New ABS figures show the demand for new housing finance remains poor, with loans for the purchase of new dwellings falling 10.4% from January to February. But FAST’s David O’Toole has said the refinancers are active, and borrowers are eschewing the majors.

“Primarily, we are seeing the refinance market is still particularly strong.

FAST has seen an improvement in the

distribution of lending to non-major lenders over the last 12 months.

This is being driven by a renewed sense of competition from non-major lenders whose funding positions have improved post the GFC,” O’Toole said.

ABS statistics give credence to the claim, showing a 0.6% rise in refinancing for the month of February.

O’Toole said the company’s brokers had been “particularly active” managing existing client databases, and that lender competition had underpinned an active refinancing market.

Doom and gloom?

19% Less than one-fifth of business owners expect the economy to improve in the next 12 months

But...

29%

41%

of Gen Y business owners expect to see revenues rise

of business owners over 60 expect to see revenues fall

Source: MYOB Business Monitor, March 2012

Homeowners hardest hit by confidence drop Mortgage holders have seen their confidence drop by a margin much higher than an overall decline in consumer confidence this month.

The Westpac-Melbourne Institute Index of Consumer Sentiment has fallen in April, down 1.6% from March.

Westpac chief economist Bill Evans said the decline was “a mild surprise”, and noted that homeowners seemed to be disproportionately affected by the drop.

“Over the last 12 months the standard variable mortgage rate has fallen by 0.4% yet the confidence of respondents who hold a mortgage has fallen by 14.6%.”

Overall, the confidence of borrowers fell 5.1%, while the

confidence of tenants actually saw a 7.4% increase. Consumers were also dour on the current state of their own finances. Evans said the result was plumbing the depths of the Index’s historical findings.

“Respondents’ spending behaviour is likely to be considerably influenced by how they assess their own finances.

As such, the very weak reads in April are of significant concern. Apart from the one observation in July 2008 – when respondents were gripped with concerns over the Global Financial Crisis, and mortgage interest rates hit 9.6% – the read in [this] survey on their assessment of finances compared to a year ago is the lowest since the recession in the early 1990s,” he said.

AGGREGATORS

Aussie eyes millennium mark with broker recruitment Aussie is looking to hit the millennium mark in its broker membership following its acquisition of aggregator National Mortgage Brokers.

Aussie executive chairman John Symond has said the company would also continue to aggressively recruit brokers. Aussie currently has approximately 700 brokers across 150 storefronts. The NMB purchase will add around 200 new brokers, and Aussie said it was targeting a force of 1,000 accredited brokers by the end of 2012.

Aussie currently has a loan book of more than $42bn, and the company said its NMB purchase will see this grow to more than $50bn. Aussie claimed the addition of NMB would see it settle $1.2bn in new mortgages each month.

Quarterly results for Aussie have revealed the company now is writing nearly one in 20 new home loans after a 32% surge in sales enquiries for the March quarter.

The franchise brokerage saw a 28% increase in mortgage settlements from the previous corresponding quarter, lifting its market share by 24%.

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NEWS / ROUND-UP CONSTRUCTION

Diversification cures ‘myopia’ Yellow Brick Road chief Matt Lawler has weighed into the debate on diversification, saying that avoiding a “do you want fries with that mentality” comes down to not being “product myopic”.

Debt Rescue operations manager Rachael Witton recently warned that over-diversification could dilute broker skills. But Lawler has argued that diversification is not just a way to increase revenue, but a necessity to serve client interests.

“I see a lot of debate on diversification and the ‘do you want fries with that’ mentality, and whether that’s the right thing for mortgage brokers. If you take the client and their needs as your primary interest, there’s no way you can serve that without at least the understanding or capability to do more than just a mortgage,” he said.

PROPERTY INVESTMENT

Investors awakening in WA Top brokers have said investors are returning to the WA market after a long period of inactivity.

MPA Top 100 Broker Troy Cameron of Stratique Finance in Wembley, WA, has seen investors reawaken in the Perth market after a long period of slumber.

“Investor activity picked up from the start of 2012 with renewed interest in the Perth property market as opposed to the former focus of Queensland and Melbourne,” Cameron said.

The Real Estate Institute of Western Australia has echoed Cameron’s claims, saying it has seen a rush of investors that is only set to grow.

“Many potential investors who have been waiting and watching the Perth market, in particular, following the decline in prices since 2010, now sense that it’s an opportune time,” the group said.

Cameron said the rental market was the key to the surge in activity.

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BANKS

BROKER SQUADS INCOMING: WESTPAC

STATS

$420

The median weekly rent in Perth Source: REIWA, March 2012

Westpac is rolling out more branch-based ‘broker squads’ in an effort to gain cross-sell business from broker customers while mitigating channel conflict.

Originally piloted in WA one year ago, the broker squads are being rolled out across the country and will eventually number approximately 170 across Westpac’s 55 regions.

Westpac’s head of third

party mortgage distribution, Tony MacRae, said the broker squads act as speciallytrained branch hubs within a region that understand the broker channel.

“It is about bringing our key brokers and our key branches much closer together to overcome that whole channel conflict perception that may have existed in the past,” MacRae said.

DIVERSIFICATION

Down tools: Construction deteriorates Subdued demand and tight credit conditions have seen the construction industry contract for the 22nd consecutive month.

The Australian Industry Group – HIA Performance of Construction Index has found the national construction industry remained in a state of decline for March. Though the pace of decline eased somewhat, residential construction saw its steepest fall since September last year.

“There is an unequivocal deterioration underway in the non-resource domestic economy in 2012. Residential

construction is highlighting this fact with the rate of decline in the detached house and apartment sub-indices of the Australian PCI accelerating,” HIA chief economist Harley Dale said.

Did you know?

$55m

If interest rates fall by this much…

0.25% Source: RateCity

… The economy could be boosted by this much

BROKERNEWS.COM.AU | 11

NEWS / PRODUCT ROUND-UP

PRODUCT NEWS A bite-size guide to the industry’s newest products, key updates and fresh initiatives EDITOR’S CHOICE Who: Pepper What: Flexi Advantage PLUS and Pepper Self-Employed Advantage PLUS

The spec: Pepper have extended its established residential mortgage offerings with two new products.

Both products provide more options for brokers and their clients, with eligible criteria now allowing two months’ current mortgage arrears, up to two defaults less than 12 months old for the Flexi Advantage PLUS and two defaults greater than 12 months old for the Self-Employed Advantage PLUS. Pepper says the products have been designed to offer home loan options to brokers whose clients do not meet traditional lending criteria; this might include the self-employed, people who have experienced redundancy or who may have been through a separation.

Pepper has also amended credit policy on the Pepper Flexi Advantage and Pepper Self-Employed Advantage Home Loan, allowing larger maximum loan amounts on both and up to 85% LVR on the Self-Employed Advantage product.

What they say: “We have always placed great importance on our brokers’ needs and wants, so with demand for an even more flexible product suite, Pepper has expanded our range. Our brokers know we can help them and their clients, and the introduction of these new products and features demonstrates this.”

“Some of the attributes of the Pepper Flexi Advantage PLUS and Pepper Self Employed Advantage PLUS include higher default and arrears allowance than our standard product suite and the continued use of the simple pricing matrices based around LVR that Pepper has become synonymous with. Pepper has also been very mindful of complying with responsible lending criteria in the development of this product suite, and will assess each individual deal on its merits.”

David Holmes, Chief Operating Officer, Pepper

WHAT WE SAY: “These two new products from Pepper are worthy winners of the inaugural MPA Editor’s Choice awards. They offer sorely-needed new and flexible options for borrowers who might not fit traditional criteria.”

David Holmes

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NEWS / PRODUCT ROUND-UP

Who: Better Mortgage Management What: Specialist Lo Doc Cashout loan The spec: Better Mortgage Management (BMM) has cut rates on its unlimited cash out loans. Rates now start from 8.09% for loans up to 70% and 8.54% at 80% LVR. In addition, minor credit impairments of less than $1,000 will now not result in the borrower’s interest rate being increased on all specialist loans. BMM say this will make finance more accessible for self-employed borrowers, and potentially sav them thousands of dollars in repayments.

The moves follow the announcement earlier this year of unlimited cash out on BMM Lo Doc loans, along with higher loan amounts and an increased maximum LVR limit of 90% LVR. What they say: “Previously, self-employed borrowers that wanted cash out above 60% LVR had been locked out of the market and were effectively stuck with the loan they took out years before. More options combined with the lowering of rates means more self employed borrowers now qualify for a loan.”

Murray Cowan, Managing Director, Better Mortgage Management

Who: ING DIRECT What: Fixed rate lock in The spec: Following consultation with key broker partners, ING DIRECT has enhanced the features of its Fixed Rate Lock In offering.

The key enhancements include: • The fixed rate will be locked in when the Fixed Rate Lock In Request is received, subject to initial fee payment being successful. This can be as early as the loan application being submitted • The fixed rate will be locked in for 90 days

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“Previously self-employed borrowers that wanted cash out above 60% LVR had been locked out of the market and were stuck with the loan they had” Murray Cowan, Better Mortgage Management • A flat Rate Lock In Fee of $749 per fixed rate loan account applies • Where the Rate Lock In Fee is paid, the fixed rate application fee will not apply • Where SmartPack is selected with a Rate Lock In, the SmartPack fee will not apply • The rate that will apply will be the lower of the locked in rate or the ING DIRECT fixed rate applicable on the settlement date What they say: “Over the course of last year and in 2012 to date we have been actively engaging aggregators and brokers for feedback on enhancements to our service, products and polices.

One key action item out of these discussions was the need to enhance our fixed rate lock in offering. This allows our brokers to offer their customers even more certainty from the beginning of their fixed rate home loan application.”

Mark Woolnough, Head of Broker Distribution, ING DIRECT

Who: La Trobe Finance What: Credit Repair The spec: La Trobe Finance has lifted its restrictions on a borrower’s credit files, allowing up to two months mortgage arrears to now be considered on a full doc basis. This is available to both employed and self-employed customers.

What they say: “These important changes allow us to

provide a complete assessment for those borrowers who were previously excluded, even if they had overcome their difficulties. By looking at each borrower’s situation we can offer this personal approach – so often forgotten by the banks” Iain Pepper, Vice President and Head of Lending, La Trobe Finance

Who: Resimac What: RESIMAC Specialist Lending Alt Doc Loan The spec: Resimac has made a number of policy changes to its Specialist Lending Alt Doc Loan, which caters to self-employed borrowers requiring loans at up to 85% LVR. The changes include: • Increase to maximum loan amount to $1.35m • Unlimited cash out permitted to 80% LVR • Can refinance non-conforming or solicitor loan • All defaults and judgements under $1,000 are disregarded – Rates correct as of 14 May, 2012

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

NEWS / ANALYSIS

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NEWS ANALYSIS / MULTIMEDIA

THE BIG

STORY

Every week, Australian Brokernews investigates the burning issues affecting the mortgage industry. Here are the biggest stories highlighted by our weekly newscasts – and uncensored feedback from brokers The subject Gloves off

The lowdown Competition is heating up as aggregators fight harder for market share. Who will come out on top?

Mark Haron, Connective: There has been a fair bit of movement and transitioning of broker groups between aggregators, and it really has heightened competition. Some aggregators who are losing a lot of broker groups have realised, and they’re trying to do something about it.

Chris Slater, AFG: If you look at a

typical AFG broker, they’ve got access to better technology today than they ever had, better marketing support

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than they’ve ever had, and better onground support than they’ve ever had. The fact that we’ve had to continue to invest and have been forced into a more competitive environment is a really good thing.

Mark Haron: Ultimately it’s great for the

brokers, for them getting their aggregation services at a cheaper cost; it also means they’re getting improved access to systems and technology.

I think all aggregator groups, and particularly Connective, are all looking to improve our service and systems, as we’re leading the way with that, other aggregator groups are looking to lift their game.

Overall, most brokers are finding that they should be getting better services from their aggregator. If not, they should be asking ‘why not?’ and getting them to lift their game.

Chris Slater: [Brokers should be looking

for] investment in technology to get more efficient about the way they handle licensing and the way they run their business; marketing and marketing support to help them retain their customers and find new ones; and on-the-ground support is really important.

Those are the three key areas, but overriding that in the last six months is a flight to transparency, a flight to security, and brokers are becoming more and more aware that we’ve seen a few organisations

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NEWS ANALYSIS / MULTIMEDIA

This month’s guests...

Chris Slater, AFG

From the forum BrokerIQ I struggle to understand how small and boutique aggregators can service the modern broker. We need state-of-the-art CRM capability that offers multiple management functions, efficient BDM support and tools that help us build robust small businesses.

The subject Reverse gear Darren Moffatt, Seniors First

Kevin Conlon, SEQUAL

Mark Haron, Connective

that basically ran their business model on saying ‘we’re better than everyone else in the market, we’re going to give a lot more back,’ and those organisations have fallen over. Brokers are starting to say ‘we want to see transparency about your business’.

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The lowdown The reverse mortgage market is predicted to skyrocket with government backing – but can brokers keep up with demand?

Darren Moffatt, Seniors First: What we’ve

seen over the last couple of years is that the reverse mortgage market has come back from a low during the GFC and has regained previous high levels that it had even without any marketing or advertising.

This is telling us that the organic demand for the product is very strong.

Kevin Conlon, SEQUAL: There is an

inevitable growth in the equity release market; just the pure numbers of senior Australians moving into retirement, that their wealth is concentrated in the family home, and that increasing longevity suggests they will live longer than other sources of income might be able to support. So the underlying trends are very strong towards growth in equity release.

The question then becomes whether or not the supply is going to be in place. The key to this is that senior Australians need to make informed decisions. That’s a process that needs to be undertaken with great responsibility. If you’re looking for a quick turnover, high-volume business, then equity release is not for you. If you ‘re looking to build engaging and meaningful relationships, not only with your customer but their children and other stakeholders, these transactions may have these sorts of relationship benefits.

Darren Moffatt: For brokers, it’s really

about building a good reputation in the marketplace, being a trusted source of information, and I would say also specialising in this area. I wouldn’t say it’s probably the best outcome for a broker from John Smith Home Loans to suddenly go into reverse mortgages. If you want to do it properly, you should think about establishing your own reverse mortgage brand. You’ve also got to be alert to other factors that you probably would not see at all, or at least not very often, in the conventional mortgage market.

From the forum Phil Whilst they are a great idea, I’m not sure that reverse mortgages and the NCCP quite go “hand in hand”. The biggest problem is that you are dealing with older people who may not have all their faculties and could well be heading towards dementia/senility (or worse) and you are signing them up for a new mortgage loan with no repayments?

NEWS ANALYSIS / MULTIMEDIA

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NEWS / ANALYSIS

Key facts

Average time to save a deposit: 4.5 years Average expected deposit size: 19.3% Average expected loan amount: $343,610

CAUTIOUS OPTIMISM QBE LMI’s latest litmus test of market sentiment reveals uncertainty and confidence in equal measure

F

ewer people think that property prices will soar in the next few years than in 2011, but there’s still a substantial minority who think that now is the best time to buy property.

That’s the key conclusion of QBE LMI’s latest edition of its annual LMI Barometer survey, which canvassed 1,162 borrowers and potential borrowers about their views on the market. While only 42% of respondents believe property prices will grow strongly over the next three years – down from 58% in 2011 – four out of 10 still think 2012 is the best time to buy a property.

A total of 62% of the respondents intend to buy property in the next five years.

of importance. Fees came in second at 6 out of 10, with features and functionality nowhere near as important.

An area of potential concern for brokers could be a drop in the proportion of borrowers using mortgage brokers for researching mortgage providers. This declined to 37% in 2012 from 43% in 2011, while the propensity for respondents to conduct their own research increased by 4% to 39%. The report emphasises that this does not imply that the appetite for using a broker to broker the loan has declined – rather, that consumers are doing more research themselves.

COST CONCERNS

The survey suggests that refinance has been a major component of mortgage activity, with 17% of respondents refinancing their loans in the last 12 months. Twenty-one per cent of property

When it comes to taking out a mortgage, borrowers are worried about one thing: cost. The interest rate on offer matters above all else, scoring 8.2 out of 10 in terms

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REFINANCE

investors refinanced their loans, compared to 16% of owner-occupiers.

Almost half of respondents refinanced in order to get a better deal. Overall, 54% of refinancers stayed with the same lender.

QBE LMI suggests that the level of refinancing is likely to remain steady in the coming year, with 19% of respondents saying they plan to refinance their loans.

FIRST HOMEBUYERS A promising sign for the future could be the sentiment offered by first homebuyers.

The survey revealed that prospective first homebuyers are more eager to enter the market, with 44% saying they’re looking to buy property within the next six months.

They’re looking to borrow more than the average loan at $372,259, with smaller deposits (12.2%). They’re also more likely to use a broker to research home loans, with 45% saying they’d consult an advisor at this stage. This could be a good demographic for brokers with a long-term view to cultivate, particularly given the uncertainty about the market at present.

PROPERTY INVESTORS Investors made up just over a quarter of survey respondents. While there doesn’t appear to be any rush to get into the market, nearly three-quarters of investors plan to buy in the next five years, so this could be a steady demographic for years to come.

Investors have a clear preference for existing property, with 69% of potential buyers plumping for an established house.

Proximity to the CBD is also a key factor, with fewer investors willing to buy in the outer suburbs than other segments.

NEWS / COMMENT

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FEATURE / SUBMISSIONS

QUALITY

Are brokers unfairly bearing the brunt for loan application problems?

Andrea Cornish investigates submission quality and what all industry stakeholders can do to up their game

S

ubmission quality is an issue that affects every broker. Even if you dot every i and cross every t, the possibility that the next broker down the line may not do their job correctly will have a negative impact on your business. Not only do poor loan applications plug the pipeline, but recent comments from CBA have indicated a failure to improve quality could result in downward pressure on commissions.

According to the Commonwealth Bank, it is a broker’s responsibility to know a lender’s loan products, credit policy and submission process to ensure their client’s financial and customer service expectations are met.

“It is also a broker’s responsibility to complete the application form accurately without spelling errors or omissions and to provide all required documentation at the time of lodgement. That documentation, of course, should accurately reflect data in the application i.e. total amount of income stated in application should be the same as the total income on payslips,” says Kathy Cummings, executive general manager, third party and mobile banking.

Naturally, the threat to commissions has all mortgage professionals concerned about quality.

However, many are also questioning if the problem is completely one-sided.

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CONTROL BLAME GAME

Sarah Eifermann, principal of SFE Loans, acknowledges brokers have a responsibility when it comes to submitting quality loan applications. However, she notes that mistakes often happen on both sides of the channel.

“Lenders are always critical of brokers, you name the topic and they’ll find something to criticise. That said, brokers are heavily responsible for submission quality. A deal should be lodged with the application form

Most common submission mistakes According to the CBA, the most common mistakes brokers make on loan applications are: Income on application does not match pay slips or tax returns, creating serviceability issues Application form not complete or information is inaccurate e.g. names spelt incorrectly or birth dates are wrong Checklist and supplementary forms incomplete or not provided All supporting documents, as per checklist, not provided

completed properly and the required supporting docs provided to allow full assessment immediately of a deal.

Sometimes this isn’t possible, especially if the lender orders the valuation, or decides it wants more income verification than the policy denotes. Much time is spent by brokers going back and having to argue with credit assessors as to just what their individual lender policy states. This happens fairly often, and then lenders say it affects ‘submission quality’.”

Pinnacle Capital’s Peter Goldberg agrees that lenders have some responsibility for channel inefficiencies.

“Lenders can share some of the blame with poor submission quality, as brokers who are outside priority groups may try to submit their deals as soon as possible to be in the queue for their deal to be looked at as soon as possible. This is particularly the case when lenders have irresistible pricing offers, and delays of over five to seven days can occur before a deal is initially assessed,” he says.

It isn’t just brokers who think lenders have a role in improving submission quality. NAB Broker distribution head John Flavell says he gets “disappointed” when he sees lenders finger-pointing at brokers on this issue.

“There’s not a broker I know of that is interested in having an application denied or drag on. And there’s not a lender I know of that is interested in having an application denied or drag on. We’re both after the same thing,” he says.

Sarah Eifermann

Peter Goldberg

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FEATURE / SUBMISSIONS

WHAT’S GOING WRONG?

Garry Driscoll

Darryl Benn

John Flavell

There are a number of ways that a deal can go pearshaped.

“Unfortunately some brokers struggle at times to provide the basic information and regardless of the number of checklists and training and encouragement they keep missing some documents such as pay slips or tax returns etc. The fact is that some people who may be very strong in sales struggle with the paperwork side of things,” says Garry Driscoll, CEO of Mortgage Ezy. Flavell argues that a big part of the solution is communication.

“It is incumbent on the lender to clearly communicate to the channel,” he says. “We need to explain to our broker partners how our procedures work and what we offer them to make their jobs easier. We need to provide the right tools and make sure brokers understand them.”

Another tactic, according to Driscoll, would be to simplify and standardise requirements across lending products. As well, he argues lenders should apply the same assessment standards across their lending team.

“A deal can go to one assessor and it is fine, but it can go to another one who comes back with a list of missing information required. Same deal different result.”

He adds: “The bottomline is that brokers who submit good quality submissions get their deals approved faster and are allowed more leeway than brokers who submit poor quality submissions, so there is a real incentive for brokers to get it right.

UP YOUR GAME? So what can brokers do to better their conversion rates?

Recently, industry stakeholders floated the idea of a ‘Certified Practising Certificate’ to improve submissions.

CBA indicated that a new more practical certification of ability was required, to ensure that the industry was ‘more sustainable’ in the long run through the creation of channel efficiencies. The MFAA acknowledged that it has been working on this initiative since 2009. According to CEO Phil Naylor, the association’s diploma requirement positions brokers as professionals, while a practical certification would ensure their competency.

However, some feel brokers feel they need to catch their breath before more requirements are introduced.

“I don’t feel the time is right to introduce a broker practising certificate when brokers are currently finalising diplomas for MFAA and bedding down new credit reform legislation in their business practices,” Goldberg says. “More onus should be placed on a lender and their business development managers to identify brokers who are providing consistent poor quality applications and to firstly reiterate to the broker the requirements expected by the lender and worse case to

24 | MPAMAGAZINE.COM.AU

Top broker frustrations Lenders are not the only members of the mortgage food chain that feel frustrated with submissions. Brokers had this to say when asked what irks them the most about the banks’ submission procedures: ✘✘ Requests for information that has already been provided ✘✘ Requests for information not on the checklist ✘✘ Requests for information not relevant to the deal ✘✘ Incompetent bank assessors ✘✘ Poorly trained bank staff who cannot adequately interpret complex loan submissions ✘✘ Communication difficulties due to language barrier ✘✘ Inconsistency in valuation processes ✘✘ Low valuations ✘✘ Being told there will be an answer on X day (which brokers relay to clients), then being told to wait an additional time period when chasing up the answer ✘✘ Inability to discuss deal with credit assessor ✘✘ Too many hands involved in the process (which results in a game of passing the buck) ✘✘ When logging in to obtain status of a loan the file notes are not up to date and require a phone call ✘✘ Calling ‘broker support’ and being told they have no idea where the application is up to and that they can only read from the screen (and if the previous person forgets to record their notes that only makes it worse) ✘✘ Very poor BDM support when you are not a high volume broker ✘✘ Having a loan declined, then finding out it was approved by the very same bank when the client went direct ✘✘ Time delays – (having to tell clients to go direct to the bank if they need a quick process) ✘✘ Inconsistent credit decisions ✘✘ When changes in credit policy are not openly communicated to brokers ✘✘ Strict NCCP obligations for brokers, which are not being applied in the same way when the consumers deal direct with lender

cancel that brokers accreditation if they continue to provide poor quality submissions.”

Mortgage Choice CEO Michael Russell also criticised the certificate as being overkill.

“Practical competency will continue to be managed by broker head groups and lenders. Brokers who continue to submit low quality loan applications to lenders and who consistently achieve sub-standard conversion rates are easily identified. Such brokers tend to be the subject of remedial action to improve their performance, or are managed out of the business. Maintaining high standards reflects an effective lender/head broker group relationship. The focus today and for the foreseeable future should be to ensure brokers are meeting their compliance obligations under the NCCP legislation.”

SPECIAL REPORT / AGGREGATORS

FULL

SPEED

AHEAD THE STATE OF AGGREGATION AND HOW IT AFFECTS YOU SUPERBROKERS 2012

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How are aggregators coping with the challenges of a consolidating industry, advancing technology and falling broker numbers?

MPA reports

S

ince 2007, MPA has been surveying the key players in the aggregation space to find out how their businesses are developing, as well as what challenges and opportunities lie ahead.

This year is no different, and hence, hot on the heels of the fifth annual Brokers on Aggregators survey, it’s time for our Superbrokers roundup.

However, is 2012 the year in which aggregators came face to face with their very own kryptonite?

Tough market conditions, increased costs and sliding broker numbers are putting pressure on many head groups, with consolidation on everyone’s minds. It seems that everyone is expecting smaller groups to be swallowed up – something we’ve already seen with the purchase of NMB by Aussie – but of course, no-one’s willing to say that they’re up for sale.

As also highlighted in Brokers on Aggregators, software is being earmarked as a key battleground over the coming years, as is simple margin preservation.

It’s not all doom and gloom, though: opportunities are out there, particularly in relation to diversified products. It seems that the superbroker of tomorrow may not be the aggregators – instead, it’ll be the mortgage broker who also offers financial planning, accountancy and other diversified services.

MPAMAGAZINE.COM.AU | 27

SPECIAL REPORT / AGGREGATORS

THE ADVANTEDGE GROUPS

FAST VITAL STATISTICS Sydney, NSW Head office location

CHOICE VITAL STATISTICS Melbourne, Vic Head office location

Senior management Steve Kane, MD David O’Toole, national sales manager) Deborah Tran, national operations, manager

Broker breakdown by state Vic 32.2% NSW 25.3% Qld 16.7% WA 13.7% SA 9.3% ACT 1.1% Tas 1% NT 0.6%

1300 brokers 19 employees 61 lenders on panel (33 residential, 20 commercial, eight specialised) PLAN VITAL STATISTICS Melbourne, Vic Head office location Senior management Trevor Scott, CEO Brett Mansfield Glenn Mitchell Michelle Middlemo 1,350 brokers 29 employees ‘Extensive’ lenders on panel MFAA, FBAA Industry association membership

Senior management Stephen Moore (CEO), Garry Dowd (National BDM), Dennis D’Angelo (national sales and commercial manager), Sean Reid, Jeanette Rowland, Scott Anderson, Brett Foster, Paul McMellon 1,330 brokers 23 employees 62 lenders on panel (36 residential, 21 commercial, five specialised) Member of all industry bodies

Q&A, STEVE KANE What’s the biggest challenge that aggregators have faced over the last 12 months?

Aggregators have for some time been facing into deterioration in the economics of their respective businesses. Significantly slowing lending growth, decreasing commissions and higher operating costs have materially impacted financial outcomes for aggregators.

This pressure on business financial performance will continue for the foreseeable future.

What’s the biggest challenge that aggregators will face over the next 12 months?

Over the coming 12 months and beyond, aggregators will need to continually enhance their service and product offering as competition for broker recruitment intensifies. Those aggregators who have access to alternative income streams, particularly through white labelling, will be in a better position to survive in a depressed credit market.

What’s the biggest opportunity for the next year for the broking industry in general?

The overall position for mortgage broking in the mortgage market is a positive one, with brokers’ share set to increase as more customers recognise the value and services a mortgage broker provides. Mortgage customers are ever more in need of the services of a broker as competition between lenders has driven more uncertainty when seeking a new mortgage or refinancing existing debt.

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Diversification: how important is it, and what is the secret to making it a success?

With the reduced revenue from commissions and increasing operating costs diversification will be critical for many brokers.

Aggregators are going to play a significant role in developing alternate revenue streams such as white labelling, and sale of risk based products and other lending products such as small business lending and equipment finance.

While not all brokers may need to adopt wide diversification in their business many who have embedded customer relationship management into their model will find increased focus in this area a natural growth opportunity.

Software – how important are effective systems, and how do you see aggregator systems developing?

At the core of any business are the systems that support it.

All aggregators will need to have a compelling software offering not only for today but inclusive of future market developments. In particular, customer database management will increase in importance to the broker proposition.

The current market environment – will we see M&A activity in the aggregator space in the next year? If so, who/what?

As pressure on aggregator economics continues there will be further consolidation in the industry.

Scale is going to be an ever increasing driver for growth and productivity. Having said that, it is important to recognise that any merger or acquisition needs to deliver more than cost efficiencies will need to carefully look at business culture, market positioning and overall strategy.

What are your key strategic goals and plans for this year?

Our focus over the next 12 months will be to deliver superior service to our broker partners through growth in our home brand products, and the introduction of opportunities in the commercial and equipment finance market and also to provide ongoing support through the use of best practise into our broker partners’ businesses.

(Steve Kane is acting general manager of Advantedge Broker Platforms)

MPAMAGAZINE.COM.AU | 27

SPECIAL REPORT / AGGREGATORS

AFG

VITAL STATISTICS Perth, WA Head office location Broker breakdown by state NSW 24.5% Qld 23.7% Vic 21.5% WA 19.3% SA 8.6% ACT 1% Tas 0.7% NT 0.7% Senior management Brett McKeon, Managing Director Malcolm Watkins, Executive Director Kevin Matthews, Executive Director Bradley McGougan, Nonexecutive Director

Lisa Bevan, Company Secretary David Bailey, CFO Mark Hewitt, General Manager - Sales & Operations Paul O’Donnell, General Manager - AFG Home Loans Lee Durston, Head of IT 1,822 brokers $69.6bn Residential loan book $3.4bn Commercial loan book $17.7bn Annual residential settlements $1.3bn Annual commercial settlements 171 employees 37 lenders on panel MFAA, FBAA Industry association membership

What’s the biggest challenge that aggregators have faced over the last 12 months?

Like the rest of the industry, the main challenge we have had to deal with is the lack of consumer confidence. Our members and staff have done a very good job staying positive in this environment and have been able to grow market share as a result.

What’s the biggest challenge that aggregators will face over the next 12 months?

The continued level of investment in IT required to assist their members adapt to changing consumer behaviour patterns.

What are your thoughts on licensing – has it ‘settled down’?

Yes, although we are now starting to see a wave of brokers who elected to operate under their own licence come in under us as credit reps.

Professional development – is there a greater appetite from brokers for education?

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Q&A, MARK HEWITT Yes, if for no other reason than the requirement of ASIC and MFAA to undertake training. Of course there will always be the high achievers who do far more than what is required.

Diversification: how important is it, and what is the secret to making it a success?

Very important in a tight market where there is vigorous competition. The key is building systems and choosing partners who make it easy to integrate other products into the mortgage process. Upstream diversification, with the introduction of home brand mortgages is also an area that is receiving greater market acceptance.

The current market environment – will we see M&A activity in the aggregator space in the next year? If so, who/what?

The requirement to continually invest in systems is now making it very difficult for those outside the top half dozen. So we would expect to see more M&A activity in the next year.

Software – how important are effective systems, and how do you see aggregator systems developing?

Critically important. As consumers increasingly migrate to mobile computing, aggregators must provide brokers with tools to harness the opportunities created.

What are your key strategic goals and plans for this year?

Continue to capture market share.

Continue to innovate our technological support to members.

Continue to promote competition, which is vital for a healthy market.

SPECIAL REPORT / AGGREGATORS

CONNECTIVE

VITAL STATISTICS Melbourne, Vic: Head offi ce Broker breakdown by sta te (%): ACT 1% NSW 41% Qld 14% SA 8% Tas 0.7% Vic 25% WA 10% NT 0.2% Senior management Mark Haron, Director Murray Lees, Director Glenn Lees, Director Ron Smith, General Man ager Michael Goerner, Head of

Sales & Business Development 1,405 brokers $26.6bn Residential loa n book $1.4bn Commercial loan book $11.4bn Annual residenti al settlements $600m Annual commercia l settlements 47 employees: 50+ lenders on panel: MFAA Industry associati on membership:

Q&A, MURRAY LEES What are the biggest challenges that aggregators will face over the next 12 months?

Value for money and continuing to add value to our brokers’ businesses. It comes back to brokers wanting to be independent – you’ve got to help them to be independent by giving them the tools to run the business the way they want to .

Consolidation: as markets mature, you end up with two to five major players. There’s always room for someone prepared to do something different. The issue here is that if you’re not a certain size you don’t get traction with lenders. That kind of makes it very hard for someone to be totally boutique. But there always will be room for someone doing things differently.

What are your thoughts on licensing – has it ‘settled down’?

Yes, the broker has now made the decision about whether or not they will remain in the industry, and if so, how they will operate their business to remain compliant. That being said, ongoing compliance is a constant rigorous process that needs to be implemented and enforced.

Diversification – how important is it, and what is the secret to making it a success?

It is important, so long as you have your core business right first. It is absolutely built on referrals and creating a 32 | MPAMAGAZINE.COM.AU

‘customer for life’ approach. It will be successful if you work it into your sales process early, and do it religiously every time.

The current market environment – will we see M&A activity in the aggregator space in the next year? If so, who/what?

Yes, but not us! We are already seeing consolidation, when NMB was recently purchased and last year the establishment of Vow from three smaller groups. We are confident those groups with the correct value offer and those that can demonstrate value for money will succeed in this climate and retain their independence.

Software – how important are systems, and how do you see aggregator systems developing?

We believe that quality software is at the core of business success. We talk about providing brokers with the ability to have complete control and visibility over each and every aspect of their broking business. In the future, as more business is done online, software will only continue to increase in importance in its role within a business.

What are your key strategic goals and plans for this year?

Organic growth in terms of broker numbers – we’ve started this year very well, talking to lots of brokers; we’re also looking to increase the percentage of our brokers using our auxiliary products.

SPECIAL REPORT / AGGREGATORS

What’s the biggest challenge that aggregators will face over the last 12 months?

We will need to assist brokers to consolidate and partner as the escalating cost of compliance will force brokers to share back-office costs. If you look back at the financial services industry you can draw a lot of comparisons to what is now happening in the mortgage broking industry. Financial planners started to share offices, form partnerships and built bigger businesses.

Q&A, TIM BROWN

What’s the biggest opportunity for the next year for the broking industry in general?

Diversifying income streams. You need to look at all your clients’ needs, not just the mortgage. The great thing about a new purchase is it generates a complete financial review of the customer’s insurance needs and there is no better time to involve a financial planner, general insurer and conveyancing to assist with this review.

What are your thoughts on licensing – has it ‘settled down’?

Most brokers are now meeting all of the requirements of the new legislation. I believe this will be an ongoing education process with constant refreshers and new regulation.

Diversification: how important is it, and what is the secret to making it a success?

This is one area where mortgage brokers can improve the value of their business and increase the retention of their clients. The key to success is building the cross-sell into their sales process and needs analysis. NCCP actually encourages the broker to know more about the client’s needs, and there is no better time to identify other opportunities than when sitting down with the client gathering all of their personal information.

The current market environment – will we see M&A activity in the aggregator space in the next year? If so, who/what?

I believe there will be consolidation at a number of levels within the industry.

From brokers partnering with brokers, financial planners and even accountants. Sub-aggregators moving aggregators. I also believe there will be new aggregators forming and they will come from the financial planning and accountancy industries.

Software – how important are effective systems, and how do you see aggregator systems developing?

Systems are becoming increasingly more important, especially with compliance and cross sell. Good software will make compliance part of the application process. A good system will also reduce admin and make the broker more efficient.

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ANCIAL VOW FIN STICS VITAL STATI Sydney, NSW Head office

Broker breakdown by state (%) NSW/ACT – 60% Qld – 5% Vic/Tas – 20% WA/NT/SA – 15% Senior management Tim Brown, CEO Matthew Walton, CFO Justin Dale, Vow Wealth

Management Matt Mitchener, Marketing Manager 600 brokers 28 employees 36 lenders on panel MFAA Industry association membership

SPECIAL REPORT / AGGREGATORS

MARKET LOAN STICS VITAL STATI Sydney NSW head office

Q&A, SAM WHITE What’s the biggest challenge that aggregators have faced over the last 12 months?

Retail broker groups have faced different challenges to aggregators. Wholesale aggregators have faced challenges such as managing regulation across multiple systems and businesses and margin compression. Retail broker groups, on the other hand, have dealt with those challenges and in addition have focused on delivering a strong, more multi-layered proposition to their broker network. This includes a specific and thorough focus on lead generation and client acquisition strategies for both broker businesses and individual brokers as well as further developing online presence for their brokers.

What’s the biggest challenge that aggregators will face over the next 12 months?

Each business needs to be very clear on what they stand for and their broker proposition. The challenge for each business will be executing on this proposition within the scope of services they can provide. Wholesale aggregators face the challenge of finding ways to compete, other than price.

Diversification: how important is it, and what is the secret to making it a success?

It’s obviously important and the key is to keep the process as simple as possible. In my experience, the simpler the process the stronger the results will be.

With diversification, the broker needs to have confidence with their business partners and in the fundamental strength of the relationship with the client.

The current market environment – will we see M&A activity in the aggregator space in the next year? If so, who/what?

Absolutely. The only guarantee is that Loan Market won’t be getting bought, and in my view everything else

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Broker breakdown by state (%) NSW /ACT 30% WA 7% Qld 21% Vic 35% SA/NT 7% Senior management Sam White, Executive Chairman Mark De Martino, National Director of Sales Stephen Scahill, General

Manager of Operations Nicole Glen, Financial Controller 470 brokers $18.3bn Residential loan

book $457m Commercial loan book $6.05bn Annual residential settlements $250m Annual commercial settlements 54 employees 28 lenders on panel MFAA Industry association membership

is on the table. Having been through a successful merger several years ago, the key is that businesses are getting together for the right reasons and with the right cultural fit. If those drivers are not there then it will cause long term issues.

Software – how important are effective systems, and how do you see aggregator systems developing?

Software is a tremendously important tool to enable brokers to segment their business. The right software systems should be tailored to a broker’s strengths. We’ve spent a great deal of time building businesses that have specific systems for a variety of requirements such as prospecting and loan writing.

What are your key strategic goals and plans for this year?

Loan Market has three key goals this year.

Building our brand. We want the quality service our brokers provide to consumers to be synonymous with Loan Market. In other words, we are aiming to make Loan Market a household name.

Leads. We have set an aggressive goal to double our lead numbers this year.

Recruitment. We will continue to offer a strong proposition to established brokers in the industry and develop loan writers and assistants for existing brokers. This year we also aim to recruit 100 new trainees to our team.

SPECIAL REPORT / AGGREGATORS

T LOANKI STICS

VITAL STATI Sydney NSW head office Broker breakdown by state (%) Qld 8%, Vic 20%, WA 1%, ACT 1% NSW 70% Senior management Simon Dehne, CEO Trish Taylor, BDM for NSW/ ACT/Qld Peter Colnan, BDM for NSW/ Qld Kim de Bonde, BDM for VIC/ SA Barry Harrison, BDM for WA Teresa Samuels, Operations

269 brokers $1.2bn combined residential and commercial loan book 8 employees (plus access to staff within Mortgage Choice) 31 residential lenders on panel 10 commercial lenders on panel MFAA COSL Industry association membership

Support

What’s the biggest opportunity for the next year for the broking industry in general?

Further consolidation in aggregator space is still on the horizon, so fully understanding the value proposition will be critical going forward. Adopting a more holistic approach to customer needs and ensuring you meet and deliver on as many of their needs as possible.

What are your thoughts on licensing – has it ‘settled down’?

Concerns over navigating through the new licensing regime and adjusting to the changes have certainly settled down. However, fully interpreting how NCCP is applied to every individual scenario is still a cause for confusion among brokers. For this reason, the importance of ongoing development from a compliance perspective is essential.

Professional development – is there a greater appetite from brokers for education?

Ongoing education is essential to development and growth. In any industry that is constantly evolving, knowledge empowers brokers to grow and succeed in

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Q&A, SIMON DEHNE their business. For our industry to develop further there is a requirement for all of us to be working towards improving our service proposition for customers and business partners.

Diversification: how important is it, and what is the secret to making it a success?

A carefully planned diversification strategy offers customers complementary services while providing brokers with additional income streams in a subdued housing finance market. Diversification solutions need to be carefully aligned to the business and integrated early on in the sales process. A broker should always be looking at how they can identify and meet their customers’ needs.

Software – how important are effective systems, and how do you see aggregator systems developing?

Mortgage systems provided by aggregators are a key component of their proposition. For us, it is about making it simple, accessible and efficient. I don’t think you can move forward until the system meets these requirements.

Our goal is to keep improving our solution, based on the direct feedback from our brokers.

What are your key strategic goals and plans for this year?

Our goal is to grow LoanKit’s market share, but at the same time to always ensure we continue to maintain our strong service offering and improve on our award winning software platform, all with the support of Mortgage Choice.

We also aim to ensure the LoanKit team continued to focus on supporting our customers and business partners.

We have been consistently doing this well, which is why our network of brokers has been growing and strengthening in recent times.

SPECIAL REPORT / AGGREGATORS

LIST FINANCE SPECIA STICS VITAL STATI Perth, WA Head office location

Q&A, WILLIAM LOCKETT What’s the biggest challenge that aggregators have faced over the last 12 months?

As a boutique aggregator, there has been pressure to improve software systems and to provide an easy avenue for brokers to enjoy the luxury of pre-populating the myriad NCCP forms associated with loan submissions – something which will be achieved in weeks.

What’s the biggest opportunity for the next year for the broking industry in general?

With the constant talk of the takeovers and merger of the smaller aggregators we see this as an opportunity for new members to be associated with an aggregator that has that personal touch and the knowledge of its members’ business and their needs. We are already seeing brokers leave larger aggregators due to varying stress from software systems to being ‘just a number’.

Professional development – is there a greater appetite from brokers for education?

Certainly there is a bigger appetite for continual professional development from brokers with regard to industry knowledge, banks, their products, systems and processes. However, this is not related to higher education such as diplomas or university degrees.

Diversification: how important is it, and what is the secret to making it a success?

It is not the be all and end all for all brokers. Being good at their core business, i.e. understanding the industry from the mortgage perspective, is important to brokers. It is also important to build relationships with referral partners you can trust and will look after your clients for their diverse needs.

The current market environment – will we see M&A activity in the aggregator space in the next year? If so, who/what?

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Broker breakdown by state (%) WA 49%, Vic 16%, NSW 19%, Qld 2%, ACT 1%, Tas 1%, OTHERS/INTERNATIONAL 12% Senior management team William Lockett, Managing Director Richard Bland, East Coast Regional Manager

Paul Hansberry, National Compliance & Software Manager Steve Ayris, BDM 232 brokers $7.3bn residential loan book $130m commercial loan book $2bn annual residential settlements $75m annual commercial settlements 12 employees 25 lenders on panel MFAA, FBAA Industry association membership

We will continue to see rationalisation within our industry, which will incorporate mergers and acquisitions. There is still an important role for boutique aggregators to play in our industry as they are able to offer generally a higher degree of service and flexibility with their business models than that of larger groups.

Software – how important are systems, and how do you see aggregator systems developing?

Effective and user-friendly software systems are extremely important for both the aggregator and its members.

You will naturally have those members who have generally been in the industry for some time that are still more ‘manual’ based; however, with the growing level of customer contact and compliance requirements the need to automate is more important now than it has ever been.

What are your key strategic goals and plans for this year?

To continue to offer our members the best aggregation package possible, which will primarily consist of greater flexibility in agreements being offered to suit their personal requirements.

To continue to grow in a controlled fashion in both the national market and to further expand our overseas operation.

To roll out our new updated software platform, which will provide our members with what we believe is the best state-of-the-art software platform available today but also giving our members the opportunity to use their own preferred software if they wish.

What’s the biggest challenge that aggregators faced over the last 12 months?

The number of mortgage brokers that will continue to leave the industry as their second year compliance costs become due in July. We have already seen a number of mortgage brokers either selling or consolidating their businesses/loan books as the cost of remaining compliant is becoming too expensive for the traditional smaller brokers.

Q&A, ANDREW CLOUSTON

What is the biggest opportunity for the next year for the broking industry in general?

Diversification of products and the ability of the aggregators to be able to deliver these products in an easy-to-use format, i.e. property referrals and SMSF. SMSF is certainly an area that has the biggest potential. However, the majority of mortgage brokers in the market are not comfortable with their understanding.

What are your thoughts on licensing – has it ‘settled down’?

The implementation of licensing has settled down. However, I still believe that there are a number of brokers that are now realising the true cost of maintaining their licences and they are now reconsidering their position for 2012 onwards as the second round of annual fees fall due.

The current market environment – will we see M&A activity in the aggregator space in the next year? If so, who/what?

OLIO FIRSTF STICS VITAL STATI Sydney, NSW Head office location

Broker breakdown by state (%) NSW: 47% ACT: 6% SA: 5% WA: 2% Qld: 16% Vic: 24% Senior management Andrew Clouston, Executive General Manager 207 active brokers $6.8bn Residential loan book $520,000 Commercial loan book $1.4bn Annual residential settlements $110m Annual commercial settlements 140 employees 34 lenders on panel MFAA COSL Industry association membership

Yes. M&A will continue to happen. Maybe not on such a large scale as in previous years but I believe you will start to see smaller aggregators looking at their options as margins continue to tighten, which ultimately impacts on the back book profitability that most of the mid to smaller aggregators operate their businesses on.

Software – how important are effective systems, and how do you see aggregator systems developing?

Our research shows that brokers rate technology and broker software support the number one driving issue when brokers are deciding on choosing an aggregation business. So ultimately for aggregation businesses to grow their broking numbers and acquisitions having a platform is most important.

What are your key strategic goals and plans for this year?

We are concentrating our efforts on retention and margin maintenance for 2012. We are also continually improving our broker software systems to ensure we deliver one of the most sophisticated platforms in the industry.

BUT THAT’S NOT ALL...

To find out what more of Australia’s aggregators had to say about the state of the market – and whether boutique aggregators can survive – visit mpamagazine.com.au now!

MPAMAGAZINE.COM.AU | 27

SPECIAL REPORT / AGGREGATORS

AUSTRALIAN LOAN COMPAN Y

VITAL STATISTICS Sydney, NSW: Head office

Broker breakdown by sta te (%): ACT 0.81% NSW 29.84% Qld 40.32% SA 8.87% Tas 1.61% Vic 16.13% WA 2.42% Senior management Lesley Wood, General Manager Chris Nott, National Training & Technical Manager /BDM NSW, ACT William Pham, Operation s Manager

145 brokers $4.8bn Residential loa n book $500m Commercial loan book $850m Annual residenti al settlements $50m Annual commercial settlements 10 employees 50+ lenders on panel MFAA Industry associati on membership

Q&A, LESLEY WOOD What’s the biggest challenge that aggregators have faced over the last 12 months?

Recruiting brokers. Brokers are unwilling to move due to uncertainty with compliance. Also, ensuring that the existing broker base has enough business in the current market, looking for other revenue sources other than the traditional aggregator splits.

What are your thoughts on licensing – has it ‘settled down’?

No. I think ASIC will start reviewing licence holders and their business practices in regards to complying with legislation.

Diversification how important is it, and what is the secret to making it a success?

Very important as it provides brokers with multiple ways

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of earning income and attracting new clients. Clients like having a one stop shop for all their financial needs, particularly if their financial needs are complex as the person handling them has the background information to go with the loan application.

The current market environment- will we see M&A activity in the aggregator space in the next year? If so, who/what?

The aggregator space will continue to shrink due to declining broker numbers and added costs from compliance

What are your key strategic goals and plans for this year?

We plan to grow our broker base and set up more referral partnerships to grow our broker’s businesses.

T FINANCE BALLAS STICS VITAL STATI Perth, WA Head office

Broker breakdown by state WA 31% SA 1% NSW 25% VIC 27% QLD 16% Senior management Frank Paratore Wayne Blazejczyk Kaylene Bishop

124 brokers $5bn combined Residential and Commercial loan book 24 employees 35 lenders on panel MFAA Industry association membership

Q&A, FRANK PARATORE

What’s the biggest challenge that aggregators have faced over the last 12 months?

Whether it’s the last 12 months or the next 12 months, it’s the same: industry consolidation is a major challenge.

Another problem is lack of broker entrants, as well as new aggregator players. Our claim to fame is being boutique in the market, and we’d like to see more players coming in, just as brokers would like to see more lenders.

What’s the biggest opportunity for the next year for the broking industry in general?

Probably SMSF - lending towards those is a huge opportunity. The refinance market is still an opportunity.

Many brokers also still need to get their heads around diversification.

The current market environment- will we see M&A activity in the aggregator space in the next

year? If so, who/what?

Is there anyone else left to buy? We’ve made no secret that we’re looking to acquire, not be acquired, but it’s got to fit, it’s got to be for the right reason.

The last thing we want is no independent players.

Software – how important are effective systems, and how do you see aggregator systems developing?

We see software as a huge part of our offering. It’s a huge consideration, but it’s not a core component. We focus on what we’re good on, full financial services and partner with specialists in IT.

What are your key strategic goals and plans for this year?

Continued growth, continued diversification and a greater support platform for all our partners.

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HEAD TO HEAD / KATHY CUMMINGS

RESPONSIBLE

LENDING Kathy Cummings is not only one of the mortgage industry’s most recognisable faces, she’s also one of its most influential figures. She discusses the state of the industry with Kevin Eddy MPA: You’re one of the most recognisable stalwarts of the mortgage industry – what keeps you motivated after all this time?

KC: The industry’s always evolving and changing, and it’s fast-paced. When things are changing in financial services, they’re going to change in broking first. I like the challenge of working through the strategies to stay in front of that.

The other thing I like is dealing with passionate people, and the mortgage broking industry is full of very passionate, results-oriented salespeople!

MPA: What would you say is your biggest achievement over the last year?

KC: I was really pleased to see that Commonwealth Bank picked up pretty much every major award in the industry, at a time when it was pretty tough. We managed to get a clean sweep.

We have very much taken a responsible approach to the market. Funding is a scarce asset and we’re not going to ‘give it away’. Where you have seen some of what I would call “irrational behaviour” by some of the other players, we’re not going to play that game.

Obviously, you wear the results of that sort of situation, but we take a responsible approach in the market, we want to see a sustainable industry, and we have our eye very much on the fact that we have a

42 | MPAMAGAZINE.COM.AU

responsibility not just to mortgage holders, but also to our shareholders, to our staff and to our deposit holders as well.

In a tough time, Commonwealth Bank came through with some good initiatives – we’ve been very innovative around things like Investorville, the property search app, and we recently launched Ka-Ching. We’ve done the major first two parts of replacing our liability platforms: you’ve got realtime banking now, so you can see exactly what’s happening with your accounts. That’s a big win, and has put us a couple of years ahead of everybody else.

MPA: Any disappointments from the last year?

KC: I think the thing that’s disappointed me is that I don’t think the broader broking market understands the long-term impact of trimming books or re-pricing the back book. If you cut your margin that fine you have to look at the whole economics [of the business model] again.

We’ve been focusing on efficiency and we’ve got some good things in place. One of the things we’re most proud of is that for most brokers, and particularly our Diamond brokers, if you put an application in you’ll have the approval out the same day, and most likely the docs as well. Some brokers can print their own docs. We’ve done so much to strengthen that

Out of office I have a pretty busy life – I have two lovely daughters and a grandson now. Other than that, I love to get away: I have a unit on the north coast at Salt, I love just getting up there and walking along the beach.

BROKERNEWS.COM.AU | 43

HEAD TO HEAD / KATHY CUMMINGS

platform, so that brokers are in control of their destiny as far as possible.

MPA: It’s in everyone’s interests to improve efficiency and quality: what can we do to improve things, on both sides?

KC: It’s about getting it right first time. It’s about putting in a complete application. I think every lender will tell you the same thing: it doesn’t happen, more times than not. We’re trying to get straight-through processing levels up, it’s one of the things we’ll be talking about extensively.

We’re trying to move from about 35% of applications going straight through without having to be touched again to 50%. That level of efficiency will be a major win if the industry as a whole can achieve that: that’s why I’ve been talking about the industry agreeing on a standard around a ‘certified practising certificate’ – so that we’re all confident that brokers know how to put a loan together, how to structure a loan, the product they’re selling. That’s got more value to the industry than things that people are getting caught up in.

MPA: You’re referring to the debate over brokers having to be qualified to diploma level here. You’ve brought up the idea of a practising certificate before.

How do you envisage this working – what’s the blueprint for it? How does it differ from existing lender accreditation?

KC: Currently, there’s no consistency around lender standards. We’ve always led the way in being pioneers, putting quality metrics in and holding brokers accountable through commissions. But what we do is not necessarily what Westpac or ANZ has in place.

If we could get everyone to agree that for a broker to hold accreditation in this industry, they must reach a quality metric, a straight-through processing metric with the major banks of greater than 50%, or a conversion rate of greater than 80%, that gives you a benchmark, and you know that they understand how to put a loan together, they’re not giving customers incorrect advice.

My question for the MFAA around the diploma has been: “Tell me what you’re putting in place as your success measure for this; tell me what difference it’s going to make to the level of customer complaint”. Are we going to see a drop in the level of customer complaints going through to the ombudsman?

It’s about brokers being at a standard, and maintaining that standard. Right now, they have to get a Cert IV. Now we’re saying they’ve got to have a

44 | MPAMAGAZINE.COM.AU

Kathy on…

Diversification We think it makes sense for the brokers to diversify, but it depends where their skill set is. I’ve seen brokers diversify and their profit go down, because they get too caught up in trying to do too many things. It’s like [commercial lending for] some brokers: unless you’re really good at it, it’s better to hand it off as a referral because you can spend a lot of time for little reward.

Fee for service Our position is that we won’t fund it, as we don’t want to get into the middle of the broker or the customer, but I have no concerns whatsoever. Some brokers do a lot of work for customers, some don’t. If you’re providing that total service, fee-for-service is a legitimate position.

diploma. I’m pro-education and always have been pro-education, but what value is that adding? What would help the industry in terms of quality and efficiency is getting a uniform agreed metric amongst the lenders – whether that’s the four majors, and four regionals.

MPA: Is this something the other lenders are agreeable with?

KC: There’s been some discussion in the National Lenders’ Committee around this concept, and it’s not for me to speak about what they’re doing, or the other banks, but I think you would find there’s a general frustration with the lack of consistency in applications.

MPA: And in your mind would this be administered by the MFAA? KC: That would be one way to do it, if you’re looking to have an accreditation process. That would be one way to do it.

MPA: And if people were to fall below the level required, what then? Further education?

KC: Yes, then there has to be education done to get them up to standard. We currently supply all the head groups with quality metrics every month, we can go right down to individual errors.

“My question for MFAA: What are you putting up as your success measure? What difference is it going to make to the level of customer complaint?” of recognition and reward that goes with it [is normal].

It doesn’t matter if you’re a Qantas frequent flyer or Coles Flybuys, everyone has these rewards. For us, it’s not a volume based thing per se. There are six metrics in how we take our approach, you have to maintain five of the six to maintain Diamond status.

MPA: From your feedback from brokers – Diamond and mass market – are they in favour of it?

KC: Absolutely. They strive to get into it. We’ve got 500 in Diamond now, but it’s a genuine service differential and a genuine recognition program. It’s recognised by the senior executive team, my peers, when I talk about my Diamond brokers. It’s not just a token thing.

MPA: Let’s move onto segmentation, that’s certainly an issue that’s reemerged over the last few months.

You’re clearly on the ‘pro’ side...

KC: We’ve found that a segmented approach has

MPA: I’d like to come back to something you mentioned earlier which referred to some of your competitors doing ‘irrational’ things, in contrast to CBA growing responsibly. Could you elaborate on that point?

KC: My view – and it’s not up to me to comment on

worked for us. If you’re living in the 21st century, customer segmentation and the appropriate alignment

competitor pricing strategies – is that we would see some of the action, particularly in the period straight

BROKERNEWS.COM.AU | 45

HEAD TO HEAD / KATHY CUMMINGS

after Christmas and early this year, as somewhat irrational, understanding what the costs of wholesale funds are.

MPA: Do you see that wholesale funding issue easing off any time soon?

KC: We think it’ll be around for a couple of years.

There are some positive indications coming out of the European situation, but it’s still a daily issue. Funding is costing more than it did in the height of the GFC, and the general public, the media and the politicians have been slow to appreciate that.

It’s good to see some of the media, and some of the more popular media, starting to get their head around it and starting to talk more responsibly about it.

MPA: What are CBA’s plans for the next 12 months? If we were to sit down in a year’s time, what would you like to say are your biggest achievements?

KC: We’d want to be saying that we have led the industry in efficiency, that we’ve got that straightthrough processing up, and that we’ve got the industry on board with that.

We’d want to say that we’ve made a difference to several of the larger broking houses around process excellence and helped some of the

Women in mortgages One aspect of the mortgage industry that Cummings is particuarly vocal about is the need to improve gender diversity, particularly at senior levels. MPA asked what progress had been made.

“I think there’s still a gap there,” says Kathy. “[Most senior-level women] are in the lenders. There are none coming through the mortgage broking ranks, and that’s the issue.”

Cummings adds that broking houses, and head groups in particular, need to broaden the diversity of their senior management ranks.

“They need to deliberately go out and seek female executive talent, as without that they’re not going to make balanced decisions, in my view. You get a much richer outcome with a diversified team making those decisions.”

She also suggests that female brokers could consider stepping back from their individual businesses for more ‘corporate’ roles.

“You’ve got some fabulous female brokers out there who are very very successful. I often say to them – and I encourage people to get involved in the industry boards – you can’t complain about things unless you’re willing to step up and make a difference. I’d like to see some real talent brought through in the management ranks and leadership ranks of the broking houses. That would be great.”

46 | MPAMAGAZINE.COM.AU

“Funding is costing more than it did in the height of the GFC, and the general public, the media and the politicians have been slow to appreciate that” individual brokers achieve their business goals.

We would like to think that we’ve been able to make a significant impact on customer share of wallet and just growing that depth of relationship with broking clients, helping them to get that stability and depth with their clients. We’d also like to think that we’ve been able to demonstrate appropriate leadership around sustainability in the industry, and that we remain competitive but responsible in the way we price, but we lead the industry on service.

We see it as ‘steady as she goes’; this time next year we should be ready to launch our lending platform. So that would be what I hope to say is a major achievement, I’m hopeful that will mean we’ll be launching our transactional offset account, which everybody has been waiting for.

MPA: Is there anything else you’d like to add or elaborate on?

KC: We’re supportive of the industry and the need to be professional, but believe this has to have substance. Not just talking about it, but demonstrating it. The broking industry is well cemented-in: it’s a large and important segment.

It needs to demonstrate the responsibility of that.

With that sort of recognition does come responsibility.

It’s about having character, demonstrating that day in day out.

I suppose the last thing I’d like to say is that I’m very proud of the team around me. A lot of the success that we’ve had is because the people we have in the Commonwealth Bank third-party team have been here for a long time, and they’ve got deep knowledge.

There’s a lot of respect for them because of that, and I think that’s part of the success. It’s not about any one person, it’s about the team at large, and that goes right down the line from my direct reports and state managers to the relationship managers in the fields and the staff in the processing shops.

MPAMAGAZINE.COM.AU | 47

FEATURE / LOW DOCS

LOW DOC LOANS:

FACE THE

FEAR!

The low doc market may still be seen as the naughty child of the mortgage industry, but there are still opportunities out there. MPA investigates if it’s a risk worth taking – and brings you a definitive product guide

L

ow doc loans are, by any stretch of the imagination, a tricky proposition.

Still unfavoured by lenders as a risky option, the time needed to write a loan has blown out significantly – with few guarantees that a loan will be approved by lenders or mortgage insurers.

But are there still opportunities in the market for the savvy broker?

THE MARKET TODAY It’s clear from even the most cursory market examination that the low doc market is fairly subdued, and has been for several years. Smartline broker Kevin Lee reckons volumes have halved, at best, since 2006-07.

48 | MPAMAGAZINE.COM.AU

“Low doc is part of my business, but not a key part anymore,” he says. “Back then it was about 20% of the business: now it’s between 5-10%. I’d say that level is the ‘new normal’.”

Loan Market’s Paul Smith agrees, citing that low docs account for around 5–10% of enquiries across the group.

A more conservative attitude to risk following the GFC, coupled with the advent of NCCP, has seen credit policies become tighter, particularly amongst the major lenders. Lee reckons a borrower now needs to be ‘squeaky clean’ – but that’s not necessarily a bad thing.

“Low doc has changed dramatically since GFC,” he comments. “It requires a lot more effort from everyone, including the borrower, and more paperwork to support the low doc loan.”

Indeed, the low doc loan in 2012 is a very different beast to the so-called ‘liar loans’ of 2006 and 2007. John Mohnacheff, Liberty Financial’s national sales manager, thinks the term ‘low doc’ is too loaded.

“If we go back to the pre-GFC days, low doc by definition almost became no-doc,” says Mohnacheff. “It never should have been that easy – it’s about alternate verification. Perhaps we should break away from the term low doc completely, and call it ‘alternative verification’. That might dispel some of the myths, perhaps.”

Better Mortgage Management’s Murray Cowan agrees the market has essentially come back to its roots.

“Low doc has returned to being available to those that it’s suitable for – self-employed people who are, for one reason or another, unable to get a full doc. Lenders that are doing low doc do need something that can be relied upon to prove serviceability.”

It’s that requirement to provide evidence for serviceability – largely fuelled by the NCCP responsible lending requirements – which has seen the most marked change to the low doc environment. Some lenders, such as Resimac, are able to offer documentation options approaching those seen prior to the GFC, but the majority of lenders now require two years’ ABN and hard evidence of income. However, given the self-employed nature of the product’s core demographic, gathering that evidence can be more difficult than it appears.

There are a range of different types of evidence that can be provided: business activity statements, tax returns, bank statements and accountants’ declarations can all be suitable, depending on context.

Business activity statements are the gold standard, especially where mortgage insurers – who typically get involved when low doc loans go above 60% LVR – are concerned.

“Within our requirements, key components are quality of asset: that’s a valuation, that’s going to be consistent regardless of product,” says Genworth Financial’s chief risk officer Paul Caputo. “The second point is fundamentally around the BAS statement and that the income they’re declaring is reasonable. Brokers will get comfort around income from a range of sources, bank statements etc, know the client and see cashflow, but that statement is a nice simple way of doing that.”

Caputo adds the BAS statement “gives you a good level of detail around the operating entity”. He recommends 12 months’ worth of BAS statements, to give assurance over how a business is trending in more recent times.

He also says that you shouldn’t rely solely on accountants’ letters.

RATE PREMIUMS ABOVE FULL DOC

0-0.5% Prime low doc lending

Up to 2% near-prime low doc lending (depending on client) Source: Better Mortgage Management

BROKERNEWS.COM.AU | 49

FEATURE / LOW DOCS

2

the number of years a selfemployed borrower must have held an ABN in order to be eligible for a loan

“It’s interesting that certain accounting bodies have indicated to their members that they shouldn’t be providing these letters,” says Caputo. “So, I do have concern when some of the more prominent bodies have indicated to their members that they shouldn’t be doing it.”

Cowan argues accountants’ letters are OK, but that you should verify the status of the accountant with their professional body.

CREDIT IMPAIRED An area of the low doc market where non-banks managers in particular are confident of recovery is the ‘mildly credit impaired’ borrower.

“We’re seeing a lot of borrowers who are just excluded from bank finance, with a good reason why that impairment occurred or why their position has changed,” explains Michael O’Sullivan, Provident Capital’s managing director. “There’s an opportunity for brokers in that space. It gets back to whether you can provide documentary evidence as to why the impairment has occurred and how the situation has changed.”

Homeloans Ltd’s Greg Mitchell agrees. “If you do have a client who’s missed a payment or might have a default, there might be logistical reasons around why they’ve had that in the first place. There’s more in that spectrum we can look at doing. That’s increased our volumes.

Homeloans has recently introduced a Pepper-funded near-prime suite of products targeted at this market, called Accelerate. Mitchell believes non-banks will need to target niches like this in order to remain competitive “You have got to locate those niche markets you can work in. When we introduced Accelerate, there

50 | MPAMAGAZINE.COM.AU

was an increase in 25-30% of business that we would have declined before that we can now look at entertaining.”

TIME IS MONEY But, with the extra work now involved in a low doc, is it even worth the effort? O’Sullivan thinks so.

“The first thing is for brokers to realise that no-doc and low-doc aren’t the same thing,” he says. “Once you’ve overcome that, then you need to provide information that supports the sense of the transaction.

Does this make sense from the broker’s POV? Is there consistency in what the borrower is saying? Can they take reasonable steps to verify the information they’ve been given?

“If they can’t get past those steps, then nine times out of 10 they shouldn’t take that borrower on as a client.

But if they can, there’s only a few additional steps required to make it a bankable deal.”

Mohnacheff agrees that there needs to be a perception shift.

“Small business is where the low doc market started and there is a vibrant SME market and I see brokers shying away from it. It’s an opportunity for people to start talking to the self-employed and helping them generate cashflow through property to support their businesses,” he says.

“However, it’s not a ‘sausage factory’ type of product: it has to be treated as an individual basis.”

LoanMarket’s Smith agrees. “It’s really dependent on brokers willing to take the time. There are a few more hurdles, prices are bit more expensive, and that can scare away some customers from application in the first place,” he comments. “Even so, while low can be tough to write, there are customers out there.”

PRODUCT GUIDE: BIG FOUR BANKS COMPANY NAME

PRODUCT NAME

ANZ Bank ANZ Bank

ANZ Simplicity Plus Lo Doc 60 ANZ Standard Variable Rate Lo Doc 60 ANZ Standard Variable Rate Low Doc 60 with ANZ One ANZ Equity Manager Lo Doc 60 Standard Variable (Wealth Package) $250k-$500k Standard Variable (Wealth Package) $150k-$250k Viridian LOC (Wealth Package) $250k-$500k Viridian LOC (Wealth Package) $150k-$250k HomePlus Home Loan Variable $250K<$500 LVR 75-<80 Home Plus Home Loan Variable (<$250K) LVR <75% HomePlus Home Loan Variable($250K<$500K) LVR 75-80 Home Plus Home Loan Variable($250K<$500K) LVR <=75 Peak Performance Equity Mortgage ($250K+) Home Plus Home Loan Variable(<$250K) LVR >75+ =80%

ANZ Bank ANZ Bank Commonwealth Bank Commonwealth Bank Commonwealth Bank Commonwealth Bank Homeside Lending Homeside Lending Homeside Lending Homeside Lending Homeside Lending Homeside Lending

COMPARISON INITIAL MAX STARTUP ONGOING OFFSET REDRAW? MAX LEND RATE % PA INT RATE LVR% COSTS $ FEE $ AMOUNT $ % PA W/LMI 6.75 7.48

6.72 7.42

0 0

600 600

7.54

7.42

0

600

7.67

7.57

0

600

7.01

6.81

97

200

7.11

6.91

97

7.16

6.96

7.26

0 5/m

n n

y y

2.5M 2.5M

15/m

y

n

2.5M

150/y

n

y

2.5M

375/y

y

y

500K

200

375/y

y

y

250K

92

200

375/y

n

y

500K

7.06

92

200

375/y

n

y

250K

6.84

6.79

95

1062.5

0

y

y

neg

6.87

6.84

95

762.5

0

n

y

neg

6.89

6.79

95

762.5

10/m

y

y

neg

6.89

6.84

95

762.5

10/m

n

y

neg

6.89

6.79

90

762.5

140/y

n

y

neg

6.97

6.94

95

762.5

0

y

y

neg

Continued on page 52

MPAMAGAZINE.COM.AU | 51

FEATURE / LOW DOCS

Don’t get burnt by ASIC Responsible lending hasn’t got rid of low doc loans – but it has made it harder. Jon Denovan explains how to stay on the right side of the law.

As we all know very well, the law requires a finance broker to make a preliminary credit assessment by carrying out the following steps; • Assess the borrower’s requirements and objectives – fact find.

• Make reasonable enquiries into the borrower’s financial situation.

• Undertake reasonable verification of the financial information you have gathered.

• Make a preliminary credit assessment having regard to your credit policy.

Here are a few tips for dealing with non PAYG borrowers:

1. Make sure your written credit policy provides for

non-PAYG deals - see Preliminary credit assessment: example credit policy on the Quick Guide to Legal & Compliance page at mfaa.com.au.

Brokers should ensure they adhere strictly to their own responsible lending guidelines.

2. Brokers need to investigate and record the

consumer’s medium-term to long-term objectives.

It would be best if file notes and so on were readily accessible.

3. A statement by borrowers or their accountant that

the loan is affordable is worth very little. It’s the broker’s job to make a preliminary assessment whether the loan is affordable, not the borrowers or their accountant.

4. Accountants who refer customers to you can

provide financial information to assist your fact find after the referral. The referral from accountants who are not ACL holders or credit reps should initially be ‘clean’ – ie just the referral. Once borrowers ask you to proceed, you can ask the accountant for more information.

Greg Mitchell

5. Accountant’s letters are a valuable tool, and can

operate to satisfy or partially satisfy both the enquiry and verification requirements of responsible lending. Best practice is to ensure the accountant’s statement confirms the consumer’s actual level of regular income, specifies the basis on which the statement is made, includes comments on previous earnings and the underlying information supporting the statement, and identifies the period for which the accountant has been engaged by the consumer.

Kevin Lee

6. You should look at bank and loan statements for at least six months as part of your verification.

7. A copy of a taxation return is not essential. In the

absence of some verification of figures disclosed in a tax return, the return is little more than an unverified statement by the borrower. However, BAS statements do give a better idea of cash flow and business turnover, and it is fair to rely on management accounts so long as some verification is conducted (eg compare to bank statements).

Jon Denovan

8. Loans that are not regulated by the National

Credit Code (primarily loans to companies and for business purposes) are not entirely free of these rules. The courts have said pure asset lending is never appropriate, and loans to small businesses can be referred to COSL or FOS, who will expect a proper fact find, verification, and assessment to have been made.

PRODUCT GUIDE: BIG FOUR BANKS COMPANY NAME

PRODUCT NAME

Homeside Lending

HomePlus Variable Interest Rate HomePlus Variable Rate 1 ($100,000 $249,999) LOC NAB FlexiPlus Mortgage PAP Rocket Repay Lo Doc $250K $500K PAP Premium Option Lo Doc $250K $500K LOC - PAP Equity Access Lo Doc $250K - $500K PAP Rocket Repay Lo Doc $150K - $250K PAP Premium Option Lo Doc $150K $250K LOC - PAP Equity Access Lo Doc $150K - $250K LOC - PAP Equity Access Lo Doc $150K - $250K Rocket Repay Home Loan Low Doc LOC EAL Low Doc

Homeside Lending NAB Westpac Bank Westpac Bank Westpac Bank Westpac Bank Westpac Bank Westpac Bank Westpac Bank Westpac Bank Westpac Bank

Source: yourmortgage.com.au All rates correct as of 1 May. Please check with lenders directly for updated rates

52 | MPAMAGAZINE.COM.AU

COMPARISON INITIAL MAX STARTUP ONGOING OFFSET REDRAW? MAX LEND RATE % PA INT RATE LVR% COSTS $ FEE $ AMOUNT $ % PA W/LMI 7.44

7.34

90

762.5

10/m

7.44

7.34

90

762.5

10/m

7.97

7.82

90

600

250/y

7.16

6.96

80

0

395/y

7.18

6.96

80

355

y

y

Neg

y

y

250K

n

n

neg

y

y

500K

395/y

n

y

500K

7.31

7.11

80

0

395/y

n

n

500K

7.37

7.16

80

355

395/y

y

y

250K

7.37

7.16

82

355

395/y

n

y

250K

7.52

7.31

80

355

395/y

n

y

250K

7.52

7.31

80

355

395/y

n

y

250K

7.54 7.7

7.46 7.61

80 80

600 600

8/m 10/m

y n

y n

neg neg

PRODUCT GUIDE: SECOND-TIER BANKS COMPANY NAME

PRODUCT NAME

COMPARISON INITIAL RATE % PA INT RATE % PA

MAX LVR% W/LMI

STARTUP ONGOING OFFSET COSTS $ FEE $

REDRAW MAX LEND AMOUNT $

Adelaide Bank

Variable SmartDoc

7.95

7.84

80

1115

10/m

y

y

2M

Adelaide Bank

SmartDoc Plus

8.14

8.09

70

1115

0

y

y

2M

AMP

Low Doc Variable Rate $40K -$1M

8.06

7.86

80

1195

299/y

y

y

1M

AMP

Low Doc LOC $40K - $1M

8.32

8.12

80

1195

299/y

n

y

1M

Bank Of Melbourne

Bank of Melbourne Low Doc Portfolio Home Loan

7.83

7.65

80

1600

17/m

y

y

1.5M

Bank of Qld

Low Doc Standard Variable Rate Home Loan

8.83

8.71

80

1345

10/m

y

y

neg

Bank of Qld

Low Doc Line of Credit Facility

9.08

8.96

80

1345

10/m

n

y

neg

Bank SA

Low Doc Home Loan Variable Rate

7.72

7.57

80

1600

12/m

y

y

1.5M

Bank SA

Low Doc Portfolio Loan Variable Rate

7.85

7.67

80

1600

17/m

n

y

neg

St George Bank

St.George Low Doc Portfolio Home Loan

7.66

7.55

80

750

12/m

y

y

1.5M

Suncorp

Back To Basics Low Doc Loan

7.03

7

80

600

0

n

y

1.5M

Suncorp

Asset Line (Low Doc)

7.61

7.58

80

600

0

n

n

1.5M

Suncorp

Standard Variable Low Doc

7.67

7.58

80

600

10/m

y

y

1.5M

Source: yourmortgage.com.au All rates correct as of 1 May. Please check with lenders directly for updated rates

60%

low doc LVR above which mortgage insurance is generally required

80%

typical max LVR for a low doc loan with LMI

95%

Absolute maximum LVR for a low doc loan

MPAMAGAZINE.COM.AU | 53

FEATURE / LOW DOCS NON-BANKS COMPANY NAME

PRODUCT NAME

COMPARISON RATE % PA

INITIAL INT RATE % PA

Australian FM

MAX LVR% W/LMI

Complete Option (Lo Doc)

7.18

7.18

Australian FM

Platinum Option (Lo Doc 60)

7.61

7.59

Australian FM

Flexible Option (Lo Doc)

8

7.97

Better Mortgage Management

Premium Specialist Lo Doc

8.93

8.89%

80

Hemisphere

Alt Doc Loan

6.99

6.94

Hemisphere

Alt Doc PLUS Loan

8.64

8.49

Hemisphere

Alt Doc Premium

8.27

Homeloans

Homeloans Ultra Plus Lo Doc

7.39

Homeloans

Homeloans Ultra Lo Doc LOC

ONGOING FEE $

OFFSET

REDRAW

MAX LEND AMOUNT $

0

0

n

y

1M

60

495

0

n

y

1.5M

80

645

0

y

y

2M

1574

0

y

y

$1.5M

80

599

0

y

y

1m

85

949

0

y

y

1.35M

8.07

85

949

0

y

y

1.35M

7.19

80

745

330/y

n

y

1.5M

7.48

7.44

80

924

0

n

y

1.5M

Homeloans

Homeloans Ultra Plus Lo Doc LOC

7.55

7.34

80

924

330/y

n

y

1M

Homeloans

Homeloans ProSmart Lo Doc

7.98

7.94

60

800

0

n

y

1.5M

Homeloans

Homeloans ProSmart Lo Doc LOC

8.09

8.04

60

999

0

n

y

1.5M

Homeloans

Homeloans MoniPower Lo Doc

8.13

8.09

80

825

0

y

y

2M

Homeloans

Accelerate

10.07

9.84

80

999

180/y

n

y

1.5M

Iden Group

Starpack Variable

6.84

80

295

330pa

n

y

1m

Iden Group

Fair Go

7.89

80

295

0

y

y

1m

Iden Group

Iden Assist

10.1

85

1510

15/month

n

y

1.25m

La Trobe

Express Residential (Low Doc)

8.78

8.55

80

2851.9

15/m

n

y

1M

Liberty Financial

Liberty Star - Low Doc

7.76

7.59

95

0

28/m

y

y

2.5M

54 | MPAMAGAZINE.COM.AU

80

STARTUP COSTS $

COMPANY NAME

PRODUCT NAME

COMPARISON RATE % PA

INITIAL INT RATE % PA

MAX LVR% W/LMI

STARTUP COSTS $

ONGOING FEE $

OFFSET

REDRAW

MAX LEND AMOUNT $

Liberty Financial

Liberty Free - Low Doc

7.79

7.79

95

0

0

y

y

2.5M

Lifestyle HL

Lo Doc 80

7.58

7.55

80

695

0

n

y

1M

Morgan Brooks DIRECT

Premium Home Loan - Low Doc 80

6.97

6.97

80

0

0

n

y

1M

Mortgage House

Advantage Mere Doc Home Loan

7.82

7.79

80

595

0

y

y

neg

National Finance Club

NFC Alt Doc Loan

8.88

8.82

85

1224

0

n

n

1.25M

Nationwide Mortgage

Lo-Doc Loan – BPay LMI

6.85

6.79

80

0

10/m

y

y

1M

Pepper HL

Pepper Self-Employed Advantage

8.83

8.65

85

1835

15/m

n

y

2.5M

Pepper HL

Pepper Self-Employed Advantage PLUS

9.93

9.75

75

1835

15/m

n

y

1M

Provident

Provident Platinum

9.75

9.25

75

1650

0

n

n

$1.5M

State Custodians

SCMC Lo Doc Variable Home Loan

7.18

7.32

82

499

0

y

y

1M

The Rock BS

The Rock Lo Doc Line of Credit

8.35

8.29

80

600

5/m

n

y

1M

Think Tank

Think Tank Quick Doc

9.57

9.55

65

350

0

n

y

2M

Think Tank

Think Tank Lite Doc

9.62

9.6

70

350

0

n

y

2M

Source: yourmortgage.com.au. All rates correct as of 1 May. Please check with lenders directly for updated rates Lenders consider applications on individual merit; rates may vary depending on credit situation

Key evidence for low docs Tax returns • Business Activity Statements • Bank statements • Management accountants • Accountants’ statements

MPAMAGAZINE.COM.AU | 51

BUSINESS STRATEGY / MARKET SEGMENTATION

How do different life stages impact what – and how – you should offer your customers? Matt Mitchener explains ways to effectively segment your market by generation

GENERATIO

W

hen marketing mortgages to potential customers it pays to remember that one size does not fit all, particularly when it comes to different generations – Baby Boomers, Gen X and Gen Y. There are compelling reasons for mortgage brokers to adopt different marketing strategies for these three ‘generations’ to ensure what they are offering is relevant to their customers’ circumstances. Much is made of the generational gaps, sometimes to comic effect. For mortgage brokers, it’s probably better to think about marketing the right products, not so much to a generational ‘profile’ but more to a customer’s stage of life.

For instance, Gen Y are more likely to be the ones starting out on home ownership; Gen X – roughly 30–50 years of age – have often got children and are looking to upgrade their home, while Baby Boomers are either in or close to retirement and require a different suite of products to make them financially secure.

Of course, these are extremely broad generalisations, but for the sake of simplicity in targeting, it’s important to recognise some of the stereotypical features of the various generations, how they like to be communicated with and through what media.

56 | MPAMAGAZINE.COM.AU

GEN Y Starting with Gen Y – or the Millennial Generation as it is sometimes known – it’s clear this is the generation that has been shaped by the rise of instant communication technologies – email, texting and instant messaging. They use new media through websites such as YouTube and social networking through Facebook, LinkedIn and Twitter. According to demographers, expression and acceptance is highly important to this generation.

They find comfort in online communities and recommendations.

When it comes to communicating to them, they are the dot point generation – it has to be fast, quick and bold. Tweets are restricted to 140 characters, so in comparison any communication should not be longwinded. Keep it hard and fast. Use media such as emails and SMS, and don’t take up too much of their time.

Target them with alerts such as the major banks raising their loan rates or any other important information that can be sent quickly over the digital highway.

Gen Ys are typically first homebuyers, and generally look for a fixed rate loan or a discounted variable in the first year. They are concerned with their ability to repay with fixed repayments, as budgets are generally tight,

ION GAP?

BUSINESS STRATEGY / MARKET SEGMENTATION

“It pays to compile a detailed database of your clients. IT platforms can help sort clients by their date of birth, location, preference to loan type etc” especially if they are starting a family. For them, it is all about rate, affordability and certainty. Competitive three-year fixed rates tend to attract their attention and features like the ability to take a repayment holiday also appeal to this group.

From a broker’s point of view, it is also important to remember that although it may involve a lot of work to hold their hand through the initial stages to get them over the line for a fairly lean reward, if you do a good job, you can keep them for life.

Some brokers completely dismiss them as too hard and not rewarding enough, but the message is to stick with them and realise the potential rewards of taking them through the next two stages of life.

GEN X Gen X is characterised as individualistic, technologically adept, flexible and great valuers of the work/life balance. It has been said they dislike being micromanaged and embrace a hands-off management philosophy.

Like their younger brethren, they are comfortable using emails, laptops and smart phones. Like Gen Y, media such as emails and SMS are very effective for reaching this demographic.

The 30–40-year-old borrowers are looking for flexibility, such as paying in advance and having offset account and redraw.

They are at a point where they want a bigger home and maybe looking at a pool or extension or holiday home. They are starting to feel relaxed about money, so are enticed by offset accounts, redraw, credit cards linked to the mortgage, and split loans.

BABY BOOMERS Now to the Baby Boomers, many of whom are in or close to reaching the age of retirement. They are workcentric, hard working and motivated by position, perks and prestige. Many in this generation like to criticise the generations that follow in their path for their lack of a work ethic.

The Boomers are independent and self-reliant. They are not afraid of confrontation and won’t hesitate to challenge established practices. Use print to reach Baby Boomers – they are used to 10-page documents they can

58 | MPAMAGAZINE.COM.AU

Gen Y ++ Typical life stage: first homebuyer ++ Key products: fixed-rate loans or discount variable ++ Best media: e-mail, SMS

Gen X

sit down and read at their leisure and feel more comfortable with comprehensive information.

Because of their stage of life – 50–60 years of age and beyond – they are looking for products that are going to give them taxation benefits, such as interest only, or for self-managed super loans to buy investments. They are about saving for retirement and looking for safe investments – nothing too risky. They look at interest only 10-year loans and even reverse mortgages to set themselves up for their last years.

HOW TO SEGMENT It often pays to simply keep in touch. Brokers make hundreds of dollars in trails from each customer each year, and it can repay immeasurably to invest just a few dollars to remain top of mind.

It certainly pays to build a profile of your clients and compile a detailed database, regardless of age profile.

This should be a regular habit every time you talk to an existing client or recognise a potential one. There are some increasingly sophisticated IT platforms that can help sort clients by their date of birth, location, preference to loan types, likes and dislikes.

Get this right, and you can build a customer for life as they progress through the years. This also creates the opportunity to offer further products and services that can fit smoothly into their growing requirements – as well as making your marketing more cost-effective.

Matt Mitchener is Marketing Manager at Vow Financial

++ Typical life stage: Upgrading, renovating or expanding ++ Key products: offset accounts, redraw, credit cards linked to the mortgage, and split loans ++ Best media: e-mail, SMS

Baby Boomers ++ Typical life stage: preparing for or in retirement ++ Key products: interest only, self-managed super loans, reverse mortgages ++ Best media: Print

COLUMN / SHOPFRONTS

Is a branded retail front on high street the best bet to grow your business?

MPA investigates…

D

o brokers operating from retail shopfronts have better businesses?

According to Mortgage Choice, 80% of its top performing franchisees (in terms of settlement value over the past 12 months) operate from branded retail shopfronts.

The other 20% operate from branded commercial offices.

MPA spoke to brokers, franchisors and industry consultants about the pros and the cons.

ADVANTAGES: 1. Prime exposure of the brand: Mortgage Choice notes that shopfronts are usually located in highly visible areas, helping brokers advertise their brand to the general public 2. A physical foundation in the local community: Having a business on high street gives brokers a presence in the community and fosters a spirit of involvement, says Scott Lawson, Mortgage Choice broker.

3. Walk-ins: Shopfronts are usually located in retail 60 | MPAMAGAZINE.COM.AU

4.

5.

6.

7.

8.

areas, so are likely to have higher foot traffic, which means greater lead generation, notes Mortgage Choice.

More professional: Some customers/staff feel more comfortable visiting/working in a retail shopfront as opposed to a home office. Perennial Top 100 broker Gerard Tiffen started from modest digs. “I had started from my one-bedroom unit and had been embarrassed on a number of occasions when clients needed to pop over with certain documents or referrers wanted to pop in and I had to say ‘no, I don’t have an office’.” His current office, which is located in a former NAB bank in a highly visible area is both professional and modern.

Easy access: Shopfronts are typically situated in convenient locations, accessible by foot traffic, train or bus. Increased car traffic from customers is better tolerated on main streets than suburban cul-de-sacs.

Getting in the right mindset: According to Advice Centre Consulting’s David Fox, moving to a shopfront supports a ‘mind-shift’ for the business owner that he/she is actually running a business rather than ‘has a job’.

Hiring advantage: Fox adds that a shopfront may provide facilities that are more attractive to employees and potential employees Power play: A professional retail business is more likely to encourage clients and potential clients to

Movin’ on up: Scott Lawson

When Scott Lawson was in the corporate world, working the odd day from home was a nice change of pace. However, when he began his career as a mortgage broker six-anda-half years ago, he quickly realised running a home-based business was not for him.

“I was working from home from a desk in the office in the house. We had three

kids and it took three months for me to realise it wasn’t working.”

Lawson then created an office in the garage, which kept him going for 12 months, after which point he decided to lease an unbranded office space.

But Lawson’s game plan was to open a retail shopfront, and in January 2012 the Mortgage Choice broker finished signage on his new high street brokerage in Melbourne.

“My objective always was to have a retail shopfront to get the branding and professional workspace.”

Before he could take that step, however, Lawson needed to prove to himself that he could generate enough business to cover the ongoing costs of retail branded business.

“It came down to the

economics. And as it’s turned out, I was waiting until the business was in a position where I could afford it and now that we’ve been here for three months the new activity levels are even higher.”

Lawson’s already had half a dozen people ring him as a result of walking by the shop, and of those four have made a purchase.

“And they’re all local people. So that’s further reinforced in my mind that it’s been worth it.”

Lawson paid $80,000 out of his pocket to cover bond, rent, furniture, air conditioning, painting, flooring and office equipment. He’s had to pay an increased premium for insurance and get up to speed on WorkCover and Occupational Health and Safety regulations.

visit the business rather than meeting client/potential client at their home or business, Fox notes.

9. Strategic partnerships: Some referral partners feel better about aligning their business with yours when you are located in a professional premise, Tiffen says.

DISADVANTAGES: 1. Expense: According to Mortgage Choice, opening a shopfront means an increase in overhead expenses from having to pay lease/rental fees, wages for multiple staff to man the shopfront during opening hours, higher electricity costs, etc.

2. Set hours: The office is committed to operating during retail hours.

3. Finding the right location: Finding a suitable space within budget and inside a franchisee’s designated marketing area can be a challenge.

4. Continued costs: Mortgage Choice also notes that due to the Commercial Premise Operating Standards (CPOS) for retail spaces and for some franchisors, many franchise owners will need to regularly reinvest in, and update, their shopfront.

5. Loss of convenience: Fox notes that working in a home office reduces travel time and eliminates need for parking and business attire when not meeting with clients 6. Insurance: Insurance premiums are often higher for businesses on main streets 7. Security: Increased chance of theft is also an issue for any small business owner in a pedestrian area

80% of Mortgage Choice’s top performing franchisees operate from branded retail shopfronts.

BROKERNEWS.COM.AU | 61

BROKER PROFILE / SCOTT MARSHALL

IN THE

BLOOD

The Loan Arranger’s Scott Marshall is a force to be reckoned with, having consistently ranked in MPA’s top 100 brokers list for the last five years. MPA finds out how he keeps on top of his game

S

Scott Marshall comes from a well-established family of mortgage brokers, and despite the accomplishments of his parents Steve and Angela, who launched The Loan Arranger in 1996, Scott has managed to stand out as an exceptional mortgage professional in his own right. In addition to ranking highly in the MPA top 100 list year on year, Scott was also named as a finalist in 2010 in the “Sales Person of the Year” awards.

Find out how a “naturally competitive” spirit and commitment to going the extra mile have made Scott one of the best brokers in the country…

an exceptional service, which in turn gains more referrals. I am also naturally competitive and enjoy the challenge of keeping on top of my game.

What do you attribute your success to?

A: I attribute my success to hard work and going that

How does your geographic location affect your business?

A: The Loan Arranger’s office is in the city so is central

extra mile to ensure my clients receive the most suitable product and best service available. I am willing to be mobile and see all of my clients personally. I have an administration team of three who assist me with processing loan applications. They are an integral part of my business and we are all working for the same goal. I make sure we promptly respond to any client contact and I am willing to invest time with any prospective client.

What keeps you motivated?

A: I enjoy my job, so the motivation comes easily. The friendships that have been formed with my clients and business partners spur me to continue. Giving my clients

62 | MPAMAGAZINE.COM.AU

What was the biggest turning point of your career?

A: I wouldn’t say there has been a significant turning point, but in the early days I spent a lot of time networking and building my referral base. This hard work has in turn given my business momentum. Most of my enquiry is now repeat business or referral from existing clients.

to most locations and allows clients easy access.

Adelaide is a great place to be a mobile broker because it is easy to commute from one side of town to the other.

Technology also enables us to deal with clients in other locations.

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

A: Since the industry has been regulated, the ease of entry into the industry has been restricted. Brokers will be better qualified and I believe consumers will see brokers as the professionals in lending.

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

A: Be prepared for hard work, develop a network referral base and form relationships with affiliated businesses. The early days are the toughest but if you’ve marketed yourself right, the business will come. Also, become educated on a broader basis than just mortgage lending, that way you will be able to offer clients advice on issues associated with lending and investing.

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

A: My primary focus is lending, I am very busy just keeping up with the requirements of our home loan customers. I can help clients with leasing and commercial lending. I refer to financial planners for insurance needs as we are complementary to each other’s business.

What business development activities have you focused on?

A: I have been busy diversifying my referral base so it’s not only limited to any one source. I have been building strong relationships with accountants and financial planners as well as real estate agents.

Factfile

Scott Marshall, The Loan Arranger ++ Location: Adelaide, SA ++ Started: 2001 ++ Achievements: 12th MPA Top 100 brokers ++ Settlements 2011: $81,931,276 ++ No. of loans 2011: 375 ++ Family life: Married, two children ++ Hobbies: Riding, windsurfing, waterskiing

How do you build brand awareness for your business?

A: The Loan Arranger is well known in Adelaide and is highly regarded within the industry. The Loan Arranger regularly advertises on the radio, and most people are familiar with the company.

Do you feel fee for service is the way forward in the industry?

A: The banks already pay brokers a fee for service for the introduction of business to their organisation, and the administration involved, which the bank is outsourcing. If a broker believes the commission paid by the bank doesn’t cover their time, professional advice and costs involved in the transaction, they may charge the client a fee for their service.

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

A: Recent reforms of regulation and licencing are the most challenging issue for the industry at the moment.

Ensuring compliance requirements are being met would be the focus for businesses.

Lending volumes and the general economic climate is also a pressing issue for brokers and banks alike.

MPAMAGAZINE.COM.AU | 63

The latest market info for investors

Darwin: $470,000 +1.7%

THEDATA

The Inpex confirmation and US marine base expansion are good news for the NT

STATE Perth: $445,000 -3.5% Western Australian property is still playing catchup to the mining boom

OF THE

STATISTICS / INVESTORS

STRIKING THE BALANCE Most property investors are looking for capital growth, but don’t want to break the bank on the way. MPA has found the balance between holding costs and likely growth by finding Australia’s best options for capital growth in each state – as selected by Redwerks’ DSR (demand-supply ratio) score – and highlighting those suburbs with a rental yield of more than 5.5%. So, which suburbs could offer the best mix of growth potential and rental income? See overleaf for answers.

DSR is a score out of 48 indicating the supply imbalance in a given suburb (and therefore capital growth potential). It takes into account eight property variables that drive prices, such as rental vacancy, days on market, stock on market, discounting, yields, auction clearance rates, proportion of renters and the number of people searching for properties online. For more information, visit dsrscore.com.au >>

Brisbane: $400,000 -6.1% Brisbane’s market is starting to show signs of growth

Adelaide: $370,000 -5.7%

Canberra:

SA markets are eagerly awaiting approval of Olympic Dam

Sydney:

$530,000 +4.5%

$525,000 -3.2%

18,000 new blocks over the next four years may loosen Canberra’s tight market

Units and western suburbs are Sydney’s strongest performers

Melbourne: $465,000 -5.4% The Victorian capital’s off-the-boil market could be at risk of oversupply

Hobart: $340,000 -7.3% It’s slow going for Tassie markets, but affordable properties may appeal to mainlanders

Source: RP Data, March 2012

STATISTICS / INVESTORS

NSW

St Peters

Sydney inner-west suburb St Peters has a non-existent vacancy rate, driving up yields compared to nearby suburbs. The amount of stock on market is very low, too, indicating a tight market.

✪ FAST FACT:

TYPE

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

$450 is the median weekly rent in St Peters

Unit

$559,000

0.27%

1.42%

5.70%

11% pa

Qld ✪ FAST FACT: 13.6% is the average annual growth in Walkerston

ACT ✪ FAST FACT: Units here take an average of just 46 days to sell

Vic ✪ FAST FACT: $260 is the average weekly rent in Long Gully

Walkerston

Walkerston is located near resources hotspot Mackay, and as such is reaping the rewards of fast population growth. Rental yields are the highest of all our picks.

TYPE House

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

$390,000

0.74%

0.95%

7.65%

11% pa

Griffith

Less than 2km southeast of Parliament House, Griffith is one of Canberra’s most popular suburbs.

Tight supply means rental yields of over 6%, yet units are still relatively affordable.

TYPE Unit

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

$444,000

0.46%

1.85%

6.05%

11% pa

Long Gully

Bendigo suburb Long Gully ticks all the boxes, and annual growth is likely to be further fuelled by the regional rail link to Melbourne making daily commuting more feasible.

TYPE House

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

227,500

0.06%

1.69%

5.68%

11% pa

Source dsrscore.com.au, Feb 2012; RP Data, March 2012 66 | MPAMAGAZINE.COM.AU

SA ✪ FAST FACT: Values have increased by 41% in the last five years

WA ✪ FAST FACT: It takes an average of 91 days to sell a unit in East Fremantle

NT ✪ FAST FACT: 116 units were sold in Darwin in the last year

Tas ✪ FAST FACT: Mornington buyers typically hold their properties for 14 years

Cumberland Park

Go south for high yields in Adelaide: units are in demand from renters. It’s a good time to buy, too: values have fallen by 11% in the last year, according to RP Data.

TYPE Unit

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

$295,000

0.60%

1.42%

1.84%

11% pa

East Fremantle

Harbourside suburb East Fremantle is the pick for Perth units; yields are very strong at nearly 7%.

Proximity to beaches, CBD and prestige suburbs make it a desirable location

TYPE Unit

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

$445,000

0.18%

0.66%

6.88%

11% pa

Darwin

Stick with Darwin’s centre for solid returns: units are affordable with high rents – and they could get even higher as Inpex takes off.

TYPE Unit

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

$496,750

0.46%

0.0%

6.14%

8% pa

Mornington

Located on the more affordable east bank of the Derwent and still just 6km from the Hobart CBD, Mornington offers opportunities for buyers seeking high yields on a budget. Growth expectations are good for Hobart’s slow market.

TYPE House

MEDIAN PRICE

STOCK ON MARKET

VACANCY RATE

RENTAL YIELD

PREDICTED GROWTH

$227,500

0.06%

1.69%

5.68%

11% pa

MPAMAGAZINE.COM.AU | 67

LIFESTYLE / A DAY IN THE LIFE OF

A day in the life of…

Charles Tarbey is owner and chairman of Century 21 Australia This meeting goes for a couple of hours – once we wrap up I head off to Dunedin airport.

11.15am

Next stop, Wellington. From Dunedin airport, I take a small prop plane up to the North Island.

12.50pm

6am

I wake up in Dunedin, New Zealand. I arrived here last night for a series of meetings with various Century 21 New Zealand real estate offices (I am in the process of purchasing the New Zealand arm of Century 21) and am going to be spending the day flying around the country visiting Century 21 franchisees. I’m looking forward to a productive day hearing about what each of the offices is up to and getting to know the teams better, and presenting our plans for the year to them.

En route to my first meeting I check my Blackberry for any emails that have come through overnight, particularly from our partners overseas and for news and economic market updates. I also watch for information that may impact the Reserve Bank of Australia’s next decision regarding interest rates.

8am

I arrive at my first meeting for the day at the Century 21 office in Dunedin where we go through market conditions in the area, the office’s business strategy and the ways it can work with and be assisted by Century 21 Australia.

68 | MPAMAGAZINE.COM.AU

I arrive in Wellington airport where I have a bit of time to kill before my next flight. I manage to find a WiFi hotspot, so I spend the time before my flight working on my laptop. I also have a phone conversation with Harry Bozin, the Head of Century 21 Home Loans, regarding content for my upcoming contribution to Century 21’s Property Investor Smartbook. I am writing about how investors can purchase properties in their self-managed super funds and gain Harry’s insights about how a mortgage broker can best help them achieve this.

2.30pm

I take off in a very small aircraft (if it were any smaller I think I would be flying it myself ) en route to Blenheim airport at the very top of the South Island – it’s a short flight and only takes about 20 minutes.

Once we land we drive from the airport to the picturesque Picton Harbour for the next meeting.

3.30pm

I meet with the team at the Century

21 office in Picton Harbour, where I present to them our new marketing campaign for Australia and New Zealand – ‘Smarter. Bolder. Faster’.

They are enthusiastic about the strategy and we discuss the ways that they can best market their listings and business to the local market.

5.00pm

My meeting in Picton Harbour wraps up and I am driven back to Blenheim airport where I journey back to Wellington.

7.50pm

After a long day of meetings I arrive at my hotel and then head out to dinner at a fancy restaurant with another Century 21 New Zealand franchisee. This is a social evening and I allow myself a well-deserved glass of red wine.

11.00pm

Once I’m back in my hotel room I spend about an hour and a half finalising reports and documents and paying extra attention to various emails that came through during the day that I couldn’t immediately answer.

1.30am

I give myself time to relax and wind down. I spend some time watching the World News and eventually head to bed, ready to do it all again tomorrow.

“I present to them our new marketing campaign for Australia and New Zealand – ‘Smarter. Bolder. Faster’”

NEWS / ROUND-UP

MPAMAGAZINE.COM.AU | 69

LIFESTYLE / FAVOURITES

❤

Favourite things...

Tony Pennells Wealth Today

Food: A great pasta dish (even better if you can be

Place to be: Right here, right now –

sitting in Italy enjoying it with great company!)

there’s so much going on within our industry, our business and personally that Perth (and Australia) is the only place to be at the moment.

Sport: Personally my sport consists of gym classes and regular walks, but as a spectator I love watching competitive swimming, especially international events – I’m really looking forward to the London Olympics.

Celebrity: I’m not a great celebrity follower.

Although it may seem somewhat clichéd, I’ve been an admirer of Richard Branson for many years.

Movie: Shawshank Redemption is one of my all-time favourites.

Music: My current favourite is Bruno Mars – my eldest son has heavily influenced me!

Vacation spot: We enjoy travelling to new and varied places, but for a few days of R&R, it’s hard to go past the Conrad Resort in Bali.

Drink: An unwooded chardonnay from a West Australian winery

Book: There are many great books, but one in particular is The Long Walk to Freedom – Nelson Mandela’s biography. It shows that one person can make a difference despite seemingly insurmountable odds.

70 | MPAMAGAZINE.COM.AU

LIFESTYLE / WORDS OF WISDOM

Cindy Tonkin’s seven strategies for leaving the office on time So you’d like to leave the office on time at least a few days a week. Perhaps your loved ones are waiting for you, you have a hobby to pursue, or you’d like to test a new hobby (or find some loved ones). Here are seven strategies for getting out that door when you’d like to.

1. Start small​ Depending on the size of your habit, consider going home ‘religiously’ one day of a week for a few weeks. Then ease yourself into two days. Don’t beat yourself up if some days you have to work longer. The reality is that sometimes you’ll have to break your own rules. Make sure it’s only because you have to, not because you can’t be bothered sticking up for yourself or re-prioritising.

2. Just get up and walk out​ It sounds simple, but just get up and walk out. It’s the most effective strategy. Much of the ritual of leaving work (logging out, shutting down, putting away and saying goodnight) just keeps you there longer. As you tidy, you finish something off, think ‘just 10 minutes more’, and suddenly it’s hours later. The same problem will be there tomorrow. You’ll be fresher and be able to deal with it more quickly.

3. Get a watchdog​ Enlist the help of a colleague or friend – get them to remind you to go home. And pay attention to them when they do.

Cindy Tonkin is the Consultants’ Consultant.

She has tips and tricks to make advice-based businesses work better.

She is the author of seven business books.

She lives in Sydney and consults across Australia. Find out more at cindytonkin.com

4. Prepare to leave​ If you have a clean desk policy, then prepare for leaving. Two hours before you’re ready to leave, make your ‘to do’ list for the next day. Clear your desk and work on just one thing at a time.

When it comes time to leave put the one thing you’re working on away, log off, and leave. Do not take appointments for the last hour of the day you want to leave on time. If people have

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questions or ideas in that time, let them know you must leave at an appointed time (and have them let you know when that time is 10 minutes away).

5. Make it important​ If you’re still not doing it, make the reason you’re leaving more important. Exaggerate it. If you leave now, you’ll catch up with friends who could connect you to that next big customer or client.

If you don’t leave now, you’ll never meet that person. Do it and you’ll get a life, a loving network and interesting customers.

6. Stop kidding yourself you can get it all done!​ It’s also important to stop kidding yourself that you can get it all done if you can’t. You’re busy. So are most of the successful people in the world. If you think that working an extra 30 minutes (or three hours) is what it will take to move the mountain of work you have to do, then start tracking how long it actually does take.

If you’re attempting to do 18 hours of work in a 10-hour day, then perhaps you’d better re-prioritise or let yourself off the hook.

7. Realise what you know​ We make tasks bigger by over-preparing and double-checking.

You will never have enough information. What do you need to do to satisfy it, to see or feel that you’re prepared enough? Do that first. Remember, you can also call on your track record, your memory and your experiences. No amount of preparation will equal this experience. Trust in what you know, and just get up and walk out at the right time.

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