Mortgage Professional Australia magazine Issue 13.03

NON-BANKS ON TRIAL WHY NON-BANKS AND MORTGAGE MANAGERS AREN’T OUT FOR THE COUNT BUSINESS PARTNERSHIPS WHAT HAPPENS WHEN THE LOVE DIES?

YO NG GU S MPAMAGAZINE.COM.AU ISSUE 13.3

TAKING ON THE BIG FOUR ME BANK CEO JAMIE MCPHEE ARGUES THE CASE FOR THE NON-MAJORS

CONTENTS / ISSUE 13.03

46

24

Head to head ME Bank CEO Jamie McPhee talks to MPA about breaking the big four dominance

Non-banks on trial Non-bank lenders and mortgage managers argue their case

WEEKLY INVESTIGATIONS NOW ONLINE: COVER STORY 31 | Young Guns Meet the young talent that’s taking the Australian mortgage broking industry by storm

2 | MPAMAGAZINE.COM.AU

Are you valued by your brokerage?

Build better business relationships: 3 vital tips » mpamagazine.com.au

CONTENTS / ISSUE 13.03 NEWS & VIEWS 8 | Round-up The latest market intelligence from the world of property, economics and mortgages 12 | On line The best from MPA Online and Australian Broker Online 14 | News Analysis What do mortgage enquiry and approval figures tell us about state-by-state mortgage demand?

18

SMART BUSINESS

18 28

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18 | Business partnerships: What happens when the love dies?

How to avoid things turning sour when partnerships come to an end

59 | Three keys to business planning Make this year your most successful to date

PROFILES 44 | MPA Top 10 broker Jeremy Fisher on his drive for exceptional service

STATS 63 | Your Mortgage Index The latest mortgage hunter trends from our sister website

LIFESTYLE 62 | A day in the life of …

James Veigli, Broker Profits Vault 64 | My favourite things ...

Andrew Russell, Mortgage Choice

28 | Mission impossible 9 tips for dealing with demanding clients

64

NEWS / ROUND-UP

BROKERNEWS.COM.AU | 5

CONTENTS / EDITOR’S LETTER

FRESH TALENT

There’s no doubt that mortgage brokers are facing some significant challenges in the current economic climate. Credit growth is slow and new regulations are coming in thick and fast.

It’s refreshing, therefore, to speak to those brokers who are new to the industry and gauge the genuine level of enthusiasm for the profession that is being exhibited at its grass roots. The 16 bright young brokers that we’re profiling in MPA’s annual Young Guns feature (page 31) exemplify the passion and work ethic that’s required to make a go of mortgage broking in 2013. As you will see, their approach to getting the job done is truly inspirational.

Judging by recent industry figures, the mortgage market may be blowing either hot or cold depending on your location, and the big four’s slice of the pie is expanding (News Analysis, page 14), but the non-bank lenders and mortgage managers still believe they have plenty to offer brokers and their clients – despite the adverse publicity caused by the Provident Capital and Banksia collapses (page 46).

And it’s not just the non-banks that are arguing their case. ME Bank CEO Jamie McPhee certainly thinks that there’s room for the smaller bank lenders to work with brokers to increase their share of the mortgage market (page 24).

Whatever direction the mortgage market is heading, if our Young Guns are anything to go by, it looks as if the future of the broker channel is in safe hands.

Robin Christie, editor, MPA

CONNECT

Contact the editor: robin.christie@keymedia.com.au

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COPY & FEATURES EDITOR Robin Christie CONTRIBUTORS Bob Neill, David Fotheringham, Cindy Tonkin, Sue Viskovic PRODUCTION EDITORS Carolin Wun, Moira Daniels

ART & PRODUCTION ART DIRECTOR Jonathan Phillips SENIOR DESIGNER Rebecca Downing

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 Robin Christie tel: +61 2 8437 4787 robin.christie@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, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Auckland, Toronto mpamagazine.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

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NEWS / ROUND-UP

BROKERNEWS.COM.AU | 7

NEWS / ROUND-UP FRAUD

ONLINE

INTERNET NO THREAT TO BROKERS: MFAA

Fraud a ‘continuing’ trend in broking: ASIC Fraudsters cost Australia a whopping $372.7m last year alone, and ASIC says the issue is a serious one within the mortgage broking industry.

ASIC spokesperson, Daniel Wright, said the organisation is seeing a ‘continuing’ trend of fraud within the mortgage broking industry and says it is the category of misconduct involving brokers that is, in fact, most regularly reported to ASIC. “ASIC is particularly concerned with instances where persons have engaged in fraud or other misconduct relating to information provided in loan applications. Since the commencement of the NCCP, ASIC has banned six persons from engaging in credit activities for such conduct and has 18 other current investigations. ASIC has also secured criminal charges against one finance broker under the responsible lending provisions of the NCCP.” But MFAA CEO Phil Naylor argued that fraud remains a relative rarity in the mortgage broking industry, accounting for less than a handful of finance industry cases.

“From MFAA’s experience, lending fraud occurs but based on our expulsions – three last year – it is clearly not a major issue for brokers.

All lenders, aggregators and good brokers have systems and checks and balances to mitigate against fraud.”

Yet, a report released by KPMG – in the very same week that ASIC clamped down on two rogue brokers – brings the issue to a head.

Finance, perhaps unsurprisingly, boasts the highest fraud rate of any industry in Australia, according to KPMG’s 2013 Survey of Fraud, Bribery and Corruption in Australia and New Zealand. The report found that the financial services industry accounted for 86% of all fraud in Australia and New Zealand in 2012. Twenty-five per cent of fraudsters came from outside the company they victimised.

8 | MPAMAGAZINE.COM.AU

STATS

42.7% The percentage of Australians that indicated that they are living debt free

Source: December 2012 St.GeorgeMelbourne Institute Household Financial Conditions Report

Do you see the web as a growing source of competition for home loan hunters? Think again, says MFAA CEO Phil Naylor. He believes that the internet is nothing more than a tool when it comes to borrowers seeking a home loan – and that online portals pose little risk to the broking industry.

While Naylor acknowledges that the internet is a vital tool for home buyers, he’s not convinced that flashy bank websites pose a major threat.

“While the internet is one of the most important sources of information for home buyers when researching potential property purchases, the best locations and their finance options, face-to-face contacted with an MFAA broker is central to completing a deal,” he said.

Naylor said the MFAA’s own research shows 81% of potential borrowers planning to buy a house within the next 12 months are using the internet as their ‘primary’ source of information – but that this is a preliminary step taken before contacting a mortgage broker.

“There is no risk the industry risks fading away as we are now providing more than 40% of home loans in the market and are growing as a crucial financial services sector. While technology is obviously important as a first step in potential borrowers searching for a loan, it is the broker who can secure the loan for the customer through face to face contact, which is more important than ever before.”

He added that the industry and its representatives are spending ‘record sums’ of money online in order to help brokers connect with their potential customers.

NEWS / ROUND-UP

MPAMAGAZINE.COM.AU | 9

NEWS / ROUND-UP INVESTMENT

INFOGRAPHIC

Housing investment back in fashion

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2013

2014

5.0

5 4

3.7

3.5

3.5 3.1

3 2

2.1

2.0

2.0

1.7

1.4

1

Average

Perth

Adelaide

0.1 Brisbane

Melbourne

0.4 0

Sydney

Spread the news, residential property is still a solid choice for investors. This is the assessment of AMP Capital chief economist Shane Oliver. He has added, however, that residential property still places second to the share market in predicted medium-term (five-year) returns.

He argued that, for the past five years, bonds and cash have been ‘the place to be’ and that, while yields on bank deposits have been single digit, they’ve still been higher than returns from both shares and residential property.

Now, said Oliver, things have changed – signalling good news for those working in the property market.

“Going forward, shares and to a lesser degree property, are likely to be a better option for investors – depending, of course, on their risk tolerance – as global recovery supports growth assets and low yields hamper the returns from bonds and cash,” he said, adding that residential property and shares already offer higher yields than cash and bonds – and will benefit as economic growth improves.

“House and apartment yields are running around 3.7% and 4.8% respectively, which are well up from their lows last decade. With mortgage rates well off their highs and likely to fall further, the residential property market appears to have bottomed out after falling since mid-2010, with a mild cyclical recovery likely over the next 12 months.”

However, Oliver warned that short-term gains are likely to be restricted to around 5-7% as buyers remain cautious about taking on excessive debt, particularly as job insecurity remains high.

“More broadly, capital growth in residential real estate is likely to be constrained over the next 5–10 years by still very high property prices. This suggests a cyclical rebound in prices over the next year should be seen as part of a broad range-bound market for property prices in real terms as the market continues to work off the excesses that built up over the property boom of the mid-1990s [which] continued into last decade.”

He explained that, while good quality properties in sought after locations will no doubt do well, medium term back drop for property returns is likely to remain constrained – though still better than cash and bonds.

“There are two risks for property. The main downside risk is that China has a hard landing with the hit to export earnings, resulting in higher unemployment, forced sales and hence lower house prices,” he said. “The other risk is on the upside – a concern that the old housing bubble is reignited by the latest collapse in mortgage rates… This seems unlikely though, given Australians have developed a more cautious approach to debt since the GFC.”

NAB Capital City House Price Forecasts (%)*

* percentage changes represent through the year growth rates Source: NAB Residential Property Servey Dec 2012

REGULATION

ASIC VOWS 2013 BROKER CRACKDOWN

STATS

83.65% The percentage of new home loan approvals that were variable rate in January – a six-month high Source: Mortgage Choice

Watch out, ASIC commissioner Peter Kell has stated that the regulator will crack down on brokers this year.

“ASIC conducted a study at the end of 2011 on how brokers were travelling in terms of complying with the new legislation and we found that, generally, there was a pretty good understanding of the new legislation – but there were some areas where we thought there needed to be an improvement,” he told Broker TV. For example, Kell said brokers need to understand that they have responsibilities when it comes to establishing the customer’s ability to

repay or deal with the credit that’s being offered. “They can’t just rely on, for example, the lenders. So, while we are seeing generally good compliance, it’s very important for brokers to understand that their responsibilities in this area are also quite important to get across.

They can’t sort of ‘outsource’ those to others.”

Kell said there are three areas ASIC will be focusing on in the mortgage broking space this year: fraudulent material provided on loan applications; advertising; and disclosure. He added that any claims of ASIC taking a ‘light touch’ approach are unwarranted.

NEWS / PRODUCT ROUND-UP

PRODUCT NEWS Your bite-sized guide to the industry’s newest products and initiatives

Who: Bankwest What: Two new home loans: Double Deal Home Loan and Regular Saver Home Loan Key specs – Double Deal: • Discount of 1.01% pa off the SVR for two years • No on-going fees • Minimum loan amount of $20,000 • 95% LVR (where applicable) • Exclusive introduction application fee of $295 (limited time offer) • 100% offset facility with a monthly fee of $15 Key specs – Regular Saver: • Basic variable product • Replaces the Lite Home Loan • Applicable for transfers from existing Bankwest home loans (unlike Double Deal)

• Exclusive introduction application fee of $295 (limited time offer) • 100% offset facility with a monthly fee of $15 They say: “I can confidently say that Bankwest is ready and is thrilled to give our customers more value for money whilst providing our brokers with a greater choice in this ultracompetitive market” – Bankwest head of specialist banking, Ian Rakhit We say: The Double Deal’s introductory discount should turn heads.

Who: Australian First Mortgage (AFM) What: Second funding line in respect to lending to SMSFs They say: “This new product is exciting as the higher LVR was in much demand” – AFM founding director Iain Forbes We say: Higher LVR SMSF products are a welcome addition to the market.

KEY FEATURES: • 80% LVR on AFM’s new Secure Option Full Doc residential product • P&I repayments to 30 years • Interest-only repayments to 10 years • Maximum loan amount of $500,000

MPAMAGAZINE.COM.AU | 11

NEWS / MULTIMEDIA

ON LINE

The latest highlights from MPA Online and Australian Broker Online

In motion

The latest from Broker News and MPA TV

SAY WHAT? THE BIGGEST QUOTES FROM THE MONTH

“It’s a bit like boiling a frog in hot water; you don’t notice the change because it happens so steadily” – Intelligent Finance managing director Justin Doobov on Sydney being labelled the third most expensive city in the world

ASIC TO CRACK DOWN ON MORTGAGE INDUSTRY Commissioner Peter Kell talks about ASIC’s plans for the coming months.

“I think it’s a matter of – if you do get a client – service the hell out of them” – Daniel O’Brien of PFS Financial Services on why individual service trumps focusing on any one market sector

MARKETING GURU’S TOP TIPS The most effective ways to maximise your marketing strategy.

“We’re still nMB, we’re not becoming a sub-set of Aussie.

We’re here for brokers who want to develop a business under their own brand”

AUSTRALIA’S MORTGAGE DELINQUENCY HOT SPOTS REVEALED It’s that time of the year again. Fitch Ratings has published its signature postcode delinquency report, providing a fascinating insight into those areas where the mortgage delinquency rates are well above the national average. Are you operating in a high-risk area?

In terms of overall mortgage values, the country’s delinquency hot spot was Nelson Bay, NSW, which reached a 30-plus day arrears rate of 6.6% in September 2012.

This was an improvement on its March 2012 rate of 7.8%, but wasn’t enough of a drop to take it off the top spot.

“Nelson Bay has been the worst performing postcode in Australia since this report was first published in November 2007,” said the agency in its write up.

“If these foreclosed properties were to be sold and the 90-plus day arrears cured, Nelson Bay arrears would improve significantly.

“Other postcodes, such as Surfers Paradise (Qld), Pacific Paradise (Qld), Waterford (Qld), Greenacre (NSW), Rooty Hill (NSW), and Green Valley (NSW), remain among the worst performing by mortgage value.”

When it came to those areas with the worst delinquency rates by number of mortgages in arrears, Tasmania’s Montrose was the worst performer – with 32 borrowers out of 1,000 in delinquency.

“Surfers Paradise (Qld), Eagle Vale (NSW), Cessnock (NSW), Waterford (Qld), Nelson Bay (NSW), Crestmead/Marsden (Qld), Green Valley (NSW), Eagle Vale (NSW), Macquarie Fields (NSW), and Helensvale (Qld) remained among the worst performing postcodes by number of mortgages in arrears, with 18–29 delinquent borrowers out of 1,000,” said the report.

– nMB managing director Gerald Foley on being bought by Aussie Home Loans last July

HOW TO CREATE THE PERFECT PARTNERSHIP What’s the best way to establish a referral relationship?

12 | MPAMAGAZINE.COM.AU

To find out more on all of these stories, as well as latest business strategy advice, special reports, profiles, news, views and analysis, visit mpamagazine.com.au

BROKERNEWS.COM.AU | 13

NEWS ANALYSIS / MORTGAGE DEMAND

HAVES & HAVE-NOTS Mortgage enquiry and approval figures suggest that, despite RBA rate cuts, Australia’s two-speed economy continues to be the overriding factor determining the state-by state demand for home loans

S

ome interesting statistics have been released in recent times regarding the state of Australia’s mortgage market. Veda’s Quarterly Consumer Credit Demand Index for the final quarter of 2012, for example, indicates that mortgage enquiries remained flat – decreasing by 0.7% nationwide over the course of the year – but that the state-by-state situation tells a varied story.

Judging by the Index’s figures, brokers in the Northern Territory and Western Australia may well have seen an increase in clients walking through their doors – with mortgage enquiries picking up by 12.6% and 11.1% respectively in these resource boom states.

South Australia, too, saw an increase in mortgage enquiries towards the back end of 2012 (4.8%), while home loan enquiries in Victoria remained largely flat (0.5%).

At the bottom end of the scale, Veda’s figures suggest that brokers in Tasmania will have struggled to attract new business. Enquiries here fell by 7.6% between October and December 2012. New South Wales also saw a significant dip in home loan enquiries (-5.7%), while Queensland’s enquiry figures were also in negative territory (-2.8%).

SUBDUED OUTLOOK 14 | MPAMAGAZINE.COM.AU

So what can brokers take from the Index’s latest results?

According to Veda, mortgage enquiries are a good indicator of homebuyer demand and housing turnover, with movements in mortgage enquiries tending to lead movements in house prices by around six to nine months.

“Housing markets have, in the majority, been weak since late 2010,” said Angus Luffman, Veda’s general manager of consumer risk.

“There is little evidence in the latest Veda data that the RBA rate cuts are having much effect in reigniting housing turnover, with the level of mortgage applications staying flat since halting a two-year decline in the March 2012 quarter.”

“This generally soft mortgage applicant demand suggests that house price growth will be relatively subdued for at least the first half of 2013.”

REASONS FOR OPTIMISM CommSec’s latest State of the States report, however, provides more heart-warming reading for the broker community. Rather than looking at enquiry activity, the report looks at settled loans in the form of ABS housing finance commitment data.

Its author, CommSec chief economist Craig James, does concede that nationwide trend housing finance

12.6% 9.4% % Year-on- % QuarterYear on-Quarter

NT

-2.8%

3.3%

% Year-on- % QuarterYear on-Quarter

QLD

11.1% 5.0% % Year-on- % Quarteron-Quarter Year

WA

4.8% 10.6%

-5.7%

% Year-on- % QuarterYear on-Quarter

% Year-on- % QuarterYear on-Quarter

SA

MORTGAGE DEMAND % Year-on-Year (Q4 2012 vs Q4 2011) % Quarter-on-Quarter (Q4 2012 vs Q3 2012)

1.4%

NSW

0.5% 4.3% % Year-on % Quarteron-Quarter -Year

VIC

commitments are below decade averages, but adds that “encouragingly, commitments in November were above year-ago levels in six of the economies”.

Once again, Western Australia was picked out as one of the mortgage markets with momentum on its side.

Home lending figures in WA were 10.9% higher than a year ago in trend terms, which signified a 37-month high. In long-term average terms, WA hit negative territory (-2.5%), but this still put the resources powerhouse in second spot for housing finance on the long-term scale.

Victoria was picked out as the strongest state on the long-term housing finance scale, with housing finance commitments coming in at 1.7% below the decadeaverage level. Year-on-year commitments saw a 4.5% rise.

Third spot in the decade-average scale went to the ACT (-6%), followed by NSW (-12.4%). South Australia hit the bottom spot (-26.8%), but, with a figure of -26.7%, Tasmania was effectively neck-a-neck with the Festival State when it came to long-term housing finance commitment figures.

-4.2%

0.1%

% Year-on % Quarteron-Quarter -Year

ACT

-7.6%

3.3%

% Year-on- % QuarterYear on-Quarter

TAS Source: Veda Quarterly Consumer Credit Demand Index: Oct-Dec 2012

MORE RATE CUTS AHEAD Despite the positive year-on-year housing finance commitment figures identified by CommSec, there is a

MPAMAGAZINE.COM.AU| 15

NEWS ANALYSIS / MORTGAGE DEMAND

% change

CONSUMER SENTIMENT Average*

Jan 2011

Jan 2012

Dec 2012

Jan 2013

Dec 12-Jan 13 Jan 12-Jan 13

Consumer Sentiment Index

101.6

104.6

97.1

100

100.6

0.6%

3.7%

Family finances vs a year ago

89.9

85.8

77.9

85.2

77.8

-8.6%

-0.1%

Family finances next 12 months

108.6

104.7

101

104.8

103.5

-1.2%

2.5%

Economic conditions next 12 months

90.6

97.6

90.3

92.4

95

207%

5.1%

Economic conditions next 5 years

90.7

95.8

90.4

88.2

91.1

3.3%

0.8%

Time to buy a major household item

128.1

139.3

125.7

129.6

135.7

4.7%

7.9%

Time to buy a dwelling

122.5

114.9

131.5

142.2

140

-1.5%

6.5%

Time to buy a vehicle

121.8

137.9

127.8

138.4

146.8

6.1%

14.9%

Source: Westpac–Melbourne Institute *average over full history of the survey, all figures except ‘dwelling’ and ‘vehicle’ indexes are seasonally adjusted

growing mood that the RBA must implement further interest rate cuts to pull consumer sentiment out of the doldrums and spur Australians to take on mortgage debt.

The number crunchers at financial services researcher RFi, for example, have noted that housing credit aggregates grew by 4.7% over the year to October 2012 – which was 0.5% lower than the previous year’s figure – and have tipped the RBA to implement further rate cuts as 2013 unwinds.

“The continued deceleration of housing credit growth comes despite 1.5% of cuts to official interest rates by the RBA since November 2011, which has cut the average SVR [standard variable rate] by 1.15% over the same period. The slow growth in housing credit following the latest round of interest rate cuts suggests that monetary policy has lost some of its potency, which is likely to lead to further cuts in interest rates by the RBA in 2013, particularly as the mining boom unwinds,” said the RFi Australian Mortgage Market Wrap.

Various consumer sentiment scores underline the opinion that rate movements have yet to bring homebuyers out of the woodwork in earnest. The often-cited Westpac-Melbourne Consumer Sentiment Index, for example, may have just crept into optimism territory in January 2013 with a score of 100.6 (anything above 100 indicates optimists outweigh pessimists), but Westpac chief economist Bill Evans offered words of caution.

“This is the third consecutive month when the Index has been at or above the 100 level. That compares with 14 of the previous 16 months when the Index had registered below 100. However, having said that, it

16 | MPAMAGAZINE.COM.AU

remains disappointing that despite a total of 175 basis points of rate cuts from the Reserve Bank since October 2011, the Index is only 3.5% above its level at that time,” he said.

“Indeed, following the first rate cut in November 2011, the Index surged by 6.4% to 103.4 in November 2011. Consequently the Index remains 2.7% below the level in November 2011 despite 150 basis points of rate The percentage cuts from the Reserve Bank. of Australians “Since the Reserve Bank started cutting rates, who expect respondents’ assessments of their finances has improved house prices by a miniscule 1%.”

45.6%

to rise over the next 12 months TIME TO BUY Source: Westpac-Melbourne Consumer Sentiment Index

85.2%

The big four’s slice of bank-held owneroccupied loans in Australia Source: APRA

However, while Australians may not be full of optimism regarding their overall financial outlook, sentiment towards the property market’s prospects has seen some improvement.

“Over the last 12 months sentiment towards ‘whether now is a good time to purchase a house’ has been boosted by 11% (quarterly average). For the last four months, that Index has been near the highs of 2009 when house prices lifted by around 14% nationally,” said Evans.

“On the other hand, a special question which was included in the current survey around the outlook for house prices shows 45.6% of respondents expected house prices to rise over the next 12 months, while the same question a year ago showed a slightly higher 46.9% of respondents expecting prices to increase despite the cash rate having fallen by a further 125 basis points.”

When it came to the main categories of home loan

applicant, Evans noted that upgraders and investors are responding to the lower rates in “a broadly comparable fashion to 2009”, while first homebuyers have remained reluctant to dip their toes in the property market.

“This is certainly partly due to less generous government subsidies, but may also be impacted by weaker overall confidence around finances and job prospects,” he said.

Support for this theory comes from ING DIRECT’s latest Financial Wellbeing Index, which found that 39% of Gen Y respondents – who might otherwise have been looking to enter the property market for the first time – are instead focusing on saving. Amongst all respondents who intend to save this year, 51% intend to build a spare buffer of cash, while 16% were worried about job security.

The Index also found that the Australian appetite for housing debt remains subdued, with 49% of respondents paying down their mortgage ahead of time and 28% of respondents being mortgage free.

BIG FOUR DOMINATION RAMPS UP When it comes to those Australians who do have a desire to take on mortgage debt, one telling figure

-0.7% The decrease

in mortgage enquiries over the year to the December 2012 quarter Source: Veda Quarterly Consumer Credit Demand Index

highlighted by RFi was APRA’s assessment of the big four’s growing market share.

Within the ‘bank-held owner-occupied loans’ category, for example, the combined market share of the majors increased from 80.3% to 85.2%.

The RFi report does note, however, that the sudden increase “was largely due to APRA’s reclassification of Bankwest as a division of CBA, which officially went into effect on 1 October 2012”.

“As a result of the reclassification, CBA’s share of the owner-occupied home loans market grew from 23.5% in September to 28.4% in October 2012, while ANZ, NAB and Westpac’s penetration of the market remained steady,” said the report. “There was a lack of bank-held owner-occupied loans market share movement among the other lenders and the mutual banks.”

Overall, the banks took a 93.9% slice of owneroccupied lending commitments – a 1.3% increase on the previous month’s figure.

The reclassification of Bankwest also saw the big four cement its grip on the ‘bank-held investment property lending’ category, with APRA’s figures showing the major banks’ share of this segment of the market rising from 82.8% to 85.6%.

MPAMAGAZINE.COM.AU| 17

FEATURE / BUSINESS PARTNERSHIPS

BUSINESS PARTNERSHIPS: What happens when the

LOVE

DIES

Separation is a part of life, but the process can easily turn sour when business is involved. Seaview Consulting directors Bob Neill and David Fotheringham explain how you can ensure a smooth transition – and avoid decimating your practice’s value – when you and your business partner decide to go your separate ways 18 | MPAMAGAZINE.COM.AU

R

eflecting on 2012, one of the things that surprised and disappointed was the number of business relationships that fractured and descended into protracted disputation during the course of the year.

We have witnessed a significant increase in the number of partners or shareholders deciding that, whilst they may want to continue in business, they did not wish to do so with their current business partners.

This year’s New Year’s resolution should be for practice owners to revisit their documentation, particularly those aspects which cover exit provisions, to ensure it remains relevant and provides a clear process on how to conduct a smooth exit under varying circumstances.

Separation is a part of life, and for many it is the right decision, and an effective resolution allows all concerned to rule a line and move on.

However, when the dissolution does not go smoothly it becomes an expensive exercise that drains finances and emotion in equal doses. The consequences of protracted unresolved business relationships have far-reaching effects.

Firstly, there is the cost of each party engaging legal representation, which inevitably adds an adversarial flavour to the process and quickly extinguishes any goodwill that existed between the protagonists. Both parties are constantly assured they have a strong position and the desire to ‘win’ overtakes common sense.

Secondly, there is the loss of commercial value as the distraction from business that occurs whilst the battle rages and eats away at the principals’ time, energy, profits, and sustainability of the enterprise. The result can be that by the time agreement has been reached as to how much of the pie each is to get, it becomes irrelevant as the pie no longer has any substance.

Thirdly, the process of dispute takes a significant emotional toll on the participants, particularly where they have conducted business together and been brought close by the joint endeavours. The loss of trust and respect manifests itself in a bitter, unforgiving scenario.

Fourthly, when matters go to court, a ‘no holds barred’ approach is deployed and people’s dirty linen can be aired in the most public of forums. Personal issues are often viewed as impediments to a

“Separation is a part of life, and for many it is the right decision” – BOB NEILL professional’s ability to discharge his or her obligations to partners and colleagues.

Such human failings can destroy partnerships just like marital break-ups often lead to home lending foreclosures.

Without some confidentiality agreement for protection this can quickly spiral out of control with information of a personal and sensitive nature aired in public.

However, without doubt the major cause for dissolutions escalating into significant disputes can be sourced back to poor or absent documentation around the agreed exit terms for the stakeholders. This inattention is quite astonishing amongst professional advisers, such as mortgage brokers, who would be scathing in their criticism of their clients if they paid as little attention to critical business issues under their watch.

A documented agreement should provide a road map on how to part ways with a minimum of disquiet and in a manner that maximises the value for all parties in an equitable way. The process should be flexible and reflective of the reasons for separation, include timeframes required for settlement and the process used to determine a separation value.

The difficulty is that no single document can predict the nature or reason for a request to separate. However, this does not prevent a business from documenting the framework in a manner that can enable the effective and smooth management of the separation request.

The strength of any relationship can be measured in the ease with which the parties can discuss and resolve differences in opinions or views in a manner that enables the relationship to grow and be rewarding.

The inability to have open dialogue is an early indication of potential future breakdown and should

FEATURE / BUSINESS PARTNERSHIPS

The causes of separation The triggers for separation fall into two categories – insurable or uninsurable events.

Insurable events are usually well thought through but difficulties can still arise if: • procedural aspects around the management of the claims and remittance process do not exist • valuation methodologies are not well documented • payment timeframes are not clear and linked to receipts from insurers Furthermore, additional documentation is required to address matters outside the insurance process, including procedures around the settlement of debts, the release of security or guarantees and other external factors that may impact the business.

The capital gains tax (CGT) taxation treatment around insurance policies is complex. Avoiding the taxation office taxing a significant share of any proceeds is essential, so confirmation of arrangements around buy-sell agreements need to be correctly structured.

Non-insurable events include the following examples of the varying reasons behind the desire for people to separate: • desire to move to greener pastures • retirement • staleness • a partner not hitting contractual key performance indicators (KPIs) • acrimony • loss of trust • a sudden departure due to family or health reasons • alleged theft or fraud • relocation interstate or overseas • financial stress or external demands (if equity used as security)

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also be a prompt for the partners to reflect on what documentation exists to enable an orderly exit should a separation be necessary.

The intent of the exit document is to provide a clear, balanced and fair process to facilitate an exit, while taking into consideration the circumstances of the separation and the ability for the business to operate going forward. It should also ensure that any acquiring party receives an appropriate value for the assets they purchase.

In some circumstances the separation may be managed by an agreed allocation of the revenue source – eg, commissions – with each party electing to manage the allocated clients in a manner suitable for them.

This becomes more difficult when the equity ownership is split to parties primarily performing different functions in the business – ie, one to a sales and advisory function and another to a back-end operational and administrative function. In these circumstances it is difficult to segment a client base by allocating the revenue source, and as such an appropriate exit document needs to address funding mechanisms and payment terms upfront.

JEALOUS CREATURES It is beneficial to reflect on human nature. More often than not it is the accumulation of little things that destroys a relationship. It is rare for one isolated action to destroy a relationship.

Humans are often very jealous creatures, and if an individual perceives another individual is getting too many non-reciprocal benefits then tensions will surely surface. Ensuring your business has a mechanism and outlet to raise such concerns will prevent the snowball effect that may lead to a destruction of value and the end of a previously rewarding relationship.

If such a mechanism is absent, or should the need to separate arise, it is essential that a business such as a mortgage brokerage has a clearly documented process.

When business partnership relationships turn sour and separation is the only solution, such a process can provide the mechanism that prevents the destruction of the firm’s assets and long-term financial viability.

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FEATURE / BUSINESS PARTNERSHIPS

5

The procedure around the engagement with and transfer of clients including a methodology for value recognition is required. For disputed clients, a process that involves an independent person contacting the client and confirming their preferred relationship in an orderly and agreed manner is also required.

THE SOLUTION Principles to documenting an exit will depend on the manner in which the relationship is structured – ie, a partnership, equity in a company, units in a unit trust, or units in a hybrid unit trust.

Exit arrangements should be documented in a partnership agreement, a shareholders agreement, or a unit holder’s agreement. All partners should be bound by the agreement to ensure that the objectives of all parties are addressed in an equitable and agreed manner. Here are the key principles to bear in mind:

1

Due to the complexities associated with personal tax, employment termination payments (ETPs), CGT concessions, personal finances and interests of the extended family in the outcome, construction of an exit arrangement should include and be conducted in a collaborative environment with a legal adviser, an accountant and another external independent financial adviser or specialist adviser.

2

Avoid trying to document all specific reasons for someone wanting to exit. Documentation should be based on generic reasons for an exit request such as personal circumstance, performance, financial stress, unplanned events, health, loss of trust, moving to another business or retirement.

3 4

The treatment for insurable events should be managed separately to uninsurable events.

Attention to health-related absenteeism or reduced performance should be specifically addressed around times, KPIs and independent assessment. You are more likely to be faced with an issue around performance triggered by health than death.

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6

Remuneration arrangements up to the point of departure need to be addressed including whether any adjustment is required for underperformance to expectations or whether there are entitlements to contractual incentives including profit share. Transition/handover support obligations should also be documented.

7

The treatment of any balance sheet items must be documented, such as repayment of loans or loan accounts, personal use assets, secured finance or guarantee arrangements in place and any ongoing responsibility for liabilities for historical work performed.

8

If an equity owner isn’t performing, the agreement should contain a mechanism that affords the non-performer notice of failure to achieve specific and documented KPIs. The agreement should require that the non-performer be independently appraised of the KPI that has not been met and there should be reasonable time given to correct any underperformance. Failing to attain the KPIs will instigate exit procedures without any consequences.

9

It is essential the document includes a logical and compulsory dispute resolution process that includes the use of mediation with the ‘bolt on’ of confidentiality clauses so as to avoid the disclosure of private and confidential matters in a public forum such as the courts.

10

Keep it simple: include calculations and make them easily measurable and referable to common assessable data, and use illustrative calculations to aid in the interpretation should a disagreement occur.

FEATURE / CONSOLIDATION

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HEAD TO HEAD / JAMIE MCPHEE

BIG FOUR

TAKING ON THE

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Sixteen months since ME Bank embraced the broker channel, its CEO Jamie McPhee tells MPA why he believes that it’s more important than ever for brokers to educate customers about non-major alternatives and help break the big four dominance

are experiencing strong demand for mortgages at the moment?

JM: If anything, first homebuyers as a sector might

MPA: What are the biggest challenges that the mortgage industry faces at the moment?

Jamie McPhee: The major banks have 83% of

greater demand for residential property. The other key driver is consumer confidence rebounding, which will be driven by people feeling more confident about job security. In addition, lower rates improve the affordability for first homebuyers. It’s worth noting that as the RBA cuts interest rates, deposit rates also fall, including term deposits. While some banks like ME Bank continue to offer term deposit rates at a position well above the cash rate – much higher than they are traditionally priced – some investors may start to look towards investment properties, giving a further boost to the housing market. We are starting to see a modest rise in house prices which is a positive sign of recovery, and is likely to stimulate further market growth into the future.

mortgage share. Such a large concentration of the mortgage industry with major banks means that competition is reduced, and a lack of competition over the longer term is never a positive outcome for customers. Pleasingly, however, non-major banks like ME Bank are starting to generate greater awareness of their highly competitive offers with customers and there are signs customers are starting to take notice and are starting to make the switch.

MPA: Are there any areas of the country, or sectors of the market (eg, first homebuyers), that

actually be going backwards due to changes to the incentives provided by some state governments.

Interestingly, ME Bank continues to see relatively strong demand for its first home savers account, with demand increasing by 85% during the last financial year. Customers respond when banks step in to help people buy a first home. We have also noticed an increase in fixed rate activity in recent months, based largely on the low fixed rates currently being offered.

ME Bank is experiencing above-system demand for fixed rates – over 20% of total new home loans.

MPA: How do you think the current environment of falling interest rates will affect the mortgage market over the coming year?

JM: Over time, falling interest rates will drive a

MPAMAGAZINE.COM.AU | 25

HEAD TO HEAD / JAMIE MCPHEE

“We would hope to see a continued movement away from the big four and a steady increase in competition”

– JAMIE MCPHEE

received much positive feedback, particularly on ME Bank’s position in ensuring all our customers receive fairer treatment. Our brokers are also our customers and we take our commitment to them seriously. It’s why brokers are given equal access to our BDMs and credit teams. We will continue to work with brokers to understand the difference their clients will experience with ME Bank.

MPA: What is ME Bank’s key value proposition when it comes to the mortgage broker channel?

JM: As mentioned, ME Bank is the genuinely fairer banking alternative and our promise to our customers is to provide straightforward, transparent and low cost products combined with great service. For brokers, this means equal access to BDMs and credit teams regardless of volumes, and to uniformly provide quick decision times. For example, we offer the same low rate even for smaller loans. Another example is we’ve offered a lower standard variable rate than the majors ever since we became a bank in 2001.

MPA: Are there any other trends that you expect to see in the mortgage market over 2013?

JM: As non-majors like ME Bank continue to raise

MPA: What will take for the mortgage market dominance of the big four banks to be eroded?

JM: Educating customers that non-major banks like

awareness of their better offerings across service, fees, rates and flexibility, we would hope to see a continued movement away from the big four and a steady increase in competition.

ME Bank are a genuine banking alternative. We hold the same level of security but provide a fairer banking experience. ME Bank believes that mortgage brokers play an important role in educating customers about banking alternatives like ME Bank. Their clients go to them as they are looking for a trusted adviser who has their best interests at heart, so we see the brokers we work with as very important to helping get the word out to Australians that they don’t need to put up with the major banks. There are much better options – a genuinely fairer banking option – and they should vote with their feet.

MPA: How do you rate ME Bank’s relationship with mortgage brokers, and can it be improved?

JM: ME Bank made a very positive entrance into the mortgage broking market in November 2011. Within a year we’d established great working relationships with 11 aggregators, and more than 2,500 brokers are now accredited to sell ME Bank home loans. We have

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HEAD TO HEAD / LISA MONTGOMERY

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MOTIVATION / IMPOSSIBLE CLIENTS

Mission impossible 9 tips for dealing with demanding clients

Sometimes your client wants the impossible: they want to pay you less; they want everything delivered yesterday; they want to do a deal outside the ordinary… Here are some essential tips to help you out when your clients make impossible demands

01|

Make sure you are clear

Firstly, make sure you are clear: It can’t be done that quickly, at that price, the deal isn’t within guidelines. Say it out loud. Not with a lukewarm ‘yes’, but a cold hard ‘no’.

02|

Is it impossible or a new product?

And before we go any further, be certain that what they want really is impossible. All progress is indebted to the unreasonable person: what they want could in fact be your new product.

03|

Write it down

Cindy Tonkin is the author of ‘The Australian Consultant’s Guide – setting up your consultancy business profitably and painlessly’ and ‘Consulting Mastery: being good is not enough’. She is Australia’s office politics expert.

Find out more at politicalacumen. com.au

But if not, to be doubly clear, write it down. If you have a procedure, make a client version of it, so they can read it in black and white: what’s possible and what’s not.

04|

Try a different channel

Next option: try changing sensory channels. Some people believe things they see, others what they hear, what they read or what they experience. You’ve tried sound and the written word. So draw a diagram. Walk them through it.

05|

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Try a different person If that doesn’t work, get

someone else to explain. This may work because the other person changes ‘channel’ (from words to pictures, as I just suggested). Or it could be their ‘convincer’.

06|

They may have to meet it more than once

Research on convincers (how people decide) shows that we all need to hear, see, experience or read things a certain number of times or over a

period before we believe it is true – until we are convinced. Every person has a different channel and a different number. I had a client once who needed to hear something for three months to make a decision. She talked about working with me for three months before making the appointment. She followed up on my quote three months later.

My dad’s different: he needs to experience something once before

NEWS / ROUND-UP

deciding. He proposed to my mother on their first date. He bought houses he saw once. He took a holiday on the spur of the moment. So your client may just need to hear, see, read or experience why what they are asking is impossible a few more times to know it’s not possible. If your convincer is short, and your client’s convincer is long, then maybe it’s just about a little patience.

07|

Last resort: refer them to a colleague

There is also the nuclear option: don’t provide to them. Refer their business to a colleague.

08|

Check out your processes

Finally, if your clients consistently ask for the impossible, check how you are

marketing to attract this kind of request. Look at your customer information, website, customer welcome packs, everything you give to clients. Make them so clear that you’ll cut out some of the impossibles.

A chain of pharmacies found the most impossible customers were those waiting to pick up prescriptions. They created a poster showing the 26 steps that the pharmacist went through to ensure a prescription didn’t accidentally kill someone. Customer impossibility evaporated.

“There is also the nuclear option: don’t provide to them.

Refer their business to a colleague”

09|

Look after yourself

In the end, the more fit, healthy and happy you are, the more easily you can convert impossible clients into happy, referring clients.

So look after you!

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YO NG GU S

SPECIAL REPORT / YOUNG GUNS

AUSTRALIA’S BROKING STARS OF THE FUTURE Meet the young talent that’s taking the Australian mortgage broking industry by storm

W

ith all the stories of doom and gloom that have engulfed the Australian financial services and property markets in recent years, you’d be forgiven for wondering why bright young things would be drawn to a career in mortgage broking. Listen to the doomsayers and you’ll hear about mass redundancies in the finance sector and cautious homebuyers sitting on their hands waiting for the property bubble to burst.

It’s both inspiring and refreshing, therefore, to speak to the numerous ambitious young brokers who have made great

strides in their fledgling careers, and show no signs of turning back.

This year’s MPA Young Guns report features a bright crop of promising new entrants to the industry who are attacking the profession with vigour.

So how did we select these young stars? Candidates had to be no older than 35, have been broking for no more than two years and can’t have featured in last year’s Young Guns report – only fresh faces need apply.

Judging by the calibre of new brokers that feature in this year’s rundown, the future of mortgage broking looks to be very bright indeed.

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Young Guns enriching our future The ideas and talent recognised in this year’s MPA Young Guns feature are the ones that will grow and enrich our industry into the future. They may even change the way you are doing business.

The MPA Young Guns feature highlights a select few of the industry’s most outstanding young mortgage brokers. They have been nominated by their Aggregator and have been acknowledged for their customer service, outstanding performance and business growth.

The future of our industry depends upon professional, young operators who are focused on building successful businesses by delivering excellent customer service. This feature highlights those who are doing it right and it shows they are all driven to help their customers to get the best home loan to suit their needs.

Commonwealth Bank is committed to the mortgage broking industry and encourages all brokers to be professional in every way; to adopt on-going education and ethical behaviour.

If you want to see the best of now – look to the winners at industry Awards such as the Australian Mortgage Awards and the MFAA Excellence Awards. If you want to see the best of tomorrow, look to this special on Young Guns in the industry.

The MPA Young Guns feature has been recognising young talent since 2010. If your name isn’t in here yet, don’t give up trying.

Kathy Cummings Executive General Manager, Third Party and Mobile Banking

NAME: FAB MASTRO COMPANY: MORTGAGE CHOICE LOCATION: MELBOURNE, VIC Twenty-seven-year-old Fab Mastro has taken an interesting route into the world of mortgage broking. Before becoming a loans consultant at Mortgage Choice in Melbourne, he worked in the sporting and recreational industry with the YMCA, as well as some other sporting organisations. Recently, however, he decided that it was time to seek pastures new and move out into fresh territory with his career, and it turned out that mortgage broking was the perfect fit. Evidence that moving into the mortgage space was the right move for Fab comes in the form of his impressive settlement figures. During the 2012 calendar year he settled $37.5m of home loans.

Not bad for a mortgage broking freshman.

“Getting into the industry was a combination of factors,” he explains. “Having the right contacts, getting involved in an opportunity that was going to provide the right support base – which I definitely have – always enjoying the interaction with clients and having a love of property. After buying my first property and going through the process, I saw an opportunity to become involved in a way that suited both my lifestyle and my hunger for career progression. I

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now work the hours I want to, can operate from a remote location if need be and am building not just a loan book, but hopefully clients for life. This has proven extremely rewarding, and it’s something I hope to do into the future.”

When questioned about what he has learnt about broking so far, he notes that the single thing clients are crying out for is great service.

“Some brokers talk about it and don’t deliver; others don’t talk enough about how they do deliver. It is a fine line, but at the end of the day it’s only achieved by putting in the effort and having an amazing support team behind you. If a client becomes a ‘raving fan’ of the service you provide, this is what then builds your business.”

Career-wise Mastro would like to further entrench himself in the finance and property industries, and would ultimately like to be able to employ others. To continue learning is also another key goal. “I suppose the day I stop learning in this industry is the day I move on!” he says. “I’m always looking for ways to improve the way I operate and gather different ideas of doing things, whether it is by trying to better my skills, learning new information by attending industry events or PD days – or simply improving my management techniques.

“The industry is in an interesting period right now.

With the change in credit legislation and the overall slowing of credit growth, some would expect brokers to either leave the industry or begin the transition away from it. I really see it as an opportunity to change the way brokers operate and offer a more comprehensive service, both in what we initially provide to the client and the ongoing contact we have with them throughout the journey. I certainly have some ideas around this, but that may be an idea for another time!”

SPECIAL REPORT / YOUNG GUNS

NAME: KARLI MARTIN COMPANY: MORTGAGE CHOICE LOCATION: BRISBANE, QLD One of the youngest brokers in this year’s Young Guns, 22-yearold Karli Martin has made great strides in her short career in the world of mortgage broking. Starting out as an admin assistant at Mortgage Choice in inner North Brisbane in July 2011, Martin showed great potential from the get-go, and within six months was offered the opportunity to move into a loans consultant role – which she grabbed with both hands.

“After seeing the professionalism of the brokers around me, I immediately jumped at the offer,” she explains. “I completed all the required qualifications and began writing loans in February 2012.” She went on to settle $23.2m worth of loans last year, showing that she’s taken to the job like a fish to water.

In terms of short-term goals, Martin aims to advance her mortgage broking skills and continue to increase her volume of clients and applications, which will in turn see her settlement numbers increase. “In the long term, my goal is to continue working for Mortgage Choice in Brisbane and to make the most of any opportunities that may emerge,” she adds.

“I only see positive things for the industry. There has been consistent growth in our local franchise business. I envisage this to be replicated industry wide and I don’t anticipate any change. Lenders are more competitive than ever trying to gain market share, and this combined with the drive of clients to compare loans to save money, means brokers are the best solution to assist them.”

So what’s the secret to her successful entry into the mortgage broking market? Martin puts it all down to having great mentors. “I’m very fortunate to be in an office surrounded by successful mortgage brokers. The things that I have learnt from them are invaluable [such as] understanding that the customer is the most important aspect to being successful, as is building strong business relationships. I’m a very competitive person who is always aiming to improve and develop, professionally. I believe this determination is important in any successful broker.”

NAME: CALLUM KERR COMPANY: AUSSIE LOCATION: GREENSBOROUGH, VIC Thirty-five-year-old Callum Kerr originally started out in real estate, but the close ties with mortgage brokers that he forged while working in the UK saw him move into the broking field back in Australia.

“I was an estate agent in the UK for four years, as well as two years in Australia. In the UK we had a mortgage broker working in the office, and our sales targets were actually aligned to how many referrals go to the mortgage broker. So we needed to have a fairly good understanding of mortgages, how they worked and how much people could borrow. So that interested me.”

His mother is also a finance professional, having worked in banking all her life. She owns half of an Aussie franchise, and Kerr decided to move into the family business.

When asked whether the kind of in-house referral arrangement that he experienced between brokers and real estate agents in the UK would work in Australia, he noted that this may not work for all customers.

“We’ve got a lot of key referral partners, and a lot of them are estate agents. The difference here is when they’re working in the office it’s almost too in-house.

[Client’s may think] ‘I don’t want the estate agent knowing how much I can borrow’,” he says.

“With the people we deal with in the first conversation we say we’re completely independent to these guys.

‘Whatever you say to me is 100% confidential’.”

Kerr echoes the sentiments of many of our Young Guns in stating that success is all about service: “You’re selling the person, not the product. For example, my real estate background helps me immensely. A lot of people don’t know how to make an offer, and I give them a bit of help with that as well.” All of which helped him to settle $35.8m in the past 12 months.

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NAME: JOSH GILBERT COMPANY: LOAN MARKET LOCATION: ST KILDA, VIC Twenty-nine-year-old Josh Gilbert exemplifies the work ethic demonstrated by our Young Guns.

When asked what he’s learnt about becoming a successful mortgage broker in his short career, his answer is simple: “You are ultimately rewarded for how hard you work.”

“I think to be a successful broker you have to be good at building rapport with your clients and have good time management,” he adds, “[as well as] a desire to continually learn and most of all the motivation to drive your business.”

It’s this independent entrepreneurial streak, and a desire to meet the customer’s needs, that drove Josh to move out of the confines of being a credit union lending consultant and into the broking space.

“I have seen first hand how restrictive working with one financial institution with a strict lending policy can be. It was frustrating declining customer applications back at my old job when I knew they could obtain finance at a bank just around the corner. I wanted to be that person that could offer solutions and not turn people away,” he explains.

“I want to continually develop my knowledge and skills of lending into more forms of complex lending solutions, eventually building a team around me that will allow me to focus more on seeking out new business as well as continually maintaining my existing database.”

He sees a bright future for the mortgage broking profession, where clients trust their brokers enough to ask them to recommend anything from financial planners and accountants to builders and buyer’s agents.

“This client mentality of not only seeing the mortgage broker for borrowing solutions but also as their one-stop shop for other services closely related to their industry can be attributed to two things,” he says.

“Since the legislation ban on exit fees, competition within the industry has grown. This on the basis of stronger industry body requirements (diploma) as well as ASIC continual overview of the NCCP Act. This will

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ensure brokers are suitably qualified and help build credibility of brokers.

“With the continual increase in competing for leads growing over time, brokers are building strong relationships with as many closely associated industry partners as possible. This presents much needed cross-sell opportunities. All of whom can provide valuable services for our clients.”

These grand visions are all certainly a far cry from his post-high school vocation – shovelling rocks and sand in the scorching summer heat all day as a labourer.

NAME: MATTHEW FORD COMPANY: FINESTREAM GROUP LOCATION: UNLEY, SA Finestream Group managing director Matthew Ford may only be 23 years old, but he already has a fine head for business. And in the case of his team at Finestream Group, business is all about concentrating on what they do well – and marketing themselves in that area.

“We have always predominately been focused in the asset finance field, specialising in motor vehicles and plant and equipment finance,” he explains. “Increasing demand from our customers has led to the recent formation of a mortgage broking service. However, to avoid taking on more work than I could handle, and potentially jeopardising our existing level of service or reputation, I sought out and employed the best candidates I could find to manage the home loan business; young, mostly ex-bank workers with a strong motivation to carve out their own section of the industry, and enthusiasm and knowledge to provide the highest level of customer service.”

Referrals, too, are central to Ford’s ethos, and he has built up a solid network of referral partners. He also encourages his team

SPECIAL REPORT / YOUNG GUNS

to actively ask clients for referrals, which means service has to be top-notch.

“We want them to walk away wanting to use us again, and to encourage their friends and family to do the same,” he says. “Being based in Adelaide, reputation is everything. Everybody knows everybody and you only get one shot to prove yourself to your clients and potential referral partners. We have worked very hard to build up our reputation in the field of asset and equipment finance in Adelaide. How you are perceived by the market is very important; we constantly work towards being known as the best in our field.”

Ford took a big risk in entering the mortgage broking market, as that meant ditching his job with a big four accounting firm, but a personal experience persuaded him to make the move. He knew he wanted to work with money and went into accounting to gain exposure to a cross section of different businesses before deciding on his next move.

“I did not enjoy it at all,” he explains. “Joining the firm was one of the best things that I will ever do because it taught me very quickly (and thank God right at the beginning of my career) what I did not like. I knew that I didn’t want to be an accountant, I knew that I didn’t want to be a very small wheel in a very large machine, and I knew that I didn’t want a desk job tucked away from the world referring to clients as surnames only rather than ever actually meeting them in person.” But a chance encounter would change all that.

“While working for a large accounting firm I purchased a house with the help of a mortgage broker who was referred to me by my real estate agent at the time. With a common interest in cars and business, we became friends and not long after that I quit the accounting firm and started working as a trainee mortgage broker in his company. After completion of my studies I was presented with the opportunity to purchase the business in its entirety.

At this stage it was a small book of mortgage and asset finance clients based predominately in Adelaide,” he says.

“It wasn’t that long ago that I didn’t even know what a mortgage broker was. I did know, however, that I didn’t want to be an accountant – the career path that I had so promptly chosen out of high school. I always knew that I wanted to have my own business. I remember when I was about 12 or 13 I would think up elaborate business ideas complete with business names, and business plans, and present them to my father who to this day is my greatest business mentor.”

Having set about establishing Finestream’s

“It wasn’t that long ago that I didn’t even know what a broker was. I did know, however, that I didn’t want to be an accountant” – MATTHEW FORD, FINESTREAM GROUP

reputation, Ford took client feedback on board and decided to do things differently. Complaints about the duplication of paperwork that was required when dealing with various different finance professionals led him to test the one-stop-shop idea – incorporating broking, accounting, business advice and financial planning under one roof.

“The response I received was astronomical, with clients explaining how much easier this would make dealing with the financial requirements of life. Through this, Finestream Group was formed,” he says. “With each business unit supporting the next, and all the while focused on a framework of exceptional customer service, the business has grown organically and exponentially. We have beaten a down market by adjusting our business to be so dynamic that every Australian is now a potential client.”

NAME: BRUCE PODGER COMPANY: AUSSIE LOCATION: SOMERVILLE, VIC Thirty-year-old Bruce Podger has been in the mortgage broking game since August 2011, and has got off to a flying start – settling $24m in loans in his first year.

His was an unconventional route into the industry, having previously run his own café business, but the lure of flexible hours and being able to help people achieve their home ownership goals led him to take up a mortgage broking role with Aussie.

When asked about his career goals, Bruce is ambitious and to the point: “To have a loan

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SPECIAL REPORT / YOUNG GUNS

MPAMAGAZINE.COM.AU| 37

book of $100m by the end of my third year as a broker”. That gives him until August 2014 to hit his target.

In terms of the profession’s future, Bruce is optimistic that meeting the needs of busy customers will continue to be the mortgage broker’s domain. “I see the industry growing as competition in the market grows. Customers are getting busier and busier in the world these days. Having a broker one-stop shop makes the time involved in researching different home loans a lot simpler and easier for customers,” he says.

“Being a successful broker in my opinion is about customer service. If you look after your customers they will refer you to others.”

NAME: JUSTIN VELLA COMPANY: BERKELEY CAPITAL PARTNERS LOCATION: MELBOURNE, VIC Twenty-five-yearold Justin Vella has some phenomenal figures to back up his claim to being one of Australia’s Young Guns. Over the past 12 months he has settled approximately $65.5m in loans – $59.5m in the commercial sector, and $6m in residential transactions. He’s one of a new breed of mortgage broker who has entered the industry straight from university with a finance qualification (Bachelor of Business, Banking and Finance) already under his belt. In fact, Vella couldn’t even wait for graduation to get his foot in the door, joining Berkeley Capital Partners’ Work Integrated Learning program while still an undergraduate.

“The position was part-time and it gave me an opportunity to understand and get a feel for the industry first-hand while allowing me to complete my degree,” he explains. “Upon completion, I worked towards the necessary minimum requirements to become accredited. I have been trained via an accelerated training program under principal Brett Hartwig,

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supported by my other colleagues, in both the commercial and residential sectors.”

He has since worked on a wide range of transactions, including residential and commercial property purchases and developments, cash-flow lending, trade finance, foreign exchange, equipment finance and refinances varying in complexity and size.

“Berkeley Capital Partners has provided me with the opportunity and exposure to complex commercial and property transactions allowing me to develop my skills and excel in the industry. As debt arrangers and advisors, with $500m-plus under management, I always felt Berkeley Capital Partners would give me great exposure to the finance industry. Our client base is broad and has a variety of high net worth corporate, commercial and small business relationships held within various industries,” he says.

NAME: ASHLEIGH WIGHT COMPANY: DIVERSIFI LOCATION: NORTH PERTH, WA Diversifi’s Ashleigh Wight attained her Australian Credit Licence and became an MFAA broker at the age of 23, and within four months had already found herself in fourth place on Choice Aggregation Services’ monthly list of mortgage brokers who had attained the highest number of individual loan approvals.

“I then jumped to second position in WA the following month and simultaneously was awarded a Bronze Award for settling over $2m of loans. December 2012 saw another monumental month, with me settling over $4m of loans,” she says. “My milestone months of September and October 2012 also saw Diversifi achieve record numbers of group loan approvals, totalling over $36m.”

All up, eight months down the line, Wight had $14m of unconditionally approved loans to her name, and settlements that were just shy of the $10.3m mark. At the same time, she was announced as one of the five finalists in Australia for the MFAA’s Achievement Award for brokers who have less than four years’ experience in the mortgage

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“Clients want a broker who has patience and is willing to hold their hand through the process” - ASHLEIGH WIGHT, DIVERSIFI industry. Still just 24 years old, her enthusiasm is palpable.

“The honour in being named a finalist is truly a feeling that has been indescribable! I love what I do, but there has been a lot of hard work involved, with wonderful support from my principals, so I can honestly say that this accolade is a true testament of my commitment to a successful career. For Diversifi, me being named a finalist has instilled their belief there is a place for me to contribute to the industry and represent our brand in a reputable light,” says Wight.

When it comes to maintaining her reputation, Wight believes that service, patience and understanding are key.

“Clients want a broker who has patience and is willing to hold their hand through the loan process.

This makes the world of difference between an exceptional experience with a mortgage broker and a below average experience. Returning phone calls and emails within two hours goes a long way when clients recall the service they received from you,” she says.

In terms of her future goals, Wight plans to establish her own Diversifi franchise within the next four to five years. And with her “love what you do, and you’ll never have to work another day in your life” philosophy, she has every chance of achieving that goal.

In the future she sees technology and internet continuing to evolve, and customers becoming more and more educated on financial alternatives and loan products – as well as realising the importance of using a mortgage broker for gaining unbiased advice.

“With access to lender comparisons, clients can make a more informed decision when choosing which lender to proceed with. With the support of the MFAA, the mortgage industry has seen rapid growth and has become a force to be reckoned with, as more and more consumers are using mortgage brokers, instead of approaching the banks direct,” she says.

NAME: CATALINA MILLA COMPANY: LOAN MARKET LOCATION: MELBOURNE, VIC Thirty-three-year-old Loan Market broker Catalina Milla regularly settles $2.5m per month, making her a solid performer in the Melbourne market.

She picked up the idea of taking on broking herself through her work as office manager and PA to a broker.

This is where she cut her teeth learning to structure and prepare loans “as well as how to problem solve and work together with the lenders to achieve results”.

While she has few complaints about her pre-broking career, which provided ample opportunity for teamwork and on-the-job education, there was something missing in Catalina’s eyes.

“The ability to evolve and expand in my career was limited,” she explains. “I had worked very hard for years and found when I became a parent I would have to change careers or begin within another industry. Becoming a mortgage broker allowed me to become mobile and work wherever I am – and take control of my business growth and potential through the amount of effort and hard work I am able to put in.”

Judging from her ethos of keeping in touch with clients regularly, and “knocking their socks off with service”, the amount of effort and hard work she’s able to put in is considerable. “Always place yourself in your client’s position and then structure their loan accordingly,” she says. “There is less need for maintenance in the long run, and it personalises your service to them by really trying to understand how your client wants their loan to function.”

In line with many of our Young Guns, Catalina sees the mortgage industry becoming more regulated in future, but views this as an opportunity for brokers to carve out a niche market in providing the unique capability to offer comparative solutions to clients “rather than limiting the clients’ options to only one lender’s products”.

And in this future she sees herself expanding her business to create a team of loan writers that can provide exceptional service “and an avenue for specialised lending and solution-based lending”.

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NAME: MATTHEW EGAN COMPANY: MULCAHY & CO LOCATION: BALLARAT, VIC Twenty-eight-year-old Matthew Egan is going great guns for one so new to the mortgage broking industry. He already settles approximately $3.25m-worth of loans each month, which equates to annual settlement figures of just under $40m. He puts his success down to forming strong relationships with clients from a range of different backgrounds and professions – which helps to diversify his client base.

“These include residential, commercial business owners, investors, self-employed, self-managed super fund lending, and farming primary producers,” he explains. “The diverse nature of my client base means my referrals will come from more than one source, which is vital to my success as a broker.”

He moved into broking to seek a new challenge and step out of his comfort zone. He was working as a lending manager for one of the majors at the time, but decided that he needed to move on to progress his career.

“Taking the biggest risk in my life and leaving my secure surroundings has been the best decision I have ever made in order to progress my career, knowledge and client network,” he says. “My career goals are to maintain strong trustworthy relationships with my clients, which will ultimately lead to longevity in an industry that can be difficult to succeed in.”

As well as getting the basics right – maintaining your level of training and product knowledge and having honest conversations with your clients to earn their trust – always being prepared to challenge yourself is a quality that Egan sees as vital to success.

“Diversify your client base with those who have different lending needs. If you specialise in one area of lending only, the well may dry up on you very quickly.

Most importantly, know your customer and what makes them tick. Know what they like to talk about, understand what interests them, and don’t be afraid sometimes to simply have a social conversation with them. The more you know your client on a personal level, the more chance you have of maintaining that relationship, and receiving business from family and friends.”

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He believes that unprecedented regulation changes within the industry, such as NCCP and diploma requirements, can only be a good thing. “This makes sure that our industry brokers are of the highest standard, and have the required knowledge to give the advice that we do. I can see further regulation to come; whether that will be a positive or a negative will depend on what will be introduced,” he says.

Egan also expects the volume of loans introduced by brokers over the coming years to steadily increase.

“Consumers more than ever are realising the benefit of seeking the best finance offering available to them, rather than traditionally walking into their local bank.

Competition in the mortgage market is as intense as it has ever been, and consumers are now more savvy when it comes to seeking that better deal.”

NAME: HAYDEN DEMPSEY COMPANY: PREMIUM PORTFOLIO FINANCE LOCATION: PERTH, WA Twenty-nine-year-old Hayden Dempsey may be new to the broking industry, but in his short time as a broker he has already become the owner of his own practice – Premium Portfolio Finance (PPF). He began his formal training as an accountant and cultivated his talent for sales through roles at the Police and Nurses Credit Society and then as a banker at NAB. At NAB, Dempsey was selected to be part of the National Mobile Bankers Advisory Board and, on average, wrote $50m per year – exceeding $20m in some quarters. He was recognised as one of the top 10 mobile bankers for NAB in Australia.

“The structure of your week is pre-booked due to the high level of demand. Targets are set from $35m up to $55m per year, depending on how long you have been working for the organisation. The considerable workload makes it increasingly difficult to build rapport as your focus has to be on the new mortgage clients only, and there is a fragile balance between service and productivity. That balance makes it difficult to maintain ongoing satisfaction within the role,” he explains, adding that the highpressure environment also had its plusses.

“The best experiences were the

SPECIAL REPORT / YOUNG GUNS

colleagues that I met during that time. Whilst mobile bankers are generally incentivised from an individual target, everyone banded together to help a new entrant and teach them the ropes. It’s a tough job without support, as the majority of our time was spent in client’s homes in the evening; it was comforting to know you always had three or four other bankers working the same hours should you need to talk through a scenario.”

In May 2012, Dempsey used his eight years of experience in the finance sector as a springboard for making the jump into mortgage broking, and formed PPF from the ground up. Thanks to ex-colleagues and his aggregator Finsure, he has built up a sound referral base which continues to grow as his reputation for quality service spreads. He has settled approximately $15m in mortgages for the financial year to date, and has set a budget per loan writer of $25m–30m per year.

“I decided to move into broking due to the clients’ demand to be cared for after funding. This wasn’t part of the primary job role in the bank. You learn so much about a particular customer to the point that you are thinking about them and wondering how they’re doing two or three years later, when you may not be working for that organisation in that timeframe.

“The product options available to a broker are incredible. There is a deal out there for everyone and I find it just takes the right approach and knowledge to place a customer with a suitable solution.”

Vital to Dempsey’s business model are the strategic alliances that he has formed with a number of likeminded professionals across different, but aligned, industries. He has made a proactive effort to source leads and business from financial planners, real estate agents, marketing campaigns and social networking.

Dempsey’s passion for PPF is fuelled by the belief that brokers should provide clients with the service of their own personal bankers who can move with them through their financial goals and life changes.

It is this which sets him the ultimate goal of setting PPF apart from other brokering practices by providing long-term solutions.

“My career goals involve building a sustainable business where we can implement a retention model then add to our service offerings. The clients that we manage under our portfolio will grow with us and we plan to be around for them through these changes.

We already have strategic alliances with financial planners and insurance specialists, however we are looking forward to seeing these relationships develop over the years and developing market presence with likeminded organisations. For now, I’m excited to assist each client in making the most informed choice about their finances.”

NAME: BRENDAN HAWE COMPANY: ECHOICE LOCATION: NEWCASTLE/HUNTER, NSW Irishman Brendan Hawe wouldn’t have entered the Australian mortgage broking market if he hadn’t fallen in love with an Aussie girl back home and followed her to these shores.

Having worked in an accounting practice in Dublin, Hawe’s introduction to the mortgage market came as a telemarketing consultant with Firstfolio. “My best experience from my time as a telemarker pre-qualifying leads was helping people achieve their goals and the sense of satisfaction you get from this,” he says.

Hawe’s strong work ethic saw him take evening and weekend shifts, and he often set the bar for the number of appointments booked and conversion rates.

This ambitious approach to his work saw him promoted to loan consultant, initially on the My Rate/ wholesale account, and later as an eChoice phone broker. During this time, Hawe picked up his Certificate IV in mortgage broking, became an MFAA member and obtained numerous bank accreditations.

He’s now been broking since October 2011.

On a personal level, Hawe got married, started a family and decided to escape the big smoke – trading Sydney for Newcastle. He’s now a home loan manager, receiving eChoice leads for client appointments while also building his own local network.

He now settles $3m–4m per month in loans over the phone, and wrote just under $39m in mortgages during 2012. “My career goals are to grow my business here in the Newcastle/Hunter region and build the eChoice brand up here into one of the local market leaders,” he says.

“The eChoice model is great because it is flexible.

I’m based in Newcastle as an on-ground and phone broker. I’ll be given leads in the Newcastle area where I can go and visit and the client for the initial consultation. I’ll also be given phone-based leads where I can take the appointment over the phone and send quotes or comparisons by email.”

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NAME: AARON CHONG COMPANY: ACE CAPITAL LOCATION: MELBOURNE, VIC Mortgage broking runs in the family for 26-year-old Aaron Chong. His father is also a broker, and watching dad go about his work convinced Chong to join the family business. “I thought I’d help him out with that, it was something I was interested in doing and it turned out to be a good move,” he says.

His route into the trade is a familiar one, having spent some time working for a national bank before deciding to take a more personal approach to business. “I’ve always wanted to do things for myself and play a more active role, and that’s why I got out of it,” he says. “It gives me a chance to get out there and do something more proactive.” But he does admit that mortgage broking isn’t as easy as it seems.

“It’s actually quite complicated. You really want to do the right thing by the client, and there are a lot of different angles to it. But I’m glad I made the move.” His 2012 settlement figure of just under $30m suggests it’s a move that’s paying dividends.

Perhaps less conventional, but useful nonetheless, is his other pre-broking career as a lawyer for ASIC. Chong concedes, however, that his ASIC experience is “more of a background thing” rather than being something that helps him with the day-to-day tasks of broking.

Looking ahead, he predicts that brokers will score a larger share of the market as time goes by. “But what I’ve also noticed is that people are willing to change their broker. A lot of the clients I have used to use other brokers.”

One of the key complaints he hears is that brokers don’t maintain the ongoing relationship with their clients, or don’t have the expertise required to deal with more complicated requests from property investors for example.

“Particularly with the prolific investors they need someone who understands how to get the deal across the line.”

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NAME: NATHAN TADDEO COMPANY: STRATEGIC FINANCIAL GROUP LOCATION: MELBOURNE, VIC For 27-year-old Nathan Taddeo, joining the financial services industry was almost a foregone conclusion. He grew up surrounded by finance, and ultimately decided to join his father, Frank, at the familyowned Strategic Finance Group. Taddeo has been a loans consultant with the group since April 2011, and has made incredible progress in his fledgling career – settling $34m in residential loans in 2012.

“Some of my earliest memories are of accompanying my father when he was at Citibank to yum cha business lunches and these encounters sparked my strong interest in the finance industry,” he says. “I tested the waters by taking a different path, studying resource management at university whilst doing as much travelling as I could. But there was no denying that the finance seed had already been planted, as my electives were always chosen around economics and property.

I knew it would be silly to not at least give the field a shot.”

He’d initially planned to look at other areas of finance as well as mortgage broking, but found that its challenges and day to day lessons were so satisfying that he never moved on.

“From my perspective, the industry is in complete control of where it heads and how it moves, which is a good thing. There are plenty of positive signs in the market for brokers and because of this I believe that we’ll see the cream rise to the top. Those who really understand not just mortgage broking but finance as a whole are the ones who will thrive. As will those who are able to mix in a bit of creativity on the technology and marketing side,” he says.

Taddeo’s ambition is not to be the biggest, but the best. “There’s nothing more satisfying than knowing you’re doing the right thing for a client who needs and appreciates it,” he explains. “At the core of being a successful mortgage broker is understanding: your clients’ needs, your product offering and how a client’s borrowings may affect their overall financial position.”

SPECIAL REPORT / YOUNG GUNS

NAME: MARK WYLD COMPANY: MW WEALTH MANAGEMENT LOCATION: MELBOURNE, VIC After completing his Bachelor of Commerce, majoring in finance, 29-year-old Mark Wyld made his debut in the finance sector at a boutique financial planning firm. He tried his hand in real estate sales for 12 months before starting up MW Wealth Management in March 2011.

The company started out managing investment portfolios and specialising in SMSFs, but within six months Wyld extended his service offering to debt management.

He’s a big fan of new and innovative marketing strategies, such as video blogging and inbuilt referral systems into financial and mortgage products, and this approach has seen MW Wealth Management take in more than $10m in funds under advice and over $200k in insurance premiums in its first 12 months.

On the mortgage front, Wyld has been engineering specific mortgage products designed to help clients get out of debt faster – and puts the amount that he has managed to wipe from his clients’ mortgages in just 12 months at more than $1.5m. His total settlements over the last 12 months have come in at $15m.

He believes that trust is crucial to the broker-client relationship. “We do this by benchmarking clients’ progress and holding them accountable. With this comes peace of mind for the client that you’re the person for the job.”

Clearly ambitious, Wyld envisions compounding growth that should see his business grow to accommodate a full-time broker and a financial planner in 2014. He’d like to have 10-plus advisers under his wing in the long term.

Looking ahead, he sees the need for brokers to propose a strong value proposition. “I think the need for personalised service will become more prominent as we enter a more digital world. Clients want to be heard, understood and have peace of mind that their needs are looked after.”

NAME: GEORGE SAMIOS COMPANY: MADD MORTGAGES LOCATION: EAST BRISBANE, QLD George is another Young Gun who moved from banking to broking. He started out as a mobile banking manager with Bankwest as a green 20-year-old – he didn’t even know what LVR was at the time.

“I sold myself as a salesperson to gain employment,” he explains. “I still remember saying to the lady who put me on, ‘I don’t even care if you don’t pay me, I will be number one.’ I was extremely motivated and driven, young and mega enthusiastic.”

He had previously worked in the cut and thrust world of real estate and, rather confidently, figured that mobile banking would be “a walk in the park”.

This confidence saw him take the number one spot he craved.

“I don’t let anything put me down. When I was a real estate agent , fresh out of school, I used to door knock every day. The rejection keeps me going, I thrive on every ‘no’ because I know that eventually I will get a ‘yes’.”

Samios looked at the figures he was settling as a mobile banker (averaging $8m–9m per quarter) and estimated that he could triple his income by matching that success as a mortgage broker. “I was far too comfortable in that role, I needed to be back on commission and out of my comfort zone,” he says.

Now 24, and with $41m of settlements to his name in 12 months, his goal is to continue expanding the MADD brand, having grown from a one- to three-strong team in the last month. “We have two admin staff and another mortgage broker who sees my vision. For the team we want to settle $10m per month.”

As well as keeping to the basics and being seen by clients, Samios sees a large part of his success having come from learning to diversify to meet community needs. “I became a mortgage broker just to do home loans.

I find myself now doing every facet of finance.

Don’t limit your income by only doing home loans. We do car loans, equipment finance, insurance… We need to be adaptable and open to anything.”

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PROFILE / JEREMY FISHER

MPA Top 10 broker Jeremy Fisher from 1st Street explains why he thinks industry regulations are a positive step for the mortgage broking profession, how exceptional service always leads to client referrals and why he’s looking to bring more brokers onboard

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Q: Why did you become a mortgage broker?

A: I have always been interested in the property market and, after several years as a stock broker, I recognised that there were great opportunities within the emerging mortgage broking industry. I established 1st Street in 2002 in order to offer a premium, boutique and personalised service to those seeking a home loan.

Q: You reached number 6 in MPA’s Top 100 last year.

What do you attribute your success to?

A: In my dealings with all clients I always go to great

"I always go to great lengths to offer exceptional service and treat people how I would like to be treated"

lengths to offer exceptional service and treat people how I would like to be treated. Clients have appreciated this approach, and all have referred me to at least one other new client.

Q: How has the industry changed since you took up mortgage broking?

A: Every year the government, as well as the heads of the

Q: What has been the highlight of your career?

A: It was great to be awarded with the inaugural

industry, have diligently tightened regulations to ensure that mortgage brokers have a reputation for honesty, integrity and transparency.

Australian Broker of the Year (ABA Awards) in 2011.

Q: What keeps you motivated?

A: Purchasing a property is a big step for most of my clients, and it is great to see their satisfaction with my service and delight with the opportunities I make available to them. Having a growing business with motivated people around me is also very rewarding.

Q: What do you think is the biggest challenge facing mortgage brokers at the moment?

A: With the continuing enhancements to industry regulations many brokers may have found it difficult to keep up, but overall these changes are a positive step forward for the industry.

NITY Q: What do you see as your unique selling point when it comes to attracting clients?

A: 1st Street offers a highly personalised service through very experienced and knowledgeable mortgage brokers.

Each client has one main contact from their initial meeting through to settlement and it is always a priority that the home loan process is as simple and stress-free as possible for all clients.

Q: How do you see it evolving over the next decade or so?

A: I see the biggest change over the coming years will be mortgage brokers integrating other services to their current offerings, such as financial planning and leasing.

I also believe we will see the online mortgage market evolve over the next decade so mortgage brokers need to remain in touch with this space.

Q: What advice would you give to new entrants to the mortgage broking industry?

A: New brokers should become well aware of industry regulations and market segmentation, and keep up to date with all changes. They should also aspire to offer exceptional customer service to all clients at all times.

Q: How do you build up awareness of your brand?

A: 1st Street is heavily involved in sponsorship in the areas of junior sport and primary education. We continue to enhance and develop alliances with complementary businesses and we have been expanding our social media presence over the past year.

Q: What are your key goals for the year ahead?

A: With our recent move into new and larger premises, we have more desks available and are always looking to take experienced and like-minded brokers onboard. We are also focused on continuing to expand into all states across the country.

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

A: As part of a full-service and holistic approach, 1st Street also offers insurance, leasing and financial planning all under the 1st Street name.

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FEATURE / NON-BANKS

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ON

The reputation of non-bank lenders and mortgage managers has been under the spotlight in the court of public opinion. How do they plan to fight back?

F

ollowing recent high profile collapses of non-bank lenders such as Provident Capital and Banksia, the reputation of non-bank lenders has taken something of a battering in the public eye. However, even with GFC hangover, market pressures and regulatory changes continuing to hit home, non-bank lenders and mortgage managers are still fighting their corner with vigour.

MPA has spoken to some of the sector’s leading lights to discover how they are facing up to the challenges that the year ahead presents, and why they still have plenty to offer to mortgage brokers and their clients.

NON-BANKS

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FEATURE / NON-BANKS

JOHN MOHNACHEFF, NATIONAL SALES MANAGER, LIBERTY FINANCIAL

customer is a mainstream borrower looking for a great rate or in a hurry, or someone with unique circumstances, we can help.

Since 1997, Liberty Financial’s custom lending has been making the dream of home ownership a reality for tens of thousands of Australians who previously had been frozen out of the market. It has gone on to diversify its product range to include car loans, investments, commercial finance and SMSF lending. Liberty is now one of Australian’s leading non-banks, having helped over 140,000 people with their lending needs.

What are your plans for the year ahead?

What’s the biggest challenge facing non-bank lenders at present?

John Mohnacheff

A: We have exciting plans for 2013. Not the least of which will be strengthening our leading position in the custom space, but also leveraging our multiple products across residential, motor and commercial lending to help our brokers diversify their service and revenue.

We’ll do this with the same service focus we have always had, with continued emphasis on professional development days and our constant training and visitation schedules – all of which are designed to support the broker community.

A: The ever-present control of the major banks. Even though non-banks provide consumers (and their Why should brokers come to you rather than advisers) with innovation, choice, price competition and other providers? superior service, they are rarely as well known or used A: Our innovative product range is only matched by as banks. To counter this, we continue to focus on market leading service. Liberty has a relationship team innovation, service and a great that is more extensive than most product line-up – but we can’t win other lenders in the country. We THE PROVIDENT-BANKSIA EFFECT the war alone. We really need the have a committed and experienced broking community to be equally team nationwide that provides What effect has coverage of the diligent in promoting the benefits brokers with unparalleled access Provident Capital and Banksia collapses of a vibrant non-bank community to to key decision makers, responsive had on the public perception of nontheir customers. turnaround times, an innovative banks and mortgage managers? and unique product offering, and A: The problem with the term non-bank is it’s far too broad. Aggregators are not banks, technology Where do you see the exemplifies a willingness to see a deal companies that provide loan systems are not opportunities? through to the end. banks – should we be including them in the A: Non-banks provide a fantastic set group too? You can’t just say all non-banks are of products to both brokers and the same and link the unfortunate failure of consumers, and can help brokers companies like this to all non-bank lenders. Each diversify their product range to lender can and does offer different benefits, counteract the potential challenges products, services and has its own unique strengths. The variety is enormous and this in the home loan market. This creates genuine competition. The danger in diversification is essential for brokers generalising is that the end customer misses out to survive in an increasingly because of inappropriate misconception. competitive financial services market.

Q

What’s your standout product, and what are its features?

A: Liberty’s custom lending product provides brokers with enhanced flexibility to offer solutions for all types of borrowers. It spans home, car and commercial loans, at highly competitive interest rates and for a broad range of borrowers including those who may struggle in obtaining finance elsewhere. We also pride ourselves on our fast and engaging service. That means, whether your 48 | MPAMAGAZINE.COM.AU

Following these high-profile collapses, how can brokers reassure their clients that your products are safe?

A: Unlike either of these companies, Liberty grew up in the broking market right from the beginning and has a long and proud history of supporting brokers and their customers. We know that brokers understand that our business model is very different from these companies, that it has withstood the test of time, including the odd crisis along the way, and that we have continued throughout our 16-year history to be a competitive, strong and credible lending alternative.

"We need the broking community to be diligent in promoting the benefits of a vibrant non-bank community"

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FEATURE / NON-BANKS

ADRIENNE CHURCH, DIRECTOR SALES, RESIMAC Adrienne Church

RESIMAC has been a product manufacturer, wholesale provider and securitiser of residential mortgages for more than 27 years, and became the first issuer of Residential Mortgage Backed Securities (RMBS) in 1988.

RESIMAC launched its retail arm through aggregators in 2010 under the Hemisphere brand.

investor demand both locally and internationally, the market isn’t back to where it was pre-GFC. Competing in a fiercely competitive market: While the major banks fight for market share, we have to ensure we continue to be competitive in product, pricing and service.

Where do you see the opportunities?

A: We have opportunities to raise awareness of our

brand and products. RESIMAC has always focused on raising awareness of our brand and products through What are the biggest challenges facing nonPR, advertising, conferences, roadshows and individual bank lenders at present? training. We have strong broker support today; these A: Product awareness: Non-banks offer much broader brokers recognise the superior service proposition and products than the main banks. In order to be competitive product innovation that we offer. We both rely on each we have to offer more other for success and we innovative products and recognise and reward the THE PROVIDENT-BANKSIA EFFECT superior service – this isn’t vital role we each have. something we can just talk There is always an What effect has coverage of the about, we have to deliver opportunity to continue Provident Capital and Banksia on it. raising awareness collapses had on the public perception New legislation: The throughout the wider of non-banks and mortgage managers?

A: The unfortunate effect of the collapse of some new legislation has driven broker community. As we non-bank lenders is this impacts both distributor some confusion about some are smaller than the banks and consumer confidence of our sector. Due to of the products we offer, for we have the ability to be the GFC, this isn’t limited to non-banks. The last example, Alt Doc (Lo Doc). nimble and to design few years has seen the demise, collapse and We have to continue to products based on the consolidation of many larger entities as educate the market that market needs and feedback well. With this brand damage it becomes more these products are viable received from our business imperative for the remaining survivors to band together to raise awareness of our sector, our under the new legislation. partners. Non-banks were brands and educating both distribution networks Some brokers are missing born from the need of and consumers of our strength and our out on business if they only market competition and businesses. RESIMAC is proud to say we support the banks and this continues to be a never stopped lending throughout the GFC, mainstream providers; genuine need for both we have always supported our business partners there is a market for distributors and and consumers, we are one of the survivors, alternative products and we consumers. Non-banks we are strong and we will continue to grow and strengthen. have to raise awareness on have historically led the these, and to provide tools market with product Following these high-profile collapses, how on how to sell them. innovation and we will can brokers reassure their clients that your Brand awareness/ continue to do so. products are safe? confidence: There has A: Non-banks are impacted by the collapse of been a lot of change and What are your standout other lenders. This isn’t limited to non-banks negative press over the last products, and what are collapsing – some larger brands also haven’t few years with the GFC, their features? survived the major challenges of the last few years. Brokers can reassure clients that we, and and non-banks have seen A: Highly competitively our products, are safe based on our resilience to a drop in volumes and priced Prime Full Doc date. There has been a lot of change and support due to this. products: annual fee and consolidation, and this has actually made the Cost of funds: This will no fee options; rate market stronger, the remaining survivors are continue to be a challenge, discounts <75% LVR; strong. We are here to stay. We also have external even though the non-genuine savings validation to support this from the likes of S&P securitisation market is a available; 100% offset with where we receive the highest possible servicer rating of ‘strong’, which reflects our robust lot more buoyant than it debit card; LOC with no business model. was. With increased interest rate loading.

Q

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"In order to be competitive we have to offer more innovative products and superior service" Newly launched SMSF product: max LVR 80%; competitively priced well below major banks; multiple loan splits available at no additional costs.

Specialist lending products: both Full Doc and Alt Doc options; 90% Alt Doc available for both purchases and refinances; unlimited cash out to 80% (including Alt Doc loans); interest rate ‘step down’ available; highly competitive interest rates and upfront fees, with no ongoing account-keeping fees.

Other products: impaired credit consider <12 months across all products; Alt Doc loans available without BAS; ABN from six months acceptable for both Full Doc and Alt Doc loans; recently introduced an additional 11,800 acceptable locations to our SL program. RESIMAC will now consider a security property virtually anywhere within Australia.

What are your plans for the year ahead?

A: This year will see us rebranding our retail arm to RESIMAC Financial Services, leveraging off the strength of our brand and business. We will continue to widen our distribution networks and invest in workshops and roadshows educating our business partners on the strength of our brand, our products and our key points of difference to the banks. We will continually focus on our business partners, listen to their feedback, identify and take advantage of opportunities as they arise.

Why should brokers come to you rather than other providers?

A: Because we do it better, we have broader products and a better service proposition and we have to deliver on this to compete. The banks have much larger brands and with the ‘flight to brand’ seen over the last few years they haven’t had to work as hard for their business. We have to and we do to survive, hence we are still here, we are still strong and we are still focused on growth. RESIMAC not only provides broader products but we definitely have a better service proposition, our distribution networks not only have BDM support but they can also contact our credit assessors, we provide personal service, and we listen to their needs.

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FEATURE / NON-BANKS

SCOTT MCWILLIAM, CEO & GREG MITCHELL, GENERAL MANAGER SALES, HOMELOANS LTD Scott McWilliam

Founded in 1985 and listed on the Australian Securities Exchange in 2001, Homeloans Ltd specialises in home loans, and has a wide range of products to meet the needs of all types of customers, from first homebuyers to investors. With an Australia-wide presence, Homeloans provides a refreshing alternative to the banks for home finance.

What’s the biggest challenge facing non-bank lenders at present?

SM: There does still remain some negative perceptions with regards to non-bank lenders. The challenge for us is to educate borrowers and brokers alike of the benefits of dealing with today’s non-bank lenders and reassure them of our strength and security.

Where do you see the opportunities?

SM: The non-bank sector has a genuine opportunity to grow its market share by continuing to deliver a broker friendly service proposition and enable a wider group of borrowers to access finance. Homeloans has an opportunity to educate the market on the benefits of dealing with the Australian non-bank lenders of today, and our solid relationships in the third party broker channel will enable us to achieve this.

What’s your standout product, and what are its features?

GM: We have lots of great product ranges. With five different options all with extremely competitive pricing or features, it’s difficult to highlight just one.

However, the Homeloans Ultra is a fully featured loan with fixed rates starting below 5% and variable rates from 5.49%pa [rates correct at time of publication].

THE PROVIDENT-BANKSIA EFFECT

Q

What effect has coverage of the Provident Capital and Banksia collapses had on the public perception of nonbanks and mortgage managers?

SM: As a non-bank lender we may be tainted, to a degree, with the same brush as the likes of Banksia; however, most industry stakeholders would be aware that we operate under a fundamentally different business model. Now in our 28th year of operation, we are confident that the market recognises our strength.

Following these high-profile collapses, how can brokers reassure their clients that your products are safe?

SM: Homeloans was established in 1985, and has been listed on the Australian Securities Exchange since 2001, so our clients can be assured that we are backed by nationwide strength and security and we adhere to the ASX’s strict standards on reporting and transparency in the way we run our business.

Our business model and funding arrangements mean that our risk profile is no different to that of an Australian bank.

"The challenge is to educate borrowers and brokers of the benefits of nonbank lenders "

What are your plans for the year ahead?

GM: One of our focuses is to continue to offer

complete competitive products, living by the “providing solutions” motto. We will also ensure we maintain excellent levels of service via our BDMs and retail salesforce enabling us to be a true non-bank lender alternative to our competitors in the marketplace.

Why should brokers come to you rather than other providers?

GM: Products, service, BDMs and competitive upfront commissions.

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Greg Mitchell

MPAMAGAZINE.COM.AU | 53

FEATURE / NON-BANKS

BRETT HALLIWELL, GENERAL MANAGER OF DISTRIBUTION, ADVANTEDGE Brett Halliwell

Advantedge has over 25 years’ experience in funding residential property purchases for Australians and, since 2009, has been part of the NAB Group.

Advantedge delivers competitive, innovative, secure and accessible home financing solutions with genuine, personalised service.

What’s the biggest challenge facing non-bank lenders at present?

A: Access to long-term, reliable funding. We facilitate

A: Advantedge offers a range of loan products for use by mortgage managers. Our flexible platform allows mortgage managers to tailor products to fit with their own strategy. Our model is the opposite of one-sizefits-all. It’s all about providing our mortgage manager customers with access to a range of dials and levers so they can customise their products to best fit.

What are your plans for the year ahead?

A: We are very aware that it is an increasingly

challenging market and, as a result, we work with all of our non-bank lenders as partners to help them maintain and grow their business.

non-bank lenders access to secure and stable What is your value proposition? wholesale funding via NAB’s AA- rated balance sheet.

A: Advantedge is committed to supporting its mortgage There is also increasing interest rate competition manager customers. Advantedge provides superior between banks and non-bank lenders. Banks are service through its call centre (8am–8pm); a dedicated driving competition by scenarios team; online deal providing more submissions, lending and competitive interest rates approval system for THE PROVIDENT-BANKSIA EFFECT and non-bank lenders mortgage managers via What effect has coverage of the must ensure that their Litework; support to loan Provident Capital and Banksia collapses rates remain sharply writers who are able to had on the public perception of nonpositioned to provide a talk to underwriters in banks and mortgage managers? competitive edge. every instance at every A: Provident and Banksia failed in many of the Consumers are also point in the process; and basics of finance. Their business models relied seeking a much more flexibility in structure. on raising funds from the public, who were conservative and riskAdvantedge provides potentially not aware of the quality of the fund averse angle. As a result, solutions and support for with which they were dealing. On the asset side, these organisations created high-risk loan they are looking for its mortgage manager books which experienced above average bigger brand names, partners to help them arrears. Unfortunately, collapses like these can security and backing when grow their business. lead to confusion where consumers get worried it comes to financing.

Examples of how this is about the risk of losing money, which is more of done are through the a risk when depositing, versus utilising a Where do you see the following: the Mortgage reputable lender to take out a loan. The opportunities?

Manager Forum; cutting coverage of the non-bank lender collapses has reinforced to the public the importance of A: The main opportunity edge consumer tools, such non-bank lenders being funded by institutions for non-bank lenders as point of sale brochures with solid financial pedigrees such as remains their relatively developed for mortgage Advantedge. As a result, it is important for small size. Non-bank managers to re-badge with consumers to understand who the underlying lenders are able to provide their logo on the back wholesale lender funding the loans is offered by more tailored and flexible page; a voice in the non-bank lenders. solutions to individuals. industry – Advantedge They are nimble and can sponsors trade media Following these high-profile collapses, how can brokers reassure their clients that your offer customers and their features to support the products are safe? distribution partners, such industry and its mortgage A: Select a mortgage manager which accesses as brokers, personalised managers; and the 23 loan funding from a wholesale lender with a and attentive service.

Reasons Campaign – a strong financial pedigree. Advantedge has been value-add advertising a part of NAB since 2009 and has delivered What’s your standout campaign to assist in the some of the most competitive and innovative product, and what are promotion of mortgage mortgage products on the market. its features? managers to consumers.

Q

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IAIN FORBES, DIRECTOR, AUSTRALIAN FIRST MORTGAGE (AFM) Iain Forbes

AFM was founded by Iain Forbes, David White and Tanya White in July 2003. Since launching in 2003, AFM has opened state offices on the Gold Coast, Melbourne, Adelaide and Perth. AFM employs 55 staff and is on the panel of most of the larger aggregators.

What’s the biggest challenge facing non-bank lenders at present?

A: To remain competitive; offer quality products with

attractive features; maintain excellence in service; beat the banks at their own game; improve existing IT systems and electronic lodgments; improve the client retention program and loan management system; and generally improve on technology to provide a professional image of AFM, its staff and operations.

What’s your standout product, and what are its features?

THE PROVIDENT-BANKSIA EFFECT

Q

What effect has coverage of the Provident Capital and Banksia collapses had on the public perception of nonbanks and mortgage managers?

A: These collapses have had little or no effect on AFM. It must be clearly understood that these companies offered debentures to the public, and used these funds from depositors to lend on risky commercial and other properties.

AFM, as a non-bank, does not take funds on deposit, or by way of debentures. All of AFM’s lending is from other accredited lenders who have AFM on their panel, eg, Adelaide Bank, ING Bank, Advantedge and others. Most loans with a high LVR are mortgage-insured and comply with the strict lending criteria of the lending institution and mortgage insurer.

Brokers can assure their clients that they are dealing with a highly reputable organisation when dealing with AFM. There is no risk to a borrower when obtaining funds from Adelaide Bank, ING Bank or Advantedge.

A: Complete Option Full doc: Loans to 95% LVR; no

application, valuation, legal, monthly or annual fees (fee terms and conditions apply); 25–30 year term; flexible repayment options; internet and telephone transacting; competitive pricing; mortgage insurance premium can be capitalised above 90% for purchases but cannot exceed 93% for refinancing; unlimited redraw transactions (variable rate only).

Why should brokers come to you rather than other providers?

A: The founding directors are available at most times to help brokers if their help is needed. Staff adopt a

can-help attitude, and will do whatever is necessary to assist and achieve a satisfactory result to a broker’s or client’s problems. Upfront and trailing commissions are attractive. AFM pays on time, every time. No excuses for late payments, as this has not happened in the 10 years of being in business. We have experienced and competent sales staff, supported by a national sales and credit support officer. Senior credit managers have delegated lending authority up to $2m to approve loans ‘in house’. AFM is a one-stop shop. It offers residential and commercial loans, as well as leasing and hire purchase facilities. Loans may be full-doc or low-doc.

MPAMAGAZINE.COM.AU | 55

FEATURE / NON-BANKS

Paul Wells

PAUL WELLS, SENIOR VP ASSET ORIGINATION AND CHIEF INVESTMENT OFFICER, LA TROBE FINANCIAL

upon such lenders’ securitisation trusts by the big banks who fund the initial loan origination (‘warehouse’) phase in the trusts used by many bank-independent lenders.

Established in 1952, privately-owned La Trobe Financial has lent over $10bn to over 100,000 borrowers nationally. La Trobe Financial has offices in Sydney, Melbourne and Shanghai, employs 125 full-time staff and can handle circa $1bn in loan originations annually.

Where do you see the opportunities?

What’s the biggest challenge facing non-bank lenders at present?

A: The competitive position of bank-independent

lenders has been somewhat diluted since the beginning of the GFC and, whilst La Trobe Financial continues to have access to long-term funding due to our diversified and stable funding model, the biggest challenge to other bank-independent lenders is raising cost-effective funding which delivers competitive product and pricing flexibility. So many of the product offerings now look exactly the same because of tighter post- GFC credit acceptance guidelines being placed

A: Bank-independent lenders in the past have provided greater flexibility and product innovation and we don’t see this changing. We will see more and more customers whose needs are not being met by the larger lenders and who will need flexible solutions. La Trobe Financial’s expertise in delivering specialised products to residential and small commercial borrowers is a proven model with its focus on appropriate, tailored credit analysis and innovative, efficient documentation processes to streamline settlement. We also see opportunity in the bank-independent brand space, as when you are dealing with RAMS you are really dealing with Westpac, and when dealing with Aussie you are really dealing with CBA – which is not suitable for everyone.

What’s your standout product, and what are its features?

THE PROVIDENT-BANKSIA EFFECT

Q

What effect has coverage of the Provident Capital and Banksia collapses had on the public perception of non-banks and mortgage managers?

A: I think the public are thinking, just like all of us in the

industry, “we’ve had enough of this allegedly highly regulated market permitting such behaviour”, and that it’s really not good enough. Trust is destroyed so quickly and can take years and decades to be re-established. But history tells us people do forget and regulators are left to clean up the mess of well-intended institutions which fail, and investors become the poorer. Over the last six months we have seen both loan originations and our funds under management increase at La Trobe Financial, with no investment withdrawals in response to any debenture funds being wound down. As usual, discrimination about who you deal with (track record of the firm) and asset quality is key. Experienced brokers and investors do understand the different underlying asset profiles at different lenders, and now increasingly the specific legal problems within a debenture structure. In our view, investments in low-risk assets like residential and small commercial mortgages through appropriately managed investment structures have experienced little to no performance stress in recent years, and our experience suggests that demand for our investment and lending products remains strong.

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Following these high-profile collapses, how can brokers reassure their clients that your products are safe?

A: As far as any borrower clients are concerned, no

borrower at these failed institutions has lost any money or had their mortgage loan enforced unless the underlying borrower has defaulted. So it has been a smooth ride, or business as usual, for loan brokers and their clients. Our commitment to innovation, product quality and service has been proven over 60 years and has never been better. We provide a broad range of products focused on meeting the needs of customers who we identify as inadequately serviced by larger lenders, whilst ensuring the stability of our business through choosing quality assets which in turn protect our investors – both retail and institutional. In short, this means we choose safe funding and investment structures, issued on conservative terms and over low-risk products. We have performed across every economic cycle over the last six decades, including maintaining lending and funding throughout and subsequent to many of these economic downturns. This reflects a core value of the business; that is, to perform strongly through every predictable downturn that can impact our business. Our investment products are rated independently and since inception we have not lost a cent of capital or interest to any of our institutional investors, ever.

A: La Trobe Financial’s Commercial Loan product is available for a variety of purposes including purchase, refinance, and limited cash out. We have structured our commercial products so brokers who have experience writing residential loans can write commercial loans more easily. Our requirements will be familiar to any experienced broker.

What are your plans for the year ahead?

A: We are very optimistic about the year ahead, notwithstanding projected low economic growth broadly. We are planning a regular roll-out of product improvements, including simplifying our product matrix, and increasing the efficiency and speed of our approval process. We are recruiting further experienced staff to add to our team of decision makers, and making sure they are armed with the tools and knowledge that could possibly make 2013 a record year for La Trobe Financial.

Why should brokers come to you rather than other providers?

A: One of La Trobe Financial’s main competitive advantages is its speed of decision making and

"We will see more and more customers whose needs are not being met by the larger lenders" execution. Whether our customer is a large aggregator, a broker or a direct borrower, our customer service is consistent. Customers always talk to real people; we do not use answering machines. All brokers access decision makers quickly and directly, receiving service levels even above the high levels expected. We have led the market in key evolutions but never lose sight of the lending basics and long-term business success.

Our staff are nationally recognised for their friendly manner and how easy it is to deal with them.

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FEATURE / NON-BANKS

DAVID HOLMES, CHIEF OPERATING OFFICER, PEPPER Pepper primarily focuses on providing home loans to customers who do not meet the acceptance criteria of banks and other lenders, in particular the selfemployed, small business owners, and borrowers with irregular income, an unsubstantiated savings history or a prior record of minor credit impairment.

What’s the biggest challenge facing non-bank lenders at present?

A: Portraying their point of difference to consumers.

As a result of the GFC, non-banks aren’t able to easily differentiate on price or features. Non-banks that are doing well have found new ways to differentiate through areas such as specialist lending, customer service and tailoring products for niche customer segments.

Where do you see the opportunities?

A: Non-banks struggle to compete with the major banks on price. This means non-banks need to find another aspect of the mortgage process where they can compete with the majors. Non-banks due to their size are able to offer a more personalised service throughout the mortgage process, and therefore this is a key area where they can shine. Non-banks can also thrive by specialising in finding solutions for consumers who do not neatly fit the major bank model.

This applies to the large number of small business owners throughout Australia who often have seemingly complex business structures and find it difficult to fit into the commoditised major bank approach to mortgage finance.

What’s your standout product, and what are its features?

A: Pepper’s success is not hinged on any one product.

What makes us successful in the specialist lending space is our service, simplicity, transparency and the dedication of our team. Our product suite has been developed based on 12 years of specialist lending experience and direct feedback from our customers and broker partners. At Pepper we service a large spectrum of different borrowers from prime to those with a slightly impaired credit history, and we have a suite of products that assist their individual needs. A key segment of the market that we service includes self-employed and small business owners. Through our alt

David Holmes

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THE PROVIDENT-BANKSIA EFFECT

Q

What effect has coverage of the Provident Capital and Banksia collapses had on the public perception of nonbanks and mortgage managers?

A: Both Banksia and Provident Capital were niche players in the overall mortgage market and were funded largely via debentures. This is not a typical non-bank funding structure with the vast majority of non-banks being funded by longterm secure funding arrangements from major banks. Their collapse was clearly not a positive for non-banks or the mortgage market as a whole, but it has not had a significant adverse effect on the consumer perception of non-banks.

Following these high-profile collapses, how can brokers reassure their clients that your products are safe?

Pepper has been lending throughout Australia since 2001 and did not cease lending during the GFC. Pepper is funded via three of the four major banks in Australia and has successfully completed 10 securitisations. Pepper has also been successful in winning over $4bn of third party servicing contracts mainly funded by the major four Australian banks and in 2011 Pepper bought $5bn of mortgage loans from GE. doc products we are able to offer an alternative method of verifying income, providing greater flexibility from the standard full-doc products.

What are your plans for the year ahead?

A: Broker education and providing brokers with practical tools that add value to their businesses.

Pepper will launch its ‘Better Business’ program in Q2, which will consist of a national series of professional development workshops and online learning modules.

The content schedule will include a range of topics including ‘How to develop a customer value proposition’ and ‘How to have a needs based discussion’, as well as lending-specific topics, such as ‘How to write and package a specialist loan’, and ‘How to comply with responsible lending’.

Why should brokers come to you rather than other providers?

A: Pepper values its broker partners and invests in

skilled sales and credit teams that are accessible and help provide brokers with the support and information needed to grow their businesses. Pepper’s products are transparent and easy to use, and as a result we have seen broker groups grow their settled loan volumes by over 15% through use of Pepper products.

BUSINESS STRATEGY / BUSINESS PLANNING

BUSINESS PLANNING:

THE 3 KEY ELEMENTS By combining bravery and ambition with a measurable and strategic approach to business planning you can make this year your most successful to date. Elixir Consulting managing director Sue Viskovic explains all

W

hen writing your business plan there are three vitally important ingredients that will help ensure that your plan is effective.

Let’s call them the ‘three key elements of business planning’. Diagram 1 on page 60 represents how they interact.

THE ‘WHY’ This is not ‘why should we create a business plan?’, I’m assuming that you’re reading this because you already know that the most successful businesses have an effective business plan, and you’re looking for some insight or inspiration to help you create your own phenomenally effective business plan.

Simon Sinek has articulated the importance of ‘why’ before ‘how’ and ‘what’ in his book Start with Why. One of my favourite quotes from his book is when Sinek notes that “[Martin Luther King Jr.] gave the ‘I have a dream’ speech, not the ‘I have a plan’ speech.”

In order for your business plan to be truly effective, you and your team must connect with it on an emotional level. The alternative is to just write one because you think you should, and for your staff to look at it/learn it by rote because you told them to. Which option do you think will achieve better results?

If you’re not clear on the overall vision of your business, you’ll be hard-placed to create a business plan that delivers results that exceed what you’ve achieved previously.

Remind yourself why you started the business, what it stands for and why you’ve taken the risk to create it in the first place rather than simply go out and get a job… share that with your team and complete the next two steps with this vision and purpose firmly in mind.

THE ‘WHAT’ Now get specific – what is it exactly that you want your business to achieve in this period? We recommend

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BUSINESS STRATEGY / BUSINESS PLANNING Diagram 1.

thinking both in quantitative and qualitative terms.

Quantitative ‘whats’ will typically be the financial measures you’re looking for – your annual turnover, your net profit figure, the average income per client (and therefore number of clients), etc.

Qualitative ‘whats’ will be more about the quality of your business experience – perhaps you want to move offices, or you’d like your team to implement a community service of some sort – or the principals want to cut back and enjoy more time away from the office.

In order to generate true power, your ‘whats’ have to be measurable and definable. ‘Increase our recurring income’ will not work nearly as well as ‘lift our recurring income to 45% of total revenue’.

Your qualitative ‘whats’ by definition may be harder to quantify, but you still want to be specific. For example, ‘principal(s) to play golf once a week’.

Be brave when setting your ‘whats’! Don’t limit yourself – cast off the shackles of self-doubt and go for it! At this point, don’t allow external forces to limit your expectations of what you can achieve. We have worked with many businesses that surpassed their previous highest annual growth figures during the GFC. You’ll get some reality when you look at your ‘how’, but at least start by aiming high. The worst that can happen is that you fall short of achieving the targets you’ve set – but you will likely find that by aiming high, you’ll still achieve more than what you would have had you set a modest target.

THE ‘HOW’ Get specific about the activities required to achieve the targets you’re aiming for. It is at this point that you can have the greatest impact on achieving extraordinary things.

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It’s one thing to set a BHAG (big, hairy, audacious goal) but the true value is in figuring out – and then implementing – the things you’ll need to do to get you there.

An ambitious target can appear exciting on one day, and overwhelming on the next. As the saying goes – ‘how do you eat an elephant? One bite at a time!’

There is a reason that the ‘what’ and ‘how’ steps are interconnected. You can start with either one – and revise each one after refining the other – until you get to a point where you believe that it is indeed possible to achieve what you’re aiming for. No doubt, you’ll want to be working smarter than you have in the past – but ultimately, you can see a clear path to achieve your ‘whats’.

First, determine your new client revenue target, work out the average amount you charge each new client, then determine the number of clients you need to achieve that figure. Divide this by the number of months that you actively see clients (allowing for holidays, and lead time from enquiry to implementation) and you have your monthly target. Then consider your conversion rate to determine the number of new enquiries you need to generate, and determine your enquiry target. Then consider the marketing activities you can implement that will generate those enquiries.

Example of calculating ‘hows’ $300,000 Average new client fee: $4,000 Number of new clients required ($300,000/$4,000): 75 Number of months: 11 New client target:

(wind down up to, and just after, Christmas)

Monthly new client target (75/11): Conversion rate of new clients from initial enquiries: Monthly new enquiry target:

7 70% 10

We’ve shown an example here of a business that’s decided they want to grow their new client revenue to $300,000 per annum (and that’s a jump from what they’ve previously achieved). So in our example, to obtain seven clients per month you may need to field 10 enquiries. You may know that each new client will require four meetings with a broker before their plan is implemented, and the typical turnaround time from first meeting to implementation (and commission paid – assuming you don’t invoice a portion at the outset) is, say, three months.

Now you have some real information you can work with. Your ‘hows’ on your business plan will now be

specific – obtain 10 enquiries per month; conduct seven first meetings with new clients per month.

When you break it down to this level of specifics, you can now see each bite-sized portion of your elephant, and your target, becomes much easier to swallow. What is really important is to then determine what you will do to attract those 10 enquiries per month, and note these activities as specifics on your business plan. If you’re working to a one-page business plan you may need to simply state ‘implement marketing plan’, and dig into the detail in a separate document that is your marketing plan.

You might find that, when you break it down, the activities aren’t all that onerous at all and you have the capacity in your current team to handle the additional workload with ease. At this point you might revise up your revenue target (one of your ‘whats’). Alternatively, if you simply don’t have the manpower – or the ability to generate the number of enquiries you need – then you can tinker with a few things: Perhaps you need to start attracting clients more suited to your offer, or perhaps it’s time to add a staff member (considering the impact this will have on net profit and therefore the income target).

Get specific about the activities required to achieve the targets you’re aiming for

Ensure you articulate the ‘hows’ to achieve each one of your ‘whats’ – including your qualitative ‘whats’. If you decide, for example, that your principal wants to cut back to four days a week, what has to happen to achieve that? Don’t forget to include the ‘what’ activities you will need to complete in order to maintain or service the existing/recurring income you’re generating. There’s no point working hard to bring in new clients if your existing clients are walking out the back door!

If you start at the right place, your ‘why’, and clearly define what you want to achieve and how you will get there, your business plan will hold meaning for you – and will be an effective blueprint to deliver the results you’re seeking in your business.

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LIFESTYLE / A DAY IN THE LIFE OF

A day in the life of…

James Veigli is the founder of Broker Profits Vault marketing campaign and results from the previous. We might mastermind overall business strategy and I’ll find solutions to their major roadblocks.

10:30am

Phone meeting with a business partner – we talk about how to work together and add value to brokers in a bigger and better way.

11:00am

6:00am

I hear an alarm go off, but it’s not mine! My partner Clare is a personal trainer so she’s up early most mornings. As for me, it’s back to sleep unless I have an early meeting.

8:00am

Wake up. Relax in bed and read the news: business, sport and the top stories. I’ll also take a look at emails and my calendar for the day.

8:30am

Have breakfast – a crucial decision awaits, do I have toast or eggs today?

9:00am

Sit down in the office ready for a day’s work. I choose to work from home. Some people can’t handle it, I wouldn’t have it any other way.

11:30am

6:00pm

Phone meeting with private client – we work on developing and implementing a ‘shoe-string budget’ lead generation campaign. My motivational hat goes on to dish out motivation to help focus on what needs to be done to reach goals.

12:00pm

Clare is finished personal training for the day, so we go through a list of things she will do for me that day: follow-up phone calls, emails and general management of our broker database and membership program.

2:00pm

Phone meeting with a private client – we discuss implementing the next

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Close off work for the day and prepare my task list and calendar for the next day.

Walk the dog – until now he’s been sleeping, trying to get my attention, or barking when someone comes to our door.

“I do everything by appointment and that’s how I can get so much done”

12:15pm

9:15am

10:00am

Check emails and respond to any private client enquiries. I don’t answer the phone and almost never give out my private mobile number – I do everything by appointment and that’s how I can get so much done. A strategy all brokers should adopt.

5:30pm

Reply to emails and see what’s on my task list for the day.

Preparation and behind the scenes work for private clients (some of the country’s top brokers). This could involve copywriting, sales scripts, optimising web strategy, cross-sell strategy and anything in between.

5:00pm

Phone meeting with an aggregator group – discuss ways I can add value by presenting at their upcoming PD events around the country.

Membership content creation – writing newsletter articles, deconstructing marketing examples, preparing expert interviews and developing webinar content for our monthly gold, platinum and diamond members.

9:05am

free webinar, video training or article for my email subscribers.

Lunch. Clare and I are ‘foodies’, so will often cook up a hot lunch.

3:00pm

Marketing strategy time – I work on my next promotion to the broker market. An exclusive offer for MPA Top 100 brokers, re-release of my Fee-For-Value Blueprint training program, or just putting together a

6:30pm

Get ready and hit the gym. We do CrossFit (a type of group fitness) a few days a week and I love it. I also play competition tennis twice a week.

8:30pm

Dinner time.

10:30pm

Clare goes to bed as she’s up early. I relax and watch some TV, a movie, or turn the light on and read some marketing material to keep me sharp.

11:30pm

Should get to bed, but might not be until midnight!

THE DATA / YOUR MORTGAGE INDEX

STATE OF THE NATION Data from Yourmortgage.com.au shows the borrower breakdown for the past months

THEDATA

BORROWER BREAKDOWN 72%

First homebuyers

17%

Property investors

11%

Refinancers

42% are

buying alone, while 58% are purchasing with a partner

NUMBER OF DEPENDENTS

14% had a poor 66%

14%

4%

16%

None

One

Two

Three

$ REASONS FOR REFINANCING

79 9% 4% 8%

% TO GET A BETTER INTEREST RATE

TO FIX THEIR MORTGAGE RATE TO BUY AN INVESTMENT PROPERTY FOR OTHER REASONS

credit history, while 86% were looking good credit-wise

PROPOSED NEW HOME VALUE $0-100k 3% $100,001-200k 6% $200,001-300k 16% $500,001-600k 12% $600,001-700k 4% $700,001-800k 3% $800,001-900k 2% $900,001-1m 1% $1m+ 5%

25%

are only interested in getting a fixed rate loan

32%

have a combined credit card limit of $10,000 or more

70%

$300,001-400k $400,001-500k

24% 24%

22%

are not in need of have less than a a quick approval $20k deposit

MPAMAGAZINE.COM.AU | 63

LIFESTYLE / FAVOURITES

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Favourite things...

Andrew Russell

general manager, product and distribution, Mortgage Choice Vacation spot: Samui, Thailand is my place to relax

Place to be in Australia: Sydney Harbour

Sport: I love to watch

Drink: Vodka martini

sport and I’m getting into ice hockey this year. As for playing, I’d have to say tennis

or 1800 Tequila

Book: True North

by Bill George

Movie: The Descendants

Music: My taste is constantly changing and very wide. I like new and old – anything from Mozart to Beyoncé.

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Food: Can’t beat a family barbecue