Mortgage Professional Australia issue 17.06

MPAMAGAZINE.COM.AU ISSUE 17.06

BREAKTHROUGH Australia’s new No. 1 Franchise Brokerage, Mortgage Choice Melbourne, on turning downsizing into triumph ASIC REVIEW What happens next

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MICHAEL SAADAT ASIC exec on commissions

ALT-DOC Too big a sector to miss

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JUNE 2017

CONNECT WITH US

CONTENTS

Got a story or suggestion, or just want to find out some more information? twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU

UPFRONT 04 Statistics

What the Deloitte Mortgage Report says about the slowing mortgage market

20 COVER STORY

TOP 10 FRANCHISE BROKERAGES 2017

34 FEATURES

AUSTRALIA’S BEST BDMS

Award-winning BDMs share their top tips for brokers

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Australia’s best individual offices on achieving greatness within and through the franchise system

THE BIG INTERVIEW

MICHAEL SAADAT ASIC senior executive leader Michael Saadat on the remuneration review and more

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06 Head to head

Three brokers discuss whether elite broker clubs harm consumers

08 News analysis

After ASIC’s review, the real battle begins for broking’s future

12 Opinion

MoneyQuest’s Michael Russell on changes to interest-only lending

MORTGAGE INSIDERS 46 Paul O’Regan

Reflecting on lessons learnt launching LJ Hooker Home Loans

52 Choice Home Loans Wollongong

The brokerage of Top 100 Broker Paul Wright is an investor powerhouse

FEATURES

ALT-DOC LENDING Engaging and financing the new wave of alt-doc clients

54 Career path

Bluestone’s Royden D’Vaz on his journey with the non-bank lender

56 Other life

Fighting rare cancers with Paul Dossetto and his charity, Without a Ribbon

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BUSINESS STRATEGY

FINANCIAL LITERACY

Brokers on helping clients become more confident and savvy about finance

MPAMAGAZINE.COM.AU NOW ONLINE: Our new daily newsletter Every day you can expect news analysis that goes beyond the headlines to discover what matters to your business, in addition to property market trends, business strategy, industry leader opinions, and the stories of real brokers on running their businesses.

It’s free to subscribe; simply go to our website.

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UPFRONT

EDITORIAL www.mpamagazine.com.au JUNE 2O17

AMBUSH!

P

redicting the future is a dangerous business, as broking’s industry associations and aggregators discovered this month. For two years all eyes had been on ASIC’s broker remuneration review, and many interpreted its 243-page report as letting brokers off the hook. Yet in just 59 pages the separate Sedgwick review, dismissed as a covering exercise by the banks, has plunged the industry back into chaos.

Thanks to Sedgwick’s review, bank-broker relations appear to be at their lowest point since the GFC. Within 12 hours of Stephen Sedgwick publishing his final report, all four major banks explicitly committed to implementing his recommendations in full. That includes Recommendation 18, that banks do not directly link payments to loan size; meaning, in short, an end to percentagebased commission.

Banks are not known for keeping their promises, yet the majors were particularly explicit in their statements, even putting a date on implementation: by 2020, at the latest. This indicates the decision to change commissions has already been made at the highest level, yet the industry associations we spoke to were confused and did not appear to have been consulted. Given lenders are members of the MFAA, why did they not consult the association?

While there are many views on commissions and incentives, it’s clear unilateral action, such as that taken by the banks, has a divisive effect Broking associations should shoulder some of the blame for being so comprehensively ambushed, but much of the problem lies with the banks. It’s noticeable that the bank executives who commented on Sedgwick’s review were not the national third party channel bosses brokers have become accustomed to dealing with. There seems to be a disconnect between these broker heads – who have continually vowed to work with the channel – and more senior bankers who seem mainly concerned with protecting their own reputation in the press.

While there are many views on commissions and incentives, it’s clear unilateral action, such as that taken by the banks, has a divisive effect. With the Treasury currently consulting industry stakeholders on the future of remuneration, Sedgwick’s review has set the scene for a combative and drawnout process, not to mention a distraction for brokers who are just trying to run good businesses.

EDITORIAL Editor Sam Richardson Journalist Maya Breen Contributor Michael Russell Production Editors Roslyn Meredith Bruce Pitchers

SALES & MARKETING Publisher Rajan Khatak Account Manager Simon Kerslake Marketing and Communications Manager Lisa Narroway

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Designer Loiza Caguiat Traffic Coordinator Freya Demegilio

Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

tel: +61 2 8437 4720 sam.richardson@keymedia.com.au

SUBSCRIPTION ENQUIRIES

tel: +61 2 8011 4992 • fax: +61 2 8437 4753 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

rajan.khatak@keymedia.com.au simon.kerslake@keymedia.com.au

Key Media Regional head office Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Bengaluru

Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL justin.darosa@kmimedia.ca T +1 416 644 8740

Sam Richardson, editor, MPA Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.

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UPFRONT

STATISTICS

SLOW TRAFFIC AHEAD

Lending growth is slowing to a near standstill and Deloitte’s 2017 Mortgage Report brought together industry leaders and experts to explain why

LOANS TOTAL

25bn

20bn

15bn DELOITTE’S MORTGAGE REPORT is one of the smallest surveys in the industry, but also one of the best. This is because Deloitte surveys industry leaders in a small panel, getting not only their views but also their explanations for the biggest changes affecting the industry.

This year’s panel was dominated by the finding that mortgage settlements did not grow in 2016 – the first year since 2012 this has been the case. While house prices are

$384bn

Total new lending, including refinancing, in 2016

9.7m

Number of dwellings in Australia

rising, strict controls on investor lending reduced settlements in 2016 and look set to do so this year, according to the panel.

This year’s panel included ex-NAB boss Steve Weston, Malcolm Watkins of AFG, Mario Rehayem of Pepper Money, Scott McWilliam of Homeloans, Meg Bonighton of NAB, Peter Andronicos of eChoice, Lisa Claes of Corelogic, Vimpi Juneja of Bank of Queensland and representatives of CBA and Suncorp.

$1.6trn

Outstanding mortgage debt in Australia

51.5%

$12.76bn

$13.66bn

10bn

5bn

0

Household debt held in housing

Feb 2007

Feb 2008

Source: Deloitte Mortgage Report 2017/Corelogic

ONLINE LENDING

WILL LENDING INCREASE?

Deloitte’s panel was sceptical that fully online lending, from distribution to settlement, would have much immediate impact on the mortgage industry.

2016’s market contraction was not a freak result – almost half of Deloitte’s panel believed settlements could contract further in 2017; even the most optimistic only saw a marginal increase.

What percentage of new mortgages will be originated via digital only in two years’ time?

Less than 5% 6/10 Between 5-10% 3/10 Between 10-20% 1/10

Settlement volumes will reduce further compared to 2016

30%

50%

Remain flat with 0% growth continuing A modest return to growth of 1-5%

What is your prediction for settlement growth nationally in 2017?

20%

(Options for further growth were provided but none were selected)

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LENDING HAS FALLEN Lending fell from 2016-17, the first time a year-to-year fall has occurred in Australia since 2009-10. It was the first year since 2012 that settlements did not grow.

$18.48bn $17.48bn $14.6bn $13.24bn $11.81bn

Feb 2009

Feb 2010

$11.26bn

Feb 2011

$12.16bn

$12.46bn

Feb 2012

Feb 2013

Feb 2014

$15.34bn

Feb 2015

Feb 2016

Feb 2017

Source: Australian Bureau of Statistics Housing Finance, February 2017

CHALLENGES FOR THE MORTGAGE MARKET IN 2017

FALLING DISCOUNTS

Deloitte held their panel in December, before APRA further tightened lending standards. Even so, the panel correctly predicted increased prudential policy and accompanying rate hikes by lenders.

While 2016 saw interest rate discounts of around 120bp, Deloitte’s panel saw this number reducing as the banks react to funding pressures.

What is your biggest concern for the mortgage market in 2017?

Prudential policy implications on capital pressuring prices

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What level of front-book discounting on the standard variable rate will be the norm over 2017?

Inability of first home buyers to enter the market

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4/10

<80 basis points discount

Risk of customer related conduct matters tainting the industry

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3/10

101-120 basis points discount

2/10

81-100 basis points discount

1/10

>120 basis points discount

House (and apartment) price growth reducing or falling Unemployment rising and placing pressure on serviceability

3 2 (Respondents could select two options)

Source: Deloitte Mortgage Report 2017

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UPFRONT

HEAD TO HEAD

Do elite broker clubs harm consumers?

ASIC has proposed a shift away from broker clubs to provide better consumer outcomes

Colin Lamb

David Kearns

Amy Song

Director Mortgage Solutions Australia

Director Picket Fence Finance

Financial consultant The Financiers Group

Brokers choose lenders that provide ‘not unsuitable’ loans and differentiate via unique selling propositions like faster turnaround times. A broker having ‘elite status’ for certain lenders is more likely to have higher knowledge of their policies and therefore provide a better consumer outcome.

But it’s about offering choice to consumers and managing expectations should the best lender be one which you don’t have elite status with, and ensuring quality submission for suitable outcomes to the client. Most elite status brokers focus on full banking relationships rather than chasing the lowest rate, meaning only dealing with a few lenders.

I don’t believe that elite broker clubs harm consumers as Picket Fence Finance has never been driven by lender incentives but rather by repeat client and referral business resulting from always acting in the best interest of the client, ie finding the most suitable loan for their specific needs.

However, if a lender wants to reward good business as opposed to loyal business we do not have a problem with that. In almost all facets of business life there are incentive schemes, and as long as the end user is not disadvantaged we are happy for the practice to continue.

I have no issues with broker clubs who offer ‘incentives’ passed directly on to the customer. They offer tangible benefits to the customer, like improved processing time and enhanced service levels.

Businesses with higher volumes will always have more buying power, which results in further discounts/incentives.

Potential conflicts can lie in incentives that have nothing to do with the customer, like holidays, monetary benefits.

A brokerage that has multiple statuses with different lenders will generally be less biased in their recommendations. I think it’s healthy for a business to strive for greatness, but most importantly to do so through ethical conduct.

WHY ELITE BROKER CLUBS COULD BE ON THE WAY OUT MPA talked to brokers about elite broker clubs following the ASIC broker remuneration review, which included among its proposals for consultation that the industry should move away from soft-dollar benefits, to minimise conflicts of interest. The report stated: The conflict from broker clubs may be direct; such as higher commission rates directly incentivising the broker to recommend the lender’s home loans. It may also be indirect; for example, improved service levels will allow the broker to have more loans approved by the lender in a shorter time, which will result in more commission being paid to the broker.

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UPFRONT

NEWS ANALYSIS

OUT OF THE FRYING PAN Now that ASIC has published its Review of Mortgage Broker Remuneration the real battle begins as associations, lenders and consumer groups go head to head to decide broking’s future. MPA editor Sam Richardson looks at the big players and what they’re proposing TECHNICALLY

SPEAKING, ASIC’s review of broker remuneration has changed nothing. Unlike other ASIC reviews, in which ASIC has researched, drafted and implemented new regulations, ASIC’s review of remuneration is just that: a review, and its recommendations should not be confused with regulations – for now.

ASIC has had its say, but it is the government that will ultimately decide on new regulations. Brokers, lenders, consumer groups and individuals have until 30 June to submit their views to the Treasury, and the stakes could not be higher: commissions, governance, and indeed broking’s sustain­ ability as a profession. Here the industry’s biggest stakeholders tell MPA the future they want for mortgage broking.

While many stakeholders have already published initial responses to ASIC’s recommendations, these responses will now be turned into detailed submissions. “This report coming out is not the end of the process; it’s the start of the process. It’s what we do from here that is really important,” says MFAA CEO Mike Felton. “We already have a number of views, which will reflect a lot of the thinking that is already out there, but it’s a case of taking that to the next step.”

Prior to making its submissions, the MFAA will hold six roundtables in Australia’s different states to consult its members.

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Individual brokers can also email the association, and Felton says the MFAA will talk to lenders and agrgegators. “That’s the beauty of the MFAA,” he says. “We represent all industry groups: we are in a position to work with all our member groups … that gives you a great deal of credibility.”

The FBAA is also talking to aggregators, says CEO Peter White: “I’ve already done two laps of the country and am about to enter my third, talking on this subject with key aggregators.”

Aggregators themselves will be making submissions: Brendan Wright, CEO of FAST, says his organisation will be making a submission as part of the NAB Group.

it’s possible that non-bank lenders will also submit their views.

Finally, consumer advocacy groups have taken a keen interest in mortgage brokers.

Erin Turner, head of campaigns and policy at CHOICE, told MPA: “I know there are some parties that are saying the sector only

“This report coming out is not the end of the process; it’s the start of the process. It’s what we do from here that is really important” Mike Felton, MFAA When it comes to lenders, the Australian Bankers Association has its own review of remuneration – the Sedgwick review – which will form the basis of its submission.

However, the ABA only represents the bigger banks; the Customer Owned Banking Association will also make a submission, and

needs tweaks. I worry about that spin: I think the message brokers need to hear is this report is significant, this report has many major findings that the outcome this sector is delivering to consumers isn’t OK … we’re not talking about a tweak; we’re talking about reform.”

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ASIC’S PROPOSALS FOR CONSULTATION Changing the standard commission model to reduce the risk of poor consumer outcomes

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Lenders should change their standard commission arrangements so that brokers are not incentivised purely on the size of the loan Moving away from bonus commissions and bonus payments, which increase the risk of poor consumer outcomes

2

Moving away from soft-dollar benefits, which increase the risk of poor consumer outcomes and can undermine competition

3

Clearer disclosure of ownership structures within the home loan market to improve competition

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Establishing a new public reporting regime of consumer outcomes and competition in the home loan market; and

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The big issues For most brokers, ASIC’s review is primarily about future upfront and trail commissions.

ASIC’s first proposal argues that commissions should be changed so brokers are not incentivised to write bigger loans, suggesting commissions should be linked to LVRs – and the FBAA and MFAA are both opposed to this.

White calls it “horrendously wrong”, while Felton concedes that, athough remuneration may need a “more balanced scorecard”, LVR is too prescriptive. Speaking in March, Felton told MPA that “I don’t think the different member groups will have vastly different views of what things should look like”.

Felton was proved wrong. In mid-April the Sedgwick report was published, with huge and immediate consequences for the industry. Sedgwick recommended that banks decouple broker commissions from loan size, a recommendation all four major banks explicitly agreed to implement within hours of its publication. Furthermore, they have set

dates on implementation, ranging from 2018 in the case of CBA to 2020 for the others.

The banks’ decision effectively bypasses ASIC’s review and the Treasury’s consultation.

However, the banks, by their own admission, may still need ASIC’s support to move forward. According to Westpac’s George Frazis, chief executive of its Consumer Bank, “some initiatives, particularly those where third parties carry the primary responsibility for progressing matters, are likely to be more challenging and may ultimately require regulatory or legislative intervention”.

The banks may well get ASIC’s support: ASIC’s review continually referred to the Sedgwick review, and ASIC senior executive Michael Saadat told MPA that “we are pleased that industry is working to improve remuneration structures to create better outcomes for consumers, and improved trust in the sector”, although he encourages all stakeholders to take part in the Treasury’s consultation process.

Reporting on: actual value of remuneration; average pricing of home loans by brokers; average pricing by channel; distribution of loans by particular broker networks

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Improving the oversight of brokers by lenders and aggregators

Lenders to provide consistent reporting on individual broker businesses to aggregators Aggregators to actively monitor loan pricing, features, clawbacks, refinancing, default rates and distribution of loans by individual brokers

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FEATURE / BROKER EDUCATION UPFRONT

NEWS ANALYSIS ASIC’S REVIEW: A TIMELINE

JAN 2016

November 2015 Government instructs ASIC to start review March 2016 ASIC confirms final scope of the review, opting to exclude commercial lending March 2017 ASIC publishes the final report of its review, with six recommendations for changes April 2017 ABA’s Sedgwick review publishes its final report, with three recommendations relating to brokers

JAN 2017

June 2017 Deadline for industry stakeholders to submit views to the Treasury’s consultation process July 2017 onwards Government to consider stakeholders’ responses and decide whether to award ASIC new powers Late 2017 ASIC to undertake shadowshopping of brokers 2020 Deadline set by Sedgwick review for banks to implement changes to broker remuneration

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Although CHOICE isn’t a big supporter of Sedgwick or the ABA – Turner compared it to “letting the fox set rules for the henhouse” – it is concerned about percentage-based commissions.

“That kind of incentive just adds fuel to the fire that is our housing market at the moment,” Turner says. “We need to talk through whether that’s the right way to incentivise brokers.”

Soft-dollar benefits Not all of ASIC’s proposals have divided the industry. Proposal 2, on moving away from volume-related bonuses, has already been accepted by industry associations, and MFAA CEO Felton has warned brokers dependent on such bonuses that they could

in the Caribbean for high-performing brokers – but genuine education programs.”

Aggregators have already begun a shift to more education-focused events. Since 2012 FAST has run conferences onshore or in business hubs such as Singapore, Wright told MPA. “If they are overseas they need to be locations that are recognised as business hubs … without crazy time differences,” he said. This year’s conference is onshore and Wright doesn’t see that changing in future years, while FAST’s high-performer trips include a professional development program.

Governance Just as significant, but often overlooked, are ASIC’s recommendations concerning governance. ASIC’s review called for better

“I know there are some parties that are saying the sector only needs tweaks.

I worry about that spin” Erin Turner, CHOICE change by the end of 2017. The major banks have now agreed to a similar recommendation in the Sedgwick review.

Brokers are far more likely to be affected by changes to soft-dollar benefits. Elite broker clubs, such as CBA’s Diamond Brokers and Westpac’s Platinum Brokers, are treated by ASIC as soft-dollar benefits, given membership of these clubs is often volume-dependent.

FBAA CEO White has branded such clubs as “disgraceful”, saying they should go, while CHOICE says disclosure of such benefits is not enough to protect consumers. The MFAA, however, has held back from denouncing elite broker clubs. And Sedgwick did not explicitly mention the clubs, although the review did recommend banks cease “non-transparent” forms of soft-dollar payments.

The stakeholders MPA talked to did agree that bank-sponsored training of brokers constituted an acceptable form of soft-dollar remuneration. CHOICE’s Turner has called for more training to become rigorous, however.

“We’re not talking about an education cruise

oversight of brokers, and the ABA has made a major head start on this, with the Sedgwick review providing a plan for how enhanced oversight could be achieved. Yet neither broking nor consumer organisations accept the ABA as a mediator for the industry.

Instead, the mediator, according to CHOICE, “needs to be a party that doesn’t have a financial stake in the outcome”.

With the industry divided, broking’s future could be determined by a party that has so far remained silent: the Turnbull Government. After all, it was Minister for Revenue and Financial Services Kelly O’Dwyer who originally commissioned the review, rather than ASIC, and its decision to handle the consultation process is unusual, says FBAA boss White. “The main reason Kelly O’Dwyer has put this in the hands of the Treasury is that in her mind she’s planning on rewriting some legislation,” he says.

For now, however, that remains speculation.

Until 30 June the industry holds broking’s future in its hands; come July that future will begin to be revealed.

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UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email sam.richardson@keymedia.com.au

INTEREST ONLY – A COALFACE PERSPECTIVE Rather than demonising interest-only loans, regulators should understand why borrowers want them, argues MoneyQuest managing director Michael Russell APRA HAS recently instructed the banks that no more than 30% of new housing loans can be interest only, and ASIC intends to run tackle by increasing its surveillance of lenders and mortgage brokers to ensure the continuation of responsible lending.

Such a clampdown on interest-only housing loans should not really come as much of a surprise given the concerns stemming from a red-hot housing market and rising household debt levels.

However, has APRA responded in a manner befitting ASIC’s concerns?

Here’s what we know: Since 2008, interest-only investment loans have fallen from circa 70% to 60%, while interest-only owner-occupier loans have risen from circa 17% to 23%.

Interest-only owner-occupier loans make up around 40% of all interest-only loans.

Investors prefer interest-only investment loans and principal and interest home loans given our taxation system.

Housing loan applications are all assessed at an interest rate buffer of 2–4% higher than the actual borrowing rate.

The final point in particular is often overlooked when concerns abound regarding rising housing prices and low interest rates.

The fact remains that even if interest rates rise and housing prices fall, borrowers have been prudently assessed to be able

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to still meet their mortgage repayments without hardship.

This is what drives great mortgage brokers to not only deliver great customer outcomes but also to insulate our clients against both known and unknown future adverse events.

Returning to the issue of interest-only housing loans, MoneyQuest is broadly supportive of APRA intervening, but not simply abrogating it to the discretion of

only on their home loan and the principal and interest differential into an offset account.

2 Conversely, first home buyers who only ever wish to remain in their first home often request an initial interest-only period to give them the opportunity to fund known or unknown property improvements or repairs and then convert to principal and interest.

3 Self-employed borrowers often request interest-only repayments to cater for inconsistent month-to-month incomes. The flexibility of the repayments allows them to make additional principal (or lump sum) repayments in good months and interestonly repayments in quiet months; 4 Astute clients will often specifically request interest-only repayments to preserve their cash flow for what they regard as better investment options – such as investing in their business, home renovations, equities and so on.

5 Many clients are naturally conservative and prefer to maintain cash buffers for life’s emergencies, and as such lean strongly towards interest-only repayments;

APRA and ASIC must be made aware of the very legitimate reasons why mortgage brokers couple some clients with interest-only periods individual lenders.

MoneyQuest believes that any intervention should be restricted to curtailing interest-only repayments on certain owner-occupier loans.

However, in doing so APRA and ASIC must be made aware of the very legitimate reasons why mortgage brokers couple some clients with interest-only periods:

1 First home buyers often convert their first homes into investment properties when either upgrading or relocating as a consequence of their employment. Mortgage brokers are often asked to provide the flexibility of repayments to cater for this option and allow their clients to pay interest

In short, it is ill-informed to suggest that all interest-only owner-occupier loans are irresponsible and not in a client’s best interests.

A broad-brush response from both the regulators and lenders is not the solution.

Rather, taking the time to engage participants at the coalface to really understand the issues at hand will unearth sensible solutions to mitigate future concerns.

Michael Russell is managing director of franchise brokerage MoneyQuest. His 25-year career in financial services also includes six years as the CEO of Mortgage Choice, and he was previously managing director of Choice Aggregation Services.

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PEOPLE

BIG INTERVIEW

MICHAEL SAADAT: SETTING THE RECORD STRAIGHT As brokers, lenders and consumers go head-to-head over ASIC’s remuneration review, the man behind it gives MPA editor Sam Richardson an insider’s view ASIC LAUNCHED its review of broker remuneration in November 2015, and since then brokers have talked about little else. It’s very possible you’ve at some point criticised ‘those bureaucrats at ASIC’; if so, Michael Saadat is your man. You won’t find Saadat’s name in the review, but ASIC’s senior executive leader played a huge role in its production, staying behind the scenes. Now, two years later, he’s finally free to talk about the review and how it could change your business.

What ASIC wants Over two years ASIC collected 200 million data points from 1.4 million home loans, before boiling that data down to 243 pages. “It was a very time-consuming process,” Saadat recalls.

“Not only did we look at the raw data and provide conclusions, but we also controlled the data for customer characteristics.”

In their quest to achieve an ‘apples for apples’ comparison of broker and non-broker customers, Saadat and his team broke down comparisons into, for instance, the difference in loan amounts taken out by low-income customers going to brokers and to banks.

Now ASIC is explaining its methodology and the data it has collected to the industry.

“We’ve had a few roundtable discussions with stakeholders; we’re planning on having more, and when we speak at industry events or

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conferences we will definitely be discussing the report and taking questions from people who are interested in hearing more about it,” Saadat says. At the time of writing he was confirmed to speak at the Annual Credit Law Conference in October.

These discussions will chiefly concern ASIC’s six proposals. Firstly, ASIC wants to change the standard commission model to take into account factors other than loan size (1). It also recommends moving away from bonus commissions (2) and soft-dollar benefits (3). ASIC believes there should be clearer disclosure of ownership structures (4) and proposes establishing a new public

Financial Services Kelly O’Dwyer, the Treasury will be managing the process, in which industry associations, lenders, aggregators, consumer groups and individuals can have their say on the proposals before the end of June. Saadat, however, will not be taking part: “We wouldn’t put in a submission to our own report.”

On the sidelines ASIC is now consigned to the role of spectator, left on the sidelines, observing the furore surrounding the separate Sedgwick review, which published its final report a few weeks after ASIC’s.

“We know the Sedgwick review only covers the banks, and that’s why we said in our report that the banks need to work with the rest of the industry” reporting regime on consumer outcomes and competition in the home loan market (5).

Finally, ASIC wants to improve the oversight of brokers by lenders and aggregators (6).

Now that the review has moved into the consultation phase, Saadat is effectively powerless. Under Minister for Revenue and

Stephen Sedgwick’s Australian Bankers Association-sponsored review ran concurrently with ASIC’s, but Saadat insists there was no collaboration between the two. “[ASIC] did not share any data with him that has not been made public by ASIC,” he says.

Nevertheless, in its final report ASIC did

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PROFILE Name: Michael Saadat Title: Senior executive leader – deposit takers, credit and insurers Company: ASIC Years in the industry: 12 Career highlight: Saadat first joined ASIC in 2005 as senior manager in the deposit takers, credit and insurers team (which includes brokers) following a stint as a consultant for PricewaterhouseCoopers in London and Sydney. In 2012 Saadat joined Citi as their director of consumer bank compliance, but in 2014 he rejoined ASIC, taking on his current role of senior executive leader. In 2016 he was also appointed ASIC’s regional commissioner for NSW. Saadat holds an Executive MBA from the Melbourne Business School and a Master of Laws from the London School of Economics.

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PEOPLE

BIG INTERVIEW repeatedly refer to Sedgwick’s review and was condemned for doing so by the MFAA and FBAA. ASIC was right to refer to the Sedgwick review, Saadat insists: “We know the Sedgwick review only covers the banks, and that’s why we said in our report that the banks need to work with the rest of the industry in responding to [ASIC’s] recommendations.”

When writing his report, Saadat had no idea what Sedgwick’s recommendations would be; in fact Sedgwick’s final report was published just 30 minutes before Saadat talked to MPA.

Expanding ASIC Regardless of whether Saadat or Sedgwick get their way, ASIC’s remit looks likely to expand.

Sedgwick and the banks want ASIC to enact regulation to facilitate a move to a new commission structure, while ASIC will play a role in implementing whatever rule changes the government decides to introduce after June.

Furthermore, Saadat explains, “ASIC’s ability to intervene may also be bolstered by law reform proposals that are currently being considered by government, including those recommended by the Financial System Inquiry”.

Already Saadat has more immediate work on his plate: a shadow-shopping of brokers by

“ASIC’s ability to intervene may also be bolstered by law reform proposals that are currently being considered by government” Sedgwick’s recommendations go much further than ASIC’s, urging banks to decouple commission from loan size. ASIC had recommended a change to the standard commission model to avoid incentivising brokers to write larger loans, while recommending that banks work with brokers to develop a response.

Instead the major banks, on the day Sedgwick published his recommendations, all agreed to implement them in full by 2020.

This unilateral decision bypassed brokers, ASIC and the Treasury’s consultation process.

Despite this, Saadat says he is “pleased that industry is working to improve remuneration structures to create better outcomes for consumers, and improved trust in the sector”.

Acknowledging the review and the banks’ response, he “encourage[s] all industry stakeholders to provide feedback to Treasury as part of the current consultation process”.

Commissions, in Saadat’s view, “are obviously commercial arrangements, and it’s up to both individual banks, aggregators and brokers businesses to work out what those commercial arrangements should be”.

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consumers, which he will start planning by the end of 2017. “It is early days,” Saadat says. “We’re planning on commencing that work before the end of this calendar year, and are still working through the detail.” Shadow shopping will take place, Saadat confirms, regardless of the Treasury’s ongoing consultation process on the remuneration review, and “once it kicks off it’s going to be a pretty significant piece of work”.

ASIC’s work will not end with commissions.

Instead Saadat and his team are faced with a Sisyphean task. The role of referrers was flagged by the review for further investigation, while consumer groups have demanded more oversight of cross-selling. And, says Saadat, the data that was published was just the tip of the iceberg.

For now it’s up to the industry to make changes, he says. “It was more about us trying to get the industry to respond without being forced by legislation to have change imposed upon them. We think the industry has an opportunity to respond and to take positive steps to make changes that will deliver improved consumer outcomes without necessarily needing the government to legislate for changes.”

ASIC’S METHODOLOGY Taking almost two years of work, ASIC’s review contains so much data that much of it remains unpublished.

In total, ASIC analysed:

4 years’ worth of data Gathered from:

19 lenders 14 aggregators 44 broker businesses ASIC looked at:

1.4 million home loans 157 data points about each loan In addition:

3,000 consumers were surveyed

by ASIC, as well as

4 comparison websites

3 referrer aggregators

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SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

2017

TOP 10 FRANCHISE BROKERAGES Rapid regulatory and lender policy changes haven’t held back Australia’s finest brokerages; quite the opposite — their financial expertise is becoming a vital resource for new and existing clients

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MPA’S TOP 10 reports have long been about celebrating high performers. However, they have another, more serious purpose: to find out why some brokerages flourish while others are left behind. How, for instance, do Australia’s Top 10 Franchise Brokerages beat other brokerages with identical brands, year after year?

Standing out from other brokers has only recently become make or break for brokerages. Most brokers continue to see their competitors as the local bank branches, but they should be looking at other brokers instead. The MFAA’s latest Industry Intelligence Service report showed brokers are entering markets faster than those markets are growing; in the case of NSW, they are actually shrinking. With the banks appearing set on major changes to broker remuneration, broking faces its biggest challenge since the NCCP. The brokerages that emerge from such changes will need to be different from their competitors and better at writing loans, and the brokerages in this Top 10 are both. While they all benefit from the franchise system, particularly when it comes to compliance, this also means they need to find other ways to stand out than through branding.

Many combine well-established clients and referral partners with social media marketing strategies; most have taken on new staff, or retrained existing staff, rather than resting on their laurels.

MPA’s Top 10 Franchise Brokerages are ranked by a combination of four metrics: total loan book size; settlements over a 12-month period; settlements over that 12-month period per loan writer; and conversion rate. We rank brokerages on each metric, then combine the rankings to produce the final ranking that you see here. In the event of a tie we prioritise the brokerage with the best performance over the most recent 12 months, to celebrate current performance.

This method has remained unchanged for several years, and it’s also the method we use for our Top 10 Independent Brokerages report.

We accepted applications both from franchise head offices and also direct to our website, and all numbers were checked with the franchise head offices. We’d like to thank all the brokerages that applied for this year’s Top 10, whether or not they appear in this list.

Look out for our Top 10 Independent Brokerages report in the next issue of MPA.

HOW 2017’S TOP 10 COMPARE TO PREVIOUS YEARS Lending fell nationwide in 2016, with regulatory changes, lender rate hikes and slowing housing markets outside Sydney and Melbourne to blame. How were Australia’s Top 10 Franchise Brokerages affected?

On average, Top 10 Franchise Brokerages recorded lower settlements in 2017: 2016 Average settlements

$216,414,015

2017 Average settlements

$204,349,838

Conversions also fell slightly, with some brokerages reporting clients struggling to find lenders: 2016 Conversion rate

91%

2017 Cownversion rate

88%

However, taking broker numbers into account, 2017’s brokerages actually performed better than in 2016: 2016 Average settlements per broker/loan writer

$42,312,864.93

2017 Average settlements per broker/loan writer

$45,747,202

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SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

10

AUSSIE LIVERPOOL

Despite losing a broker and facing high serviceability requirements, Mark Burton’s brokerage is making the most of Sydney’s flourishing housing market Established 2009

Total loan book

$454,257,694

Total settlements 1 March 2016–28 February 2017

$185,598,473

Number of brokers/loan writers

5

Average annual volume per broker

$37,119,695

Conversion rate

81%

MPA: What changed in your business and your local market this year?

Mark Burton, owner: We lost one broker, which impacted on our overall results. Our market, as has the whole of Sydney, continued to grow, but unlike some of the inner suburbs there is more stock on the market for prospective buyers. This has meant more on-market transactions and more customers seeking mortgages.

do you generate leads on a limited budget?

MPA: How do you benefit from being part of a franchise?

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

MB: Aussie is a very recognisable brand and is easily recognised by consumers. Aussie continues to invest in marketing and brand awareness with a TV and online presence. We also have strong systems and support when needed.

With brokers facing more and more risk and compliance requirements and regulation, Aussie has its own compliance team that is able to keep abreast of regulatory changes and make sure that Aussie brokers remain compliant, which mitigates potential risk to the franchise.

MPA: Other than through client referrals, how

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MB: We have a number of key referrers that are very important to our business. Aussie franchisees are not permitted to pay referral fees, so we are not on a level playing field with some of our competitors. That forces us to add value for our referrers by providing superior service that reflects on them, and, where possible, by referring clients to them.

MB: We have noticed a drop in settlement volumes of around 10–15%. This is not through a lack of enquiries but rather that we can no longer assist clients due to higher serviceability requirements. It means we have to work even more closely with our clients to achieve their goals.

However complex things are becoming, I see this as an opportunity for all brokers as the rules and regulations are becoming more complex by the month, and a customer is only going to be able to check out one to three lenders, which may not get them the answer that they need and the best result for them.

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AUSSIE CARNEGIE

Business at Glenn English’s brokerage is booming, not despite APRA’s changes but because of them

9

Established 2006

Total loan book

$470,426,346

Total settlements 1 March 2016–28 February 2017

$164,919,082

MPA: What changed in your business and your local market this year?

Glenn English, principal: It is definitely a tougher market due to the ongoing changes with APRA, rate changes and an increase in house prices. But despite these market difficulties, we’ve seen an increase in our customer enquiries. Aussie is quick to adapt and embrace change; we have grown the team by increasing our support staff, which has helped our brokers to provide even better customer service and ultimately write more loans.

MPA: How do you benefit from being part of a franchise?

GE: Working with a well-known and respected brand has its benefits. It helps to open doors, as people recognise who we are and what we do. The Aussie brand, combined with the exceptional personal service and support that our office provides, makes a great combination.

MPA: Other than through client referrals, how do you generate leads on a limited budget?

GE: Customer referrals make up the majority of our

business, and we wouldn’t have such a successful business without their ongoing support. Our referral partners are equally important, and each broker has formed their own referral partnerships. This is beneficial to our business as it broadens the number of referral partners we work with, which helps to build not only our individual businesses but also the franchise.

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

GE: The rate hikes have had an impact on some of our customers, and my team takes a personal approach with their customers to find the right solutions for their home loan needs.

I know some brokers wonder why there have been so many changes introduced by APRA, but if you sit back and look at the big picture, in my opinion the changes are there for good reason. Again, these changes have seen a growth in our business which I attribute to our ability to adapt to the new market conditions, versus other brokers who may not have embraced the change or mastered lender policy to find alternative solutions to their customers’ needs.

Number of brokers/loan writers

4

Average annual volume per broker

$41,229,770

Conversion rate

84%

www.mpamagazine.com.au

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SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

8

SMARTLINE CURRAMBINE

With Perth’s housing market going slow, Dave Urquhart’s brokerage is diversifying, providing new solutions to its business clients Established 2005

6

MPA: What changed in your business and your local market this year?

Dave Urquhart, principal: Our local market, Currambine in northern Perth, has been impacted by the slowdown in the Western Australian economy.

This has included job losses and a decrease in residential valuations as house prices have fallen.

These developments have had an effect on our clients and the brokerage.

Looking to broaden our services, we have had a continued focus on building a financial planning offering for clients, including a partnership with Gallery Financial Solutions, a local financial planning firm.

We’ve also been increasing our business and commercial lending as well as providing other solutions to our business clients. Brenton Bell is our commercial specialist, and he can help with commercial property purchases, business and trade finance, debtor finance, asset finance, consumer loans and more.

A continued focus on existing clients has ensured they are being looked after, with advice on the correct product and rate to meet their personal needs, and on reviewing loans and refinancing where necessary.

Average annual volume per broker

MPA: How do you benefit from being part of a franchise?

DU: Smartline support our marketing with their brand, which has been around since 1999, their website and call centre. The IT support helps also: Smartline provide us with a CRM and client care system.

Total loan book

$803,500,000

Total settlements 1 March 2016–28 February 2017

$170,000,000

Number of brokers/loan writers

$28,333,333

Conversion rate

89%

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MPA: Other than through client referrals, how do you generate leads on a limited budget?

DU: Social media really helps us generate new business. Smartline Currambine has a Facebook page which we regularly update, both with customer testimonials but also lighthearted things we’ve read and local news, such as new supermarkets opening.

We’ve also got an advice video up there. Both Sandy and I are on LinkedIn, and the brokerage also has a

“Falling valuations have had the biggest impact on clients and what they are aiming to do” Twitter account with plenty of retweeting and following local personalities.

We also have a number of local sponsorships that help keep us front of mind within the local community.

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

DU: Falling valuations have had the biggest impact on clients and what they are aiming to do. With the rate hikes clients are concerned; however, through proactive communications and client reviews we have ensured they are educated on what is happening and how it impacts them. In some cases we have saved clients thousands in interest payments by getting them a better rate with their existing lender or moving them to another.

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WHAT AN ELITE FRANCHISE BROKERAGE LOOKS LIKE IN 2017 SUPPORT STAFF

WHAT SERVICES DO YOU OFFER?

CONFIDENCE

Commercial finance 10/10 Vehicle/equipment finance 10/10 minimum number of support staff

Insurance 10/10 Financial planning 7/10

maximum number of support staff

: ratio of support staff to brokers across all brokerages

COMMISSION SPLIT MPA asked our Top 10: Have you been able to negotiate a better commission split/fee structure with your franchise as your business has grown?

0 brokerages said they had been able to do this

9/10 brokerages are planning to hire staff over the next 12 months

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8/05/2017 12:37:07 PM

SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

7

MORTGAGE CHOICE MIAMI

New to MPA’s Top 10, James Hasselle has just completed a major overhaul of his brokerage’s processes as he looks to drive efficiency Established 2004

Total loan book

$500,000,000

Total settlements 1 March 2016–28 February 2017

$164,844,792

Number of brokers/loan writers

2

Average annual volume per broker

$82,422,396

Conversion rate

91%

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MPA: What changed in your business and your local market this year?

James Hasselle, director: We have revisited our entire end-to-end process and changed fundamental roles within the business; our focus has been to empower credit analysts to assess customer enquiries up front prior to them sitting down with our loan writers. This means upfront collection of income, expenses, valuations and also CRAA files.

Our clients receive a more efficient service from initial enquiry through to settlement and beyond.

This has led to increased customer referrals and testimonials.

During our changes we have also added a defined advice process for credit advisers. This means we go into every detail of their future loan and account set-up, internet banking, offsets and account personalisation.

We also streamlined the document signing process to make sure the advice goes all the way through to settlement and beyond.

As part of the long-term management of the loan we have begun adopting new technology to reach out to our loan book at annual home loan review time. We have also used existing services that have long been available to other real estate industries to tag our loan book so we are alerted if a client sells their home or rents it out.

MPA: How do you benefit from being part of a franchise?

JH: As part of a franchise group I have found the level of support higher for both the ongoing compliance requirements but also at early stages of navigating rule changes from industry regulators.

HR requirements of a small business can also be a minefield, and I have found a franchise group has been able to offer me a larger level of both legal and documentation support.

Over the years we have had a much louder voice in the banking and finance industry because of the

franchise group size. We also get access to the people that can make a difference in the banks and lenders.

During the GFC some smaller broking businesses lost accreditations with certain lenders; our franchise group and size meant we were somewhat protected from these risks.

MPA: Other than through client referrals, how do you generate leads on a limited budget?

JH: Continued marketing and services offered to our existing clients, using new technology and services as we discover and test them.

Reaching out on a regular basis to our existing client base is one of the lowest-cost and most reliable lead generation activities.

Networking groups have been a great low-budget option for lead generation, as have online marketing sources through our website, Facebook and Google.

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

JH: Clients have been directly affected by all these changes.

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8/05/2017 12:37:16 PM

MORTGAGE CHOICE CHELTENHAM

Anthony Smith’s brokers have fought their way back into the Top 10, while also opening a new office

6

Established 2000

Total loan book

$862,146,271

Total settlements 1 March 2016– 28 February 2017

$185,260,092

MPA: What changed in your business and your local market this year?

Anthony Smith, owner: This year was a big one for us, as we opened another office in Port Melbourne.

Based on Rouse Street, it’ll be serving the local areas in addition to Albert Park, South Melbourne, Middle Park, Prahran, Windsor, Armadale, Malvern and Toorak.

It’ll be headed up by Chris Howitt, who’s been part of our team with Mortgage Choice since 2004. As well as being a highly experienced broker, Chris is also a keen property investor himself, which can really help our investor clients.

Also working across the Cheltenham and Port Melbourne offices is broker Craig Micallef, and the office is managed by Glenn Mayne.

MPA: How do you benefit from being part of a franchise?

AS: I’ve been with Mortgage Choice for over 16 years now, and the brand can be an advantage. Potential clients have often heard of the brand, and that can give them comfort that they are dealing with a large and established company.

Mortgage Choice has expanded into financial planning, and we work with a dedicated financial planner, Jeff Morel, who can help clients with insurance, investment planning and tax strategies.

Added to our commercial and vehicle lending offerings, this gives a broad range of clients a good reason to get in touch with us first.

MPA: Other than through client referrals, how do you generate leads on a limited budget?

AS: Returning clients make up the majority of our business. We also receive leads from business partners, sporting clubs and our website, in addition to the client referrals that we love to receive.

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

AS: Yes, many clients have been greatly impacted by the policy changes; the unintended consequences of these changes will be felt for many years. We have changed direction with our business in the short term and are trusting that logic and sanity will eventually win through when it comes to policy.

Number of brokers/loan writers

4

Average annual volume per broker

$46,315,023

Conversion rate

85%

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8/05/2017 12:37:23 PM

SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

5

MORTGAGE CHOICE BUDERIM

After a whirlwind few years Linda Ireland and her team are looking to improve their processes and make the brokerage more balanced Established 2004

Total loan book

$580,000,000

Total settlements 1 March 2016–28 February 2017

$174,942,150

Number of brokers/loan writers

4

Average annual volume per broker

$43,735,538

Conversion rate

90%

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MPA: What changed in your business and your local market this year?

Linda Ireland, co-owner: We had a very stable year in terms of our business, its services, staff, clients and processes. We didn’t make any major changes this year apart from slightly improving on some of our processes.

Off the back of a number of major changes in 2015 and 2016, reconnecting with old clients was one of our priorities which we have maintained. We got quite a few investor clients, assisted by the fact that all of the brokers in our office are keen investors themselves and have a great deal of experience to share.

Our clients are generally mum-and-dad investors, although looking to build portfolios, and our business wasn’t hit by the first wave of investor lending restrictions in 2015. Quite the opposite: clients came back to us looking to renegotiate with their existing lenders, or refinance.

Therefore our aim this year was to gain better balance after a couple of high-growth years.

MPA: How do you benefit from being part of a franchise?

LI: We find the support and mentorship really valuable

within the Mortgage Choice group office. We also love the Mortgage Choice community and network; we have gained valuable knowledge from other franchisees, and everyone is genuinely very supportive and encouraging.

MPA: Other than through client referrals, how do you generate leads on a limited budget?

LI: After so many years in the business, we stick to some basic marketing concepts, mostly working closely with real estate agents, solicitors and accountants. It helps that I have an accounting background and so some links with local accounting firms.

Our brokers all have different specialisms, including in construction and commercial finance, which allows us to bring a broader range of clients into the brokerage.

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

LI: Yes, and we have been very proactive with our communication to our clients and managing their lending to make sure they understand the recent changes and the effect they have on them.

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8/05/2017 12:37:31 PM

MORTGAGE CHOICE GLENELG

Keith Caine’s brokerage is expanding, while continuing to build and maintain excellent relationships with referrers and clients

4

Established 1998

Total loan book

$1,168,599,091

Total settlements 1 March 2016–28 February 2017

$232,873,775

MPA: What changed in your business and your local market this year?

Keith Caine, owner: I took over running the brokerage last year, and since then we have recruited one new loan writer and one further admin support staff member. It’s a great addition to a large and experienced team: some of my colleagues, including Malcolm Simpson, Julie Mahony, Rea Magill, Darren Rayner, Ginet Moutakis and Heather Jones, have spent multiple decades working in financial services.

MPA: How do you benefit from being part of a franchise?

KC: Firstly would be branding! Customers are often already familiar with our brand, and I’m regularly told by my customers that it’s a brand that comes with a lot of trust! Secondly, we benefit from Mortgage Choice’s compliance and regulatory support. It is great having head office support, with such a changing market and all the lender and regulatory requirements we have to keep up with.

MPA: Other than through client referrals, how do you generate leads on a limited budget?

KC: Local-level club sponsorship, real estate agents and accountants. Our sponsorships include the Glenelg Football Club, home of the Tigers, and the Glenlea Tennis Club. We have built many important relationships over the years, both with referral partners and more broadly in the community, and we work extremely hard to maintain these and deliver exceptional customer service outcomes for all involved.

It also helps that we can offer a range of services, as the brokerage has an established financial planning arm. We also offer car finance and a door-to-door car-buying service, which can save our clients a great deal of time and money.

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

KC: Absolutely! It’s obvious that none of our investor customers have been happy with their rates going up, but we make a conscious effort to remain positive in this space. All too often it’s doom and gloom, so we always focus on what we can do to help and improve their situation.

Number of brokers/loan writers

6

Average annual volume per broker

$38,812,296

Conversion rate

87%

www.mpamagazine.com.au

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8/05/2017 12:37:37 PM

SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

3

AUSSIE PARRAMATTA

Aussie’s big hitters are back with a vengeance, recruiting and retraining staff to further improve their customer service Established 2009

Total loan book

$731,293,392

Total settlements 1 March 2016–28 February 2017

$194,201,443

Number of brokers/loan writers

4

Average annual volume per broker

$48,550,361

Conversion rate

89%

MPA: What changed in your business and your local market this year?

Ross Le Quesne, co-owner: We had a significant change to core staff in our business in the period. This meant that our focus was on recruiting the best people possible for the roles. While this did take time, as training and upskilling were involved, it provided us with the opportunity to hand-select staff and recruit change embracers; people with flexible, can-do attitudes and with an exceptionally high work ethic and customer-centric values. This has been important in achieving the changes necessary to move our business forward and enhance our customer service proposition.

MPA: How do you benefit from being part of a franchise?

RLQ: Aussie Parramatta’s unique selling points coupled with strength of the Aussie brand give us the strongest chance to be the best we can be. Aussie’s brand awareness and longevity helps us attract new customers by giving them the confidence that they are benefiting from many years of experience and knowledge.

MPA: Other than through client referrals, how

30

do you generate leads on a limited budget?

RLQ: Our business systems and processes are in place to encourage repeat and referral business, which is underpinned by our delivery of exceptional customer service. They are intrinsically linked to our delivery of exceptional customer service. More than 80% of our business comes from referrals from existing customers, solicitors, accountants, buyers’ agents and real estate agents.

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

RLQ: Recent changes to APRA and increases to current lender rates are drawing people to the likes of brokers as we have more options available to us to help them satisfy their financial objectives. We are open and honest with clients about their options from the beginning of their journey. There are some instances where we cannot help the client in the first consultation; however, we stay in touch with them ... It is key that we stay abreast of all lender and policy changes so we can help our clients make informed decisions about their property finance options.

www.mpamagazine.com.au

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MORTGAGE CHOICE BRISBANE CITY

Matt Cunliffe is presiding over an ever-growing organisation, opening offices, targeting new territories, and bringing on a new broker

2

Established 2015

Total loan book

$501,012,988

Total settlements 1 March 2016â&#x20AC;&#x201C;28 February 2017

$372,679,450

MPA: What changed in your business and your local market this year?

Matt Cunliffe, managing director: In our business we have picked up a fourth franchise patch (Brisbane North) and are opening a new retail office in Nundah Village as of May (fitout currently being completed).

The new franchise is a Greenfield (brand new to the area), which we are putting a lot of focus on growing.

This is very exciting for us to stretch our reach even further across Brisbane. Also within the business we have brought on a new broker and are training existing staff to move into broking roles. We will be looking to expand further with new hires over the coming 12 months.

business with the backing of a publicly listed entity.

MPA: How do you benefit from being part of a franchise?

MC: Mortgage Choice provides a great brand. It is a household name for many and instils confidence in clients that we do business with. The brand awareness that the franchise brings with it provides a good platform for us to perform from ... Mortgage Choice as a franchiser provides a wide range of support services, and it is great to be able to operate as a â&#x20AC;&#x2DC;smallâ&#x20AC;&#x2122;, nimble

MPA: Have your clients been affected by recent rate hikes and policy changes, and what are you doing to respond?

MC: A large number of clients are being impacted by recent policy changes. Clients are still out there hungry to invest, and policy changes affecting investors have started to stir confusion among our investor clients ...

These changes, although frustrating at times, are a great opportunity for us as brokers.

MPA: Other than through client referrals, how do you generate leads on a limited budget?

MC: We generate leads online through our local minisite (franchise website) as well as social media.

Both avenues can be done quite well with little spend.

We ensure we are providing regular content as well as a focus on search engine optimisation and our Google rankings to ensure that we appear high on related search topics. In addition to this, referrals through partner businesses (solicitors, accountants, property groups, developers) can also be obtained with relatively no budget as these are relationship driven.

Number of brokers/loan writers

9

Average annual volume per broker

$41,408,828

Conversion rate

93%

www.mpamagazine.com.au

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8/05/2017 12:37:47 PM

SPECIAL REPORT

TOP 10 FRANCHISE BROKERAGES

MORTGAGE CHOICE MELBOURNE

Australia has a new top franchise brokerage, with Cameron Price and his team overcoming adversity and changing the way they write loans Established 2006

Total loan book

$804,000,000

Total settlements 1 March 2016–28 February 2017

$198,179,128

Number of brokers/loan writers

4

Average annual volume per broker

$49,544,782

Conversion rate

89%

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Cameron Price, co-owner: At Mortgage Choice Melbourne we had a very challenging year as we lost several staff, which forced us to rethink our processes and how we operated as a business unit. In saying that, we were able to hire three new team members – one broker and two customer service managers, (admin support) – who have fitted in wonderfully well and added to our team both from a work perspective and that of our overall environment. We lost two brokers, so we went from six to four.

Losing 33% of our customer-facing team meant a complete change of direction in how we operated.

We decided that we wouldn’t try to hire additional brokers but rather would reinforce our admin support team and streamline our work practices. Our admin team, led by our office manager, Di Aparo, stepped up to take on further responsibility, thereby freeing the brokers up to do what they do best: face-to-face client meetings, lending strategies and business development. We still continued to receive fantastic support from our client base, both repeat clients and new referrals. Maintaining regular contact with our database through annual loan reviews means we stay top of mind.

Apart from the obvious brand recognition of Mortgage Choice, our biggest benefit in being part of a franchise network are our fellow franchisees. We’re lucky enough within Mortgage Choice to have a wonderful and diverse group of franchisees who are not only colleagues but great friends. We travel Australia-wide to visit other franchisees, share information and learn best practice and how we can tweak and improve our business. Conversely, we share our experiences and any changes we may have made. We have franchisees regularly visit and use our retail office, and we view the network as colleagues rather than competition.

Leads and lead conversion are the keys to a successful business, and apart from client referrals we regularly hold information sessions both off-site and in our retail offices. Lunchtime information sessions are a cheap and easy way to both inform and create brand awareness. We have a signed up company car used by one of our brokers, and our annual loan reviews with existing clients have also been beneficial, especially with the market in a state of flux.

A large majority of Australian borrowers have been affected by the recent lending changes, and our clients are no different. As an established business we have a large number of investors who are affected by rising investor interest rates and decreased borrowing power that have limited the options of many.

To combat this we ensure we utilise our entire lender panel to identify the niches each has, and thankfully we’ve been able to assist the majority of clients.

The lending market is dynamic, and we need to adjust now just as we have in the past. Our clients are well educated and understand that change is occurring and we as a client/broker partnership must take a long-term view to ensure goals are achieved.

The difference between a good brokerage and a top brokerage are the little things. Most brokers are customer centric, wanting to and achieving great client outcomes; however, we try to do the little things well. We ensure clients are kept informed along the lending process. We don’t forget the client post-settlement; we ensure the clients are contacted annually to review their lending and organise property reports or valuations. We ensure calls and emails are responded to within a two-hour window.

And we thank our referrers. These things may seem trivial, but to the client they are vital.

“Losing 33% of our customer-facing team meant a complete change of direction in how we operated”

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Cameron Price (left) and Stephen Zamykal, owners of Mortgage Choice Melbourne

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FEATURES

BUSINESS DEVELOPMENT MANAGERS

Holding the industry together Far from being middlemen, BDMs are becoming a vital link between brokers and lenders in an era of rapid policy changes. Australia’s top BDMs tell MPA how they can help your business

BDMs ARE now the most important asset a lender can have. Don’t take it from us – that’s what you told MPA in 2017’s Brokers on Banks report, where BDMs were rated as more important than turnaround times, credit policy and all other factors when picking a bank.

This wasn’t always the case. Up to 2016, turnaround times were brokers’ top priority – while discounted interest rates, bonus commissions and special policies could also help lenders get ahead. Whether because of APRA or regulation, lending in 2017 is a different ball game, with unpredictable policy and rate changes coming thick and fast. Far from just drumming up business, BDMs are increasingly tasked with helping brokers keep up.

BDM of the Year at the Australian Mortgage Awards, Shannon Gibbons of Westpac, describes himself as a “problem solver and a gatekeeper”. Having 400 brokers and a vast number of credit, risk and mortgage back-office staff to work

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with, Gibbons has a vital part to play in maintaining turnaround times: “When applications from brokers come across their desks, they have all the information they need to progress quickly.”

BDMs have long provided a vital second opinion for applications before they get lodged. John Loukadellis, Macquarie Bank

Working with the broker to check policies, collect supporting documentation and order valuations, Loukadellis aims to provide his brokers with a “formal approval quickly”.

Macquarie is branchless and so having a BDM who has a close relationship with brokers is particularly important.

At Liberty Financial this challenge is

“We need to be the front line in providing training sessions and supporting brokers, as well as being the go-to person for policy changes, administration support and loan scenarios” John Loukadellis, Macquarie Bank BDM and Non-major BDM of the Year, has a favourite line for brokers: “Call me for all your scenarios, and then I can work out what is a Macquarie application and can guide you where to place the deals I cannot do.”

particularly acute, not only do they lack branches, but often they deal with nonconforming scenarios that require extra work. BDM Alf Vasta aims to see four to five broking firms a day, to talk to them about

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WHY BDMS ARE NOW A LENDER’S BIGGEST ASSET What do brokers want?

Brokers on Banks 2017 (MPA 17.04) Brokers on Non-banks 2016 (MPA 16.09) BDM support 4.78 4.52

Turnaround times 4.75 4.51

Credit policy 4.63 4.44

solutions-based lending, and he also runs group sessions.

“It’s just getting a whiteboard and then structuring live situations or scenarios and engaging,” he says. “Because you’ve got different levels of experience in the room, you can get different viewpoints.”

Educating brokers in this way helped Vasta clinch the Non-bank BDM of the Year award in 2016.

There is another type of BDM, one with a role that is slightly different: an aggregator BDM. Hannah Carter has worked at AFG since 2014, as a relationship manager, dealing with existing AFG brokers, and has just begun working as a BDM. Her job is to help 250 brokers build their businesses, and changing regulation is keeping her busy.

“Working with these groups that may have had a strong focus or a lot of their business going down these avenues – such as working with Chinese clients buying investment properties here – as

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soon as regulators change the rules we need to be getting these guys looking at other models for their business,” she says.

Tips for brokers Working with brokers for several years means BDMs that MPA spoke to have a number of tips for brokers. Westpac BDM Gibbons says the best brokers he’s worked with have great relationships with customers, referral sources and BDMs. “In my experience, that comes from getting to know the individual first and the business person second,” he says.

In addition to using Westpac’s Broker Base website, Gibbons encourages brokers to talk to him if in doubt: “We see hundreds of these deals every week and can help brokers pre-empt issues that could arise before submitting the application.”

At Macquarie, Loukadellis finds his best brokers keep in mind previous loan scenarios and keep on top of policy, order valuations upfront and attend industry and

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FEATURES

BUSINESS DEVELOPMENT MANAGERS

AUSTRALIA’S BEST BDMs According to our Brokers on Banks report, the banks with the best BDMs are: 1 Westpac 2 ANZ 3 Bankwest For non-banks: 1 Homeloans Ltd 2 Liberty Financial 3 Bluestone BDMs are also honoured at the Australian Mortgage Awards.

2016’s winners – many of whom feature in this piece – included: Alf Vasta, Liberty Financial – Best Non-bank BDM John Loukadellis, Macquarie Bank – Best Non-major Bank BDM Chris Straw, AFG – Best Aggregator BDM Shannon Gibbons, Westpac – Best Major Bank BDM Are you a top BDM? Have you worked with a top BDM? Applications for 2017’s Australian Mortgage Awards open on 29 May. Apply online: www. australianmortgageawards. com.au

professional development days, which makes it easier to keep in touch.

“It’s always a pleasure to deal with brokers who are keen to sit face-to-face with you and hear about policy updates and changes,” he says.

When it comes to specialist lending, a broker’s notes are important, says Vasta.

“Detailed broker notes are the key; it gives the underwriter a clear picture; it makes them understand what the client wants to do and how to move forward, and enables us, because we have so many solutions, to assist the client as best we can,” he says.

Brokers should also keep in mind Liberty may need extra information further down the line, Vasta adds: “We may ask for credit

“It’s about getting an understanding of what their business is all about” Alf Vasta, Liberty Financial history on deals we’re not consolidating. As it’s a specialist loan, we want to make sure we’re putting a client in a better position.”

Following Liberty’s documentation checklist goes a long way to achieving this, says Vasta.

Finally, from Carter’s point of view at AFG, the best brokers are not afraid to diversify and provide all lines of business with good referral partners to back it up. Those that stand out are “brokers that want to achieve more; the selfdrive, whether it be a big organisation or oneman band. It may involve more training, or networking with other brokers, to write more business and do better by their client.”

BDMs as business partners Lenders and aggregators invest heavily in technology and talk of its increasing role, so you might presume it’s changing the role of their BDMs. Loukadellis says this is the case, arguing the role of a BDM is “constantly changing” and that “there’s no better time to be a BDM who prides themselves on going above and beyond for your broker network.”

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Not all of our brokers saw technology having such a big impact, however. Westpac’s Gibbons agreed that mobile technology has enabled BDMs to get on the road more and visit brokers, but cautioned that the “most important thing about this role is never going to change, and that is being available to brokers and helping them achieve great outcomes for our customers.”

As Carter puts it: “There’s only so much you can get from a webinar. I think brokers want to be, in most instances, much more involved and have that face-to-face contact.”

The role of a BDM is changing, but not simply because of technology. Aggregator BDMs such as Carter’s have long worked with

brokers to build their businesses, but now lender BDMs are also going beyond a purely sales-orientated role.

At Macquarie, Loukadellis sees himself as a one-stop shop: “We need to be the front line in providing training and supporting brokers, as well as being the go-to person for policy changes, administration support and loan scenarios, which technology allows us to do.”

At Liberty, Vasta’s work as a BDM includes providing training, scenario workshops and helping his brokers build referral networks.

As brokers try to become less transactional, BDMs are aiming to do the same.

“I certainly don’t see myself as transactional,” says Vasta. “From a BDM, what brokers want to see is support and reliability.”

He sees his brokers as business partners: “When I go and see brokers, it’s to get an idea of what their business is all about, what they’re trying to achieve in the long run and what’s keeping them up at night.”

Shannon Gibbons has since left Westpac to pursue other interests.

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FEATURES

ALT-DOC LENDING

Alt-doc: same destination, different route Lenders are urging brokers not to leave their small business owner and self-employed customers behind when it comes to lending. Here they tell MPA why alternative documentation shouldn’t hold borrowers back

EVER FEEL like you’re missing out on a big opportunity? Well, there could be one right within your reach. The SME market in Australia is a booming one and when it comes to alt-doc loans, small business owners and self-employed borrowers are the target market. In this sector focus, MPA talks to five specialist lenders about why this market sector is filled with opportunity and how it’s down to brokers to set aside any hesitations in order to seize it.

Since 2011, alt-doc lending has been growing year-on-year, says Pepper’s head of Australian mortgages and personal loans, Mario Rehayem. He attributes this trend to brokers gaining an increased awareness and understanding of the sector and also to the continuous growth in the SME/selfemployed market over the last four years.

Royden D’Vaz, national head of sales, marketing and distribution at Bluestone, explains that “brokers who embrace the alt-doc market (primarily self-employed and credit impaired) are tapping into a significant growth sector.

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“It’s estimated that the specialist lending market is worth about $4bn and that the lion’s share is self-employed or small business operators. Not only do SMEs dominate the specialist lending sector, they’re also the engine room of the Australian economy, with new figures citing up to 2.4 million of the 11.6 million working Australians being selfemployed. Of this group, 62% operate as sole proprietors with no employees.”

At Pepper, Rehayem is seeing the emergence of a particular type of borrower for alt-doc loans.

“There’s been a huge shift in new entrant self-employed that had been working for that particular employer as PAYG for the last five or six years, and either the employer has been asked to change tack in their business, or the employee has opted for various reasons, eg tax, to leave the employer as a PAYG and then come back to them as a contractor.”

Better Mortgage Management’s founder and managing director Murray Cowan also saw healthy growth in the last year and notes the performance after settlement continues to be solid: “It has become more competitive

Lenders in this sector, nevertheless, remain positive. Bluestone products for selfemployed borrowers accounted for 58% of their total settlements in March and D’Vaz only expects the figure to increase: “This is expected to grow with brokers and borrowers becoming more aware of the solutions that are available to self-employed borrowers – particularly those who struggle to produce tax returns as a means to verify their income.”

Opportunities abound Not only is there a massive market for altdoc loans, a unanimous observation from the lenders is that SMEs are still underserved and, without doubt, they hold substantial business growth avenues for brokers.

“Providing a solution when an alt-doc customer is facing a challenge deepens loyalty and client retention,” notes D’Vaz. “An alt-doc product provides the broker the opportunity to have two bites of the cherry, when the customer moves onto a mainstream loan in two to three years’ time.”

Homeloans’ Carde says brokers already have an advantage in terms of first-hand

“An alt-doc product provides the broker the opportunity to have two bites of the cherry” Royden D’Vaz, Bluestone and as a result pricing has improved. Loan sizes are increasing as property values rise.”

Not all lenders have seen growth in this sector. Liberty Financial’s national sales manager, John Mohnacheff, says he hasn’t seen any change in the last 12 months: “If I can say anything, it’s been flat.”

Homeloans has seen steady volumes.

“We’re not seeing a major shift in the alt-doc space; our volumes are fairly consistent,” says general manager third party distribution, Daniel Carde. “We’re more than happy with the volume and also how they’re performing.”

insight into the self-employed market, since most brokers are self-employed themselves and run their own small business.

When it comes to finding clients, Liberty’s Mohnacheff says the most powerful way for brokers to find them is by advertising themselves. But Rehayem warns that brokers need to be careful when advertising in order to find consumers who may suit an alt-doc loan option.

“The only time an alt-doc loan should be offered to a customer is when the customer cannot meet the requirements of handing in

ALT-DOC AND LOW-DOC According to an ASIC review of low-doc home lending: “The name low-doc loan continues to be used by some lenders to market loans aimed at self-employed consumers or those that do not have an income stream that can be readily verified by reference to standard documentation, such as payslips.

The majority of the lenders in our review have adopted various names other than low-doc, such as alt-doc, for their products targeted at self-employed consumers.

These terms better reflect the obligation under the National Credit Act to verify a consumer’s financial situation.”

Source: ASIC Review of low-doc home lending following the introduction of the responsible lending obligations, 2014

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FEATURES

ALT-DOC LENDING

“There’s been a huge shift in new entrant selfemployed that had been working for that particular employer as PAYG” Mario Rehayem, Pepper

the income information as a self-employed.”

He says only after that should a broker bring up an alt-doc loan option to verify income in a different way: “To go out and actively coerce or entice borrowers to go down the path without understanding the customer’s current situation is an actual breach from the ASIC act, from our NCCP obligations and requirements. So we have to be very careful in the way people very loosely go out and try to advertise for alt-doc.”

Overlooking the opportunity Although self-employed is a large market and underserved, Rehayem believes it’s an area where brokers can do better.

“The perception with a lot of the brokers is that self-employed is too hard. The only reason why it’s too hard I would say is their grass-roots training never had a focus point,

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or they didn’t religiously look at it as part of their suite of education to learn about.”

The National Consumer Credit Protection Act may also have played a part. It was introduced to encourage responsible lending so borrowers could handle their loan repayments. Mohnacheff says the SME market is underserved by brokers because regulatory changes may have given the impression that alt-doc is a more difficult road. But he says there is no reason for this.

“The whole situation about NCCP is that the lenders have got the brokers’ backs,” he says. “All it is, is that we look at income from a different lens. The applications are pretty well identical; we just assess their income with a different view.”

It’s an asset class that has taken somewhat of a back seat and it shouldn’t be the case, he says, noting the many good products

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FEATURES

ALT-DOC LENDING

out there and stressing it’s a matter for the industry and its associations to sound the message loud and clear that there is nothing wrong with alt-doc loans. “They’re there to help a segment of borrowers that are finding it a little bit difficult to get a loan.”

“The struggle is often twofold,” adds D’ Vaz. “Taking the time to understand

“The applications are pretty well identical; we just assess their income with a different view” John Mohnacheff, Liberty Financial alt-doc products and fully understanding a client’s financial position. We find that the initial block is to invest in understanding alt-doc loans [whether it’s through BDM support or on-boarding training].

“The critical component, and one that’s often not prioritised, is becoming fully aware of the client’s circumstance – meaning it’s not just responding to the current requirement, it’s being across the client’s full exposure.”

But he says there are positive signs, too.

APPROVAL RATES FOR LOW-DOC An ASIC report on lender compliance around low-doc home loans found larger lenders had higher approval rates than smaller ones, but the regulator noted this could be partly due to the narrow lending criteria of the bigger lenders.

Overall:

One larger lender:

Smaller lenders:

70% (approx)

80%

35%-50%

Source: ASIC Review of low-doc home lending following the introduction of the responsible lending obligations, 2014

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“In terms of market perception, there’s a growing interest and uptake in brokers investing in, and becoming more familiar with, alt-doc loans.”

Cowan agrees that more brokers are embracing alt-doc loans, and the lenders are making sure they have support in place to educate them in this sector.

Learning from lenders “A large part of our service proposition is educating brokers in this space and we run seminars that are designed to help brokers understand alt-doc lending,” Cowan says.

Homeloans’ Carde adds that if there is a regulatory change, the lender will explain it to brokers and educate them to make sure they can comply, via one-onone training from BDMs, and also group workshops detailing full specialist lending, including alt-doc.

Collaborating with aggregators, Bluestone’s state managers and BDMs also hold regular technical workshops around alt-doc lending, and explain ways brokers can help their self-employed borrowers.

In Q3, Pepper is set to launch their latest version of interactive educational modules around the self-employed.

“You should always put a customer in a loan that you know they can comfortably service, and the only way you’re going to know that, in PAYG or in alt-doc, is by asking the right questions that meet the compliance regulations of your business – not that of the lender,” Rehayem says. “That’s where a lot of brokers fall short – where they go out there and display just the lender’s credit policy but not their own compliance responsibilities.”

Because of the way they earn their living, small business owners and the self-employed often need a different way to successfully gain a mortgage. As more Australians turn to business ownership and take control of their own incomes, it’s a growing market that brokers shouldn’t hesitate to embrace.

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PEOPLE

VENDOR FOCUS

PAUL O’REGAN: CHANGING THE GAME Chief executive Paul O’Regan tells Maya Breen how LJ Hooker Home Loans’ new model is tracking and what brokers who join the group can expect MPA: How is the recruitment of your franchisee team going? What’s your target number of franchisees?

PAUL O’REGAN: We have a target of 60 franchisees throughout Australia, with expectations that each franchisee will have multiple loan writers to ensure maximisation of the territories. We have ambitious growth plans, however our long-terms goals will only be achieved with the right people, so we’ll grow at the pace we’re comfortable with.

The culture fit is crucial. It ensures all parties work well together and are successful.

We are pleased that we have six approved franchises in our pipeline, backed up by a very strong list of quality people we are talking to. We’re talking to a lot of people, but we want the best, growth-minded business owners. To assist people with finding out more about our business model, we recently upgraded our information website: joinus. ljhookerhomeloans.com.au. We are getting a lot of enquiries from the site.

MPA: How will you help your franchisees concentrate on writing loans rather than admin work?

PO: To run a successful mortgage business you always need to stay focused on sales and marketing. We have a few unique ways that allow our franchisees to concentrate on core business leadership and growth activity. One

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key area is outsourced loan processing and support. For a fixed fee of $395 per month, a franchisee has unlimited loan processing support. Our outsourced processing system assists with data entry, upfront and CRM, valuation ordering, loan packaging and electronic file storage post-settlement. The support team are quality people, with good experience. We help foster a link between the franchise, so they act as an extension of their business.

Our outsourced team are a dedicated LJ Hooker Home Loans asset managed by us, so we are always looking to extend their support and offer additional services to our network. We’re currently trialling some areas that also involve customer interaction points.

Compliance is now a large part of our industry

all files to be neatly stored electronically, so a lot of our reviews can be done behind the scenes without us having to disrupt the franchisee’s business. Given the unique basis of our business model of having only 60 franchisees across Australia, we will be able to provide them with the real-time and caring business support a franchisee deserves.

This allows our franchisees to concentrate on growth and leadership – and not admin work, which we believe hinders the growth of franchisees.

MPA: How will having large territories benefit your franchisees?

PO: For the right person who wants to grow and build a real business with succession planning ability, they are crucial. Having

“We will be able to provide our franchisees with the real-time and caring business support a franchisee deserves” – and so it should be. But it has also added another level of workload onto mortgage professionals. The people on the ground are carrying this burden, so we have a very simple and streamlined support system around compliance.

For example, the outsourced model allows

large territories will benefit in many ways.

An example of this is the ability to grow the business faster to a medium to large size business. There is also the ability to have retention and succession plans for loan writers, ie the business can grow greater sales and support teams and offer leadership

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PAUL Oâ&#x20AC;&#x2122;REGAN ON KEY TRENDS IN 2017 Property values remain strong Due to a continued historically lower interest rate environment, property as an investment vehicle will remain strong. Combined with an undersupply mainly due to lower listing levels, property values will remain buoyant throughout 2017.

Debt repayment will be the focus for most Australians Recent data continues to show lower confidence levels in job security.

Due to the threat of interest rate increases, we expect that a large percentage of the population will focus on debt repayment.

This will also be driven by lender P&I loan repayment pricing and policies and the perception that, given current property prices, debt repayment is a more achievable path to financial independence.

Refinancing to drive market volumes Given the above factors, driving a desire to structure debt for faster repayment, we expect more people will look to refinance in 2017. As the cost of refinancing becomes cheaper and the ability to do so easier, we expect average loan life between switching will lessen.

We also expect that rapidly emerging technology via online platforms will drive greater levels of refinancing, forcing the market and lenders to embrace this trend.

Technology From ID services and automated decisions to online processing, we expect technology and outsourcing to change the industry in 2017 in a big way.

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PEOPLE

VENDOR FOCUS

“We are here for the long term and want to become Australia’s most trusted and admired home loan provider”

roles. Staff retention rates can increase as more opportunities are created.

Our local digital SEM marketing system allows our franchisees to manage and extend their brand reach and profile throughout the larger areas, and the best part is our package is turnkey, profiling our brand and the business owner. We localise the message and this allows us to target the right area demographics, and be nimble with updates.

The larger territories allow our digital SEO and SEM programs to gain greater traction via a wide range of digital mediums and radio. By raising the profile of our homeloans franchisees, it also helps build greater comfort levels within our real estate teams to partner and refer customers. We are always looking at how we can leverage off digital opportunities and how the market is consuming advertising.

MPA: What lessons have you learned so far from your recruitment drive?

PO: A lot of mortgage professionals are looking for greater sales and marketing support.

Brands are back in flavour and aggregators generally don’t offer this – and are limited with their marketing and lead generation support.

But there is a lot for people to consider. Moving away from a current aggregator or business can be hard – both from a time and money perspective. But if the long-term opportunity is strong enough, people will make the jump.

We have great interest from the market and a big learn for us is how to make the move more palatable. We’ve listened and ramped up our on-board support package to make the transition simpler.

MPA: How would you like LJ Hooker Home Loans to be performing by the end of the year?

PO: We have clear business goals and a strong vision. The business has a strong balance sheet with good capital to invest in growth. We are here for the long term and want to become Australia’s most trusted and admired home loan provider. To achieve this, we need the right business owners and people. Our bank funding partners have been fantastic, so a short-term goal is to ensure they are rewarded for their support with strong quality volumes. We currently have a great team of franchise owners and we want to ensure that by the end of the year they all have strong volumes flowing and are growing at a good rate.

KEY MILESTONES FOR LJ HOOKER’S REMODEL December 2015 LJ Hooker Home Loans receives a new ownership structure and vision within the LJ Hooker group

April 2016 Start-off capital injection in excess of $3m to establish home lender brand in own right and commence marketing program

Jan 2016 March 2016 Decision to effectively exit broking and establish the brand and business as a lender with closer ties to strategic bank funding partners

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December 2016 Set up our franchisee processing support operations in Manila

Jan 2017 September 2016 LJ Hooker COO Paul O’Regan takes up CEO role of LJ Hooker Home Loans

March 2017 Launches first direct consumer marketing campaign, with digital SEM on a national level and also local level showcasing our individual franchise owners

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BUSINESS STRATEGY

FINANCIAL LITERACY

BROKER AND EDUCATOR Maya Breen meets two brokers who make sure their clients walk out of the door with the extra buzz that comes from gaining deeper financial literacy MPA TALKED to two brokers who take that extra time with each client to make sure they leave an appointment with higher literacy levels in finance than when they stepped through the door. We asked them how they do it, and which clients struggle the most and in what aspects of finance.

Positively, more Australians are opening up about their finances and are seeking a better understanding.

More people are talking about their financial situation with a financial professional, particularly among homeowners, according to the Australian Financial Attitudes and Behaviour Tracker 2015/16 by EY Sweeney/ASIC. It also found a significant drop in the proportion of people indicating that they prefer not to discuss their finances with anyone.

Victorian broker Tim Reynolds of Accession

Finance says it’s important that financial literacy does increase among Australians, especially in a tech-saturated world.

“It’s not a secret that household debt is at the highest it’s ever been. Technology for all the good it has brought has also never made it more easy to spend money,” Reynolds says.

“It’s changed the way that people spend

“They look at you [and] it’s like the penny has dropped and the world is just that little bit brighter” Tim Reynolds, Accession Finance money. PayPass, payWave, tap and go, Apple Pay, online shopping, cardless withdrawals are all great additions in a fast-paced world, but they remove the need to really check how much you have put away before we spend it.”

FINANCIAL (IL)LITERACY IN AUSTRALIA Research on the financial literacy of Australians suggests levels are not quite where we would want them to be. A UBank survey for February 2017 revealed 41% of Australians had no idea what their home loan rate was and another 44% took a guess at it.

Furthermore, nearly a third of those surveyed by ASIC’s latest Australian Financial Attitudes and Behaviour Tracker found dealing with money stressful and overwhelming. Under-35s had the highest indication of having difficulty understanding financial matters, and for many Australians understanding key investing concepts such as risk/return trade-off and diversification remains a challenge.

Sources: UBank; Australian Financial Attitudes and Behaviour Tracker 2015/16 by EY Sweeney/ASIC

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Thanks to long-term client relationships and one-to-one conversations, brokers are in a prime position to play their part in improving their clients’ financial literacy.

“We know that brokers maintain a level of competitiveness in the marketplace. It gives clients options,” Reynolds explains. “We also know the volume of loans being written through the broker channel is growing daily.

I think the last number was 54%. That is a huge amount of people that brokers have the ability to be able to get in front of, educate and make a difference. Also, because most brokers are smaller businesses, the level of detail and care versus other channels is higher and overall support is better.”

He also notes that from a small business perspective, it not only benefits your client but what goes around comes around.

“Your strongest source of referrals are people you know, like and trust,” Reynolds says. “So I always go into every appointment with the impression that I will stay for as long as it takes for them to walk away and not only

know what we’re doing next but why and more importantly how.

“Because then they go out there with all that excitement on the back of your appointment and they’re positively promoting your business, and before you know it, your phone’s ringing and you’ve had to do absolutely nothing but spend an extra 15-20 minutes with the client at the time.”

John Tindall is a Choice Home Loans broker in Wattle Grove, New South Wales and spends about half an hour on improving financial understanding per client in an average day and gauges their financial savviness from the initial meeting.

“Sometimes the way that they ask the questions tells me where their level of literacy is at,” he says.

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“Better literacy for me translates into eventually better lifestyles, and my better informed clients tend to be the better ones – they get it, they understand and they don’t have unrealistic expectations” John Tindall, Choice Home Loans He also explains concepts via PowerPoint presentations, posts regular articles and videos via Facebook and YouTube and provides clients with a handy two-page loan explainer and a practical budgeting spreadsheet. This is particular helpful for clients struggling with cash-flow management or credit card discipline, he says, or if they are trying to save for a deposit or keep up with loan repayments.

“For some of them, it is the first time that they have ever had a look at their own family personal budget,” Tindall says, especially among young first home buyers.

“They don’t know what they don’t know.”

When emailing, he makes the most of targeted emails to hone in on his clients’ particular interests, such as sending information on first home owner grant changes only to his first home buyer clients.

“I can proactively send them out something that hopefully increases their understanding of what’s happening, in a way that is directly relevant to them,” he says.

Reynolds recently won an award for a community program on financial literacy and also maintains a blog on his website, offers

a FHB e-book plus a monthly newsletter and budget planner tool. He says financial literacy forms part of every conversation in different ways, with living expenses popping up as the most common. In relation to first home buyers, it’s around costs associated with moving into their own home versus renting or living with their parents. Whereas investors might need explanations around insurances, rates, body corporate or scenarios when their property has no tenant.

“Every client situation is unique, but it all comes back to education,” Reynolds says.

“In addition to an education centre we have on my website, every month we send out a newsletter. In it I not only discuss, like most, the rate updates, but have a topic for the month I focus on. It might not be relevant to everyone, but at some point it is.”

Topics have included loan application, budget organising, debt consolidation, credit scoring, life after child support/care and paths to successful property investment.

“I prepare for every appointment planning to spend as long as it takes for the client to not only have an understanding of what the proposed next steps are, but also why and how we plan to get there. I also take any additional tools with me that I think will help explain.”

Reynolds says it’s rewarding to see the difference it makes to his clients, particularly among investors.

“You go through their current pay, validate assets and liabilities, work out their borrowing capacity and then the proposed structure of moving forward and they look at you … it’s like the penny has dropped and the world is just that little bit brighter and they go, ‘I can’t believe that’s how everyone does it.’ ” In Tindall’s experience, spending that little extra time to improve his clients’ understanding on financial matters leads to big-picture benefits for his clients and his own business too.

“Better literacy for me translates into eventually better lifestyles, and my better informed clients tend to be the better ones – they get it, they understand and they don’t have unrealistic expectations.”

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PEOPLE

BROKERAGE PROFILE

CHOICE HOME LOANS WOLLONGONG Top 100 Broker Paul Wright has built a property investment-focused brokerage for the long term BUSINESS IS going well at Choice Home Loans Wollongong, and has been for some time. In fact CHL Wollongong has been one of Choice’s top performers for a decade, and principal Paul Wright regularly appears in MPA’s Top 100 Brokers report as well as at industry events where he talks about how he runs his business. All this has been built on a value proposition that has huge appeal for property investors.

At least 40% of CHL Wollongong’s business is investor-based, Wright explains. “It’s an area we definitely focus on regularly. We don’t say we just do investment, but it’s an area we try to get our clients to focus on, because we feel that’s the way they can get ahead long-term.

Clients like the fact they’re not just coming for a home loan; they’re coming for advice.”

While ‘advice’ is an occasionally overused term in the mortgage industry, Wright is

actually a QPIA (Qualified Property Investment Adviser) and has a portfolio of properties himself. Beyond the usual work of a broker, Wright says he can advise brokers on ownership structures, tax depreciation and capital gains tax (with their accountant), as well as different

“My wife and I are fortunate to own multiple properties, so the clients’ experiences are my own experiences as well” types of property and cash flow. “I’ve got property investment software which can give clients an estimate, if they buy a property of this amount and receive this rental, of what it would cost them per week after tax benefit. It’s a value-add,” he says.

CHL Wollongong has always had an

AUSTRALIA’S THIRD MOST EXPENSIVE CITY Not being a state capital, Wollongong is sometimes overlooked, but with a median house price of $700,000 it’s now behind only Sydney and Melbourne as Australia’s third most expensive city, according to Domain, and it continues to growth fast.

Median house prices Sydney

$1,123,991 $795,447

Melbourne Wollongong

$700,000

investment focus. “I’ve always been very interested in property investment, and I’ve wanted to have a point of difference from a lot of our competitors,” Wright says. Despite being such a popular strategy with clients, “there’s a lot of information [on property

House price growth in December Qtr 2016:

7.7%

4.7%

Wollongong

Sydney

According to QBE’s Australian Housing Outlook 2016–19, Wollongong prices track those of Sydney, as buyers see it as an affordable alternative. If Sydney’s prices cool, Wollongong’s high prices could become less attractive, the report warns.

investing] which is quite confusing out there in the market”.

There’s no mandatory qualification for property investment advisers, and organisa­ tions like Property Investment Professionals of Australia have repeatedly warned of the risks of rogue operators. So, while the qualification is not a gateway to advice, Wright explains: “The biggest thing it does is give me credibility: I’ve got that qualification, but I also practise what I preach. My wife and I are fortunate to own multiple properties, so the clients’ experiences are my own experiences as well.”

CHL Wollongong’s clients are mainly locals, and many choose to invest within Wollongong. Wright also works with buyers’ agents to advise clients on where to look further afield, rather than providing this advice himself. His clients are looking to build portfolios, and some own as many as 10 properties.

Investors make ideal long-term repeat clients, albeit clients with markedly different needs to owner-occupiers, Wright says. “They are rate-conscious, but not as rate-conscious.

Source: Domain, Regional House Price Report/QBE Australian Housing Outlook 2016–2019

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FAST FACTS Year founded 2007 Services Home and investment loans, construction and renovation loans, debt consolidation, SMSF lending, insurance; refers out commercial and car finance

Staff 3 brokers + 2 support staff + marketing/HR/office manager Premises Street-level shopfront Owner Paul Wright Income Upfront and trail commission

Paul Wright (centre) with his team

We try and educate them to understand that the end goal is about creating wealth; saving 0.1% on an interest rate is irrelevant if you can’t get the finance to purchase that next investment.”

Outside investors, the brokerage continues to attract first home buyers, who make up around 20% of its clients, and Wright assigns these buyers to a younger broker who is of a similar age to the clients. Wright is, as he puts it, “trying to get the individuals to fit the client”.

CHL Wollongong has begun to ‘dip its toe in the water’ when it comes to diversification.

Wright is training staff members on how to do car finance and commercial lending, although both of these services are referred out at

present. Eventually they’d like to promote these services to potential clients, although Wright explains that diversification is “not a huge goal” for the brokerage going forward.

Instead the first thing on Wright’s agenda is growth. The brokerage has already outgrown its current shopfront and is looking for a larger location, possibly a converted house. Although walk-in clients are rare, Wright is keen for the brokerage to be visible and accessible from the street.

To fill their new home, Wright intends to hire three new brokers over the next few years, including training up some new-tobroking staff members. Ultimately, Wright wants these brokers to take pressure off him to be the primary broker. “I’m stepping back from

doing the face-to-face appointments all the time, definitely. Not stopping it, but reducing it and allowing me to spend more time on training the staff and developing the business.”

For brokers looking to emulate CHL Wollongong’s long-term, sustainable success, Wright has a piece of advice: “If they’re in a position to, they should definitely buy an investment property themselves so they’ve got hands-on experience of having their own property and understanding how it works.

The other thing I’d recommend is that they become a Qualified Property Investment Adviser like I have, and do a course to do that, which gives them some education. That gives them an added advantage over another mortgage broker.”

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PEOPLE

CAREER PATH

THE BUSINESS BUILDER Bluestone Mortgages’ national head of sales and marketing Royden D’Vaz found his element by taking a leap of faith and embracing opportunities

Royden D’Vaz started his finance career during his university days, when he made a payment on a fridge at an AVCO financial BUYS A FRIDGE services office and a manager there asked him if he had considered entering finance.

He climbed the AVCO ranks quickly and a year later became a branch 1999 manager, managing people much older TIME FOR CHANGE than himself, then in 1993 he became After 14 years at AVCO, D’Vaz changed tack and joined Telstra as an state sales manager for WA/SA. account executive, managing accounts of finance companies in WA. “I wanted to do something totally different and wanted to try other things to see if I liked it.”

1985

2001

BUILDS UP BLUESTONE Three years later he returned to financial services, joining Bluestone in its very early days. He relished the challenge of growing the business, as in 2001 specialist lending was new to the industry and brokers.

“Having that break from finance for the three years really crystallised to me that my passion was always within the finance industry and especially the third party market”

2007

NEW CHALLENGES Leaving Bluestone’s business in a strong place, D’Vaz joined Challenger, whose mortgage arm was then bought by NAB in 2009. A year later D’Vaz became state manager for WA/SA at NAB Broker.

“From a corporate cultural point of view, NAB did teach me a number of disciplines that have contributed to my psyche and ethos which I have right now.”

2014

BACK TO BLUESTONE

Drawn back by its culture and small family environment, D’Vaz rejoined Bluestone as national manager. He felt it was the right time in his career to, on a national level, build up its sales team, grow the business and re-establish the brand.

“I always looked back on this business very fondly. I’ve always said that Bluestone was probably the best role I’ve ever had.”

2017

STRONG NUMBERS REFLECT SMART STRATEGY D’Vaz’s passion for building businesses and his well-thought-out strategy are evident in the heights Bluestone has reached today. In March the company announced a 50% increase in volume of the start-up loan product Business Easy in the year from February 2016, and also a doubling of total loan volume growth year-on-year since 2014. But D’Vaz says he wouldn’t be where he is today if he hadn’t bought that fridge back in 1985.

“That’s always been my passion – growing businesses” 54

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PEOPLE

OTHER LIFE

TELL US WHAT YOU GET UP TO Email sam.richardson@keymedia.com.au

WITHOUT A RIBBON

Queensland broker Paul Dossetto talks about being involved in the national charity for rare cancer, Without a Ribbon A FEW years ago, a friend asked Star Finance’s Paul Dossetto if he would like to establish a charity with her. His friend had a rare form of cancer, adenoid cystic carcinoma, less than 100 cases of which are diagnosed in Australia each year.

Dossetto’s response was a definite yes.

“I knew how her rare cancer was affecting her and her family and wanted to help others in the same situation.” So he became the vice president and founding board member of Without a Ribbon, supporting rare cancer sufferers.

At their recent annual conference, four men who had undertaken a 54-day motorbike journey, the ‘Compass Run’, around Australia, announced they had raised over $53,000 for the charity.

Dossetto’s Brisbane brokerage also hosted a local ‘Drag Queen Bingo Night’ last year, raising over $5,500. “My staff, friends and local community all came together to assist and make it a fantastic night.”

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Paul Dossetto

$53k+

raised by four men in a 54-day ‘Compass Run’ around Australia

$5.5k+

raised in a single Drag Queen Bingo Nght

25%

of diagnosed cancers are rare cancers

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