Page 1






Their secrets to success revealed





CONTENTS / 13.11




Independent Brokerages


Top 10 Independent Brokerages

Their secrets to success revealed



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


Glenn and Murray Lees

Why brokers must focus on being business owners

12 | Online The best from MPA Online and Australian Broker Online 14 | News analysis Business optimism is on the wane, but the future is bright

FEATURES 40 | Non-conforming loans How to make the most of this resurgent market

BUSINESS STRATEGY WEEKLY INVESTIGATIONS NOW ONLINE: How to get the right new brokers How to make fee-for-service work 

54 | Data artistry How to find business value in data 58 | The (r)evolution of management Why you must engage your team on a whole new level

MORTGAGE INSIDERS 38 | Tony Inglis Why diversifying can pay dividends – but isn’t for the faint-hearted

52 | Aaron Russell-Smith Building a new life in broking after a tragic accident 62 | Day in the life Bank of Melbourne’s Paul Filippone talks us through his day 63 | Favourite things AMP’s Glenn Gibson on New York, Frank Sinatra and marathon running

OCTOBER 2013 | 1  


CHANGING OF THE GUARD If you’re anything like me you’re probably sick and tired of the infighting at the top level of government that’s been hitting the news since the last election. As we discuss in our news analysis piece, business confidence in Australia has deteriorated by a worrying degree on the back of recent political uncertainty, and brokers aren’t immune to this negativity. Will the changing of the guard in Canberra and Tony Abbott’s triumphant declaration that Australia is “once more open for business” put the wind into the sails of Australian business? Time will tell, but there are signs that the certainty that surrounds a decisive election victory may aid a comeback in the mood of Australia’s business community. Whatever the future holds, one thing that we can count on is that Australia’s broking community will continue to produce sterling examples of entrepreneurial brokerages that are adapting to the times and drawing in business regardless of the mood of the nation. Take the businesses featured in this issue’s Top 10 Independent Brokerages special report, for example. The teams behind these outstanding organisations continue to thrive by bringing their A games to the mortgage broking sphere. Further essential business advice comes in the form of our spotlight on the non-conforming loan market and the opportunities that it can offer to brokers. Meanwhile, Connective directors Glenn and Murray Lees tell MPA why it’s vital for brokers to focus on being business owners. Robin Christie, managing editor, MPA

2 | NOVEMBER 2013


EDITOR Robin Christie JOURNALIST Amy Rosenfeld PRODUCTION EDITORS Roslyn Meredith, Moira Daniels CONTRIBUTORS Tim Phillipps, Therese S. Kinal


ART DIRECTOR Jonathan Phillips SENIOR DESIGNER Rebecca Downing DESIGNER Red Redrico


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 Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 Account Manager Simon Kerslake tel: +61 2 8437 4786


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CONTENTS / 13.11

OCTOBER 2013 | 3  




Mortgage Choice has, for the first time, been added to the S&P/ASX 300 Index. The announcement came as a result of the S&P Dow Jones Indices September quarterly review and comes at a time of significant change for Mortgage Choice, which is currently launching its financial planning business. Speaking about the upgrade, Mortgage Choice spokesperson Jessica Darnbrough said it was a “pleasing milestone” for the company.

4 | NOVEMBER 2013




1 in 8 The proportion of first homebuyers seeking to purchase their first home or an investment property within the next three months. Source: RAMS First Home Buyers’ Pulse Check

Spring is here, and it seems that it has awakened some dormant buyers. According to Credit Repair Australia, there has been a noticeable shift in the number of people who are interested in fixing their credit report. “In fact, in the past month we have seen a 28% increase in individuals seeking to increase their credit score, who are preparing for investing and buying in the next few months,” said Credit Repair Australia CEO Richard Symes. “Those wanting to fix their credit report tend to be in their mid to late 20s and early 30s.” He added that this development comes at a convenient time for brokers, with increased first home owner grants in some states and territories making it easier for first-time buyers to get into the market. “With a number of those trying to fix their credit report in their mid to late 20s and early 30s there is a good chance that some will be looking into buying their first home; this means that it’s a good time for brokers to be up to date with the latest first home owner grant information, so they can help their clients out and get them approved,” said Symes. At the beginning of September the ACT’s first home owner grant increased from $7,000 to $12,500. The catch, noted Symes, was that the residency requirement is now 12 months. Victoria’s grant increased from $7,000 to $10,000 in July, the NSW grant will sit at $15,000 until January 2016 (when it will reduce to $10,000), while South Australia will drop the amount given to new home owners from $23,500 to $15,000 at the beginning of 2014.


OCTOBER 2013 | 5  




The most appealing feature to potential homebuyers by a “long shot” is a good neighbourhood – particularly when it comes to family buyers aged 35-54 and to women in general, according to a survey conducted by Aussie Home Loans. “We undertook the survey feeling confident that we would know the outcome, but were surprised to find some things were not as much of an issue for homebuyers as we expected,” said Aussie general manager for marketing and product, Stuart Tucker. He says the survey of 1,000 people “smashed” some real estate myths, with a modern kitchen only coming third with 63.4% and a modern bathroom way down the list at number seven, with just 50.2% rating it a top priority. In second place was a garage with 63.7% rating it their top priority. Perhaps unsurprisingly, men (65%) rated it higher than women (62.4%). Storage, ensuite, outdoor entertaining and light and airy atmosphere rounded off the top 10, but all with below 50% of respondents rating it highly.




6 | NOVEMBER 2013


Good neighbourhood


Fuel prices

Garage Cash flow


Small-to-medium business owners have lost confidence in the last six months, despite most reporting increased or stable income in the last year. The latest MYOB Business Monitor Report surveyed over 1,000 SMEs one month prior to the election, and found just 23% of business owners expect the domestic economy to improve within 12 months, a drop from 25% in March. The proportion expecting an improvement to take one to two years has also dropped, while 26% now expect it to take over two years (up from 22%). These statistics come in alongside a dip in revenue expectations for this financial year, with just 25% expecting a rise in revenue, down from 30%, while the proportion expecting a fall has also increased. All this is despite the fact nearly 60% of respondents reported revenue as having increased or remained steady over the past year. MYOB CEO Tim Reed said he hoped to see a rise in confidence now that the election result is in, but that research suggests it will be “a slow road to significant improvement”. “The financial confidence of the country’s small to medium business operators is closely linked to the health of our economy and it is telling us a clear story. They see factors at play such as record-low interest rates and although many welcome the upside, they recognise it as a sure sign the domestic economy is experiencing slowed growth,” he said. The number one concern for small business owners surveyed in the report was rising fuel costs, especially impacting those in Queensland.


63.4% Modern functional kitchen

Price margins/ profitability

54.7% Large bedrooms

Attracting new customers

54.5% Air conditioning Source: Aussie Home Loans/ Nine Rewards survey

Competitive activity Source: MYOB Business Monitor Report




The country’s small business owners may complain about red tape and lukewarm government support, but new research shows Australian entrepreneurs are better off than their overseas counterparts. Ernst & Young has named Australia as one of the leading countries for fostering entrepreneurship in the world, coming in alongside Canada, South Korea, the UK and the US in the study’s top quartile. The study rated countries in the G20 in five categories to determine the overall rankings: access to funding, entrepreneurship culture, tax and regulation, education and training and coordinated support. Australia came in the top 10 for all but one category (co-ordinated support), and the top five for all but two. Australia was rated fifth in both the access to funding and entrepreneurship culture categories. The report praised initiatives such as the Government’s pledge of $100m to local adventure capital funds in March, as well as highlighting the relative ease of starting a new business in Australia. “In countries such as Australia and Canada, establishing a business is quick and simple. It takes just two days to register a business in Australia and five in Canada,” said Annette Kinnett, managing partner of Ernst & Young Melbourne. The high number of immigrants in many parts of Australia also adds to the entrepreneurship culture, as people from overseas are more likely than non-migrants to set up their own businesses, said the report.




Access to funding



Entrepreneurship culture



Tax and regulation



Education and training



Coordinated support



Source: The EY G20 Entrepreneurship Barometer 2013

NOVEMBER 2013 | 7  




ANZ has lost 4% of its customers in the last 12 months, the worst figure out of all the major banks, according to the Roy Morgan Research Consumer Source Survey. Despite a strong focus on customer retention, more than a million customers have stopped dealing with a financial institution in the last 12 months. The majority, 855,000 people, ended a relationship with a bank, 65,000 stopped dealing with a credit union, 18,000 dropped a building society and 140,000 ended their relationship with some other financial institution. While ANZ fared the worst out of the big four, Westpac fell in close behind, losing 3% of their customers, while CBA – who has the largest customer base – lost 2.7% and NAB lost 2.3%. Among the smaller banks, 5.6% of Bankwest’s customers stopped dealing with it, followed by 5.2% for ING Direct, 3.8% of St.George customers and 2.9% of Bendigo Bank customers. Roy Morgan industry communications director, Norman Morris, said consumers are finding it easier than ever to swap financial institutions and that, while many banks are placing a strong focus on customer relations, it’s getting harder for banks to maintain their client base.


1.05m The number of customers who have stopped dealing with a financial institution in the last 12 months.


Source: Roy Morgan Research Consumer Source Survey











Bendigo Bank


ING Direct




Growth in the $3.5bn reverse mortgage market since 2012. Source: Deloitte’s 11th annual study of the reverse mortgage sector

The percentage of 18-34 year old women (versus 79% of men) listing propertyrelated ambitions as a top lifetime goal.




Source: Westpac Home Ownership Report

Source: Roy Morgan Research Consumer Source Survey

Residential, Commercial, Industrial & Land Finance » » » » » » »

Arrears & defaults acceptable Paying out ATO debt acceptable All ongoing, verifiable income sources considered MAX LVR 66% No restrictions re: cash out Minimum loan $200k No Maximum


» » » » »

Residential Commercial Industrial Vacant land Location: Melbourne, Sydney

8 | NOVEMBER 2013

» » » » » »

Capitalised interest available Minimum 6 months to maximum 1 year term with ability to extend No NCCP / Regulated deals Land-banks with capitalised interest acceptable Loans can be rolled over subject to conduct Flexible lending guidelines

Further Information

To discuss current investment opportunities or for further information, please contact: Daniel or Paul. E: E: M: 0409 566 822 M: 0426 266 822 P: 03 8621 8484

Suite 1604, 530 Little Collins St, Melbourne VIC 3000


OCTOBER 2013 | 9  



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

WHO: St.George Banking Group WHAT: Broker commission increase KEY FEATURES:

WHO: Suncorp Bank WHAT: $500 credit assessment guarantee KEY FEATURES: • Suncorp is promising brokers that initial credit assessments will happen within 48 hours. • If this doesn’t happen, they will refund the customer $500. • Suncorp claims the service guarantee gives brokers the confidence to set expectations with their customers, and meet, if not exceed, those expectations. • It also claims that no-one else in the market is confident or willing to guarantee their service and back it up with $500. • Brokers should contact their Business Development Manager or 1300 308 973. They say: “Guaranteed service turnaround gives our broker partners confidence and allows them to devote more time to their business, customer and referral network” - Steven Heavey, Suncorp Bank head of intermediaries. We say: Suncorp is clearly confident about its broker proposition. Will the service guarantee bring more brokers into the fold?

10 | NOVEMBER 2013

• A temporary commission hike for brokers working across the St.George, Bank of Melbourne and BankSA brands, for loans settled from 1 October. • The change will give all brokers 0.65% upfront commission and removes the current conversion incentive during the promotional period. • Trail in year one will continue at 0.15% p.a. They say: “We’re keen to continue to support brokers by making it easier for them to do business with us and we also want a considerable uplift in volumes, so this just makes sense.” - St George mortgage broking general manager, Clive Kirkpatrick. We say: St.George Banking Group is putting its money where its mouth is as it continues to invest in the broker channel and improve its processes.

WHO: Homeloans Ltd WHAT: Product with no credit scoring required KEY FEATURES: • Homeloans has launched a product with no credit scoring required on applications with genuine savings up to 90% plus LMI. • The product, dubbed FlexiChoice Prime, was developed in order to benefit both brokers and borrowers, says Homeloans. • The FlexiChoice Prime is available with either a variable or fixed interest rate and is purely designed for the purchase of an owneroccupied property. • Borrowers must have a clear credit history and have been in their current employment for a minimum of 12 months or 24 months continuous employment within the same industry. • They must also disclose the source of funds and provide appropriate evidence. They say: “ Homeloans is one of very few lenders in the market that can offer a no credit scoring up to 90% plus LMI; it provides us with another niche product to offer better solutions for our brokers.” - Homeloans general manager, sales, Greg Mitchell. We say: An interesting option for clients who fit the criteria.


WHO: Westpac

WHO: Macquarie

WHAT: Commission incentive extended

WHAT: Qantas rewards scheme



• Westpac has extended a commission incentive that has seen brokers receiving an extra 10bps upfront. • The bank will extend a program it launched in June to offer volume incentives to aggregators. • The program has seen members of aggregators who hit the targets receive an extra 10bps of upfront commission on Westpac deals, regardless of their individual volumes through the bank. • Originally slated to run through the end of September, the program will now be extended through to the end of March. They say: “The program has been received exceptionally well, and I think it’s a testament to how it’s been received and its success is that the reaction to it is this extension.” - Westpac general manager of broker distribution Tony MacRae. We say: Brokers who continue to benefit from the extension will certainly be happy.

• Borrowers earn 10,000 Qantas Points for every $100,000 drawn down at settlement as an ‘introductory gift’ (calculated to the nearest point). • They earn an additional 25,000 bonus Qantas Points at both the third and fifth year anniversaries (as long as the outstanding loan balance is at least $150,000). • Plus 1,000 Qantas Points for each month for the life of the loan (as long as the outstanding loan balance is at least $150,000). They say: “Whether it’s a mortgage for a new home or an investment property, a Macquarie mortgage can help your clients realise both their property goals and travel aspirations.” - Head of Macquarie Mortgages product James Casey. We say: Macquarie is certainly selling the dream with this one.

NOVEMBER 2013 | 11  


ONLINE The latest highlights from MPA Online IN MOTION

The latest from MPA TV


The Westpac Rescue Lifesaver Helicopter is the 2013 AMA Community Partner and the countdown has begun to its Celebrity Golf Classic.


Finsure’s recent acquisition of LoanKit caused a splash in the broker space. Finsure director John Kolenda explains what the future holds.


“We call those people ‘cakepigs’. They have their cake and eat it too.”

– Independent Mortgage Planners director Craig Morgan, who charges a fee and rebates commissions, has his say on brokers who charge a fee as well as collecting commissions.

“When I don’t need them I don’t have to pay someone to sit around trying to look busy.”

– PFS Financial director Daniel O’Brien explains how flexible workers allow him to maximise profits and minimise costs.

“Whether you like it or not under a Liberal government big business always does well, and when big businesses do well it filters down.” – Smart Lending director Melissa Gielnik says she expects good things to happen under the Coalition government.

12 | NOVEMBER 2013


Stress is bad for your health, and can even increase your risk of an early death – but only if you believe it can, new research shows. In a recent study of 30,000 adults, researchers found that people who experienced a high level of stress in the past year were 43% more likely to die in the next eight years. This was only true, however, if the participants held the belief that stress was bad for their health. Participants that had a high level of stress, but didn’t view stress as a harmful experience, had a lower risk of death even than those who had experienced relatively little stress in the past year. It’s estimated that over the eight years the study took place more than 180,000 people died prematurely in the US – not from stress, but from the belief that stress is bad for you, making this the 15th biggest killer in the US, above skin cancer, HIV and homicide. Public speaker and health psychologist Kelly McGonigal says simply changing the way you think about stress can make you live longer and work better. “For years I’ve been telling people stress makes you sick, it increases the risk of everything from the common cold to cardiovascular disease. Basically, I’ve turned stress into the enemy, but I’ve changed my mind about stress,” said McGonigal in a recent TED Talk. “I no longer want to get rid of stress; I want to make you better at stress.” In another study conducted by Harvard University, participants were put through an experiment designed to increase their stress levels. First, however, some of the participants were taught to view stress as a positive, natural reaction to help them prepare for their next challenge. Those that went through this process didn’t experience the constriction of blood vessels that usually occurs during stress and which links stressful experiences to heart disease. “Over a lifetime of stressful experiences, this one biological change could be the difference between a stress-induced heart attack at age 50 and living well into your 90s,” said McGonigal. Not only can the act of embracing stress neutralise its negative effects, it can actually help to counteract any health problems from past stressful experiences.


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


OCTOBER 2013 | 13  


A w e n e p o h Australian business confidence has plummeted to its lowest point in recent years. Amy Rosenfeld explores the issues that are holding Australia’s entrepreneurs back, how brokers are dealing with current business conditions and whether the change of government will be the silver bullet brokers and business owners need “From today I declare Australia is under new management and is once more open for business.” These were the triumphant words that Tony Abbott used to declare the Coalition’s victory on election night. With business optimism sitting at worryingly low levels in the lead up to the election, Australia’s business owners will be hoping that the new Prime Minister’s words ring true. 14 | NOVEMBER 2013

In Newport Consulting’s latest State of Play report, for example – which was issued just before the general election – optimism amongst business owners was found to be at a staggeringly low 15%, down from 78% in 2009. New Zealand, in contrast, has seen a gradual increase in confidence, with the number of business owners expecting growth currently sitting at 28%.



74% Growing 12%






Source for all infographics: Newport Consulting’s State of Play Report 2013-14

David Hand, CEO of Newport Consulting, warns that Australians are facing record-low interest rates, major slowdowns in the mining sector, creeping unemployment figures and alltime low consumer and investor confidence levels. “Post-GFC, we noted an optimistic outlook among leaders, particularly Australian SMEs, which all displayed bullish growth expectations despite the global recession. The buoyant spirit has dissipated with each subsequent report and this year’s study reports the lowest levels of confidence to date.” Over a third of Australian business owners reported facing difficult conditions this year, up from just 7% in 2009. Chris Andrews, vice president of La Trobe Financial, says Australian business owners have been “looking to ride out the storm”. “In financial services, this has been reflected in a conservative approach to balance sheets, debt and investment appetites. “Profits and savings have largely been retained in cash, with historically low levels of investment (excluding the resources and resource services sectors, both of which are now showing signs of slow down).”

BUSINESSES ‘IN THE BUNKER’ Difficult conditions have forced Australian leaders into ‘survival mode’, according to the report,

focusing on immediate goals and failing to make long-term business plans. The number of Australian companies axing jobs has almost doubled in the last year, while the number of companies hiring full-time staff has dropped significantly. Gareth Jones, CEO of credit information bureau Dun & Bradstreet, says it has been a “trying year” for many companies, between concerns about cash flow, operating costs and weak demand.

“The incoming government will need to show its support for SMEs as much by competent management as by policies” Chris Andrews, La Trobe Financial “As a consequence we’ve been seeing companies focusing on paying down their debt, managing expenses and focusing on core operations, to the detriment of investment and employment.” Political uncertainty has done little to help an already difficult situation, says Andrews. “In financial services circles, this has been compounded by a large amount of substantial regulation, which requires time for business to absorb.” Increasing costs and on-going pressure on margins have been of particular concern to SMEs, with the report finding that, while large businesses have been able to absorb the costs, smaller companies are having to pass these on to the consumer. Melissa Gielnik, director of Smart Lending, says brokers have felt the squeeze more than most, as they don’t have the option of passing this cost on to the consumer. “Cost-cutting is something every broker has needed to look at. Commissions have been cut but at the same time banks are getting us to do more for them; the cost of doing business with them has gone up.”










NOVEMBER 2013 | 15  



“Costcutting is something every broker has needed to look at” Melissa Gielnik, Smart Lending

Finding more efficient ways of doing business has been a focus for brokers over the last 12 months in particular, says Gielnik. “There’ve been tools at our disposal that we weren’t using. I look at those things now and I wish I’d used them two years ago, but sometimes brokers can be creatures of habit.” The report also found a lack of access to funding for capital expenditure in Australia has been a key driver behind a renewed focus on efficiency. “Given the present difficulties in raising capital, leaders are eschewing expansion in favour of leveraging their existing operations, and are examining ways of becoming more efficient.” Business owners are increasingly aware of the importance of productivity, as well as of ways to measure and improve it. The top three methods businesses plan to implement are identifying inefficiencies (17 %), maximising business resources (14%) and improving service (13%). While in previous reports productivity had been seen as one of the top challenges facing business, it was instead seen as an opportunity amongst business owners in 2013. Other top opportunities earmarked for the coming year included customer satisfaction (13%), followed by innovation and R&D (12%).


Operational performance


Sales growth




13% Cost

New market



12% Innovation 13% Productivity and R&D

13% Customer





Skills and development

STEPPING UP TO THE PLATE Government inadequacy was the single biggest factor affecting business outlook for survey respondents, with business owners appealing for an end to politicking and a focus on action. “An image emerges of rising dissatisfaction with party politics and election-winning antics taking precedence over policy planning and quality.” More than half of business leaders felt the Australian government was “working against them”, an all-time high for the survey. This compares to just 13% in New Zealand. High cost of business, red tape and inflexible workplace regulations were all cited as key issues. The number of Australian business leaders satisfied with the amount of government support they received also halved within the last 12 months.

16 | NOVEMBER 2013


13% Capital


18% Status of economy


Credit and capital access


Recruitment and retention


Cost management


OCTOBER 2013 | 17  





Customer service



Quality assurance

Utilise resources




Inefficiency and waste



R&D, technology and innovation

In-house capability


16% Global


Local economy



Competitive landscape

27% Inadequate






Strong dollar

18 | NOVEMBER 2013

“[Political uncertainty] has been compounded by a large amount of substantial regulation, which requires time for business to absorb” Chris Andrews, La Trobe Financial


Escalating costs

Whether the new Coalition government will fulfil its promises to address these issues is yet to be seen, but Australian business leaders appear confident change is on the cards, with a quarter expecting the economy to grow in the next 12 months, and nearly three quarters expecting growth in the next three years.

Labour and skills

Andrews says many SMEs are hoping the election will “act as a ‘circuit breaker’ and cut through the political impasse that has made business so uncertain in recent years”. “For this to happen, the incoming government will need to show its support for SMEs as much by competent management as by policies explicitly targeting the sector.” The report suggested that, unlike other countries such as New Zealand which were forced to adjust to the downturn, Australia has been cushioned by a resources boom and is only now beginning to face the challenge of optimising the economy for growth. Glienik agrees, and urges the government to start looking at other economic opportunities available in Australia, such as agriculture. Regardless of whether the government heeds this advice, both Glienik and Andrews expect a significant increase in business confidence following the election. “In the medium term, that should be reflected in increased demand for credit and investment for growth,” says Andrews. “This presents a clear and immediate opportunity to brokers. The current low price of credit will not persist indefinitely. Smart SMEs who obtain credit now could be at a significant advantage to those who wait until later in the interest rate cycle.”


OCTOBER 2013 | 19  



Connective directors Glenn and Murray Lees tell MPA why their business is achieving record settlements, the advantages of the feebased aggregation model, and why transferrable trails are a fundamental broker right MPA: Connective announced record settlements this year. What do you put this success down to? Glenn Lees: Our success reflects our strong growth in broker numbers over the past 12 months. We now have more brokers, but more than that, we have more brokers writing more loans. In particular, we are seeing a material uplift in the settlements of those brokers utilising our marketing tools via My Marketing, and across the board have seen an increase in the number of loans written per broker. Murray Lees: Strong growth isn’t a new phenomenon for us. Over the past 10 years growth has been spectacular, and particularly over the last four or five years we’ve been seeing figures that consistently surpass our previous record – it’s records on records!

MPA: Are there any regions or segments of the market that are seeing an increase in settlement activity?

Glenn Lees

20 | NOVEMBER 2013

GL: We are witnessing strong growth in all markets. The established eastern seaboard continues to perform, and we’re gaining traction in strategic locations, such as South Australia and particularly Western Australia, where we’ve experienced 67% year-on-year growth over the past 12 months. ML: Despite NSW already being our strongest state, demand from NSW brokers continues to increase year on year and we see more growth in NSW than anywhere else.


MPA: What do you think the issues are that brokers are facing today? Do you have any advice on how to deal with them?

MPA: Connective operates under a fee-based model. What advantages does this system present to brokers?

GL: Compliance is always going to be something that brokers need to contend with. There is a clear necessity from brokers in our industry for a software platform that houses and supports their compliance processes, one that makes compliance part of the day to day running of their business – not just an afterthought. Software is always a hot button, as increasingly brokers are relying on their software platform to get ahead of their competition and deliver exceptional customer service. Of course, my advice: just join Connective. ML: Brokers need to continue to focus on being business owners, rather than just loan writers. They must choose activities and make decisions that will help to build their business into the most valuable asset it can be down the track. Success is about longterm growth, not just short-term gain.

ML: The advantage is obvious – our brokers enjoy a fixed cost of aggregation each month, providing certainty and transparency. Most importantly, our flat fee-based model means that brokers are not paying their aggregator a disproportionate percentage of their hard earned commissions. This is what brokers want, and is the resounding feedback we get from brokers who have made the switch to us from an old-school commission split model aggregator.

MPA: What are Connective’s other core value propositions? GL: Our core value proposition is simple: the risk of non-performance is ours. If we don’t deliver on what our brokers demand, then we don’t have a business. Because our agreement allows our members to leave without restriction or penalty, we

“If we don’t deliver on what our brokers demand, then we don’t have a business”

NOVEMBER 2013 | 21  


Murray Lees

“Brokers need to continue to focus on being business owners, rather than just loan writers”

22 | NOVEMBER 2013

need to prove ourselves every single day. Our brokers stay with us because they want to, not because they have to. ML: As an extension to Glenn’s response, our business is built on fairness and transparency. Our brokers enjoy a simple flat fee and our fees are published upfront. We don’t hide anything, we reward the broker who is doing the work, and most importantly, our agreements with members are not predicated on their ability to negotiate a better deal with us. It’s open and honest, and that is key to our business success. The final pillar to our success and what sets us apart from other aggregation groups is choice. Our brokers have real freedom when it comes to the loans they write. Other aggregators may push certain products, but we don’t do that because it’s their business and who are we to tell them how to run it?

MPA: Is there anything else that sets Connective apart from other aggregators? GL: Accessibility and accountability. Despite our size and growth, we as directors have an open door policy. We are available to our brokers, and we listen and act on their feedback. We understand that our brokers make the business, so we focus on staying in the business and forming relationships. Our brokers also influence change in our business, for example – if brokers want to see developments made to Mercury or our My Marketing offer that will improve their business – we act!

MPA: What would you say are the key services brokers are calling for from aggregators? ML: Software, compliance support, marketing... and software. Lately it seems it is all about the software, but we like to think a little differently about our platform. Via Mercury we deliver a complete business management tool to our brokers that houses everything they need to run their business – marketing, compliance, commissions, accreditations and support. Aggregators today need to deliver more than just commission and accreditations. Brokers are looking for someone to partner with, to help their business grow and deliver them real business support that they value.

MPA: What type of broker would suit joining Connective? GL: Anyone. Any broker who is looking to build the most valuable asset they can. As our brokers have the right to 100% of their commission, it makes their business a more valuable investment for the long term.

MPA: You launched Connective Socialise this year to enable your brokers to engage their audiences through social media channels. How important is social media to brokers nowadays? ML: Our industry is seeing more and more borrowers going online to research their lending needs before


they make contact. Social media provides a point of validation and helps to provide a reputation trail, so visibility online is key. In fact, if you’re not online you are invisible in the digital world and risk losing business – no matter what kind of business you’re in. It’s that simple. Social media also allows for another means of engagement and communication to foster stronger relationships with clients. It not only provides a launching point for brokers to generate exposure of their business name, services and brand. It’s a great way to reinforce existing relationships and demonstrate ongoing value. This inevitably leads to increased client retention and more future business.

MPA: Where do you stand on the issue of making trails transferable between aggregators? GL: We absolutely support it. We believe that moving your trail is a fundamental right for all brokers. It can be done, it is done, and it should be an option for all brokers, not just Connective brokers. It’s remarkable that some aggregators who have been saying, “It can’t be done”, are currently being paid trail from Connective brokers who elected to transfer their trail in the past.

MPA: Are you noticing an upswing in the number of brokers trying to diversify their business? Do you have any advice in this area? GL: Yes, definitely. Just one example is that our own Connective Plant & Equipment has experienced significant growth with a sustained upward trend in settlements, indicating an increased demand for this type of diversification opportunity. ML: We give our brokers more choice about how to grow and diversify their business and offer support for whichever business model they choose. With Plant & Equipment for example, you can create a referral agreement, move into a joint venture or employ and train a specialist to do it in house. We support the broker no matter what way they choose to expand and diversify. My advice? Decide how you want to run your business, then talk to your aggregator about how to make that diversification option work for your business. NOVEMBER 2013 | 23  




Independent Brokerages These brokerages are thriving as independent operations. MPA discovers the business strategies that make them tick


rokers these days are more than just mortgage salespeople. They’re entrepreneurs who approach their work with an eye on the business at large, not just on where that next commission cheque will be coming from. To celebrate the increasingly professional and entrepreneurial spirit that embodies the mortgage broking profession in the 21st century, MPA has once again compiled a list of 10 of the nation’s best-performing independent brokerages.

24 | NOVEMBER 2013

As well as celebrating the achievements of these independent operations, we’ve quizzed some of the key decision-makers at each organisation to discover how they approach the business of broking – and what strategies they have put in place to ensure ongoing success. Over the next 12 pages MPA presents this year’s Top 10 Independent Brokerages. What are the keys to their success? Turn the page to find out.


METHODOLOGY As the market leader in the Australian mortgage broking industry, Commonwealth Bank is proud to sponsor MPA’s Top 10 Independent Brokerages report. Congratulations to those who have made the Top 10. It not only takes drive and commitment to build a successful business but also an ability to understand and respond to your customers’ needs. It is no longer enough to know the policies of lenders; it is now essential for a broker to have meaningful conversations with their clients, as the quality of advice given is part of a broker’s ‘customer value proposition’. It is this that differentiates you in the market. This need to ‘know your client’ is changing the industry. By getting close to the customer, brokers can offer support and advice. Successful brokers use their knowledge and experience to build trust, a critical component in offering advice. Productivity is another key to success. Productivity is a global issue, and as the Australian economy focuses on growth, brokers also need to find ways to do more with the same or less resources. Successful brokers invest in ways to improve office efficiencies, and they enjoy the rewards of more satisfied customers. To be named in the Top 10 list is national recognition and sets you apart. CommBank wishes all those in the Top 10 continued success. We are keen to work with you to secure and enhance the financial wellbeing of your customers.

Kathy Cummings, executive general manager, third party and mobile banking, Commonwealth Bank

THE TOP 10 Brokerage

Total Total loan settlements Number of Average volume Conversion book brokers rate for 2012 per broker


Tiffen & Co







The Australian Lending & Investment Centre







The Loan Arranger







Oxygen Home Loans







1st Street Home Loans







In Mortgage & Finance Services







Financing Property







Acceptance Finance







ACA Mortgage Solution







Loan Gallery Finance






In contrast to MPA’s Top 10 Franchise Brokerages report, which was released earlier in the year, this report is all about brokerages that don’t operate under a franchise or branded aggregator model. Aggregators that didn’t fall into these categories were asked to nominate up to five brokerages to take part in the report. All of the nominees were then scored according to the following four criteria: •• Total loan book value •• Settlements for the 2012 calendar year •• Average volume per broker/loan writer •• Conversion rate Each brokerage was scored using these four metrics in order to make sure that size – while an element of the scoring system – didn’t override all other elements of the ranking process. Once every brokerage’s scores for all four categories were totted up, each one came out with an overall score that was then used to determine its rank. The brokerages that came out with the highest 10 scores have made it into the report.

NOVEMBER 2013 | 25  


10 Total loan book: $736,000,000

Total settlements 2012/13: $482,000,000

LOAN GALLERY FINANCE Location: Epping, Vic




New to the Top 10 Independent Brokerages line-up this year, Loan Gallery has taken the 10th spot, thanks to some solid performances in each of the categories our nominees were scored in. MPA caught up with Loan Gallery Finance director Steve Matsoukas for some bite-sized insights into what makes his business tick

85% First home




What’s the secret to building a successful brokerage? Hard work and providing value to the broking team and our referrers.

What are the advantages of being an independent brokerage? The ability to work with a number of referrers.

Number of brokers/loan writers: 33

How do you think independent brokerages can continue to thrive in today’s market? By providing innovative solutions to our clients.

What advice would you offer to brokers who would like to set up an independent brokerage?

Average annual volume per broker: $14,606,061

Conversion rate:


Work out what you like doing, then become the expert at it.

What’s your strategy for generating new business? Working with new referrers to show them the value a motivated, skilled and dedicated broking team can provide to them, and working our database more systematically and intensively.

What is the most important thing a broker can do to grow their business? Work really hard.

What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? High LVR lending is becoming more challenging.

26 | NOVEMBER 2013

What are your goals for the year ahead? To grow our referrer base and branch out into the land developers.

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? We are currently trying to diversify into the financial planning space. We’ve established relationships with planners across the regions we work to test the waters.



Total loan book: $586,715,404

Total settlements 2012/13: $254,109,778

Number of brokers/loan writers: 8

Average annual volume per broker: $31,763,722




First home buyers

Coming in at joint eighth place is ACA Mortgage Solution – ‘a place where service is a way of life’. Senior manager Canna Cao explains how her business philosophy is paying dividends What’s the secret to building a successful brokerage? Excellent service. Provide the best possible service to clients, referral and associated business partners. In essence, the mortgage industry is a people business where we have learnt to prioritise our client relationships by providing excellent service each and every time. I believe consistency in providing the best service is the key ingredient of our success. We also provide regular training every week to keep the consultants’ product and policy up to date.           

What are the advantages of being an independent brokerage? I enjoy the freedom of being an independent broker where I offer unbiased advice to my clients. We are also fully responsible for our own marketing strategy/team building/management, which allows us to explore many opportunities and maximise sales results by adopting the most effective approach to grow the business. We have also received great support from our aggregator, AFG, year on year; it is a truly unique relationship which we appreciate very much.

How do you think independent brokerages can continue to thrive in today’s market?

Conversion rate:


In my opinion many consumers would prefer to deal with an independent broker. Our business is based on word-of-mouth referrals, which is considered the most powerful lead-generation approach.

What advice would you offer to brokers who would like to set up an independent brokerage? Sometimes people need to take a leap of faith. Believe in yourself and make it happen. Being a good mortgage broker requires a great level of commitment, sacrifice and hard work. Financial reward is a by-product, whilst the true satisfaction

50% Investors 40%


derives from helping clients to achieve their goals in life. It is one of the most rewarding jobs emotionally. Along the years we have made thousands of friends through business dealings where they came from all walks of life.

What’s your strategy for generating new business? In recent years we have been heavily focused on cross-selling for each individual client. We provide a wide range of financial services to our clients, from mortgage lending, financial planning to property consultation. Furthermore, in the past decade we have also invested substantially in nurturing new loan writers and creating opportunities for young people joining the business. In return we have increased business revenue by acquiring new leads across all age groups.

What are your goals and strategies for the year ahead? We are currently running on our full capacity with five full-time assistants working around the clock. However, our main focus is to nurture new entrants, provide opportunities for the younger generation, encourage young people who are keen to develop themselves in the mortgage broking industry by providing an ongoing mentoring program.

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? We have successfully implemented diversification strategy into the business, where we now provide financial planning services to our clients. NOVEMBER 2013 | 27  



Total loan book: $1,086,000,000

ACCEPTANCE FINANCE Location: Balwyn, Vic

Number of brokers/loan writers: 11



Joining ACA Mortgage Solution in eighth place is Acceptance Finance. The company’s CEO, Daniel Di Conza, talks MPA through his business strategies – and the advantages of being an independent operation What’s the secret to building a successful brokerage?

Total settlements 2012/13: $220,000,000


50% Investors


First home buyers

20% Others

When designing your business model everybody must win: the broker, the client, the business.

What are the advantages of being an independent brokerage? Being independent allows you to set your own direction and culture for the business.

How do you think independent brokerages can continue to thrive in today’s market? I think independent brokerages can thrive in today’s market by identifying their niche and remaining focused on servicing this part of the market better than others.

What advice would you offer to brokers who would like to set up an independent brokerage?

Average annual volume per broker: $20,000,000

Conversion rate:


Create a clear business plan and review it regularly.

What’s your strategy for generating new business? We have two strategies: we aim to offer our existing clients a high level of service that encourages them to recommend others to us, and we will continue to support our referral partners in the accounting and financial planning space.

What is the most important thing a broker can do to grow their business? Provide clients with excellent service.

What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? There seems to be a growing number of financial planning businesses bringing mortgage broking 28 | NOVEMBER 2013

in-house, which has led us to providing services to assist them to do so.

What are your goals and strategies for the year ahead? We intend to stick to our niche, which should provide us with steady growth into the future.

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? We have both vehicle and equipment finance and financial planning in-house. These services complement mortgage broking, particularly for our accounting referral partners.



Total loan book: $250,000,000

FINANCING PROPERTY Location: Varsity Lakes, Qld



First home buyers

Sixth place proved to be another tie in this year’s Top 10 Independent Brokerages report. First up, we profile Financing Property, where Peter Gwynne has performed extremely well with his solo broker operation

65% Investors 33%


What are the advantages of being an independent brokerage rather than joining a franchise model?

Total settlements 2012/13: $70,046,159

Number of brokers/loan writers: 1

Average annual volume per broker: $70,046,159

Conversion rate:


You have the freedom to operate and build your business as you wish. Franchise models are great for mentoring initially, and they give you the comfort that leads will be provided. If you already have a network and feel you will be able to build a client database, then I would say being independent is the way to go. I have great support from Choice Aggregation and Advantedge, so feel I have the backing of anything a franchise model can offer. 

How do you think independent brokerages can continue to thrive in today’s market? The broker market is an unstoppable force now, and we are getting more market share. Banks have recognised this and there has been a large change to working together, and I expect this to continue.  Clients are referred to us and it would not matter if we were a franchise or independent.

What advice would you offer to brokers who would like to set up an independent brokerage? Work extremely hard initially to build up a client database, and provide excellent customer service. I find it amazing how many people don’t return emails that day or return calls.  Become more knowledgeable by attending PD days and reading bank and MI policy. Word travels very fast so if you do an excellent job then the referrals will come.

What’s your strategy for generating new business? The new Choice Podium software is magic, and I have generated a great deal of new business from my existing database. It is auto-set to send out birthday wishes, fixed-rate expiry, one-year

anniversary and many other functions, and I am finding old clients come back for new business or to look at current loans, which is also protecting my loan book. I have some key referral partners in place who continue to grow, so I have not looked for new business in the past two years, and for me my challenge is handling the growth in my business and maintaining our service levels.

What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? The market, to me, has been stable without going forward, but I feel the biggest change has been the positioning and attitude of the lenders to the broker market, which is now much more positive, and the broker market is here to stay and we will continue to grow our market share. Some lenders have come into the market, such as Advantedge, and taken an entire new strategy where assessors phone you and you work through the deals as a team.  All other lenders have seen this and followed. 

What are your goals and strategies for the year ahead? My goal is to settle $100m in the financial year, and thus far we are on track and I am confident of reaching this target. We have also recently developed and implemented a customer care program in my business and updated our website and branding, so we are now touching current clients a lot more, which will generate future business and protect our loan book, which is vital going forward. NOVEMBER 2013 | 29  




Sharing the sixth spot is IMFS. Company director Helen Lenyszyn explains to MPA how a winning workplace culture has contributed to the brokerage’s success Total loan book: $879,856,191

Total settlements 2012/13: $215,308,000

Number of brokers/loan writers: 14

Average annual volume per broker: $15,379,143

Conversion rate:


30 | NOVEMBER 2013



Owneroccupiers; upgraders

40% Investors

What’s the secret to building a successful brokerage?


IMFS has always prided itself on having strong business practices; getting the right people in the rights seats; broker productivity; a supportive culture with a strong emphasis on sales, education and training; and a friendly workable environment for all to enjoy. We are strong believers in celebrating success both on an individual and company basis. Reward and recognition for loyalty is also a strong focus to encourage staff retention.

What are the advantages of being an independent brokerage rather than joining a franchise model? We see the advantages as being able to keep all operations and processes centralised in one place from a management and cost-effective perspective. It also encourages lively chat between staff members, whether on an admin or sales basis. As we are all together we are able to better control and foster the culture that we want to impress upon our brokers. This is not to say we would ever exclude the opportunity, should it arise, to expand in the future.

How do you think independent brokerages can continue to thrive in today’s market? As always, focus should remain on the client’s needs and overall experience from start to finish. Word of mouth is a very powerful referral tool; you do not need to be a large organisation to have a favourable reputation within the industry – in fact quite the opposite can apply. To remain a small operator creates a niche that some clients prefer. We can control the client experience through consistency of procedures and processes that are easily managed. Expansion into other related areas like insurance is also going to provide the diversity to ensure our longevity. A strong and supportive aggregator partnership is also important.


First home buyers


What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? Diversification is key is ensure the ongoing viability of the business. More and more clients are seeking and expect a ‘one stop shop’. We have formed strategic alliances with financial planners, settlement agents, real estate agents, property managers and accountants.

What are your goals and strategies for the year ahead? Our team is working towards increasing their previous year business written, with the support of management and admin. We also for several years have been working to reduce the reliance on the directors/GM sales performance and focus more on broker performance. We will be increasing our broker team to continue with this strategy and already have the support staff in place to cope with this expansion.


5 Total loan book: $822,000,000

Total settlements 2012/13: $242,000,000

Number of brokers/loan writers: 7

Average annual volume per broker: $34,571,429

1ST STREET HOME LOANS Location: Rose Bay, NSW, and Ringwood, Vic

Kicking off the top five is 1st Street Home Loans. The brokerage’s director and founder, Jeremy Fisher, tells us how his operation has thrived under an independent structure


25% Upgraders and


second-time purchasers

First home buyers

25% Investors



What’s the secret to building a successful brokerage? The success of a brokerage relies on its brokers and support staff, so it is essential to have brokers and staff that are highly knowledgeable, personable and professional. By giving great service to all clients at all times, 1st Street has built a solid reputation for doing an excellent job first time, and this has led to a very high percentage of repeat business and referrals, both of which are essential to a successful business.

What are the advantages of being an independent brokerage? As an independent brokerage we can react and adapt very quickly to changes and developments within the market. Independent brokerages usually have less rigid guidelines, so brokers can take the initiative to create a more tailored client experience that suits both the broker’s and the client’s personality. Independent brokerages often have a flat hierarchical structure allowing for fast and free-flowing communication across all areas within the business.

How do you think independent brokerages can continue to thrive in today’s market?

Conversion rate:


By leveraging the advantages of being independent, such as adaptability and personalisation of services, independent brokerages can appeal to a wide range of clients. Being independent enables brokers to give a truly independent recommendation to clients across the whole range of products so clients have faith that the brokerage is working in the client’s best interests.

What advice would you offer to brokers who would like to set up an independent brokerage? Setting up an independent brokerage is challenging

and rewarding, but brokers should first weigh up the advantages and disadvantages of an independent brokerage as opposed to a franchise model. With an independent brokerage there are high overheads such as marketing and compliance. An independent brokerage takes time to develop and requires dedication and persistence.

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? 1st Street has diversified to offer financial planning in order to offer a full service to clients. All clients are made aware of the benefits of having adequate insurance cover in the early stages of the approval process and again near settlement. With the rise of self-managed super funds we have a financial planner who specialises in that area to better service our clients. NOVEMBER 2013 | 31  



Total loan book: $1,318,058,613

OXYGEN HOME LOANS Location: Rose Bay, NSW, and Ringwood, Vic

Third place is another spot that saw two brokerages come in neck and neck. First up, we profile Oxygen Home Loans, which has put in a strong performance to make the top three two years in a row. Company GM Alan Hemmings answers our questions What’s the secret to building a successful brokerage?

Total settlements 2012/13: $569,817,706

Number of brokers/loan writers: 21

It’s important to make sure you bring the right brokers into the business; provide leads and the opportunities for them to grow successful businesses in their own right. Ensure you provide the systems and support to allow the team to sell as opposed to being a loan processor.

What are the advantages of being an independent brokerage rather than joining a franchise model? The obvious answer is no franchise fees. One of the reasons we can attract brokers is there are no costs to join Oxygen.

How do you think independent brokerages can continue to thrive in today’s market?

Average annual volume per broker: $27,134,176

They must understand what their offer and value proposition is and stand true to it. The reason many brokerages start is they fill a need in the marketplace. It can be very easy to get distracted by what else is in the market and lose focus, which can impact on results.

What advice would you offer to brokers who would like to set up an independent brokerage?

Conversion rate:


Make sure you have something that will attract brokers. Whether it be access to leads, processing support or anything similar, unless you have an attractive offer it will be difficult to recruit goodquality brokers.

What’s your strategy for generating new business? As our business is a subsidiary of McGrath Ltd, the brokers work closely with the agents at McGrath 32 | NOVEMBER 2013

Estate Agents to ensure continued business. However, we also encourage the team to develop a referrer network externally as well. Last year we generated over 4,800 leads, which means for the brokers a continual source of new business.

What is the most important thing a broker can do to grow their business? Maximise  their opportunities, whether it be developing referrers to increase leads or look at their existing customer base. If they provide exceptional service, they have the opportunity to create ‘raving fans’ who will refer friends and family and remain loyal, provided the broker remains in contact.

What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? The biggest recent trend is the level of investment activity in the market. For a few months now we have seen investors accounting for over 40%, and in recent months nearly 50% of our business. Secondly, the influx of Chinese investors – we are currently reviewing this opportunity with a view to recruiting a broker who can speak Mandarin/Cantonese.

What are your goals and strategies for the year ahead? To continue growing the business both organically (ensuring existing brokers are maximising their opportunities) and through recruitment.

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? We offer more than just mortgages; we also have referral relationships for general and risk insurance via our aggregator, AFG. We also have access to a financial planning business for the wealth conversation. 



Total loan book: $1,200,000,000

THE LOAN ARRANGER Location: Adelaide, SA

Adelaide-based The Loan Arranger has experienced great success on the back of its solid team and business principles. Director Steve Marshall explains the benefits of running an independent organisation What’s the secret to building a successful brokerage?

Total settlements 2012/13: $264,000,000

Number of brokers/loan writers: 13

Building a successful  brokerage revolves around good-quality people with good business principles. 

What are the advantages of being an independent brokerage? As an independent brokerage we have been able to brand ourselves which is unique to our business only.

How do you think independent brokerages can continue to thrive in today’s market? For independent brokerages to thrive in the future we need to continually attract new people, and this may mean changing business strategies. 

What advice would you offer to brokers who would like to set up an independent brokerage?

Average annual volume per broker: $20,307,692

Conversion rate:


If any broker was looking to set up their own brokerage today, they would need to operate through an aggregator and provide a point of difference to attract competent people.

What’s your strategy for generating new business? Generating new business still comes from the traditional method of referral sources and your existing client base. We do get a large volume of business from repeat clients which recognise the quality of our services. 

What is the most important thing a broker can do to grow their business? Today’s broker must be fully equipped with knowledge that covers accounting, financial planning, property development, self-managed super and more. To be sought out for your advice is what will separate the average broker from the top performer.

What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? Our business has had good, steady growth without any part of the market affecting us. We continue to write the same volume of business regardless of whether the investment market has slowed or first home buyers are quiet.

What are your goals and strategies for the year ahead? Our goals will continually be to provide the bestquality service and keep in touch with our past loyal customers.  

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? We have not diversified from mortgages. Depending on your size and income will dictate where you channel your efforts. I still believe in being true to my core business. 

What does your client breakdown look like, in terms of first home buyers versus investors and refinancers, for example? Without breaking down where our business comes from, we are able to advise on any area of finance. If you are too narrow in your focus there will always be a time when you become quiet. My advice is to learn about all facets of lending and more, and become advice driven, then people will seek you out.  NOVEMBER 2013 | 33  


2 Total loan book: $1,005,000,000

Total settlements 2012/13: $400,014,862

Number of brokers/loan writers: 9

Average annual volume per broker: $44,446,096

Conversion rate:



ALIC has jumped two places from fourth in 2012 to second in this year’s Top 10 Independent Brokerages report. Managing director Jason Back offers his advice to aspiring brokers What’s the secret to building a successful brokerage? Passion and commitment is mandatory to succeed, and if you don’t have the time to put in, you will have a difficult time in the new broker space.

What are the advantages of being an independent brokerage? The world is your oyster. Banks close up regularly due to funding issues etc., and franchises etc. can control you, so if you have some amazing ideas to assist the industry of broking, you can be very limited. You are also able to leverage your own brand and reputation. 

How do you think independent brokerages can continue to thrive in today’s market? By being entrepreneurial, like at ALIC we are purely an investment lending model and I feel this would have been hard to manage elsewhere. A broker is a broker? Well, we don’t believe you can think that way.

What advice would you offer to brokers who would like to set up an independent brokerage? Definitely go at it alone if you are good at what you do. And something that will surprise you – referrals handed to you under a franchise model, for example, are overrated; you don’t need them if you have the skills.

What’s your strategy for generating new business? Deal with the best clients possible and ensure they grow; if they grow, you will grow. Additionally, make everyone you deal with a success, and in turn what goes around comes around. Work your stakeholders and business partners hard for the benefit of the client.

34 | NOVEMBER 2013

What is the most important thing a broker can do to grow their business? Choose your clients and the market you want to work in, and stay true to it. It’s a great industry to be in if you get this right and, as mentioned above, make everybody you contact a success.

What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? Investors are very active, but the time will be limited in certain states in Australia. You need to have a national focus.

What are your goals and strategies for the year ahead? To grow and edge a little closer to becoming the biggest independent brokerage in Australia, and to deepen our relationships with our amazing business partners who understand ALIC as a business. To deliver exceptional client service and be an employer of choice for brokers who want to be different and operational staff.

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? No, and the need to do it is not required when we hand out 1,200 referrals annually to our partners. Specialisation is the key to our success, and we really believe branching out your skill base can be a recipe for disaster if you want to be great at what you do. Revenue-wise it is great, but that really depends on what your motives are as a business operator, which can be skewed.


NOVEMBER 2013 | 35  


1 Total loan book: $1,503,665,985

TIFFEN & CO Location: Kingston, ACT




Tiffen & Co have taken out the top spot for the second year in a row. Company director Gerard Tiffen explains how his brokerage has come by such phenomenal success What’s the secret to building a successful brokerage?

40% Refinancers


First home buyers

Systems, people and the ability to create long-term relationships.

Total settlements 2012/13: $368,208,637

Number of brokers/loan writers: 7

Average annual volume per broker: $52,601,234

Conversion rate:


What are the advantages of being an independent brokerage? In my humble opinion, being able to create your own lifestyle, culture, and standards are the main benefits.

How do you think independent brokerages can continue to thrive in today’s market? As long as we are always looking at what’s next and not in slowdown mode, I think independent brokerages will continue to lead the industry. The industry needs impartial advisers that want to succeed and see their clients grow.

What advice would you offer to brokers who would like to set up an independent brokerage? I think as long as you have a plan and can survive the first three years of business, then it’s a great option. I think the days of the one-man band are over, however, and with licensing and compliance it will be harder and harder to survive. And so it should be, as clients need more support than this.

What’s your strategy for generating new business? Create relationships.

What is the most important thing a broker can do to grow their business? Write one loan, then two loans, then three loans, is what I tell my guys. We are in a very lucky position that we can genuinely nearly put every person we meet into a better loan or cheaper rate that in the long term or short term will save them money. As

36 | NOVEMBER 2013

long as you believe that, then I think you will be great.

What trends have you noticed this year? Have you had to adapt your business strategies to the market conditions? No real trends, just business as usual. You have to approach every client with their needs at the forefront of everything you do, not what’s best for you or what will earn you the most. It’s all about the clients, and if you take care of them then everything else will fall into place.

What are your goals and strategies for the year ahead? Become the MPA Number 1 Independent Brokerage for a third straight year!

Have you diversified outside of mortgages? If so, how have you incorporated this into your business? Yes, we have a full-time risk insurance specialist that offers cover to all our clients. She is great, has the same attitude that we do, and genuinely cares for the client. It’s taken a long time to find the right person; however, we have her now.

NOVEMBER 2013 | 37  



Educated Finance’s Tony Inglis and his business partner Kevin Allen run a truly diversified business suite. As well as residential mortgages, his team also offers leasing, commercial finance and financial planning, and he’s even added a real estate agency to his stable of enterprises. But, as he tells MPA, diversifying in this manner isn’t for the faint-hearted MPA: Tell us how your business evolved to become what it is now. Tony Inglis: Originally when we started the brokerage, myself and my business partner Kevin Allen had backgrounds in residential finance. From there it was a natural progression to do leasing. We’ve been doing leasing for eight years, and that’s an easy add-on, because clients that want finance for houses often want finance for cars as well. As well as that, we moved into commercial finance: originally just commercial finance where we had commercial property as security and then, as we developed contacts with the banks, we moved into other areas of commercial finance not secured by real estate, such as invoice financing and finance to fund your business. Two years ago we also got our diplomas in financial planning. So we offer a financial planning service, but we don’t focus on investments as such – that’s not our niche. It’s simply a case that we got that qualification so that we can offer risk insurance for our clients.

MPA: Where do leads for your diversified business streams come from? TI: I think the majority have come from our existing 38 | NOVEMBER 2013


TED MAN base, but then as your name gets around you will get referrals and people who will come to you out of the blue. If they walk in the door they can’t miss the sign that’s going to tell them what else we do. So we just make sure that that’s front and centre, so that they’re aware that we don’t just do finance.

buying and selling over the years and we’ve sent them away. Now we can mention to them that they’re comfortable with Educated Finance – did they know that there’s also Educated Property?

MPA: How do you deal with administration and compliance?

TI: It runs from the same premises, but it’s a separate business run by a separate person. And in that way we can do transactions at arm’s length, and avoid any conflict of interest. And it comes down to giving clients full disclosure so that they’re aware that we have an interest in this business as well, but it’s run by another person. If they’re comfortable with that, we often have clients who are looking at selling their property that list it with Educated Property. Obviously, when you do that you can expect not to have such an open-door policy with other agents in town. So you forgo referrals from real estate agents, but if you can back yourself to develop enough business then you can offset that. You’ve definitely got to back yourself, and you really need someone that you’re going to go into business with to run the real estate agent side, because you can’t wear both hats. ASIC are already looking at it now, but they’re going to come in and regulate property as well. Property will become a financial product, and therefore ASIC will want to regulate that like they’ve already done with financial planning and now finance. So I think all those businesses are going to become more intertwined.

TI: We try and specialise to a degree. So I do the financial planning and risk insurance. We’ve got another broker that we took on two years ago and we give him all the leasing. He does residential lending as well, but we give him all the leasing so he can keep on top of rates, who’s got the best deals and the back-end processing. Because if you’re not doing it all the time, if you’re not living it, it’s hard to go in and keep up with all of that. Kevin also does residential home loans, but he also does a lot of the commercial as well. I don’t do as much residential lending as the other guys, because I also do financial planning, SMSF loans and reverse mortgages – which requires its own accreditation and licensing.

MPA: Is residential lending still your business’s main source of income? TI: Residential has always been the bread and butter, and we’ve been doing that for 10 years now. You build up a good-sized book and a good trail income from that, so that’s still the vast majority. Commercial is about 10% [of the lending side of the business]; leasing is about 5%; SMSF lending, which is new, is only contributing about 3%. The financial planning is run as a separate division.

MPA: Tell us about your real estate agency. TI: Kevin and I are both licensed real estate agents as well. Two years ago we set up a real estate business, which we run as a separate entity, and we have someone else who’s also a licensed agent who runs that business. It’s more boutique; it’s never going to be a volume business, but we’ve had so many clients

MPA: Is it part of your mortgage broking business?

MPA: What advice can you offer on diversifying successfully? TI: If you’re a one-man band I would think long and hard before you thought about diversifying into financial planning, because you really need a lot of time on your hands to be able to do it right. With my situation we’re lucky; I’ve got other people working around me so I can forgo some of the workload in the finance space to give me time to do the financial planning and keep up to speed with that.

“You forgo referrals from real estate agents, but if you can back yourself to develop enough business, then you can offset that”

NOVEMBER 2013 | 39  



THINKING The market for non-conforming loans is on the up, but how can brokers make the most of these products and get the right result for their clients, without falling foul of the regulators? MPA canvasses lenders and mortgage managers who specialise in this area for their expert insights

40 | NOVEMBER 2013


NON-CONFORMING MARKET DOUBLES IN SIZE Brokers are no doubt tired of hearing about the effect that the GFC had on the mortgage market, with a number of lenders exiting the market and stricter lending criteria reducing the options offered by major lenders to borrowers who don’t conform to the prime mortgage mould. Indeed, the term ‘non-conforming’ is increasingly being seen as a term that has negative or misleading connotations for several lenders and mortgage managers, who are now opting to use more positive terms such as ‘near prime’, ‘specialist’ and ‘custom’. However it’s described, the news coming from insiders within the non-conforming loan sector is overwhelmingly positive. Pepper director, sales and distribution, Mario Rehayem, for example, has described the last 12 months as a period of “exponential growth” for the specialist market. La Trobe Financial vice president Chris Andrews agrees. “The non-conforming market has continued to ride the credit demand retraction caused by the 2008 GFC,” he says. “Many of the country’s largest lending institutions tightened their loan acceptance criteria in response to the GFC and are unlikely to revert to pre-GFC standards, leading to an increased size of the non-conforming sector. This, combined with the strict guidelines associated with obtaining loan mortgage insurance, has consolidated the underlying demand trend.” And the future looks bright. Take Bluestone Asset Management Australasia, for example. The

The Reserve Bank of Australia’s (RBA’s) latest Financial Stability Review highlighted the significant growth that’s taken place in the non-conforming market in recent times. Citing Standard and Poor’s figures, the RBA’s September review noted that “the outstanding value of non-conforming securitised housing loans has roughly doubled since its trough in April 2012”. It did add that non-conforming securitised housing loans still represented a small share of total housing lending (at an estimated 0.2% of housing credit in July), but offered some promising observations on the recent activities of non-Authorised Deposit-taking Institutions (non-ADIs) within the non-conforming sector. “Some non-ADIs have recently issued non-conforming residential mortgage-backed securities, while another non-ADI has announced plans to resume non-conforming lending after leaving this market in 2008.”

company has recently decided to re-engage with the non-conforming loan market, and its general manager, Peter Wood, believes that all signs point to a strong year ahead. “With more non-conforming lenders entering this space, there is a fantastic opportunity for brokers to capitalise on a relatively untapped market,” he says. So how should brokers go about exploring nonconforming loan options with their clients? Turn the page for more expert opinions.



Subprime and non-conforming

97% 3%

Loans >750,000

2.9% 10.9%

Weighted-average loan-to-value (LTV) ratio

61.3% 70.4%

Percentage above 75% LTV ratio

31.9% 47.3%

Percentage above 90% LTV ratio

4.4% 7%

Source: Standard & Poor’s, March 2013

NOVEMBER 2013 | 41  


“There is still plenty of business to be written, with opportunities for brokers at all levels. The next 12 months is expected to be very positive!” prime loans and the individual deal, plus be aware of the process. Greg Mitchell

GREG MITCHELL, GENERAL MANAGER, SALES, HOMELOANS How has the non-conforming market fared over the last 12 months? The near-prime market has performed very positively over the past 12 months. We have noticed an increase in demand for Homeloans’ Accelerate product (which is available as either full doc or low doc), and more recently we have bolstered our suite of products with a new product – the Homeloans FlexiChoice Prime. Taking into consideration feedback from brokers and their clients, this product has no credit scoring required on applications, with genuine savings up to 90% plus LMI. The application will still be mortgage insured by Genworth; however, it will be approved by the funder’s credit assessor without being credit scored by Genworth’s system.

What should brokers be mindful of when selling non-conforming products?

DO’S AND DON’TS • Don’t say no! • Ensure full disclosure with all deals. • Understand your clients’ needs and wants.

They should clearly understand the situation of the client and put together a complete package that takes into account their individual circumstances. Have all the facts, and cover everything!

Are there any types of borrowers who would especially suit non-conforming loans? Any type of borrower suits near-prime loans. Brokers should think outside the box and always keep an open mind.

How can brokers protect themselves from ASIC and make sure that their non-conforming loan applications are compliant?

How do you expect it to perform over the next 12 months?

It really comes down to making sure that everything is disclosed and then going through the deal with a fine-tooth comb. Full disclosure is also vital, not to mention having common sense. Plus brokers should clearly understand the borrower’s whole situation. And obviously doing due diligence is crucial.

There is still plenty of business to be written, with opportunities for brokers at all levels. The next 12 months is expected to be very positive!

What do you think is the future of the non-conforming sector going forward?

Are non-conforming loans still seen as risky? Why is this, and how can you reassure brokers that non-conforming loans are worth investigating? Obviously all cases are different. I believe the broker just needs to completely understand near42 | NOVEMBER 2013

The near-prime market will always be here, and we believe it has a long-term future.

What is your one key tip for brokers when it comes to dealing with non-conforming loans? Look outside of the box! Don’t be locked in – and build strong relationships.


NOVEMBER 2013 | 43  


MARIO REHAYEM, DIRECTOR, SALES AND DISTRIBUTION, PEPPER How has the non-conforming market fared over the last 12 months? Pepper prefer to describe the category as ‘specialist’ rather than ‘non-conforming’, as non-conforming can mislead people to think that this type of lending is unfavourable. The specialist market has experienced exponential growth over the last 12 months. From Pepper’s perspective we haven’t needed to greatly change our products, nor have we seen demand to go down the credit curve and take on more risk. Our growth is a result of our persistence in educating the broker market on what specialist lending is all about, the many benefits of providing solutions for this segment of the market, and how to best position the conversation with these type of borrowers. We have also never lost sight of what has always been an important focus for Pepper; that is ensuring we have the best team on the road assisting our brokers. Pepper offers a personalised service that our brokers appreciate, and we have also developed the most transparent specialist product suite in the market that equips our brokers with the confidence that they will get a consistent decision every time.

How do you expect it to perform over the next 12 months? I expect the market to continue to experience steady growth as more and more brokers realise the long-term revenue and referral opportunities that offering specialist products presents. Every borrower a prime lender turns away is a potential lead for a specialist lending solution. In a market where credit is tightening, more borrowers will be funnelled into this segment of the market, and savvy brokers will start to capitalise on this.

Are non-conforming loans still seen as risky? Why is this, and how can you reassure brokers that non-conforming loans are worth investigating? Pepper has worked hard to dispel many of the misconceptions associated with specialist lending. The perception of non-conforming loans being risky loans has been influenced by the lending practices that took place offshore, ie subprime mortgages. What brokers need to be aware of is that today’s non-conforming borrowers were yesterday’s 44 | NOVEMBER 2013


Mario Rehayem

conforming borrowers. The borrower has not changed but the banks’ credit policies have, effectively disenfranchising these borrowers from the market until they are exposed to specialist lenders.

What should brokers be mindful of when selling non-conforming products? Selling a specialist loan is no different to any other loan. A broker still needs to make reasonable enquiries in relation to the borrower’s requirements and objectives, their financial situation and appropriate verification of the information obtained. As with any financial solution, the broker needs to put the customer’s best interests first and utilise their expertise to ensure that the loan recommended is not unsuitable.

Are there any types of borrowers who would especially suit non-conforming loans? There are no clearly defined characteristics that help to classify specialist borrowers. The reality is that any borrower who is rejected by a bank or mortgage insurer could potentially be a specialist borrower. Pepper offer specialist solutions for PAYG borrowers who don’t satisfy mainstream lenders’ employment or income requirements, self-employed borrowers who don’t have complete financials, and borrowers who have overcome a credit event such as bankruptcy. As a result of changes to credit over the years, what was deemed conforming yesterday is in many instances now deemed non-conforming. The borrowers’ characteristics haven’t necessarily changed; it’s the banks’ and mortgage insurers’ appetite to certain areas of their credit policy.

• Make sure your customer understands and accepts why they are not eligible for a conforming/prime loan, rather than trying to push a specialist solution prematurely. • Speak in terms the borrower will understand by focusing on the repayment rather than the rate so they can establish how the loan will fit into their existing budget. • It is also important to sell the future – a borrower’s circumstances can change and there will be an opportunity in the future to move them to a lower rate once their finances are back in line with prime lenders. • Last but not least, fulfil your responsible lending obligations. Don’t say no! • Ensure full disclosure with all deals. • Understand your clients’ needs and wants.


How can brokers protect themselves from ASIC and make sure that their non-conforming loan applications are compliant? As with any lending a broker should adhere to the NCCP regardless of the product, ie conforming/nonconforming. The evolution of low doc, now more appropriately called ‘alternative documentation’ by Pepper, is just that: an alternative, not a lesser way of prudently assessing a borrower’s income. The ASIC guidelines clearly allow for these alternative methods of income verification for the self-employed borrower. At Pepper our sales and credit teams are accessible to discuss loan applications with our broker partners, particularly in the early stages of the relationship.

What do you think is the future of the non-conforming sector going forward? This sector is growing every day; both broker and borrower awareness of the options that are available is becoming more prevalent. Specialist lenders such

as Pepper are offering real growth opportunities to brokers by allowing brokers to do what brokers do best, which is find solutions for their customers.

“The specialist market has experienced exponential growth over the last 12 months” What is your one key tip for brokers when it comes to dealing with non-conforming loans? Use a specialist lender that you can trust, and know that you and your customers will receive the service they deserve. Do not confuse a specialist lender with a small boutique/private funds lender or a specialist lender that is prone to exit the market when their business model becomes stressed.

NOVEMBER 2013 | 45  


Are there any types of borrowers who would especially suit non-conforming loans?

CHRIS ANDREWS, VICE PRESIDENT, LA TROBE FINANCIAL How do you expect the non-conforming market to perform over the next 12 months? We expect to see a steady increase in volumes over the coming year, particularly following the introduction of the positive credit reporting regime in March 2014. La Trobe Financial holds a view that the nonconforming space does not easily lend itself to automated credit scoring, so we prefer instead to assess each application on its merits. Potentially, this new reporting regime will actually drive more business our way. Our flexibility, combined with a personal approach to each individual application, will see us attract new opportunities and grow again in the coming year.

Are non-conforming loans still seen as risky? Why is this, and how can you reassure brokers that non-conforming loans are worth investigating? It depends on the individual scenario; remember the definition of non-conforming loans has changed significantly post-GFC. The majority of non-conforming loans we now see would actually have been classified as prime by the majors only five years ago before their internal loan acceptance criteria were squeezed. That said, however, there certainly are some high-risk loans in the non-conforming category that require very careful investigation or walking away from. Brokers should talk to their lender where there are any doubts about an application.

What should brokers be mindful of when selling non-conforming products? Often you are selling a solution, not the cheapest rate or the lowest fees; this should be communicated to the borrower. Non-conforming loans present a great opportunity for brokers to build long-term relationships with clients, by using this initial ‘solution’ as a way to demonstrate their willingness and ability to help, then look to gain future business as the client’s situation changes or improves over time. 46 | NOVEMBER 2013

Chris Andrews

Borrowers seeking a solution are generally selfemployed applicants. We know non-conforming loans carry a slightly higher price, but that is because generally the transaction and risk is more complex, which requires a greater level of investigation. Borrowers needing a quick solution due to security type (eg commercial), layered loan purpose (eg construction or debt consolidation), holding some level of credit impairment, or having limited time to settlement are generally the best suitors for non-conforming lenders.

How can brokers protect themselves from ASIC and make sure that their non-conforming loan applications are compliant?

DO’S AND DON’TS • Do educate the borrower about their situation, and communicate realistic outcomes for them to consider. If it is unlikely they will get the lowest rate or cheapest fees, don’t promise it, and instead sell the solution. • Don’t make quick judgments when dealing with non-conforming scenarios. Keep an open mind; look at the facts; listen to the borrower’s explanations; and then determine if it is reasonable to proceed. • Open communication with clients to ensure you get the full picture is the key to dealing with non-conforming scenarios.

The National Consumer Credit Act requires credit assistance providers (brokers) to make reasonable enquiries and to take reasonable steps to verify the consumer’s situation. These obligations are scalable, depending on the individual circumstance. Therefore, if you are dealing with a complex or high-risk transaction, then we would suggest you upscale your enquiries appropriately, and record your findings in your detailed fact-find document.

What do you think is the future of the non-conforming sector going forward? In the short to medium term we expect the fallout from the incoming positive credit reporting regime to be a major driver for non-conforming business. Our ability to individually assess applications that fail credit scoring models elsewhere is what we expect to be a catalyst for further growth into the future.

What is your one key tip for brokers when it comes to dealing with non-conforming loans? Work with your lender. Don’t put the scenario in the too-hard basket and miss an opportunity. We encourage all of our brokers’ partners to call our credit analysts directly to leverage off their experience with these transactions. We will always help to ensure the transaction is put together appropriately, easing any concerns or uncertainty the broker may have about dealing with non-conforming loans, especially if they do not regularly process them.


NOVEMBER 2013 | 47  


Are non-conforming loans still seen as risky? Why is this, and how can you reassure brokers that non-conforming loans are worth investigating? Yes – this is still a perception within the community, which should be addressed. Non-conforming lenders are now governed by strict licensing rules and regulations. Brokers can feel confident that writing a non-conforming loan is as compliant as writing a loan with a prime lender. Brokers should most definitely be considering writing nonconforming loans as they have the potential to significantly expand their customer base, increase referral sources and drive revenue growth. Conformance, transparency and ease of process are core Bluestone principles.

What should brokers be mindful of when selling non-conforming products?

Peter Wood

PETER WOOD, GENERAL MANAGER, BLUESTONE ASSET MANAGEMENT, AUSTRALASIA How has the non-conforming market fared over the last 12 months? The non-conforming market has performed sluggishly over the past 12 months, struggling to gain momentum due to market awareness, confidence in the sector and a limited product offering that targets a broad base of credit issues.

How do you expect it to perform over the next 12 months? The outlook for the non-conforming market is particularly positive for the next 12 months as brokers become more familiar with the various products available and how this expands their offering/corresponding client base. With more non-conforming lenders entering this space (and thus a broader scope of sector-specific products), there is a fantastic opportunity for brokers to capitalise on a relatively untapped market. Bluestone recognises this opportunity and have re-entered the market to help realise this potential. 48 | NOVEMBER 2013

Each borrower’s situation is unique. Understand the complete picture – the story – of the client’s circumstances, including any credit or life events which may have an impact upon their application. An estimated one in seven people have experienced an event in their life which has impacted their ability to meet financial commitments. Bluestone products address this demand and accommodate an extensive range of credit issues.

“There is a fantastic opportunity for brokers to capitalise on a relatively untapped market” Are there any types of borrowers who would especially suit non-conforming loans? Bluestone caters for a broad cross-section of borrowers who come from all walks of life and situations. Our loans are designed to be flexible and provide a solution where most other lenders’ won’t. Typically our borrowers are self-employed or PAYG, have past or present credit issues, require a large number of debts to be consolidated, need to pay a tax bill, or require funds for business expansion or other valid purposes.

DO’S AND DON’TS • Do manage the expectations of the borrower at an early stage. • Do always focus on the affordability of the repayment amount and the clear benefit to the borrower. • Do look at all the alternatives and provide a solution. Fully understand the borrower’s situation. • Do have a shortand medium-term plan to discuss with the borrowers, centred on how you will assist them. • Do be across market movements. Be aware of the full range of products available and how these can benefit. • Don’t just focus on the interest rate. • Don’t put it in the too-hard basket. Don’t say no! • Ensure full disclosure with all deals. • Understand your clients’ needs and wants.


How can brokers protect themselves from ASIC and make sure that their non-conforming loan applications are compliant? • Ensure you have explained to the client the benefits of the product; this includes being able to demonstrate a tangible financial benefit. • Give the client the opportunity to take away the documents and read them or even take to an expert for review (accountants/lawyers). • Ensure your own paperwork, including that pre-assessment summary and key fact sheets, has been completed. • Always follow the lender’s policies and procedures. • If unsure, discuss with the lender.

What do you think is the future of the non-conforming sector going forward? The future of the non-conforming market is exciting. Prior to the GFC the non-conforming market represented approximately $3bn–$5bn per annum in settlements. The market has not disappeared but has merely been hibernating due to a lack of quality products being available. Brokers should be incorporating non-conforming loan products into their business, enabling greater market penetration, referral sources and revenue opportunities.

What is your one key tip for brokers when it comes to dealing with non-conforming loans? Set the borrowers’ expectations at the very early stage and help them to fully understand why they can’t go to a mainstream lender. Provide them with a solution and a plan to enable them to achieve their goals. Ensure the borrowers are managed on an ongoing basis. Create a client for life.

“The outlook for the non-conforming market is particularly positive for the next 12 months” NOVEMBER 2013 | 49  


JOHN MOHNACHEFF, NATIONAL SALES MANAGER, LIBERTY FINANCIAL How has the non-conforming market fared over the last 12 months? We’ve seen strong growth in the custom loan market over the past 12 months. It could be because our customers have not been getting a fair go from their banks, or their needs are quite customised. Regardless, we’ve found clients to be pretty good at finding alternatives, and that’s meant growth for them and for us.

How do you expect it to perform over the next 12 months? We expect the custom market to continue to perform well over the next 12 months as confidence increases.

Are non-conforming loans still seen as risky? Why is this, and how can you reassure brokers that non-conforming loans are worth investigating? Brokers should not see custom loans as risky, as long as they conform with NCCP guidelines and perform the necessary investigations of their client’s requirements, objectives and financial position to ensure a loan is not unsuitable. If brokers approach custom deals with integrity and in a disciplined manner, they present a fantastic opportunity to diversify their offering and grow their business. If they’re unsure, work with their BDM to find out more about custom loans.

“We expect the custom market to continue to perform well over the next 12 months as confidence increases” Are there any types of borrowers who would especially suit non-conforming loans? A wide range of brokers’ clients, such as the selfemployed, contractors or new business owners as well as those with credit impairment, could suit custom loans, depending on the client’s requirements and objectives. 50 | NOVEMBER 2013

DO’S AND DON’TS • When selling custom loans, just like all other loans, it’s important to always be upfront and disclose all liabilities from the outset. • It’s also important to not treat clients who need nonconforming loans any differently to your other clients. • One-off life events such as a marriage breakdown or illness can lead to an adverse credit history, and it’s the job of a broker to help these people understand the range of finance options that may be available.

John Mohnacheff

How can brokers protect themselves from ASIC and make sure that their non-conforming loan applications are compliant? Brokers should comply with all NCCP requirements and ASIC guidelines to ensure that the necessary investigations of the client’s requirements, objective and financial position are made.

What do you think is the future of the non-conforming sector going forward? The custom sector will continue to evolve over time. Even so, Liberty will continue to offer its innovative custom loans at great rates, for a broad range of customers and, most importantly, with the best levels of service.

What is your one key tip for brokers when it comes to dealing with non-conforming loans? Always give your Liberty BDM a call. We offer brokers quality service with an emphasis on constant training, deal-by-deal support, and attendance at professional development days. We also provide brokers with direct access to customer support and our underwriters. All of these things are specifically designed to support the broker community.


NOVEMBER 2013 | 51  



Aaron Russell-Smith moved from construction to broking after a tragic accident put him in a wheelchair for life. Inspired by the efforts of the broker who helped him to secure a home using his insurance payment, Russell-Smith recently made the move into broking himself and has fallen in love with the job. He tells MPA how he’s established himself as a new broker, and explains his big plans for the future MPA: How did you get into broking? Aaron Russell-Smith: From 2006 I wanted to be a mortgage broker, and when I bought my house I  enlisted a broker who did a great job in getting me approved,  so I asked him what was needed to become a broker. He explained that I needed a Certificate IV in Finance and Mortgage Broking, to join an aggregator and either the MFAA or FBAA, and to gain lender accreditations.

MPA: What did you do for work before broking? AR: In 2010 I bought a restaurant. I’d just got married and was setting the business up (making phone calls, emails, signing forms), all on our honeymoon in Hawaii. The missus wasn’t happy with me at the time. (Guys, never do business on your honeymoon – not a happy wife!) I sold the restaurant in 2011 and started doing contract work with recruitment agencies, working with Queensland Health, Telstra, Holcim Concrete and Bupa, which was my last role in August 2012. 52 | NOVEMBER 2013

MPA: What challenges have you encountered, being a new entrant to the industry? AR: Just trying to find my feet not having instant cash flow coming from a regular wage to commission is hard, as well as learning credit policies and understanding the bank procedures.

“[Clients ask] how it happened; they say it’s great to see me doing what I love and that it isn’t holding me back” MPA: What advice would you give to other new brokers? AR: I would say, find an aggregator that suits you and  find a mentor you like and trust.  Finsure is my aggregator and I have the best mentor in Steve


Lowe. He has my interests at heart and he wants me to be successful, along with Finsure. Surround yourself with other brokers that have the experience and understanding of the industry.

MPA: How do you generate leads? AR: I have a couple of ways of generating leads. I will buy some; there are companies that advertise home loans online. I recently had 1,000 flyers printed, so at night me and my wife pick an area and drop them in letterboxes. My youngest brother has three kids, and I’m in the process of raffling off my signed Gold Coast Titans jersey to raise money for their school. In return, I get the email addresses of every mum and dad that buys a raffle ticket. I also find RP Data works well for me.

MPA: What are your goals? AR: Making the MPA Top 100 Brokers list. I want to settle $2–3m a month in home loans, but my fiveyear goal is to be running a successful mortgage broking business, making the Top 100 every year and even taking the number one spot out in a few years’ time.

MPA: How do clients react to dealing with you being in a wheelchair? AR: When it comes time to make the appointment to meet them, I let them know I am in a wheelchair. The clients have no problem meeting me at a coffee shop. They ask questions about how it happened; they say it’s great to see me doing what I love and that it isn’t holding me back. I had two customers who didn’t want to meet at a coffee shop or at my home office, but I don’t let those two customers get me down. Everyone I deal with has said there is no problem. I meet them at a nice coffee shop, I buy them a coffee, and we walk away from the appointment with smiles on our faces, whether they’ve signed on the dotted line or they have to wait six months before I can get the approval.

MPA: Being in a wheelchair, what kind of challenges do you face in day-to-day work? AR: It is a lot harder, but that’s life; I have to deal with it. I do get really sore sitting in the wheelchair for hours on end. By mid-afternoon I get tired and start dozing off at the table. I try to get all my appointments done by 1.30pm, as my lower back, hips, pelvis, knees and wrist all start throbbing. It gets worse throughout the winter months, when it takes a little bit longer to get out of bed. My wife Roxanne won’t sleep next to me as I lay awake till the early hours of the morning. There are times when I have to meet a client and it’s pouring down with rain: I have to put the wheelchair together dripping wet, and after the appointment pull the wheelchair apart. So these are some of the challenges I face day to day.

“I meet them at a nice coffee shop, I buy them a coffee, and we walk away from the appointment with smiles on our faces”

NOVEMBER 2013 | 53  



Data science is the new ‘rock star’ business profession that picks up where big data and analytics leave off. Tim Phillipps argues that, to become more predictive, organisations should recruit those who see the future and others who can visualise it for the rest of us 54 | NOVEMBER 2013


Worldwide gaming, resorts and hotel empire Caesars Entertainment analyses data from slot machines to present real-time offers and marketing promotions to its patrons. While organisations are building their in-house ability to use data to peer into the future, Kaggle, a platform that allows organisations to crowdsource data scientists, has attracted the backing of Silicon Valley high-flyers who were behind the online payments platform PayPal. Kaggle allows organisations to farm out complex business problems to data scientists around the world in return for cash prizes. Although data science is the future of decisionmaking, organisations must hurdle two obstacles. First, they must bridge a skills gap and, second, understand and act on the predictive business insights that data scientists produce. The ‘data scientist’ is a new breed of analytics professional who takes an experimental approach to analysing data. Professor Thomas H. Davenport, visiting professor at Harvard Business School, is one of the world’s foremost authorities on data science and a senior adviser to the Deloitte Analytics Institute. He says a data scientist is “part hacker, part quantitative analyst, part trusted adviser and part scientist”. Organisations are interested in data science because it has the potential to transform business models and create new ones. It also replaces gut instinct with data-driven decision-making and is the basis of a new form of competitive advantage that is difficult to replicate. Consider the following examples. LinkedIn owes much of its success to the ‘people you may know’ function – an experiment instituted by its former chief data scientist, DJ Patil, who also coined the term that applies to the new profession. GE realised that the growing amount of data produced by sensors in the firm’s gas turbines, jet engines and other industrial products could be collected and analysed in real time to improve machine performance and operations, turning unscheduled maintenance into scheduled maintenance and identifying potential operational disruptions before they occurred. The insights it has drawn from its devices are already improving the efficiency of its customers’ businesses, saving them anywhere from tens of thousands of dollars to millions for each analytics-based service.

A SHORTAGE OF SCIENTISTS A survey carried out last year by EMC revealed that two thirds of data science practitioners expect demand to outpace supply over the next five years. Even first-year business students know what happens when demand exceeds supply: prices go up. We’re already seeing this, with organisations willing to pay top dollar for data scientists. However, this is a risky strategy. It involves considerable expense, and there’s no guarantee an individual will be a good cultural fit.

Organisations are interested in data science because it has the potential to transform business models and create new ones So, where can organisations find the data scientists of tomorrow? Mark Grabb, Analytics Technology Leader at GE’s Global Research Center in New York, suggests that PhD graduates are likely to continue to be a major source of data scientists in coming years. The private sector, universities and industry bodies like INFORM are also developing tailored data science courses. However, there’s a question as to whether these courses are teaching the right skills. Most of the courses that are currently being developed focus on the data cleaning, mining and

NOVEMBER 2013 | 55  



Decisionmakers have to be able to absorb the insights from data science to effectively use them to solve problems

analysis skills necessary for data scientists to do their job. However, less attention is being paid to the ability to communicate those insights, says Davenport. “Communication still doesn’t have the importance it should in most programs,” he says.

MARRYING ART WITH SCIENCE Bridging the communication gap is of paramount importance. It’s great to have a team of big brains that can crunch data, but their efforts are useless if they can’t explain what they find to decisionmakers. Communicating the message hidden within data requires a rare capability to combine the right-brain analysis with the left-brain creativity needed to communicate with non-specialists. This isn’t just about running experiments with data; it’s about being able to paint a picture with the results. In many respects, this skill is more art than science, namely ‘data artistry’. There are two key elements to data artistry. First, the data artist must be able to speak both the language of data and the language of business. Second, data artists need to be able to tell stories with data, understanding the most effective way to communicate results and being able to work with different media to deliver those insights. This typically involves using data visualisation tools. In the past, these might have been static reports, PowerPoint presentations, heat maps and charts. Now, data artists are increasingly turning to new and more creative ways of telling stories with data. They are now using audio-visual presentations, dynamic charts, interactive games, 3D models and apps to convey meaning.


Tim Phillipps is the DTTL global leader of Deloitte Analytics and is responsible for Deloitte Analytics Institute Asia. He is an authoritative voice on the application of analytics as a source of managerial insight and competitive advantage.

56 | NOVEMBER 2013

In the short term, organisations will struggle to find a professional who embodies a data scientist and data artist in the one ‘rock star’ package. A better approach is to create rock bands: data science teams with a breadth of expertise. By focusing on forming teams, organisations can blend a mix of top skills without staking everything on a single risky hire. It also enables organisations to fish in a wider ocean of talent, rather than the existing pool of data professionals. You can hire in specialists in particular areas: data scientists to run experiments, industry specialists who can apply analytical insights to their work, or even computer games

Founded in Melbourne, Australia, in 2010, startup Kaggle is an online marketplace that connects organisations with the world’s best data scientists. Now based in San Francisco, the company has two products: 1. Data science competitions for optimising a company’s existing algorithms 2. A matchmaking service called Kaggle Connect, which connects companies to data scientists who can help them solve challenging data science problems (whether new or existing) With competitions, companies can post datasets and problems to Kaggle, and the community of 100,000 data scientists compete to create the best solution. Competitions are effective for well-specified problems, where predictive accuracy is most important. Good examples include retailers that want to forecast demand more accurately (to optimise pricing and prevent out-of-stock situations) and insurance companies that want to more accurately predict risk. For less well-specified problems, Kaggle provides a matchmaking service called Kaggle Connect, which matches companies with a data scientist who has a track record of solving a particular problem (as demonstrated through their competition performances). Kaggle Connect is suitable for problems such as helping retailers and CPG companies optimise their pricing, or telecommunications companies better target their customers or potential customers with personalised marketing offers or customer retention initiatives. The Kaggle Community now contains over 100,000 data scientists, including many of the world’s biggest names (from the IBM Watson team to the Google Prediction API team). Deloitte Australia announced on 28 May 2013 that it had entered into a preferred alliance with Kaggle. This alliance will combine Deloitte Australia’s analytics, business advisory, technology and process consultants with Kaggle’s data scientist network to bring the best analytics solutions to clients.

programmers and animators to devise data visualisations. Finally, tapping into external sources of expertise can bridge skills gaps, benchmark your own approaches against the latest advances in techniques and technology, and source talent in specific analytical areas. The Deloitte Analytics Institute is one such centre of excellence; alternatively, organisations like Kaggle offer affordable access to data scientists around the world on a project-by-project basis.


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OF MANAGE If you want innovation and growth, you need to engage your people on a whole new level, argues Therese S. Kinal Management is in need of a revolution. And not just one on glossy academic paper, but one that actually changes how organisations think and act. Despite the inspirational stories we read about companies like Zappos, Innocent Drinks and Google, the truth is that most of us are using outdated management practices and failing to get the most out of our people. Not convinced? Consider this: • 65% of people are unhappy at work (Right Management, Manpower Group, 2012 online survey) • Only 14% understand their company’s strategy (Smither, J.W., and London, M. (2009). Performance management: putting research into action) • 75% are seeking jobs as we speak (Jobvite’s Social Job Seeker Survey, 2012)

Today’s leaders face increased complexity and ambiguity, and employees and customers alike are demanding engagement, transparency and responsibility. One billion people are now on Facebook, and 500 million Tweets get sent every day. Customers don’t want to be sold to. They want to connect with brands and play a role in the development, sales and marketing of products. If we ever thought we had ‘control’, it’s definitely gone now. 58 | NOVEMBER 2013

All of this presents a new challenge for how we think about and practise management and how we develop leaders that can excel in this brave new world. But before we look at the future, let’s take a look in the rear-view mirror and see how we got to where we are today:

1910’S–1940’S: MANAGEMENT AS SCIENCE ‘Management as science’ was developed in the early 20th century and focused on increasing productivity and efficiency through standardisation, division of labour, centralisation and hierarchy. A very ‘top down’ management style with strict control over people and processes dominated across industries.

1950’S–1960’S: FUNCTIONAL ORGANISATIONS Due to growing and more complex organisations, the 1950s and 1960s saw the emergence of functional organisations and the human resource (HR) movement. Managers began to understand the human factor in production and productivity, and tools such as goal setting, performance reviews and job descriptions were born.



EMENT 1970’S: STRATEGIC PLANNING In the 1970s we changed our focus from measuring function to resource allocation and tools such as Strategic Planning (GE), Growth Share Matrix (BCG) and SWOT were used to formalise strategic planning processes. After several decades of ‘best practice’ and ‘one size fits all’ solutions, academics began developing contingency theories.

1980’S: COMPETITIVE ADVANTAGE As the business environment grew increasingly competitive and connected, and with a blooming management consultancy industry, competitive advantage became a priority for organisations in the 1980s. Tools such as Total Quality Management (TQM), Six Sigma and Lean were used to measure processes and improve productivity. Employees were more involved by collecting data, but decisions were still made ​​at the top, and goals were used to manage people and maintain control.

1990’S: PROCESS OPTIMISATION Benchmarking and business process re-engineering became popular in the 1990s, and by the middle of the decade 60% of Fortune 500 companies claimed to have plans for or had already initiated such projects. TQM, Six Sigma and Lean remained

popular, and a more holistic, organisation-wide approach and strategy implementation took the stage, with tools such as Strategy Maps and Balanced Scorecards.

2000’S: BIG DATA Largely driven by the consulting industry under the banner of ‘Big Data’, organisations in the 2000s started to focus on using technology for growth and value creation. Meanwhile, oversaturation of existing market space led to concepts such as Blue Ocean Strategy and Value Innovation.

A WHOLE NEW LEVEL After a century of trying to control people, processes and information, we have come to a point in organisational history where we need to recognise that what worked before just simply isn’t enough anymore. Traditional management is fine if you want compliance, but if you want innovation and growth, you need to engage your people on a whole new level.

NOVEMBER 2013 | 59  


We need to recognise that what worked before just simply isn’t enough anymore

In our research, we looked specifically at the evolution of the management approach and the approach to innovation/problem solving, and at how these would develop in the future (see graph, ‘The evolution of management’):

two go together, and that having happy and productive workforces is not about team building exercises or lucrative benefit packages but about creating a working environment that offers purpose, mastery, challenge and autonomy, which in turn creates more business value than the traditional approach. Recently, Steve Denning wrote about the management revolution that’s already happening at In the article, he discusses organisations like Apple, Zara and Wholefoods that have successfully forged ahead despite the increasingly challenging environment: “None of these organizations has arrived at any final state or equilibrium: in each case, management practices continue to evolve. Nor are any of these organizations perfect, as they have to cope with a context that is filled with contradictions. Their virtue lies in the creative energy with which they are pioneering new ways of adding value.” Steve makes some excellent points about the need to constantly reinvent ourselves, but I’m not sure if the revolution is already happening. In fact, I think it might be more of an evolution. And herein lies the problem. We need a revolution, not an evolution. We are armed with tons of research that supports a more holistic, human way of doing business. It is up to us to stop simply following best practice and translate our know-how into how we develop leaders and organisations that are more agile, innovative and purpose-driven… and, in doing so, breed the pioneers and market leaders of tomorrow.

1. Management approach: the style of top management, ranging from: a. Control (ie your boss tells you what to do and how to do it); to b. Set goals (ie your boss sets goals and expectations, but you have more freedom with regard to how you achieve them); to c. Inspire (ie your boss gives you scope and freedom to innovate on both the what and the how) 2. Approach to innovation/problem solving: how leaders solve strategic problems and develop new products and services. This ranges from: a. Top down (ie solutions are created and come from the top); to b. Top down with bottom-up data (ie the rest of the organisation contributes information and experiences, but solutions are still created at the top); to c. Participatory (ie solutions are created collaboratively, and throughout the organisational levels)

Organisations of the future are neither consensus driven nor top down. They aren’t dictatorships, nor are they anarchies. They’re not merely occupied with increasing shareholder value or making their people happy. Leaders of the future know that the

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Top down w/ bottom-up Participatory data


Top down

Therese S. Kinal is the CEO and co-founder of Unleash, a disruptive innovator in the management education and consulting industry. She is the co-author of Unleashing: The Future of Work, and she writes, runs workshops and works with clients on a range of management issues.




Unleashing Big data Competitive advantage

Process optimisation

Strategic planning Functional organisation Management as science







2013 ->

Source and copyright: UNLEASH SPP LTD. For more information, go to


NOVEMBER 2013 | 61  



Day in the life of...

Paul Filippone, state manager mortgage broking, Bank of Melbourne 6:00am: Wake up and look out the window, it’s a nice day so I get up, put on my running gear and head out for a 45 minute run – exercise helps to work out the kinks and puts you in a great frame of mind for the day ahead. Having said that, if it’s raining I hit snooze faster than Usain Bolt!

7:15am: A quick breakfast with my gorgeous five year old princess Ruby Rose and my wife Rose. For me it’s sour dough toast and an espresso, for her, sour dough with Nutella and sprinkles and a glass of juice.

7:30am: I’m on the way to work, I like to surf the radio stations – I usually end up with talk-back radio on the drive to the Bank of Melbourne head office on Collins Street.

8:00am: The work day is off and running. I review any emails that have hit my inbox overnight, review the stats from yesterday and prepare for my 9am teleconference with the BDM team.

9:00am: The team dials in for our daily sales teleconference, we review and discuss the previous day’s results and talk about the proactive visits and activities we have planned for the day ahead.

10:00am: I touch base with my boss Clive Kirkpatrick, GM of mortgage broking for the St. George Banking Group – we cover off the key messages from the sales teleconference and discuss our upcoming Aggregator Briefing.

“It’s been a morning of short sharp results and actions focused meetings – I need another espresso” Paul Filippone

11:15am: Operations engagement meeting – this is a regular meeting with our processing teams to understand where we are at with our service levels and whether there are any impacts I need to be aware of or in turn any issues I need to cover off with them.

1:00pm: Lunch at “Mr Huang Jin” with a Flame broker and a BDM – let’s face it we’re in a relationships business and many a solid business relationship is built over good dumplings.

2:00pm: I spend the afternoon visiting brokers with one of my BDM team; there’s nothing like getting back to the fundamentals of doing business. Getting out on the road to talk to brokers, understand their business and help to leverage relationships to create great outcomes for our customers.

10:30am: Meeting with Gavan Thompson, head of retail to discuss and benchmark retail performance against broker performance. We also discuss leveraging branch and broker relationships to gain the most traction for our MyBank strategy.

11:00am: It’s been a morning of short sharp results and actions focused meetings – I need another espresso before I attend the last one for the morning. 62 | NOVEMBER 2013

5:00pm: Back in the office, I check my email, listen to phone messages, check on our numbers for the day – general housekeeping.

7:00pm: Home in time for dinner with Rose and the princess, they’re my lifeblood, my peace and my inspiration for life. Ruby Rose asks “how many loans did you get today Dad?” – “did you talk to Clive?”

9:00pm: Watch some Ray Donovan, my favourite new show, and finish the day with a cheeky glass of red.



Favourite things Glenn Gibson, national sales manager, third party distribution, AMP Bank

Glenn Gibson – AMP

Vacation spot: New York... It was the place I proposed to my wife (I’m not a sit and relax kind of holidaymaker). Sport: AFL and St Kilda. They kill me but I love it.

Book: Christine by Stephen King. I enjoy revisiting books once they have become movies.

Food: I love duck accompanied with a nice glass of red.

Music: Anything from Pitbull to Frank Sinatra depending on my mood.

Drink: Vodka.

Movie: Austin Powers, The Love Guru, Talladega Nights, Anchorman... don’t act like you’re not impressed.

Place to be in Australia: Melbourne in winter and Sydney in summer.

Hobby: Marathon running: Running gear, fortnightly massages and osteo, travel and a new pair of shoes every 10 weeks...who said running was a cheap sport?

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Key stats from borrowers making enquiries at






48.9% The percentage of enquiries from first homebuyers

To buy an investment property

$390,000 $380,000 $370,000 Sep












48.9% First homebuyer





Move home

30% 20%


10% The percentage of borrowers looking for a standard variable-rate product

Give my home a makeover

0% Sep
















Visit for all the latest borrower trends

64 | NOVEMBER 2013


Refinance to get a better deal


I want some spending money

Mortgage Professional Australia magazine Issue 13.11  

The magazine for mortgage professionals in Australia.

Mortgage Professional Australia magazine Issue 13.11  

The magazine for mortgage professionals in Australia.