Mortgage Professional Australia issue 17.08

MPAMAGAZINE.COM.AU ISSUE 17.08

CONNECTING THE DOTS Our Brokers on Aggregators survey reveals who can take your business to the next level Commercial lending What’s in store this year

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Alice Del Vecchio On HSBC backing brokers

APRA Turning its sights on the non-banks

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AUGUST 2017

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CONTENTS

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UPFRONT 04 Statistics

Deposits, affordability and why your clients can’t get on the housing ladder

32 COVER STORY

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06 Head to head

Do consumers really care about rate hikes? Three brokers give their views

08 News analysis

FEATURES

COMMERCIAL LENDING

The big players on what’s ahead in the next year and how brokers can break into the commercial space

HSBC’s Alice Del Vecchio on why the global bank is re-entering the broker channel

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MORTGAGE INSIDERS Elders Home Loans’ boss on the brand’s new broker recruitment drive

Which is Australia’s number one aggregator? Introducing aggregator rankings to our long-running survey

ALICE DEL VECCHIO

10 Opinion

AFG CEO David Bailey on navigating an era of commission uncertainty

44 John Rolfe

BROKERS ON AGGREGATORS

THE BIG INTERVIEW

APRA’s newfound interest in non-banks and what it means for brokers

FEATURES

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REVERSE MORTGAGES

How to diversify with services for clients you already have but simply haven’t seen

52 Robinson & Sewell Partners From the bush to the big time with Australia’s most decorated regional brokerage

54 Sarah Willsallen

Introducing Westpac’s new state manager for NSW and the ACT

56 Tim Jennings

Fighting fires with a broker who really knows what it’s like to feel the heat

BUSINESS STRATEGY 50 Downsizing your business

48 FEATURES

AFTERSETTLEMENT SERVICE

Supporting your business clients long-term

Management specialist Karen Gately on cutting staff and costs without chaos

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UPFRONT

EDITOR’S LETTER www.mpamagazine.com.au AUGUST 2O17

AT A LOW EBB

W

hat’s the rarest commodity in Australia’s financial system? Trust. Starting in April with the Sedgwick report and continuing with the Federal Budget, the level of trust is in freefall.

Clearly, banks don’t trust brokers, commissioning Sedgwick’s controversial remuneration review even alongside ASIC’s more comprehensive report. Consequently, brokers don’t trust banks, with AFG branding Sedgwick’s review as “outrageous” and “ridiculous”. Banks don’t trust the government, who’ve paid for the budget with an unexpected $6.2bn bank tax, and Treasurer Scott Morrison evidently doesn’t trust the banks not to pass this tax on to consumers, appointing the ACCC to monitor future rate hikes.

In place of trust we have suspicion, which is becoming corrosive. Talking to brokers at MPA’s recent High-Performance Business Summit in Melbourne, many believed that commission cuts by the banks were imminent – a suspicion shared by some aggregators, who might otherwise have bridged the divide between brokers and banks. Trying to develop a brokerage while expecting an imminent cut in income is far from ideal.

As the availability of a commodity falls, its value should rise. Challenger banks have realised this, mounting marketing campaigns that capitalise on how much Australians distrust the major banks. Brokers will be hoping they experience a similar surge in consumer interest at the expense of the majors.

In place of trust we have suspicion, which is becoming corrosive Unfortunately, trust, or rather the lack thereof, is an issue for everyone in an industry that depends on collaboration. If banks can’t trust brokers to write compliant loans, or brokers can’t trust banks not to hike their clients’ rates or cut commission, the system breaks down.

Rebuilding trust requires big players to cross the divide, exemplified by the recent Sydney forum on commission changes involving the ABA, COBA, industry associations, brokers and aggregators. It’s an essential step in the long and difficult process of developing an industry-led rather than regulatorenforced response.

Brokers may not feel they’re responsible for the Australian public’s lack of trust in finance, but they have the most to lose. Banks will always have money to lend, but a broker’s main asset starts with a ‘t’.

Sam Richardson, editor, MPA PS We’d like to apologise to our readers and particularly 1st Street Financial for a mistake in our Top 10 Independent Brokerages report, in the most recent issue (17.07) of MPA. 1st Street’s picture was accidentally replaced with a picture of another brokerage during the production process. Please go to our website to find the full and updated report.

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EDITORIAL Editor Sam Richardson Journalist Maya Breen Contributors David Bailey Karen Gately Production Editor Roslyn Meredith

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

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

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UPFRONT

STATISTICS

STILL OUT OF REACH

CoreLogic’s latest Property Pulse uncovers the true costs facing first home owners IN SOME good news for first home buyers in NSW, the state’s government recently announced a stamp duty exemption for first home buyers purchasing properties under $650,000, effective 1 July. But saving up a deposit still remains an enormous challenge for first home buyers.

Commenting on the announcement, CoreLogic head of research Tim Lawless says, “Abolishing stamp duty for first home buyers is likely to create some headaches for eligible buyers who have recently entered into

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proportion of homeowners with no mortgage debt 15 years ago

contracts. Additionally we can expect first home buyer activity to stall before surging higher on 1 July 2017. The long-term outcome may be self-defeating due to higher demand pushing up prices.

“It is unclear as to how, absent a big fall in property prices, housing affordability for first home buyers can be greatly improved,” Lawless also said in the latest CoreLogic Property Pulse report. “Governments have tried incentives such as Grants in the past and they generally just lead to greater demand and higher property prices.”

67%

rate of home ownership in Australia in 2013

15%

increase in LVR ratio since 1980s

13.5%

Canberra

Perth

Adelaide

Brisbane

Melbourne

Sydney

$361,165 $525,000 $327,000 $403,000 $274,500 $337,500 $330,000 $390,000 $370,000 $475,000 $540,000 $666,000

drop in home ownership among 25- to 34-year-olds, 1995–2014

Source: AIST Housing Affordability and Retirement Incomes report, March 2017

LAGGING INCOME GROWTH The growth of income is not keeping up with dwelling value increases, making saving a deposit a huge struggle for first home buyers, especially those in Sydney and Melbourne.

15.3%

16%

The AIST Housing Affordability and Retirement Incomes report highlights three reasons why it’s a bad idea for first home buyers to use super to top up a deposit.

Melbourne

May result in higher house prices as FHBs compete with each other for the limited supply available to those armed with larger deposits

Sydney

4.6%

Ultimately lower retirement savings down the track for those who tap into super for their deposit

2.7% % rise – household income

% rise – dwelling value

(over 12 months to March 2017, ANU data)

(over 12 months to April 2017) Source: CoreLogic Property Pulse report, 25 May 2017

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USING SUPER TO BOLSTER DEPOSIT

May lead to significant cost for the government due to reduced tax revenue Source: AIST Housing Affordability and Retirement Incomes report, March 2017

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$33,165 $41,357

LOOKING BEYOND HOUSE PRICES CoreLogic’s figures show that higher house prices don’t always mean higher deposit/stamp duty costs. Case in point is Adelaide, which has the secondlowest house prices in the country but ranks third highest when it comes to deposit/stamp duty costs.

$16,772 $20,572 $29,771 $32,921

25th percentile prices across the capital Houses cities, April 2017 Units

$17,543 $20,543

Costs for 5% deposit and stamp duty on 25th Houses percentile property Units

$18,773 $24,023 $52,733

$59,033

Source: CoreLogic Property Pulse report, 25 May 2017

RISING MORTGAGE DEBT

STAMP DUTY COSTS

Research shows that first home owners are taking out larger mortgages at an older age and taking longer to pay them off.

The cost of stamp duty for houses and units across each city based on 25th percentile prices is shown in the table below. For this analysis by CoreLogic, it was assumed that the first home buyer would purchase at the 25th percentile price for owner occupation.

Outstanding mortgage debt of 44–54-year-olds has risen 31% since 1995

88.2% of homeowners aged 35–44 had outstanding mortgage debt in 2013/14

9.7% of homeowners 65 years and over still had mortgages to pay off in 2013/14 Source: AIST Housing Affordability and Retirement Incomes report, March 2017

HOUSES

UNITS

Sydney

$25,733

$273

Adelaide

$16,046

$12,622

Canberra

$15,107

$8,303

Melbourne

$11,553

$8,507

Brisbane

$1,043

$845

Perth

$422

$402 Source: CoreLogic Property Pulse report, 25 May 2017

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UPFRONT

HEAD TO HEAD

Do major bank customers care if their rates go up?

Three brokers share their thoughts on whether customers of the major banks really care about rising interest rates

Ren Wong

Dean LaFrenais

Peter Goldberg

Yes, they do. But they probably won’t feel it at the beginning because most mortgage holders are too busy to even check their rates regularly and didn’t know they probably have been paying too much relative to market average. They are going to realise a huge chunk of their monthly budget is taken up by mortgage costs when they’re hit by monthly repayments after a couple of months, especially in Australia as a country with high household debt. Most borrowers with major banks are there for convenience, but there is always a tipping point when rates they’re paying just don’t justify the convenience – we call them margin product.

To be fair, I think all customers care if their rates go up, and that’s irrespective of which bank they belong to. More significant is what they choose to do about it. Banks increasing rates is not something new, but nowadays there is a lot more visibility around it. When customers see other banks increasing rates all at the same time they automatically think that this is the ‘norm’ and leave it! This should be the trigger for them to make contact with their broker to see how their loan is placed within the current market.

As brokers we have greater responsibility to educate our clients on reasons why banks are increasing rates in this changing regulatory and banking landscape. My clients are very conscious of rising home loan interest rates, together with present high cost-of-living pressures. Many of my clients are taking up a portion of their home loan as a fixed rate to mitigate against rising rates. I’m finding many clients are disappointed with major banks raising rates outside of the RBA cycle as ‘profit grab’, and also with banks repricing old loans that were sold on an excellent special discounted rate, leading them to look more favourably at non-bank options.

CEO N1 Holdings

General manager InReach Finance

Managing director Pinnacle Capital

HOUSEHOLD DEBT WEIGHING DOWN ON MORTGAGE HOLDERS Rate rises have always been big news in broking, but politicians are only now beginning to listen. Following this year’s federal budget, Treasurer Scott Morrison ordered an inquiry by the ACCC to force the banks to publicly show their reasoning behind rising mortgage rates. The inquiry will be conducted until 30 June 2018.

Household debt connected to rate rises is increasing: Of 3.1 million mortgaged households in Australia, about 22% were in “mild mortgage stress” in March 2017, a 1.5% increase since February as a result of rising interest rates.

1% of households are in “severe stress” Source: Digital Finance Analytics

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MPA top

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UPFRONT

NEWS ANALYSIS

OUT OF THE SHADOWS Non-banks will now be regulated by APRA, with potentially seismic consequences for brokers, lenders and property investors, writes MPA editor Sam Richardson THERE ARE two ways to bury bad news, and brokers have now experienced both. Method one is to run that news on a Friday when everyone’s mind is on the weekend, as APRA did when announcing curbs on interest-only lending on the final day of March. The 2017 Federal Budget took the other approach: burying bad news in more news, namely a controversial $6.2bn bank levy.

Whether increased regulation of non-banks is indeed ‘bad news’ is up for interpretation.

Yet for an industry so jaded by regulation, the announcement that APRA will now have oversight of non-bank lenders – who were previously regulated by ASIC – has occurred with remarkably little in the way of reaction.

“Of all the things that were announced, that’s the biggest deal,” Martin North, principal of consultancy Digital Finance Analytics told MPA. “If APRA now has responsibility for them, they will have to make a decision about whether they require them to hold capital, which is probably not going to happen as they aren’t ADIs … but they will probably put a structure, or limits, or some other mechanism to reduce the risky lending behaviour.”

A work in progress With just three paragraphs in hundreds of pages of budget papers, there’s little in the way of specific information on the new regulations. It has now been confirmed that the government will provide an extra $2.6m over four years to APRA to “exercise new powers” and collect data from non-authorised

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deposit-taking institutions. To assist with this the Banking Act of 1959 will be modernised, also enabling APRA to restrict lending to certain geographical areas.

Appearing before the Senates Estimates Committee in late May, APRA chairman Wayne Byres was pushed for more information on APRA’s role. Byres played down the degree of regulation. “If there is a systemic risk … APRA would have the capacity to introduce some rules which might help mitigate that. But that is very different to saying we take day-to-day responsibility for individual institutions.”

Nevertheless, uncertainty remains. Asked

by Liberal senator David Bushby which institutions would be affected by APRA’s

build-up of risky lending in the sector could have more far-reaching consequences.

Investor and interest-only caps Byres’ inability to specify APRA’s new powers (at the time of writing) leaves open the

“If there is a systemic risk … APRA would have the capacity to introduce some rules which might help mitigate that” Wayne Byres, APRA expanded powers, Byres was unable to provide an answer, as the government had yet to announce the actual powers APRA would have.

Byres was more specific about why the new powers were required. It was “in some sense” a consequence of restricting lending by ADIs to investors, which Byres suspected had pushed a large degree of investor lending into the nonbank sector. While Byres said the failure of individual non-banks was “a fact of life”, a

possibility of APRA capping investor and interest lending growth by non-banks at the same level as banks. At present, growth per lender is capped at 10% and 30% respectively.

APRA warned ADIs in March that lending by non-banks they fund “should not be growing faster than their own portfolio or materially faster than their own portfolio and also should be of a similar quality to loans they would be prepared to write themselves”, Byres

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WHAT APRA IS WORRIED ABOUT While numbers on the non-bank sector are hard to come by, international ratings agency Moody’s gave an insight into the sector’s growing importance in the aftermath of the budget:

6%

percentage of mortgages written by non-banks

16%

proportion of Australian residential mortgage backed securities (RMBS) backed by investor loans in 2015

36%

proportion of RMBS backed by investor loans in 2016

46%

proportion of RMBS backed by interest-only loans in 2016, up from 21% in 2015 Source: Moody’s Credit Outlook, May 2017

told the Senate Estimates Committee.

Having experienced rapid investor lending growth from a small base, many non-banks would be hit hard by a percentage-based limit.

In a furious article in Australian Broker magazine, ex-Pepper CEO Patrick Tuttle warned against “regulating the non-bank sector out of existence”, as well as depriving legitimate borrowers of funds and causing a sharp correction in house prices. Tuttle also claimed that non-banks had not been consulted by the Treasurer prior to the announcement.

Prospects for non-bank lenders The non-bank lenders MPA spoke to appeared to be unconcerned by the prospect of APRA oversight. Pepper Money said it was “business as usual”, claiming it had already taken note of APRA regulation of ADIs to ensure a balanced approach to lending, in addition to satisfying the demands of warehouse funders.

Liberty CEO James Boyle supported the regulator’s efforts to lessen the risk of an inflated property market. Boyle argued that,

with limited scale compared to the majors, non-banks already had to build balanced portfolios with diverse geographies, products and borrower types.

However, Boyle said, “as non-banks do not accept deposits, there is less need to apply measures primarily designed for depositors”.

According to Boyle, the “very virtue of their difference” allows the non-bank sector to increase competition in the industry, providing better choice for customers. “We would say the government should continue to be sensitive with moves such as those proposed to not increase costs for consumers, stifle competition or shift responsibility for risk management from the regulated to the regulator.”

In MPA’s Brokers on Non-Banks survey, which will be published in August, hundreds of brokers were asked whether they’d continue using non-banks if they were regulated in the same way as banks.

The majority of brokers said they would, pointing out other advantages the non-banks have over the majors. As one Sydney broker

explained, “they are proactive, adept and keen for business. Their hunger means that they meet the market and fill the niches the major lenders don’t”.

However, many brokers warned that already-high interest rates would become impossible to justify without correspondingly differing policies. “If non-banks were restricted by APRA, then likely their policy attractiveness would be lost,” commented a broker from Perth, “so the reasons to use them would be less. However, maybe they would keep their upfront approach, which I prefer to the majors’ ‘have to haggle to get a good deal’ approach.”

For decades non-banks have been trying to catch the eyes of consumers and brokers.

Australia is only just beginning to wake up to its ‘shadow banking sector’, as Byres found at the Senate when he had to explain that shadow banking was “not illegal banking”. As APRA gradually elaborates on what ‘oversight’ really means, non-banks may discover their newfound popularity with investors is a double-edged sword.

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UPFRONT

OPINION

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

BECAUSE YOU’RE WORTH IT As commission uncertainty escalates, AFG’s CEO, David Bailey, explains how his aggregator is demonstrating the value of brokers to regulators and the general public AFG HAS been involved in the conversation about mortgage broker remuneration since the government first announced the ASIC review in November 2015. Following an unprecedented data collection process, ASIC’s long-awaited Review of Mortgage Broker Remuneration report recognised the important role that mortgage brokers could play in promoting good consumer outcomes and strong competition in the home loan market. The regulator identified some areas in which the industry could be strengthened, but it did not recommend wholesale change.

ASIC has stated that the aims of the proposals made in the report are to “strengthen the positive contribution that brokers provide in this sector” while enhancing (a) consumer outcomes and competition; (b) the operation of the home loan market more generally; and (c) the trust and confidence that consumers have in brokers.

AFG supports these aims and believes it is incumbent upon the industry as a whole to respond to the regulatory process. We will continue to play an active role in the ongoing process.

The ABA report AFG has previously raised concerns about the risk of the ABA-sponsored Retail Banking Remuneration Review drawing false conclusions about broker remuneration due to the limited and one-sided nature of the investigations that were undertaken. We have concerns that the focus on the positive outcomes of the ASIC broker remuneration review is being lost in the attention being paid

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to the ABA report, which we continue to assert is a submission by just one interest group in the mortgage industry.

Commission model It is important to remember that the existing commission model for mortgage brokers is not broken. The existing model means that all Australian borrowers have the option of using a broker or dealing directly with a lender.

Australian consumers have voted with their feet and embraced the mortgage broking industry. AFG has 45 lenders on its panel, with more than 30% of borrowings going to lenders other than the four majors. The winner of this increased competition is the consumer, and

What can brokers do?

Brokers provide a vital service in a sector that is performing well and is already well regulated.

Our message to the politicians and regulators will continue to be that mortgage brokers: • work at times and places that suit customers • are open for business when branches are not • pay taxes • speak many languages and are a part of many communities that would otherwise not have an understanding of the way lending works in this country • are a highly productive variable cost base for lenders • drive competition • spend a considerable amount of our time educating potential clients at no cost to them • for many rural and regional Australians, provide the only lending assistance available in their local communities • in an increasingly complex home lending landscape, are working in the interests of consumers trying to negotiate one of the biggest financial decisions they will likely make only a couple of times in their lifetime. The probability of those consumers knowing the options available to them is remote

There is no one-size-fits-all lending solution. And there is no one-size-fits-all remuneration model this point should be front and centre as we debate the commission model as part of the next phase of the ASIC review process.

AFG believes any changes to the commission model need to be carefully considered to ensure that consumers with different needs are not unintentionally disadvantaged with a ‘one size fits all’ approach. There is no one-size-fits-all lending solution. And there is no one-size-fits-all remuneration model. Informed consideration must be given to additional metrics that may help to determine fair remuneration for the work done and skill exercised by the broker.

AFG will continue to ensure those messages get through, and we will be encouraging the decision-makers to look at what our industry does well. We encourage all brokers to do the same by picking up the phone or sending an email to their Federal Member of Parliament to remind them that mortgage brokers deliver true competition in the lending sector and real choice for consumers.

David Bailey is CEO of the aggregator AFG. He has been with AFG since 2004 and is a chartered accountant and a member of the Financial Services Institute of Australia.

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PEOPLE

BIG INTERVIEW

ALICE DEL VECCHIO: HSBC’S HOMECOMING After an 11-year absence, HSBC is re-entering the broker channel in partnership with Aussie. HSBC’s head of mortgages tells MPA editor Sam Richardson why

HSBC’S RETURN to the broker market couldn’t have come at a better time – or at least a more eventful time. In March ASIC recommended tweaks to broker commission, in April the majors committed to flat-fee commission, and by May UBS was calling for the banks to save $2.4bn by cutting commissions entirely. Brokers need some good publicity, and HSBC head of mortgages Alice Del Vecchio is the woman to provide it.

HSBC’s re-entry into broking, according to Aussie CEO James Symond, is “a vote of confidence that it gives not just [to] Aussie but the industry; that HSBC are thoughtfully jumping back into it, is really, really strong.

Having a global lender like HSBC on our panel is really important; having a global leader from a banking point of view is really important”.

Far from a humble panel addition, HSBC’s agreement with Aussie represents the conclusion of an 11-year experiment in distribution. Having sold its mortgage book to Firstmac in 2006, the bank became an anomaly: outside the broker channel, but with the resources and consumer awareness of a non-major. HSBC’s loan book stood at

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$11.1bn in March, according to APRA, putting it on a par with AMP and making it a much bigger catch than the various mutuals that have flocked to aggregators’ panels in the last few years.

“I think we know that we have really strong, compelling products,” says Del Vecchio. “We’ve seen our above-system growth over the last

and values that sort of thing, they’re the perfect partner for us.”

Brokers with National Mortgage Brokers – which is owned by Aussie – will not initially be able to offer HSBC products, according to Symond. “It’s very much a very focused salesforce under the one brand; it’s a very controlled process, and so it’s easiest to unpack

“Our whole reason for being is that we are a relationship bank and we have long-term relationships; that’s what we do” few years and we really want to reach out and resonate with more consumers, and Aussie’s in the perfect place to do that; we definitely think the timing’s right for us.”

A not-quite-exclusive partnership HSBC’s vote of confidence in mortgage brokers is not without caveats. Aussie was chosen as a distribution network not just because of its size, Del Vecchio explains. “We really value the fact they have strong compliance and training, and, as a global bank that is extremely compliant

it with the Aussie brokers first and from there we’ll look at the other options.”

HSBC’s partnership with Aussie may not remain exclusive for long, however. “We do expect and have been in discussions with other groups, but we don’t expect to be on everyone’s panel,” says Del Vecchio. “We will have a limited number that we will probably partner with, but to be brutally honest we want to do this properly and are running this as a parallel panel. We’re not in a hurry; we just want to do it right.”

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PROFILE Name: Alice Del Vecchio Title: Head of mortgages and third party distribution Company: HSBC Years in the industry: 26 Career highlight: Del Vecchio started her career working in mortgages at Westpac in the 1990s before joining Aussie Home Loans.

She was head of mortgages and operations at Aussie from 2003 to 2009, during the tumultuous years that saw the broker channel move into the mainstream before being hit by the GFC. After a brief stint at Telstra, Del Vecchio moved to HSBC to head up its mortgage portfolio, which had been brokerfree since 2006.

Del Vecchio holds a Bachelor of Commerce degree from UNSW and is a graduate of the Australian Institute of Company Directors.

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PEOPLE

BIG INTERVIEW

Global consumers, local advantage Foreign banks have been in the spotlight recently, amid claims by Australia’s majors that the government’s bank levy will hand banks like HSBC an advantage. Yet the experience of foreign banks suggests HSBC may struggle to compete in a crowded non-major bank sector.

Take HSBC’s equivalent, Citibank, which wrote just 0.81% of loans sold by AFG brokers in February. The two banks have much in common: a global brand; special streams for high net worth clients (HSBC Premier; Citigold) – and both, unusually, have a continued appetite for lending to borrowers earning foreign income.

HSBC Premier customers, including foreigners, will be able to get discounted home loan rates through brokers, Del Vecchio confirms. “We absolutely lend to non-residents, but we lend to non-residents that we know who are part of our global Premier package.”

However, Premier customers need a minimum of $500,000 in loans with the banks or $200,000 in savings and investments, putting the Premier package out of the reach of many broker clients.

Perhaps conscious of Citibank’s limited

available to Australia’s ‘mass affluent’ consumers.

“I know a lot of banks say that, but our whole reason for being is that we are a relationship bank and we have long-term relationships; that’s what we do.”

To that end, HSBC has invested in a whole new team, a head office in Sydney and state staff supporting the broker rollout, as Del Vecchio is mindful that relationship banking starts with brokers. “For brokers they have to live that experience, and the first time they submit a deal is going to be critical.”

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5th largest bank in the world

2016 NPAT:

The paradox facing the banks Although the timing of HSBC’s return to broking was perfect for brokers, it could have been better for HSBC. Investing heavily in a channel under investigation by regulators was hardly ideal but may have been unavoidable: brokers’ market share reached 53.6% in February, according to the MFAA. When HSBC left the channel in 2006, brokers only accounted for around 25% of lending. Should a major bank attempt to move away from the channel today, as many in the industry predict, they would face a

“We absolutely lend to non-residents, but we lend to non-residents that we know who are part of our global Premier package” appeal, Del Vecchio is looking beyond such “internationally minded consumers”.

“I think the brand is so much bigger than that, and most of the consumers who come through and are onboarded are local Aussies just looking for better value.”

Brokers can sell the bank’s full range of home loan products, and HSBC’s home value loan had (at the time of writing) a sub-4% interest rate, with a 90% LVR limit for both owner-occupiers and investors.

In Del Vecchio’s opinion, HSBC will succeed by making its brand of relationship banking

HSBC IN AUSTRALIA

much bigger challenge. Furthermore, that bank would have to explain to shareholders why they’re moving away just as HSBC has decided to put its reputation on the line in the broker channel.

Ultimately, HSBC’s re-entry to the channel provides a vital opportunity for brokers to get back on track after months of reacting to regulation, Symond explains. “Considering the ASIC report, Sedgwick report, bank levies; considering all the complications that the mortgage broking market always gets, is such a good thing for the industry.”

$270m (up from $222m in 2015)

As of March 2017:

$6.3bn in owner-occupied loans

$4.9bn in investment loans Source: APRA, Monthly Banking Statistics March 2017

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SPECIAL REPORT

BROKERS ON AGGREGATORS

BROKERS ON AGGREGATORS Not all aggregators are equal, say brokers, as excellence in some areas contrasts with below-par performance in others. See how your aggregator measured up WHAT MAKES a great aggregator? The question isn’t as simple as it might appear.

Many brokers have been with their aggregators for years, building up relationships that can’t easily be measured on a scale of one to five.

Conversely, the difficulty of leaving one’s aggregator has led many brokers to put up with substandard service as a necessary part of doing business.

Our Brokers on Aggregators survey is for those brokers in the second camp. Just as with banks and non-banks, we believe it is possible to recognise service excellence in a survey, and you’ve told us not all aggregators are equal.

This year we’ve published all category results and final results, revealing not only which aggregators are the best overall but which

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performed best in the services that matter to your business.

The methodology for our Brokers on Aggregators survey is slightly different to that of our other surveys. Brokers could only rate their own aggregators, making this a survey of real broker experiences rather than of simple perception. Furthermore, as the results come from average broker rankings, the size of a particular aggregator doesn’t determine the result, and you’ll see plenty of smaller aggregators among the top performers.

Our Final Results section details the top-performing aggregators overall, and following that you’ll find an interview with the CEO of 2017’s Aggregator of the Year and the rest of the top five.

This survey isn’t just about aggregator rankings, however. We’ve also asked brokers about the importance of different services and commission models and how these change with business success. Brokers also told us how likely they were to leave their current aggregator, and what was stopping them from doing so.

While you may be perfectly happy with your aggregator, there is always room for improvement. We hope this survey helps you to drive change within your own aggregator, or, should that not be an option, to look elsewhere.

Finally, we’d like to thank all the brokers who took the time to fill out our survey and give a frank assessment of how their own aggregator performs.

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OUR TYPICAL RESPONDENT

Less than 2

based in NSW (37%), Vic (25%) or Qld (23%)

aged between 46 and 55

writes $0–$10m in mortgages a year

2 to 5

13% 23%

Over 20

20%

Years in the Industry 11 to 20

27% 17%

6 to 10

WHAT DO BROKERS WANT? 1 = not important; 5 = very important 4.49

Accurate and on-time commission payments

4.35

Quality of lending panel Compliance support

4.19

BDM support

4.15

Communication with brokers

4.13

Training and education

4.07

IT and CRM support Additional income streams

3.97 3.67

Marketing support

3.49

White label offering

3.49

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SPECIAL REPORT

BROKERS ON AGGREGATORS

SUPPORTING BROKERS Rising emphasis on compliance support and the falling need for IT assistance reflect an industry forced to adapt to rapid lending changes

THE JOB description of an aggregator has

HOW LIKELY ARE YOU TO LEAVE YOUR AGGREGATOR IN THE NEXT 12 MONTHS?

Extremely likely

Extremely unlikely 72%

7% 3% 5%

Likely Neutral

12% Unlikely

evolved considerably since its origin as a conduit between brokers and banks. Yet while some services are essential to brokers, others are merely add-ons, as the results of this survey make clear.

Nobody will be surprised that accurate commission payments and quality lending panels are important to brokers. Failure to pay commission accurately and on time is the biggest reason for a broker to leave their aggregator.

More interesting is the high importance ascribed by brokers to compliance support.

This shot up last year and remains in third place as lenders relentlessly increase compliance demands on brokers, and many aggregators have responded with increased support and training resources. Only brokers writing more than $60m a year saw

TOP 5 REASONS TO LEAVE YOUR AGGREGATOR Poor accuracy and timeliness of commission payments

37% 35%

Poor IT and CRM support 33%

Poor BDM support Poor compliance support Poor quality of lending panel

25% 24% Note: Percentages do not add up to 100 as respondents could select multiple options

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compliance support as less important.

IT and CRM support, on the other hand, has fallen in importance over the last two years, although it remains a big reason for a broker to leave their aggregator. One explanation for this is that brokers are now well acquainted with established CRM systems and require less training; all they require is that these systems continue to function.

Compliance support shot up last year and remains in third place as lenders relentlessly increase compliance demands Lead generation and marketing support consistently rank low in importance to brokers in our survey. There are two likely explanations for this: firstly, we exclude branded franchise groups from the survey, whose brokers are more likely to value the provision of leads. Secondly, 64% of our respondents had been in the industry for more than five years and so may have built up their own client base and brand.

One further finding really stands out: that just 10% of brokers are ‘likely’ or ‘extremely likely’ to leave their aggregator in the next 12 months. While traditionally aggregators like Finsure and Connective grew through acquiring brokers from other aggregators, this result could explain why recruitment efforts now appear to be focused on new-to-industry brokers and expanding existing brokerages.

HIGHLIGHTS: SERVICE AND SUPPORT BDM support

Choice Aggregation

Finsure

Liberty Network Services

Liberty Network Services

Finsure

Liberty Network Services

Plan Australia

Compliance support

Outsource Financial

IT and CRM support

Connective

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SPECIAL REPORT

BROKERS ON AGGREGATORS

LEADS AND MARKETING When it comes to aggregator services and commission arrangements, the most successful brokers have very different requirements to the rest

NOT ALL brokers’ requirements are the same when it comes to aggregation services.

Although our respondents came from a range of states and age groups, with varying levels of experience, we found that settlement volume (per annum) was the most consistent differentiator in terms of what brokers wanted from their aggregators – or whether they really needed an aggregator at all.

As a broker’s settlement volume rises, the importance of aggregator services, on average, tends to fall. This may seem obvious,

but bear in mind that successful brokers with large databases used to require more powerful CRM systems to keep up with them. This is not the case today, perhaps because brokers of all levels now have access to relatively powerful systems. Successful

As a broker’s settlement volume rises, the importance of aggregator services, on average, tends to fall

DO TOP BROKERS EVEN NEED AN AGGREGATOR? Importance of aggregator services (higher number means more important)*

brokers may feel they have less need (and not enough time) for the support and training an aggregator provides.

While successful brokers may have the least reason to leave their aggregators, they nevertheless do so. The 2015 winner of MPA’s

COMMISSION STRUCTURES AND SUCCESS

How likely to change aggregators in the next 12 months (higher number means more likely)

100% 80%

5 60%

4 3

40%

2 20%

1 0

$0–$10m

$10,000,001– $20,000,001– $40,000,001– $20m $40m $60m Settlement volume p.a.

$60m+

0%

$0–$10m

$10,000,001– $20,000,001– $20m $40m Settlement volume p.a.

*Note: Importance of aggregator services is an average of all category importance scores 20

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Top 100 Brokers, Jeremy Fisher, recently switched from NMB to Connective, and brokers like Fisher who are writing more than $60m are the most likely group to consider switching aggregators within the next 12 months. This could be because they are offered better commission or fee arrangements, although that is difficult to prove.

Many top brokers would argue that, because they have less need for aggregator services, they shouldn’t have to pay as much for them, as the pioneers of the flat-fee commission model for aggregation services recognised a number of years ago. Flat-fee commission is indeed more popular with topperforming brokers, although commissionsplit aggregators remain the most popular model, and are used by 71% of respondents.

Commission split Flat fee Transaction fee

HIGHLIGHTS: LEADS AND MARKETING Lead generation support

National Mortgage Brokers

Connective

Liberty Network Services

Choice Aggregation

Outsource Financial

Vow Financial

Finsure

Marketing support

Finsure

Quality of lending panel

$40,000,001$60m

$60m+

Choice Aggregation

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SPECIAL REPORT

BROKERS ON AGGREGATORS

BUSINESS DEVELOPMENT Aggregator assistance with diversification remains low on the list of broker priorities, despite the need to diversify appearing to increase

WHAT’S THE MAIN OBSTACLE TO LEAVING YOUR AGGREGATOR? Data migration/IT issues Upfront commission issues

32%

Clawbacks/ trail issues

3% 3% 5%

20%

Loss of marketing services Loss of back-office services

8% 15%

Licensing issues

14%

Other

Contractual obligations

BEYOND THE services that a brokerage needs to function, many aggregators’ value propositions now revolve around business development, particularly when approaching new-to-industry brokers or those who have just gone independent.

Furthermore, proposed changes to commissions and the increasing competition between brokers have persuaded many brokers that they need to change the way they run their businesses. This was reflected in the rising importance given to training and education by respondents compared to last year, across brokers of all settlement volumes.

Although webinars are increasingly offered, PD days remain popular, with 90% of brokers saying they’re ‘useful’ or ‘very useful’.

Surprisingly, the importance of additional income streams and an aggregator’s white label offering have not increased, except for within the sub-$20m per annum group.

One could argue that an aggregator’s lending

COMMISSION AND COSTS Are you happy with your current fee/commission split?

Are hidden costs imposed by your aggregator a problem?

94% Yes

89%

22

No

11%

Not a problem

5% Problem Major problem (1%)

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panel (the second most important service) is more important when diversifying, as it gives brokers access to specialist lenders.

Aggregators appear to be performing well, both in terms of their lender panels (averaging 4.584/5) and their additional income streams (3.931/5).

The market share of white label products suggests that brokers are noticing these products; however, our results suggest that access to a particular white label product isn’t a huge incentive to join an aggregator. Nor did aggregators perform particularly well in the

One could argue that an aggregator’s lending panel is more important when diversifying, as it gives brokers access to specialist lenders area of white label products, with scores ranging between 2.5 and 3.9. With white label products mainly targeted at mum-and-dad borrowers, brokers may struggle to notice the differences between them.

For a small number of brokers, developing their business may mean changing aggregators, and brokers continue to be hamstrung by the difficulty of transferring IT systems, and by clawback and trail issues. A number of brokers also pointed out the difficulty of getting reaccredited with lenders, should the broker leave their aggregator.

HIGHLIGHTS: BUSINESS DEVELOPMENT Additional income streams

Liberty Network Services

National Mortgage Brokers

eChoice

Finsure

Connective

National Mortgage Brokers

Outsource Financial

White label offering

Choice Aggregation

Training and education

Finsure

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SPECIAL REPORT

BROKERS ON AGGREGATORS

WHAT YOU’RE SAYING Broker comments on all areas of aggregation, from new services to the Sedgwick review

STAR COMMENT

DEVELOPING THE BUSINESS

Perth’s housing market may be struggling, but one WA broker can drown their sorrows with a glass of 2014’s World Whisky of the Year: Sullivans Cove Double Cask Single Malt, distilled in Tasmania. Their winning suggestion to aggregators was on the all-important topic of referral partners:

“Business coach – providing quality, qualified coaching to help brokers grow their business, keep them accountable and moving towards a more profitable and sustainable goal would not only garner strong satisfaction levels for the aggregator but also improve their profitability”

What one service could your aggregator add to improve its offering and why?

“The aggregator could add networking with other industries, such as working with financial planners and accountants to create networking opportunities.

Essentially giving back to the broker’s and helping brokers generate more business.”

“Provide a fintech equivalent, online platform for branding/leads. Generational and consumer change will drive our industry further down this path in the future and aggregators will play an essential role in helping smaller companies to compete in this space against large, bank backed companies” “If they provided training in areas like running a business, hiring, sales, business planning and people management. Brokers want to expand their business but lack the know how to take the next step, yet there is no designated program to accommodate this” “A members’ area in which all of the members have access too, where they can share their details and help one another with deals or offer other services to each other that they may not directly offer themselves”

NEW SERVICES “A service that provides online training for new brokers i.e.: webinars that can be attended without having to leave the office or online training packages as we are a regional broker it is not always easy to attend PD days in person.”

“One service that would be very helpful would be a lender ‘niche’ chart/tool to assist narrowing the search of appropriate lenders for particular deals. With so many consistent changes, having a one- stop-shop of which lender is great for certain clients would be invaluable” “I would like to have a white label product unique to us that would help customer retention and could also be a good selling point as hopefully I would have some flexibility also” “The only additional service I would request that is not a major issue or concern would be small satellite offices for clients to meet up with their brokers to sign settlement documentation where and when convenient”

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GET POLITICAL “Fight harder as a group over the future incomes of brokers as a result of the Sedgwick review into brokers remunerations whilst the Banks are talking about adopting the review completely” “The aggregator could be involved more in educating the consumer/public about our successful role in facilitating their financial transactions with the many success, and also ensuring that the false/ incorrect negative media reports are corrected with positive client outcomes”

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SPECIAL REPORT

BROKERS ON AGGREGATORS

FINAL RESULTS We reveal 2017’s Aggregator of the Year and discuss the strengths and weaknesses of the top performers

WHO’S WINNING THE MARKETING BATTLE?

FINAL RESULTS

In addition to asking brokers to rate their own aggregators, we asked brokers: if they were to switch aggregators, which aggregator would they choose?

32%

of brokers picked Connective, the top choice by far

Aggregator

Overall score

1st

Choice Aggregation

4.22

2nd

Finsure

4.20

3rd

Connective

4.16

4th

Liberty Network Services

4.15

5th

Outsource Financial

4.10

6th

National Mortgage Brokers

3.92

7th

Plan Australia

3.91

8th

eChoice

3.88

9th

FAST

3.84

10th

Vow Financial

3.83

HIGHLIGHTS: ONGOING SERVICE

Communication with brokers

Outsource Financial

Choice Aggregation

Connective

Accurate and on-time commission payments

Vow Financial

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Connective

Plan Australia

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CHOICE AGGREGATION It’s been a bumper year for Choice: in May it celebrated its 20th year in business, its loan book surpassed $60bn, and Choice now has 1,500 brokers on board.

Now it can add Aggregator of the Year to those accolades.

Choice topped the charts this year because its brokers rated it highly across the board. Choice received the best scores of any aggregator for the quality of its lending panel, BDM support, and its white label offering, ChoiceLend, which is provided by Advantedge. Quality of lending panel and BDM support happen to be the second and fourth most important services an aggregator can provide, according to brokers.

While Choice wasn’t always among the highest-rated aggregators in particular service categories, in no single category did it receive a particularly weak score; essentially there are few noticeable gaps in Choice’s service. Its weakest score was received for lead generation (3.188), which nevertheless put it in fourth place, in a category of very low importance for brokers.

Looking to next year’s Brokers on Aggregators survey, Choice will need to work hard to stay in the number one spot: Finsure and Connective have only slightly lower scores, and one slip-up could make the difference.

FINSURE With very high scores over a range of categories, Finsure only narrowly missed out on the top spot this year.

John Kolenda’s aggregator notched up wins in the marketing support and training and education categories, and came a narrow second for BDM support.

Finsure’s only relatively weak score was for IT and CRM support, where its score of 4.219 (out of 5) said more about the high standard of almost all aggregators in this space, given that Finsure’s brokers were evidently satisfied.

CONNECTIVE Claiming third place this year, Connective was one of the most heavily represented aggregators in this year’s survey.

It was also one of the most popular aggregators among brokers currently with other aggregators.

Connective came number one in the category of IT and CRM support for its Mercury system, and was a close second for accurate and on-time commission payments. Its only relatively weak result was for BDM support, although it still scored 4.188 out of 5.

LIBERTY NETWORK SERVICES Liberty Network Services (LNS), the aggregation arm of non-bank Liberty Financial, punched way above its weight this year to clinch fourth place, becoming the top boutique aggregator in the survey.

While small, this aggregator is rapidly growing, offering Liberty and loans from a range of banks. LNS won the additional income streams category and achieved top three results for compliance support, IT and CRM support and lead generation support. Some brokers did complain about Liberty’s restrictive lending panel, although it scored relatively well (4.355).

4th

OUTSOURCE FINANCIAL Despite its boutique reputation, Outsource was very well represented in this survey, which is perhaps a reflection of its popularity with its brokers. Outsource secured wins in the important categories of communication with brokers and compliance support. Its weaker results came in the categories of IT and CRM support and white label offering; the latter less surprising given Outsource has consistently refused to create its own white label product because of fears of misaligned incentives.

5th

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SPECIAL REPORT

BROKERS ON AGGREGATORS

CHOICE’S STEPHEN MOORE ON REACHING NO. 1 Choice Aggregation’s CEO says tailored support, attentive partnership managers and a choice of models add up to a winning solution MPA: With strong scores across all services, what made the difference for Choice this year?

Stephen Moore: It’s a culmination of the overall focus of the business, and ultimately that’s the best business culture and great people. That really drives our success, and we know that’s what resonates with brokers.

It’s by building a deep understanding of each member’s business and tailoring up support for their individual needs.

We know that’s been a successful model because the feedback we get from brokers is that has been fundamental in helping them realise their business potential. The award is a great testament to the trust our members have in their support model.

The Choice team is absolutely fundamental to our success, and the feedback we get is that the broker support model on the ground is absolutely key.

We’ve simply delivered substantial valueadd to brokers throughout the last 12 months, from the launch of HR Assured, the HR-in-abox solution for brokers, to the alliance with PRDnationwide, which we announced last year, and [we launched] arguably one of the most comprehensive handbooks for brokers to increase their digital presence.

We also worked with our top groups at our Top Groups Summit and there was substantial

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investment and enhancements to Podium, including workflow reporting, commissions and management. It’s been a busy year for us, delivering really good value-add to our members.

Choice business has as well, whether that’s technology in Podium, or meeting licensing obligations, or broader marketing capability: you get far more than your partnership manager, and that’s really valuable.

MPA: How do Choice’s partnership managers

MPA: White label products can be fairly

support their brokers?

SM: Our partnership manager model is fundamental, with each partnership manager directly responsible to the brokers within their portfolio. What our partnership managers pride themselves on is not only providing great service and support to our brokers, [as] that includes effectively acting as a business coach; getting set up with the right business plans in place, ensuring you’re marketing your business in the right way, seeking efficiency gains and recruiting brokers into the right business.

We really provide that substantial support, including tapping into expertise the broader

vanilla, standardised products, so what makes ChoiceLend stand out?

SM: I guess you need to look beyond just the product itself. ChoiceLend is a good, simple product at the right price point, but it’s the service and support that goes with it that I think makes it a standout.

That includes the ChoiceLend business development managers, the broker support teams, and access to credit assessors and scenarios. The feedback we get is that it’s the service that makes ChoiceLend such a great offer in the marketplace.

“It’s [achieved] by building a deep understanding of each member’s business and tailoring up support for their individual needs”

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FINSURE MPA: Finsure received great ratings from brokers for marketing support and training and education. What does Finsure do differently in those spaces?

John Kolenda, managing director: What makes Finsure’s marketing offering really stand out from the competition is that, if the broker is unable to find the right item in our standard collateral suite, the team will work with the broker to develop any individualised campaign or material across any medium that will help improve their business.

Furthermore, we offer a guaranteed 48-hour turnaround time. And the best part: any rebrand, redesign or custom piece of collateral will be done at no cost to the broker.

Simply put, we ensure that our members are made to feel like they have their own team of marketing professionals at their disposal 24/7, with no limit to what can be achieved.

LIBERTY NETWORK SERVICES MPA: Liberty Network Services was the top-performing boutique aggregator in this year’s survey. Why would a broker pick you over much larger organisations?

Brendan O’Donnell, managing director: There are many reasons why a broker would choose Liberty Network Services over a larger aggregator.

While we offer one of the more competitive and attractive retail-branded models in the country, we do so in a high-touch environment. With no more than 25 advisers per sales manager, Liberty offers the comprehensive business support advisers need to properly grow their business. This without doubt sets us apart.

Our innovative, award-winning mobile technology platform, Spark, also makes us stand out. Without exception, every adviser who joins our network is amazed at how Spark makes their customer engagement process so much easier and the loan process hassle-free.

CONNECTIVE MPA: Brokers highly rated Connective, particularly for your IT and CRM support. What do you think your brokers like about Connective, and in particular Mercury?

Mark Haron, director: Mercury has always been at the core of our offer. Brokers value Mercury as it allows them to operate efficient businesses and adapt to their customers’ changing needs.

Mercury enables our brokers to create a customer-centric business by delivering a personalised service to every customer in a consistent way.

Brokers also benefit from the fact Mercury is designed by our in-house team of developers, and supported internally. We are always listening to our members and actively seeking their feedback, and because Mercury is our own proprietary technology, we can adapt quickly to ensure we are consistently exceeding their technology needs.

OUTSOURCE FINANCIAL MPA: Compliance was an area in which Outsource beat all other aggregators. How do you support your brokers with compliance?

Tanya Sale, CEO: Outsource adopts best practice lending by providing all loan writers with templates designed to comply with and adhere to ASIC’s criteria for loans, both regulated and unregulated.

With the benefit of our in-house compliance team, all compliance procedures and requirements are overseen internally and information is consistently communicated to all members via webinars, written communications, forums and the provision of tools monitoring fulfilment of all components related to a conforming business operation in the current regulated landscape.

Written policy guidelines for all facets of lending, including mentoring, audits, compliance of business operations and products, have been created to provide a transparent environment for our members.

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FEATURES

COMMERCIAL

COMMERCIAL LENDING ROUNDUP MPA asks a raft of commercial lenders for their insights on the biggest changes in the space; where brokers can find commercial clients, what support the lenders can offer them, and about their plans for the future

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OPPORTUNITIES

ABOUND in the commercial lending sector, and more brokers appear to be taking note as the number of those writing commercial loans continues to rise.

According to the latest MFAA Industry Intelligence Service report, approximately 2,400 residential mortgage brokers settled $8.2bn of new commercial loans in the six months from April to September 2016, adding to a total commercial loan book of just over $27bn.

However, APRA hinted earlier this year that it may turn its attention to the commercial loan sector, as it has concerns around the quality of lending standards deteriorating in an increasingly competitive environment.

“Given the more heterogeneous nature of

commercial property lending, it is more difficult to implement the sorts of benchmarks that we have applied to residential lending.

But that should not be read to imply we have any less interest in the quality of commercial property lending,” chairman Wayne Byres said at an event in March.

We asked six different lenders (three nonbanks, two major banks and a non-major) how commercial has changed in the past year; where are the best places for brokers to find clients; and what they would like to see brokers improve on. In turn, they described how they are supporting brokers dealing with commercial clients, and gave us their thoughts on APRA increasing its focus on the commercial space.

OUR PLANS AHEAD: Janelle Pearce, national head of commercial introducers, Westpac Technology remains a key strength of Westpac’s current offerings. Our DriveOnline equipment finance quote portal, Connect Now video conferencing and Business Live are just the beginning. There’s always an opportunity to be able to provide new innovation to help brokers and support them as a strong and sustainable option for their clients.

We’ll aim to be better in business tomorrow than today. This means Westpac will continue to invest in the right people, in unison with technology, whilst collaborating with our stakeholders to bring them the very best of Westpac, refining and delivering an overall proposition focused on service for all brokers and business customers.

As a business bank, it is our mission to help make Australian business stronger, and the bank’s focus can be attributed to its approach to ensuring broker needs are always met.

For us, it’s about listening to the broker feedback and then acting upon it, ensuring that brokers have access to the right people internally and in a timely manner so that they can deliver a strong proposition to their customers.

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FEATURES

COMMERCIAL

What have been the biggest changes in commercial lending over the past year?

Thinktank Apart from the significant and well-covered contraction in supply from the banks with respect to development and construction finance, there has been a noticeable adjustment in appetite from the majors who have seemingly become much more selective in terms of everyday commercial property lending. This has created a great opportunity for the nonbanks, who have been able to step into the gap with consistency of product offerings and better service propositions than the banks.

We have also been observing a steady increase in activity over the past year or so from brokers who are relatively new to commercial.

La Trobe Financial The biggest development we have seen over the past 12 months is the increased number of opportunities presenting themselves for both us and finance brokers generally.

The combination of low interest rates, steady yields that outperform residential assets, and interest from overseas investors, combined with tightening credit conditions from the major banks, has meant that more and more borrowers are turning to finance brokers to seek alternative options, which often land in the hands of a specialist such as ourselves.

Looking at some of the key trends in the commercial property market, we have seen an uplift in the number of SMSFs acquiring commercial property … and we have also witnessed solid interest in both the office and light industrial property markets.

Westpac The biggest trend we have seen … is an exciting change in the rise of new emerging businesses, particularly in the start-up space.

Many of these new businesses are growing

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new collective partnerships with like-minded business partners, moreover in areas focused on healthcare, fintech and the service industries.

Liberty Financial What’s worked so well for commercial lending in the last 12 months is that it’s seen little change. While other segments of the market, like residential, have gone through considerable change, the commercial sector has maintained steady growth. Liberty has also experienced strong growth, and in particular we’ve seen more brokers realise the benefits of our commercial SMSF and LeaseStream products.

While we expect APRA’s heightened regulatory scrutiny of the sector to have an impact on some lenders in the future, Liberty has always focused on building a stable and responsible portfolio that can withstand changing market and regulatory impacts.

Suncorp With more and more lenders entering this space over the past 12 months, it’s a great sign of the support the industry has for this channel.

At Suncorp we have undertaken a national broker training campaign with our masterclass

workshops, to share our knowledge and upskill our broker partners looking to diversify and get into commercial lending. Positive changes around simplifying the submission and approval process have been a big change in this space, which has enabled residential brokers to diversify and confidently offer commercial products to their clients.

ANZ All the banks have been asked to maintain exposures to the property development and investment segments below a certain regulatory cap. At ANZ we continue to support our existing customers, who are well known to ANZ, with their property projects allowing our business development activities to focus on acquiring new trading businesses.

We have invested in our relationship managers and provided them with some additional training around banking trading businesses, which will help them have a much richer needs-based conversation with our brokers and their customers. It also means we can provide customers with some greater insight into the cash conversion cycle of the business and ultimately get a quicker decision.

OUR PLANS AHEAD: Robynne Frost, national manager, SME and commercial, Suncorp Bank Intermediaries Small business is a key priority segment for Suncorp, and we will continue to invest significantly around all aspects of our broker proposition. The ‘moment of truth’ elements are important for us. When we have the opportunity for a broker to consider Suncorp, we want to make sure that the experience we provide is second to none. For us, the next six months is about improving our application and approval processes, including improving the functionality of our market-leading online application form.

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FEATURES

COMMERCIAL

Where should brokers look for commercial clients?

Thinktank A broker’s existing customer database is often the easiest and best place to start. By focusing on those clients they already have a strong relationship with, arranging to call in and conduct a quick financial health check is a great way to identify whether there may be existing or future commercial financing needs.

Taking the time to review personal and business asset and liability positions, enquire about leasing versus owning and longer-term wealth management plans that might also include a discussion around self-managed superannuation fund options, can lead things in the right direction.

La Trobe Financial Brokers should review their CRM to identify clients who already hold commercial property and see if there is an opportunity to refinance it for them, particularly if they have held the property for some time. The next step would be to look for self-employed clients and approach them to see if they are interested in purchasing premises to conduct their businesses from, possibly even in an SMSF structure.

Brokers could also target local small businesses by running seminars … not only could this initiative drive specific commercial loan origination, but it could help raise the broker’s profile in their local community.

Westpac To ensure we are helping both customers and brokers understand emerging trends, Westpac has dedicated divisions of bankers with both the expertise and insight in emerging industries. To this point our Westpac Commercial Introducer value proposition underpins third party market relevancy to

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these new clients by connecting them to the very best of Westpac and helping them through their journey, especially in these key times of major innovation and transformation in Australian business.

Liberty Financial There are a number of effective ways brokers can find new commercial clients. The first step is to build up a database of reliable referral partners. Commercial real estate agents, property managers, valuers, accountants and financial planners are a good place to start.

However, the more important thing for any broker to consider is how they make themselves stand out to those referral partners.

The market is highly competitive, so being able to facilitate not only traditional commercial loans but also self-servicing lease loans, commercial SMSF loans, and assetlends that don’t require traditional income verification will be an attractive proposition for a referral partner.

Suncorp The best place to start is in their own established client base. We know that 30% of

Suncorp’s customers are self-employed, so it’s a fair assumption to make that most of our brokers’ clients have similar splits.

We would urge brokers to start investigating their existing customer base and find out more about their commercial needs, as opposed to just focusing on their home loan.

ANZ We all know that approximately 25–30% of a broker’s current mortgage business is for selfemployed applicants. These customers are already known to the broker, and the broker already holds a fair amount of information about them.

The broker has two options: 1. If they have a commercial accreditation, write up the deal and get it in to us. The dual app process is awesome.

2. Give us the customer details and we’ll do all the work for them and they can earn a referral payment.

At ANZ we call mortgage brokers once a self-employed mortgage has settled and remind them of the opportunity that may exist for them and their client.

OUR PLANS AHEAD: John Mohnacheff, group sales manager, Liberty Financial Our main focus over the next 12 months is to help more brokers provide the commercial solutions customers need. We’ll do this by refining our offering and simplifying the application process for our commercial loans.

The commercial lending space is likely to change, particularly as policies such as interest-only lending are expected to be reviewed by the industry regulators. For commercial brokers this will create different challenges. However, Liberty remains committed to providing our business partners with free-thinking solutions to help grow their businesses with a diverse set of customers.

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FEATURES

COMMERCIAL

From a lender perspective, what can brokers improve on?

Thinktank We encourage the workshopping of commercial deals with a relationship manager to ensure we have a full understanding of the transaction at the time of submission. This helps provide a solid starting point and increases the likelihood of the credit assessment progressing smoothly and quickly. All lenders are the same and tend to dislike undisclosed credit issues and other negative surprises which could have been identified and addressed in the workshop phase. Making the effort to walk through the entire transaction is often going to save the broker, the customer and the lender a lot of time and possible frustration.

La Trobe Financial From our perspective, there is very little improvement required from brokers to deal with us for commercial transactions, as our commercial loan processes mirror those of our residential loans, meaning it is business as usual for brokers looking to write commercial with La Trobe Financial.

The one difference with commercial that brokers should bear in mind is that it is a slightly longer process, often dictated by the time taken to obtain a valuation report, which can take five to 10 business days, whereas residential valuations generally take two to three business days. So whilst we are known for our ability to complete settlements in quick time, we would caution brokers to set expectations slightly wider for commercial, albeit our turnaround times are still consistently very fast.

Westpac Commercial brokers can always continue to grow their business by ensuring their fundamental services and support are streamlined, and having a thorough

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understanding of their lender partners’ processes, particularly at the deal submission stage. This means having all the correct information up front and lodged in one pack so there are no delays for the client.

Another key aspect around continuous improvement is the ongoing education investment in a broker’s personal and professional development, moreover in the key areas of business banking (commercial and SME).

Liberty Financial Brokers know that every deal is different, which is why it’s important they work closely with the applicant to understand their goals.

This is crucial if brokers want to get the fastest and best possible result.

Because Liberty is a free-thinking lender, often we can tailor a solution to meet the client’s unique needs – but to do that we need to understand their full story.

Also, packaging a loan with all the necessary attachments and documentation will ensure very speedy turnaround times.

Most application delays occur because they’re sent without the necessary documentation.

Suncorp At Suncorp, we find that our biggest challenge is ensuring the broker has provided all of the supporting information and documentation required to process the loan, and in particular, full disclosure and understanding of the entities included in the transaction.

Our team of qualified and dedicated SME business development managers are available to educate and support our brokers to build their knowledge through individual transactions. The other service that Suncorp provides, which we have had great feedback on, is that we have a senior credit assessor who will call each broker within four hours of a transaction being submitted.

ANZ Customer needs analysis. Most customers understand their businesses really well, and our role (broker and banker) is to ensure we are providing solutions that meet customers’ needs. A good understanding of financial statements is also a really important skill that can be easily learned. There are many courses on the market that a broker can enrol into.

OUR PLANS AHEAD: Cosi De Angelis, general manager, commercial origination, ANZ Banking is not just a debt conversation, so we want to help brokers have a much more holistic conversation with their clients about all their needs, commercial and personal.

Not only does this reduce the likelihood of attrition, but it also improves the return for brokers.

Our focus is to help customers start, run and grow their businesses, and we will be bringing more products and services to the broker market that will absolutely align with this strategy.

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FEATURES

COMMERCIAL

What resources and support do you offer new-to-commercial brokers?

Thinktank We continue to offer various training and orientation programs, often in conjunction with aggregators. These courses span Commercial Lending 101, SMSF-LRBAs, Cash Flow Lending, Construction Finance and Commercial Prospecting. While Thinktank is not active in the cash flow or construction finance market, we believe it is still vitally important to provide an allencompassing understanding of commercial lending to brokers wanting to succeed in this space. We also offer a commercial strategy session as part of our Jigsaw Program, where we will assist brokers one-on-one in putting together tailored marketing initiatives that best fit the range of opportunities in the commercial finance market.

La Trobe Financial La Trobe Financial caters really well for new entrants to the commercial space as our products are designed to look and feel like standard residential transactions. We use the same application form, serviceability calculator, income verification methods and

loan documents, and it’s all done under the same accreditation – no additional training/certification required.

Also, our experienced commercial credit analysts and sales team are keen to help brokers unfamiliar with commercial lending ‘on the fly’, adopting an educative approach so as to support brokers in writing a commercial transaction with us.

We are delighted when we can make a difference to brokers by assisting them with their first commercial loan applications.

Liberty Financial We help support our brokers in a number of different ways. We often hear that brokers avoid commercial lending because it’s more complex, so we’ve brought on more BDMs who can assist them from start to finish. We guide all our brokers, showing them how to package the loan up, and also work with them right through to settlement.

To help brokers better understand our products and services we’re also continuing to invest in our aggregator partners and to sponsor their commercial business initiatives.

This means Liberty will be present at their PD days across the country so brokers can talk face-to-face with a BDM.

Suncorp We have been successfully running small business lending masterclasses over the past 18 months, with more than 1,200 brokers having attended these sessions. The masterclasses help to educate brokers on the SME market, as well as on reading financials and making submissions, and give tips on how to start a commercial lending conversation with their current customer base. At a local level, Suncorp also delivers our Business Essentials program, which builds on our brokers’ skills and knowledge of Suncorp’s products and processes, as well as providing more information on our credit appetite and submission requirements.

ANZ As I mentioned before – calls. We have delivered a commercial mentoring training session for four years, which is supported by the MFAA with CPD points. It is pleasing to

OUR PLANS AHEAD: Cory Bannister, VP chief lending officer, La Trobe Financial We will continue to focus on our broker engagement strategy, increasing our footprint further each year.

Between technology and regulatory pressure, learning and development has seen a real transformation in recent years. Whilst participation and accessibility to webinars, PD days and summits have increased, many brokers believe that the individual attention and advice they once received from a lender has subsided. We seek to address this by continuing with our tailored presentations conducted by our commercial team, designed to coach brokers to refine their capabilities in identifying diversification opportunities, and to increase conversion rates by connecting them with our decision-makers.

Our commercial team are always available to workshop deals one-on-one. Brokers are provided direct access to our decision-makers.

We see another year of growth ahead as we look to expand both our sales and credit teams further to ensure we continue to deliver the same high standard of service consistently.

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Why is APRA investigating commercial lending? see how many mortgage brokers have transitioned to full commercial broker status over the last four years as a result of this training session and are now writing considerable commercial volumes.

Westpac Westpac is committed to ensuring our broker partners are fully informed about our commercial and SME processes, service and systems. This is in conjunction with having access to the best partnership managers in the industry and more highly capable expert industry bankers.

Over the past 12 months, Westpac has enhanced its support services by refreshing its third party introducer website with new tools and resources, as well as holding more virtual masterclass webinars and prerecorded business help videos. On the ground, investing in our people by providing additional training to our team of partnership managers is a top priority, and Westpac is continually committed to assisting brokers throughout the lending process and helping them grow their business.

Thinktank It appears that the regulator is not happy with the quality and consistency of reporting they are receiving from the banks over the expanse of their commercial property exposures, which is making it difficult to produce a reliable analysis of the true risk profile for any given institution and the industry in aggregate. Just as APRA and the RBA have been working to improve the data across the universe of residential lending, the heat of the spotlight is now turning on commercial, where the diversity and complexity of finance facilities provided to small business all the way up to corporate and institutional borrowers produces a challenge of a different magnitude.

Weighing on APRA here is the knowledge that last time there was a major property downturn the most significant losses incurred by banks were in the large-ticket commercial property sector where values in some instances fell by up to 30%. We imagine they will be demanding much better, standardised reporting from banks in an attempt to understand and manage emerging risks more

effectively, and therefore enabling better macroprudential oversight that ultimately serves to avoid the same sort of excesses as those that occurred in the past.

Liberty Financial APRA monitors the market to ensure our financial system is robust, and commercial lending is obviously part of our financial system. APRA has identified that commercial property is more susceptible to an economic downturn, so it wants to ensure lenders take this into consideration in their approach.

Suncorp While residential lending continues to be tightly monitored, with limits put in place on investor and interest-only lending, there is also concern that in a downturn it is likely that the commercial property segment will cause the greatest systemic damage to the economy.

APRA is ensuring banks remain prudent and are prepared for changing property cycles, and have strong balance sheets and resiliency to withstand this.

OUR PLANS AHEAD: Peter Vala, head of sales and distribution, Thinktank Commercial Finance We are looking at quite a full schedule of releases over the next year. We have a series of new product initiatives that we’ll be market testing in the next couple of months, which offer greater versatility around loan account offset options, LVR limits, borrowing purpose and serviceability requirements, which we are keen to test. There will be important enhancements for brokers on our commissions platform, improving information availability and speeding up the payment cycle, while our borrowers will get access to a brandnew internet banking interface with increased self-service functionality.

We have two investment products ready for launch that we expect will be a popular option for individual, business and SMSF clients who are seeking an attractive and safe yield. While on the ground, we will be officially opening a Brisbane office in early August to provide an even better service for our broker and aggregator relationships across southeast Queensland.

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3/07/2017 1:34:11 PM

FEATURES

REVERSE MORTGAGES

Reverse mortgages: reaching maturity A combination of Australia’s ageing population and high property prices is driving up demand for reverse mortgages. MPA and Heartland Seniors Finance explain how brokers can get started

ON THE RISE

$3.3bn

4%

60.6%

99%

43%

total value of reverse mortgages market

growth in the market over the past year

of growth accounted for

by Heartland alone in 2016

of brokers surveyed

by Heartland expected reverse mortgages lending to increase

of brokers surveyed already wrote reverse mortgages

Source: Heartland/MPA Diversification Webinar Series

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DOWNSIZING HOMES has become a catch-all solution to Australia’s housing affordability problems. Consequently, a significant part of the federal budget was devoted to reducing barriers to downsizing by allowing superannuation contributions from the sale of homes. Yet there are plenty of reasons why senior Australians don’t want to downsize, ranging from the pensions assets test to stamp duty and the desire to grow old in familiar surroundings.

It’s for these reasons that an increasing number of borrowers are turning to reverse mortgages. Reverse mortgages unlock equity from the home without requiring repayments, and do not allow the borrower to owe more than the value of their home. The borrower repays the loan inclusive of accrued interest when they pass away, move out, or sell the property.

Heartland Seniors Finance has offered reverse mortgages since 2004, but recently it has seen a surge in awareness of this type of loan, according to CEO Andrew Ford. “The increasing indebtedness you read about in the media is affecting the average loan size we see, and an increasing number of applications are for refinance, with much larger loans than we saw historically.”

“We’ve grown very strongly and we’re expecting that to continue,” Ford adds.

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Sponsored by

He explains that while Australia’s ageing population will naturally create more reverse mortgage clients, the political landscape is accelerating this process, with demands for increased means testing of pensions against valuable property creating asset-rich but cash-poor clients in capital cities. These clients will need funds to retire on, accessed through reverse mortgages.

A broker’s role You need a credit licence to write a reverse mortgage, giving brokers an instant advantage over accountants and financial planners.

Brokers also have an edge over the few banks left in this space, argues Heartland’s head of distribution Craig McInnes. “The broker offers something the clients value very much; that is the in-home service: going round and having a cup of tea and a scone with the clients and talking about their deal.”

Start by looking at your existing network.

Ford recalls one broker who wrote letters to clients he’d dealt with 10–15 years ago. A few of those clients were now aged over 60, thus eligible for a reverse mortgage, and several took him up on the offer. Alternatively, Ford says, “a lot of our enquiries come from the children of prospective borrowers, but it might be networks of accountants and financial planners as well as increasing enquiries online”.

The borrower profile affects the loan: in Heartland’s case the maximum LVR starts at 15% and increases with age in yearly increments to 45% for those aged above 90.

A maximum of two borrowers is allowed (additional occupiers are permitted) and the LVR is set at the age of the youngest borrower.

Residential properties in all capital cities and many regional centres are eligible, covering 97% of the country by population.

Heartland also offers reverse mortgages on investment and holiday home properties.

Repayments and redraws are available, with the amount being available as a lump sum,

regular advance or reserve drawdown.

There’s no maximum loan size. Heartland has written up to $1.8m, but according to McInnes “we’re open to bigger loans if you’ve got them”.

Whether or not Heartland appears on the panel, most brokers are able to write reverse mortgages after a short accreditation process.

“Not every broker writes every product,” says McInnes. “What we have found is that people who step into the reverse space find that it’s easy; it’s straightforward; you’re dealing with great clients; they stay in it. We rarely deal with people who write one loan and disappear.”

Loans typically take around four weeks, says McInnes, with potential bottlenecks being the valuation and the need for the client to consult their solicitor as part of the process. Brokers then receive upfront and trail commission or, if they prefer, upfront commission only. Although trail is paid, reverse mortgages can be an easy option for brokers, McInnes explains. “Once the loan is written there’s not much ongoing maintenance involved; they do a last a lot longer than your average home loan.”

Crest of the wave Heartland CEO Ford sees demand for reverse mortgages only moving in one direction. “This is the beginning of a wave that’s really going to pick up as we overcome some barriers around awareness and apathy.”

Those barriers are diminishing: ASIC’s MoneySmart website now has an extensive section on reverse mortgages, and Heartland produces a range of blogs and YouTube videos on the subject that are raising awareness.

The biggest push factor, however, may be necessity, as a generation of Australians struggles with life on the pension.

“The pension covers the essentials but nothing really else,” Ford says. “For people that need more, accessing the equity in their home can be transformational.”

TYPICAL REVERSE MORTGAGE CUSTOMER Heartland has detailed the characteristics of its average customer:

Retired couple (48%), female (35%), male (17%)

75 years old

Has depleted super and other assets

On Age Pension

Based in Sydney, Melbourne, Brisbane, coastal NSW/Qld

Property worth $910k

Funds 13%; balance set aside for Cash Reserve and/or Regular Advance

Uses it for renovations, travel, medical expenses, car, aged care, debt consolidation, to support next generation, everyday bills, etc.

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3/07/2017 1:35:14 PM

FEATURES

VENDOR FOCUS

JOHN ROLFE: BUILDING UP ELDERS The head of Elders Home Loans talks to MPA about the company’s plans for growth, and how regulatory changes are impacting brokers, particularly in rural Australia

MPA: What regulatory changes imposed on areas outside of Sydney and Melbourne concern you the most?

John Rolfe: The recent changes made by the banks in reaction to APRA and ASIC’s changes were in part a reaction to the reported overheating of the property market.

Unfortunately, the Sydney and Melbourne property markets make up a significant proportion of national property transactions, and this is where the majority of the problem lies. However, these markets are not reflective of the rest of the country. Other capital cities haven’t experienced the same price growth but are hit by these changes as these policies are national.

MPA: How are these changes impacting brokers and their clients in rural and regional Australia?

JR: Perth and Darwin are good examples of how these policy changes are having a worsening effect on the market. Both of these cities have been heavily hit by the slowdown in

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mining construction, have experienced price falls over the past few years and now have the double whammy of tighter lending policies.

Elders’ brokers in both locations have reported a further slowdown in activity, while the real estate market is seeing significant oversupply and vacancy rates are increasing.

An existing investment borrower who could afford to borrow up to $2m more under previous credit policies is likely to be able to borrow only a third of that now.

brokers’ earning capabilities has been negatively impacted.

MPA: In what ways can brokers make sure they stay ahead of the curve with these regulatory changes, and how is Elders helping them?

“Brokers, just like professionals in any market, need to accept and embrace change. Where one segment dries up, others are created” The elimination or significant reduction in the use of negative gearing ‘savings’, and reductions in percentages of other income types have hit borrowing capacity. Whilst we understand the reasons behind this, the impact on borrowing capacity and therefore

JR: Brokers, just like professionals in any market, need to accept and embrace change.

Where one segment dries up, others are created. The rate movements on investment loans have created a situation where existing borrowers could benefit from a review of

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KEY TRENDS IN 2017 APRA clampdown on investment and interest-only lending – we have and will continue to see increases in interest rates and tightening of credit policies for investment and interest-only loans.

Out-of-cycle rate increases – in addition to investment lending, the cost of funds is rising due to credit rating deterioration of most regulated lenders.

ASIC remuneration review report and recommendations – there will be impacts on broker commission structures and payments to aggregators.

their situation as these changes have not been uniform. There are some great refinancing opportunities for investors to better secure their financial position. As such, brokers should be contacting clients to see how the changes have impacted them and to look at possible solutions to avoid financial stress.

MPA: What are your concerns about the new tax on banks in the budget potentially being passed on to borrowers in the form of higher interest rates?

JR: It is a definite risk; however, the Treasurer has warned banks not to do this.

We will need to see how it plays out. It is only the larger institutions that will be hit by this, so there are plenty of other lender options to consider. This is a real opportunity for these lenders, and, most importantly, for the customers to look for a better deal.

MPA: What is Elders Home Loans planning this year? What is the business looking to achieve?

JR: Our plan is for growth. Since I joined in July 2016, we have focused on positioning Elders as a niche player in the market. We’ve created a model that provides brokers with a low-cost, high-commission split, head office support and the backing of the iconic Elders brand. The model is suited to brokers who may be employed by a larger company at present and are looking to ‘go out alone’.

The Elders Home Loans model gives brokers more freedom than under a traditional franchise agreement, allowing them to run their own business alongside Elders’ national network of over 900 sales executives and 300 property managers.

The Elders Home Loans’ model provides brokers with a package of tools to help them

ASIC Cost Recovery Levy – move to fund ASIC from the industry. Implementation of levies to credit providers and licensees that will be passed on to the individual brokers.

Artificial intelligence and further automation of lending processes – facilitating fintech propositions.

Diversification will be a survival requirement for many brokers. The world is changing and we must change with it.

There will be some consolidation in the industry.

Consumers will have more transparency than ever before.

Borrowers will know and care more about who they deal with.

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FEATURES

VENDOR FOCUS

KEY FOCUS POINTS FOR ELDERS HOME LOANS

Implementation of a more flexible model

Improved integration with other divisions and businesses within the Elders Group to maximise opportunities

Grow number of brokers nationally – target 100 by September 2019

Focus on growth in the eastern seaboard capitals and improve Elders’ brand recognition in metropolitan areas

Introduction of market-leading tools and techniques to facilitate more coverage

Leverage relationship with aggregator, Connective, and lenders to meet market changes

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grow their business in a compliant and sustainable manner. For a flat monthly fee, brokers are provided access to the aggregator software, an industry-leading compliance package, website promotion, leads from the Elders network and our 1300 LENDING

product offerings but also opportunities to build relationships that will cater for referral relationships, which will not only create income-producing opportunities for our teams but also further strengthen the Elders brand within our customer base.

“The beauty of this business is that you get out what you put in” phone number, and a suite of promotional material, whilst also having their professional indemnity insurance, EDR membership and credit representative fees covered. In addition, we are trialling software that will assist in reducing the time taken to gather and collate customer documentation, providing them with more time to focus on their business.

MPA: How has Elders’ national recruitment drive been tracking since it started?

JR: It is very early days at this stage. We have focused on restructuring the business for growth and are now looking to recruit new members of the team. We have seen a high level of interest from the Elders Financial Planning and Insurance businesses, who see the value in diversifying their offerings by including brokers.

MPA: Can you discuss details of the Elders’ referral program and how brokers can expect to interact with its financial planning/real estate and insurance networks?

JR: As the head of Elders Home Loans, I work closely with the real estate and financial planning equivalents. Based in the head office in Adelaide, I sit with the real estate team and meet several times a week with the financial planning executives. We are working together, along with the insurance business, to leverage opportunities across our businesses. This may include multi-

MPA: What advice do you have for brokers who are considering going out on their own but may be hesitant to do so?

JR: There are great opportunities for people with the right skills and attitude to be successful business owners. For some that may be with Elders – and we would welcome the opportunity to discuss those – but for some it may be through another model. If you have the passion, the ability to build a business, and the understanding and commitment to do it in a sustainable and compliant manner, then I suggest you have a go.

MPA: Can you provide a case study of one of your most successful brokers since they started out with the Elders model?

JR: Like any business, we have a variety of examples of success. However, success to one person may not be to another. One of Elders’ longest-serving members is in a regional location and has built a great steady business that meets his needs and requirements. He loves going to work every day and helping people. He won’t ‘win’ volume awards but he is a valued member of his community.

We have a member in a remote regional area who has been regularly recognised for her business, and, more recently, we have a new broker who was formerly working for a lender. In his first six weeks his commission earnings are equivalent to four months’ previous wages.

The beauty of this business is that you get out what you put in.

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FEATURES

COMMERCIAL

Beyond the deal MPA talks to ANZ about the after-sales service products that could boost your business client base IT GOES without saying that telling your client their loan has been settled is one of the highlights of being a broker, but what about after the deal? MPA explores with ANZ why taking the conversation beyond the loan settlement is so important for you and your clients, and what tools are available to help business owners grow. As ANZ’s general manager of commercial origination, Cosi De Angelis, explains, sometimes you need to go beyond banking to help businesses get running and growing.

Stickier clients So why embrace the after-sales conversation?

One reason is to increase ‘stickiness’ – the stickier the customer, the better it is for both brokers and banks. “You can run at a million miles an hour, putting on hundreds and thousands of new customers,” says De Angelis, “but if you’re not looking after your customers and you’re losing the same amount of customers at the back end, the model won’t be successful.”

De Angelis says that while it’s a phrase often heard in banking, having ‘a customer for life’ is still the ultimate goal, as it benefits both the broker and the bank.

Logically, if you can look after more of the financial needs of your customer, they are less likely to be pulled away by other

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services, and you’ll save time by not having to look for as many new leads. “Finding new customers is hard work, so looking after your customers that already trust you is much easier. But if you don’t look after your customer, somebody else will.”

Simplifying business De Angelis explains three service opportunities that brokers can offer their ANZ loan clients: Employment Hero; Be Trade Ready; and Business Ready.

“We’ve collaborated with Employment Hero, and it’s basically to provide an all-inone HR/payroll/benefits program for these small businesses – for their staff and to help them manage HR.” The program is designed to save business owners time and money and cut back on the paperwork involved in this area, which

can be complex due to variations between states. “They manage all of that for small businesses, allowing them to generate new contracts of employment, all in one place.”

Be Trade Ready is a digital tool for Australian businesses who may be planning to expand overseas but may not know where to begin. Features include being able to benchmark themselves against other businesses that have already successfully expanded into new markets, and create a personalised international business plan.

These tools could be applicable not only to a broker’s business clients but even to residential clients such as first home buyers who may also be running businesses.

“It’s available to all those brokers’ clients who might be in business, whether they’re a first home buyer or self-employed,” says De Angelis. “Whatever they are, brokers have access to these products for their customers.”

ANZ’s Business Ready, powered by Honcho, allows people to set up their business in a single day. “It allows them to set up their business by registering for an ABN and a business name; setting up domain names, websites, business logos, and even setting up their ANZ bank accounts.

“If a broker has got that at their fingertips and they can do that for their customers who are looking to set up small businesses, it makes them look like a superstar. So if we can help brokers delight their customers, we hope that those customers will be ANZ customers.”

SMALL BUSINESS AND THE BUDGET Of all businesses in Australia, 99% are small businesses and contribute $380bn to the economy. The government intends to create a more desirable environment for Australian businesses to thrive in by easing their tax burden, according to its budget for 2017/18.

The government is set to extend the $20,000 instant asset write-off for a year until 30 June 2018. It also plans to lift the turnover threshold five times higher than was originally available, to $10m.

Source: Budget 2017/18

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“The best brokers in the market talk to a customer about all their needs, not just their lending needs” Cosi De Angelis, ANZ Expanding the conversation De Angelis stresses that banking isn’t all about debt. “Somehow banking has become about debt. These are the kinds of programs that we can help brokers put around their customers to make them stickier,” he says, explaining that they may become so sticky that they may choose to stay with a lender even if interest rates rise or another lender has a cheaper rate, because they hold the additional benefits from these programs in high regard.

“Because of the work we’ve done with the broker to put these other products around

the customer, they won’t leave, and therefore it protects the broker’s future revenues,” De Angelis says.

“Customers hate changing banks – it is a nightmare. So they do it as a last resort when we’ve made them really upset – and if we put services around them that make them happy, then they won’t leave and we won’t have to put them through the hassle of having to change banks. They hate it just as much as we do.

“The best brokers in the market talk to a customer about all their needs, not just their lending needs.”

ANZ works with you to find complete financial solutions across mortgages, commercial banking and asset finance. Our comprehensive suite of flexible products can help your clients achieve their business goals.

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Your clients will be introduced to a local ANZ relationship manager who will meet with them, with yourself, to provide them with a complete tailored financial solution to meet their needs.

Cosi De Angelis General manager commercial origination, ANZ

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BUSINESS STRATEGY

DOWNSIZING

DOWNSIZING WITH DIGNITY There are often significant benefits for businesses that downsize, but only if the process is managed well, writes management specialist Karen Gately

LARGE-SCALE JOB losses unfortunately continue to feature all too frequently in our news headlines. Tough economic conditions, rapidly changing industries and competitive markets are commonly reported reasons for corporate downsizing. While staff cuts are typically made with the intention of strengthening an organisation’s future, how the process is managed will impact on the extent to which benefits are realised. Lost productivity, diminished quality of products and services, and inflated employment costs due to high staff turnover are just a few of the challenges organisations face when downsizing isn’t managed well.

While there is nothing anyone can do to avoid altogether the pain inherent in downsizing, a planned and compassionate approach will go some way towards minimising adverse impacts on people and ensuring the organisation’s spirit and capabilities are protected for the future. For any team to move forward with strength to a better and brighter future, trust in and respect for the organisation’s leadership team is essential. The approach to leading change will have a powerful impact on trust and respect.

Lay foundations of trust Minimising the impacts of downsizing

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should begin long before it becomes necessary to make redundancy decisions. Making substantial changes to your workforce while maintaining engagement of the rest of your team is only possible when people trust, and feel loyalty towards, the organisation. Trust is at the core of any strong relationship, and nothing has as great an influence on the success of a team as trust does, especially when faced with difficult circumstances.

When times are tough people who trust their manager and leadership team are more likely to accept decisions made to protect the viability of the business. When trust in the character and competence of leaders is low, resistance and conflict typically escalate. Without trust a leader will struggle to inspire people to strive at the best of times, let alone when they are facing a future of uncertainty or little hope of success.

Look ahead At times it is challenging to forecast conditions and circumstances that will lead to downsizing. However, adopting a planned and considered approach to running your business will go some way towards ensuring you see challenges coming before they arrive.

Forecasting what is likely puts you in the driver’s seat, enabling you to be ready for and to proactively manage change.

A structured and disciplined approach to change planning and implementation is key to ensuring people are treated with the fairness and respect they deserve.

Identifying roles that are no longer required, redeployment opportunities, and ultimately the redundancies that will occur demand that full and careful consideration are given to both options and their consequences.

Think about what the future looks like before deciding to expand your team or hire new people. Maintain an optimal level of resourcing in your business by questioning the need for every role as the need to recruit for them arises. Before going to market to fill a vacancy, consider the likelihood that the business will require that position in the foreseeable future.

Do what’s needed – no more and no less.

Think very carefully about the extent of the job cuts you make. Consider the immediate future and the roles and capacity the organisation will need to drive forward post-implementation of redundancies. While a harsh and deep cut

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are and how their lives are impacted by your decisions. Never step back from the decisions you have to make, but get the insights you need to minimise any adverse impact on people.

Communicate well Being authentic and honestly sharing insight are important elements of treating

If the truth is that further redundancies are likely, help the team to understand what needs to change to avoid those circumstances.

Irrespective of how hard the fight might be to avoid that reality, you are better off focusing your team on what they can do, rather than simply leaving them to wallow in the miserable reality that further job losses are looming.

When trust in the character and competence of leaders is low, resistance and conflicts typically escalate

to your resources may achieve short-term financial objectives, capabilities and energy are essential to achieving the turnaround or improvement objectives of your business.

Be respectful, fair and compassionate People impacted by downsizing typically want to know that every decision reached was made with fair and reasonable consideration given to all of the options and the consequences. It’s essential that you demonstrate you care and are doing everything you can to avoid unnecessary impacts on staff and their families. Help people to feel personally valued and that the loss of their job is sincerely regrettable.

At every step along the way, choose to behave in ways that have a positive impact on the spirit of your team. Behaving with respect, fairness and compassion is likely to serve you well and earn the respect of most reasonable people.

Focus on each person and strive to understand their circumstances and how they will be impacted by change. Appreciate who people

people fairly. Give your team the opportunity to understand reality, while protecting commercially sensitive information.

Reasonable people understand that there are some things you can’t say, and will trust you to be the judge of what you can and can’t. Every manager should be coached to communicate decisions clearly, provide facts accurately and deliver news with sensitivity.

Often when people complain about being lied to and misled, the issue is the approach taken, not the intentions of their employer. It’s common for organisations to fear providing information too early and risk undesirable staff turnover or disclosure of information.

However, where there is a void of information people will typically make assumptions and draw their own conclusions. Proactively manage the awareness and perceptions of your team. Be upfront with people about how and when redundancy decisions will be made.

Maintain communication with the team well beyond the last day that employees who were made redundant left the business. After job cuts have been implemented people often spend a lot of time talking about what has happened and worrying about what might happen in the future. Keep communicating with your team about why you have confidence in the future and the role you need them to play to make it happen.

Look out for everyone involved Never underestimate how stressful downsizing can be for everyone involved.

Some organisations, however, underestimate the stress felt by HR staff and the leaders driving change. These people often find themselves having to work long hours, many of which are spent engaged in emotionally charged conversations, making decisions that have life-changing consequences for people they know and in many instances like.

Check in with these people and encourage them to seek the support they may need. While managers and HR need to avoid getting caught up in emotions that undermine their ability to drive the process with objectivity and professionalism, that can be easier said than done. Understand that while maintaining high standards of conduct is essential, at times people immersed in the process of downsizing will struggle to have the strength they need to maintain composure and resilience.

Karen Gately is a leadership and people management specialist and a founder of Ryan Gately, a specialist HR consultancy practice. She is also the author of The People Manager’s Toolkit: A Practical Guide to Getting the Best from People and The Corporate Dojo: Driving Extraordinary Results Through Spirited People.

For more information, visit www.ryangately.com.au or contact info@karengately.com.au.

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PEOPLE

BROKERAGE INSIGHT

ROBINSON SEWELL PARTNERS Brad Sewell, director of multi-award-winning brokerage Robinson Sewell Partners, talks to Maya Breen about engagement fees, finding partners, and how business is bustling in outback Australia MPA: How did you carve out a niche in agribusiness and commercial?

Brad Sewell: Both Ian and I are ex-agri and commercial bankers, and we worked with major lenders for the first part of our career, so probably in my case 15–20 years in agribusiness lending with banks around Australia, and likewise with Ian. He had a similar amount of time in the banks.

We just met one day and decided to jump on the other side of the table and represent farmers and small businesses in their negotiations with lenders around property acquisition and interest rate negotiation.

We also get involved in succession planning around helping farmers and families hand over the family farm to the next generation.

We travel all over Australia; we’ve got clients everywhere – Northern Territory, Queensland, New South Wales, South

Australia and Victoria. As an example, I’m currently working with clients on sheep and cattle stations, sugar cane, horticulture, viticulture, irrigated cotton – that’s just a sample of some of the industries we’re working with at the moment.

“Once a client’s paid a fee they want to see a result, and to get a result they have to provide the information we request” MPA: What is your reasoning behind charging clients engagement fees?

BS: We consider ourselves to be professionals, just like accountants and lawyers, and we don’t know of any other professionals that work for nothing. Ultimately brokers like to work on the basis that they are going to

ROBINSON SEWELL PARTNERS’ INDUSTRY NICHE

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Agribusiness

Beef production

Agribusiness supply chain enterprises

Wool production Horticulture

generate income once the deal has settled – but every broker summit, seminar and conference that I go to there’s always stories about brokers doing a whole lot of work, and for whatever reason the client just says they couldn’t be bothered or they change their

Soft commodity grains – cereal and oilseed production (broad-acre and irrigation)

Lamb, pork, chicken production Dairy Sugar

mind, so we charge a fee up front.

We call it an engagement fee, and the reason we call it an engagement fee is because it actually does engage the client in the process. Once a client’s paid a fee they want to see a result, and to get a result they have to provide the information we request. The fee is also there to cover our hard costs, which are fuel, telephone, accommodation, meals – you just can’t go and incur those costs, especially in regional and rural Australia.

We started with $500, then we went to $1,000 – we actually noticed the higher it went the more people engaged us. We found that once we got to $2,500, clients actually were really keen to sign up because they thought, “If

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FAST FACTS Year founded 2010 – co-founded with Ian Robinson Specialty Agribusiness, corporate, commercial, asset finance Location Wagga Wagga, NSW, but with a national reach

Brad Sewell (right) with business partner Ian Robinson

these guys reckon they are worth $2,500, they must do a good job”. The minimum is now $3,000, but the average is more like $5,000 – up front, non-refundable, and they don’t get it back when you settle the deal.

It’s a fee that’s basically there to cover us in the event that the client is unsuccessful at auction or changes their mind. The engagement fee is critical to our business and it’s easy to sell, and we actually find that clients see the value in what we do and are happy to pay that fee. Engagement fees cover nearly 100% of our operating costs.

MPA: Can you tell us more about your corporate partner program?

BS: The corporate partner is someone who typically would have experience in the finance industry and a passion for starting their own

business and being involved in the agricultural and commercial sector.

So we set up a company and Ian and I take a minority shareholding in the company, and we also take a minority share of the income and in return the corporate partner gets all our know-how, procedures and systems and intellectual property on how to run a successful broking business.

We’re getting a lot of interest – our first corporate partner started three months ago down at Wagga, and our next corporate partner starts in about six weeks in another state. We have a very disciplined approach to taking on corporate partners, so there’s a vetting process at the start and there’s about four key steps that both parties take to ensure that what we’re offering is what the corporate partner is looking for, and that it suits all of us.

Because really at the end of the day we’re in partnership. Partnerships are like marriages; you’ve got to get up every morning not just for your family but for your partner’s family, and with the corporate partners I’ve now got to start getting up for a whole lot of other families! It’s good; it’s nice to work with people that are looking to do something for themselves and get their own business up and running, and that’s what we’re doing.

MPA: What are your top three tips for new brokers looking to establish themselves in a niche?

BS: Make sure you have a client-signed mandate. Get out and meet people and build your network. And focus on net profit, not just volume.

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PEOPLE

CAREER PATH

THE PROBLEM SOLVER Westpac’s new state general manager for NSW/ACT mortgage broker distribution, Sarah Willsallen, brings a fresh perspective to the bank

1999

STUDIES HR AND LAW

Sarah Willsallen completed her undergraduate degree in commerce at Western Sydney University before gaining a master’s in labour law at the University of Sydney. Although she started her career in HR, she was always interested in a career in business, as her studies reflect.

“I like solving problems, I like working with people, and I find the commercial side of business really fascinating too.”

2000

STARTS HR CAREER Willsallen started her HR career working for technology and information services companies, including Cisra, and says she was drawn to HR because it felt like the place where customer service, relationships and solving business problems came together.

“When I started, I loved the variety and the fact that no two days were the same”.

2006

EXPANDING ROLE AT FUJI XEROX At Fuji Xerox, Willsallen discovered that she enjoyed being closer to customers and embracing personal accountability for commercial outcomes. This was a turning point in her shift from HR to business leadership.

“I loved the way that role [at Fuji Xerox] expanded over time to include work with sales capability, strategy and targets, design and implementation. This area increasingly drew my interest, particularly the challenge of how to structure people, processes, cultures and market offerings to get the best outcome.”

2016

JOINS FINANCE WORLD Upon being accepted into Westpac’s Equilibrium Leadership Development Program, Willsallen started her Westpac career as a retail manager and another opportunity soon presented itself. “When the opportunity arose for a state general manager in broker distribution, I jumped at the chance.”

“Equilibrium identifies leaders from outside financial services and from within … who can bring different perspectives, innovative thinking and a customer focus” 54

2003

LEARNS FROM MENTORS Willsallen feels lucky to have had many brilliant mentors in her career, particularly in her roles as HR manager at Wolters Kluwer, which she joined in 2003, and later as HR business partner at Fuji Xerox. “[Wolters Kluwer’s] regional HR manager would have to be the most strategic person I’ve ever known,” Willsallen says. And the executive GM of Fuji Xerox is a fantastic sales leader, she adds. “He taught me about salesforce effectiveness, client management and to keep things simple.”

2010

GROWING GM EXPERIENCE Willsallen credits her experience gained with mid-size companies as vital in helping her get to where she is today. “This gave me the opportunity to take on a broader remit as a GM managing multiple unrelated fields.” Then one day an old friend at Westpac mentioned the bank’s Equilibrium program aiming to support women in leadership to take the next big step in their careers.

“It sounded like a rare and valuable opportunity to learn and grow my career in a new sector.”

2017

FAST ASCENT Now Westpac’s new state general manager for NSW/ACT consumer third party distribution, Willsallen says, “If you had asked me at 15 whether I thought I’d work in HR, I would have said, ‘Probably not’; and if you’d asked me at 30 whether I thought I’d move into broker distribution, I would have been equally surprised.

I’d always been a broker customer and I have two brothers who run small businesses, so I have a lot of respect for business owners.”

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PEOPLE

OTHER LIFE

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

2x more likely Fatalities are twice as likely to occur in a home fire if there are no working smoke alarms

1/2

Nearly 40%

Of the 4,500 residential fires/year Almost 40% of home fires are that the FRNSW is called out to, caused by electrical appliances half start in kitchens and faults Source: Fire & Rescue NSW

DOUSING THE FLAMES This NSW broker and firefighter has extinguished both financial fires and real ones for 16 years

TIM JENNINGS of NSW brokerage NRG Financial Services has balanced two careers – in firefighting and finance – for the past 16 years. Working two 24-hour shifts every eight days in the NSW fire service, he says there is a strong correlation between broking and firefighting.

“You’re still putting out fires; they’re just different types of fires,” he explains, with both roles demanding empathy and understanding of people in a diverse community. “I can often be talking to people from either the worst day of their

life to the best day of their life – from someone who needs some assistance through emergency services to someone who’s just been approved for their first home loan.”

Broking takes him from Sydney to the Hunter Valley, but as a senior firefighter he is currently halfway through a secondment to the fire communications section, which spans the entire state.

“When you know that you’ve helped someone it’s just like writing a home loan – it has all come together for them.”

Credit: YCM Photography

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